In industrial insurance, the signs point to a storm

October 27, 2020 – The industrial and commercial insurance brokers have to prepare for a very tough renewal round for 2021. The insurance companies want to reorganize many industries comprehensively. There is a hail of premium increases and capacity bottlenecks. This should make communication with customers more difficult. The bottom line is that mediators have a lot of work to do in the middle of the pandemic. That was shown at the DKM.


“Industrial insurers have a great need to reorganize their business,” said Thomas Olaynig, Head of Placement & Specialties and Managing Director at Marsh GmbH, on Monday at the trade / industry / life congress at the trade fair DKM.

The combined ratio deteriorates

Thomas Olaynig (archive image: Schmidt-Kasparek)
Thomas Olaynig (archive image: Schmidt-Kasparek)

Many insurance companies are already close to or above 100 percent in their combined ratio. According to an analysis by Marsh at the, the combined ratio in industrial insurance was AIG Europe SA 103.7 percent in the first half of 2020 compared to 99.6 percent for 2019. This has exceeded the magic limit of one hundred.

It looks similar with Axa Insurance AG with 101.7 (96.4) percent, Chubb European Group SE with 101.0 (90.6) percent, Markel Insurance SE with 103.0 (94.0) percent, Munich Reinsurance Company AG with 103.0 (101.0) percent and Score SE with 102.3 (99.0) percent off.

The combined ratio is very gloomy for them Swiss Re Group with 115.8 (107.8) percent, while the Zurich Beteiligungs-AG with 99.8 (96.4) and the Allianz Global Corporate & Specialty SE (AGCS) are even better in the race with 96.7 (95.5).

While the effects of Covid-19 would be relatively minor in Germany, Society of Lloyd’s reckons that the effects on the global insurance market will be over 200 billion euros. Olaynig: “These numbers will definitely continue to develop.”

Corona acts like a turbocharger for portfolio optimization by insurers.

Thomas Haukje, President of BDVM

The hard market is fueled by Corona

Thomas Haukje (Image: BDVM)
Thomas Haukje (Image: BDVM)

The industrial insurance market was “tough” even before the corona pandemic. “Corona acts like a turbocharger for optimizing the insurers’ portfolio,” said Thomas Haukje, managing director of Nordwest Assekuranzmakler GmbH & Co. KG and President of the Federal Association of German Insurance Brokers (BDVM).

He also outlined a very strenuous and difficult renewal for the German industrial and commercial market for 2021. In property insurance, for example, there would be significant premium restructuring and industry-related capacity bottlenecks. “I call this a risk discrimination that is getting worse,” said Haukje.

The meat, wood, electroplating, chemical, petro and recycling industries would be particularly affected. In addition, the cover would be undermined by pandemic and cyber exclusion.

In the Directors-and-Officers-Versicherung (D&O) the scandal about the Wirecard AG would have “brought the barrel to overflow”. In addition, there is the fear of the financial consequences of Corona. Now there would be a doubling of premiums, a reduction in capacities or the suspension of new business. So have Starstone Insurance Bermuda Limited completely abandoned the business.

Home office protection is difficult

In addition, the underwriting policy of insurers at D&O is becoming increasingly strict and there are “provocative” insolvency exclusions.

It is similar with cyber insurance, the previous star of hope in industrial and commercial insurance. The providers would react very restrictively to the fact that entire workforces had been sent to the home office due to the pandemic and thus could not always use the more secure IT environment of the office.

Here, too, there would be a reduction in capacities, an increase in premiums and revision of conditions that are disadvantageous for customers. Haukje called the reaction to increased security risks from home office “sad.”

The attempt to agree multi-year contracts with fixed rates of increase would in many cases be downright “wiped off the table” by insurers. That is problematic.

Medium-sized insurers as saviors in an emergency?

The BDVM President also made it clear that insurance brokers would have to adjust to a tough market for a long time. Therefore, neutral and competent consultants, i.e. insurance brokers, are particularly necessary at the moment.

Haukje pointed out that medium-sized insurers could possibly help out during the crisis. These providers are currently being massively upgraded, hiring new underwriters, expanding capacities and improving their internationality.

The speaker generally saw a high workload for industrial and commercial insurance brokers.

If the customer is ready to take on more risk, he thinks […] more attention from the insurance companies.

Yorck Hillegaart, shareholder and managing director of the Funk Group

Hillegaart: Don’t let go of the reins

York Hillegaart (Image: Schmidt-Kasparek)
York Hillegaart (archive image: Schmidt-Kasparek)

Therefore, Yorck Hillegaart, managing partner of the Funk Group GmbH International insurance brokers and risk consultants ensure that the insurance brokers “must not give up the reins” to the insurance companies.

Smaller companies should also enter into negotiations with insurers at an early stage to determine in which direction a restructuring could take.

“In an irrational environment, you have to use a lot of rationality to explain to your customers how the current situation came about,” says Hillegaart. It is important to develop “deductible models” in advance. ^

“If the customer is willing to take on more risk, he will find more hearing in the insurance industry in the current difficult situation.” This would improve the customer’s attractiveness.


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