The insurer’s view–HDI Spain

Juan Aznar Gáldiz, managing director of HDI Global, Spain, shared his thoughts on this year’s European Risk Frontiers Survey with Adrian Ladbury. Adrian Ladbury (AL): Will the corporate insurance market in Spain harden this year? Is there adequate capacity for customers’ risks? In which areas do you see demand for more capacity? Juan Aznar Gáldiz [JG]: Spain is a very mature and competitive market – probably one of Europe’s most competitive market places. Therefore, I do not foresee in general any hardening. An improvement of the premium quality within the property sector as a whole does also appear to be unrealistic. However, what can be observed are premium increases related to some companies within the heavy industrial sector, as well as clients that experienced losses or have natural catastrophe exposure within their international insurance programmes. As far as our book of business is concerned, those risks in particular need to be adequately priced so that the premiums reflect the actual exposures. Last year, some clients faced premium increases because of their Latin American exposures and because of catastrophe risks in the Caribbean or Mexico. It is true that huge capacity is still available. But we believe that oversupply of capacity can also cause problems for industrial clients. We observe that brokers are often placing risks with the cheapest options in the market, resulting in placement of risks with large and complex panels of insurers. I had one case on my desk where about 18 insurance companies were involved, each of them writing just one small share of the risk. Such scenarios might become tricky and too complex when claims handling is required. As we see it, some clients are often unaware who is behind their policies, the true financial security of certain carriers and the underwriting quality of some insurers. AL: Is the supply chain of Spanish companies adequately insured in your view? [JG]: Given the complexities and the amount of people and enterprises involved in a supply chain, I believe it is fair to say that control of supply chains is challenging and gaps cannot be easily avoided. While the ‘chain’ itself might appear obvious at first when buying cover and underwriting a particular risk, critical issues quite often only materialise in case of a claim. AL: What is needed to make them more insurable? [JG]: Information and transparency! We need transparency and a clear understanding of what will be insured and how. Clients and brokers must ensure that both sides have risk clarity. The client must be made aware of how the insurance is placed, what is actually covered, what is excluded from cover and what happens in the event of a claim. It is all about transparent exchange of information, managing expectations and not promising something to the client that cannot be delivered. AL: Do you believe that cyber cover is adequate to meet customers’ needs in Spain? [JG]: Yes, I believe the cover on the market is adequate. The quality level of cyber cover does improve year by year as we increase our understanding of the underlying risks. The key problem in the early days of cyber insurance was the very limited claims experience. The lack of historical claims knowledge is a reason why we need to be cautious. We are not able to predict future challenges associated with big claims and we may lack the imagination about how a complex and huge cyber claim might occur. Spain is certainly different to its European neighbours such as France, Germany and even Italy. We do not have as many corporate customers. Our clients are mainly part of the small to mid-sized market segment. Such companies are aware of cyber threats, but they do not expect that they will suffer a cyberattack. This is one of the main reasons for the currently rather moderate sales of cyber policies in Spain. SME and mid-market companies fail to invest enough in cyber protection, making them an easy target for hackers. These companies are more concerned about GDPR-related issues, data-related fines and sanctions, rather than hacker attacks. Therefore, if cyber policies pick up such data-related claims, smaller companies might feel more encouraged to buy a cyber policy. Brokers similarly also advise their commercial clients to buy cyber for this reason. But this is not the only approach. A major Spanish bank, for example, might have the resources available to properly manage a cyberattack, while smaller firms do not have these resources available. Cyber policies provide smaller enterprises with support services, allocating them an expert within hours after a cyberattack. It will take time, but we will get this message across. AL: How would you make global programmes work more efficiently? [JG]: Because of the economic crisis in Spain, mid-sized and smaller companies had to look abroad to Asia, Latin America and the Middle East to export their products. Their expansion in the last five to ten years helped us in Spain learn more about the needs of our clients in conjunction with international programmes, and to improve the way they work. In order to make global programmes most efficient, you must have reliable and trusted long-term partners and colleagues and, preferably, your own international network in place. It is also important that your entire international network partners for global programmes use one identical system for administration.

The insurer’s view–HDI Spain

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