The Nordic region has become popular for big and small businesses alike and was recently highlight in the news as a terrorist target. Jakki May reviews how insurers have responded to this and asks what other risks firms in this region face.
Events that unfolded just before Christmas, when a suicide bomber failed in his attempt to bring chaos and tragedy to the Swedish capital Stockholm, showed that the Nordic region is not immune to global events and threats. Luckily the terrorist attack failed in its intent - not least for those working in the local Lloyd's office located just metres from the site. The event also showed the wider world the region is a target just as any other European country.
In terms of risk management, the terrorist threat is well recognised and insurers mostly include terrorism in their cover. It is very much a case of little and large when it comes to the Nordic region. The area is home to some of the world's largest corporations and has certainly moved with the times as some of the biggest names are involved in mobile technology, for example. At the other end of the scale, the region is also home to myriad small and medium sized firms, which have little connection to the huge conglomerates that they share a physical location with.
Insurance across the region reflects this diversity, catering to the major international accounts and also to the very local operations. For the first group, risk management is part of the fabric of the operation while the second group is unlikely to have anybody analysing risk at any level across the company.
Overall much of the market is extremely sophisticated, looking for innovation from insurers but other sections are still in need of some very basic education in terms of exposure to risk. And the market reflects Nordic society generally - Sweden for example, has high taxes but accepts huge social responsibility for its citizens.
Roman Still, client executive for Northern Europe at Munich Re, sums it up: "Social aspects play an important role in Nordic countries. The well-being and protection of workers and state welfare for its citizens are very important."
However, he does not believe "that this has an effect on the design or structure of insurance or reinsurance products". He explains: "Large industrial enterprises have been global for a long time now, with risk management at a high international level. Products are comparable with those offered by other European industrial companies. It is the same situation with market players in reinsurance."
At the primary level, he says many of the local insurers are also international players: "All large international reinsurers and brokers operate in these countries. Products are, therefore, the same as in other countries and I cannot see any developments that give rise to different needs and demands in these markets.
"The challenges in the Nordic countries are the same as in other European states. Industrial risks are becoming increasingly complex and require new, innovative solutions. The prevailing low interest rates are making it difficult for insurance companies to assess long-term risks and to determine adequate prices.
"This general feeling of uncertainty, which is still very evident despite the recovery in many industries, means that companies are taking a very close look at exactly what insurance they need and where perhaps savings can be made."
Erik Börjesson, Scandinavian country manager for Lloyd's, says, however, that competition is rife with plenty of appetite from insurers for local business. His view is backed by Denmark-based Ole Hesselager, chief risk officer, and group risk and investment manager at insurer Tryg, who believes insurers need to be careful before diving into the Nordic markets.
Mr Börjesson says that Denmark was traditionally the hub of the region but the emphasis has moved to Sweden in recent years with many multinationals, such as Nokia and Eriksson, basing their operations there.
Oslo remains the hub for energy with many oil and gas corporations based in the Norwegian capital. While in Stockholm, according to Mr Börjesson, there are many of the major international insurance names, such as Allianz and Zurich adding to the local companies, battling it out for a share of the lucrative corporate market. Programmes of €500m are not uncommon.
Catering for the smaller local markets, there are about four main players in each country. "A number of players strive to be pan-Nordic," says Mr Börjesson, "but only two or three have really achieved that at the moment."
In terms of premium volumes, there are about four carriers handling about 80% of the market in Sweden, Norway, Finland and Iceland - Denmark remains a little less concentrated with those four players sharing nearer 60% of the local business.
Mr Hesselager agrees, adding that this dominance, combined with competitive rates make it hard for anyone to break into the local markets. He warns although the business is attractive and there is a greater degree of stability in the region, people have to know the markets well and not just move in and undercut other players.
Much effort, he says, is spent educating insureds and working with local brokers to open insureds' eyes to the idea of risk management. Despite the terrorist attempt in December, that is not seen as a major threat in the way that other risks are.
For Mr Hesselager the greatest threat comes from climate change. After a record bad winter last year, and with a terrible start to the current season, he says the freezing temperatures and record levels of snow resulted in the highest levels of claims on record too. If this is a sign of things to come, he warns, the market is going to have to adapt and help insureds too. Renewable energy, which has been boosted by concerns over climate change, also brings its own risks.
An example of this is wind turbines. Insurable for the past decade, the risks have been well understood but wind factories based offshore have suddenly produced a raft of new risks and complications making the insurable risk far from straightforward, according to Mr Hesselager.
Overall, however, insurers agree that the corporate sector in the Nordic area is an interesting market with plenty to keep all the major insurers and brokers interested and active in the future.
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