View from the top—Hans-Jürgen Allerdissen

Q: There have been protests from buyers that insurers offer too little capacity. For which risks is this true? And is this situation changing? A: Classically there are limits to the capacity for cover against natural hazards. What is new is that now large European bus fleets are having capacity problems in the liability sector. And naturally emerging risks—that is risks that appear new to the market—are often not accompanied by insurance, in particular for business interruption without preceding property damage and cyber risks. These are risks that are difficult to insure with adequate capacity. Q: More and more new providers are pushing into the industrial insurance market. How can it be then that capacities are still not sufficient?hideA: Here the market and also the product range consist of two very separate segments. The new capacities flow, in particular, into standard covers and for short-tail risks. These are generally investors who are thinking in terms of one or two years. For standard cover, therefore, you can speak about over-capacity. For the other risks, long-tail risks like doctors’ liability or new risks, there is definitely a lack of capacity. Q: Are the insurers being too careful? A: Insurers are feeling their way forward slowly. The risk capital is being utilised very carefully, in some cases you could say too carefully. Q: Some insurers are now offering improved cyber policies—are they useful? A: It is good that they have done this, you have to say that. I even regard the attempts as quite successful. There are two directions: on the one hand the company’s own risks and on the other liability risks. In addition, you have to bundle several lines of insurance into one form of cover—the first providers have now done this. I think this is a good beginning. Q: Are the sums insured offered under these new cyber policies sufficient? A: The amount of coverage offered is, as so often when new products are introduced, inadequate for large companies. It may be enough for small and medium-sized companies. But for the big corporations it is at present not enough. Q: Do you expect an improvement? A: The market is developing. We know that premiums in the US reached around a billion dollars last year, with an increase in annual premiums of 20%. In the meantime, even politicians in the US are calling for this sort of cover. This market is going to develop rapidly, also in Germany. The sums insured will then go up too. Q: Are you happy with the conditions in cyber policies? A: One problem is that there is no standard. This means that, at least in the first phase, we are going to find differing concepts that are not congruent with each other. This makes it more difficult to change providers, or to compare coverage. It is also difficult to arrange a layering of cover. So it will not be possible here to put several providers alongside one another, because the scope of cover is different. We will have to see whether a standard develops. Q: Will the recent floods and hailstorms have an effect on insurance prices? A: At the start we had very high catastrophe loss estimates as far as the floods were concerned. In the meantime that has been put into perspective and we can estimate the loss volume better. The figures have gone down considerably. But we now have a second large event through the hailstorms. That will be added up and will possibly also lead to discussions about premiums. This is all the more the case as we also have to cope with the matter of piped water damage in older buildings. It could be that premiums develop a slight upwards tendency in residential buildings insurance, or property insurance in general. But precisely in this sector there is a lot of new money around. These are two contradictory factors. What surprised me, though, was that the majority of flooding took place in zones 1 and 2 of the German insurers’ zoning model. This means that we have to question the insurers’ models. Q: How do insurers behave when it comes to claims handling? Is their service getting worse in this area? A: Driven by a number of factors, there are definitely changes to be seen in claims handling by insurers. Several things have changed, and not in the right direction—in particular for small and medium-sized companies. Q: Are there changes afoot in the role that brokers will play in industrial insurance? A: I think that whether anything changes, or not, relates to the professionalism of the risk manager. Where risks are professionally prepared, structured and brought to the market, the role of the broker will not change much. The brokers—at least the big ones—always have their place where global scope is concerned, both for placing international risks but also for arranging cover from international markets. Q: And what about in cases where risk managers are not so professional? A: Here the role of the broker will increasingly be that of a competitor to the in-house brokers. Brokers will try to show that they provide additional value, and then the captive broker must show that he also works to the same market standard. I believe that in-house brokers still have a great deal they can do. If they can show that they also bring extra value, apart from buying insurance, discussions about their validity are answered quickly and positively. Q: Industrial companies often complain that insurers are not innovative enough. The insurance industry’s reply is that companies do not buy the new products. How can this dilemma be solved? A: Both sides of the market will have to talk to each other, possibly with the presence of brokers. The increasingly critical eye of anti-cartel authorities makes that difficult though. You always walk on a tightrope. But I think if you keep to the established rules, you can certainly talk to one another without suspicions arising. Q: Where would such talks have to start? A: They would have to start with product development. As soon as a risk becomes recognisable but is said to be uninsurable or covered by insufficient capacity, you can certainly talk to each other on a wider basis. But don’t let’s deceive ourselves. Anyone can copy conditions once they are on the market. To that extent it is not really an advantage any more for an insurer to be the first mover. There you could, at the beginning, discuss certain framework conditions with those from the other side of the market. Q: How is Inex24 developing, there are a number of critical voices? A: There is one important market player who clearly stated that he does not regard the system as compliant. I personally have no experience, we have not tendered any risks via this platform. It might function for standard risks. But there are critical aspects. One is the storage of data, which, as far as I know, is done in a cloud. The second is that not every market participant can make offers via Inex24. And I have the impression that market participants on both sides are not being dealt with identically. For example, the companies that took part in the development of Inex24 are treated differently from those coming in later. So I think this is not a platform that will be developed for the really difficult and complicated risks.

View from the top—Hans-Jürgen Allerdissen

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