View from the top – Rüdiger Auras, Managing Director of the DVS

Patrick Hagen: We frequently hear complaints that insurers are not delivering enough innovation—is that changing? Rüdiger Auras: On the whole I am not really unhappy about the insurance industry’s readiness for innovation. There is some movement, for instance in non-physical business interruption, or with cyber risks. I could complain that everything moves too slowly, but new products have always needed a certain time. PH: So you are happy with the offers available? RA: I miss the readiness for risk. Sometimes I have the impression that insurers definitely have products up their sleeves but do not trust themselves to bring them to the market. Or they bring them out, but with prices that are much too high. It often seems that the insurance industry is not prepared to accept any entrepreneurial risk.hidePH: Do you have an example? RA: Cyber risks are a good example, or non-physical business interruption. There are products available, but there is relatively little capacity and this is sometimes with prices that make this cover unattractive. PH: Why is that? RA: I believe this is connected to insurers’ lack of readiness for risk. Then there is probably Solvency II. Insurers are worried about adequate capital ratios and therefore demand high prices. PH: What areas of risk should insurers be looking to better address? RA: Insurance of reputational damage is one of the important themes for us. Munich Re has developed a product and so has Allianz. But here we are right at the beginning. We have to wait and see whether there will ever be a development in the direction of a standardised product. With cyber risks it seems to be going in that direction, but here also it was at first only with individual insureds who had had cover or cover extensions to their contracts for years or decades. PH: Are your members satisfied with the sums insured for cyber risks? RA: For many companies—and that doesn’t have to be blue chip groups, it is also true for larger medium-sized groups—I do not believe that the sums offered are adequate. And if I cannot obtain the necessary capacity, the best wordings are of no use to me. PH: But couldn’t buyers bundle capacities from several insurers to meet their needs? RA: That is not so easy. Even if I have three or four insurers offering cyber products, it could be that it is not possible to bundle the capacity because each has differing basic conditions. PH: How widespread are cyber policies among your members? RA: I know some companies that have solutions for individual cases or have already bought a standard product. But this is still not an area-wide product like liability or property insurance. PH: What about accusations from insurers who say that industry demands new products but doesn’t buy them? Do they have an argument here? RA: Not necessarily, but if they offer a new product and bring it onto the market as a high-priced product most insurance buyers decide that risk transfer at that price isn’t worth it. In my opinion we are at present in a situation in which products are available, but either the price is unacceptable or the amount of cover is too low. PH: Where else are there problems in obtaining sufficient capacity? RA: We see it in the natural hazards sector, in certain critical zones, not necessarily in Germany but overseas. There we can see a certain caution. PH: In motor fleet business insurer Basler has publicly considered withdrawing from this market. What would that mean for fleet business? RA: We don’t see that as a dramatic event because Basler is not one of the big providers. But prices here will rise because of the claims ratios. I don’t see difficulties with capacity here. PH: If we listen to the insurers, prices are going up across the board. Is that so? RA: We know the announcements of insurers regarding rising prices. I can understand that they are saying that. But when new capacity is coming onto the market every day, it is difficult to go along with these claims. PH: What effect is reinsurance pricing having on the primary market? RA: A certain discipline appears to have emerged. This of course has an effect. So we don’t expect that prices will continue to go down. But neither do I see wide-ranging increases for industrial companies. Spectacular large losses leading to substantially worse results have not happened over the last 12 to 18 months, as far as I am aware. PH: And what about this summer’s floods and hailstorms in Germany? Wasn’t that spectacular enough to shift the market? RA: Industrial companies were not so hard hit by the floods, they affected private and commercial clients more. For this reason, the pressure in industrial insurance can’t be so strong. PH: What about the ever-recurring subject of international programmes? Do you foresee any issues here? RA: In the next few years we could have a problem putting international programmes into practice because of the differing supervisory and taxation situations in different countries. That makes it more and more difficult to put such programmes together. PH: But hasn’t this problem been known about in the insurance industry for years? RA: Yes, and the big industrial insurers are doing their best to provide solutions. But there is great uncertainty around this. Every provider has its own solution. If you ask five insurers, you get different answers about what is possible in a particular country. How is a client to act? In my opinion, the problems arise because supervisory and tax authorities today check such constructions much more carefully. PH: What effect does this have? RA: In the worst case it could lead to a position where international programmes are no longer possible. This is not yet the case, but it is a matter that we will have to consider over the next few years. PH: What is the position concerning claims handling of insurers—do you and your members observe delays in payments? RA: We discussed this in the spring with various members. There is no simple, single answer. There are certainly individual cases, more in the liability sector than in property, where delays take place and where certain tactics could be suspected. PH: Are you satisfied with the role being by brokers? RA: In Germany in the last 20 years we have seen a much more diverse broking industry than ever before. The smaller brokers have found ways of keeping up with the big brokers on an international basis. Or they have specialised in other subjects. Brokers have proved to be very resilient. The competition arising from this is positive for us.

View from the top – Rüdiger Auras, Managing Director of the DVS

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