The collaboration game

Commercial Risk Europe talks to HDI Global Belgium’s Chris Staes about supporting clients in their ESG transition and collaborating on captives.

Thrust into the spotlight in the wake of the pandemic and the ongoing war in Ukraine, the risk manager’s role has changed significantly. It has never been more appreciated, says Chris Staes, managing director at HDI Global’s branch in Belgium. “Risk managers have also been better able to prove their value to senior management and the board, not only as an insurance buyer but as a genuine risk manager.”

Staes cites the greater use of alternative risk transfer (ART), captives and mutual loss models for transferring emerging risks like cyber in Belgium. In essence, companies are choosing to retain more risk themselves and opt for self-insurance through captives and mutuals. But rather than seeing this as lost premium, Staes welcomes the development.

“When you involve ART, the client and the insurer have the same interests. Managing and mitigating risk. Risk retention is a big part of that,” he says.

“It’s a great evolution because we can prove ourselves as technical insurers and we can support our risk management clients with the tools they need – weather risk monitoring for natural catastrophes and our expertise on cyber claims modelling. It is more about sharing knowledge and expertise with the market.”

Collaborative relationship

There have been changes on both sides to develop a more collaborative relationship, even when a captive is involved, says Staes. “We can front for international programmes, manage the compliance topic related to it and look after the claims-handling process. So it is not a case of missing premiums, it is about providing a better service and that is ultimately what insurance is designed for,” says Staes.

The greater prominence and sophistication of risk management should also help make the profession more appealing to a younger generation of prospective employees, he adds. Plus, the development and availability of global programmes has made it a more international role. “It is a challenging and interesting job that should be attractive to young job hunters,” says Staes.

When it comes to the risk landscape, Staes highlights three prominent exposures – climate change, cyber risk and economic volatility. “In terms of climate change, there have been some loss events in Belgium the last years. In 2021, it experienced the worst floods for many years, which resulted in roughly €2.55bn in insured losses.

“But it is not just the cost to insurers and reinsurers, it is the cost to governments and public sector bodies when there are insurance pools involved. And you see that when there is a nat cat event, the limits are not enough. So there is a need for a better public-private partnership, be it on a local or European level. Also, prevention is key,” says Staes.

In terms of economic risk, the world is experiencing a period of high inflation – claims inflation and salary inflation. “That is a challenge for the insurance sector because in times of inflation, there is a higher number of claims, and the claims are much more expensive. We must consider that when we are pricing risks,” says Staes.

The final risk on Staes’ list is cyber. “We have seen public sector services attacked, as in the ransomware attack on the city of Antwerp in December 2022. The cyber threats are everywhere, and the frequency and severity are increasing. Every week you can find news of a new attack or breach. As an insurer, it is our job to provide protection, but we need more transparency and a better understanding of the risk and how cyber security is monitored at companies. We are happy to dialogue with our clients and to support them by offering additional services.”

A lot of these risks, and others, have increased in both frequency and severity since the war in Ukraine, even if it is difficult to make a direct link. “Prices for food and energy have dramatically increased since the war. It has also been cited as the main cause of inflation and it has disrupted global supply chains,” says Staes.

The relevance of ESG

Another development that has gained pace in the last 12 months is sustainability and ESG, an area Staes says is very relevant for HDI Global as an insurance group.  “There are some ESG-linked risks that we will not provide insurance for on our Belgian market, such as new coal-fired power plants,” he says.

“But we also want to support innovation and new renewable or green energy projects and will continue to do that. We were one of the first insurers to provide coverage for wind farms and we will continue to support the green revolution. It is important that insurers play their role in supporting the green revolution,” adds Staes.

Sustainability also plays a greater role in the information required by insurers from their clients. “At HDI Global, we want to support our clients in their transition to green energy so the investment in new, green technology is part of our risk assessment,” says Staes.

However, new technology creates new risks. For example, the increased adoption of electric vehicles and the discussion around battery storage. To this end, HDI Global has formed a partnership with ACCURE battery Intelligence, a specialist in battery storage monitoring, to increase the financial viability and insurability of battery storage.

The insurer has also developed a new innovative and flexible online tool GREEN 4.0, to help companies manage their location-related risks. “This helps them to visualise and identify the different risks faced by certain plants or branches in a company’s network and to exchange information on the quality of the risk,” says Staes.

HDI Global has also developed a customer web portal IP-Web, a reporting tool for international insurance programmes, which is a big focus for the insurer. “We have over 5,000 international programmes as lead insurer, so it is important that we have a good IT infrastructure for the underwriting and the claims process. But what really makes us strong as a company are the people. We have experts working across the globe to ensure we are compliant in every country and sharing their experiences to improve our coverage,” says Staes.

He says that while the frequency of losses has decreased, the severity has increased. Consequently, when it comes to the price of insurance, Staes still sees a hard market for large loss lines like natural catastrophe.

One reason for the increased severity of losses is the ongoing rise in M&A, creating a value concentration. There are other factors, such as the increased complexity of supply chains and the dependency between suppliers and producers/manufacturers. “These factors all have an impact when clients want to extend their natural catastrophe coverage and to buy higher limits,” says Staes.

It is also important to maintain a dialogue between insurer, broker and insureds when there are so many factors affecting the price of premiums, he says. “In the last three to four years there have been some price increases, but before that we had 15 years of rate reductions. When you have a combined ratio of 96%, the profit margin is much reduced and you need lean structures, low overheads, fast processes and a good relationship with clients. This is not only to improve margins but also to ensure we can pay our clients’ claims.”