In the latest of a regular focus on European insurance companies and brokers, Post Europe talks to Esteban Manzano, managing director, Markel Spain.
How has the regulatory landscape changed in the country/countries you work in over the last five years?
The main change has been the Private Insurance and Re-insurance Intermediation Act, of 17 July 2006 (Ley 26/2006, de 17 de julio, de mediación de seguros y reaseguros privados), which regulates the role of intermediaries and their relationship with insurance companies, defining the following types:
Exclusive agents, who can only work with a single company
Linked agents, who are linked to one company but are allowed to place with others the business they cannot underwrite with their primary company
Bank-insurers: banking brokers
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?
Our regulatory framework is in line with EU countries, with some differences. In essence, these regulations aim to provide greater protection to consumers, so in some respects they are somewhat protectionist.
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"?
The insurance sector has traditionally been little valued by Spanish society. This perception is changing gradually, although the overall opinion remains negative. Anyhow, the banking sector is not particularly well regarded, especially after the economic crisis.
In Spain, insurers have not been strongly impacted by the economic crisis, when compared with other industries. A drop in consumer spend, however, has had an obvious impact on the insurance sector.
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?
In a globalised world, imports and exports of insurance products have become a reality. As a market, London continues to attract business from all over the world, and although local brokers prefer to place business locally, there are still niches and capacity shortfalls which require sourcing abroad.
How prepared do you believe the local market/markets in which operate is ready for Solvency II? What are your reasons for your answer?
The latest official survey published by the Spanish Insurance Business Association (UNESPA) demonstrates that the Spanish market is ready.
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?
Without a doubt, and probably more in Spain than in any other country due to its particular economic situation, with rising unemployment and negative GDP growth, the downturn is driving a drop in consumer spend and this is forcing companies to look for new lines, which in turn is bringing about excess capacity and therefore a decline in rates in order to offset the reduction in income.
As for the claims ratio, the trend points to an increase and this in turn will impact combined ratios. However, even if the claims ratios were in line with previous years, combined ratios would still suffer due to the decline in premiums. We may also see in increase in D&O liability claims, mainly due to the growing number of bankruptcy proceedings.
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 is really soft and we do not anticipate significant changes in the foreseeable future. On the one hand, competition is fierce in all the business segments and this results in declining premiums or at least a maintenance thereof. On the other hand, companies are experiencing a high excess capacity and a pressing need for premiums.
What are the biggest issues facing your employer in terms of distribution?
In order to achieve visibility in the market, sales and marketing tools need to be used. A personal and ongoing relationship with brokers is a critical strategy, particularly in the retail market. .
How much of an issue is broker remuneration/disclosure for your company and its clients presently?
How easy do you find it to recruit fresh talent? If there are any obstacles what are they?
The Spanish insurance market is not transparent, so it is not easy to fund the right people. It is a market which is frequently driven by contacts, although it is also a market where you can find skilled and professional workers.
Which of these insurance distribution model/s do you believe has the brightest future in the market/markets in which you operate and why?
It all comes down to the type of business in question.
Broadly speaking, I believe that the future lies in direct contact and having the right Business Intelligent System.
On another note, the broker plays a fundamental role, but it will be equally necessary to have enough IT tools in place to be able to develop the relationship with them with lower costs and in an efficient manner within a market which is mature and very competitive.
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