In the first of a regular focus on managers of European insurance companies and brokers, Post Europe talks to Ralf Geck of German-based broker Ecclesia Group.
In the first of a regular focus on managers of European insurance companies and broker Post Europe talks to Ralf Geck of German-based broker Ecclesia, which is part of the EOS Risq group.
How has the regulatory landscape changed in the country/countries you work in over the last five years?
Germany has gone from a rather tight technical regulatory environment, into a system where the authorities restricted themselves to financial supervision, i.e. focusing on solvency and liquidity of carriers, which I deem more appropriate for our industry.
What is your overall impression of the body charged with regulating the local insurance market/markets in which you operate? Has this improved or worsened in the last five years?
The national supervising authority has changed for the better, as described above. The institution as such can be judged by the stability of carriers, where we did not have significant cases of insolvency or even bankruptcy of carriers since many years, thus helping the reputation of the insurance industry.
How much of a priority do you believe the local government in the territory/territories in which you operate place on having a thriving insurance mark?
The focus is more on personal lines and there mainly on life and health insurance, which I deem appropriate. Insurance tax for most lines, relevant for commercial buyers, is 19 % which I think should be lower, because it increases frictional cost. Meaningful finite risk and funding solutions can become unviable with this tax rate.
How is the insurance sector generally viewed when compared to other parts of the wider financial services sector such as the investment and banking communities? Has this changed in light of the economic downturn which has widely been labelled the "banking crisis"?
Up to now, the insurance industry has sailed widely unscratched through the banking crisis. The industry is seen mostly as stable and reliable, which we are and which is good. Life insurance has to correct some overdrawn expectations on projected interest rates, but this is part of necessary adjustments.
If and when do you think we will ever see a single common market across Europe in which insurance is sold on a truly pan-European basis?
The legal framework is mostly in place, but apparently customers want local services for their insurances. So far, I think we will always have local markets for many high frequency policies. Liability insurance is another area, where due to specific national legislation we will see national markets for many years to come. Arbitrage over national markets is very rare, cross border programs bought and agreed in one country, even for locations outside Europe are available.
How prepared do you believe the local market/markets in which operate is ready for Solvency II? What are your reasons for your answer?
Probably Germany is not different to other countries. Solvency II will require carriers to improve their own portfolio risk management and strengthen their capital base. This will require additional organisational measures and eventually different reinsurance agreements. Nothing carriers would not have considered after 09/11 and nothing they are not focusing on in the actual crisis. I hope Solvency II will not lead to reduced creativity in an industry that is to some extend already burdened with regulation as far as their operational model is concerned.
How has the global downturn impacted the wider insurance market in the territory/ territories in which you operate? Are customers cutting back on cover? Are you seeing an increase in claims and if so in what areas?
Rates are still rather soft and low, which helps maintain the scope of policies customers buy. Some customers abandon trade credit policies because of restrictions in scope, reduction of limits and increase in rates demanded by carriers.
What is currently happening with regards pricing and insurance rates in the country/countries in which you operate? How do you expect this to change over the next two years?
The market has mostly stabilized at a rather low level, We had a period of 5 to 7 years of soft market. As the insurance industry will see decreasing cash flow because of premium returns for last year and reduced annual premiums for this year, and the losses in the working layers not decrease in the same relation, I think we will see rate increases for the renewal 2010/2011. Rate increase will aim at risk quality and loss experience. General market increase like we have seen them in the past, are a "thing of the past".
What are the biggest issues facing your employer in terms of distribution?
Due to the relatively long period of soft market some clients have lost a little the focus on necessary consulting quality and ongoing service. A distribution driven by price requires selling the value of sound advice and quality service. Insurance is not a commodity like some people think. Clients need good advice on what to buy and the dynamics of risk makes ongoing service and adjustment of covers imperative.
How much of an issue is broker remuneration/ disclosure for your company and its clients presently?
I think this should be seen by client segment. The larger the client the more transparency can be an issue. I don´t know any client who does not have a good notion of his brokers remuneration, based on the total premium volume. Mainly the midsize industrial clients feel comfortable with the commission charged by the broker as long as they get the value added by the broker. The discussion over transparency is more driven by competition among service providers, than reflecting a real client need or concern.
How easy do you find it to recruit fresh talent? If there are any obstacles what are they?
There is clearly a chase for talent. This applies specially to good account executives and sales people. I think we lost to the banks as far as being a "sexy" industry over the last decade. This might change now, after banks are loosing some of their lustre. Our company stands for continuity and high professional ethics, which does not come as a surprise considering our shareholders; therefore we are an attractive employer. Fortunately we do not have these problems the market has.
Which insurance distribution model/s do you believe has the brightest future in the market/markets in which you operate and why?
Talking about commercial insurance the broker market has gained market share over the last decade and will continue to do so. Independent and unbiased advice and client focussed service is the reason. All other distribution channels cannot provide these qualities. On strongly standardized products in the personal lines business, such as motor insurance we will see an increase in online sales.
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