MDS MAGAZINE ENGLISH VERSION #9 SUMMER 2016
ANTONIO HUERTAS ACCLAIM FOSUN GEOPOLITICAL ON MAPFRE “Mr Singapore” Chinese group on the RISKS Global business success success story insurance “super highway” Beware of the new with society at its heart world order
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All aircraft offered by NetJets® Europe are operated by NetJets Transportes Aéreos S.A., an EU air carrier. MDS magazine
Director José Manuel Fonseca
Editorial Committee Ângela Fonseca Jacqueline Legrand Liliana Baptista Paula Rios Susana Neiva
Contributors Adrian Ladbury Alain Simon Anthony Lim Corey Gooch Daniel O’Connell David Anderson Gustavo Quintão International SOS / Control Risks Iulia Simon John Bugalla Jorge Luzzi José Ribeiro Karen Jenner Paulo Varela Pedro Castro Caldas Prakash Ratilal Rob Hough
Title FULLCOVER
Author MDS Group
Edition Number 1st edition (Fullcover 9)
Publisher MDS Corretor de Seguros, S.A. Av. da Boavista 1277/81, 1º, 4100-130 Porto, Portugal mdsinsure.com
Place of Publication Porto
Date of Publication July 2016
Circulation 2500
Design Studio Dobra
Cover Photo Pedro Lobo
Printing & Finishing Lidergraf Sustainable Printing
Legal Deposit 374241/14
ISSN 2183-6787
Partner 4 fullcover
Editorial
We are delighted to bring another issue of FULLCOVER, the MDS Group’s magazine, to a close. It is distributed in many different countries and is today a benchmark publication on the international market.
New for this issue is the fact that instead of a bilingual issue, we are actually publishing two separate versions, one in English and one in Portuguese, the fourth most-spoken language in the world and of which the group is extremely proud. We believe that by doing so we have made the magazine easier to read, as well as improving the graphic and design quality.
António Huertas, Chairman and CEO of the MAPFRE Group features prominently in this issue. Our team had a very interesting conversation with him in which he shared his considerable knowledge and enthusiasm for the extraordinary mission that MAPFRE has been engaged in around the world.
We bring you first-hand the impressive story of growth of Fosun Group, with special emphasis on the interview with the President of Fosun Insurance Group, Lan Kang, and the President of Fidelidade, the Group company in Portugal, Jorge Magalhães Correia.
The issue contains a number of articles that I would like to draw your attention to in particular: the one about Acclaim, Brokerslink’s partner in Singapore and its leader Anthony Lim, a friend and outstanding figure in risk and insurance in Asia; our traditional dossier, which in this issue focuses on geopolitical JOSÉ MANUEL FONSECA → MDS Group CEO risk; the importance given once again to Risk Management and ERM; and lastly the first-hand unveiling of the MDS Group’s new image on the market. See it on pages 146 and 147, where you can also read about the continuous innovation in our company and our non-stop growth and expansion.
And if you think this issue is special, wait till you see the next one, when we will be celebrating the tenth anniversary of this unique project!
WE WILL BE THERE!
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44 FOSUN
On the insurance superhighway Lan Kang: Fosun playing the long game Jorge Magalhães Correia: Fidelidade – going from strength to strength
64 EVADING INSURANCE C PREMIUM TAX ERRORS By Karen Jenner 9 ANTONIO HUERTAS
MAPFRE’S Chairman and CEO 68 GEOPOLITICAL RISKS DOSSIER 22 PEDRO CAMPOS When the news is writing a page of History Managing and mitigating the evolving threat of terrorism Sailing, risk and passion Travel security and crisis management Geopolitical risk: what products & coverages? New ideas for tackling geopolitical risks in 29 PEDRO MACEDO business Geopolitical overview Remembering
91 RIO 2016: 30 ACCLAIM INSURANCE MANAGING RISK IN BROKERS THE OLYMPIC GAMES The pursuit of a dream Singapore insurance market: facts & figures A view by Jorge Luzzi Singapore by Anthony Lim 95 ERM
Alessandro di Felice: a new model for risk management ERM: giving your firm a strategic edge
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104 FRANÇOIS SETEMBRINO
Remembering
107 BROKERSLINK 152 THE BRAZILIAN
Jirina Nepalova: an example of top expertise HEALTHCARE MARKET in the insurance industry Brokerslink in Africa: Ghana and Tanzania By Gustavo Quintão Brokerslink: from idea to reality – a transformation story Brokerslink news 156 ACE AND CHUBB MERGER
126 ANGOLA: PRESENT Growth, discipline, innovation and service top AND FUTURE of agenda for the new Chubb Veronique Brionne on Chubb Iberia By Paulo Varela
134 162 TRIVIA: THE BAGHDAD A VISION OF (AND RAILWAY FOR) MOZAMBIQUE By Pedro Castro Caldas
By Prakash Ratilal
166 READINGS 138 STEVE HEARN
Building the broker of the future
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Jacques Goldenberg: from Egypt to Brazil, a route charted by passion Enrique Schoch: a sailor in the world of insurance The power of will: discover MDS's new brand MDS news
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INTERVIEW WITH MAPFRE'S CHAIRMAN AND CEO
ANTONIO HUERTAS
From a Spanish company to a global insurer, MAPFRE epitomises how corporate ambition and success work hand-in-hand with a strong commitment to social responsibility. fullcover meets Antonio Huertas, MAPFRE's Chairman and CEO, to find out more about the company and what drives the man leading it.
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Antonio Huertas interviewed by Enrique Schoch and Paula Rios of MDS Group.
It’s fascinating. When you start getting involved with insurance, you see how you are actually helping people, other companies, and your environment. I think that’s what makes us passionate about our job.
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How did a man from Extremadura who What were your ambitions when you finished studied Law at University become the university? Chairman and CEO of MAPFRE? My vocation was clear: to work as a lawyer, and so I I studied Law, and wanted to be a lawyer. When I started an internship in a law firm. But things moved finished my studies, I did not know anything about slowly that way, so when I saw the advertisement I insurance or MAPFRE. I got the chance of working for mentioned earlier appear in the newspaper, I applied and MAPFRE on a trainee project after reading an article in I was selected for a MAPFRE trainee project. a newspaper that the company was looking for young When you start working in insurance, you do not really people with little knowledge about insurance. So, know where you will end up. My intention was to try to although it was not my first job option, in the end I was convince someone that I could work in the claims or legal thrilled to work in the world of insurance, and I have departments, but that never happened. ended up loving my work and feeling passionate about I was guided in another direction because they saw the job. other skills in me – most likely a vocation for learning. We have a great advantage in MAPFRE. It is a company It was an important time for the company and Spanish based on meritocracy and professional development society. There was the birth of business technology, which responds to our merits. The company trains us and changes in consumer consumption and much more helps us develop. Those who have the attitude and better open competition and the flexibility of the relationship use their chances, end up making the most of them. with the client. The Spanish insurance market was an Obviously, not everyone can become Chairman and exciting place. When I joined MAPFRE in 1988, it was CEO. In my case, I had mentors that helped me a lot the benchmark Spanish insurance company and it was including my predecessor as Chairman, who obviously clearly a very appealing challenge. My career has not decided and proposed to the board that I should take turned out as I originally envisaged, but there is nothing I the role. regret about it. At MAPFRE, relationships are very open and sincere, and so, after only three or four months of starting work, Is it true that most insurance professionals I was having meetings with the general manager. This begin their careers indirectly, but end up continues today. Working for MAPFRE gives people lots of being enthusiastic about the area? opportunities and advantages to grow and develop. I always say that ambition is important, it is not a Yes, it’s fascinating. When you start getting involved negative thing. But you need to use it in the best sense. with insurance, you see how you are actually helping Ambition is not about hindering others; it is the complete people, other companies, and your environment. I opposite. It is about having the capacity to learn, grow, think that’s what makes us passionate about our contribute and want to continue to do more things. job. Commercially, we are involved in a huge social This does not involve any negative attitudes towards activity – we receive premiums from a lot of people and colleagues and team mates. I think camaraderie and those funds are there to help others in contingency, in ambition are compatible. misfortune, and in difficulty. In reality, a natural process is happening. If we do well as a company, if the human resources management is appropriate and we have the right tools to meet the needs A social role that is not well understood, don’t of team members, in the end, we must try to place the you think? best people in the correct positions. The best person is not always the one who is around, or the one who has We probably do not explain it well enough. There are more knowledge, who displays the most skills for a task. complex relationships. We have to establish a very This combination requires a very complex analysis. closed relationship framework that enables us to All of us who have managed people know that this control our activities in order for this to be profitable, learning process – handling the team – is very important. long-term and sustainable for all of us. I think that can You need to be able to count on these people later on to be difficult to articulate. help you and to contribute to make the project a success. This is the great challenge that, in my opinion, we all have. In MAPFRE, we have set up an active transparency project to try to reach all stakeholders more directly and clearly. To try and make them see that there is much Ambition is not about hindering others; it more to the insurance business than really meets the eye, and that MAPFRE occupies a model social position is the complete opposite. It is about having for many other activities related directly, or indirectly, the capacity to learn, grow, contribute and to the company that we have to strengthen and support. want to continue to do more things.
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When you became MAPFRE’s Chairman and transforming rapidly. The world has changed too, look CEO, what were your main objectives and at technology, and access to it, for example. The tools goals? Do you think you have achieved them? that exist nowadays to help these relationships did not exist in the past. I had three basic objectives. You have to accept that you It is not that we did things wrong before, but I have to gain the respect and credibility of those who believe we were not aware that we needed a little you are going to lead. You are going to be the first among more closeness. In that sense, I think that we are now equals. At MAPFRE, when you reach a senior position, reaching that much more as a company. you have already been working a lot in the organisation, so you have to become the leader of a team in which probably one of the members had been your boss. This is the first challenge. The second is understanding the success model. When I took over the presidency, it was at a very successful period of time in our history, in terms of Diversification is the main guarantee results and international expansion. Leading a team of success in what we do – to the in which I was the youngest, I had to convince my colleagues and my team that the project had to undergo extent that, if you do not diversify, you some changes, some variations, to be able to address the concentrate the risk a lot more and you challenges that we ourselves had already determined. We did a strategic analysis at all levels around the world, are not managing it adequately. where we completely reviewed what we were and what we would like to be. This led us to a new business model. The second important objective, therefore, was to reach success with this new business model and I think that we are getting there. Why has MAPFRE decided to become a global The third objective was to enhance MAPFRE’s DNA of company by establishing itself as one of being a socially engaged company. Ours is a company Latin America’s main insurers? Is Asia in with values, with institutional principles and an MAPFRE’s plans? internal culture that respects these values. We do this both as a company and in Fundación MAPFRE but it all Diversification is the main guarantee of success in needed to be reactivated at a worldwide level. what we do – to the extent that, if you do not diversify, It is not only about charity and donating money. It you concentrate the risk a lot more and you are not is also about being engaged in an effective way to managing it adequately. collaborate and improve things. I think that we are MAPFRE reached a very important market position in reaching this objective too. Spain in the late 1980s, and it realised it had to extend a So, for me, it was all about the people, a business bit more, and branch out its business. project and the social presence of the company. We developed some reinsurance activities at an international level by setting up MAPFRE RE which is now 40 years old. Have those values made MAPFRE seem more We had gained great knowledge of the Latin open now than probably some years ago? American market, obviously because of the closeness of the language and the culture, and because it was I think that we are gaining openness because we are an under-developed insurance market. So MAPFRE’s gaining transparency in MAPFRE. natural diversification process was to go to Latin MAPFRE has always been proud of its social values, America, but it was not easy. but maybe it has not been able to express them in a Growth in Spain meant that resources had to be kept practical way because it has been more of a thought here, so investments in Latin America were low. We rather than a perception. bought new companies with problems and little room I really think we are now achieving this with our for manoeuvre, but we had a good spirit and the backing clients, trying to see how they see us from the outside, of the mutual that supported the business development. and we are really trying to correct any deficiencies. With patience we developed a long-term project that We do not want to be a closed company. We open the brought us a lot of success. It consolidated us as the doors wide to anyone who comes our way, whether it’s a largest regional insurance company in Latin America. competitor, a regulator, a company from another sector, Then, naturally, through reinsurance and other or the man on the street. activities, we saw that we could reach other markets. But we also have to understand that it is a Nowadays, MAPFRE works with different companies successful model that has grown over 20 years, and is in more than 100 countries worldwide. Today, it is
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present in 50 markets, 50 countries with their own structure. We are a large insurance company in the Northeast Region of the United States and in Europe, even without considering Spain, we have a presence in the UK, Turkey, Germany, Italy, Portugal, and Malta. Asia represents a third of the worldwide insurance market and, as a global insurer, MAPFRE wants to be, and must be present there. We have had a presence in the Philippines for more than 20 years, and 12 years ago, we started in China. At that time, foreign insurance companies were not allowed to operate without a partner, and we did not have one. We decided to get to know the market by launching a service company that provided processing, advisory and call centre know-how services – and we have been doing this ever since. We opened small platforms for the assistance unit and, recently, we have broken into Indonesia with the acquisition of a relevant local company. The immediate future is that we are on the verge of obtaining a license to become insurers in China. Our 12-year working experience has given us the capacity to develop the Chinese business, and we will start with car insurance. We are working, as I always say, for MAPFRE’s next generation. Asia is not going to be important in terms of numbers for this generation’s employees and directors, but it will be for the next one. We have to stay in Asia and we have to get to know it. We have seven regional hubs around the world and one of them is Asia Pacific, based in Shanghai, and this allows us to get to know the area. South-East Asia offers us lots of opportunities, as does China because of its immensity. We are going to work in the Shandong province which has 90 million inhabitants. We are close to receiving the license, and we believe that by the end of next year we will be selling car insurance through a purely digital model.
The market for commercial risk and insurance is changing very fast, while very important clients – who are constantly expanding – are looking for wider services and cross-border solutions for emerging risks. What do you think about the development of MAPFRE’s service in this new environment, Nowadays, MAPFRE works with different for example, through a client such as Sonae that is a traditional client of MAPFRE? companies in more than 100 countries worldwide. Today, it is present in 50 markets, Major corporations demand that insurance services providers offer the solutions they need. We cannot 50 countries with their own structure. We are change Sonae’s business model, we have to learn what a large insurance company in the Northeast it does and stand by them, and every other client, and that requires huge flexibility. Practically everything is Region of the United States and in Europe, personalised and customised for the client and not the even without considering Spain, we have a other way around, as it is with packaged services –, where we have traditionally been experts. Here we presence in the UK, Turkey, Germany, Italy, can clearly offer solutions that are successful in Portugal, and Malta.
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MAPFRE is an independent Spanish multinational business group with 83 years of activity that operates MAPFRE in all areas of insurance. It originates in a mutual entity created in 1933 called “Mutua Agrícola de los WORLDWIDE Proprietarios de Fincas Rústicas de España”.
MAPFRE is presently in 50 countries, five continents, with a global worldwide net of more than 80.000 agents & brokers, more than 38.000 employees and 34 million clients.
MAPFRE has a strong presence worldwide BUSINESS IN MORE and more than 50% of the business comes THAN 100 COUNTRIES from this global activity.
34 +38.400 5.848 80.000
MILLION CLIENTS EMPLOYEES OFFICES AGENTS & BROKERS
PREMIUMS Brazil Iberia 4,814.2 (20.0%) 6,696.7 (27.8%)
North America 2,776.8 (11.6%) 23,995.9 MILLION EUROS
LATAM (North) Mapfre Re 1,849.6 (7.7%) 3,731.9 (15.6%)
LATAM APAC (South) 114.6 (0.5%) 2,030.4 (8.5%) EMEA 1,981.1 (8.3%)
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MAPFRE GROWS IN STRATEGIC MARKETS
PREMIUMS (LOCAL CURRENCY)
SPAIN ⬏ USA ⬏ PREMIUMS DISTRIBUTION NON LIFE PREMIUMS 27.8% +1.8% +8.7%
HE ALTH MEXICO ⬏ +7.4% +62.4%
AUTO TURKEY ⬏ +0.9% +41.3% 72.2% BRAZIL ⬏ OUTSIDE SPAIN +3.6% SPAIN
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Fundación MAPFRE Madrid.
other markets, or which we have already proven, and incorporate them for these risks. For example, cyber security is a big issue for all major companies. It is about knowing the specifics, We cannot take the plunge without a life vest. We what the client needs, and have to learn, and we are testing in some markets with specific clients to see how it works out with the objective committing to a long–term of extending the service. It is not a problem of capacity. relationship. We must try to manage There is capacity in the market, and MAPFRE cannot provide much more value there because of competition the relationship by understanding from other players with more capacity than us. what they need and expect from It is about knowing the specifics, what the client needs, and committing to a long-term relationship. the insurer. We thank Sonae for We must try to manage the relationship by understanding this relationship and understanding what they need and expect from the insurer. We thank Sonae for understanding this of course, the confidence they have relationship and of course, the confidence they have placed in us and the continuity over placed in us and the continuity over many years of work. We show it by working with clients where we many years of work. are able to keep this long-term trust. And with major risks, we cannot think about short-term. That is neither interesting for the client nor for the insurance and reinsurance world.
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MAPFRE’s three-year global strategic Would you highlight other impacts? plan is called Focus on Profitable I am a strong believer in the credibility of the image of Growth. Growth and profitability our country. are linked. If there is no profitability, We are a company of Spanish origin having reached markets where, many years ago, we were appreciated we do not want growth. This year because we were the great European economy that had we don’t mind sacrificing growth grown and created a lot of employment. Suddenly, the crisis started to show some uncertainties. in exchange for maintaining levels To really convince those who were the most critical of profitability because that is what that we were not an economy in crisis which was what the numbers showed, but that we had the capacity gives us the capacity to continue to to recover much faster than others – which is what grow without getting nervous when happened. This has really given a lot of credibility to MAPFRE’s image. markets go wrong. But, what’s more now only 30% of our business is in Spain, and 70% of our revenue, and the majority of our profits, come from outside Spain. In other words, MAPFRE has the capacity to work in adverse environments in a crisis, such as the one that happened in 2011. It allowed us to say “we are going to do it, and we are going to do it well” and that was an important message for the organisation. What kind of impact has the Spanish debt crisis had on MAPFRE’s financial situation performance, and how has Spain managed How did it affect your actions? this crisis? In effect, how could we not be affected by the Spanish It has affected us, undoubtedly. Firstly, because crisis? If the GDP was reduced nearly 10%, if three or four MAPFRE’s primary market continues to be the Spanish million more jobs were lost, if families could not pay for one, and the Spanish economic situation during these their insurance, if people were becoming unemployed, last years has not been good. if there were nearly two million families where all their The insurance market has shrunk. Companies had family members were unemployed, that had to affect us problems surviving, and a lot of them closed down. Many because we lived in that reality. others cut back on their activities and reduced in scale. But we also came to accept it and adjusted costs so The insurance sector had to acknowledge this as to be able to be more competitive and offer lower situation and accept it, not only by trimming policy insurance rates. We modified the products so that conditions or limits but also by adjusting market rates. they could be more accessible for the consumer and I have to point out that those in the Spanish business we took an important step in our internal structure sector that have survived, which is the majority, have to be prepared for new, more flexible, more agile been tremendously honest and loyal to their insurance circumstances, such as embracing technology to try to providers. This means that there have not been major simplify processes. upheavals in terms of companies moving around, We simplified MAPFRE’s own structure in order to looking for the best price. tackle more challenges, and we even had the courage MAPFRE was substantially affected by the Spanish to take on new business models in the most difficult sovereign debt ceiling, particularly for reinsurance periods of the crisis. and global risks. This was because the reduction in the The Verti digital distribution model of car insurances rating affected the underwriting capacity. was launched in the midst of the crisis. “How do you When Spain was downgraded to BBB, we had some dare do it?” we were asked. Not only did we launch it problems. MAPFRE Global succeeded in remaining two in the midst of the crisis, but we believe that the crisis or three notches above the Spanish sovereign debt, but helped us learn and develop this model to export it later we had to travel the world, visiting each client and each to China and the United States. reinsurer, to convince them that sovereign rating was one thing and MAPFRE’s situation another. We have never had any solvency problems, and our results have been continuously good year after year. We haven’t reduced returns in any year. Our rating has continued to be good, and clients trust MAPFRE.
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Having seen MAPFRE’s first quarter results, could Brazil be a problem in future?
Two years ago we grew 16% and now we are growing 1% in local currency, but that is normal. In Spain we have seen decreases for three or four years. It does not scare us. We are told: “If Spain goes down, MAPFRE will no longer be MAPFRE”. No, Spain is simply not going to go down. This is very clear to us. Brazil will not go down, but it needs an important adjustment. It needs to make its labour structures more flexible. It needs to be much more competitive in productivity and it has to gain efficiency. That requires political measures from the government. We are aware that, along with international investors, they do not like the current reality but it is a great country with a significant capacity for productivity. With a huge population and favourable demographics, it can do whatever it sets out to do. Moreover, it has a plentiful natural resources, energy resources, and local market resources. As a result of all that, Brazil should not have a problem. MAPFRE’s three-year global strategic plan is called Focus on Profitable Growth. Growth and profitability are linked. If there is no profitability, we do not want growth. This year we don’t mind sacrificing growth in exchange for maintaining levels of profitability because that is what gives us the capacity to continue to grow without getting nervous when markets go wrong. It allows you to act naturally to tackle problems because you know that the business you have is very safe, and that you can still have some room to manoeuvre with the margin and negotiate with intermediaries and clients so that we can all cope with the most difficult problems. So we have to have confidence in Brazil in the same way that we do in Spain. In Spain, politicians did their work and they also have to do it in Brazil. Not MAPFRE headquarters in Madrid. everything is in the hands of the company and society.
What do we have to do to prevent a crisis like the one we had from happening again?
Society, education, values, a culture of effort, fighting to live in a fairer and more balanced society are all Fundación MAPFRE has an important role. concepts that are essential for society’s stability. If we It is a constant and is MAPFRE’s largest lose that, crises appear. And it’s not an economic crisis but the economic part is a consequence. shareholder. This gives us a long-term We could not have imagined the harshness of the final confidence because the main shareholder consequences that countries such as Spain and Portugal suffered, but we undoubtedly knew that we were losing shares our business interests and carries out elements of social trust that we have to recover. an activity based on giving back to society. It I think that we have to go further and demand from society and companies that education, training and helps to improve what we consider basic in a development must be based on merits, learning, patience community – education, health, culture and and a long-term commitment. This is the main moral lesson that I have seen, personally and in my company. improved living conditions.
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How can MAPFRE help? It tries to show, in a few steps, how to save the life of a child who has suffered a sudden cardiac arrest. In Spain Maintaining this policy of standing by our word. We alone, more than 200 teenagers have died because they have redefined our values. The first one is solvency play football at weekends in fields without a medical and the second is integrity. We said before “integrity service. There are many children with heart problems is everything; it is any behaviour that involves that have not been diagnosed. being respected in the long-term by all stakeholders, We are taking this app all over the world where supervisors, administrations, everyone”. And we have football is huge. Trying to avoid cardiovascular diseases, to be honest at all levels. trying to avoid obesity – we are very involved in this. Then we collaborate with a lot of institutions that do research. For example, the Pro cnic Foundation What is the role of Fundación MAPFRE? led by Doctor Valentín Fuster, one of the world’s most What is its contribution to MAPFRE, as well preeminent authorities in cardiovascular research. We as to society in general? are doing a project in Spain called Women for the Heart. This social commitment and an understanding that we Fundación MAPFRE has an important role. It is a have to devote time to help, is important to us. constant and is MAPFRE’s largest shareholder. This gives An experience has come from America – that is us a long-term confidence because the main shareholder not very developed here in Spain – the concept of shares our business interests and carries out an activity volunteering. based on giving back to society. It helps to improve what In Europe, we traditionally have not been very we consider basic in a community – education, health, developed in this field. Society has evolved so much culture and improved living conditions. that we sometimes think that everything will be given Our commitment is to return, or to give back to society. For example, when we talk about accident prevention, private or professional, as well as accident prevention on the road to improve road safety, we are making a huge contribution. We have done this in Spain for 30 years and We have ambition to grow, but what is are now bringing it to all the Latin American countries. In road safety, each little step we take avoids hundreds important is to continue to be a solid and and hundreds of traffic accident deaths in Latin America. stable company, with continuity in the With regard to training, we have general insurance and finance training. We understand that people have long-term. And from a social point of view, made wrong decisions due to lack of training during the to continue to maintain and increase our crisis. People bought products they should not have due to bad advice but also due to lack of knowledge. social responsibility commitment. We have just created a game, we call it ”PlayPension”, similar to Monopoly, and it helps you learn to make financial decisions in your life. We want to provide it for free to educational centres all over America and Spain so that children can learn to us by the State. In Spain, the family has become more that basic financial knowledge is important in order to active again because we had to help each other. make appropriate decisions. A volunteering plan, approved by MAPFRE and Culture is very important, too. We know that societies developed by Fundación MAPFRE, is based on the fact which do not have interest in culture end up losing that the company gives extra holidays to those workers their personality and their values. Knowing our history who want to do volunteering. helps us avoid future mistakes. In every country, we are Not only do they contribute with their time, but if working with teachers and local historians who have a employees want to use a week of their holidays to do slightly more neutral overview of what evolution has volunteering in a project from Fundación MAPFRE, been like from the time of Latin American countries’ MAPFRE will give them extra holidays. independence up to modern times. The social element is very important, as you can see, We have our own important art collections that and we have to make it compatible not only from the we take all over the world. In Spain and in Brazil, we Fundación MAPFRE'S perspective but also from that are staging exhibitions of masterpieces and getting of the company, what we traditionally call Corporate involved in sponsorships so as to be able to help to show Social Responsibility. In this regard, we have just these works of art. approved two social commitment objectives. We are also promoting our healthy lifestyle. We have In Spain there is a legal obligation that at least 2% of the developed an app with FIFA which is becoming very staff must be people with disabilities. Few companies successful because we presented it with football players. comply with this. But we are going to ensure that within
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three years at least 2% of our workforce worldwide will When you are not leading MAPFRE, what do comprise people with disabilities. you do to relax? Our other social objective is to take action to facilitate gender equality. We do not discriminate, but we have Many things. Nowadays, with technology, we work to take positive actions. All our human resources even when we do not want to so we have to make time departments around the world have a commitment for leisure. The truth is that work absorbs me a lot and I that, in the strategic plan, at least 40% of employees in have to try to disconnect occasionally. positions of responsibility must be women. I am very aware that balancing work and family is We really think we must always do more than the law important – not only because your family should see currently imposes; it is our own concept of helping to you more, but also because you need to have free time. improve equality and the balanced development of the I try to get away in the afternoon at a reasonable time, company and of society. whenever I can. I never organise late meetings so I can In addition to this, we must sell insurance and make go home or go to the gym and do a bit of exercise. money and we must continue to grow. This is the part I like reading, walking, and going to the cinema. we, traditionally, know how to do well. What I do on any trip, if I have time, is to walk quietly for an hour in any city and get to know it at a street level. If you are stuck in a car you do not actually see what What legacy would you like to leave, both in happens in the city. MAPFRE and in the market as a whole? My hobbies are very simple – I like mountain biking with my friends at weekends. I am also tremendously That it is a healthy and solvent company. We have competitive, and I do not like to lose! I try to finish first, ambition to grow, but what is important is to continue although I don’t get there most times. It is a big thrill to be a solid and stable company, with continuity in the because it allows you to be very motivated. Having an long-term. And from a social point of view, to continue activity is good because it allows your mind and body to to maintain and increase our social responsibility be more balanced. My life is being with my family and commitment. my friends. MAPFRE has a mutual origin, which means that it is in our nature to help each other. Our owners have historically been mutualists. When we demutualised, the objective was to continue to maintain the spirit of mutuality, even as a limited and listed company. We have transferred this spirit to the Fundación MAPFRE and it We have developed an app with FIFA which is the Fundación MAPFRE which helps us understand is becoming very successful because we which social situations to have a commitment to and which to develop, as previously mentioned. presented it with football players. It tries to My greatest wish is that we continue to be a better show, in a few steps, how to save the life of a company, but become more involved in improving people’s quality of life. We do not have to give up one child who has suffered a sudden cardiac arrest. thing for the other – it’s not only NGOs working for social improvement and companies just doing business. I think that it is an obligation we have at MAPFRE. It has always done that but now I think this is more organised If you retired today, how would you spend and more visible and has a greater strategic focus. This your spare time? is my great aspiration for the years I will be in charge of the company. I would do exactly what I do now with a little difference, which is when I travel, I would really get to know the places I visit. I would continue to travel, but I would take more advantage of it. I did not change my personal life when I became an executive, or when I became chairman and CEO. I continued to do exactly the same things like going to the cinema and walking around my neighbourhood in Madrid to look for the little restaurants that have opened recently.
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Enrique Schoch and Paula Rios of MDS Group with Antonio Huertas.
If you had to organize a sporting event to raise Different methods to understand what teamwork is really funds for a good cause, which sport and which like – that is important. And for what cause? I think that charitable cause would you choose? we always have to help the weakest, and the weakest is always a child. If our children are well taken care of, and I would choose a sport where teamwork is involved, because well-educated, they have the chance to create a better life. it gets across all the values that we normally promote. This will certainly help society as a whole. • Sometimes, when you see certain sporting behaviours, even in professional team sports, you say “that shouldn’t be like that”. But any sport, which does not involve revenge, helps get across values. I was recently in Brazil, watching one of the campuses that Fundación MAPFRE has with both FC Barcelona and My hobbies are very simple – I like Real Madrid. mountain biking with my friends at In this case, I went to see one of the Barcelona teams and they showed me how they taught children from weekends. I am also tremendously favelas – slum areas in Brazil. competitive, and I do not like to lose! They taught them not to win, that is, not to celebrate a victory. When a child scored a goal and had the impulse to celebrate it, he was expelled from the field. It was not the team which scored more goals that won, but the one which passed the ball most.
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ONE OF THE GREATEST SPANISH ATHLETES OF ALL TIMES One of the top sporting events in the world, the Volvo Ocean Race attracts hundreds of sailors to a nine-month-long regatta that takes them around the world in a number of different legs. During the race Pedro Campos: they encounter every imaginable type of sea and weather conditions, from the dead calm of the equator to the ‘roaring forties’ around Cape Horn. sailing, risk This is considered to be one of the toughest sporting competitions on the planet. To put it in context, just one leg of the Volvo Ocean Race takes longer than the entire Tour de and passion France cycle race. Not to mention the fact that the sailors in the Volvo Ocean Race are competing for 24 hours a day, something virtually unheard of in other sports.
Pedro has his father to thank for his sailing career – he used to take his young son sailing with him in a galeón on the Arousa Estuary in Galicia. And he remembers that at the age of three, he was already bold enough to take the boat’s helm.
Risk and safety
Every sport inherently has its fair share of risk, but As with any competition, preparation that risk becomes all the more significant when the is one of the critical factors for success, and it takes time. According to Pedro, sport in question depends on the unpredictability preparations for the regatta begin as soon of an element like the sea. It is in this environment, as the necessary sponsors have been found. First of all, the crew and the boat particularly when you consider its severe risks, such must be chosen; and it must be done in that as storms, that attention to detail – no matter how order because the most important crew members have a say in the final decision small – is crucial. It can be the difference between on the boat and its preparation, which can success and failure. This relationship, between risk last for months – or even years – before the race itself. Whenever possible, training is and success in a sport like sailing, led fullcover undertaken in conditions similar to those to interview Pedro Campos, the prestigious Spanish that will be encountered during the regatta. All of this work leads to a good knowledge yachtsman in charge of the MAPFRE team in the of the boat and its characteristics, which Volvo Ocean Race. will allow top speeds to be achieved under all circumstances.
On the subject of safety, Pedro says this is the most important factor both before and during the competition, so crew training and boat maintenance are fundamental when it comes to reducing risks. He explains: “The limits of boat and crew are one of things the captain must know best.”
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Sailing enthusiast King Juan Carlos of Spain and the MAPFRE team.
Another important aspect is being able the equipment used to heat water for this When it comes to studying or implementing to predict the kind of breakdowns or purpose was washed at the stern and, once, risk management in an organisation or malfunctions that might occur so that during training in the South Pacific, many project, Pedro’s example teaches us two the tools and materials necessary for miles from land, it was accidentally dropped very important lessons: repairs are taken along. This is to ensure overboard. This might seem trivial but it as many potential problems as possible was actually a huge problem because it 1. The risk analysis and corresponding can be resolved, helping prevent minor was the only water heater container on measures taken to address the identified issues from developing into something board and without it the crew could not risks were not effective enough - since more serious. prepare their meals. Obviously, without an they failed to identify this particular adequate diet, the crew’s performance would risk, meaning neither boat nor crew were Pedro discusses one of the many incidents suffer dramatically and the risk of a serious prepared for the sudden loss of their ability he has had to deal with and which malfunction would rise exponentially. to prepare their meals. clearly shows how, when it comes to risk management, you cannot make the The problem was solved following 2. When facing adversity, the team was able mistake of thinking that only the big issues discussions with the land-based members to react and find an alternative solution. matter. On the contrary, in such a difficult of the team who suggested an alternative However, since the incident occurred setting and with so many risks, you have water heater could be a distress flair during training, it was not possible to to pay attention to everything, including container and lots of sticky tape. After this assess what could have happened had it tiny details. Failure to do so could put a incident, they always carried a container taken place during the race and whether major project or undertaking in jeopardy. with a handle and kept it permanently it would have prevented the team from tied up with a safety cable so it couldn’t winning a regatta. Aboard the boat, the crew eat freeze-dried be dropped overboard during washing. meals, prepared with hot water. Normally,
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Lessons learned
Pedro talked about the hardest moments in his career and the lessons he has learned. Curiously, the incident he recounts took place not at sea but somewhere completely unexpected - the Entrepeñas Reservoir. He describes it as: “One of the toughest moments of my sporting career.”
It was a Sunday in February, and Pedro and his companions were competing in a regatta in a small boat. When they arrived at the club, they boarded a dinghy with an outboard motor to get to their boat, which was anchored nearby. It was very windy and cold and, although the reservoir is small, the surface was a bit choppy because of the strong wind. They had only travelled about 100 to 150 metres and were about half-way to their boat when the prow of the dinghy dipped into the water, flooding and capsizing it in seconds. Luckily, the dinghy’s watertight bottom kept it afloat. Although they were not far from shore, the temperature of the water and their saturated clothing hampered their attempts to swim to dry land.
As luck would have it, a nearby boat Pedro Campos at the helm. owner was able to reach Pedro and his companions in a little rowing boat. They decided not to try and clamber aboard the rowing boat, not only to avoid sinking it but also because it was tiny and there were Apart from the risks, the teams sometimes When it comes to risk a lot of them. Instead, they grabbed onto have to face up to tough legs where they are management, you cannot its sides, keeping their bodies as high out losing successively but nevertheless are make the mistake of of the freezing water as they could, and able to ‘change course’ and win. Pedro says: made their way back to land without any “The source of motivation is the mindset of thinking that only the more mishaps. the team, who train to become accustomed big issues matter. You to giving it their all.” There are many factors have to pay attention to Pedro recalls one of the crew members had a that help keep the crew motivated, starting everything, including tiny wetsuit and was able to stay with the capsized with the leadership skills of those in charge and still-floating dinghy, helping the club’s and which could be summed up as not being details. Failure to do so sailor who did not know how to swim. overconfident of victory but not becoming could put a major project or demoralised by defeat. He continues: “You undertaking in jeopardy. Fortunately, everything ended well and have to appreciate the worth of your rivals nobody suffered from hypothermia but and give them all due respect, while still things would certainly have turned nasty being aware they can be beaten". had it not been for the rowing boat. “Furthermore, the life of the 10 people aboard is tough because the environment Pedro concedes the lesson he learned that is demanding and you always have to be day is that you should never let your guard 100% at the top of your game. The crew down, especially in adverse conditions, must be able to get along with each other and that safety rules and standards are and this must be achieved before the race sacred and must be followed. Problems can begins, while the boat is being prepared occur when you least expect them. and during training.”
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Support: the key to victory Pedro considers sponsors to be essential for the survival of sports such as this and has no Out of all the trophies he has won – there are hesitation in saying: “Nowadays, no top-level lots of them and they are all very important – competitive sport can survive without Pedro confesses: “My proudest achievement sponsors and sailing is no exception.” From is winning five world championships in a sailing schools and Olympic sailing to the row in the ¾-ton class between 1990 and world championships or ocean sailing, 1994, in three different countries.” He sponsors’ contributions are essential for believes this record still stands to this day. anyone to be able to compete and have a chance of winning. It is up to the athletes to Former King Juan Carlos is a sailing make the most of these investments.” enthusiast and a long-standing friend of Pedro, confirming the Spanish Royal Family’s And he tells us how it all began with Mapfre. commitment to promoting the sport in Spain. The relationship started with a non-stop, Pedro agrees: “His regular appearances at the round-the-world race - the 2010-2011 main regattas and his constant support for Barcelona World Race. The team, sponsored Spanish sailors have been key factors in the by Olympic champions Iker Martínez and considerable success achieved in our country Xabi Fernández, successfully sailed round in every sailing discipline.” the world without putting into land. They took second place overall, the first Spaniards ever to do so, and the only ones to date. In conjunction with Mapfre, they are the fastest Spaniards to have circumnavigated the globe. That round-the-world trip was so successful and mentioned so often in the media that the insurance company’s brand visibility dramatically rose.
Since then, the collaboration with Mapfre has been so intense that two more round-the-world trips have been undertaken jointly – but with stops this time – in the Volvo Ocean Race. The boat stops at some of Mapfre’s most important markets, such as Spain, China, the United States and the rest of Europe, achieving extremely high levels of brand recognition. Not only is Mapfre across five continents but it has given its name to this ‘round-the-world team’. Such sponsorship has made a huge contribution to the brand’s presence both in the media and in direct customer campaigns.
Pedro Campos as a child when he went sailing with his father.
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The Volvo Ocean Race Mapfre boat.
Essential qualities – When the regatta started Pedro felt that, Asked about whether he can see himself in sailing and in business as Captain, he had the responsibility for leaving the sea one day, Pedro replies: the entire country’s image in his hands, “I have no doubt that moment will come, When asked about decision-making in on such a highly significant date: the but I hope it won’t be any time soon! Sailing high-pressure situations and the qualities 500th anniversary of the discovery of is a sport that has a big advantage over needed to lead this type of team, Pedro America. In the end, it all worked out others; you can compete almost for your confirms decision-making during a perfectly, they won the start and the first entire life, unlike other sports where the competition, whether in a championship regatta against the Australians, and that physical demands on your body mean you or facing difficult conditions, or more victory gave Spain ‘a foot in the front door’ have to give them up much earlier.” importantly, when the two circumstances of the oldest competition in the world. occur simultaneously, requires: “A He concludes: “In sailing, you have two cool head, nerves of steel and as much Pedro sees similarities between sailing ingredients that need to counterbalance experience as you can muster.” In this and the business world, suggesting each other - one is physical fitness and the respect, the qualities he considers essential ocean sailing and business can be easily other is experience. And as one decreases, are: mutual trust between captain and compared. He says: “First of all you have the other increases.” crew, experience of working as part of a to face up to the elements, which in the team, in-depth knowledge of the boat and business world would be the market - always In sailing, just as in life, you may lose your rivals and the ability to concentrate changing, sometimes unpredictable and vigour with the passing years, but you and keep a cool head, all of which can be where wind and sea are alternately in your gain wisdom. In Pedro’s case, he is in great acquired with time and practice. favour or against you - exactly as happens shape, and fullcover would be so bold with companies.“ Pedro also mentions as to say that, for the time being, he still He can remember many very tense rivals, who can influence our strategies has both! We are convinced his childhood moments during competitions but and tactics, again exactly as happens with passion will remain with him for the rest of highlights the one which probably marked rival companies. And the ultimate goal of his life – you only have to look at Pedro in him most, Spain’s first ever participation trying to do better than your competitors the photo, firmly grasping the helm at just in the Americas Cup, in San Diego in 1992. is also the same. three years old, to be sure of it. •
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MDS m maagagazinezine
REMEMBERING Pedro Macedo
BY JOSÉ RIBEIRO
Pedro Macedo, CEO of MAPFRE RE and a highly renowned professional in the reinsurance sector sadly passed away last May. José Ribeiro, Managing Director – Asia Pacific of A.M.Best, former Director of International Markets at Lloyd's, remembers Pedro's professionalism and generosity. Pedro Macedo.
I became professionally acquainted with Pedro Macedo when “Pedro was a tireless worker, I was in charge of International Markets at Lloyd’s, a region excellent professional and a person that essentially covered everywhere in the world except for the USA. who was extremely well-acquainted with the world market and, In this capacity, I needed to contact MAPFRE at the very highest level to facilitate a meeting in Madrid for Lord Levene, particularly, Latin America.” the then CEO, to persuade them to create a syndicate at Lloyd’s. With an anxious boss and a very tight time window I sent an e-mail and I telephoned personally but it was impossible for the person in charge there to receive us that week.
It was then I remembered the “Portuguese connection” – Pedro was CEO of MAPFRE RE at the time and an extremely important connection outside our country. I rang Pedro, and basically explained my problem. He immediately offered to help and the next day not only did we have the meeting scheduled but, we also had our hotel booked and a car to drive us around Madrid! That was Pedro, generous and helpful, a great man and a good friend.
MAPFRE RE owes a great deal to Pedro. A tireless worker, excellent professional and a person who was extremely well-acquainted with the world market and, particularly, Latin America.
He did much to develop MAFRE RE and, under his leadership, it performed very well and increased its geographical exposure. In Latin America, we had the opportunity to meet on several occasions and did a number of deals together. His word was all that was needed for the deal to be closed. He is sorely missed at MAPFRE RE and by all the friends and colleagues who worked with him and knew him well.•
29 ACCLAIM INSURANCE BROKERS THE PURSUIT OF A DREAM ACCLAIM INSURANCE BROKERS THE PURSUIT OF A DREAM Anthony Lim speaking at MDS's 30th anniversary.
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Over the past 33 years, Anthony Lim, Founder and Executive Chairman of Acclaim, has built his business into one of Singapore’s leading independent insurance brokers with over 60 staff.fu llcover found out more about his route to success and his relationship with Brokerslink.
The pursuit of a dream In the same year he was invited by the Government to serve on several financial The journey begins in 1982 with Anthony’s and insurance committees (set up to help dream ‘to be the best insurance broker bring Singapore out of the national crisis) he can be’. “I was young, innocent and and in a bid to raise Acclaim’s profile naive”, he says “but a year later, I set up the internationally, Anthony created the Company and made my first transaction Singapore International Insurance Brokers in January 1983. I was a one-man band and Conference, attracting delegates from more delivered my first policy by foot. Although than 25 countries (the 1998 Conference was small compared to other firms in the so successful it became a major biennial industry, my ambition was to become a event in the region). In 2003, he was national company.” elected Chairman of the World Federation One year on, Anthony was still learning of Insurance Intermediaries, a global how to ‘crawl’ when Singapore experienced insurance brokers and agents’ association its first post-independence recession. In with members in over 80 countries. early 1984 there were already warning During this period, the world was signs of a slowing economy, but a booming undergoing intense regulatory changes. construction industry bolstered the overall Wielding the influence gained in his global numbers. However, by the end of that year roles, Anthony invited world-wide leading the construction market had become insurance practitioners to an Insurance saturated and only a few projects were in Leaders Forum in Singapore. This not the pipeline for completion. Singapore was only gave local and regional insurance facing a crisis! To keep the Company afloat, companies and brokers an opportunity Anthony did not pay himself any salary or to better understand the impact of the allowance for a year, but he ensured every changes and how to act upon them, but it member of his team was paid on time. brought insurance brokers and regulators For the Company to grow, it had to be together – enabling open dialogue. an active player in the market; Anthony While most insurance brokers were still joined several organisations, including the grappling with the consequences of the Singapore Insurance Brokers Association economic crisis and continuous regulatory where he was elected President in 1998. changes, Acclaim embarked on a series
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33 years’ service
This year Acclaim celebrates 33 years in business. One of the largest national independent risk advisors, insurance and reinsurance brokers in Singapore, the Company specialises in risk placement, claims advocacy, consultancy advice and risk engineering. In 2015 its revenue was us $8 million – more than some of Singapore’s international insurance brokers. Over the years, Acclaim has built a reputation for being ‘positively different to other intermediaries’ and is recognised for its high standards, speedy response, competitive pricing, high-performing technology and client/claims management. For Acclaim’s team, top priority is taking care of clients. Known as Client Advocacy, it goes beyond building tailor-made business solutions to meet clients’ needs, it’s about delivering a great customer experience, Jose Manuel Fonseca and Anthony Lim at the building strong and powerful relationships Brokerslink booth at PARIMA, Singapore, 2015. and creating emotional equity. Another priority is Claims Advocacy. A process of claims management, rather than claims handling, gives the team a competitive advantage. Tony adds his The one-man dream of of mergers and acquisitions with local feedback: “Agility and reinventing the being ‘the best insurance insurance brokers. By building its business claims experience are key, claims should broker that he can be’, is portfolios, Acclaim was in a better position not be seen as a back-end role that does to compete in the market. not add value – they should be positioned now superseded by a shared Anthony says: “Where others saw as the value differentiator. And it is in this dream of the Acclaim team challenges, we saw opportunities; many area Acclaim can boast a number of cases of ‘to be a high touch, high tech parts of Asia were still relatively untapped successful negotiation on behalf of clients. leading risk consulting group and in varying degrees of liberalisation, Acclaim believes its present and future and the concept of risk management was success depends on the people within. in the high value space’. beginning to take root in Asia – presenting Attracting and retaining talent is ever more new opportunities. Singapore was (and still important today and it is for this reason, is) well-positioned to work with existing the Company has embarked on a talent and new players so in order to harness recruitment drive, appointing experienced these opportunities, I decided to expand insurance practitioners in specialty areas the leadership team. I wanted a person such as agriculture, aviation, construction, with global experience who had worked in crime, directors and officers, employee multinational corporations and after three benefits, legal liabilities, marine (hulls years of head hunting, convinced Tony and cargo), political risk, professional Lim (no relation) to join Acclaim as Chief indemnity, property, reinsurance, surety Executive Officer (CEO) and shareholder.” and bonds and trade credit. Each brings Tony joined Acclaim in 2011 as Managing different experiences of working with Director and CEO, bringing 28 years’ multinational corporations and clients experience working with some of the top with regional and global offices. global insurance brokers in all classes of Last but not least, technology. Like it or business. His expertise in structuring, not, it’s a part of our life and one of the key implementing and servicing global and ingredients for survival in this fast-pace regional risk solutions for clients in various environment. As more and more companies industries in more than 20 countries is expand internationally or regionally, staying unrivalled. connected with clients is imperative.
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Tony explains: “Customers expect brokers Over the years, Acclaim Brokerslink membership – and insurers to deliver IT-based reporting has built a reputation for global reach, local touch and analytical tools to enable them to being ‘positively different monitor the performance and progress Membership ensures Acclaim continues of their insurance programmes. Acclaim to other intermediaries’ to provide exceptional service. It enhances is certainly using technology to improve and is recognised for its its capacity to design a complete range of productivity and enhance efficiency - we high standards, speedy global insurance solutions, co-ordinated are developing a system that enables clients response, competitive and managed via Brokerslink’s local to report claims online and monitor their partners, and in Tony’s words: “Is just progress 24/7, from anywhere in the world, pricing, high-performing like a multinational corporation without when it’s convenient for them. They no technology and client/claims having to bear the cost.” Brokerslink also longer need to wait for quarterly reports management. ensures access to specialised resources in to study claims trends or conduct risk reinsurance, specialized expertise, captive management exercises.” management and modelling. He continues: “This investment in So how did this partnership begin? It was technology demonstrates our commitment a bitterly cold morning in London in 2006. to customer service and will help us and The first Heath Lambert Global Conference our regional and global clients in their was being held at a London hotel. Anthony external growth strategies. Singapore was having breakfast and couldn’t help has a relatively small domestic market, but notice the hotel and its restaurant was so it is no surprise Asia - supported by bustling with people and activities. It felt the Government signing of free trade unlikely he would be able to connect with agreements and our membership of the anyone in such a hectic environment, ASEAN Community – is an area of focus.” yet at that moment José Manuel Fonseca (Brokerslink CEO and speaker at that conference), could not find a seat at an empty table, approached Anthony and asked if he could join him. There was an immediate connection which continued throughout the conference and remains to this day. Shortly after, José visited Anthony in Singapore, setting the foundations for their professional relationship and close friendship, to a point where they joke about being like ‘brothers from different parents’. At the time, José was Chairman of a small European Network Brokerslink and Acclaim was a member of the Asian brokers Alliance PanAsian Alliance (PAA). In 2008, PAA, Alinter (a Latin American broker Network) and Brokerslink merged, establishing Brokerslink. Anthony says: “Passionate as he was about the merger of our networks, José immediately began planning and strategizing for our shared future. When I listened to his vision, I felt sure he was one of those people destined to make a difference.” Anthony believes Brokerslink is unlike other networks: “It’s warm, welcoming and most importantly, its members possess an unequalled passion and motivation. As the saying goes ‘if you surround yourself with dreamers and creators, the results will be exponential. Most of our members are entrepreneurial by nature – they are not merely wealthy – but all of them are set on Anthony Lim, Tony Lim and Robert Tan at Acclaim's offices in Singapore. leaving their mark on this world.”
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ANTHONY LIM
→ Anthony Lim is the Founder and Executive Chairman of Acclaim. He started the company in 1982. → He is the longest serving elected President of the Singapore Insurance Brokers Association since 1997. → He was the first person in Asia Pacific to be elected Chairman of the World Federation of Insurance Intermediaries (WFII), serving his term in 2007/08. → Anthony Lim has a post-graduate degree from the Asia-Pacific Executive (APEX) and a Business Administration MBA programme from National University of Singapore. → He has spoken in many International Insurance conferences and seminars globally. He enjoys a good conversation and is a food enthusiastic. → In his free times he loves yachting. He is Commodore of the Singapore Changi Sailing Club (CSC) since 2009. Acclaim Insurance Brokers sponsored the Acclaim Regatta Event since 2009. → He also enjoys restoring heritage houses. His passion for restoration began when he set eyes on a dilapidated terrace house while hunting for a new home in 1988. “It was dirty, rundown but I saw a lot of charm and beauty” said Anthony Lim.
José Manuel Fonseca and Anthony Lim in Sidney (Brokerslink Asia Pacific Regional Conference, 2016).
ACCLAIM AND MDS – A CLOSE RELATIONSHIP IN ANTHONY’S WORDS
“I made it a point to attend MDS’s 30th anniversary, to share their joy and pride. As part of the celebrations, I was invited to conduct a Leadership Forum for more than 20 MDS leaders over two days. I recalled how enthusiastic the MDS leaders were – instead of fixating on their differences, they focused on their strengths and what they had in common. During our time together, they kept open hearts and open minds and worked on integrating each other’s point-of-view. This strengthened their resolve and motivation as a team, paving their way towards success.”
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Anthony Lim, Robert Tan, Tony Lim and José Manuel Fonseca at Acclaim's 30th anniversary.
Describing another milestone moment, Marching onwards are better informed and sophisticated, Anthony says: “The 2013 Brokerslink Global so insurance brokers can no longer just Conference was the network’s second The insurance industry is ever-changing be intermediaries, hoping to generate event taking place in Asia, and Acclaim at an increasing pace. In 2015 alone, there revenue through simple insurance had the privilege to play host to delegates were infinite acquisitions and mergers and placement. In order to remain relevant from over 50 countries. The programmes an endless restructuring of international and prosper, they must be high-value were a good mix of serious discussions and insurers. A situation made more complex service providers who drive innovation uniquely Singaporean dining experiences, by authorities all over the world hardening and collaboration in the industry. which allowed our guests to learn more regulations. The Chinese have a saying, At Acclaim they will continue to do it about our culture and history. Despite the translated it literally means ‘big fish eat ‘their way’. Anthony concludes: “We embark many happy memories we made during the small fish’. Being small is being vulnerable on life-long learning and service with all our Conference, my personal favourite was our and when the big get bigger, the small look heart. We integrate our service delivery into ‘sing-along’ session at the final evening’s even smaller. clients’ supply chains, but first endeavour to Gala Dinner. I looked around and saw all Acclaim’s senior management is understand our clients’ businesses and their the partners singing along to music from acutely aware of the need for independent environments before designing tailor-made our youth, and I marvelled at the fact that brokers to offer a similar range and level of insurance solutions.” the Beatles, Elvis Presley and other musical technology-based services as the leading Just as their beloved nation, Singapore, icons can still bring people of all races and listed international brokers. Being a part of evolved from a tiny red dot in South-East backgrounds together. I look back on this a larger network is the way to achieve this, Asia (a struggling seaport in the 1950s with memory in particular with great fondness allowing members to become shareholders no natural hinterland or resources) to a and I’m grateful to know the relationships and providing the central funding and prosperous independent country, Acclaim across our organisation, and as friends, resources needed to deliver a personalised, has also grown into one of the major players are thriving alongside our businesses. yet global service. in the Asian market. • I believe the mutual trust and reliance The one-man dream of being ‘the best we’ve established in Brokerslink is unique insurance broker that he can be’, is now and will weather the test of time. I have superseded by a shared dream of the high hopes for us and look forward to Acclaim team ‘to be a high touch, high reuniting with business partners and tech leading risk consulting group in the friends at our Conference in Amsterdam high value space’. later this year.” In this connected, highly-competitive and complex economy, Acclaim knows clients
37 MDS magazine Singapore
By Anthony Lim One of the best ways to get to know a city is through the eyes of its people. Brokerslink member, CEO and Chairman of Acclaim Insurance, and fine-cuisine lover Anthony Lim is passionate about Singapore and so was delighted to be able to share his experiences and enthusiasm for the city with FULLCOVER. He took us on a tour, discussing its history and pointing out places of interest and his favourite cafes, bars and restaurants. Illustration by José Cardoso José by Illustration
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ITS HISTORY
Singapore’s story began around 200 years ago city’ (due to the high number of trees lining the when Sir Stamford Raffles founded the country as streets), residents and tourists alike are subject a trading post of the East India Company. When to high standards of discipline and behaviour. the Company collapsed in 1874, it became a British Chewing gum is banned and first-time offenders colony. Singapore gained independence in 1963 caught disposing of gum in a public place or and joined the Federation of Malaya, Sabah (North carrying large quantities can be fined up to Borneo) and Sarawak in what later became the US $1000. Littering also invokes fines – US $300 Federation of Malaysia. Two years later it declared for first time offenders who throw small items like independence. Despite its ownership changes cigarette butts or sweet wrappers. Vandalism is over the past 50 years, Singapore has grown to also a serious offence with penalties including become a global commerce, finance and transport fines, jail and three to eight strokes of the cane. hub; commentators describe it as one of Asia’s In Clarke Quay, where women once laboured on ‘economic tigers’. the river, now you will find thriving bars, clubs and The country is the classic example of ‘East meets posh eateries sitting alongside historic colonial West’. Traditional Asian buildings sit alongside architecture, restored antique shops and the modern colonial architecture. Christened a ‘garden Supreme Court.
PLACES OF INTEREST
Kampong Glam Tiong Bahru Keong Saik
Is the stronghold of Singapore’s Malay Is one of the oldest neighbourhoods in Is a former red-light district and a and Arab community and recognised Singapore, yet over the past two years, stone’s throw from Chinatown. A myriad as its ‘beating heart’. See the palace of chic cafes and bistros have popped up of bars and restaurants can be found in Singapore’s aristocratic families, now everywhere, making the area a magnet the area’s winding streets, yet the unique a museum, and across the road, on the for food-lovers. Most notable are PS drinking places can easily be overlooked; renowned Haji Lane, check out the rows Cafe Petit and Tiong Bahru Bakery, hidden away and only accessible if you of independent cafes and specialty both cult favourites for food and know that night’s password. stores. Here, you’ll find artisan coffee, fashion bloggers around the world. The Library for example, is a normal mint, vinyl records, vintage clothing and And in homage to writers, Books restaurant in the day with fantastic knick-knacks from the Himalayas all Actually – one of the world’s top lunch and dinner set menus, but in within a short distance of each other. independent bookstores, a pillar of the evening bar entry can only be Around the corner, family-owned stores Singapore’s arts scene and a refuge for gained using a password given out on which have been there for decades line aspiring authors – is located on a quiet Facebook. The password changes daily Arab Street. Here you can customize a slip road off the main street. so if you are successful, the bouncer perfume with oils from Turkey, pick up The art-deco inspired buildings, will permit you to enter the bar through a handmade wicker-basket or smoke a harking back to the colonial era, share a secret door concealed by a bookshelf. Shisha – tobacco mixed with fruit and space with up-and-coming cafes Singapore’s gems are everywhere. molasses sugar. and independent boutiques. Walking Be sure to explore what the city has Admire the mosque at sunset, the around the neighbourhood, the to offer, and don’t be afraid to ask the palace of Sultans long past, and enjoy buildings take you through a journey in nearest Singaporean. Like Anthony, a cup of the finest coffee in the city – time from the 1950s to the 1970s. they love recommending their personal Anthony promises it won’t disappoint. favourites to anyone keen on having a good time!
39 Singapore insurance market: facts & figures
Singapore is slightly smaller than the US City of Lexington, Kentucky, or Lake Taupo in Auckland, New Zealand. In June 2015 its population was estimated at 5.54 million, all squeezed into only 277.6 square miles (719.1 square kilometres).
4040 Its history nation and defined the path to its current success. PM Lee transformed Singapore from a small struggling island For a tiny country with few natural resources, the Republic nation to a thriving metropolis. of Singapore is an exceptional success story. Last year, Singapore celebrated its 50th anniversary and while it Singapore is often referred to as the ‘Switzerland of the does not boast a rich history, it is one of the most successful East’. In a National Geographic magazine article - ‘The societies in human history. Singapore Solution’ - it reports Singapore’s per capita income of its 3.7 million workers exceeds that of many When Singapore was expelled from Malaysia in 1965 and European countries, the education and health system can thrust into an unwanted independence, it was a typical compete with the best in the West, Government officials are third-world country; per capita income was us $500 – at the pretty much corruption free, 90% of people own their own time the same as Ghana’s – and although not desperately homes, taxes are relatively low, the streets and sidewalks poor, malnutrition was rife. Things however, began to are pristine and you will not find homeless people or slums. improve dramatically; its per capita income increased Singapore also boasts an unemployment rate of less than from the 1965 figure of us $500 to us $56,000 in 2014 - the 3%. Having achieved so much, in such a short time, this highest growth reported by any newly- independent nation. growth has often been referred to as an economic miracle.
Comparing Singapore GDP per capita with some The following table summarises Singapore’s developed countries achievements.
ACHIEVEMENTS IMPLICATIONS COUNTRIES/ GDP 1965 2014 PER CAPITA (IN USD) Second most important Strategic location, supporting global container port. infrastructure and technologies. Singapore 516 56,285
City with the best Favourable operating conditions, Switzerland 2,621 85,594 investment potential. strong diplomatic ties, a stable political and economic climate creating an ideal environment to United States of America 3,665 54,630 invest in.
United Kingdom 1,851 46,332 Second most The best in Asia due to its; competitive city in the lack of corruption; Government world. efficiency and global financial Japan 920 36,194 market development.
Source: The World Bank 2014. Best global innovation The best performing Asian in Asia Pacific and the country ahead of Hong Kong, world. Korea and Japan. Excels in Institutions, human capital, research, infrastructure and Today Singapore is the world’s fourth-largest financial business development. centre, operates one of the busiest container ports in the world and is the only Asian country to have a AAA credit Top of Business Proven to have a consistently rating from Standard and Poor, Moody and Fitch Ratings. Environment Risk productive and skilled labour Intelligence’s Labour force, making a conducive In just half a century, Singaporeans have become some of Force evaluation environment for business the wealthiest people in the world with the highest number measure. growth. of millionaires per capita in Asia. It is also one of the world’s most liveable cities – rated as the greenest in Asia. Second in world for Workplace relationship between One reason for its success is a combination of Singapore’s best labour/employer employee and employer is the relations in Asia. best in the region. strategic position on the major sea route between India and China, its excellent harbour and free-trade harbour Source: Economic Development Board of Singapore 2016. status (granted by founder Sir Thomas Stamford Raffles). While Sir Thomas created the framework for Singapore’s early success, it was Singapore’s forefather and former Prime Minister, Lee Kuan Yew, who shaped the first quarter-century of existence as an independent
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The insurance market A bright future
Singapore is home to key decision makers - it is the base for At the 12th Singapore International Reinsurance Conference numerous multinational corporation headquarters, over on 6 November 2013, Ravi Menon, Managing Director, MAS, 70 insurance brokers and four out of five global brokers said: “Over the next decade, the insurance business in Asia have regional hubs here. is projected to grow at about 8% per annum. By 2020, Asia is likely to account for almost 40% of the global market.” He The Government has an ongoing commitment to listed three contributory growth factors: Asia is growing, Asia marketplace development; it is establishing research is highly prone to natural catastrophes and Asia is ageing. institutions to gather and analyse data in specific areas of risk, is actively promoting Singapore not just as a strategic As the leading insurance centre in Asia, Singapore is well location, but also as a centre of excellence for innovation, placed to serve the burgeoning insurance needs of the and has set up a Talent Development Framework (a region. The insurance industry is one of the brightest partnership between the Monetary Authority of Singapore stars in the constellation of Singapore’s financial sector. (MAS) and the insurance industry) and a Global Internship Programme to ensure Singapore remains at the forefront. Not surprisingly, in 2015, the Economic Development Board of Singapore reported ‘businesses headed to Asia will do well to tap into Singapore’s prime geographic location in the heart of the region, global connectivity and business- friendly policies. It is the number one choice for the world’s Market breakdown top global companies in the industrial goods and services sector and among the top five for media and financial services companies.” YEAR 2014 G R O S S INCURRED PREMIUM LOSS RATIO Singapore is also a member of the ASEAN1 Economic (IN SGD) Community (AEC). The establishment of AEC in 2015 is a major milestone in ASEAN’s regional economic integration Singapore Insurance Fund US $3.850B 48% agenda, offering opportunities in the form of a huge market of us $2.6 trillion and over 622 million people. In 2014, AEC was collectively the third largest economy in Asia and the Offshore Insurance Fund* US $7.918B 51.7% seventh largest in the world. The AEC is working together on a comprehensive insurance liberalization framework. *International / Regional Business coming into Singapore MAS in 2013 reports ‘insurers can expect to benefit from Source: Monetary Authority of Singapore. easier cross-border provision of services and substantial access across the ASEAN customer base from offices in any ASEAN member country’.
The country is therefore, well positioned to become the Asian insurance hub and is predicted by MAS to be the next global hub (besides London) in 2020. As the exclusive Asia’s changing insurance landscape Singapore member in the Brokerslink network, Acclaim is well-placed to act as the conduit and work with partners who are keen to gain leverage from this global insurance The insurance landscape is constantly evolving and market position. • contributors to this include: sluggish economic growth, softening rates and rising claims (pressurising under- writing results), a low interest rate environment (suppressing investment returns) and as the world shifts 1 Association of Southeast Asian Nations towards risk-based regimes such as Solvency II, regulatory and capital requirements are being tightened. At the same time, the growth potential has never been better. Much of the world remains under-insured and in Asia, the prospects are especially bright. The Asian risk landscape is transforming rapidly, generating an increasing demand for insurance and reinsurance.
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On the Insurance ‘Superhighway’ Fosun building Shanghai. On the Insurance ‘Superhighway’
46 Fosun, China’s largest privately owned conglomerate, became a truly global insurance group last year. It further increased its shareholding in Portugal's leading insurer group Fidelidade to just under 90% and bought US insurer Meadowbrook Insurance Group (MIG) and Ironshore, the Bermuda-based international specialty insurer to add to its existing Asian insurance and reinsurance operations. The insurance operations join Fosun’s fast-growing range of industrial, lifestyle and health businesses as Chairman Guo Guangchang pursues his aim of becoming the Chinese Warren Buffett and says the group is now on the ‘superhighway’ of growth. Adrian Ladbury takes a closer look at the group’s insurance and wider strategy and growth in recent times.
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Fosun Group was originally founded as a market research company FOSUN MILESTONES by five graduates of Fudan University, China in 1992 and over the last 34 years has transformed itself into the biggest privately held conglomerate in China. 1992 Guo Guanchang, group Chairman and lead shareholder, openly bases his strategy on that followed so successfully over the years Fundan University graduates by legendary US investor Warren Buffett. founded Fosun with an initial Put very simply, Mr Buffett uses the ‘float’ generated by insurance investment of US $4,00 companies that does not need to be paid back to policyholders immediately to invest in a wide range of other businesses in non-related sectors. Those businesses obviously benefit from preferential terms and 1994 conditions for their coverage from the group insurers because they know the risk profile of these companies better than any rival. Founded Fosun Pharma At the same time, the premiums generated feed the float in a and Forte virtuous circle. The group also has significant investment and asset management activities that also benefit both the industrial operations and the insurers. Lots of capital is needed to make this system work as the insurers 1998 need to be diversified by line and territory to avoid dangerous accumulation, hence the recent international expansion. Fosun Pharma listed in China Apart from the fundamental business strategy, Mr Guo also A-share market follows Mr Buffett’s example by writing a long and revealing letter to shareholders along with the group’s annual results. In his latest letter published last month as he revealed the group’s full year 2015 results he explained the strategy as thus: “The Group 2002 has regarded insurance as a good means to connect Fosun’s investment capability to high quality long-term capital. On one Yuyuan hand, the insurance companies can improve their profits from underwriting by leveraging on the group’s extensive industrial operations experience and expertise in insurance and finance, and on the other hand may also help the group to realise higher 2003 investment revenue through effective investment practices. As a result, insurance plus investment will be our core business in the Nanjing Iron & Steel future,” he explained. Just like Mr Buffett’s Berkshire Hathaway, Fosun is doing rather well in this highly competitive global insurance market. Mr Guo revealed that, as at 31 December 2015, total insurance 2004 assets under its management reached RMB 180.6bn (us $27.9bn). This accounted for 44.6% of the group’s total assets and represented Zhaojin Mining an increase from 32.9% at the end of 2014. Total investable assets reached RMB 160.4bn (us $24.8bn), an increase of 50.2% compared with 2014. Profit attributable to the owners of the parent company from the insurance business rose 2007 by 88.4% year-on-year to RMB 2.10bn (us $320m) and accounted for 26.2% of the net profit of the group. Youg’an P&C Insurance, The profit increased at a compound average growth rate (CAGR) Hainan Mining of 100.5% from 2013 to 2015, reported Mr Guo. So how exactly did Fosun build such a presence in the insurance business? 2008 Focus Media
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First step with Yong’an Second step Pramerica
Xi’an-based Yong’an Insurance P&C was founded in 2003 Fosun’s next big step into the insurance market came in and was Fosun's first investment in the insurance market. September 2012 when it announced a joint venture with The Group holds a 19.93% equity interest in Yong’an, a US financial services giant Prudential Financial. national insurance company that underwrites all types The company, named PramericaFosun Life Insurance of non-life insurance business and was ranked 11th in the Company Limited (PFI), is a 50/50 joint venture that started P&C market in 2014. with registered capital of rmb 500m. The Chinese market is currently highly competitive and The company was China’s first life insurer jointly funded profits are not easily found. by a Chinese private investor and a foreign investor. Financial details are hard to come by for Yong’an, but Mr Guo said at the time: “The life insurance industry in Mr Guo’s letter accompanying the group 2015 results China is experiencing rapid growth, driven by an increasing states that the insurer has ‘taken the initiative’ and will focus on protecting the livelihoods of families around the be continuing to ‘adjust and transform’ its business in country. We look forward to benefitting from PFI’s deep 2016, indicating that it has experienced a tricky time of actuarial experience, asset management expertise and late along with the wider Chinese market. 137-year history of success in the life insurance industry, The group said that Yong’an has discontinued certain as we move forward together to develop products that ‘less efficient’ businesses and ‘constantly optimised’ address the life insurance needs of this market.” its business portfolio. It has also increased per capita In the latest financial report for 2015 Fosun said that in production capacity, reduced claims settlement costs, recent years the premium received by PFI has grown rapidly enhanced innovative development and actively explored on the back of several innovative projects. Internet applications. He said that the company continuously promotes Despite the need for ‘adjustment’ Yong’an recorded product innovation and is also exploring a new sales model gross premium income of RMB 8.1bn, net profit of of “Insurance + Health Manager + Retirement Community + rmb 833.3m, investable assets of RMB 10.9bn, net Overseas Asset Allocation,” and crowd-funding insurance. combined ratio of 98.0%, solvency adequacy ratio The group now offers a comprehensive set of product of 263.7%. The total investment return reached 10%. lines that span from life, accident, critical illness to So the results show that Yong’an is not doing bad at all. universal life and health insurance. In 2015 the new annualised premium income and the total premium of PFI reached rmb 125.3m and rmb 978.1m respectively (both including universal life insurance policyholders’ deposits). The company also recorded gross premium income of rmb 57.2m, net loss of rmb 113m, investable assets of rmb 1.9bn, a solvency adequacy ratio of 985.5% and the total investment return reached 6.9%.
Climbing to the peak
The biggest step forward in Fosun’s Then in January of 2013 Fosun created Peak Reinsurance Company Limited (Peak Re), a Hong Kong based reinsurer insurance growth story came in designed to capture the growing demand for modern May 2014 with Fosun’s completion reinsurance solutions in the Asia Pacific region. The company started with an initial capital of Us $550m. of its €1.038bn acquisition of 80% of Peak Re is actually held jointly with the International the share capital and voting rights Finance Corporation (IFC), a member of the World Bank Group focused on private sector development. It invested of each of Fidelidade, Multicare and us $82m (14.9%) in the company. Cares, collectively now known as the At the time of launch Mr Guo said: “Together with Portuguese Insurance Group. Fosun’s other insurance projects, we believe our investment in Peak Re will create an anchor revenue stream from the insurance business to support our investment activities and steadily making inroads to establish Fosun as ‘a premium investment group.’”
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The group pointed out that Asia Pacific has been 2010 underinsured in general for too long. It pointed out that, Club Med in the aftermath of a series of natural catastrophes in Asia Pacific in 2011, including the Thai floods, Tohoku earthquake and tsunami in Japan, New Zealand earthquake and Australian floods, less than 22% of the total economic loss registered was insured. This was signif- 2011 icantly below the ratio of insured loss to economic loss seen Folli Follie in the US and Europe at that time, which stood at approx- imately 63% and 50% respectively. Moreover, in 2010 China suffered its most devastating floods in a decade that caused aroundus $50bn economic loss, of which only Us $1bn was covered by insurance. 2012 Peak Re therefore planned to invest ‘significantly’ in the Pramerica Fosun Life research and development of risk management solutions Insurance, Peak Reinsurance for households and business in the region. It said that, in cooperation with IFC and Fosun, Peak Re planned to enter emerging Asian markets including China, India and Indonesia in its first five years. The new reinsurer also said that it planned to grow 2013 both organically and strategically via the acquisition of St. John, Alma Lasers, portfolios of profitable underwriting business. Saladax, Caruso, Atlantis Last year the reinsurer took some big steps to diversify Resort, Sanya, 28 Liberty in itself by territory and product line. New York, Loyds Chambers It announced its plan to acquire a 50% stake in Caribbean in London insurance group NAGICO Holdings Limited in July 2015, currently pending for regulatory approvals. Peak Re also set up a Zurich branch in September 2015 to get closer to its clients in Europe and further diversify the book of business. 2014 Fosun revealed that the reinsurer’s business in Asia Fidelidade, Secret Recipe, Pacific expanded ‘steadily’ and added that it has also made REN, Osborne, Studio 8, ‘solid’ progress in Europe and North America. Tom Tailor, ROC Oil, IDERA, In 2015, the gross premium written from Europe and Luz Saúde, BHF Kleinwort North America accounted for 41.5% of the total premium Benson Group SA, Hainan income, showing an increase of 24.4% from 17.1% in 2014. Mining IPO By the end of last year Peak Re had served over 285 customers in 47 markets around the world, compared to 175 customers by the end of 2014. The company wrote gross premiums of us $582.7m in 2015 compared to us $288.1m for the same period in 2014. 2015 Net profit wasus $59.2m, up by us $17.6m on 2014. Ironshore, MIG, Thomas The net combined ratio was 96.8%, solvency adequacy Cook, Club Med, Cirque du ratio was 754%, investable assets were us $913m and total Soleil, Hauck & Aufhäuser return on investment was 6.4%. Privatbankiers (H&A), Silver Cross, RPIM, Phoenix Holdings, Zhejiang Internet Commerce Banking Co., Ltd. commenced operation
Based on Fosun Institutional Presentation.
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Xi’an-based Yong’an Insurance cooperate with Yong’an P&C Insurance in technologies, products and sales channels to achieve rapid business P&C was founded in 2003 and development. On the other hand, Fosun will make use of was Fosun’s first investment in its core investment capability to optimize the investment portfolio to improve the investment returns for the the insurance market. Portuguese Insurance Group, especially combining with Fosun’s global investment strategies. Fosun will also review in at full lengths the investment opportunities across Europe and OECD markets while broadening its business scope, with a view to minimizing systemic risks of geographical concentration through diversification,” explained Fosun. The Chinese group added that it had been actively identifying different types of ‘value investing opportu- nities’ around the world and decided that, despite Portugal’s recent economic problems, it believed that Fosun arrives in Europe… Via Portugal that country remains a highly attractive key market and matches well with Fosun’s global expansion strategy. The biggest step forward in Fosun’s insurance growth story “Fosun stays vigilant and is attentive to other investment came in May 2014 when Chinese President Xi Jinping and opportunities in other sectors of the Portuguese market, Portuguese President Aníbal Cavaco Silva witnessed the in particular the sectors of property, tourism and brand signing of documents to secure Fosun’s completion of products,” added Fosun. its €1.038bn acquisition of 80% of the share capital and Fosun’s representative office was set up in Lisbon from voting rights of each of Fidelidade, Multicare and Cares, where it would be able to provide better support to the collectively now known as the Portuguese Insurance Group. Portuguese Insurance Group and explore investments The three companies were wholly-owned subsidiaries in other sectors in Portugal and further promote of Caixa Seguros e Saúde (CSS), the insurance arm of ‘Sino-Portugal’ economic exchange and cooperation, said Portugal’s state-owned bank CGD. the group. Fosun said that, following the successful completion “This move will also allow Fosun to contribute its effort, of the acquisition, it had made a ‘major stride’ towards albeit minute, to recovery of the economy in Portugal. becoming a world-class investment group underpinned Fosun aspires to play the role as a bridge that facilitates by the twin drivers of ‘insurance-oriented comprehensive business developments in China by companies originated financial capability’ and ‘profound industrial foothold in Portugal, and developments in Portugal by companies based investment capability.’ originated in China,” added the group. This, said the group, moved it closer towards In early 2015, Fosun further increased its equity interest implementing the ‘Warren Buffett model of development’. in Fidelidade to 84.986%. The Portuguese Insurance Group’s unaudited total Fosun Insurance Portugal is now a significant global assets reached €12.8bn by end-2013. On a pro forma basis operator in the Portuguese insurance market. after consolidating the Portuguese Insurance Group, the Fosun explained in its latest set of annual results that it proportion of Fosun’s insurance assets to the Group’s total sells its products in all key lines of business and benefits assets increased significantly from 3% to 39%. from the largest and most diversified insurance sales “As insurance is the core business for Fosun’s network in Portugal. development, the cooperation between Fosun and the This includes exclusive and multi-brand agents, brokers, Portuguese Insurance Group will undoubtedly be a own branches, Internet and telephone channels. It also long-term and stable one. Meanwhile, Fosun is fully has strong distribution partnerships with the post office confident about the existing management team and has and Caixa Geral de Depósitos, a leading Portuguese bank. committed to maintaining the stability of the ongoing Fosun Insurance Portugal is also active in seven business strategy. Through efforts of both parties and countries on three continents (Europe, Asia and Africa). synergies derived from shared resources in various aspects, During the Reporting Period, Fosun Insurance Portugal Fosun hopes to develop higher quality products and services reported gross premium income of €3.9bn, a non-life as part of its efforts in achieving sustainable returns to our business net combined ratio of 98.4%, a solvency adequacy shareholders, employees and customers,” stated Fosun. ratio of 215.7% and net profit of €301.1m. The Chinese group said that it would also facilitate “International business of Fosun Insurance Portugal collaboration and synergy with other insurance companies continued to reveal a strong commercial performance, that it had invested in, again following the Buffett model. reaching overall €202.1m in direct insurance premiums, “For instance, we will facilitate collaboration with an increase of 13.7% compared to 2014,” reported Fosun at Peak Reinsurance to lower the reinsurance costs and to the end of March this year.
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Next stop United States! Given the group’s existing presence in the potentially massive Chinese primary life and non-life markets, the Despite the scale of the Portuguese acquisition China’s Asian and international reinsurance market, mainland Warren Buffett was not ready to stop there and the next European life and non-life market and the US commercial target was in the huge US insurance market. specialty markets, the addition of Ironshore gave Fosun In July of last year Fosun announced the completion of arguably the final piece in its jigsaw, for now at least. its acquisition of 100% of Meadowbrook Insurance Group As the Ironshore deal was revealed, Mr Guo stressed (MIG) for us $439m. “Meadowbrook will further strengthen the Buffett style synergies that the companies will Fosun’s capability to access long-term high-quality capital enjoy within the Fosun family. He said: “Now and in the and enhance the Group’s insurance business capabilities on coming year, Fosun will strengthen its integration and both the liability end and investment end. We are committed collaboration efforts, seeking to establish a cross-region and to leveraging Fosun’s global resources to support long-term cross-industry global insurance and financial group. We and stable development of Meadowbrook,” said Mr Guo. encourage our invested companies to collaborate wherever Meadowbrook is a property & casualty insurer and applicable, seeking to connect them to Fosun’s resources insurance administration services company focused with our global insurance and finance platforms to enhance on specialty niche markets. It markets and underwrites their competitiveness in their respective industries.” specialty property and casualty insurance programs and And Ironshore did not hang around long to take products on both an admitted and non-admitted basis advantage of its new group potential for in January it through a diverse network of independent retail agents, announced that its Lloyd’s subsidiary, Pembroke Managing wholesalers, program administrators and general agencies. Agency, would set up an office in Shanghai to join the Critically, Meadowbrook possesses a full range of Lloyd’s China platform. non-life insurance licenses in 50 states nationwide, which The Shanghai Pembroke Managing Agency will cover admitted and non-admitted product lines. underwrite specialty lines of business, initially focused The completion of the Meadowbrook acquisition gave on the agriculture, marine and healthcare sectors. Fosun a strategic insurance platform in the US, enabling Tracy Ma was appointed underwriting manager of the the Group to establish a significant presence in the world’s entity and reports to Hui Yun Boo, managing director of biggest property and casualty market. Ironshore’s Asia Pacific region. Last year MIG recorded gross premium income of “Ironshore’s parent Fosun, headquartered in Shanghai, us $726.5m and net profit of us $34.3m on the back of a net positions us with clear distinction in the local market, combined ratio of 100.3% and solvency adequacy ratio of allowing us to offer onshore specialist products to meet 200.3%. MIG has investable assets of us $1,570.6m. growing demand within this vibrant city,” said Mark Wheeler, chief executive officer of Ironshore International. Ms Boo said the new Shanghai office complements And now international specialty market Ironshore’s existing regional presence in Asia Pacific growth hubs, such as Singapore, Hong Kong, Tokyo, Sydney In February of last year, as Fosun was preparing its and Auckland. acquisition of MIG, it completed the acquisition of approx- Interestingly only two months later on March 22, the imately 20% of the total outstanding ordinary shares of board of directors of Fosun announced that the Company Ironshore, the Bermuda-based international specialty is considering pursuing an initial public offering of the insurance group. The purchase price was approximately ordinary shares of Ironshore. us $466.6m. “As at the date of this announcement, no final decision True to form, in November of last year, the Chinese group has been made by the respective board of directors of the completed the acquisition of the remaining interests in Company and Ironshore on whether, when, or where to Ironshore for us $2bn in cash. proceed with the Possible IPO,” stated the group. Ironshore is a big step forward for Fosun into the Whatever Fosun decides to do with Ironshore it is clear highly valuable and currently popular large corporate that the Chinese group will continue to build its business and commercial insurance market. Apart from Bermuda, in the international insurance space. As Ms Lan Kang Ironshore has operations in the US, Lloyd’s and Ireland. states in the following Q&A Fosun will remain focused on In 2015 Ironshore’s gross premium income reached this market and use its Portuguese and international bases us $2.16bn and it delivered a net profit ofus $57.8m on to seek further growth opportunities. Watch this space! • the back of a net combined ratio of 96.7%. The solvency adequacy ratio was approximately 166% and total investable assets were us $5.1bn.
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GUO GUANGCHANG MEETS ROLE MODEL AT US-CHINA CEO ROUNDTABLE
Last September Chinese President Xi Jinping attended Meadowbrook Insurance Group (MIG) and Ironshore, and its the US-China CEO Roundtable in Seattle hosted by the participation in Sino-US cultural and artistic cooperation and Paulson Institute and the China Center for the Promotion of exchange programs. International Trade. This was the highlight of the second day of At the roundtable, Guo Guangchang said that the United President Xi’s visit to the United States. States has the world’s largest concentration of superior Xi Jinping stressed at the roundtable that, due to resources, and given Fosun’s focus on the four major fields of differences in stages of development, the Chinese and U.S. insurance, private banking, health and happy & lifestyle, the economies are highly complementary. He said that there Group actively explores superior projects for cooperation. is greater room and opportunity for bilateral economic At that point, Fosun’s scale of investments in the United and trade cooperation. The Chinese President added that States had already surpassed US $5bn, creating a total of China supports large US companies that establish regional 4,895 job opportunities, Mr Guo said. Apart from Ironshore headquarters and research centres in China and encouraged and MIG, these investments include: the establishment more small and medium US enterprises to expand their of three pharmaceutical laboratories in Silicon Valley for business in China. Meanwhile, Chinese investments in the seamless 24/7 global research and development as well as United States will also continue to grow, he said. over 10 investment cooperation projects, such as the New There were 15 CEOs from China’s biggest companies York landmark 28 Liberty, renowned US womenswear brand, including Guo Guangchang of Fosun who took part in the St. John, innovative Hollywood film company, Studio 8, and a discussion along with 15 CEOs of the biggest corporations in number of other venture capital projects. the US including Warren Buffett of Berkshire Hathaway. During the roundtable, Mr Buffett and the ‘Chinese Jokingly, Guo Guangchang called himself a student Buffett’ had the chance to meet face to face and reached of Mr Buffet at the roundtable as he introduced Fosun’s a consensus: Continue to be optimistic for the Chinese US investment projects, including the recently acquired economy and continue to adhere to value investing discipline.
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FOSUN Canada 2015 Circe du Soleil Grasping Global Investment UK
2013 Lloyds Chambers Opportunities 2015 Thomas Cook RPIM Silver Cross
USA Spain 2014 Osborne 2013 28 Liberty St. John 2014 Studio 8 2015 MIG Ironshore Ambrx NoMad Luxury Residential Tower at Madison Avenue New York
Italy
2013 Caruso 2015 Palazzo Broggi
Portugal
2014 Fidelidade Luz Saúde Illustration by José Cardoso José by Illustration REN
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France
2010 Club Med
Germany 2014 Tom Tailor 2015 H&A
Japan
2014 IDERA
Italy Israel
2013 Caruso 2013 Alma Lasers 2015 Palazzo Broggi
Australia Malaysia 2014 ROC OIL 2014 Secret Recipe Greece 73 MILLER STREET
2011 Folli Follie The above mentioned companies/projects include investmentscompanies/projects mentioned include above The Note: made by Fosun,its subsidiaries and funds under it's management. * Currently under approval by regulatory authorities. by approval under Currently *
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INTERVIEWING LAN KANG Fosun playing the long game
Chinese Conglomerate Fosun Group burst onto the European and international insurance market in 2014 when it acquired leading Portuguese insurer Fidelidade. This was rapidly followed by major investments in Bermuda-based international specialty insurer Ironshore and Meadowbrook in the United States. These international investments add to Fosun’s existing portfolio of investments in Chinese insurers. fullcover interviewed Lan Kang, Vice-president of Fosun Group and President of Fosun insurance Group to discover more about the group’s plans for the Portuguese and international Insurance market and how it fits into the fast-growing group’s wider strategy.
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We need to provide the resources that are needed and create synergies among all of our portfolio companies. We also have to build strong corporate governance and risk management systems and attract and develop global talents.
Lan Kang, Vice-president of Fosun Group and President of Fosun Insurance Group.
Fosun was founded in 1992. Could you share with us What are your investment and strategic objectives? how Fosun became one of the largest private Chinese conglomerates in such a short space of time? When considering investment opportunities, the most important thing to consider is how we can create value Fosun’s rapid growth in the past two decades or so has through our investments. Nowadays, when capital been built largely on the tremendous growth of China’s becomes a commodity, we need to think about why economy as well as the strategic decisions the company other companies would take our investment versus has made along the way, which is equally important the ‘others’ and how we can add value in addition to the to its success. Beginning in 1992 shortly after they capital provided. graduated from college, the founders of Fosun Group There are three areas of investments that we are started the business in market research and consulting focusing on: Health, Happiness, and Affluence of services with little funding capital. They successfully the people. We have already built our competitive accumulated some capital and later tapped into the advantages in the health and happiness industry. For healthcare and real estate businesses, having observed example, Fosun Pharma is a leading pharmaceutical that China was going through a process of quick company in China. We have acquired United Family urbanization. Further investment into manufacturing Healthcare, the leading high-end hospital in China. We and resources proved to be also very successful thanks to have also invested in some ‘internet+ health services’ the booming infrastructure sector in China. projects, like Guahao.com. Last year we finalised the Since 2008, as China’s economic engine has been privatisation of Club Med, the French holiday resort shifting from industrialisation and urbanisation to group, that we believe has huge potential in business consumption and personal finance, Fosun continued to expansion globally. Our investment in the financial invest by ‘combining China’s growth momentum with services sector, in particular the insurance sector, also global resources’. provides long lasting wealth preservation for consumers.
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What are the selection criteria for your wealth management realms, we can help the insurance investment projects? companies explore synergies in product development, distribution optimisation, integrated finance platform For insurance projects, we have 10 investment and various other areas. guidelines. These are: On the other hand, we can help to improve the asset-liability management and investment portfolio of 1. Market leader in the segment; the insurance company by leveraging Fosun’s excellent 2. Great management team; investment capabilities. 3. A good combination of asset scale and operating Furthermore, for overseas insurance companies, capability; Fosun can provide additional value by connecting 4. Relatively low cost of liability; China’s momentum with global resources. 5. Reasonable valuation; Fosun is dedicated to helping its portfolio insurance 6. Prudent risk management; companies to improve underwriting profitability by 7. Market opportunity; focusing on operational excellence, strengthen the 8. Controlling stakes to acquire; balance sheet and enhance market competitiveness 9. Potential improvements on the asset side; and, through innovation and evolution. 10. We understand that every project is unique and Then, only when the insurance operational side is we always evaluate each project comprehensively sound and profitable, we can utilise the long-term float to and rigorously with, but not limited to, the above achieve better investment returns. mentioned guidelines.
Why did you enter the insurance market when it is What are the major challenges that Fosun faces so competitive and pricing is so soft especially for with its overseas investments such as Fidelidade, non-life commercial business? Ironshore and Meadowbrook? It is true that global insurance markets, especially developed For such overseas investments you need deep local markets, are facing fierce competition and alternative knowledge and capabilities to gain access to the best capital surplus. However, the range between great and investment opportunities. This is critical because mediocre companies is huge. Our task is to identify value there is growing market competition that is driving investment opportunities despite the challenging market prices up. You also need to obtain understanding and conditions and create value after investment. trust from foreign regulators and there is increasing For instance, specialty insurance has outperformed complexity in risk management. other lines of business in the United States in recent years. Ironshore, a strong player in this segment, appears to be an interesting and unique opportunity for us. What are the guiding principles when you are We believe that sound fundamentals, underwriting dealing with your portfolio’s companies? expertise and excellent management talent are crucial for the success of an insurance company. We are proud You need to select and/or build a leadership team with to tell that all of our overseas insurance portfolio strong entrepreneurship and partnership. We need companies have achieved profitable financials in 2015. to provide the resources that are needed and create synergies among all of our portfolio companies. We also have to build strong corporate governance and Why has Fosun decided to expand outside of Asia to risk management systems and, of course, attract and expand its insurance business, why not concentrate develop local talents and provide them with a global on markets closer to home? platform on which to grow. Actually, we are not restrained in terms of geographic areas. We select the best opportunities that fit Fosun’s Why did Fosun choose the insurance market as one strategy. In 2014, it was Fidelidade in Portugal and in of its key markets? How does it fit with the rest of 2015, we invested in Ironshore and Meadowbrook in the the group’s activities? United States. Maybe there will be another star performer for Fosun in Asia or somewhere else in the world in The insurance sector is the best channel to connect 2016. But we have not neglected our home market. Fosun’s unique expertise in investments and industries Our insurance companies in China and reinsurance with long-term stable capital. companies in Hong Kong have all been managed by On the one hand, given Fosun’s strong industry strong teams of insurance professionals and have been capabilities in health, happiness, real estate and doing well.
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Could you explain the importance of Fidelidade for the strategy of Fosun?
As our first investment in the overseas insurance realm, Fidelidade opened a new chapter for Fosun Group. Simply by looking at the numbers, in 2014, Fosun’s asset had increased by €13bn with the transaction of Fidelidade. And we all know there is much more value embedded apart from the numbers. Fidelidade is a strategic platform in Europe which helps Fosun to better connect China’s momentum with global resources, to better understand the insurance operations in the Solvency II environment and to better implement our ‘Insurance + Investment’ core strategy prudently and effectively. In the past two years, Fosun has provided strong support to Fidelidade to improve its underwriting profitability and financial performance. We fully understand that for policyholders, financial strength of the insurance company is the top priority. We are dedicated to help Fidelidade achieve a stronger and brighter future. Shanghai: where traditional and new architectural co-exist.
Where does Fosun see the best opportunities for profitable growth in insurance markets worldwide – by geography and line of business?
We will be looking for companies with strong leadership, competitive and innovative products and services, as well as operational excellence, more than geography and line of businesses. LAN KANG
→ Lan Kang is Vice President and Chief Human Resources Is Fosun keen to expand in the larger corporate Officer at Fosun, as well as President of Fosun Insurance multinational insurance space and if so how? Will Group. She currently serves on the board of 6 insurance Ironshore be the main platform for this business? companies that Fosun has invested in, including Yong’an P&C Insurance and Pramerica Fosun Life Insurance in China, Peak The short answer to the first question is ‘Yes’; but it’s Reinsurance in Hong Kong, Meadowbrook Insurance Group worth further elaboration. Our goal in the insurance in the US, Ironshore in Bermuda and Fidelidade Insurance sector is to build up a global insurance holding Group in Portugal. company with world-class insurance management and → Prior to joining Fosun Group, she was a Senior Client investment capabilities. We will continue to search Partner focusing on executive search and leadership for high-quality insurance investment opportunities development at Korn/Ferry International’s Greater globally based on our rigorous investment guidelines China Office. She also spent over four years working in and prudent risk management. We will never embrace a management consulting at McKinsey & Company’s Greater growth strategy that is aggressive and irrational. • China office. She assisted many leading multinational and local Chinese companies in strategy development, operation improvement, and change management, and is experienced in talent acquisition and organization development. → Lan Kang spent 9 years in the US, before returning to China in 2002, right after receiving her M.B.A. with Honors from The Wharton School, University of Pennsylvania. She also obtained her Bachelor of Science degree from Zhejiang University in China, and a Master of Science degree from Tulane University in the U.S.
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FOSUN’S #1 INVESTMENT IN INSURANCE Fidelidade: going from strength to strength
Jorge Magalhães Correia is Chief Executive Officer of Fidelidade, Multicare and Fidelidade Assistance insurance companies and President of the Board of Directors of Universal Seguros (Angola) insurance company. He is also Vice-President of the Portuguese Association of Insurers (APS) and a member of The Geneva Association. He spoke to fullcover about Fidelidade, its strategy for growth, its work in the Chinese capital market and relationship with MDS.
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In a newspaper interview you once said:”What is expected of us to do in a year would normally take three years to achieve.” Have you been able to keep up with this pressure in terms of results?
My quote was intended to demonstrate the level of enthusiasm coming from our shareholders. The entire organisation has adapted quickly, post-privatisation, based on two strong shareholders who complement one another. We have taken advantage of the additional opportunities this new context has brought; not only do we have a more comprehensive view of the insurance business but we are also participating in transnational projects, bringing added value and knowledge to the Company. Apart from this, there has not been any particular pressure from the shareholders in connection with profits, and earnings have actually been retained in the Company to enhance its growth capacity.
Have there been any changes to the Organisation’s culture?
Other than the international dimension I mentioned, no. Of course, some things do change, for example, 150 more employees have opted to study Mandarin and we have a China Business Unit operating in Portugal, Angola, Mozambique, Spain and France. But the Company’s culture and management model have not changed - Fidelidade has always supported businesses in the private sector and will continue to be dynamic and innovative. We were responsible for introducing transport insurance in Portugal, were the first to sell life insurance and the first to issue a policy covering industrial accidents. And we will continue to be the main driving force behind innovation and progress in Portuguese insurance.
JORGE MAGALHÃES CORREIA The latest figures show Fidelidade has boosted its market share to around 30%. Is this growth an early → Jorge Magalhães Correia began his career as a reflection of the new management philosophy? lecturer at the Lisbon Faculty of Law. He also practised law and held management positions at the General As I said before, there is no new management Inspectorate of Finance (IGF) and the Portuguese philosophy. On the contrary, the team is continuing Securities Market Commission (CMVM). with the groundwork it began prior to privatisation. → He has held various positions in companies in the What has changed is the competitive market, which was finance and insurance sectors, including Administrator unable to cope with the downward spiral of prices and and/or President of the Board of Directors of Mundial- results. In practically every non-life sector, Fidelidade’s Confiança, Fidelidade Mundial, Império Bonança and Via management indicators are better than the market Direta the insurance companies. average; higher average premiums, fewer new and → In the hospital sector, he was Administrator of ongoing claims, more technical reserves and proven USP Hospitales (Barcelona) and Administrator and better levels of service. If we add to that the strength of subsequently President of the Board of Directors of HPP the brand and the highly professional broker network, it – Hospitais Privados de Portugal SGPS. is no surprise we’ve increased our non-life market share in a new underwriting cycle. In the life insurance sector, however, things are going to be different. In 2016, we will be introducing some
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changes in terms of strategy and positioning because we have come to the conclusion the new European Oncology insurance responds to the Solvency II regulations penalise this line of business, making growth difficult in its current format. challenge of cancer and is innovative in every respect, from the attention Today, Fidelidade operates in the Chinese capital given to preventing the disease, to the market. What could this mean for the future of the sums insured and personal attention insurance Company and its stakeholders? given to every case. A number of international insurance companies operating in Portugal have obtained this authorisation. What few people realise is that the Chinese authorities scrutinise every application in minute detail and this process can take months or even years. The fact that Fidelidade has been authorised to operate in the Chinese capital market is further proof of our financial and management capacity and this should be a source of pride for Portugal. We should not forget that China is the world’s second-largest economy and the number of middle class citizens equates to that of the European Union. Although we have the authorisation to operate on the Chinese capital market, we are not yet doing so because the investment opportunities so far, have not justified this.
We have seen the Portuguese insurance market become increasingly concentrated. What is your take on this development? Fidelidade is the leading insurer in Portugal, currently holding a market share A decade of not-so-prudent pricing practices, a climate of 29.8%. The company operates in all lines of interest rates close to zero and an economy with poor of business, having the largest network of growth perspectives make the process of concentration agencies in Portugal and being present in inevitable. And if we add the challenges of Solvency several countries, including Angola, Cape II into the mix, it’s not surprising the market has Verde, Mozambique, Spain and Macau. contracted quickly. We are very pleased Fidelidade prepared for such issues early on and we are now of a size where we play an important role in the Iberian market.
FIDELIDADE IN 2016 will also be marked by the Solvency II NUMBERS (2015) directive coming into force. How do you view the regulator’s increased stringency?
Above all, Solvency II represents higher capitals for the PORTUGAL same level of risk; in other words, more protection for policyholders and greater demands on shareholders. TOTAL PREMIUMS Solvency II brings significant improvements in terms of risk management and reporting and management €3,768M obligations. However, it also introduces new concepts that may have a negative impact on certain areas of MARKET SHARE the business, such as life insurance, where the essence of the business model may be compromised. When 29.8% Solvency 1 was in place, life insurers were a stabilising influence in the market; they provided support for economies and overcame the 2008 financial crisis without requiring support from taxpayers.
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How is Fidelidade preparing for this new challenge? What are your main strategies for growth in the future? Fidelidade began preparing for Solvency II in 2006, almost 10 years ago, by creating its Risk Management We are hoping to grow in every non-life sector, Department. Today we have a highly-specialised benefiting from the ongoing rate recovery and our full-time team for this purpose. increasing competitiveness. Health insurance will continue to gain weight in Fidelidade’s portfolio, In 2014, prior to privatisation, we distributed almost as will our activities connected to assistance and €600 million in accumulated dividends and capital, service provision in the insurance sector. And we will and in 2015, as planned, our equity capital increased by be increasingly multinational, with 20% - 25% of our €520 million. But the structural volatility of the markets premiums coming from other markets. in practically every sector and geography, coupled with the market-to-market asset valuation rule (which makes We are making a concerted effort to ensure our no sense for long-term activity), will bring permanent technology adapts to the OECD’s predicted fourth and unsustainable pressure to bear on the capital of Industrial Revolution and are experimenting in big every life insurance company. And this is changing the data, digitisation and online platforms. Innovation is face of insurance in Europe. certainly in the pipeline.
How do you envisage your relationship with insurance brokers in the future?
Our aim is to be a driving force for Our relationship with brokers is currently good but I innovation and progress in the insurance believe there is still room for improvement, hopefully to be more focused and efficient, creating more value for sector in Angola and Mozambique and both sides. to offer insurance options that will be attractive to the new middle classes. How would you describe Fidelidade’s relationship with MDS?
We have a long-standing relationship that goes back to the early days of MDS, in the 1980s. Over these three Fidelidade has a significant presence in the decades, a true spirit of partnership has been nurtured Angolan and Mozambican markets. What is the and strengthened and, in our opinion, this has made Group’s strategy here? it possible to bring value to a considerable number of customers, not just through our unrivalled cover To serve families and companies in the same way we do solutions but in our risk and claims management. Our in Portugal, by offering products appropriate to their relationship goes beyond the bounds of insurance needs at competitive prices and with excellent levels of intermediation, extending into other areas of service. Our aim is to be a driving force for innovation and collaboration such as training and reinsurance, and is progress in the insurance sector in these countries and to cemented in a personal relationship of trust and mutual offer insurance options that will be attractive to the new appreciation at all levels. middle classes. We are currently planning how to achieve this and will certainly consider opportunities for growth. Such loyalty on both sides has helped our portfolio remain stable during this time, and naturally, the Sonae Group carries considerable weight for Fidelidade; As market leader, Fidelidade has pioneered the we’ve provided Workers’ Compensation and Health development of innovative products and services. insurance cover for the Group since it was founded. The Is there anything particular you’d like to highlight? partnership with MDS however, has made it possible for us to work with a wide range of leading Portuguese firms. Oncology insurance, since it is our most recently launched product, and because of the joint effort it The improvements we’ve made to our organisation, requires from two of the Group companies, Multicare processes and products will strengthen our relationship and Luz Saúde. This type of insurance responds to the with and benefit our business partners, not only challenge of cancer and is innovative in every respect, in Portugal but in other external markets were we from the attention given to preventing the disease, to the are increasing our presence; we know this type of sums insured and personal attention given to every case. collaboration makes sense. •
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Evading Insurance Premium Tax Errors
Karen Jenner of FiscalReps offers her insight into the emerging risks mounting from Insurance Premium Tax (IPT) mistakes and provides advice on how to avoid them. Illustration by Tiago Galo
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Insurance Premium Tax (IPT) is often viewed as a lower tax cost compared to other taxes imposed on insurance companies, though those writing multinational insurance programmes, including those in the captive sector, face increasing risks arising from IPT errors and non-compliance, which can ultimately impact underwriting profits and bottom line results.
The growth of IPT allocation with regard to the risks based in Germany, insurers may find the authorities In the aftermath of the most recent global challenging an underpayment of German tax. financial crisis, it is evident that a growing It’s key that an insurer must be able to number of governments around the world have demonstrate a fair and reasonable premium either introduced ipt or have strengthened allocation and subsequent amount of ipt to existing ipt regimes. Since 2008 governments a particular jurisdiction, investigations may across the world have been shifting their attention require production of calculations, paper work from the direct taxation of businesses to the and an audit trail, sometimes going back over taxation of transactions, including insurance several years. Other investigations can cover transactions, in order to boost revenues. New legacy settlements, policy wording reviews and ipt regimes have been implemented in Hungary, application of appropriate ipt rates. Bulgaria and San Marino within Europe. With regards to increasing rates, in the EU, the Dutch authorities over the last 10 years have increased IPT Wariness their ipt rate from 9.7% to 21%; and 2015 saw increases in the Uk, Greece, Slovenia and France There has also been an increased level of scrutiny as well as many other countries. around ipt as a recent development allied to The increased focus on indirect taxes, concerns by tax authorities, especially in the and specifically ipt, is further evidenced by EU, about the use of transfer pricing. The tax a significant increase in the number of ipt authorities increasingly take the view such compliance investigations and audits conducted costs should be spread across the group on by national tax authorities. Audits are not always a fair, objective and arm’s length basis. This directed at the insurer, with ipt investigations more recent scrutiny may well come to impact more recently seen to increasingly arise from the methodology behind insurance premium audits of a corporate policyholder. These have allocation over the next few years as this is recently arisen independently from both Belgian something that governments are beginning to and Austrian tax authorities. Not only have look at very seriously. investigations sought to review amounts of ipt Although corporate policyholders may need settled and ensured that there were settled in to report ipt compliance for their own audit a timely and compliant manner, but various purposes, in Europe the insurance company tax authorities now wish to review and maybe typically pays ipt, with a few niche exceptions question premium allocations. where that may not apply. In practice, the respon- Uk and German tax authorities have recently sibility for ipt compliance rests with both the been involved in such investigations. With insurer and the policy holder and both have regards to Germany, if as an insurer, premium a measure of responsibility to make sure that allocations do not appear to be structured in the premiums are allocated reasonably and a way the tax authorities deem not to be a fair the various factors are calculated correctly.
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pass on to the policyholder will effectively come The potential impact of mismanaging out of the insurer’s underwriting profits which, IPT on the underwriting performance given the current soft market, are marginal at best. This effectively could mean losing money of a multinational insurance even before considering business claims and programme can be considerable. service costs. As both life insurers and reinsurers are often exempt from ipt, the burden of this particular tax falls on non-life insurers, including captive insurance companies.
Avoid IPT Mismanagement Implications of non-compliance can impact both the insurer and the policyholder. The ultimate The potential impact of mismanaging ipt on the responsibility should fall on the insurance underwriting performance of a multinational company because it is directly answerable to insurance programme can be considerable. the tax officials, but there are instances where Based on a typical ipt rate across Europe of 15%, the policyholder may be pursued. and an average combined operating ratio of 95% Some EU countries are in the process of across the majority of the Uk insurance market, revoking the requirement for foreign insurance a 5% ipt error could reduce underwriting profit companies writing business locally to have a by 15%. fiscal representative, which up until very recently Take the example of an insurance company was a legally mandated appointment. So much writing a Us $100m of premium income. With so, the partners of the firm acting as the fiscal an average rate of ipt in Europe of 15%, there representative are jointly and severally liable for is a potential exposure to ipt of Us $15m. If the payment of any taxes incurred on behalf of everything is compliantly and correctly managed the foreign insurer. There have been arguments with regard to ipt, the exposure is zero. But KAREN JENNER at the EU level that the requirement to force an with any errors, your exposure can increase. EU-based, non-domestic insurer to appoint a If at the same time, a combined ratio is about → Karen Jenner joined fiscal representative when the domestic insurer 95%, meaning that on a Us $100m premium an FiscalReps as an insurance does not have to do so, is unfair. insurer can make Us $5m of profit, the Us $5m consultant with over 20 Over the last few years, we have seen a number of profit is much smaller than the ipt exposure. years of experience in the of countries, usually as a result of pressure applied Any undue increase in your ipt costs will directly insurance industry. Prior to by the EU, revoke the requirement to appoint a impact profits. joining FiscalReps, Karen fiscal representative. Spain is a good example of Combined ratios of captive insurance Jenner was at AIG working this. In 2010, a case was brought against Spain by companies may differ from those of general in various roles in their the European Commission which argued that it insurers – the premium income of captives is Major Accounts Practice, was unfair for Spain to force non-Spanish insurers known to generally be significant, with the cost responsible for the global to appoint a fiscal representative. Last year, Spain of any ipt error equally impacting significantly insurance programmes of finally relented following a second case. But, even the profit margin of the captive. some of the top 100 FTSE though the fiscal representative requirement is no Additionally, there is also the question of companies. longer in force, as an insurer you still need to file reputational damage. For example, should an and pay IPT and comply with local regulations. insurer, for one or other reason, leave an ipt Currently, the average ipt rate in Europe demand unpaid in any country in the EU, a is somewhere between 10% and 15%. This has precedent set by the European Court of Justice implications for both providers and buyers in the Kvaerner case of 2001 gives national tax of insurance cover. As for a corporate buyer authorities the right to pursue the insured if of insurance, especially a multinational the insurer fails to settle up. This is particularly corporation, 15% of the total premium amount an issue in the current global regulatory and will be a material figure. It’s key to ensure that compliance environment when the tax affairs the right amount of tax is paid because insureds of corporates are under unprecedented levels of do not want to pay any more tax than is required. scrutiny from both the tax authorities and the As an insurer, it’s important to ensure you are media. Insurers increasingly need to consider collecting the full amount of tax payable but also, effective compliance systems because of the as an insurer you are allowed to pass on certain severe consequences that non-compliance can elements of the tax cost to the policyholder. bring: fines, litigation and reputational damage Whatever part of that cost the insurer fails to can all result from unpaid taxes. •
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68 DOSSIER GEOPOLITICAL RISKS
WHEN THE NEWS IS WRITING A PAGE OF HISTORY ALAN SIMON – PHILEAS CONSULTING GROUP
MANAGING AND MITIGATING THE EVOLVING THREAT OF TERRORISM DANIEL O'CONNELL – XL CATLIN
TRAVEL SECURITY AND CRISIS MANAGEMENT INTERNATIONAL SOS / CONTROL RISK
GEOPOLITICAL RISK – WHAT PRODUCTS & COVERAGES? BY ROB HOUGH, CGSC
NEW IDEAS FOR TACKLING GEOPOLITICAL RISKS IN BUSINESS DAVID ANDERSON – ZURICH
GEOPOLITICAL OVERVIEW IULIA SIMON – CH TORO INTERNATIONAL
All illustrations by Tiago Galo
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The argument that follows will attempt to demonstrate by just a few examples that it is less the world that is changing so radically than the lenses with which we view it, our geographical When the news and historical perspectives, remain stagnant and anachronistic, making comprehension difficult if not impossible.
is writing a Let us use as case studies three places: Libya, Syria, and Iraq. It is now 2016, five years after the start of what we felt able to call the Arab Spring. page of history What season would it remind us of today? All the readers of this article, as well as the writer, have learned to identify the names BY ALAIN SIMON of these three countries, to locate them on color-coded maps with names identifying precisely delineated states. There’s no doubt, we were dealing with countries or even states. What is the legacy of this? We see the pieces of a fragmented puzzle superimposed on the names of old ruined countries: in place of exploded Libya there is now Cyrenaica, Tripolitania, and Fezzan. “The revenge of Geopolitical explanations of Meanwhile in Iraq and Syria, Sunni and Shia, Arabs and Kurds (the reality is far more complex territories on risks in the new world order than this simplification) have by fire and blood maps, long arcs torn apart the countries we had become used of history on Strange sentiments affect the witnesses and to seeing. short periods, is a agents in this second decade of the 21st century. But in reality all these entities existed long The old world seems to them to be unequivocally before our maps were printed, long before we bearer of violent dead, while the new one is not yet born, with no learned to conceive of the world by their neat lines. conflicts, which clear delivery date. Libya, Syria, and Iraq, are in effect voluntary accompany The interaction of these two states is often and recent constructs, born out of the desire to affirmations at the heart of much pessimism but also overcome old divisions by giving independence questions, doubts, uncertainties, concerns and to heterogeneous regional agglomerations in of identity, understandable but possibly dangerous nostalgia. the first half of the 20th century. resurgences all This is by no means the first time that the In the first the desire was Italy’s, while with the stronger for generations to whom belonged the second respect to Syria and Iraq it was the Franco-British having been half of the 20th century are faced with critical Sykes-Picot Agreement of 1916 – its centennial schisms between the past and future. being this year – which should be conducive buried, as a There was 1989, the fall of the Berlin Wall, the to its co-memorization, meaning the common, return of the defining symbol of the Cold War. popular operational memory. repressed. They There was 2001, when, on 9/11, we saw These realities precede our memory. Long destabilize the tragically that History was not at an end. before we were demarcating world maps, In these two cases, there were certainly complicated identities existed in the places we powers in place remarkable places and images, but nevertheless wished to simplify, sometimes with good reason, that loathe ceding understandable and interpretable events. by a varnish of homogeneity. their privileges.” But since 2011, all countries, regions, and But the old identities have persisted under the continents seem to be in motion simultaneously, thin layer of the will of men. It is as if we wished without apparent links. This (apparently) to hide wall cracks with whitewash. senseless motion, almost Brownian in nature, Everyone agrees that history is written by begets anguished bewilderment. the victors, we should also add that it is they We will suggest here that a geopolitical who draw the maps. But just as the clothes do lens can make a small contribution to fashion not make the man, as a beard does not make a comprehension from anxiety. philosopher, likewise a map does not create a Let’s give geopolitics a chance, with the territory, especially when it tries to agglomerate understanding that geopolitics is the composition some and divide others. And identity perseveres, of geography and history. it can be recalled at any time.
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And this is what is playing out before our eyes. As for the independence movements in Scotland We have mistaken makeup for skin, constructed and Flanders, notice that these are territories appearances for ancient realities. This incredible that were not incorporated into the Roman illusion causes us to confuse maps and territories. Empire, regions whose people were regarded as This is my initial hypothesis: we have learned barbarian. It appears that the past does not pass. to view the world through the latest maps, while real comprehension requires an appeal to the Let us stop the examples there. Do not doubt that make-up of the former territories. each can find in his own geographic environment Rendered myopic by our acclimation short illustrations of such processes. time spans, we are stupefied by the resurgence In the Chinese world, unity does not eliminate ALAIN SIMON of long-term realities. On all sides, the tables turn, the Beijing/Shanghai divisions, nor the tossing off tablecloths and dishes. peculiarities of identity among the Han and other Can we find more examples of what could be populations. In Vietnam there is the presence → Since 1985, Alain Simon is called territory’s revenge on maps? and resurgence of specificities between Tonkin, the Managing Director of the These could be countless since the process Annam, and Cochinchina. Phileas Consulting Group, a is at work the world over, we can all discover this There are many much more qualified than me consultancy specialized in the process around us. who can demonstrate how diverse India persists globalization process. So we see in Africa the reappearance of as just one country. He previously worked for ancestral rifts between nomads and sedentary In the United States itself, are we certain that seven years at COFACE, peoples, ancient denizens and new arrivals, the divisions of the Civil War are forgotten? A the French export credit farmers and stock-breeders, animisto-Christians recent quarrel over flags gives reason to doubt guarantee company. and animisto-Muslims. And a number of this assumption. His field is Geopolitics and countries recently drawn onto the atlas have Of course, we gladly admit that there may Corporate Strategies (Video, already fractured, will they survive? be counterexamples, we are not proposing an in French, on You Tube “Clip In Europe as well, the fracture lines, hidden absolute theory but a lens to use as a key, with Alain Simon Géopolitique”). from view by the superficial cosmetics of maps, which we do not aim to open all doors. → Currently, he takes part in are reopening: we see in the division of Ukraine, However, through these examples, several the decision making process which is itself but a constructed aggregate from lessons can be offered to readers to inform their of many French and foreign 1945, the divisions that emerged during the viewpoints and reflections on the risks of the corporates who want to East-West schism of Christianity in 1054, always world. We offer two: develop their activities on a alive as testified by the meeting between Popes worldwide basis. Francis and Kirill in February 2016. This line • The revenge of territories on maps, long arcs of → He has been Associated also went through Crimea, which only became history on short periods, is a bearer of violent Professor at University of separated from Russia in 1954. Those who have conflicts, which accompany affirmations of Rennes 1 (2003-2011) and is seen but the edited map, are not aware of these identity, resurgences all the stronger for having for many years a close partner circumstances. And this situation is even more been buried, as a return of the repressed. They of Essec Executive Education. extreme for those who have seen only maps destabilize the powers in place that loathe He published several created after 1991, they have learned of the world ceding their privileges. Even though they articles and four books: with no cartographic references to the USSR. are cyclical, decades serve as brackets on «Geopolitics and corporate Just as the sign “Wet Paint” signals that it is best history. It is necessary to explain: in all cases, strategies» awarded in 1994 to stay away, we should be wary of “recent maps”. the aggrandizement of tensions leads to an the best French financial There is not enough space here for many more increase in risk and necessitates investigating book; «The map of the new examples. We will contend ourselves with just a a broader scope. world» published in 1997; few to highlight how troubling and systematic is “Geopolitics of a melancholy the current counter-attack of territories on maps. • A second lesson: the proposed hypothesis world” published in 2006 and Greece’s Orthodox affiliation appears in its shows how dangerous it is to confuse short “A time of discredit” that was movement away from the European Union and and long time - the duration of our lives, the published in 2008. towards Russia. There is no ambiguity here: length of our memory, and the span of history. what is influential here is not primarily religious It is perilous to consider a volcano extinct just beliefs or practices, but, above all, a cultural because it has long seemed dormant. This is tropism, encompassing believers, unbelievers, the same error that leads some to renounce and infidels all. vaccinations, having never experienced an Since the start of 2016 we have seen in epidemic. A specialist in risk management Athens a project for the departure of Greece must then have a memory which extends far from the Schengen agreement to put it in line beyond his or her birth. with the non-signatory Romania and Bulgaria, recreating the dividing line between the Eastern Beware, beware of amnesiacs! • and Western Roman Empire which dates from the fourth century AD!
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Managing and mitigating the evolving threat of terrorism
BY DANIEL O’CONNELL
A volatile and Risk management unpredictable risk Terrorism is sometimes treated as an isolated Terrorism risk is similar in some ways to natural threat, but it is usually better handled within the disasters – both tend to occur with some overall risk management programme. Measures regularity, and cause significant economic that reduce the risk of attack – such as greater impact as well as injury and death. The nature controls over access to premises – are also good of the events also tends to follow a few common practice generally. Steps that companies should scripts. With terrorism, it’s bombings and consider taking include: shootings; with natural disasters, it’s hurricanes, DANIEL O’CONNELL typhoons, earthquakes, floods, etc. • Implement physical security and personnel Where they differ, however, is in their source measures to reduce exposure to attack. → Daniel O'Connell is and predictability. We know, for instance, the Class Underwriter for War, conditions that will generate a hurricane, and • Consider potential indirect impacts tied Terrorism & Political Violence can predict with increasing accuracy where to nearby targets, or from disruption to at XL Catlin. and when the impacts will occur. We are only transport systems or public utilities. → He joined legacy XL in starting to understand the conditions that will 2013, leading the Political cause someone to decide to inflict grievous • Ensure that business continuity plans are Violence team at Lloyd’s. harm on innocent people. And even as we begin up-to-date and include terrorism-related → He has over 10 years’ to understand the underlying motivations and measures, such as managing media experience in the insurance pathologies, it is extremely difficult to predict attention. industry. He has held senior where and how a terrorist could strike. underwriting positions at But, as with natural disasters, that does not mean • Review insurance policy terms and Willis and Hiscox. companies lack options for addressing the threat conditions and revise as necessary to → He served in the Irish of terrorism, as volatile and unpredictable as it may mitigate potential terrorism risks. Guards after joining the Royal be. In the years following 9/11, a number of prudent Military Academy in 2001, actions have been identified that will lessen Companies should also consistently monitor and was awarded the Military the possibility of a company being targeted by possible threats and assess potential Cross for his services in Iraq terrorists, and minimize the physical and financial vulnerabilities, especially as the organisation in 2013. impacts of a terrorist attack. At the same time, evolves. As with any catastrophe, distance in the insurance industry has developed a broader time from a well-publicised terrorism plot or range of options for mitigating potential impacts. event is likely to reduce awareness of warning signs, as well as the perceived likelihood of an event taking place.
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Risk transfer Flexible cover – many insurers now offer terror- ism-related coverages tailored to a company’s A terrorism attack on property or infrastructure specific needs such as: is likely to hit many aspects of an organisation’s operations, directly and indirectly, and can • Loss of attraction cover in case a company cause a wide array of losses including property loses business because of damage damage, business interruption and workers’ to a nearby iconic building or critical compensation or employer’s liability. And while infrastructure. many countries have some form of national • Contingent business interruption when terrorism insurance or reinsurance, these access to an insured’s premises is not schemes often have some material limitations possible, including as a result of a civil or such as: military directive. • An official declaration of an act of terrorism • For US-domiciled businesses, cover for may be necessary to trigger recoveries. TRIA captives. • Only certain lines of coverage are available. CBRN risks – these are normally excluded • Business interruption cover, if available, can in insurance policies, but can be purchased be limited. either as a ‘write back of an exclusion’ or on a standalone basis. Physical damage (including • All assets must be included. clean-up costs), business interruption and • Coverage for chemical, biological, third-party liability coverages are available from a radiological or nuclear (CBRN) risks may not limited number of specialist commercial markets. be available. Indemnity period – while some loss adjusters However, the commercial market for terrorism advise that the indemnity period for business insurance protection, either standalone or in interruption cover tied to terrorism events should combination with a national terrorism insurance be at least 18 months, insured’s generally have scheme, has matured considerably since 9/11. the option of specifying the coverage term, from Businesses now have a range of options for as short as six months to as long as five years. matching their risk profiles and appetites to the coverages they buy. The risk transfer options for Contingent business interruption – terrorism risk now include: businesses do not need to experience direct physical damage to suffer a loss. It is now Global programmes – it is now possible to possible to cover the impact of a supply chain incorporate terrorism cover within a global disruption resulting from a terrorist action or programme, although some considerations other indirect causes of loss. need to be addressed. Most importantly: whether there are overlaps or gaps between the terrorism Event cancellation – terrorist attacks or even policy and the all-risk property cover; and how severe threats can lead an organiser to cancel a national terrorism insurance scheme, where a major commercial event. This was most it exists, differs from the global programme in extensive after 9/11, but there have been many terms of triggers and coverage levels. In both other instances of events cancelled as a result instances, difference in conditions (DIC) and/or of a terrorist threat or attack. difference in limits (DIL) policies can be used as necessary to help create consistency. Recent events show that terrorism, unfortu- nately, will remain part of the risk landscape for Policy extensions – in addition to standard the foreseeable future. Nonetheless, terrorism wordings, underwriters can provide a bespoke risks can be managed in order to minimize the or follow form wording with sub-limits and threat and mitigate the potential impacts. In the extensions tailored specifically to the company’s absence of a loss, insurance provides comfort to needs, either within the framework of the an organisation’s board and its shareholders; it property programme or as standalone coverage. also offers a path to recovery if a terrorist event does occur. Today, there are wide choices in policies and wordings that enable businesses to create cost-effective coverages tailored to their specific situations and requirements. •
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Travel security and crisis management BY INTERNATIONAL SOS / CONTROL RISK
When large organisations send employees overseas or into regional danger zones, they must ensure the safety of their staff. With that in mind and the logistical nightmare that this entails, there has been a rise in companies working to prepare employees for travel and supporting them whilst they are in unfamiliar locations. International SOS, the world’s leading medical and travel security services company, conducted a Travel Risk Outlook 2016 survey among European organisations from December 3rd 2015 till January 26th 2016. Business travel is expected to continue or grow, with 91% of the survey respondents indicating international travel within their organisation is likely Dealing with crisis to remain at the same level or to increase in 2016. A key outcome of the survey was as well that Dealing with crisis and what you confront in that 88% of respondents are concerned travel risks is difficult. Some of the crisis management teams may have an impact on their business in 2016. and incident management teams we have had Whilst many risks may be mitigated, one in three to drive for our clients are highly challenged. It organisations reported they do not pro-actively is how we try to mitigate those risks by better educate their travellers before they go abroad. preparing companies for situations before With that in mind, it is crucial for organizations to they travel into high-risk environments that can be able to educate and prepare their employees help prevent tragic events. You can’t predict an before travelling, as well as to assist them during Icelandic volcano or a Japanese tsunami, but you a trip or even in the case of a crisis. can prepare for emergencies and risks and we International SOS and Control Risks enables act very quickly to try and mitigate those risks. managers to mitigate travel security risks and When an event like Cyclone Pam comes along, make the right decisions for their staff’s health, we are very skilled at looking at many things at safety and security. International SOS and Control once. First of all we ascertain where our clients Risks’ local expertise derives from years of are. We do that through our travel tracker solution operational experience to provide companies with that tracks their movements. deeper, more insightful, specialist knowledge. We also form a crisis management team and an The team is composed of 200 dedicated travel incident management team that we can deploy. security experts, from 30+ nationalities and And usually we deploy within 24 hours. We sent a speaking 30+ languages, who have all lived and medical team, operations team, nurse, doctor and worked in the regions they manage. Their extensive security personnel to the place to ascertain where experience includes: analysis, commercial security, the people are and account for their safety and crisis management, logistics, military, operational make sure we can reach them and look after them. intelligence, and police. They have qualifications At the same time, we have our crisis management in relevant areas such as risk management, team in our assistance centre to co-ordinate back international relations or security studies. to the clients what we are hearing.
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“You can’t predict How we have managed Everybody within International SOS is working an Icelandic crisis during Paris and Mali towards the same goal; to deliver more protection volcano or terrorist attacks and quality health and security services to more at-risk clients. In this world that has become a Japanese flatter and more dangerous, health and safety tsunami, but you On the evening of 13 November 2015, a series of and managing traveller risk is a crucial business can prepare for coordinated terrorist attacks occurred in Paris. requirement. • emergencies and Three suicide bombers struck near the Stade de France in Saint-Denis, followed by suicide risks and we act bombings and mass shootings at cafés, restaurants very quickly to and a music venue in Paris. 130 people were killed. Our integrated travel security and medical try and mitigate About International SOS support teams provided advice and assistance those risks.” International SOS is the world’s leading medical to those in Paris at the times of the attacks, and travel security risk services company. They including clients in the vicinity. care for clients across the globe, from more than In response to attacks, and realising their 850 locations in 92 countries. They have unique magnitude, we immediately added teams to expertise: more than 11,000 employees are led our 24/7 assistance capabilities. Our teams by 1,400 doctors and 200 security specialists. supported client crisis management: providing Their teams work night and day to protect their clear, balanced and robust security advice and members. They pioneer a range of preventive direct assistance. programmes strengthened by their in-country Our integrated assessments and advice expertise. They deliver unrivalled emergency helped to put media speculations and social assistance during critical illness, accident or media commentaries into context and provided civil unrest. They are passionate about helping reassurance to our clients and their people. clients put ‘Duty of Care’ into practice. With them, Ground support was provided for secure multinational corporate clients, governments and escorts, close protection and guarding. NGOs can mitigate risks for their people working TravelTracker support was provided to clients remotely or overseas. to ensure it was being used most efficiently to locate and support employees. On 20 November 2015 terrorists attacked the About International SOS and Control Risks Radisson Blu hotel in Bamako, capital of Mali. They The alliance brings together two of the world’s took 170 hostages and killed 20 in a mass shooting. leading medical and security specialists. Their Throughout the day, our crisis management combined resources and expertise are well teams in Paris and London provided essential placed to meet the customers’ growing need advice to clients. Our unique operations network for integrated travel security risk services. Their means we were able to maintain contact with solutions ensure that mobile employees are clients and members affected and coordinate the safe and productive and help employers with response accordingly. Control Risks’ embedded their duty of care obligations. 50 dedicated crisis management resource further enabled the experts, located across the globe with access effectiveness of support. to over 200 dedicated travel security experts One member was trapped in her hotel room through 27 regional assistance centres and a during the attack. She called us for support. One partner network of over 700 accredited providers, of our security experts stayed on the phone with produce global travel security information and her for four hours to help her through the ordeal. analysis 24/7. They also provide travel security This lifeline provided essential emotional training, preventative travel assessment, support in addition to expert advice. “During support with the development of travel security the call, we advised on how to deal with the risk policies, evacuation plans and the latest smoke in the room, life-safety techniques, and technology to enable clients to track and what to do in the event of the attackers trying communicate with their mobile employees. to gain entry. In addition to safety support, our doctors were also able to provide medical advice. We liaised with the security forces and the local government to coordinate the safe release of the member. She survived the attack as a direct result of calling us.”
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Geopolitical Risk – what products & coverages?
BY ROB HOUGH
While it is critical for organizations to be aware of an operating or import/export licence or of the Geopolitical risks they are facing, the good the inability to convert or transfer funds due to news is that there are insurance products that restrictions imposed on the insured. Coverage may cover them, thus allowing companies to is also available against loss arising from continue developing their activities even in what political violence or war on land (see below). may be considered risky areas. Rob Hough of the Financial & Political Risks Who purchases this coverage? Department of CGNMB, a CGSC Company, Corporates with insurable interests in a showed Fullcover some those tailored products: foreign country, lenders with a contractual “The Lloyd’s and London markets offer various insurable interest through their loans and/or products that banks and corporates can use to investments and foreign equity investors who ROB HOUGH protect their assets and investments against have an equitable interest in a foreign company/ politically related events. We have summarised enterprise. → Rob Hough is Director of the main risk transfer products available and Financial & Political Risks at how they can respond below. Coverage can be CGSC. specifically tailored to the insured’s needs and Contract Frustration → He has been part of the it is important to note that levels of indemnity,
NMB Financial & Political deductibles/excess, waiting periods and the Contract Frustration is a product that covers Risks Division since October breadth of coverage will differ on a case by case corporates and lenders against non-payment or 2011 and assists clients with basis, reflecting a combination of factors such as non-performance of contractual obligations, by their trade credit and contract the location of the risk and any capacity restraints a majority owned state entity or public company. frustration, comprehensive in the market.” Government contracts are significant business contractors plant cover and opportunities. However, there is a risk that they their terrorism and political may be unilaterally cancelled or amended by that violence cover including Confiscation, Nationalisation, government or its agencies. The perceived level control of well for energy of risk will depend on the country in question, focused clients. He has seven Expropriation, Deprivation its performance history and insurers’ appetite. years’ experience in the (cend) Terms and prices will reflect this perception. The insurance and reinsurance level of loss which can be compensated is usually market and speaks Spanish CEND policies indemnify companies operating up to ninety per cent of the total contract value. to an intermediate level. in foreign jurisdictions, (that is in countries outside their own domicile) against the loss Who purchases this coverage? of assets, equity or income arising from Corporates selling or buying from state entities or selective and discriminatory actions by the public companies and banks/lenders financing local authorities. Events that may be covered the specified trade. also include the cancellation or non-renewal
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GEOPOLITICAL RISKS COVERAGES Trade Credit Insurance
Comprehensive Trade Credit Insurance is very similar to Contract Frustration but the key difference is that it protects contracts to CONFISCATION, What covers? Who purchases? finance, buy or supply products or services from Indemnify companies → Corporates NATIONALISATION, or to a private company rather than a public or operating in foreign → Lenders state entity. A claim under the policy can be EXPROPRIATION, jurisdictions against → Foreign equity triggered by default or non-payment by the loss of assets, equity investors DEPRIVATION private company. or income; cancellation
(CEND) or non-renewal of an Who purchases this coverage? operating or import/ Corporates selling or buying from private export licence, inability companies and banks/lenders financing the ↳ to convert or transfer specified trade. funds; loss arising from
political violence or war on land Political Violence
Political Violence is defined as the physical loss CONTRACT What covers? Who purchases? or damage to an asset due to pre-agreed, defined FRUSTRATION Covers corporates → Corporates types of event, such as: and lenders against buying from state/ non-payment or public entities • Sabotage & Terrorism ↳ non-performance of → Banks/lenders • Strikes, Riots, Civil Commotion (SRCC) contractual obligations, • War and Civil War by a majority owned • Mutiny, Coup D'etat, Rebellion, Insurrection state entity or public company Coverage can be purchased in any territory in which the applicant has an insurable interest, including their own country, provided that insurers have appetite and capacity. As well as TRADE CREDIT What covers? Who purchases? coverage against physical damage, extensions INSURANCE Protects contracts to → Corporates are available for consequential business finance, buy or supply buying from state/ interruption and liability to third parties products or services public entities ↳ from or to a private → Banks/lenders Location and type of activity enables or restricts company the coverage available. The insurance market continues to proactively respond to the demands and needs of customers with the development of additional coverages such as cyber, denial POLITICAL What covers? of access and loss of attraction which can VIOLENCE Physical loss or damage due to pre-agreed complement an existing property or political event, such as: risks placement.
↳ → Sabotage & Terrorism This is a brief overview of the solutions that the → Strikes, Riots, Civil Commotion (SRCC) insurance market can provide to their clients to → War and Civil War assist them to mitigate their exposure to financial → Mutiny, Coup D'etat, Rebellion, Insurrection and political risks. Such covers can make the difference between a company being able to go ahead with a venture or losing a potentially valuable business opportunity. •
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New ideas for tackling geopolitical
DAVID ANDERSON risks in business → David Anderson is Director of Global Business Development BY DAVID ANDERSON at Zurich Credit & Political Risk. Based out of Washington, D.C., David Anderson manages Zurich Credit & Political Risk (ZCPR), a market-leading underwriter of credit and political risk insurance worldwide. He is also a subject matter expert and blogger for the Risk & Insurance Management Society (RIMS) on credit and Companies will increasingly need to address political risk, and is a frequent geopolitical security as interstate conflict, source on these topics in the press. terrorist attacks and refugee flows, demand → He started with Zurich in 2002, greater strategic attention from business leaders launched the Sydney, Australia, and have a bigger impact on the global economy, ZCPR underwriting office in according to the Global Risks Report 2016 from 2006, launched the Singapore the World Economic Forum (WEF). office in 2009, and managed the The report, developed in collaboration with Asia-Pacific regional team until Zurich Insurance Group and other leading 2012. Following that, he became institutions, argues that states and governments Director of Global Business are less able to tackle geopolitical issues alone as Development for the team. these challenges are increasingly interconnected. → Prior to joining Zurich, he And the private sector has expertise and led FCIA’s eastern region for resources that can help, such as data for tracking multibuyer credit insurance out risk factors, information that can be shared on of New York and underwrote criminal activity, and, crucially, the ability to political risk insurance for Citicorp control supply chains during emergencies. International Trade Indemnity. “There is a growing role for public-private → David Anderson earned his B.A. collaboration to tackle global security challenges,” in Political Science (magna cum states the report. “We need clear thinking laude) from Amherst College and about new levers that will enable a wide range his M.A. (Latin American Studies) / of stakeholders to jointly address global risks, M.B.A. from University of Texas at which cannot be dealt with in a centralized way.” Austin. In the past many companies have been reluctant to become too closely involved in geopolitical issues. Half the managers surveyed in a 2011 study by Wharton Business School said their most common method of managing geopolitical risk was simply to avoid investing in volatile places. But that tactic is unlikely to hold up as companies seek new markets, with unrest and volatility able to spread quickly from one location to others.
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Industry alliances
There is evidence, however, that this is changing. New global partnerships are emerging and action taken by the private sector against human trafficking is an example of the kind of influence companies can have. Initiatives from a number of different sectors including banking, technology and the trucking industry, are outlined in a 2014 WEF report Hedging Risk by Combating Human Trafficking. That report also highlights the travel sector, which started “the Code”, a voluntary set of guidelines to help prevent child sex tourism and trafficking, in 2004. Spearheaded by Marilyn Carlson Nelson, the former chairwoman and chief executive officer of Carlson Companies, the Code was signed by Hilton Worldwide in 2011 and now has over 1,200 company signatories from countries including Colombia, China, Egypt, Thailand, Brazil and Russia.
International partnerships
In the past few decades, companies have also begun to play an increasing role in multi- stakeholder partnerships with UN organizations and non-governmental organizations. These partnerships have ranged from financial pledges such as Unilever’s £27 million of support to the World Food Programme since 2007, to Coca-Cola’s 5by20 initiative with UN Women which aims to support five million women entrepreneurs across the company’s value chain by 2020. Economist David McWilliams, a Professor at the School of Business at Trinity College, Dublin, points to the UN Global Compact – a voluntary initiative by the private sector officially launched in 2000 to support UN sustainability goals – as an illustration of how influential corporations can be when they work together with governments on global challenges. Some 8,000 companies have signed up to the UN Global Compact’s ten-point code of behavior around the areas of human rights, labor, anti-cor- ruption and the environment. They submit an audit each year to show how they are meeting these requirements and these are published online. A 2013 statement from the Coca-Cola Bottling Company of Ghana, for example, stated that it had bought a new more energy-efficient plastic bottling line and built a waste water treatment plant for its fruit juice supplier.
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Climate action The need for partnerships
At the Paris climate talks in December, the “Farmers saw the utter futility of changing their 443 corporate signatories of the UN Global own habits without effective joint efforts of all Compact’s Caring for Climate initiative, set major stakeholders in their watershed; and so new targets for an estimated collective annual they wouldn’t,” writes Brabeck-Letmathe. “Played emissions saving of 93.6 million metric tons of out on an international scale, this is the crux: carbon dioxide equivalent. Without partnership between all those who share In welcoming the Paris climate agreement, a stake in the problem we won’t make progress Lise Kingo, Executive Director, UN Global towards any meaningful solution.” Compact, said the private sector should be From water issues to refugee crises, applauded for bringing better business practices partnerships are vital to finding solutions to into the process and sending a forceful message the world’s increasingly interconnected global on the importance of a solid climate agreement. problems and, as suggested in the Global Risks “We believe the Paris Agreement sends the right Report 2016, many businesses appear ready to market signals which will provide predictability, play a more important part. unlock capital, drive innovation and reward responsible business,” she said. “Never before have we seen this level of engagement from Key takeaways business and it is clear that the momentum is unstoppable.” • The Global Risks Report 2016 believes there is a growing role for public-private collaboration to tackle global security Addressing the water crisis challenges.
Beyond the UN, companies contribute in other • Multinational corporations have traditionally ways on global issues. International food avoided becoming too closely involved in company Nestlé, which has made the responsible geopolitical issues. treatment of water “critical” to its business, proposed its own Sustainable Development • Action taken by the private sector against Goal to the World Bank in 2013, aiming to cut human trafficking is an example of the kind its use of water to sustainable levels. of influence companies can have. “While this measure may not be perfect when looking at the complexities of water withdrawals, • The UN Global Compact is an example of usage and return flows,” says Peter Brabeck- how influential corporations can be when Letmathe, Nestlé chairman, “I am nevertheless they work together with governments on convinced it can work as a good, practical global challenges. • approach for measurement-driven action.” Brabeck-Letmathe takes the issue of water so seriously he writes his own blog called Water Challenge [https://www.water-challenge.com]. In a post entitled “We will fail to feed the world until we fix the water crisis” he cites the experience of the Punjab, where water tables were dropping by one meter per year after pumps were subsidized for irrigation. There was no incentive to limit water use despite the inevitable consequences – drought and failing crops.
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The perspective on the year 2016 is quite a controversial one. There are those with an almost apocalyptic vision, who predict that we are headed toward “the perfect storm” created Geopolitical by the stock market crash, another real estate collapse, and skyrocketing unemployment rates. On the other hand, there is a more optimistic outlook from those who forecast Overview a weak, yet steady recovery. Economists are analyzing the maze of objective economic BY IULIA SIMON signs and interpreting them subjectively, which leads to certain expectations and more worries. How do we proceed from that point? Who is to be believed and what can be expected?
Despite pessimistic views out there, we all want to hold on to a glimmer of hope for our future, as well as our children’s future. As a result, when undesirable news reaches us, there is a tendency to block them out and apply the concept of “If I did not hear of it, it does not exist”, which for some is often a survival tactic. Understanding our world, however, is the basic prerequisite for shaping our life and happiness.
The Expert Forecast
The International Monetary Fund projects the world economy at 3.4 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage points from the previous estimates in last October. Moreover, it stresses the idea that policymakers should consider ways to bolster short-term demand. IULIA SIMON IMF released an updated World Economic Outlook forecasts as global markets have been → Iulia Simon has over twenty years of experience in roiled by worries over China’s slowdown and evaluating, designing, and implementing specialized risk plummeting oil prices. It maintained its previous programs in the Institutional and Corporate market. China growth forecast of 6.3 percent in 2016 In addition to her specialty in Special Risk insurance, she and 6.0 percent in 2017, which represents possesses a detailed and comprehensive understanding sharp slowdowns from 2015. China reported of political, economic, and social issues throughout Latin that growth for 2015 hit 6.9 percent after a year America, Europe, and Asia. in which the world’s second biggest economy → She is actively involved in the German, French, and Russian endured huge capital outflows, a slide in the Chambers of Commerce, as well as STEP, a professional currency and a summer stock market crash. association for those advising families across generations. Shares in Europe and Asia rose and the dollar In her current role as Senior VP Marketing, based in Miami, gained after China’s data was released, as she serves as the primary Client Relationship Executive for investors anticipated greater efforts by Beijing CH Toro International Ltd. clientele throughout the USA, to spur growth. Concerns about Beijing’s grip on Latin America, and Europe. economic policy have shot to the top of global → Through her extensive knowledge and experience in the investors’ risk list for 2016 after falls in its stock international market, she has successfully been able to assist markets and the yuan stoked worries that the executives and family members in designing an optimal economy may be rapidly deteriorating. A steeper coverage tailored to specific needs, protecting the lives and slowing of demand in China remained a risk to wealth of clients. global growth and weaker-than-expected Chinese
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imports and exports were weighing heavily on of mass destruction (2nd), water crises (3rd), other emerging markets and commodity exporters. large-scale involuntary migration (4th) and Soft consumer demand in the United States severe energy price shock (5th). and Japan and weakness in emerging markets The number one risk in 2016 in terms of due to worries over plunging oil and commodity likelihood, meanwhile, is large-scale involuntary prices and capital outflows from China are migration, followed by extreme weather events among the main risks. Furthermore, the Fund (2nd), failure of climate change mitigation states that the outlook for an acceleration of U.S. and adaptation (3rd), interstate conflict with output was dimming as dollar strength weighs regional consequences (4th) and major natural on manufacturing and lower oil prices curtail catastrophes (5th). energy investment. It now projects U.S. economic At the top end of the scale, 2016’s two growth at 2.6 percent for both 2016 and 2017, most interconnected risks – profound social down 0.2 percentage point in both years from instability and structural unemployment or the October forecast. under-employment – account for 5% of all In Europe, lower oil prices will help support interconnections. private consumption; therefore, IMF has added As an annex to this article our readers will find 0.1 percentage point to its 2016 euro area growth data sheets with excerpts from a 2016 Threat forecast, bringing it to 1.7 percent, where it will Forecast provided by Red24, a leading security remain for 2017. company, focusing on various political, security and Brazil will stay mired in recession in 2016, kidnapping risks by region in the year ahead. This with output contracting 3.5 percent, a 2.5 information will provide a realistic and alarming percentage-point downward shift from the overview of threats for the year 2016. previous forecast, and there will be essentially no growth in 2017 as Latin America’s largest economy struggles with lower Chinese demand. Forbes magazine contributor Bill Conerly reflected on the International Monetary Fund forecast, considering that the commodity- dependent countries, Latin America, Africa and parts of Asia are facing difficult times. Commodity prices being so down, it represents cutback in mining, petroleum and agriculture. Conerly suggests that the world will probably grow a little bit slower than the IMF forecast. From the environment to international security and the coming Fourth Industrial Revolution, the World Economic Forum’s Global Risks Report 2016 finds risks on the rise in 2016. In this year’s annual survey, almost 750 experts assessed 29 separate global risks for both impact and likelihood over a 10-year time horizon. The risk with the greatest potential impact in 2016 was found to be a failure of climate change mitigation and adaptation. This year, it was considered to have greater potential damage than weapons
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Maritime Crime Maritime security in the waterways surrounding Indonesia, Malaysia, the Philippines and The threat from piracy and other forms of maritime Singapore has been a longstanding concern in crime, in particular robbery at sea, will remain the region and is expected to remain so in 2016. elevated in a number of regions worldwide in According to IMB reports in mid-2015, pirates 2016. Piracy will continue to pose a specific attacked a tanker approximately every two security risk in the Gulf of Guinea as well as South weeks in South East Asian waters during the East Asia. While the majority of pirate attacks are preceding six months. In a high-profile incident expected to continue in the abovementioned highlighting this trend, which took place on 8 regions, the possibility of incidents occurring August, a Singapore-registered small oil tanker, elsewhere cannot be discounted. MT Joaquim, was seized in the Malacca Strait off The gradual extension of the geographical the coast of Malaysia. spread will likely continue in 2016. A contin- The 2015 uptick in attacks in Vietnamese uation of 2014 and 2015 trends regarding the waters and in the Singapore Strait itself will also nature of attacks in Nigerian waters and its need to be monitored closely in 2016. evolution from oil siphoning and bunkering to Regional and international concerted security increasingly well-coordinated and often violent efforts, particularly on-board security measures attacks targeting commercial shipping vessels and national and international counter-piracy and their crew, including longer-term hijacking efforts continue to contribute to the ongoing and KRE incidents, should also be anticipated. major decline in Somalia-based piracy since the This risk is highlighted by a number of incidents end of 2011. Nonetheless, the regional piracy of this nature in 2015. threat has not been eliminated and there are regional and international concerns regarding a potential uptick in pirate activity. Following no reported incidents for the first six months of 2015, an Iranian-flagged fishing vessel was hijacked and at least ten crew members kidnapped by suspected pirates off Somalia’s eastern coastline on 22 November.
Open source information indicates that the approximate cost to the shipping industry of additional counter-piracy security measures in East African waters totaled US $1.3 billion in 2014; war risk and KRE insurance premiums on vessels transiting this region were an additional US $103 million. In addition to the above-mentioned regions, the risks of piracy and robbery at sea extend to waters elsewhere. In the Indian subcon- tinent, there has been a rise in attacks off the coast of Bangladesh over the past 18 months. Piracy and armed robbery will continue to pose a potential security risk in South and Central America and the Caribbean, particularly in the vicinity of ports and anchorages in Brazil, Peru, Haiti, Ecuador and Guatemala. Sporadic incidents in this region, such as an attack on a luxury yacht, Pelikaan, in Haitian waters in April, underscore the ongoing risk. Furthermore, an uptick in incidents has been recorded in Venezuela in recent months, particularly near Lake Maracaibo.
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The accelerated Information Security for those seeking to release them. For example, increase in the Aegis Response has noted a shift away from use of technology Information security remains a pervasive threat negotiations taking place via telephone calls, to business, and travelers often do not have the to email negotiations with kidnappers, with is already same protection as when working in their offices. Islamic State almost exclusively using this form demonstrating Internet security risks increase the pressure on of communication for their demands. This gives impact on how governments for greater regulation in the years a crisis management team the luxury of time in traditional kidnap to come. It is imperative that all stakeholders, a less pressured environment, enabling them from government to businesses, academics to reach a decision on strategy and to craft an for ransoms and consumers, collaborate to ensure that ideal response “behind closed doors”. are perpetrated regulations are comprehensive, proactive and In terms of proof of life, there are many more and managed. improve the security and privacy vulnerabilities options for verification – video voice calls, for of connected devices. For enterprises seeking example – that can provide extra assurance that to take advantage of new IoT technologies, one a victim is alive and being held by the group in of the keys to success will be to ensure that new question. However, the almost blanket use of technologies are impervious to cyber-attacks. forms of social media and popular messaging The accelerated increase in the use of applications creates new problems in the technology is already demonstrating impact kidnap for ransom arena. Victims can now be on how traditional kidnap for ransoms are vulnerable to simple reconnaissance on their perpetrated and managed. On the one hand, this personal wealth gleaned from photos posted can be positive for both the potential victims and online and employment information, which kidnappers can investigate from the comfort of their own homes, choosing from a wide range of potential victims. There have been cases of kidnappers with sophisticated cyber capability conducting research on their victims’ bank accounts, abducting them, and then forcing them to simply use their online bank accounts to personally transfer a specific ransom amount for their release. While bitcoin, the anonymous currency, is used extensively in cyber extortions, it is spilling over into the realm of kidnap for ransom: we have begun to see cases where kidnappers have demanded to be paid ransoms in this crypto currency. For instance, in October, an executive from Hong Kong was released after being kidnapped and held in Taiwan for over a month by a gang demanding a ransom of US $9 million in bitcoin. Over the coming year, the trajectory of this technological shift will proceed rapidly and – for better or worse – further changes are likely in the field of traditional kidnap for ransom. In conclusion, based on all the evidence, we can safely deduce that the risk of Kidnap and Ransom is here to stay for the year to come. We live in a world of continuous challenges, as well as evolving dangers. Facing those means understanding our circumstances. Acquiring knowledge on our surroundings, keeping informed on where our world is headed is “sine qua non” for our survival. Let us be equipped for the battle for our future and our children’s future, armed with knowledge and an accurate vision of our world, while never losing sight of the wonderful things humanity has built; the acts of greatness and charity that make the human race something so important to fight for.•
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Turkey, September 2015: The 13-year-old son of a prominent Syrian businessman was kidnapped in Istanbul for a Threat Breakdown ransom demand of US $1 million. He was freed by police forces in a security operation, which involved a fake ransom.
Latvia, September 2015: Two foreign executives fell victim to an attempted kidnapping outside of their hotel in the capital, Riga. Seven suspects were arrested during a police sting operation while trying to transport the Irish and Swedish hostages to an undisclosed location.
France, May 2015: A local millionaire was kidnapped from his residence in France and then transported to Marbella, Spain, where he was held hostage by a group of experienced kidnappers for two months. Following his abduction, he was forced to call his family and tell them he was taking an unexpected holiday; the gang then proceeded to extort him of approximately US $1.37 million. When Europe An additional threat will stem from opportu- they released him, they demanded he continue to nistic individuals, motivated by financial gain pay an amount of US $106,000 per week. Towards the end of 2015, some of the key or personal grievances; disgruntled former political and security risks facing the globe were employees, business associates, suppliers or Germany, August 2015: starkly highlighted by developments in Europe, malicious individuals may pose a security risk The 17-year-old daughter of a Saxony businessman traditionally a secure business and travel zone. to business operations as well as unquantifiable was kidnapped and subsequently killed by the The migration of tens of thousands of people into reputational risks. Recent incidents affecting perpetrators shortly after they made a ransom the region from conflict-ridden and economic- business continuity, such as the persistent demand of US $1.27 million; this occurred despite depressed states in Africa, Asia and the Middle extortion of Dutch supermarket chain, Jumbo, her family stating publicly that they would make East not only impacted on intra and inter-state highlight this threat as well as the challenges that the payment. The perpetrators were inexperienced transport but also disrupted the movement of successful resolution may pose to victim(s). Over a and after some ‘easy’ money; they chose their persons and goods across borders, as states period of several months, anonymous individuals victim after coming across her Facebook profile moved to restrict the flow of asylum seekers. threatened to place explosive devices in Jumbo and reading up on her family. One perpetrator The Paris attacks in November compounded stores in various locations in the Netherlands; reportedly conducted surveillance while walking regional unity concerns and highlighted, again, the perpetrators demanded that a ransom be a dog in the same area the victim walked her dog. the far reach of Islamist extremist ideology. The paid in the anonymous digital currency, bitcoin. link between migration and militants was the The situation escalated between May and Russia, August 2015: focus of far right and leftist groupings, which August, when explosives were in fact detonated Police arrested six members of an extortion gang have continued to seek to benefit from popular in several Jumbo stores. As investigations following the abduction of a prominent local concerns regarding the longer-term influence continued, the company was forced to increase businessman; the victim was seized from his the flow of migrants will have on local states. security at over 500 branches countrywide. vehicle and injected with a substance, which the In the coming year, there will be a persistent Furthermore, political, hacktivist, anti-European kidnappers stated was lethal venom. He was told threat of terrorism from international Islamist Union, ultra-nationalist, anarchist, or extremist that an antidote would be given if he complied with extremist groups and self-radicalized individuals entities may choose to use extortion/cyber the kidnappers’ financial demands - final ransom and an increased frequency in low-level incidents extortion to target individuals or businesses in demand was US $106,000. The victim reportedly of violence that will be confined to countries that relation to domestic, regional or international contacted his family and arranged the payment, have existing political and social tensions and developments. High-profile cyber-attacks by after which he was given an undisclosed antidote. which are some of the key target locations for unconfirmed state/non-state groups on various migrants, including Germany, France, Italy, Greece major European businesses and financial and Germany, June 2015: and Hungary. political institutions during 2015 demonstrate The 50-year-old mentally disabled son of German The year ahead will be characterized by a more that digital and cyber extortionists are capable billionaire, owner of the Wurth Group, was militarized Europe, the rise of nationalist parties, as of infiltrating a range of prominent targets. A kidnapped from his care home near Frankfurt, well as increased protest activity and associated cyber-attack targeting the German Bundestag and held hostage as the perpetrators demanded a low-level acts of violence. Non-traditional (Parliament) in May 2015 may require the institution ransom payment of approximately US $2.2 million. kidnapping variants, in their physical and virtual to completely overhaul its IT system at the cost The victim’s father is reported to have a personal forms, will pose the most significant risk across of several million euros. Additional high-profile net worth of US $7.2 billion. After becoming Europe and Russia in 2016. Countries that already attacks included the online infiltration of French aware of the massive police operation underway have an entrenched organized crime element broadcaster, TV5Monde, in April, during which to rescue the victim, the perpetrators left the may be subject to an elevated risk; these may several of the station’s channels and social media hostage tied to a tree in a forest near Wurzburg. include Russia, Eastern European countries, platforms were hijacked and negative material Spain, Greece and elsewhere. related to French military action in Iraq broadcast.
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In one such example, a distribution center for Coca-Cola in Guerrero, Mexico, was closed in June 2015, reportedly because of ongoing extortion attempts by a criminal group. In addition to threats of violence, which will be used to coerce payments, past incidents in Mexico and Venezuela suggest that groups may physically attack critical infrastructure, including oil pipelines, manufacturing sites or transportation services, in order to solicit payments. An increase in extortion activity is highly likely in areas where foreign investment is expected to grow in 2016.
Express kidnappings will occur regularly and hold the potential to evolve into a longer-term kidnap for ransom incident, depending on the circumstances, perpetrators and victims. The death of a Spanish tourist during a December 2014 urban express kidnapping in Maracaibo, Venezuela, as well as similar fatal outcomes in incidents elsewhere in the region, point to the potential for such an incident to rapidly deteriorate into violence. Furthermore, virtual kidnappings have grown in frequency and scope across Central and South America over the past year. Virtual kidnappings, which often emanate from incarcerated individuals, have increasingly included a cybercrime element; surveillance of potential victims is increasingly gathered using social networking platforms, or via stolen identity data. For example, in 2015, South The Americas Organized criminal activity, particularly in Mexico America-based criminal entities orchestrated and other Central American states, will remain at virtual kidnappings targeting victims in the US In the Americas, slowing growth has served to elevated levels throughout 2016. The connection and Spain. A further uptick in incidents, both place stress on populist governments that rely between organized crime networks and political domestically and across geographical borders, on heavy social spending policies. A change of elites will continue to be exposed and, in some areas, is anticipated in 2016. leadership in Argentina has already occurred and these connections may break down in response to further political upheaval is expected. Pressure political reforms or changes in leadership. Traditional long-term kidnapping levels are from disaffected middle class populations and In some areas, the political/organized crime expected to remain highest in Mexico and opposition groups has already increased in relationship may grow, including in El Salvador, Venezuela. Kidnappings orchestrated by various key states, including Brazil, Venezuela where local gangs, estimated to have 70,000 organized crime groups will continue to pose a and Ecuador. Associated civil unrest will remain members, increased activity in 2015 in response security risk in countries such as Argentina and a key concern and risk, which both business and to a government crackdown. Overall, the economic Brazil, and persistent lawlessness together with general travelers will need to implement mitigation downturn is likely to benefit criminal groups at high crime and homicide rates in El Salvador, measures for in 2016. the expense of state attempts to curtail criminal Haiti and Honduras will contribute to the ongoing Latin America experienced a period of activity, including drug producing and smuggling. elevated kidnapping risk in these countries. unprecedented economic growth from the early Long established as the kidnapping center of 2000s to 2013, which pulled tens of thousands the world, kidnap for ransom and extortion (KRE) Finally, politically motivated and/or communal of people out of poverty and into the middle will continue to pose one of the key security risks to protest activity is a common occurrence in lower class. This success depended largely on export individuals and companies operating in high-risk kidnapping-risk operating environments such as goods that were in great demand by the rising locations in South and Central America and the Bolivia, Ecuador, Peru, Chile and Paraguay. The Asian states. Recent decreases in demand have Caribbean in 2016. possibility of recreational travelers being affected resulted in an increase in poverty rates and slowing cannot be discounted; in 2015, approximately 40 growth in the region’s largest economies. This Traditional and short-term kidnappings for tourists were detained overnight by protesting economic downturn coincided with and appears financial gain will continue to affect locals and community members in Peru. to be contributing to increasing anti-government foreign nationals in Mexico Venezuela, as well sentiment by many in the lower classes, which are as in Colombia, Argentina, Brazil, El Salvador, feeling the direct impact of the crisis, and among Guatemala, Honduras, Haiti and elsewhere in the fragile middle class, which is traditionally more 2016, albeit at varying rates. In addition, threats likely to demand government accountability. In posed by express and virtual kidnapping and cyber addition to disruptive and violent protests linked extortion are expected to increase. directly to the economy, long-standing grievances such as corruption, state mismanagement, Actual and attempted extortion incidents, be it environmental concerns, political reform and of local or foreign staff, may potentially hamper indigenous rights have surfaced in numerous areas. business operations and impact profit margins.
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Middle East and In restive Bahrain, Iran’s support for Shiite IS has played a major part in driving sectarianism. North Africa protesters against the Sunni minority and Bahrain’s Since emerging as a major regional power Saudi-backed regime will persist. Political support in mid-2014, its propaganda machinery has may increasingly be complemented by support presented Shiites, apostate states (those in The Middle East and North Africa’s security and with resources. coalition against it) and infidels (foreign powers) as political troubles continue apace. The conflicts in the clear enemies. The group’s establishment of a Syria, Yemen and Libya, the persistent menace of Since the establishment of a caliphate in June caliphate and its remarkable battlefield successes the Islamic State and its various affiliate groupings, 2014, with Abu Bakr al-Baghdadi as its caliph, have drawn thousands of fresh recruits to its and rising tension between the region’s two IS has continued to make gains, albeit at a lower banner from across the globe. Mixed communities, powerhouses, Saudi Arabia and Iran, threaten to rate compared to its 2014 victories over the Iraqi such as Tripoli in Libya, Beirut in Lebanon and the draw in major global powers in even greater ways military. In May 2015, the group captured Ramadi Eastern Province of Saudi Arabia, which borders in 2016 and heighten already elevated sectarian and, despite losing territory in Diyala governorate Bahrain, will increasingly become flashpoints of tensions. The prospect of an end to the region’s in Iraq and in northern Syria to the Kurds, it has confrontation. various conflicts remains remote, while the risk of managed to hold Raqqa, Mosul, Fallujah and parts interstate conflict continues to increase. of Ramadi. Kidnapping for the purposes of financial, political and ideological gains will be a key security risk The high-profile conflict in Syria continues to In 2016, IS will seek to strengthen defenses in the in many countries within the Middle East and impact on the security environment and political Sunni heartland of the Anbar governorate and will North Africa (MENA) region in 2016. Pre-existing stability of states across the region. Major regional continue to harry pro-Iraq forces elsewhere in the kidnapping risks from criminal, extremist and and global powers are increasingly viewing Syria country. In Syria, IS will look towards the Aleppo militia groups will remain elevated. as a battleground to preserve or enhance influence governorate to make additional gains against the Precedent has shown that, when compared to through support of proxies, to support or topple regime and rebel forces, while seeking further other regions, the potential for negative outcomes the Bashar al-Assad regime, or to contain what is thrusts into central Syria. in kidnapping incidents in MENA is elevated. This increasingly becoming a bloody and most likely has been clearly demonstrated by the abduction drawn-out conflict lasting for many more years. Coinciding with the rapid rise of IS in Syria and subsequent execution of dozens of foreign and Iraq has been the emergence of various IS nationals (including Chinese, Egyptian, Norwegian, Western, Saudi Arabian, Turkish, Jordanian and Qatari affiliates or provinces across the region and the UK and US citizens) by the Islamic State (IS) and support for anti-al-Assad forces, and Iranian, Russian, globe. Provinces have emerged in North Africa affiliate groups. IS has made financial demands for Chinese and Hezbollah support for the al-Assad (Egypt, Libya and Tunisia), the Arabian Peninsula the release of hostages in Syria in the past; in 2015, regime is likely to escalate through 2016. The (Yemen and Saudi Arabia), Asia (Bangladesh and the group demanded a US $200 million ransom involvement of so many states and, by association, Afghanistan) and Africa (Somalia and Nigeria). payment for a Chinese and Japanese hostage larger military alliances like NATO will serve to Many of these ‘new’ groups are simply rebranded and a US $6.2 million ransom for a 26-year-old increase the risk of low-level interstate conflict. former al-Qaeda-aligned groupings. These groups US national. The threat stems from individuals may pose a significant threat to foreign interests or groups affiliated with IS as well as unknown In Yemen, Saudi Arabian support for the regime and local tourist industries. IS sympathizers. The kidnapping and execution of President Abd Rabbuh Mansur Hadi has been of a French tourist in northeastern Algeria overt and significant. The fighting in Yemen, In 2016, mass-casualty and high-profile attacks illustrate this threat. In addition, the possibility of which is expected to persist through 2016, has are likely to continue in Egypt, Libya, Algeria, opportunistic kidnapping and short-term hostage left thousands dead and has further devastated Yemen and the Gulf States. taking incidents occurring in countries with a the Yemeni state. medium or even low overall kidnapping threat may grow. The kidnapping and beheading of a Croatian national near Cairo, Egypt, by a previously unknown IS-affiliate group in 2015 illustrates this new threat posed by little-known militant groups keen to gain attention and support from IS.
Ransom demands and settlements increased in countries such as Libya, Syria and Yemen, as unaffiliated groups have taken advantage of growing fears of a negative outcome fueled by IS execution of foreign hostages. This has been compounded by a number of instances where unsophisticated criminal groups are believed to have sold foreign hostages to IS after being unable to absorb delays in negotiations due to operational inexperience or inability to hold hostages for longer periods of time. This possibility adds a new dynamic to the regional kidnapping threat and is expected to continue in 2016.
Africa’s complex political and security environment remains a point of concern for foreign business operators. The regionalization of the Boko Haram insurgency is a key focus area, while the mineral-rich
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Congo region continues to struggle with stabilizing Sub-Saharan Africa increasingly restive polities. Within restive zones, kidnapping threats will remain elevated. Kidnapping for the purposes of ransom, as well as short-term variants such as extortion and express The year 2015 was one of milestones in Boko kidnapping, will remain a primary security concern Haram’s near-decade-long armed insurrection in many high-kidnap risk countries in Sub-Saharan against the Nigerian state. The year commenced Africa and may increase in frequency in some low- ominously, with the sect inflicting its deadliest to medium-risk locations in 2016. act of mass violence since its inception, when In particular, foreigners involved in the construction Boko Haram militants allegedly killed as many and/or engineering sectors have emerged as frequent as 2,000 people in the northeastern village of targets, particularly in Nigeria; this trend is expected to Baga between 03 and 07 of January. The Baga continue in 2016. Furthermore, longer-term business massacre and the global outcry it evoked served as travelers and expatriates will also face an elevated the catalysts for a regionally coordinated counter- kidnapping threat. offensive against the Islamist extremist group, Furthermore, the kidnapping of locals employed launched in mid-January. by foreign companies will remain a major concern For the first time, the military forces of Nigeria, in high-risk countries. Cameroon, Niger and Chad conducted joint military operations against the sect, culminating The presence and activities of well-organized in Boko Haram losing swathes of territory in criminal syndicates in relatively stable security northeastern Nigeria, which had been declared environments within the SADC (Southern African part of the group’s nascent caliphate in late Development Community) region, particularly in 2014. However, the relative success of these Kenya, Mozambique and South Africa, have the joint military operations triggered another, albeit potential to continue to contribute to what may far less desirable, accomplishment in the Boko become an increasingly embedded kidnapping Haram insurgency. and extortion industry in 2016. Further sporadic kidnappings of locals and foreign nationals by Although Boko Haram developed as a grassroots extremist groups should be anticipated in 2016, Nigerian organization with a domestic focus, as well as short-term hostage-takings such as the the group’s rhetoric and ideology have always November assault on the Radisson Blu hotel in suggested a much wider ambition. Central to Mali’s capital, Bamako, which left approximately its recruitment strategy has been the sect’s 19 people dead. manipulation of the historical narrative of the The abduction of a Romanian national from a Kanem-Bornu Empire – an Islamic kingdom poorly secured mining site in northern Burkina that once incorporated parts of modern Nigeria, Faso by AQIM (Al-Qaeda in the Islamic Maghreb) Cameroon, Chad and Niger. For Boko Haram splinter group, al-Mourabitoun, in August 2015 to achieve its purported goal of resurrecting speaks directly to the threat of operating in this ancient Islamic empire, the sect would be insecure regions without adequate risk mitigation required to export its armed insurrection beyond measures in place. the confines of Nigeria’s borders. By submitting to IS, Boko Haram has effectively pledged to pursue the IS agenda of creating a unified Islamic caliphate spanning all Muslim- dominated regions of the world.
Although the terrorism threat in Lagos is assessed as most acute in its densely populated mainland region, the threat will extend to the Victoria and Lagos islands’ commercial districts, which host both foreign diplomatic and business interests. In Chad, acts of terrorism are likely to continue in the capital, N’Djamena, which may also serve as the operational base for a regional force mandated to spearhead counterterrorism operations against Boko Haram in 2016. In neighboring Niger, an expansion of Boko Haram activity to the respective south central and southwestern Zinder and Dosso regions, where a number of humanitarian organizations have based their operations, will be a credible concern in the coming year.
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Asia as business interests in many parts of Asia in 2016. a common response to corporate disputes or The threat of financially motivated kidnapping misunderstandings. Furthermore, wrongful The Asian region’s primary security issue in 2016 will remain significant in numerous locations in detention by official government entities will will remain the conflict in Afghanistan while the region. Although the kidnapping risk posed remain a concern for business and recreational the emergence of other IS-linked groupings in by regional and international Islamist extremist travelers. South Asia, South East Asia and Australia will groups garnered widespread media attention in gain popular attention and raise concerns among 2015, in terms of incident rates and frequency, Travelers from Asia face a general higher risk of foreign and local security agencies. Afghanistan the primary kidnap threat in the majority of being kidnapped in many countries in the region has served as a breeding ground for Islamist countries in Asia continued to stem from criminal due to their perceived wealth, history/culture of extremists and the threat of a greater spillover into groups; a significant change in this dynamic is not paying ransoms and the fact that they are less likely neighboring states remains a persistent likelihood. anticipated in 2016. to attract the type of media attention associated The connection between political and security with the kidnapping of Western nationals. Chinese, threats and KRE (Kidnap, Ransom and Extorsion) The express-kidnapping risk will be most South Korean, Taiwanese and Malaysian nationals, risk levels remains strong, and in areas where elevated for persons operating in larger cities in in particular, are subject to an elevated kidnapping the former risks are present, kidnapping threat Bangladesh, China, Hong Kong, India, Indonesia, risk in several Asian states. levels and incident rates are generally elevated. Malaysia, the Philippines and Taiwan. With over The types of KRE risks associated with travelling 40,000 kidnapping cases reported per annum, In the Philippines, specifically, the criminal to or operating in each region are becoming the kidnapping rate in India is expected to remain kidnap threat will remain high in the restive increasingly diverse. one of the highest in the world during 2016. southern areas, as well as in urban centers such Incidents of virtual kidnapping are also growing as the capital, Manila. Urban centers in low- and The increased conflict in Afghanistan is likely in frequency. In 2016, this risk is anticipated to be medium-risk destinations such as Malaysia, to negatively affect the security situation of its most prevalent in India, Taiwan, Hong Kong and Indonesia, China, Hong Kong, Singapore and northern neighbors, Tajikistan, Turkmenistan and China. In India and Bangladesh, tiger kidnapping¹ Taiwan are not immune to the KRE threat. In Uzbekistan, albeit in an indirect manner. There are gangs are expected to continue to target cash-rich particular, the abduction of company employees, many citizens of Central Asian states fighting for organizations, such as banks and financial termed ‘economic kidnapping’, is fast becoming militant groups abroad, including in the states institutions, as well as jewelry and other high-end a lucrative business; individuals in the retail and listed above and Kyrgyzstan. Some estimates stores. Cyber extortion may present a significant manufacturing industries are subject to the highest place the number of Central Asian fighters in Syria security risk to individuals and businesses in 2016. risk. In addition, the targeting of high-net worth alone at between 1,000 and 1,500. Extortion will remain endemic in the insecure and individuals and their dependents by criminal conflict affected areas of Afghanistan, Pakistan entities was highlighted by several high-profile Australian security operations have also and the Philippines, where rebel and militant cases in Hong Kong, Taiwan and Singapore in 2015. escalated in response to government concerns of groups and their criminal counterparts operate In addition, while not comprising the primary radicalization among the population. Following the well-established extortion rackets that target threat, the risk of being kidnapped by Islamist December 2014 ‘Siege of Sydney’, a hostage crisis various sectors. High-risk operating environments extremist, politically motivated, rebel and involving a single and apparently IS-motivated include Bangladesh, India and Papua New Guinea. separatist groups in certain locations in high- and individual, and more recently, the October 2015 However, extortion will not remain limited to the extreme-risk destinations will remain elevated. • Parramatta isolated shooting incident, Australian above high-risk destinations. In 2015, incidents intelligence services have escalated surveillance were frequently reported in China, Taiwan, Hong of those suspected of harboring extremist Kong, Indonesia, Malaysia, Singapore and Sri Lanka. sympathies, and have carried out numerous raids and arrests. In Bangladesh, two separate killings Wrongful or illegal detention by state or non-state of Italian and Japanese nationals were reported in groups will pose a risk to individuals and September and October, respectively. companies in certain Asian countries in 2016. 1 It's a kidnapping in which one or more hostages are taken China has emerged as a particular hotspot, where to coerce another person, usually a relation of the person Kidnapping in its various forms will pose a credible the wrongful detention of managerial staff by or people held, to take part in a crime (In Colins English security risk to local and foreign personnel as well employees or business partners/suppliers is Dictionary).
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The opening and closing ceremonies will be held in the historic and majestic Maracanã Stadium. Here, athletes will compete in 28 sports, two Rio 2016 more than at the 2012 London Olympics (the International Olympic Committee decided to add golf and rugby sevens). There are four Olympic zones; Barra, Copacabana, Deodoro Managing risk in the and Maracanã. When Rio de Janeiro was chosen to host the Olympic and Paralympic Games, Brazil was Olympic Games faced with the challenge of organising two of the biggest sporting events on the planet, with A VIEW BY JORGE LUZZI an interval of just two years between them - the Football World Cup in 2014 and the Olympic and Paralympic Games in 2016. For the Football World Cup, there were huge infrastructure, logistical and security issues to overcome. The stadiums where the matches were to be held were scattered geographically and the challenges were compounded by the sheer physical vastness of the country. A risk management strategy, taking into account transport infrastructure, physical structures, logistics and the security of visitors and teams while travelling, ensured risk mitigation measures could be implemented, reducing or In recent years, excitement in Brazil almost eliminating the risks associated with the event. From an organisational viewpoint, has been running high, partly because this was a success. of it hosting the world’s biggest football The venues for the Olympics’ 28 sports are spread across various facilities in Rio de Janeiro, tournament, but also due to the growing a city that by Brazilian standards is relatively anticipation of new events to come. While small. This means the risk issues posed by a wide geographical spread are reduced. Football Brazilians’ traditional good humour, matches however, will be held in the cities of Belo cheerfulness and optimism may have Horizonte, Brasilia, Salvador and São Paulo and, of course, in the legendary Maracanã Stadium. been shaken by political upheavals over The 2016 Rio Olympic Committee therefore has the last two years, the prospect of a new high hopes for this event, partly because of the reduced geographical risk and also because of the ‘mega’ event, universal in its scope, is experience already gained in handling events of getting hearts racing again. The events this magnitude. Also featured on the 2016 Rio Olympic in question are the Olympic Games, Committee’s ‘risk map’ are issues related to running from 5-21 August 2016, and the health and the host city’s hotel capacity. Where health is concerned, the Zika virus is Paralympic Games, taking place from clearly a worry. The epidemic affecting Brazil 7-18 September. Jorge Luzzi, President has been rapidly addressed by the healthcare authorities of the state of Rio de Janeiro and of Herco Global and Director of Risk the Federal Government, as well as by the Management at Brokerslink, outlines Olympic Committee. In order to reduce or even halt the virus’s development, the Brazilian how the host nation is preparing for army has been mobilised with large numbers these global sporting events from a risk of military personnel locating the mosquitoes’ breeding areas and treating them with larvicide. management perspective. Luckily, when the Olympic Games take place,
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it will be winter in the southern hemisphere, Unfortunately, Guanabara Bay will not be so the tropical rains that normally foster the decontaminated in time for the Games. This proliferation of mosquitoes are very unlikely to is regrettable, since it would clearly be of huge occur at that time. benefit for the competition and the city itself, In order to address any health concerns visitors given that almost 1,400 competitors will be may have, new, large and well-equipped private sailing on the waters of the Marina da Glória, in hospitals have been built close to the Olympic Guanabara Bay, swimming from Copacabana Village and the stadiums. Beach, and canoeing and rowing on the waters As far as crowd control is concerned, studies of Rodrigo de Freitas Lagoon. indicate that international supporters of the The stadium infrastructures, while not yet Olympic Games are likely to be less volatile finished, pose no major problems and will be of than those who attended the Football World Cup. the standard required for competitions of this Taking into account experiences gained during level, as will the Olympic Village itself. the tournament, and as long as the sporting As with any large-scale human activity, there authorities work in similar fashion, there should are risks – in differing places and occurring at be no major difficulties during this year’s events. differing times. But the Olympics are universal Rio de Janeiro’s hotel infrastructure will not and of great importance to mankind, when pose a problem since Rio is a city accustomed sport brings us all together as one. As the to receiving large numbers of tourists and has a legendary chairman of the International Olympic huge range of hotels, both in terms of star ratings Committee, Baron Pierre de Coubertin said: “… and price. may the Olympic Torch pursue its way through Another risk that must be considered is the ages for the good of a humanity always more terrorism. Although Brazil is not normally enthusiastic, more courageous and more pure.” a target country for terrorist attacks, various Risk has and will always exist. However big or initiatives are being undertaken to mitigate this small, it is a consequence of the times in which risk. These include tighter border controls and we live. In Brazil, many people are working stricter individual searches (since some of the to ensure that, under no circumstances, will foreign delegations may be targeted by terrorists). this ‘celebration of mankind and humanity’ be This risk is being assessed jointly by the Brazilian jeopardised, and that the Olympic Games can Olympic Committee and the Olympic authorities continue to be celebrated as the greatest sporting of the countries considered potential targets spectacle in the world. for attacks. These will be the first Olympic Games to be held in South America, the second in Latin America (Mexico City 1968) and the third in the southern hemisphere (Melbourne 1956 and Sydney 2000). •
JORGE LUZZI
→ A well known professional in risk and Insurance management, Jorge Luzzi is President of Herco Global. He is also Executive Vice President of IFRIMA (International Federation of Risk and Insurance Management) and President of Alarys (Latin America Risk Management Associations). Jorge Luzzi was Vice President and President of Ferma (European Federation of Risk and insurance Management associations) from 2009 until 2013, Risk Management Director of Pirelli Group in Italy and CEO of PIRCO and Pirelli Reinsurance Company in Dublin, Ireland and Lugano Switzerland for many years. He graduated in Business Administration at the University of Belgrano and is Academic at the Academia de Seguros e Previdência in Brazil. At Brokerslink, Jorge Luzzi is director of Risk Management.
92 The client, a global energy company has grown in the LATAM region largely by acquisition. Companies acquired can have different loss control cultures and approaches to managing risk. Changing these attitudes needs a solid TRUST US argument in respect of risk benefit arguments in making the business case for investment against the losses prevented. MAPFRE GLOBAL RISKS has developed a risk management and TO GO risk assessment tool, specifically for the Energy sector, that enables clients to operate internal benchmarking across sites. For this client this has led to changes in their investment policy FURTHER and the management of their maintenance programmes in the region. Trust is at the heart of everthing we do NOVO LEXUS RX 450h VIVA A VIDA RX OFERTA DE LANÇAMENTO Upgrade para nível de equipamento Executive+ e F SPORT+.
Viva a vida RX 450h. Viva à velocidade de um híbrido de 313 cavalos, com um consumo de apenas 5,2 l/100 km. Viva com design arrojado e o sofisticado equipamento de segurança Lexus Safety System+. Viva ao volante de um modelo icónico, com as mais avançadas tecnologias. Pronto para começar a viver?
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10192 LEXUS RX450H_Revista Exame 220x280mm.indd 1 11/07/16 14:21 ENTREPRISE RISK MANAGEMENT
NOVO LEXUS RX 450h VIVA A VIDA RX OFERTA DE LANÇAMENTO Upgrade para nível de equipamento Executive+ e F SPORT+. ERM A NEW MODEL FOR RISK MANAGEMENT INTERVIEW: ALESSANDRO DI FELICE, PRYSMIAN
ERM: GIVING YOUR FIRM A STRATEGIC EDGE COREY GOOCH, BROKERSLINK & JOHN BUGALLA, ERMINSIGHTS
REMEMBERING FRANÇOIS SETTEMBRINO Viva a vida RX 450h. Viva à velocidade de um híbrido de 313 cavalos, com um consumo de apenas 5,2 l/100 km. JORGE LUZZI Viva com design arrojado e o sofisticado equipamento de segurança Lexus Safety System+. Viva ao volante de um modelo icónico, com as mais avançadas tecnologias. Pronto para começar a viver?
◀ Saiba mais sobre este modelo. Oferta válida nas versões Executive e F Sport.
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10192 LEXUS RX450H_Revista Exame 220x280mm.indd 1 11/07/16 14:21 MDS magazine
A new model for risk management
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Alessandro di Felice is Chief Risk Officer at (ERM) approach inside the Company and I became responsible for a number of risks Prysmian, following a long career in risk that are not typically insurable.” management. He has been heavily involved in Jorge, at this point, wants to know who Alessandro reports to regarding ANRA, the Italian Risk Management Association insurance and enterprise risk management. and today is President. Jorge Luzzi, President of Alessandro is happy to clarify: “I report to the Board of Directors, or rather to a Herco Global at MDS Group and António Fernandes, committee from the Board of Directors. Global Business Executive at Herco Portugal, This follows the corporate governance policy of the Company, where ERM is met Alessandro at an event promoted by MDS in integrated into its corporate governance. Porto, and talked to him about his career and risk As a traditional risk manager, I report to the Group Chief Finance Officer, so fall within management. the administration, finance and control functions.” Jorge agrees with the placement of both activities in one pair of hands but with different areas of focus. He now steers to another direction, asking Alessandro to describe the risk management approach of Italian companies, other than Pirelli, in the 90s and 2000s. Alessandro thinks for a moment and recalls: “I would say the evolution of our profession has been more or less similar in all other large companies. When I talk about large companies it means the 100-120 Italian companies that are the largest operating conglomerates in Italy, Curiously, Alessandro began his career Jorge and António naturally agree – typically listed, they are also multinational not as a risk manager but as an insurance they both know how it is to work in risk or have a number of multinational broker in London, after graduating in management – after all they have many operations. There are few large companies; business administration at the university years’ experience in this area too. Jorge 95% of the Italian economy comprises small La Sapienza in Rome. He tells us “this was wanted to know how committed Pirelli and medium enterprises and in this area a very important experience, because was to risk management at that time things are very different. Historically they spending two years in the most advanced and Alessandro went on to advise Pirelli have not been particularly interested or market in the world for insurance brokerage historically had one of the most evolved focused in managing risks. However, at ensures you learn all the technicalities, how risk management departments in Italy: the Italian Risk Management Association this business works and the most important “They started in the late 70s, establishing (ANRA) we’ve noticed this has been business fundamental – to trust the person an insurance management department and changing over the last few years, perhaps you are doing business with.” in the 80s this evolved into advanced risk as a result of the recent economic crisis. After a couple of years in London he and insurance management.” He explains: “Many companies understood that a way moved back to Italy, this time to Milan, still “Advanced means looking at a risk profile to face the crisis was to manage the risk in broking. In the late 90s Alessandro was with a different, more proactive approach, and try to control the volatility of results hired by Pirelli, in their risk management rather than just negotiation. In the 90s, when – stabilising them to avoid unexpected department. As Jorge puts it: “You began I joined, there were already a number of risk issues - and this really created and is still working on the other side of the fence.” engineering, loss prevention, risk analysis creating a new risk management culture Alessandro agrees: “Yes, I discovered an and risk profiling activities. In the beginning in the country. I’m referring more to entirely new world and in the beginning these mainly focused on the insurable medium-sized than small companies, I was worried it might be boring in risk rather than non-insurable risks, but evolved because small companies tend to be management. I feared it might become too quickly to embrace risk management. Later family-owned by two or three people, so repetitive, more or less always the same, on, I became Risk Manager of Prysmian – very small. Another possible reason for whereas in broking you know a lot of people, a spin-off from the Pirelli Group. It was better risk management is that banks, different customers and different activities. a specialist cable division of Pirelli that investors and customers started to But this was not the case at all - it has always became a completely independent company require feedback and reports on how the been a fantastic job, from the very beginning and for the last five years I’ve been Chief Risk risks are managed. I’m confident a risk to this day.” Officer. This means five years ago we adopted management culture is really growing in a complete enterprise risk management Italy – as confirmed by what we see in our
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it has influenced the mindset of those working in this area. Alessandro has been President of ANRA for a year and actively involved in its management prior to this. He explains: “We invested a lot in enabling people to access a wide range of information and set up training courses, training meetings and workshops to educate people who are asking for training. This is receiving very positive feedback and interest is growing. ERM has become very popular in large companies and through ERM we are seeing a rediscovery of traditional insurance risk management. This is because when you conduct a risk profile analysis on ERM you include a number of risk areas such as legal and reporting, strategic, financial, compliance and operational. In an industrial company, its key findings typically place insurable risks at the top of the scale, but with this new approach the level at which these risks are reported and communicated is much higher than before. They are communicated to top level executives; the Chief Executive Officer and/or the Board and therefore the need to buy insurance has become more ‘popular’ together with other aspects of the ERM. They understand the insurance market has the financial capacity to reduce exposure to these risks. Clearly there are other areas of risk that are not insurable so still represent big issues for companies.” Alessandro di Felice. Jorge recently arrived from the annual Risk Management RIMS conference in Association where over the last one and a San Diego California and commented "I think the insurance half years we have doubled our associates, that several risk managers for large USA market needs to study which is very unusual.” companies mentioned insurers and Alessandro continues: “The Association reinsurers are increasing their focus on a new business model. is receiving more approaches from people covering non-traditional risks; things they Something like an who are not risk managers; they have other didn’t realise before were a real need of roles within their companies, but need to their clients, but that risk management ‘insurance 2.0’" identify the risks and understand how to associations were bringing to their manage them, plus do some networking, attention, saying ‘you know, if you develop benchmarking and training activities.” a policy to cover some balance sheet gaps Jorge agrees: “The profession - the of your clients, and if the insurance market activity of risk management - is becoming acts upon this, technically you could do more widespread in Italy than ever before.” some very profitable new business’. As Alessandro adds: “Perhaps maybe not as a result, the lobbying by regional risk a full-time profession yet, but certainly it associations is generating new kinds of forms part of a role for someone with wider covers by insurers. company responsibilities.” Jorge wanted to know if this is also Moving on from this, Jorge asks about happening in Italy. Alessandro replies: the work of the Italian Risk Management “Yes, and taking this further, I think Association (ANRA), how it has contributed the insurance market needs to study a to risk management in Italy and whether new business model. Something like
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an ‘insurance 2.0’, which is: if a large company integrates an ERM framework into its corporate governance, conducts an in-depth analysis of potential scenarios and evaluates its potential exposure, why should the insurance market still only consider traditional lines such as property, liability, marine & cargo and personal accident, etc? Why don’t they, for example, become some kind of company ‘partner’, respond to the business risk management plan and say ‘that is the risk that has been assessed in your business management plan, I will provide a certain capacity just in case the outcome goes above your expectations, or below them”. He continues: “This would insure the risk management plan rather than the risks within it. I don’t know how to do it yet, Alessandro di Felice with Jorge Luzzi and António Fernandes. clearly, I still don’t have the answer, but I do believe this is something to be evaluated and studied in order to generate a new cutting costs and getting the market share. Switching to the subject of captives, Jorge business model. It is not just launching a We do this because we don’t have any more asks: “Prysmian is one of the oldest captive new product like cyber cover, contingency/ margin to cut prices. You can only have a owners in Italy and from your origins one of business interruption or an evolution of margin if your costs are very, very low. the first in Europe too. How is this working, existing lines of business – this is about Otherwise it’s impossible. And the insurance how much of a risk appetite do you have completely rethinking the business model.” market is going in this direction right now - with your loss prevention approach etc, The discussion livens up. While Jorge it’s been some years now that, if a traditional when using the captive?” comments this would mean that not property programme, for example, is good, Alessandro replies: “I would say the only underwriters, but also clients might and does not have particular issues in terms captive for us represents our level of risk suggest new kinds of covers, António joins of claims and frequency, it is easy to get a appetite in property, liability and credit. in and asks Alessandro what is the position discount in a renewal. So what is the added Over the years, thanks to the positive of insurers on this, if they are open to this value if the discussion is only about price? results, we have always kept profit in the kind of approach. This is dangerous for risk management and captive, generating more capitalization so Alessandro’s opinion is that some risk managers, because if at a certain point the captive self-financed itself, progres- insurers are getting the message, but insurance buying becomes so cheap and sively increasing the level of retention. cautiously adds: “I don’t know how open easy to do, there is no incentive to invest In traditional lines like property, liability they are and how willing because this is money in loss prevention, risk control or and credit, we are buying just capacity a strategic issue for an insurer. I would risk management.” from the market. All the frequency claims say that currently the insurance market, Jorge and António agree. Alessandro are retained by us. There is a balance, it is together with part of the brokerage industry, continues: “The capacity available on sustainable and our focus will continue to be is in a very dangerous situation; there is a the insurance market is enormous at on only insuring very high risk events, below lot of capacity and because the price is low, worldwide level. Insurers also have to that our own company will cover the risk.” in certain lines of business insurance is take into consideration, for example in All three would happily continue to going to become a commodity. And if it Europe, the introduction of Solvency II discuss risk management, but Alessandro becomes a commodity, it will be easy to rules that require a lot of capital allocation has a plane to catch. As they say their access and will need controlling. This may for granting the business, which means goodbyes, it is clear this has been a very mean cutting costs, reducing head count, an additional cost. So, I don’t know where interesting discussion. And what is clearest doing acquisitions, mergers etc. Only the this market is going. It could be the right of all is that these men are passionate about strong players will win – the others will be moment to invent something completely risk management. • completely erased from the match.” new that is neither an insurance policy, nor António intervenes: “In a way, your a financial product, some sort of hybrid.” company, Prysmian, wants to play this game Jorge adds: “That might work by providing because they will make huge acquisitions”. cover in case a strategic assumption of a Alessandro agrees: “Yes, a part of our company is wrong or the scenario becomes business – low voltage cables - is in the different from the assumption made when the commodity market, so we know how it strategic plan was written, for example. It is works. It works by buying small companies, typical of the way weather insurance works.”
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Linking ERM to strategy
Too many ERM programs are initiated and championed by a single individual or department from the bottom up without giving adequate consideration to both the needs ERM and goals of the entire enterprise, which is a core concept of ERM. The result is an ERM effort that is narrowly focused. For example, an ERM effort championed by the compliance or regulatory group often becomes a compliance-biased Giving your firm program. a strategic edge Obviously, these organizational capabilities are important, but they should be considered within the overall context of the organization’s strategic goals. An ERM initiative that BY JOHN BUGALLA AND COREY GOOCH takes a holistic approach in a culture that supports it will not only leverage the best risk identification and treatments already in place throughout the organization, but also help to incorporate the same risk processes into the strategic planning process.
In many industries, companies are being pushed When ERM is aligned with the organization’s strategic by their regulators to implement Enterprise Risk and operational goals, ERM can also lead to strategic and Management (ERM). However, the vast majority of operational benefits. The methodology is to embed ERM companies are not subject to a high degree of regulation within the strategic and annual business planning process. and are still pushing for the adoption of ERM. Perhaps Because the strategic plan sets out a vision for the organiza- the reason that regulators and boards are so favorable tion’s growth over a multi-year time frame, incorporating toward ERM is because of the strategic and operational the ERM process will support, not hinder, the strategic plan. benefits that it makes possible, including:
The reason is straightforward: while the strategic plan • Increasing the chance of achieving strategic and is based on various projections over time (among them business objectives; political, economic, technological, social, environmental, and legal), its starting line is existing conditions. However, • The ability to see adversity on the horizon and there is an enormous range of changing circumstances with minimize its impact; consequences that vary over time – the future is not what it used to be – that can quickly turn favorable operating • The ability to take advantage of value-creating conditions into an extremely difficult environment. opportunities such as a competitive advantage for the Consider the wide range of outcomes, such as interest future; rates, the price of oil, a British exit from the EU, the refugee migration, and cyber risks, that are possible spanning the • Provides a process for board members to oversee risk five-year time frame of 2016-2020. management activities as required in some countries.
With the introduction and adoption of ERM by many companies around the world, an additional step Link strategic and business should be included in their ERM process. The new planning to decision-making step – planning – is critical to establish the context surrounding the new ERM program. The planning Embedding the ERM process into strategic and business and preparation stage should take place before an planning is not an end to itself. The ERM process supports ERM program is initiated. It is at this point that the the strategic plan, but it is executing the strategic and organizations leaders should discuss how the ERM business plans with tactical actions that are critical. When program will be aligned with the organization’s data and information about risks or obstacles is added early strategic objectives, and be utilized as a compliance in the process and decisions are based on that data and tool for regulators as needed. information your organization will actually start to practice strategic risk management. Embedding the ERM process into strategic planning also is important for growing the business because the opposite side of risk is opportunity. And a focus on opportunity can lead to an important competitive advantage within your industry.
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Outside Risk Factors • Political • Economic • Social Current Strategic Plan • Technological • Legal • Environmental Your Operating Environment Your
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ERM enhances strategic planning
Initiating the ERM process The ERM charter
Adequate planning and preparation before initiating An ERM charter created during ERM planning is an ERM are crucial. The planning step requires the active internal blueprint for both executive leadership and engagement and leadership of the CEO and leadership middle management to follow. The strategic nature of team. With the CEO leading the planning sessions, a the document warrants creation by senior executives who constructive dialogue about ERM that will determine the have a broad view and power within the organization. At unique shape and contour of your organization’s program the very least, the charter should state the vision, mission, can begin. and purpose of ERM within the organization. It will set the tone from the top for ERM in one of two very different An initial planning session with the following agenda is directions: either risk management is a strategic support a good place to start: function, or it is about audit and control. We believe ERM should be aligned with and support the business activities • Create an ERM charter: vision, mission, and purpose. of the organization. Risk management should collaborate • Identify the ERM leader: Chief Risk Officer, CFO or CEO. with audit and compliance, but not be housed within compliance, if the option exists. • Identify how best to align the organizational team that will include the ERM process within the Half of the foundational principals of ERM have to do with organization’s strategic plan. “preserve, protect, and comply,” but the other half have • Define “risk” within your organization. to do with supporting building the business. ERM should be employed to identify, assess, and address both threats • Draft an initial “risk register” for your organization. and opportunities to the organization. More specifically, • Initiate a discussion about risk appetite and tolerance. the goals of an ERM program should be: (1) minimize the impact of adverse events, (2) support business growth • Identify internal and external resources and opportunities, and (3) enhance organizational governance. collaborations that will bring added robustness to the effort. Conclusion
Incorporating ERM into the strategic plan will support growth objectives and minimize the impact of adverse events that could hamper an organization from achieving its goals. We view ERM as an important component of the strategic planning process. At Brokerslink, we have the capabilities to help our clients build and implement an ERM process that adds value and gives them a competitive edge. •
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COREY GOOCH JOHN BUGALLA
→ Corey Gooch is Director of Business Development → John Bugalla is an Enterprise Risk Management (ERM) at Brokerslink. He joined from Towers Watson thought leader. He has a 4 decades track record of creating where he held positions as an Account Director, US new value for clients by designing new products, services, Risk Consulting sales leader and Global Corporate techniques, and management methods. Enterprise Risk Management consulting practice → From 2002 to 2014, he was Managing Director of Marsh & leader. Prior to Towers Watson, he worked at Aon McLennan, Inc. From 1990 to 2000, he held the position of for 11 years in their brokerage and risk consulting Managing Director of Willis Corporation. From 2002 to 2004 divisions and led their London-based EMEA team of he was Managing Director of Aon Corporation. ERM consultants. Corey Gooch has been quoted in → Since 2005 he is the managing principal of numerous periodicals and has been a frequent speaker ermINSIGHTS, an advisory and training firm specializing at a variety of international industry conferences. He in enterprise risk management (ERM) and strategic risk holds a B.B.A. with double majors in Finance and Risk management (SRM). The firm advises clients how to embed Management from Temple University, and attended the ERM into strategic planning and leverage the process to United States Naval Academy. create new value. → Based in Chicago, Corey Gooch can be reached at → John Bugalla is a regular speaker at CEO, CFO, and RIMS [email protected]. conferences. He collaborates with companies to turn ERM from a compliance exercise to a value creator. → He has published articles in several magazines like CFO Magazine, Risk Management Magazine, The Risk Management Association, The Journal of Risk Education, among others. → Based in Indianapolis John Bugalla can be reached at [email protected].
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“François’s ethos was that education and associations would be the only way to build a harmonised European risk management culture.”
François Settembrino.
Celebrating FERMA's 40th anniversary.
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REMEMBERING After a productive and prolific life as a broker, François joined a Belgian company as a Risk Manager, developing, promoting and engraining risk management within its culture. He worked closely with the European Commission François and in the early 70s was asked by the General Customs Directorate to set up a European association, representing the interests of the sector, working closely with insurers and Settembrino brokers. This he did with the help of contacts in Germany, Netherland, UK, Italy, Spain and France. BY JORGE LUZZI On a personal note, I first met François in the late 80s. I was quite young at that time, taking my first steps in the risk management world. It was during one of the AEAI/RIMS conferences in Monte Carlo and François was chairing the In September last year, François Settembrino, creator opening session. His multi–lingual capabilities – delivering of the Belgian Risk Management Association and his speech in six languages – and ability to engage with the founder of the Federation of European Risk Management audience were impressive. Associations (FERMA), passed away, aged 86, after a short illness. François was Chairman of FERMA for 10 François became a reference point during my 35+ years years (1984-1994), responsible for the formation of its in risk management and many of the initiatives I delivered biennial Federation Forum and named the Association’s during my time as President of FERMA and the International Honorary President after his retirement. A former broker Federation of Risk and Insurance Management Associations and Risk Manager at Tabacofina in Belgium, François were inspired by his life teachings and conversations. was recognised as a prolific contributor to the risk management and insurance industry and described by In 2014, we met in Brussels to celebrate along with all his peers and colleagues as ‘the father of FERMA’. Here, FERMA´s presidents, its 40th anniversary. He was there Jorge Luzzi, President of Herco Global and Director quite elegant and as lucid as ever. of Risk Management at Brokerslink, remembers this remarkable man. François never gave lessons or advice in the traditional way; instead he gave you ‘food for thought’ and continued to do so even in his later years. Long after retirement he remained François Settembrino was a major influence in the European active within FERMA, working alongside general secretary, risk management sector and for me, a real teacher, both in Pierre Sonigo and executive director, Florence Bindelle; my life and my career. He was indeed a ‘founding father’ always ready to help, writing articles for the press and of FERMA and responsible for its predecessor – the sharing his enthusiasm until his last days. Association of European Industrial Insureds (AEAI) – which he launched in 1974. On July 2015 he sent Florence his last article, quite funny, but slightly too provocative to share publically. His He started his career in insurance in the sixties, with Belgian accompanying email text read: ’This article is like a Will, broker, Henri Jean. One of his famous quotes at the time it reflects my thoughts and wishes! See you soon and big was: “For everyone a premium is seen as a financial reward, kiss!’ This was his last email. yet in insurance it is something that has to be paid!” He specialised in car and personal lines insurance before Thank you François for what you have given to our profession moving onto pensions and employee benefits. This was and all of us within the risk management community. • at a time when many foreign organisations, particularly from the United States, were setting up their European headquarters in Belgium. François – frustrated at the lack of harmonisation across Europe – was keen to help them establish their businesses and overcome the apparent cultural and legal differences between the US and Europe. As a result, he rapidly became known as ‘the European expert’ on these matters.
François’s ethos was that education and associations would be the only way to build a harmonised European risk management culture and this desire to promote insurance and risk management education across Europe was the rationale behind the formation of AEAI and FERMA.
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BROKERSLINK: FROM IDEA TO REALITY – A TRANSFORMATION STORY
BROKERSLINK IN AFRICA: GHANA AND TANZANIA
INTERVIEWING JIRINA NEPALOVÁ RENOMIA FOUNDER AND CEO
BROKERSLINK NEWS
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Brokerslink: From idea to reality A transformation story
BY PAUL BITNER, MANAGING DIRECTOR BROKERSLINK AG
An idea. explorers set their sights upon Middle East and Africa, until then, key unexplored regions. They also heightened their The setting and time was Portugal, the land of explorers efforts to forge new relationships in key countries around sometime in 2004. Driven by the need to provide quality the globe where Brokerslink lacked presence. service to clients on an international basis, with no acceptable solution available, José Manuel Fonseca and Along the way, relationships were forged with high quality MDS set out beyond their borders to find like minded, specialty brokerage and risk consulting firms. Brokerslink independent insurance brokers in order to forge a regional also focused efforts on strengthening strategic relationships network. Brokerslink was born. with key global insurers launching a website with a collaboration platform. By 2013, Brokerslink had presence Much like fine wines evolve over time, good ideas, in over 85 countries, 10 world-class specialty broking or accompanied by vision and a sense of direction, become risk consulting offerings, strategic agreements with key a continuum of ideas that evolve over time. Brokerslink, insurers and increased visibility. a fine idea, started its evolution. During this time, another idea in the continuum started The first phase of the evolution centered on geographical forming. What about becoming a different kind of global expansion in order to be able to service clients around the broking? You may ask: what was it that drove this idea? globe and formalization of the structure as an association. The simple answer is to provide a long-term viable differ- By 2009, a mere 5 years after starting as an idea, Brokerslink entiated option in the market. However this simple answer was a global insurance alliance present in over 50 countries has subcomponents. The incorporation further differen- with strong reinsurance brokerage support. 2009 also tiates Brokerslink from the existing independent insurance marked a significant shift in strategy. Half way across broker networks and provides an alternative to the publicly the globe from Portugal, in Hong Kong, the site of the first traded global brokers. global conference, Brokerslink starts transforming into Brokerslink becomes a global broking company owned an offensive organization in search of new business. The by independent insurance brokers who retain their second phase was under way. operating identity. The capital obtained from the incorpo- ration will enable additional investment in human capital, The transformation of the nature of the organization software, branding and the individual operating brokers required further geographical expansion, creating a geared towards providing the market with a differentiated complete risk solution offering and market visibility. The service experience and set of risk solutions.
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20% 20% 20% 20% 20%
BROKERSLINK MANAGEMENT AG 50 NEW INVESTORS, REPRESENTING 41 COUNTRIES FROM 5 CONTINENTS
BROKERSLINK AG
This time the setting was Brokerslink’s 5th Global The incorporation further Conference, October 2013 in Singapore. Brokerslink’s members took the first step by voting to transform differentiates Brokerslink the association into a corporation. The third phase of from the existing independent Brokerslink’s existence was under way. insurance broker networks and The complex and time-consuming incorporation process provides an alternative to the got under way. The first step in the process was completed by 2014, when Brokerslink Mananagement AG was created, publicly traded global brokers. registered and capitalized in Switzerland with five shareholders, all key players in Brokerslink’s evolution, are shown in the chart above.
In 2015, Brokerslink AG, the global broking company was created, registered and capitalized by Brokerslink Management AG. At that time, the share offering process was launched to be completed in May of 2016.
A new type of global broking company has come into existence. Now owned by 47 independent insurance brokers and consulting firms from all regions of the world, Brokerslink AG is capitalized and in a position to deliver a different client experience through a robust central team and a network of 90 affiliates with a global footprint and a broad range of industry expertise.
A reality with more good ideas coming. •
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José Manuel Fonseca, Mohammed Jaffer, Youness Rhallam and Eric Addo-Mensah at EMEA Brokerslink Conference, Porto 2016. Brokerslink in Africa: Ghana and Tanzania
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Brokerslink is going from strength to strength in The markets Africa, a fast developing continent where many Their portfolios and lines of business companies and clients are undertaking increasing may vary, but both markets face the same challenges: servicing clients with multiple amounts of business. Midas Insurance Brokers demands in differing business classes, from Ghana and Tanzania-based Tan Management reducing the need for specialisation. Although generalists, in certain market areas Insurance Brokers are new African members. they have more experience, for example, in Eric Addo-Mensah, COO of Midas and Mohammed terrorism and political risks cover. As Eric says: “With the exception of South Africa Jaffer, CEO of Tan Management, were in Porto for and maybe Morocco, in most of the other the Brokerslink EMEA meeting where fullcover parts of Africa, you do everything, you are forced to be a ‘Jack of All Trades’, but that’s caught up with them. They discussed their careers, also one of the reasons why joining a group their companies, their markets and reasons for like Brokerslink for me is very important. When I was studying in the UK there was an joining Brokerslink. advert that used to play on TV with a guy who said ´If I don’t know it, I know a man who can’. We try our best to follow this ethos so if we do not have the experience we have access to someone who does.” In Ghana or Tanzania, for the moment, specialization is out of the question. In Tanzania the corporate market accounts for 65% of total premium income. The retail market is currently at 35% but has huge growth potential. Mohammed says: “Outside of business, people do not consider insurance a necessity. Micro-insurance is The companies masters degree, this required some profes- definitely helping and the regulator estimates sional experience so Mohammed’s family the insurance penetration rate to triple by Eric started his career as a teacher but suggested he secure a role outside the 2019-2020.” In Ghana the retail market is even then decided to study insurance in the UK family businesses. Mohammed’s first job smaller, around 15%. Both markets comprise (being a teacher he knew the importance was with Jubilee Insurance - the largest mandatory insurances, such as third-party of knowledge). Ten years - and many hours insurer in East Africa – where he worked for and employer’s liabilities in Tanzania and of study later – Eric returned to Ghana nine years. It was only after promotion to motor insurance and commercial liabilities and joined the largest insurance broking regional manager that Mohammed thought linked to construction in Ghana. In the company in the country. In 2008, the it was time to bring his insurance sector Tanzanian market, soon-to-be-enforced opportunity arose to set up his own company experience into the family businesses. regulations will establish mandatory fire and within three years, the firm was one of In 2009, he bought an insurance agent insurance for schools and mandatory the top 10 insurance brokers in Ghana. – not even a broker – with a premium engineering policies for construction Midas employs 12 people working out income of Us $200,000. In 2015, the business projects. A health insurance programme of two branches in Tamale and Accra reported around Us $3million premium for employees will also be put in place, and between them they manage around income. Such is its growth, KPMG ranks justifying estimates the market will triple in Us $8-9million premium income. Eric has Tan Management as the fifth top midsize the next few years. As for Ghana, since there plans to expand into other cities. company in Tanzania and the firm is ranked is no mandatory workmen’s compensation Mohammed’s story is somewhat ninth out of 120 brokers in Tanzania. insurance, construction firms are required different, even if there are certain Tan Management employs 26 people to have third-party liability cover that similarities. He studied at the American working in three branches in Dar Es Salaam, indemnifies the companies’ own employees university in Sharjah (United Arab Moshi and Arusha and Mohammed, like as well as third-parties in the case of injury. Emirates). After graduating at 20, Eric, is looking to grow the business further. When asked about the consequences of not Mohammed returned home to Tanzania Midas and Tan Management – two having mandatory motor insurance, Eric tells (his family owned several businesses businesses born out of chance. us the police is very strict and if you do not such as real estate, medical facilities and display proof of insurance in your car, you bakeries). Although keen to complete his could get arrested (he wryly smiles).
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Ghana Insurance Market
Market size – The total market size in 2012 was broken down as follows. Figures for personal accident and health premiums are not available:
Tanzania Insurance Market
Market size – In global terms the Tanzanian non-life insurance industry in 2013 ranked at 97th position and the life industry 119th. The total market size was broken down as follows:
Note: * PA & Healthcare data represents PA & Healthcare business other than life riders, whether written by life, non-life or specialist healthcare insurers.
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The strategies The broking and And recognised he is. Last year, Mohammed insurance sectors was given the Tanzania annual young With growth potential in both markets, professionals award in the under 35 it’s interesting to discover what the Conversation now switches to the broking category and identified as the youngest future strategies are for Midas and Tan sector in both countries. Mohammed, in achiever in the country on a national Management. Eric reports in addition addition to his Tan Management role, level at the Tanzania Excellence Awards. to increasing property and casualty for is President of the Tanzania Insurance Achievements to be rightly proud of, but corporate clients, life cover will be a future Brokers’ Association (tiba). He explains: ones he says, are a result of a lot of work. focus: “There’s a burgeoning middle “In my capacity, I see a number of changes Development is also prevalent in the class and because of the way society is such as brokers becoming more educated. Ghanese market. Eric explains: “Insurance structured, where everybody depends upon In a market so young, 120 brokers competing in Ghana has evolved over a number of relations, most of the young and up-coming for business is a challenge. Out of these, 95 years, with the oldest companies over middle-class people need to have life are based in Dar-es-Salam, so everybody 80 years old. In the 1970s there was a insurance for their children, particularly is fighting for the same pie. Unfortunately change of government and it was decreed if they want to safeguard their education.” not all are professional, making it worse for all insurance companies should have In the last two years major life insurers, those who are.” Mohammed adds:”This at least 40% Ghanese ownership. This such as Credential and Old Mutual, have concentration is apparent when you look forced a number of global firms to leave established themselves in Ghana. at the regulator’s reports – brokers control the country, so locals took them over.” But For Tan Management, the situation is 60% of a market worth approximately in the last few years things have changed slightly different; each region is unique Us $300 million. Of this Us $200 million, and foreign companies have come back into so the branches must adopt different the top 15 brokers control Us $180 million the market, some of them Nigerian, but also strategies. Mohammed comments: “It’s and the top five control almost 50%.” others such as Allianz and Saham. While difficult to focus on corporate lines in a The lack of expertise worries the the 40% ownership is no longer required, place like Moshi¹ and in Dar-es-Salam the Association, so Tiba has partnered with local participation is still needed. retail market is becoming slightly difficult KPMG as their training partners in East He continues: “The number of insurance with the introduction of bancassurance Africa, helping brokers become more companies has grown and they’ve separated which allows banks to sell insurance.” He professional and better serve their clients. into life and non-life. We have close to 50 continues: “In order to sell insurance, banks The sector is evolving at a fast pace; the insurers; 26 non-life and around 24 life. have to register as brokers. This means regulator has developed a national Insurance brokers have equally increased they will not have the necessary technical insurance policy (still in draft) and a in numbers. Twenty years ago when I joined expertise when it comes to offering certain national insurance education strategy to the first broker I worked with, there were classes of cover, such as marine.” include insurance within the curriculum in about 20 brokers, now the number has Having moved away from the retail schools and universities. The regulator has risen to 70-odd. And, as in Tanzania, the market, Tan Management has identified also introduced Takaful insurance² and top brokers account for 89% of commissions. medical insurance as a growth area (similar bancassurance and unlike other African It’s quite a challenge as many of the large to life insurance in Ghana). Numbers look countries, accepts the industry should accounts come from major state-sponsored set to triple in this line of business and so become more self-regulating. projects and of course you have to be in this, alongside corporate business, is the In addition to his role as President of the front line. But we’ve been there, we main focus. Mohammed is also keen to Tiba, Mohammed is vice-president of the keep pushing, we never give up and will expand out of the country, either through East African Brokers Association (EABA). endeavour to retain our top 10 position.” affiliates in Tanzania or via international This comprises five countries: Tanzania, Like Mohammed, Eric is also involved in placements for clients. Kenya, Uganda, Rwanda and Burundi. sector activities, serving on the Technical He points out: “The challenges we face in Committees of the Ghana Insurance East Africa and Africa in general are quite Brokers Association and co-opted to serve different from those of the European market on the Technical Committee of the Ghana and when faced with such challenges there Insurance Institute. are only two options – either sit back and say ‘ok, this is what it is, this is Africa’, or move 1 Moshi is a small but typically vibrant Tanzanian market forward in the belief ‘it’s our industry, our town with an urban population of 150,000 and rural market, our country’ and if we don’t utilise population of 402,400. It is the regional capital of the the experience we have, what’s the point Kilimanjaro region. of having it? Mohammed’s enthusiasm 2 According to Investopedia Takaful Insurance is and passion for his work is clear; even if he defined as a type of Islamic insurance, where confides: “These positions are very taxing members contribute money into a pooling system in - the travelling, dealing with government order to guarantee each other against loss or damage. Takaful-branded insurance is based on Sharia, Islamic officials etc, but it’s definitely worth it when religious law, and explains how it is the responsibility your work is recognised.” of individuals to cooperate and protect each other.
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Joining Brokerslink
Eric and Mohammed share the same view when asked about how they see Brokerslink in the international insurance landscape and why they have become members. They joined because, as ‘generalists’ in their own markets, they need to have access to specific knowledge when their clients require it. As Mohammed puts it: “We do not have access to a reinsurance broker in Tanzania; Brokerslink gives brokers like us, in countries like ours, a backbone to rely on. Someone calls me and asks about Kidnap & Ransom and I just have to send one email and I get a reply from a Brokerslink member somewhere across the globe. We want to provide the same support mechanism for Brokerslink members which is why we’ve expanded to East Africa. We don’t want Brokerslink to feel the need to go to countries like Malawi, for instance, when we already have somebody there. For example, when Dutch member Léons³ wanted a risk placement in Malawi, we handled it; we know the region and were able to advise them. And they felt confident because they knew us. Brokerslink can have a strong position in Africa - we have the local knowledge and our colleagues know they can trust us.” Eric wholeheartedly agrees: “When we set up Midas, I recognised how this kind of synergy can help start-up companies like mine, so I was looking for an international relationship with a network I could tap into for information and knowledge. As Mohammed mentioned, there are times when we need expert knowledge or insight and this is something Brokerslink provides. When I was approached Mohammed Jaffer, CEO of Tan Management Insurance Broker. by the Nigerian member of Brokerslink, I didn’t have to think about it at all, it was what I had been looking for, for a long time. These things take time however, you have to develop a relationship and get to know people. When people ask me ‘what have you been able to get from your association with Brokerslink?’ I tell them it’s not a one-day thing, it’s relationship-building; getting to know people and knowing where to go for information. Brokerslink will always have somebody able to provide the answers where you have none. As I said before, ‘if I can’t, I know A health insurance programme someone who can’.” for employees will also be put in place, justifying estimates the 3 The Dutch member of Brokerslink. market will triple in the next few years.
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The people Coincidentally – or maybe not – Mohammed also plays golf, having taken it up four years ago. Always a keen Eric is married with two children, a son aged 26 and reading sportsman, he plays football, squash and badminton and Law and a 24 year-old daughter with a degree in Food enjoys scuba diving. Mohammed also likes extreme sports, Processing Engineering. Apart from business, he enjoys and the day before Brokerslink’s EMEA meeting, he went to playing golf, has been golf club secretary for three years, Évora, a Portuguese city in the Alentejo region, to practise was recently re-elected for another term and loves playing skydiving. He is also an avid reader, always keeping a book every Wednesday afternoon and on weekends. Eric says: by the Indian spiritual teacher Osho on his bedside table. “It’s one sport for business. You can go and sit at a CEO’s Mohammed is married with a seven year-old son. His office and talk for 20 minutes, but if you have a game, six wife, as are all the women in his family, is deeply involved hours on and you are still talking!” We cannot resist telling in the company. He explains: “Being a family business, him we have fantastic golf courses in Portugal, having women are involved in it and although from the Muslim organised a golf tournament at MDS some years ago, one culture, our women have business responsibilities; my wife of which was held in a beautiful course near the sea, in a is an administrator at our Dar-es-Salam office, my sister, unique landscape. a director handling the northern region and my mother, a director in one of the investment companies we own.” He concludes: Women bring balance to the company, every time we win an award we dedicate it to them.” With the conversation coming to an end, we learn from Eric that Ghana is a famous chocolate producer – he shares some of Ghana’s specialties – and Mohammed confirms Tanzania is a wonderful market to invest in. There are many exciting things happening in East Africa, one of them being the East African Community, where governments are working on a similar model to the EU, with plans for a single passport, for instance. As we bid farewell and thank Eric and Mohammed for sharing their stories and dreams, again we feel that unique relationship which can only be enjoyed between Brokerslink members; business partners and friends we can trust all over the world – and now in Ghana and Tanzania. •
Tan Management and Midas joined Brokerslink because as ‘generalists’ in their own markets, they need to have access to specific knowledge when their clients require it.
Eric Addo-Mensah, COO of Midas Insurance Broker.
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GHANA TANZANIA
Population 25,9 million Population 49,3 million Population growth 2,1% Population growth 3% GDP per capita $1,401 GDP per capita $968 Life expectancy 61,1 Life expectancy 61,5 Adult literacy 76,6% Adult literacy 80,3% Inflation 15,3% Inflation5,6% Human development index (out of 187 countries) 138 Human development index (out of 187 countries) 159 Foreign direct investment $3,4bn Foreign direct investment $2,1bn Current account as % of GDP -8,3% Current account as % of GDP -8,2% Mobile phone penetration 108% Mobile phone penetration 55% Key export Petroleum and crude oil Key export Tobacco Last change of leader 2012 Last change of leader 2015
GDP growth (%) GDP growth (%)
GDP ($bn) GDP ($bn)
2013 2014 2015 2016* 2013 2014 2015 2016*
*Estimated Oct. 2015 *Estimated Oct. 2015
WEST AFRICA EASTERN AFRICA POPULATION (MILLIONS) POPULATION (MILLIONS)
2016 2016
2030 2030
2050 2050
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Jiřina Nepalová began working in insurance in 1978 and is one of the most recognised insurance experts RENOMIA: BROKERSLINK @CZECH REPUBLIC in the Czech Republic. This is mainly due to her & CENTRAL AND EASTERN EUROPE extensive experience of implementing insurance programmes and managing claims for companies from a wide range of sectors.
In 1993, she founded and continues to run Renomia with her two sons, building its position as the leading Jirina insurance broker in the Czech Republic and in central and eastern Europe.
Renomia has been a partner of Brokerslink since 2007 and currently handles some €240 million in clients’ Nepalová premiums. The firm has more than 1000 colleagues operating in the Czech Republic, Slovakia, Hungary, Bulgaria, Romania and Serbia and is constantly expanding its services. In November 2015, it launched An example of top a new Company – Britanika - focusing on financial consulting, insurance services, mortgage loans and expertise in the investments for retail clients. Ms Nepalová was elected Chairwoman of the insurance industry Association of Czech Insurance Brokers in 2015 and her many awards include: Manager of the Year 2014, Banking and Insurance sector; named as one of the forbes Top 10 most influential women in the Czech Republic and Ernst & Young City of Prague Entrepreneur of the Year, 2016.
Jiřina Nepalová, Founder and Chief Why did you decide to work in the insurance Executive Officer of Renomia, is at the industry? pinnacle of the Czech insurance industry; It was by chance, maybe luck. Thirty-eight years her expertise and professionalism is ago, Česká pojišťovna, then the only insurance Company on the market and State-owned, was unrivalled, as evidenced by the national looking for a motor loss adjuster – I was studying accolades she frequently receives. electrical engineering so they approached me. This was a big life change. From the start it was highly fullcover found out more about this interesting work and it essentially became a lifelong amazing woman and her business. hobby. Another big change came when my son Pavel who, after the political regime changed in the Czech Republic, was studying at the Sorbonne in Paris in 1993. He discovered brokers play a very important role in the world of insurance and along with my other son Jirka (also a university student), convinced me to build upon my years of insurance experience and establish a brokerage company. This decision further strengthened my relationship with insurance. The role of an insurance broker is to be on the side of the client, to search out and negotiate the best conditions for them, to deal with claims and in general protect clients´ interests. I find great meaning in this.
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AWARDS Top 10 Manager of the Year (run by the Czech Management Association, the Czech Confederation of Employer and RENOMIA Entrepreneur Associations and the Czech Confederation of Industry) 2011/2013 Insurance Broker of the Year LADY PRO (run by Czech 100 Best) Ruban d´Honneur (European Business Awards) 2014/2015 Top 10 best employers in Europe TOP 25 Women in Business (run by Hospodářské noviny, the 9th most widely- 2015 circulated paper with a circulation of 43,000 Employer of the Region (Sodexo) in September 2013)
50 most influential women in the Czech JIRINA NEPALOVÁ Republic (run by FORBES magazine, 10 page article and cover pictures in November 2014 2015 issue) Manager of the Year in Banking and Insurance 2016 City of Prague Entrepreneur of the Year 2015 (run by Ernst & Young)
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What did you find the most difficult when building What is your vision? How do you see Renomia’s up Renomia, which today is one of the strongest future? insurance brokerages in central Europe? My personal and business vision is to maintain the Definitely the beginning. In my case it meant starting family character of the Company, expand in central and the business from scratch in a small town with no eastern Europe and provide the best services for clients. capital. I had to apply for a loan while mortgaging our We continue to work in line with our values and mission family house. I also had to convince future colleagues which is ‘we serve people and companies and contribute – professionals from within the insurance industry – to a better life’. We share our vision with colleagues in to join me in a start-up business which was hard. For all the countries we operate in so they identify with it, that reason I started working with people outside the naturally want to be a part of it and are keen to build a sector, teaching them everything. This must have been strong brand in Europe. a good move as some are still working with Renomia now and are recognised as top insurance experts. It helped having my two sons with me as they were Why is it important for Renomia to be a member of committed to building the business too. Brokerslink?
An important milestone in the successful development of What was it like to be a successful entrepreneur and Renomia was working with international broker networks mother at the same time? and partners. We’ve been with Brokerslink since 2007 and this partnership has enriched us, enabling us to gain not I was lucky that I started my business when my sons only new knowledge and experience, but also friends. were already adults. What’s more, we could combine Thanks to Brokerslink we have the opportunity to provide our talents and take advantage of the fact that I had services to our clients in countries where we are not active insurance experience and they had creative ideas, and at the same time this cooperation brings us new courage, vision and knowledge of foreign languages. clients. We greatly appreciate the joint meetings and the As a mother I have been tolerant and listened to them. open and friendly communication. • From the start-up to today, we have been excellent and equal partners in the business.
Do you think it’s easier now for women to achieve leading positions in insurance? There should be no difference between There should be no difference between a woman or a a woman or a man striving for a man striving for a management position. It depends on the abilities and opportunities a person has. He or she, management position. It depends on the however, must be prepared to sacrifice something and abilities and opportunities a person has. have courage and perseverance. He or she, however, must be prepared to sacrifice something and have courage What is your best memory in this journey? and perseverance. I have lots of beautiful memories which I’ll never forget. One that really moved the business forward was my first trip abroad by plane. I was flying to London with my sons and another colleague, who is now a Renomia shareholder, to meet a senior executive of one of largest brokerages in the world. We had to convince him to work with us to acquire a major account - a large Czech chemical holding. And we succeeded. Later on, we jointly won the tender defeating strong, international competition and have been servicing that client ever since.
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BROKERSLINK NEWS 2016 Brokerslink Conference Amsterdam N October 20-22
brokerslink.com @Brokerslink
Brokerslink’s Amsterdam Annual Conference
Brokerslink’s biggest annual event is being held in Amsterdam this year, at the Okura Hotel, from the 20th to the 22nd of October. Over 250 participants from all over the world are expected, including members, risk managers and insurers at what is the 8th edition of the conference. The new challenges and opportunities facing Brokerslink and the insurance industry will be one of the main focuses of the conference, highlighted by notable speakers such as: Inga Beale – Lloyd’s CEO; Jean-Marc Paihol – Head of Group Market Management and Distribution at Allianz SE; Steve Hearn – Group CEO Cooper Gay Swett & Crawford and Fons Trompenaars – Founder and Director of Trompenaars Hampden-Turner.
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Brokerslink @RIMS'16
Brokerslink has once again been present in another edition of RIMS’s (the Risk Management Society) annual conference, considered the world’s leading insurance industry event. This year the conference took place in San Diego, between the 10th and 13th of April, with over 440 exhibitors. MDS Group, Crystal & Company and In2Matrix had their own presence with branded counters within Brokerslink’s booth. Brokerslink’s visibility in RIMS, through strong management and partner participation with a large attractively designed booth, is a key initiative within the strategy of elevating the organization’s brand to be viewed as a major player in the global insurance Brokerslink at San Diego Convention Center. broking field. This unique event also creates the opportunity to establish presence in the market by strengthening relationships with insurers and risk managers and offers opportunities to find additional partners and clients. No other event in the industry can offer such a high quality forum for branding and developing attractive business opportunities year after year. Over 60 participants, from Brokerslink firms, were present and took part in Brokerslink organized meetings and events, such as the the traditional breakfast – where connections get reestablished and everyone gets up-to-date on the latest news – and the famous cocktail, which welcomed over 200 guests this year. RIMS 2017 will be held in Philadelphia from April 23rd through the 26th. Brokerslink will be there. Brokerslink Cocktail.
Brokerslink booth at San Diego Convention Center.
123 MDS magazine Get to know Chronopost. What makes us unique is the excellence in relationship with our customers, as Brokerslink Expansion well as innovation and technological leadership. Every day, our more than 750 employees in Portugal put at your disposal their commitment and dedication. Brokerslink is currently present in 90 countries, 400 offices and with 10.000 professionals around the world. The expansion of the geographic reach, in association with As specialists, we always find new ways to make each customer experience servicing the needs of the Brokerslink firms and clients is a something brilliantly simple. continuing major focus for the management team. Brokerslink’s most recent new firms are based in Europe. chronopost.pt Each one of them is a leading, quality independent insurance brokers in their market. They are:
• Austria: Aktuell • Spain: Filhet Allard España • Norway: Norwegian Broker Group photo. • Sweden: Söderberg & Partners Zurich Multinational Insurance Training
The global strategic partnership between Zurich and Brokerslink continues to make important strides. The strengthening of this relationship is fundamental in providing adequate solutions and better service to existing clients in the international space. In order to reinforce this relationship, the Zurich Development Center, in Switzerland, organized and hosted training about International programs for individuals from Brokerslink firms. For two days, 25 participants from 15 countries focused on Multinational Insurance Training through very dynamic sessions, analysis and case studies on how to use Zurich’s Multinational Insurance Application (MIA), a high quality and awarded tool that provides the necessary Ventiv Technology: a Risk know-how to support and assure global and sustainable insurance solutions. Management Information At the conclusion of the training, the participants’ feedback System Partner was highly positive and proved that everyone understood and left better informed about the options available when structuring an international program. Brokerslink announced a strategic partnership with Ventiv – the biggest independent company in the world with specific insurance and risk technology solutions – which will allow the delivery of a RMIS (Risk Management Information System) portal to its clients. This portal will provide the multinational clients of Brokerslink Regional Asia Brokerslink with the necessary tools to analyze their global Pacific Conference insurance programs, as well as the possibility to access other risk management tools. In what has been a busy 2016 Brokerslink schedule, another The Brokerslink – Ventiv partnership shows the strong important Asian conference was held, from the 27th to the 30th commitment with the strategy of boosting growth by means of April, in Sidney, well organized and hosted by PSC Insurance of innovation, making world class risk technology available to Brokers, Brokerslink’s partner in Australia and New Zealand. its clients. Under the title “Working Together for Better Results”, 60 delegates from 10 countries presented and discussed subjects such as ERM (Enterprise Risk Management), Emerging risks, Brokerslink’s new technological tools – Risk Console and the Future of Brokering.
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Anuncio Chronopost2.indd 1 29-03-2016 09:57:13 Get to know Chronopost. What makes us unique is the excellence in relationship with our customers, as well as innovation and technological leadership. Every day, our more than 750 employees in Portugal put at your disposal their commitment and dedication.
As specialists, we always find new ways to make each customer experience something brilliantly simple.
chronopost.pt
Anuncio Chronopost2.indd 1 29-03-2016 09:57:13 MDS magazine
Angola: Present and Future
PAULO VARELA
The sharp drop in the price of oil on the international markets since 2014 has greatly impacted the economies of countries traditionally producing and exporting this commodity. The severity of the impact is directly proportional to the degree in which individual countries’ public finances depend on oil. According to the International Monetary Fund (IMF), the sub-Saharan African countries most penalised by the adverse international climate in 2015 were Angola and Nigeria. In this piece, Paulo Varela, President of the Board of Directors of CCIPA (Portugal-Angola Chamber of Commerce and Industry), outlines the issues facing Angola.
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Current context
The drop in revenues from exports and tax in the oil sector, which production, especially in agriculture, thus cutting imports. These previously accounted for around 80% of total revenue, forced the actions contained the flow of currency out of the country and Angolan Government to review its 2015 State Budget. A fall in the reduced its dependence (particularly in foodstuffs) on foreign estimated price per barrel from Us $ 80.00 to Us $ 45.00 prompted trading partners. the immediate adoption of austerity measures to contain public spending (by suspending, postponing or cancelling works and Earlier diversification of the Angolan economy took place during projects considered as non-priority under the 2013-2017 National the 2008-2009 financial crisis when measures were imposed by the Development Plan). Alternative sources of revenue also had to be IMF as part of a structural adjustment agreement. The agreement identified and steps taken to make the country less dependent on remained in force until May 2013. However, those in charge of foreign trade. economic development failed to adopt a concerted strategy for the process and consequently, although several large, viable and Indeed, in an oil-dependent country, where revenue from other sustainable projects were implemented, they were low in number exports is comparatively low (while diamonds are the second-largest and involved few business areas. source of income, they accounted for a ‘mere’ €990 million in 2015, in compared to €8.2 billion in oil revenue), it was essential the Angolan In light of the worsening internal crisis, in mid 2015 the Government authorities took swift action, implementing measures recognised passed its first laws which it hoped would attract private by the international community as both timely and adequate. investment. These included: the abolition of a minimum value for eligible projects, the introduction of benefits and incentives The most impactful measure proposed was the decision to diversify payable to applicants meeting certain objectives and predefined the economy; this encouraged investment in industry-based, criteria, the repatriation of capital from the outset of the project non-oil-related areas (there are prolific natural resources in and the safeguarding of 35% of the investment in areas considered many different economic sectors) and developed primary sector a priority (including media, hospitality and tourism) for Angolan
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investors. In addition, agencies such as the Angolan Agency for the Promotion of Investment and Exports and Technical Support Units for Investment were tasked with promoting and providing support for private investment and fostering Angolan exports. They operate alongside various ministries responsible for investment, including the Presidency of the Republic, which evaluates and decides upon projects with amounts exceeding Us $10 million. Angola concedes however, that even with these initiatives, it will struggle to source funds to meet the population’s basic needs and support essential projects. Alternative funding, from the public and private sector, in Angolan and foreign currencies, is therefore vital. PAULO VARELA In support, the National Bank of Angola (NBA) implemented a series → Paulo Varela has a Bachelor’s Degree in Law of remedial measures; it issued debt in the form of securities and from the Faculty of Law at the University of treasury bonds in Angolan currency (index-linked to the Us $) and Coimbra and completed post-graduate courses in secured funding from the international banking sector (Goldman Business Management and Administration. Sachs, Bilbao Vizcaya Argentaria, Santander, Deutsche Bank), → He is the Administrator of Galp Marketing global development institutions (World Bank, mainly through Internacional S.A, is a representative for Galp the International Bank for Reconstruction & Development, the Energia S.A and President of the Board of African Development Bank and the European Union), multina- Directors of the CCIPA – the Portugal-Angola tional companies (GemCorp Capital) and from other countries via Chamber of Commerce and Industry. bilateral agreements. In June 2015, a credit line of Us $6 billion → From 2002 to 2014, he was Vice-President of was negotiated with China and Us $ 1.5 billion was also listed the Board of Directors of the Visabeira Group in sovereign debt (Eurobonds) on the London Stock Exchange. and has been President of the Board of Directors This was the country’s first experience of international money of Visabeira Global SGPS S.A. since 2006. From markets and a good opportunity to assess how receptive others November 2009 to May 2014, he held the position were to its requests. of President of the Board of Directors of Vista Alegre Atlantis, S.A. In a bid to keep Angola’s net international reserves fairly stable (it → Paulo Varela was President of the Board of currently covers five to six months of imports), the Government Directors of Visabeira Moçambique S.A. from extended the time limit for overseas payments and created a 1999 to 2014 and President of the Board of payment schedule following guidelines set by the NBA. This it Directors of Visabeira Angola S.A. from 2002 to hoped, would contain the outflow of foreign currency. These 2014. He was also non-executive Administrator at measures however, led to suppliers suspending exports and as the Banco Único (Mozambique), PCI – Parque de the flow of imports to the country dropped, it severely impacted on Ciência e Inovação Aveiro S.A. sectors whose production was reliant on imported raw materials. Worst hit was the automotive sector and businesses involved in brewing, milling, dairy and glass production. Suspended production inevitably led to an increase in unemployment.
An updated regulatory framework to address the crisis and minimise its harmful effects on the population was needed, and so the Customs Tariff and Excise Duty Regulations were introduced. They increased taxes on luxury products, relieved the tax burden on essential products (especially those considered to be household staples) and introduced taxes on petrol and diesel fuels produced in the country. In addition, new Securities and Urban Rental Codes were approved and a new General Employment Law was passed.
The shortage of currency and a reduction in imports led to a continued devaluation of the Kwanza against the Us $ (24% in 2015) and the Euro which were compounded by rising prices and increased inflation. The latter shot up to over 17% in the first months of 2016 (previously the highest rates had been 15.31% in 2010 and 14% in 2009).
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In light of this and with the aim to contain price escalation on essential products, the Government adopted new measures in Where minerals are concerned, February 2016. They comprised: Angola’s resources include diamonds
• The creation of a National Price Council – chaired by the (production in 2016 is expected to Minister for Finance, members include Ministers for the reach some nine million carats); Economy, Territorial Planning and Development, Trade, Agriculture and Fisheries and Transport, plus the Governor ornamental stones – granite, marble of the NBA. The Council’s powers allow it to formulate a and limestone; construction materials Government-approved national pricing policy, develop, manage and implement ‘market regulation policies’ and monitor and – sand, clay and gravel; and ores – take action against activity that could impact prices. gold, silica and mercury.
• The publishing of a ‘watched prices’ list – this ensures the prices of 32 essential products and services, such as rice, milk and bread, are controlled.
• Agreements that the Government is to be responsible for setting the prices of gas, paraffin for lighting, plumbed water, electricity and urban public transport.
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Areas of focus
The Government’s key focus was in the primary sector (as Euronews When it comes to electricity and, more specifically, its generation, says: “Angola is exchanging black gold for green gold”). This sector Angola has the second-highest hydroelectric potential in southern is fundamentally important; it ensures the population’s basic Africa. It has taken steps to maximise this, building essential needs are met and can replace significant volumes of imports, hydroelectric plants and connecting them to the grid. New plants stemming the currency outflow. In recognition of this, rural and including the Capanda and Cambambe dams in Kwanza Norte livestock development programmes have been implemented and province will provide an additional 960 megawatts of electricity water supplies to rural areas improved and extended under the from June 2016 when the first of four installed turbines comes into ‘Water for All’ programme. Farmers are being provided with seeds operation. In Laúca - 65% of construction work is complete and and tools, a rural trade programme has been adopted with the aim the first two turbines will be operational in June 2017, generating of stimulating agro-industry and livestock, and the large coffee 267 megawatts of electricity. Production will increase by a further plantations are once again investing in producing and exporting 77 megawatts when the third turbine comes into operation in coffee. Fisheries have also received special attention; incentives December, the same year. Soyo – a combined cycle dam - will via the provision of licences, vessels and nets, foster eco-friendly generate 750 megawatts of electricity in 2017 from natural gas. local fishing, supporting around 500,000 families. Angola’s electricity project is long-term and one that requires heavy investment in both generation and distribution by the Government Where minerals are concerned, Angola’s resources include: and its partners. It is a project that must be concluded urgently; diamonds (2016 production is expected to reach some nine million the viability of the country’s industry depends upon it. carats), ornamental stones (granite, marble and limestone), construction materials (sand, clay and gravel) and ores (gold, silica A further area of focus is the environment. Environmental impact and mercury). Yet to be fully-exploited, this sector has considerable studies are compulsory for certain projects, consulting firms have growth potential. Particularly when you consider companies still to be registered, support programmes to protect the local fauna and import finished construction materials and export raw unprocessed flora and combat the poaching and killing of endangered species stone which is subsequently re-imported in differing formats, are underway and the creation of nature reserves is encouraged. In but typically finished-off, polished and ready-to-buy. A parallel the latter, the Kaza Transfrontier Conservation Area is especially can be drawn with the timber sector where resources cannot be important as it has a huge impact upon tourism. Following on fully exploited due to difficulties in accessing logging sites and from Angola’s participation in the 21st United Nations Conference transporting the cut logs. Also a lack of electricity for processing on Climate Change (COP21), the country will be hosting official means generators have to be used, making the costs prohibitive. celebrations for World Environment Day on 5 June 2016. The theme for the event is ‘The Fight against the Illegal Trade in Wild Fauna and Flora’ – a subject particularly important and topical for the African continent.
Logistics are equally a priority as it is essential products reach end consumers. The main railway lines have been rehabilitated, roads and bridges are being repaired and restored and work to build the deep-water port at Caio in Cabinda has been scheduled for Q1 2016. Various projects are also being implemented to improve conditions The most impactful measure for road traffic in the capital and surrounding areas, including proposed was the decision to resurfacing the main roads and providing passenger ferries across diversify the economy; this the river to connect Luanda with the neighbouring areas. encouraged investment in industry-based, non-oil-related areas (there are prolific natural resources in many different economic sectors) and developed primary sector production, especially in agriculture.
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2016: preparing for the future
Despite the efforts and measures adopted by the Government, and In addition to ratifying its 2016 State Budget, the Angolan the positive results achieved from them, 2016 did not start well for Government approved a strategy for economic recovery, signalling Angola. The price of oil continues to fall in the international markets the start of a new and more stable era where tax revenue is (with the occasional small rise followed immediately by further non-dependent on oil. It involved the issuing of guidelines around; drops) and the geopolitical climate in the Middle East (the conflict taxation, monetary policy, foreign trade and the real economy. between Iran and Saudi Arabia and Iran’s return to the oil market) The Government pledged to take greater control of the country’s have not facilitated an increase or international stability in prices. deficit, seek increased financing and improve the efficiency and effectiveness of foreign investment. Greater priority is being However, some of Angola’s problems earlier this year originated given to promote exports and there are plans to adjust the public from factors arising late in 2015 and although unconnected to the debt repayment schedule, increase non-oil-related tax revenue, price of oil, have negatively impacted its external economic and optimise public expenditure on staff, pensions, operations and business relations. In November the US Federal Reserve suspended, the acquisition of financial assets, rationalise the import of goods via North-American banks, the sale of dollars to the Angolan and services and generally increase domestic production of basic banking system. It alleged the country’s financial system failed export goods. Tax reforms are also being introduced; the Council to comply with internationally-approved rules regarding money of Ministers approved a draft law governing banking operations laundering and the financing of terrorism. This, combined with and transactions, which in turn will increase revenue and enable the oil price crisis, contributed to a lack of currency in the country, taxpayers to cross-reference banking transactions. which in turn has led to a steep rise in prices. Although the Angolan Government took action at the first In response, the NBA adopted a series of initiatives recommended signs of the crisis, the measures adopted were ineffective and by the inter-governmental body, the Financial Action Task inadvertently contributed to the worsening economy in 2015. Force (FATF). Top priority was given to regulatory reform and As mentioned earlier, a key trigger was an increase in the global the enforcement of 23 out of 41 new regulations. These included; supply of oil and subsequent fall in demand. Contributory factors the licensing of banks, risk governance and credit management, included; the return of Iran and other oil-producing countries to the establishment of an ‘appropriate legal framework’, the the international market, the failure by OPEC to apply production development of faster and more precise ‘automated customer restrictions, the exporting of shale oil by the US, a fall in European monitoring procedures’, leading to better control over transactions consumption due to its economic crises and climate change and a in progress, the autonomy of the Financial Information Unit (FIU) slowing of China’s economy to 7% in 2015 (the lowest in 25 years) and a recommendation to the private sector for ‘more cohesive and which prompted a drop in imports from Angola, China’s biggest better quality reporting’. supplier of crude.
As a consequence of the changes introduced, and following Angola’s difficulties have severely affected relations with its foreign feedback from FATF specialists who after visiting Angola in January partners and there’s still some way to go before confidence in its this year reported: “No assets relating to the financing of terrorism economy returns. were identified,” the NBA announced, in late February, that as Angola and its national banking institutions had been found to 2016 will be a year of constraint and austerity, reflected in the be “strictly abiding by the rules of compliance,” the country “was GDP deficit forecast of 5.5% in the State Budget. Economic growth no longer under international surveillance in respect of money however, is predicted to reach 3.3%, supported by an estimated 48% laundering and the financing of terrorism.” increase in revenue from the oil sector and 12% from non-related industries. Equally positive is feedback from the World Bank; in This acknowledgement and the recent regulatory reforms should its 2016 Doing Business Report, it ranks Angola two places higher soon alleviate the severe difficulties faced by the Angolan banks than in 2015 (181, up from 183). Perhaps measures to improve its in accessing dollars on the international markets. This will give business environment with easier company registration and lower a much-needed boost to a well-developed financial system which costs for new business set-ups are working. is on a par with the best in Europe and Africa. While the (slow) process of diversifying the economy is underway, Regarding financial services, Angola’s insurance sector witnessed Angola’s economic and financial recovery currently depends on a year of consolidation and growth in 2015. New products were the increase in the international price of oil, which the IMF says developed to meet the country’s needs, and an increasing number could start happening towards the end of 2016. of companies, offering more comprehensive cover, led to a surge of interest from Portuguese and South African companies operating in the sector.
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A country cannot go however, from being a mono-producer and mono-exporter to having an industrialised and diversified The Government is confident its economy easily or quickly. It is a lengthy process that requires economic and financial crisis is a great deal of work, mental stamina, financial capacity and heavy investment in the training of local manpower. If, however, temporary; the country is known an internal project is approached from a medium or long-term for its resilience in overcoming perspective (with a view to securing the presence of enterprises and entrepreneurs in the market), structural costs are likely to fall, difficulties. Angola’s history marks expatriate workers can be replaced by qualified local workers and if periods of adversity but also, ones the project has Angolan roots – ie is set up locally and particularly if it involves Angolan partners - local consumers will look upon of achievement and progress. it more favourably. Angola firms are equally favoured when it comes to applying for funding, programmes and support through official bodies (eg the Ministry for the Economy’s Angola Invest programme, the Angolan Development Bank or Angolan banking system), since there is no shortage of local currency and credit rates are low. Angola also has an abundance of natural resources that can be used as raw materials for various industries, making entrepreneurs less reliant on currency from commercial banks.
The Government is confident its economic and financial crisis is temporary; the country is known for its resilience in overcoming difficulties. Angola’s history marks periods of adversity but also, ones of achievement and progress.
Portugal has equal confidence in Angola succeeding in the face of adversity. At the opening session of the conference ‘40 Years of Angolan Independence – Building a Sustainable Future’, held in Lisbon on 29 February this year, the Angolan Ambassador to Portugal, Professor Dr José Marcos Barrica, affirmed: “No crisis can hold out in Angola, it’s all a matter of time!”
The Portugal-Angola Chamber of Commerce and Industry also believes the Angolan Government is doing everything in its power to put this complicated episode in the country’s economic history behind it and that, once the crisis is past, nothing will be the same as before. The characteristics of the Angolan economy will change, requiring a different approach to bilateral relations. More than ever, it will be necessary to take advantage of existing synergies, the shared cultural identity and common language. It is in everyone’s best interests – Portuguese and Angolans alike – to gradually increase local production and build sustainable partnerships, supported by the authorities of both countries.
Portuguese companies and entrepreneurs have already shown they are more than capable of rising to Angola’s socio-economic challenges; they are present in every province, operate in every sector and so will continue to be long-term partners for Angola. •
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A vision of (and for) Mozambique
Excerpts from the speech – ‘Reflections on Mozambique’s Economy over the Last 40 Years’ – given by Prakash Ratilal on 29 June 2015
PRAKASH RATILAL
→ Prakash Ratilal has an extensive track Governments of Angola and East Timor and record at the Banco do Fomento Nacional Member of the Panel of Eminent Persons bank in Lisbon, which he joined while still a on United Nations Relations with Civil student. At 24, he was awarded a degree in Society to Special Adviser to East Timor’s Economics from the Faculty of Economics at President, Xanana Gusmão, in 2001, he took the Technical University of Lisbon’s Institute on the Presidency of the Moza Banco bank, of Economic and Financial Sciences.1 alongside his Chairmanship of the Board of In that same year (1975), the year in Directors at Moçambique Capitais, S.A. which his homeland, Mozambique, → Prakash Ratilal says the most important gained independence he returned lessons he learned during his career are ‘the home and was appointed Chairman of need to be bold without fearing failure, never the Board of Directors of the Montepio giving up, investing in people who can turn Bank of Mozambique. At 27, he became ideas into realities, understanding success Vice-Governor of the Bank of Mozambique comes from involving the greatest number of and at 31, was appointed Governor. stakeholders, having a vision and strategy that → After a period of collaboration with everyone agrees with and sharing its results’. the United Nations, where he took on a variety of tasks, from Consultant to the
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In his speech at the Polana Hotel in Maputo, Prakash Ratilal looked back at Mozambique’s progress after gaining independence on 25 June 1975, considering it from an economic, political and social perspective. Economically he undertook ‘a cold analysis of the incidents that took place in the immediate run-up and which impacted and moulded the future of Mozambique’, and gave the following examples ‘demonetarisation of the official price of gold, which changed relative worldwide prices forever, the change from a fixed exchange-rate system to a flexible exchange-rate system, and the first oil-related shock; the drastic rise in the price of oil from Us $2.90 to Us $11.65 per barrel in just three months!’. “These factors,” he explains, “were devastating in their effect on a poor country like Mozambique, with its fragile institutions and severe lack of qualified personnel, on the verge of independence and relying only on its exports and farm produce. In the final years prior to independence, the Prakash Ratilal. colonial economy was showing considerable structural imbalances in its balance of payments and balance of trade.” Mr Ratilal remembers: “Mozambique’s independence came in the context of considerable East-West confron- tation, since no Western support for the independence movements had been forthcoming, with the exception of the Nordic countries.” He adds: “Members of Parliament in Mozambique’s first Government as an independent country were charged with the mission of ensuring national unity, building the State and profoundly transforming the economy and society; yet they were mostly young – under the age of 35 – with little experience of social, Prakash Ratilal was born in economic and financial management. A gargantuan task Mozambique in March 1950 and indeed, particularly when responsible for; the smooth- running of the economy (in a country where the majority instrumental in the process that led of leadership positions in trade, industry and services to the country’s independence and were occupied by colonists who had since left the country), investment in education (only 7% of the population over building of the Mozambican state. the age of seven could read and write and there was only one university in the whole country), the creation of a healthcare system (almost non-existent for the majority of the population whose average life-expectancy was 44 years), and the building of the State’s institutions (almost always from scratch!).” The situation following independence was difficult. He continues: “A severe shortage of qualified professionals with little economic management experience. Political instability, in the aftermath of the attacks carried out by the then regime in Southern Rhodesia, condemned by the United Nations for its unilateral racist declaration of independence, which destroyed important infrastructures in a war that led to (…) and damage to the tune of several hundred million dollars (…) according to various UN agencies.” But the Government was determined not to given in. Mr Ratilal recalls the decisive moments for the country: “The Government launched an organisational offensive to reorganise the production and circulation of goods, encourage family production and green spaces and privatise certain sectors it felt it should not be responsible for.”
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“A vision in itself is not enough – Prakash Ratilal’s vision for the risk and it has to be credible and based on insurance market in Mozambique is closely reality. Everyone must roll their connected to the country’s economic sleeves up and get on with the job.” development. He believes the current outlook is extremely hopeful and suggests if a number of positive factors come together, Mozambique could be one of a few countries After 1980, Mozambique forged closer ties with the West, especially the United Kingdom. He reminds: “A period to deliver great economic growth from 2020 of relative peace and quiet followed, during which there onwards. He foresees this growth will require was an acceleration in the intensive training of personnel, an expansion in financial services, particularly the Metical was introduced as the country’s new national insurance, reinsurance and broking (expected currency, in 1982 there was a renewed focus to encourage the country’s private sector and open it up to foreign capital to grow exponentially). Cover will be needed and in 1984 work began on preparations for the country for the various risks associated with the to join the International Monetary Fund and the World development of the hydrocarbon industry and Bank Group. A Draft Indicative Plan was also drawn up its infrastructure, the development of ports, to promote and develop the country’s natural resources.” “From the late 1980s,” he reports “there was a period railways, the forestry industry, tourism and of terrible destabilisation with a general decline in agribusiness etc. In light of this, he considers production, rapid devaluation of the currency on the the management of these risks and their parallel market, the need to introduce rationing cards transfer to the insurance sector will require in cities to ensure people had access to staple foods and the rationing of fuel, which was generously supplied with specialists of international quality, something concessionary credits by Algeria, Libya, Iraq and Angola. currently unavailable in Mozambique. “This ‘destabilisation war’ required tough political, economic and diplomatic action, with various missions to foreign countries such as Portugal, France and the United Kingdom, the signing of a good neighbourhood agreement with South Africa, the conclusion of the first restructuring of Mozambique’s external debt and the drawing up of an Economic Action Programme allowing greater growth in Mozambique’s private sector which mobilised new funds Despite the tragic circumstances of the late 1980s and early into the national economy.” 1990s profoundly marking the people of Mozambique and Once the country formally joined the IMF, Mozambique’s significantly impacting the country’s economy, he opines: President, Samora Machel, was received in Washington by “It was the young people of the generation of independence, US President Ronald Reagan. alongside Mozambique’s liberators, whom I am proud to The country’s economic situation was improving and so be a part of - they held the country together in those early too was other countries’ views of Mozambique. However, years. This generation became known as the ‘Generation of trying years lay ahead for Mozambique, due to its destabi- 8 March’. Many agreed to interrupt their studies and answer lisation, aggravated by the apartheid regime. This was the call to go to the districts and production units, various known as the 16-Year War, as Mr Ratilal explains: “In 8 and 9 grade students taught classes to their younger peers the late 1980s, the destruction and successive droughts and others agreed to study abroad. Today, these are the and flooding meant the people of Mozambique found people who occupy the top positions in the economic and themselves in the midst of a human tragedy on a massive social life of Mozambique.” scale, but the rest of the world was scarcely even aware For education, the future looks promising. Prakash of it. In 1989, I wrote a book, Enfrentar o Desafio (Facing Ratilal concedes, however, there is still a long way to go: the challenge) where, based upon United Nations data, “In 2012, some 5.3 million pupils were attending primary I wrote that 200,000 children did not know the whereabouts school, while there were 760,000 and 197,000 attending of their parents and over 5.6 million were displaced and the first and second years of general secondary school. affected. Of these, around one million had taken refuge “And did we make mistakes? Of course we did. Was it in neighbouring countries.” worth the sacrifice? It was hard, but of course it was. Forty He underlines the importance of the collaboration years on, the country benefits from high sustainable growth between various Non-Government Orngaisations, the rates and has a promising future based on the exploitation United Nations and Ministries, who made a decisive of natural gas (it has the third-largest reserves in the world), contribution to save lives and rehabilitate the country hydroelectricity, mineral resources, agribusiness, tourism economically and socially. and nature conservation.”
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He continues: “Mozambique to some extent remains resolved and legislation/contracts complied with, severe indivisible, Mozambican society prefers to be penalties for acts of corruption and finally, greater non-confrontational and resolve disagreements by transparency and the introduction of a framework that themselves. Regular elections have made democratic enables us to become a more competent state. changes to Government and the country is making good “To achieve this, it requires close collaboration and progress. There are still challenges to be faced, including; commitment by all Mozambicans, greater national peace and stability, job creation, the promotion of good cohesion and tolerance of everyone’s differences and business practices and entrepreneurism, a reduction in beliefs, more inclusive policies and better distribution imbalances and asymmetries, a fairer distribution system networks. We have a window of opportunity to build a and a more inclusive society.” more prosperous and peaceful future – a historic moment Mr Ratilal concludes by sharing his vision for that Mozambicans cannot afford to miss.” Mozambique: “The current situation, the natural resources Prakash Ratilal's final message is clear: “These are Mozambicans depend upon and of course, the worldwide tasks involving every generation. Everyone must conquer market, can change the fortunes of this country, to the their own space and do specific things. A vision in itself benefit of all citizens. This requires however, agreement is not enough – it has to be credible and based on reality. and understanding between the various political and Everyone must roll their sleeves up and get on with the job.” social players, a desire for the definitive restoration of An undeniably inspiring testimonial from a Mozambican peace, a priority focus on agricultural development and who knows the past, helped build the present and is now the promotion of skills and schooling, public policies treading the path that will build his country’s future. • aimed at the development of a competitive economy, greater management capacity for public companies, better quality management for micro, small and medium-sized companies, the promotion of a business climate capable of attracting major investment in a credible atmosphere where business-related conflicts can be expected to be
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Steve Hearn Building the broker of the future
Steve Hearn is a leader with an enviable skill set and extensive insurance market experience. So it was no surprise that his appointment as Group CEO of Cooper Gay Swett & Crawford (CGSC) in November last year, succeeding Toby Esser, was roundly welcomed. Taking the reins at CGSC he is setting out to build a global wholesale distribution operation that will be a centre of excellence and innovation; he relishes the challenge as he explains to fullcover.
On 2 November 2015, Steve Hearn was Gleincairn Group. In 2008 he joined Willis ment and reinsurance broker groups. MDS appointed Group Chief Executive Officer as a result of their acquisition of Hilb Rogal Group began working with Cooper Gay in (CEO) of Cooper Gay Swett & Crawford & Hobbs and held a number of senior 2005 and in 2007 became a shareholder, (CGSC), succeeding Toby Esser. positions including Chairman and CEO remaining a strong partner of CGSC. He discussed the move with fullcover: roles with Willis Global, Willis Re and The Company is set to continue its growth “The opportunity to join CGSC was Willis Limited, the Group’s principal UK strategy. “Steve has the leadership, vision impossible to pass up. The business has a regulated entity. Prior to joining CGSC he and energy to realise the potential that compelling story and strong established was Deputy CEO of Willis Group Holdings. exists within this business”, said Martin teams that are among the best in the Between 2014 and 2016, Steve was Sullivan, Executive Chairman of CGSC. market. At its core, CGSC is a great Company Chairman of both the London Market As part of this strategy, Cooper Gay has with the potential to be exceptional. We Group (LMG), which is concerned with sold its North American business unit (CGSC have the tools at our disposal for growth maintaining and enhancing London’s North America Holdings Corporation) to and a strategy that will mark us out from our position in the international insurance BB&T Corporation. Steve explained: “The peers. Together, this will enable us to build market, and the London & International sale will enable Cooper Gay to further evolve a business, centred on innovation, expertise Insurance Brokers’ Association (LIIBA), and build a business that drives change in and service, which is fit to challenge which represents the interests of insurance the market. We already have the foundation established markets and become a leading and reinsurance brokers operating in the to build a truly exceptional business and force in our chosen sectors.” London and international markets. He we now have the resources to realise this Steve brings to CGSC more than 25 years’ is also a Vice President of the Insurance potential.” insurance market experience - in the global Institute of London. He concluded: “I look forward to mee- retail, reinsurance and wholesale sectors. Steve’s role as Chair of LMG has been ting and working with more members of Early in his career, Steve was President recognised by the London Insurance Brokerslink. Cooper Gay has been an active & CEO of Marsh Affinity Europe and held Market; in 2015, he won the Reactions member of this independent insurance a number of positions in client, sales and London Market award for Industry broker network since its creation and I profit and loss management at Marsh and Personality and the Innovation accolade believe it has an important role to play in Sedgwick Limited. for LMG’S ‘London Matters’ initiative. the development of our global Company.” • From 2005-2008 he was Chairman CGSC is one of the largest independent and CEO of privately-owned wholesaler global wholesale, underwriting manage-
138 GLOBAL INSURANCE & RISK CONSULTANTS MDS
JACQUES GOLDENBERG: FROM EGYPT TO BRAZIL, A ROUTE CHARTERED BY PASSION
ENRIQUE SCHOCH: A SAILOR IN THE WORLD OF INSURANCE
THE POWER OF WILL: DISCOVER MDS' NEW BRAND
MDS NEWS
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Jacques Goldenberg From Egypt to Brazil, a route charted by passion
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More than five decades have passed since Jacques Goldenberg, Director of International and Business Risks, MDS Brazil, moved away from Egypt. This move, which may seem long distant, still remains vivid in his mind – so much so he can describe it in minute detail. Jacques admits: “It’s interesting to tell people a bit about our lives, our experiences and the emotions we felt. It’s almost as though we were travelling again.” Perhaps it is for this very reason – and his desire to stay in touch with his origins – that his latest bedtime reading is Nasser, the Eagle of Egypt. Jacques is unrivalled in his career and seen as a role model and inspiration for many. fullcover finds out more about his history.
Early career
The fall of the monarchy in 1952 and election of Gamal Jacques began his career in insurance at the age of just 17 Abdel Nasser as President set a new direction for Egypt and as office clerk. Two years later he was in charge of Auto, for Jacques Goldenberg too. At just 12 years old, following Workers’ Compensation, Life and Property insurance. the nationalisation of the Suez Canal Company (which at His career was undoubtedly influenced by his father the time was British Government owned), he was forced to who, for many years, was responsible for managing the leave Cairo. Jacques remembers: “Some nationalities were Mercedes-Benz insurance portfolio within the company. given 24 hours to leave the country. For Jews, there was Jacques used to go to Mercedes with his father three to not really a deadline but my father was worried about the five times a week and considers this period of learning situation so left Egypt for his homeland of Israel.” However, particularly important as it enabled him to acquire their stay in Israel was short and in 1958, Jacques’ family extensive knowledge of the automobile sector. left to join relatives in Brazil. He recalls how insurance operated during the State Jacques’ father worked in the industry so insurance was monopoly: “When I started, insurance in Brazil was very in his genes. Although he aspired to become a doctor, he conservative. There was a risk rating guide and it was graduated with a degree in Business Administration from considered our ‘bible’. Although the characteristics of the the Pontifical Catholic University. Jacques comments: risk would differ, once you understood the risk tariff and “I always wanted to be a doctor, but when my son, Dov, processes involved, you could be more competitive when decided to study medicine I felt my dream had come true placing the risk. My father used to say ’here’s the tariff to some extent. I have no regrets about my chosen career for fire cover and you have to read it from start to finish’. path, it has gone very well.” It was no fun at all, but that was how I learned, reading the tariff and all policy wordings. This learning process gave rise to my habit of constantly auditing everything, even to this day.” Jacques’ father eventually started up his own brokerage, Integridade, but never severed his connection with Mercedes-Benz, remaining with them for 23 years via a captive broker arrangement. Having started up Integridade, he soon attracted customers in Egypt and won major accounts in Brazil, including the Bozano Simonsen Banks, Embraer and Anglo American.
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A passion for insurance and life In Jacques’ eyes, José is a well-rounded person. In addition to his business vision, insurance and reinsurance knowledge and considerable experience, he is recognised Despite a self-confessed passion for insurance, Jacques as a man of culture, well-informed about history, geography has other interests; he learnt about the work of laboratory and music, and someone who commands global respect. technicians and undertook courses in electrical Jacques continues: “We were on a boat trip in New York engineering and transactional analysis. He studied for and talking about people in politics. José recommended enjoyment, cultural enrichment and to gain a different two fantastic books to me, one about Golda Meir and the outlook from the one his degree and life experience had other, Nasser. Being of Jewish origin and having been given and continue to give him. born in Egypt, both were of interest to me. Incredible as Jacques says: “Insurance however is my main focus - I it may seem, I was more touched by the story of Nasser really like the business and eat, sleep and breathe it. It’s one than that of Golda Meir. I would never have bought those of the few businesses that always keeps me interested; so books if he hadn’t recommended them! Ours is a beautiful much so, I don’t feel life is monotonous. Things are never friendship.” repetitive, there’s always something new happening and I can use my imagination and be creative.” Alongside his career, Jacques has seen his family grow. He has four children – Denys, Dov, Cyntia and Ariel – and Relationship with MDS six grandchildren. His fondness for them is clear to see, but he has no hesitation in saying one of his sources of Jacques explains: “I have been with MDS for 11 years and energy and inspiration is Denys, the son who followed his hope to stay a few more yet. I enjoy working, I always have. father’s footsteps into insurance and who sadly passed I have never yet had to turn down covering a risk, I always away a few years ago. try to get a maybe and whenever possible, turn it into a yes.” As someone who keeps his finger on the pulse of the He speaks proudly of his achievements at MDS, and insurance sector both in Brazil and internationally, he soon of the growing market recognition of the Company as a noticed the trend of consolidation among brokers. Although customer-focused, technically strong and ethical broker: not in a position to acquire another broker, Jacques was “The MDS of today is the result of the work of previous and aware of Integridade’s strong market position and the existing employees, our philosophy and the guidance we opportunities this could bring and following negotiations, receive from our predecessors - the Sonae and Suzano joined forces with Lazam MDS (a broker created through groups – and their heritage and values of serenity, vigour a joint venture between the Sonae Group and the Suzano and strength.” Jacques adds: “The Company’s image was Group) in August 2004. highly respected in the market, but José wanted to be The intention was to stay long enough to manage the bolder. When he appointed Hélio Novaes, MDS Brazil CEO, portfolio transition (Jacques worked with his son Denys he was confident he was the right person to realise his who was Commercial Director and seven other team vision for the Company and become one of the top brokers members). Unfortunately, Denys was unable to see the in Brazil, building upon the respect we’d gained and yet project through to completion so Jacques decided to feared by competitors.” continue his son’s dream and remain proactive in broking. Jacques remembers a moment that was very special for him: “It was MDS’s 30th anniversary and I was invited to attend the celebrations in Porto. Imagine my surprise when A decisive encounter José called me to the stage to receive a prize as a thankyou for my ten year collaboration with the Group. I was very touched by the gesture, coming, as it did, not only from a Following Lazam MDS’s partnership with Integridade, professional but also from a friend.” Jacques met MDS Chief Executive Officer, José Manuel Fonseca. In the early days, they worked together and created a strong bond, perhaps – Jacques thinks – because both had a past in insurance. Jacques recognised José’s vision for the future and his ability to plan ahead in the medium and long term, without neglecting the present. During this period Brokerslink was born and it soon became apparent the network Lazam previously belonged to – Uniba – had nothing in common with MDS (it was a small broker network). In contrast, Brokerslink was an association of larger brokers who shared similar ambitions. Jacques explains: “José was both father and mother to Brokerslink - it began as a network and turned into something larger.”
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Jacques Goldenberg says a few words after receiving his prize from José Manuel Fonseca at MDS's 30th anniversary.
Brokers and Brokerslink in the future Endless energy
Jacques comments: “The perception of the broker as a Jacques has endless energy both in and out of the office. salesman is slowly but surely being replaced by that of His hobbies are reading, music and the sports centre broker consultant, someone who guides customers on (where he goes early every morning). He confirms: “It’s the best path to take, the best options and the best way to very important for me, it makes me feel good. It’s more manage the risks that could jeopardise their businesses. than just a hobby - it’s part of my life. You could say it’s Brokers must be consultants, offering their customers the an addiction.” tools to facilitate tasks and using technology to allow them And he affirms with satisfaction: “I’m not getting old. It’s to have an overall view of their business at any given time.” my children who are getting old. I’ve stood still in time. I’m Referring to Brokerslink, he acknowledges how at a great age now and I’m going to stay this age forever! I important its role has been for mds in Brazil: “It started off have experience of life and the knowledge younger people as an idea and has evolved into a recognised and respected acquire over time.” Jacques warns: “People usually retire worldwide organisation, with a solid growth base that is when they reach a certain age, but I have no plans to retire. going from strength to strength.” I like what I do and the company where I work. As long as I’m healthy, I’m staying!” Owner of a finely-honed sense of humour, Jacques concludes: “There is a direct link between insurance and cookery. Whenever someone turns up with a business that presents a different type of risk, some people will say they have no appetite for that type of risk! "He shares his motto: “I live in the moment that is the equation between yesterday, today and tomorrow. Today is the realisation of yesterday’s dreams; yet today I also dream of tomorrow.”
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Enrique always had a liking for the sea which was why he began his career in the Merchant Navy. He says: “This could only have come from the Portuguese side of my family - my great grandfather was an admiral in the Portuguese fleet.” So it would seem almost natural that his career path would lead him to a life at sea. Enrique remained in the Merchant Navy for eight years until a twist of fate changed everything. With the fall of the Berlin Wall and the collapse of the Soviet Union, merchant shipping was suddenly flooded with a never-ending influx of sailors from Eastern European countries like Poland and Russia. Enrique realised the time had come for a career change. Luckily, his academic training left him well-prepared. Aside from subjects connected to navigation, Enrique had studied others related to law, insurance, maritime economics etc, which enabled him to steer his career course in a new direction.
First steps in the world of insurance
It was here his path crossed into the world of insurance. Insurance companies in Spain were recruiting staff for a number of developing classes, including life and transport insurance, and in a happy coincidence, there was a requirement for a maritime insurance specialist within the transport business. On 1 October 1991, Enrique took charge of the Transport Insurance Department at Sun Alliance, despite having very little ‘real’ knowledge of the insurance business. “I knew about boats, I knew about transport and I knew about trade Enrique – because I had sailed all around the globe. But insurance was new to me,” he explains. It was at this time a decisive figure was to appear in Enrique’s life; the now-retired Director of Sun Alliance’s Schoch Transport Department. Enrique continues: “I had a great mentor, he taught me everything I know about insurance and he did it the old-fashioned way.” Enrique fondly remembers the time he spent with the A sailor in the man who was a true mentor for him. Over a number of years, he spent every afternoon answering the questions Enrique asked while enthusiastically studying policy clauses. He world of insurance describes this as ‘a truly marvellous time’. There was a somewhat ‘romantic’ concept of underwriting that fired Enrique’s passion for his role. He discovered even a signature scribbled on a napkin was Last year, Enrique Schoch was appointed enough to close a deal, remembering the time when a client would say ‘that’s 500 million, here’s my signature Chief Executive Officer (CEO) of the joint- and we’re done’. venture between Filhet-Allard and MDS in Enrique recognised the world of insurance and its wide range of options on offer was similar in scope to the Spain. fullcover asked him about his 25 grandeur of the sea. He continues: “In the end, we insure year insurance-industry career, plans for everything. Indeed, anything and everything can be insured, from a multinational or an oil company to a tiny the future and his ethos for success. corner shop. And the potential is infinite.” He remembers an episode during his time at Sun Alliance that left its mark on him professionally. Enrique explains: “It was my worst 31 December for many years, I took on a
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risk exposure (valued at approximately five million dollars The future of the insurance industry at the time) unaware that there was no reinsurance cover for the following year.” His boss, the man who had trained At a time when the Spanish economy is finally seeing an him, kept his cool, telling him that he had made a mistake upturn and Madrid is becoming an international insurance but that the risk had to be covered. “That was when I really and reinsurance centre for the Latin American market, understood what being an underwriter meant and I became Enrique points to three major challenges facing the Spanish one,” he continues. insurance sector. At Sun Alliance, Enrique’s ability to ‘talk with the top The first is the impact of the Solvency II programme brokers in the market’ propelled him up the career ladder and on the insurance market. Without casting doubt on the he was promoted to Director of the Transport Department security the new regime will bring, it nevertheless raises and, later, brokers and industrial risk. When a merger the pressing question of insurance companies’ capacity between Royal and Sun Alliance created Royal Sun Alliance to take the new requirements on board and still stay in he was responsible for the company’s industrial risks. business. Enrique asks: “How many of today’s players will In 2001, when Liberty bought Royal Sun Alliance in still be in the market five years from now?” Spain, Enrique embraced a new challenge in his life. It The second is the question of dimension (scale) and was known on the market that the company intended to internationalisation. In Enrique’s opinion, only two close down its industrial insurance branch. At the time, Companies on the Spanish market embody these principles. a large part of Enrique’s time was devoted to the brokers’ One is MAPFRE, a truly impressive firm with international market, so when broker EOS invited him to take up the scope. And the other, although operating in the specific position of Managing Director, he decided to accept. Eric sector of credit and surety, is Atradius. The remainder, says: “Everyone was telling me that I was on the wrong side conducting business sporadically in various operations, of the table, that I was more of a broker than an insurer, do not have the capacity for a global venture. and I heard it so often that I ended up believing it.” Shortly The third is more from an internal perspective and concerns afterwards, he would be appointed CEO and for the next operational efficiency. At a time when insurance companies 14 years, until 2015, Enrique managed EOS RISQ in Spain. across the market are looking to attract clients at any cost, it is vital they consistently provide a high-quality service. An irresistible challenge On a personal note In 2015, Enrique was challenged to take on an innovative project; a joint venture in Spain spearheaded by two of In his free time, Enrique enjoys taking part in sport. He Europe’s leading brokers, Filhet-Allard and MDS. Enrique currently plays padel – the game is growing in popularity comments: “The fusion of a multi-generation family and is a combination of tennis, squash and badminton. Company with vast experience in the insurance sector Miniature trains and photography are long-standing in Europe and a Company with the power, magnitude, passions that have now been put on the back burner. grandeur and turnover of MDS was an irresistible challenge.” When asked if he lives by a particular motto, Enrique As CEO of this joint-venture, Enrique believes the replies: “It used to be ’make others happy’, but over time I Company has everything it takes to be successful: “Our have come to realise that life is long and sometimes hard, target market is one essentially made up of businesses who with many obstacles to overcome. Although ‘making others need more brokers to act professionally and who can provide happy’ is still essential, I believe we must not neglect our clients with a specialised service. There is a worthwhile own happiness, so I have to be happy too.” • gap waiting to be filled in the Spanish insurance market; while the number of players may fall, those that remain will grow in size. Logically this merger movement can only be undertaken by leading companies that belong to strong groups, as we do. We have the experience, know-how, professionalism and global dimension, and we develop customised solutions adapted to our clients’ needs, locally and internationally.”
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MDS NEWS N
MDS steps up focus on African continent
As part of its efforts to strengthen its worldwide growth strategy and step up operations in the African market, the MDS Group has appointed João Alvadia as CEO of MDS Africa. João Alvadia has a long track record in the insurance sector in Portugal and Africa and he will now lead and coordinate MDS Group’s entire operation in Africa, with Angola and Mozambique being his priorities. His appointment will drive growth in this area, consolidate the investment already made and explore new opportunities for development.
Strategic partnership S21sec and MDS have entered into a strategic partnership to help with S21sec delivers organisations deal with the problem of cyber risk. The intention is to offer a comprehensive cyber security service for the global business market. pioneering cyber security This pioneering initiative offers companies protection against cyber-attacks by combining an active prevention programme – based on S21sec’s security solutions – with specific insurance provided by MDS, minimising any possible impacts. S21sec’s services of cyber attack prevention, detection, analysis and performance in the area of cyber security are offered alongside cyber risk insurance cover. Included within the service is: an assessment of the organisation’s maturity with regard to the security of its information; technical audits, awareness-raising campaigns and training, continuous security monitoring, response teams for critical security incidents and forensic analysis. As a result of this proposition, companies will be able to take a comprehensive and assertive approach to cyber risk management.
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MDS Brazil – New head office represents innovation and sustainability
MDS Brazil has opened its new head office in São Paulo. The larger, more efficient and sustainable office reflects the transformations the company has been going through, focusing on an environment which values the exchange of information and uses space to encourage greater knowledge sharing and learning. The company has implemented a ‘clear desk’ policy, meaning staff do not have designated desks, enabling greater flexibility and mobility. The new office, located in the Eldorado Business Tower on the Avenida das Nações Unidas in Pinheiros, was named by Exame magazine as one of the best places to work in Brazil. The building was also the first in Latin America to obtain LEED® C&S – Platinum, the highest level of environmental certification in the world.
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Frederico Casal-Ribeiro to work on global development strategy
The MDS Group has reinforced its management team by hiring Frederico Casal-Ribeiro as Global Business Developer. MDS and Brokerslink at the 24th Frederico is a highly-reputed executive with extensive AMRAE event international experience in the insurance sector.
He has worked in the insurance markets in Greece, Mexico, Jacqueline Legrand represented MDS and Brokerslink at the Russia, the United States and Brazil, as well as Portugal. His 24th annual AMRAE – Association pour le Management des mission is to enhance MDS’s competences in all the countries Risques et des Assurances de l’Entreprise - event, which took it operates, leveraging synergies between different local teams place in Lille, France, from 3rd to 5th February. Her attendance and supporting customer base growth in varying lines of at the event reflects the MDS Group’s continuing focus to business. support the growing number of French investors in Portugal. Frederico’s appointment reinforces MDS’s commitment to Founded in 1993, AMRAE represents the French risk international growth and innovation, responding to Portuguese management and insurance community. Based in France, it is companies’ need and harnessing the knowledge and particularly active in the French-speaking countries of north capabilities of companies around the globe. and west Africa.
MDS supports reigning champion at International GT Open
Miguel Ramos once again competed with the colours of the MDS brand in the International GT Open, which got underway at the Estoril Circuit in Portugal on 23 April. The Portuguese driver was at the wheel of a BMW M6 GT3, with the Teo Martín team, and accompanied by Spanish co-driver, Roldán Rodriguez. The various rounds of the International GT Open take place at the Spa-Francorchamps, Paul Ricard, Silverstone, Red Bull Ring and Monza circuits, before the final round in Barcelona on 6 October.
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Maílson da Nóbrega on MDS TALKS’
The highly reputed speaker, Maílson da Nóbrega, was in Portugal at the invitation of MDS, to speak on the subject of “Perspectives of the Brazilian Economy” at the fourth MDS Talks event. Economist and statesman, Maílson was Brazilian Minister of Finance from 1988 to 1990, one of the most difficult periods for the country’s economy. His career in public life began at the age of 20 and since then he has been involved in numerous government campaigns. His detailed knowledge of the Brazilian economy has secured crucial roles in the areas of financing, negotiations and foreign relations. Maílson has published five books, including his autobiography, Além do Feijão com Arroz, and various articles in newspapers and specialist magazines. He writes a column in the magazine VEJA and in 2013 was voted Economist of the Year by the Ordem dos Economistas do Brasil, the professional association of Brazilian economists.
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The Brazilian Healthcare Market BY GUSTAVO QUINTÃO Illustration by Tiago Galo
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fullcover asked Gustavo Quintão, Employee Benefits Director at MDS Brasil, about the trends and future challenges facing this sector.
The Brazilian healthcare market is currently The Variation in Hospital Medical Costs (VHMC) going through a period of major change, Index, also known as ‘medical inflation’ and triggered by the lifting of the ban on foreign determined by the Institute of Supplementary investment in healthcare companies in Brazil Health Studies, points to a disconnect with and a need to reinvent the existing model in general inflation. The average costs of inpatient order to make it more sustainable. care paid for by individual healthcare plans, rose by 53.7% between 2008 and 2012. However, in the According to the Brazilian Association of Group same period, the cumulative inflation rate on the Medicine (Abramge), the sector accounted for 9.3% Extended National Consumer Price Index (IPCA) of GDP in 2014. In 2015, it was the third-largest was 24.3%. A report published in 2015 stated: sector for job creation, with four million employees "The variation in hospital medical costs for the and a total of 72.2 million beneficiaries (50.3 12 month period ending June 2015 was 17.1%, million with healthcare plans and 21.9 million higher than the general inflation figure (IPCA) with dental care plans). Abramge also reports that of 8.9% for the same period. The Index recorded Brazilians most desire (in order of importance): 1.8% growth up until the end of Q2 2015 – rising education, their own home and a healthcare plan. from 15.3% in January to 17.1% in June’.
These figures highlight the investment opportu- The causes of this growth are likely to be waste nities for international capital and a need for and the introduction of new technologies, greater consolidation and professionalization including drugs, more modern complementary in Brazilian healthcare. The approval of Law examination equipment and highly complex and 13.097/2015 – an amendment of 8.080/1990 - costlier procedures. Abramge ranks the sources enables ‘foreign companies or capital to hold of waste, by percentage, as: direct or indirect shareholdings in healthcare, including controlling interests’. This can only • Administrative bureaucracy 27.2%; support growth. As a result, companies such • Excessive treatment 21.1%; as United Health, Bain Capital and the Sanitas • Fraud and abuse 19.4%; Internacional Group, have positioned themselves • Overpricing 14.4%; as major players. United Health, for example, • Inefficient service 14.1%; recently opened the Americas Medical City, • Lack of ‘in service’ coordination 3.8%. a major medical complex with two hospitals and a training centre, occupying more than In order to reduce waste and excessive treatments 72,000m2 (an important part of the healthcare and tackle the inefficient and poorly-coordinated infrastructure for the 2016 Rio Olympics). service issues, a number of initiatives have been implemented by healthcare operators. Despite its size and the opportunities it affords, Companies are encouraging family doctors to Brazil’s private healthcare model shows act as ‘gatekeepers’, focusing on primary care symptoms of being in poor health itself, with and preventive medicine alongside their usual worrying economic and financial repercussions. comprehensive approach to healthcare.
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Over 70% of people accessing healthcare are covered by company plans and Brazilian law Indirect Tax Solutions requires employees to have an occupational health check-up You Have Been at least once every two years. Searching For
FiscalReps helps international insurance
Greater emphasis is on the use of advanced businesses to comply with IPT, VAT and IT-based solutions. MDS Brasil has developed a parafiscal taxes internationally, offering a new tool – the MDS Health Report – which cuts the high costs of administrative bureaucracy, suite of solutions to assist clients in achieving reduces fraud and will be a powerful ally in and maintaining premium tax compliance: preventive medicine. By using algorithms and cross-referencing data from various healthcare databases (including epidemilogical information and implementing protocols based on the findings of major scientific studies), this Business Intelligence System can create scenarios for risk • OUTSOURCING assessment.
Occupational or preventive medicine has, for • TECHNOLOGY many years, been relegated to the sidelines, often little more than form-filling and far removed from providing any sort of management that • TRAINING might benefit employees’ health. It is, however, playing an increasingly important role in the promotion of health and the prevention of • CONSULTING disease, helping to reduce the costs of company healthcare plans. Over 70% of people accessing GUSTAVO QUINTÃO healthcare are covered by company plans and Brazilian law requires employees to have an → Gustavo Cruz Quintão is the Director of Employee occupational health check-up at least once every Benefits at MDS Brazil. two years. → He graduated as a medical doctor from the Federal University of Minas Gerais (UFMG) before working as Consequently, MDS Brazil has identified an an intern at the Cook County Hospital in Chicago, in the opportunity to screen the population’s clinical United States. data, based on employees’ occupational medical → He specialised in corporate health as part of a Ministry records. This would enable clinical conditions of Education approved medical residency programme in and risk factors to be flagged up and acted upon, Occupational Medicine at the Odilon Behrens Hospital in before the employee ends up in hospital. Belo Horizonte. → Gustavo Quintão has been involved in a number of Although the Brazilian healthcare market is health management consultancy projects for operators complex, this cycle of change not only brings and companies in different industry sectors. For a no obligation meeting, contact opportunities for sector operators – risk → His leadership experience was gained while working in Karen Jenner, Client Management consultants, insurance companies, hospitals/ multinational companies such as Telefônica, where he was service providers, the pharmaceutical industry in charge of Occupational Health and Safety, and Sanitas Director: etc - to develop new business models, but it will International Group, where he was Medical Director. t: +44 (0) 20 7036 8070 also be the spring-board for regulatory reform → He is currently attending the Executive MBA course at and cost-reduction strategies. • IESE Business School – University of Navarra. [email protected]
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Advert Final.indd 1 4/12/2016 3:34:14 PM MDS magazine ACE and Chubb merger
What’s in a name? Well, quite a lot when it comes to what to call the combined expertise and resources of two global insurance giants. When ACE’s acquisition of Chubb hit the headlines in 2015, the statistics were impressive – the world’s largest publicly traded property and casualty insurer; operating in 54 countries; a market capitalization of US $51.2 billion, annual gross written premiums of US $37 billion and; total assets of approximately US $150 billion.
So what do you call this new member of the elite group of global property & casualty insurers? Rather than keeping to the accepted practice of using the acquiring party’s brand, the business chose to move forward with Chubb – a strong, historic brand and unique symbol of strengthen. Both ACE and Chubb saw an opportunity to adopt a brand that stands for shared values of excellence, quality and service. But far from being stuck in the past, the new Chubb presents a modern and clean brand that reflects the company’s drive for superior underwriting, service and execution.
We hear two perspectives on the rationale and opportunities for the new Chubb. Andrew Kendrick, Senior Vice President, Chubb Group and Regional President for Europe, sets the scene talking about the major areas of challenge and opportunities facing the business in Europe. Then Véronique Brionne, Country President of Chubb in Iberia, talks about the new Chubb’s aspirations in the region and how the combined resources and knowledge of ACE’s and Chubb’s teams are increasing product offerings while ensuring a strong local client service but with global expertise and reach.
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Growth, discipline, innovation and service top of agenda for the new Chubb
BY ADRIAN LADBURY
One of the main questions that people have asked Andrew Kendrick in recent months is whether he was surprised by the news of the acquisition of Chubb by ACE when the news broke last July. The straight-talking Lloyd’s veteran concedes that he was surprised because it was a very well-guarded secret and because of the sheer size of the deal. But, like the rest of us, once the dust had settled for Mr Kendrick the reasons behind the acquisition quickly began to make sense. “As soon as Evan set out the reasons for it, it made perfect sense. And as we have started the process of integration planning over the last few quarters and it has started to become reality, I can honestly say that here in Europe, those reasons have come to make even more sense,” said Mr Kendrick. The former Lloyd’s underwriter, who is head of Chubb in London and Europe, said that the acquisition will help the new Chubb address the three major areas of challenge and opportunity that the European insurance market is facing: growth, discipline and service. First up Mr Kendrick tackled the tricky area of growth in a persistently volatile and under-performing global economy. “Global markets have had a very volatile start to the year. They are clearly trying to tell us something and, if you can look beyond all the daily noise, it’s not too difficult to work out what that is: global economic growth is falling short of expectations,” bluntly stated Mr Kendrick. The Chubb European leader explained that, according to World Bank figures, global GDP [gross domestic product] growth fell again in 2015, slowing to 2.4% from 2.6% Andrew Kendrick, Senior Vice President of Chubb Group.
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in 2014. Moreover, growth is now projected This new capital is not going to go away Today sometimes I think, to recover at a slower pace than previously quickly and, at the very least, the mobility as an insurance market, hoped. According to the World Bank, it will of capital and the ease with which it can be barely reach 3% in the next few years. deployed is now very different than before, we don’t always pull Indeed International Monetary he added. together our skills and Fund (IMF) forecasts have been revised Mr Kendrick explained that the three downward by 0.2 percentage points for big brokers (Aon, Marsh and Willis-Towers experience in a way both 2016 and 2017, added Mr Kendrick. Watson) estimate that alternative sources that really works best “Now that might not sound much. But of capital now represent between 12 and when you consider the low growth rates we 17 percent of global reinsurance capital. for our clients. There is are seeing today – and the fact that some Moreover, while total reinsurance capacity often too little energy European economies are still struggling to overall has started to level out and even fall shake off the impact of the global economic slightly in response to market conditions, going into making things crisis – it presents a slightly gloomy alternative sources continue to increase easy to understand, picture,” he explained. their share. Since the onset of the financial crisis and In these conditions, revenue growth through clear wordings subsequent global economic downturn , the becomes ‘very difficult’ for any insurer and definitions. natural reaction of European companies, globally, let alone in Europe, and so action including insurance companies, has clearly had to be taken, concluded Mr Kendrick. been to compensate for that sluggish or even “As a combined organisation, we are negative growth in core European markets now the world’s largest listed P&C insurer by seeking growth in faster growing markets and, for example, number one financial in so-called emerging regions of the world lines insurer globally. That gives us even such as Africa, Latin America and Asia. greater collective know-how and market But this is not as simple as it seems. firepower,” he said. Recently, there has been a continued Mr Kendrick said that the new Chubb deceleration in emerging and developing will benefit from greater market presence, economies, amid weak commodity prices, and not only in the US, where the Chubb poor global trade growth, and lower capital brand is very powerful. “Legacy Chubb has flows, pointed out Mr Kendrick. operations in 25 countries and 11 of those To compound the problem, as companies are in Europe. So we will be even stronger such as Chubb and its customers seek together in Europe and this is good news to maintain growth in this difficult for our clients and our broker partners who macro-economic environment, there are will benefit from an even broader offering,” plenty of ‘real downside risks still lurking he told clients at the event in Amsterdam. out there,’ pointed out Mr Kendrick. “We also have the benefit of comple- “One is the possibility of a sharper-than- mentary businesses. For example, here expected slowdown in emerging markets. in Europe, legacy ACE is better known Another is the possibility of fresh financial for its global accounts and multinational market turmoil. And then there is the risk leadership, while legacy Chubb is better of increased geopolitical instability. On the known for its middle market expertise. Yet other hand there are the threats to Europe both companies have experience in these from within, relating of course to Brexit, segments, and when you put us together, Schengen and other issues” he explained. that gives us a stronger platform from At the same time, the insurance and which to grow – and to help our clients reinsurance market has seen a ‘huge grow,” continued Mr Kendrick. swathe’ of capital coming into the “In short, we are confident that insurance and reinsurance industry in acquisition will create higher growth recent years, said Mr Kendrick. potential than the sum of the two
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Illustration by Tiago Galo
companies separately. And we are very has seen and will need some very tough world means that it has become harder clear that becoming bigger does not stop decisions to navigate successfully. for insurers to make money from their us from growing further. If you look back “I honestly can’t remember another time investments. Even the most optimistic of at ACE’s history of acquisitions over the in my career when the rating environment insurers have to concede that all the latest past twenty years or so, from Brazil and has been so challenging, and over the past indications suggest that this is not going Mexico to Thailand and Indonesia, you 12 months it has only got tougher and to change any time soon. can see a strong track record of adding tougher, particularly in the large account “I mean, we even have negative policy diversification and building strength, space,” he explained. rates now in some markets. Several of whether in terms of products, distribution “The days of easy profit are long gone. As Europe’s central banks have cut key or geography.” he added. an industry, we now likely need to target a interest rates below zero and kept them The second big focus for Chubb, and any combined ratio of around 90 just to meet there for more than a year. Now Japan is other serious insurer, in these challenging our cost of capital,” said Mr Kendrick. trying it, too. So make no mistake, it is a economic and market times, is clearly “And our assumption has to be that, in challenging outlook for any insurer!” said discipline. terms of pricing, this is as good as it gets. Mr Kendrick. Mr Kendrick has seen a lot of change and We simply have to build our plans for the In the good old days it was possible experienced some very challenging periods future on the assumption that things will for insurers to underwrite at a 100% plus since starting as a junior underwriter at not get any better,” he added. combined ratio and still make a decent Lloyd’s in the later 1970s. But, he said, that The simple fact is that the record low return on the back of investment returns. today’s market is the most challenging he interest rate environment in the developed Not so now, stressed Mr Kendrick.
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In this environment only insurers and time of his speech, the first quarter had not that matter to our clients, and in particular reinsurers with the willingness and ability even been completed. in enhancing our service,” he said. to underwrite for profit will survive and “This trend is unlikely to be over. In The critical need for this focus on improved prosper and, thankfully, both ACE and the non-life sector, competition remains service and innovation in the corporate Chubb have a tradition of doing so, he said. intense. Companies are under pressure insurance market has been well documented “Both our legacy companies were to diversify, encouraging them to look in Commercial Risk Europe’s annual survey renowned for their strong underwriting towards acquisition. As a general rule, of risk managers: Risk Frontiers. cultures. At our core, we are underwriters – the softer the insurance market, then the Chubb carried out its own research last we share a passion for the art and science of more incentive there is to acquire,” he said. year with European risk managers, that underwriting. And I hope you will agree we While it is difficult to argue with Mr was endorsed by FERMA, and explored the are pretty clear about our risk appetite. So Kendrick’s conclusion that underwriting changing role of the risk manager. we share a lot in common when it comes to discipline and cost control are absolutely Not surprisingly, one of the key findings of our underwriting approach and our focus critical for success in such a tough market, this research was that, in future, a resounding on discipline. I believe we are a good fit, that does not mean that underwriters can 79% of Europe’s risk managers believe they will and that we will all enormously benefit forget about customer demands. need to think and behave as ‘innovators’ and from being together. Together, we are even Those insurers that simply focus on ‘futurists’ reported Mr Kendrick. better positioned to face the challenging price and cost control in an effort to But, as he pointed out, risk managers clearly market conditions,” he said. maintain short-term returns to investors cannot be experts on everything on their own. At the same time, as the focus of insurers will inevitably lose the best accounts and Mr Kendrick said that some 22% of those risk and reinsurers has to shift to disciplined embark on a downwards spiral that will be managers who part in the survey reported a underwriting there also has to be a sustained difficult to break out of. current lack of knowledge about emerging effort to reduce costs in this market Herein lies perhaps the biggest challenge risks, as one example. “So, it will be increasingly environment. of all for the commercial underwriting important for tomorrow’s risk leaders to build This largely explains much of the community: How to rise to ever more challen- the right relationships and partnerships inside recent mergers and acquisitions (M&A) ging and complex customer demands of and outside the business,” he said. activity in the international insurance corporate and multinational customers How then should the insurance industry and reinsurance sector, said Mr Kendrick. in particular in such a tough market respond to this difficult challenge, asked “The theme of discipline applies to costs environment. Mr Kendrick. too. A high cost base and a competitive Mr Kendrick and his fellow management Well the good news for insurers is that market is a problem for our industry. And team at Chubb are clearly aware of this Chubb’s research suggests that risk managers it is one key reason why there is so much conundrum but believe that the combi- (78% of the survey) regard the insurance M&A activity going on right now. XL-Catlin, nation of ACE and Chubb will help deliver industry as a key part of the solution when it Mitsui-Amlin and nearly Zurich-RSA. I the answer. comes to the management of change and the can’t remember a time quite like it,” he said. “We have been very clear that one of new wave of emerging risks. And, Mr Kendrick is convinced that this the reasons for the Chubb acquisition is The big question is whether the industry is consolidation process is not over yet. He to drive greater efficiency. The acquisition actually going to rise to the challenge or just said that almost 50 deals have either closed will allow us to realise real synergies, that talk about it. Mr Kendrick, for one, believes or been announced so far this year, at the will in turn allow us to invest in the areas that there is no other option.
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More generally, legacy Chubb’s strength in delivering high quality service, from claims to loss control services, is something that we are very proud of and we will continue to build on.
“I believe that the industry will simply deeper into risk management expertise, Mr Kendrick reported that, based on have to innovate to provide the service that loss control services and ‘hands-on’ Chubb’s research, currently around 70% clients and brokers need in the future. If incident response, throughout the whole of European risk managers say they are we don’t, they will find other solutions, relationship,” said Mr Kendrick. dealing with more claims outside their elsewhere,” he said. “Innovation is rarely easy. But the home market and they are generally experi- The problem is that it is one thing insurance market wasn’t invented to do the encing more complex multinational claims agreeing that a response is needed and easy things, and we don’t become leaders than they used to. another actually working out how to do it for by sticking in our comfort zones. Tackling “Good claims outcomes are surely the it is crystal clear that for the market to really complex risk problems is what we’re here test of success for any global insurance deliver what the customers want will need for,” he continued. programme so this is something that we collective and not just individual action. Mr Kendrick conceded that Chubb does all have to get right,” he said. Mr Kendrick clearly recognises this not have all the answers. But, he argued, Another area for improvement based on challenge and opportunity. by bringing the two companies together it the research is with effective technology “Today sometimes I think, as an has made a big step forward in this sense. solutions. As a result Mr Kendrick assured insurance market, we don’t always pull “We now have a greater pool of talent, risk managers that Chubb will continue to together our skills and experience in a expertise and ideas. Already this year, invest in enhancing its Worldview platform. way that really works best for our clients. we have announced a new service in the “More generally, legacy Chubb’s strength There is often too little energy going area of cyber risk, where we have made in delivering high quality service, from into making things easy to understand, available a 24/7 incident response service claims to loss control services, is something through clear wordings and definitions. in partnership with Crawford & Company. that we are very proud of and we will continue Many emerging risks – already complex And we will continue to invest in bringing to build on,” he promised customers. – are being further complicated by a these added-value services to market “So there you have it – three core themes patchwork of mismatching approaches across a range of lines, in order to innovate and challenges that I believe we face here across the market,” he said. beyond the wordings of the insurance in Europe right now. A growth challenge, The bottom line is that, as Commercial policy,” explained Mr Kendrick. a need for discipline, and a demand for Risk Europe’s annual Risk Frontiers Multinational programmes is an obvious innovative and high quality service. As survey clearly identifies each year, area where improved service is way more the new Chubb, I believe we are better innovation is not just about products but important than simple product or price positioned than ever to address these and also about approaches and the delivery for risk and insurance managers. Chubb we look forward to working with you under of more holistic and deeper reaching risk recognises this, said Mr Kendrick. our new brand,” concluded Mr Kendrick. • management as well as transfer solutions. He told the gathered Dutch and Belgian “We also need to broaden out the solutions risk managers that its research with risk we provide if we are to remain relevant for managers of European multinationals our clients in the future. There is often too showed that fewer than 30% of risk much emphasis in our industry on ‘pushing managers were very satisfied with overall product’ – inflexible solutions that don’t service levels from their insurer in respect meet individual needs. We also need to of their multinational programmes. Fewer go beyond financial compensation, and still were happy with claims performance.
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middle market, where we have been investing a lot at legacy ACE too and really now have an opportunity to grow together and improve service for clients. These are just two examples that I believe show how the new Chubb is more than the sum of its parts.
Broadly speaking, how will these changes benefit existing clients and prospective customers?
Our current and prospective clients and partners in Iberia will benefit from doing business with an insurance company of almost unparalleled global capabilities and presence, with extensive product offering, exceptional financial strength, underwriting excellence and superior claims handling. But we are more than what our size and financial strength say about us. We may be global – but at the same time, we are really a local company everywhere we do business. We may be big, but we are not bigger than our smallest client. Here in Spain and Portugal, our regional network of local Véronique Brionne was appointed Country offices is especially important to our customer and service proposition. So I think it’s really important to make clear President of Chubb Iberia in February that coming together will enable us to further build on and 2016, after the acquisition of Chubb by invest in that. ACE. Previously, she held the position of ACE's Country President for Iberia for What reaction have you had from those customers since the takeover went through last month? two years. Before joining ACE, Véronique worked for 15 years in AXA where she had The response from customers has been overwhelmingly positive and our approach throughout this process has been the opportunity to be based in different to make sure it’s business as usual for them and they receive countries, including Spain. the same level of service they did before. There is still a lot of work to do to integrate our companies, but we have hit the ground running, and we are optimistic about the future.
The ACE takeover of Chubb has seen the new company What do you/Chubb consider to be the biggest challenges branded simply as Chubb. What do the changes mean facing companies in Spain & Portugal at the moment? for you as a business? I believe most of the market faces the same challenges right I believe that we make an awesome combination. The now – highly competitive market conditions, the challenge acquisition has brought together Chubb’s 130 years of of finding growth in our mature and lower-growth post-crisis underwriting insights and devotion to customer service with European economies, and the need for insurance companies ACE’s three decades of technical underwriting excellence, to become more efficient generally. broad risk appetite and global presence. Together, we are the number one global underwriter of professional lines and I am confident that we will become The new Chubb brand is now a huge global insurance the market leader in Spain and Portugal. Indeed, across entity. Are we going to see more consolidation in the a wide range of lines from D&O liability to life sciences or insurance market? business travel, our combined strength gives us an once-in- a-lifetime opportunity to us to drive product and service Clearly the Chubb acquisition is just one of many that we’ve improvements for the market, and we fully intend to take it. seen recently. I don’t want to make predictions about the For me, most interesting of all in Iberia are our complementary future, especially in such a volatile environment. But what strengths. The legacy Chubb team is really excited about getting I would say is that these pressures aren’t likely to disappear access to our expertise and technology such as our Worldview anytime soon. Consolidation continues to be an obvious platform in the multinational space. Likewise I’m really excited response, although there are many different ways to respond about the strength our legacy Chubb colleagues have in the to the challenges the market faces right now. •
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Middle East it led to the rise and fall of new protagonists and territorial divisions which never healed in the aftermath of the conflict).
The Baghdad The establishment of communication routes transporting people and goods, some authors claim, began with the voyages of the Portuguese discoveries to Railway the Far East and the New World. These may well have given rise to the present-day phenomenon of ‘globalisation’ – the BY PEDRO CASTRO CALDAS process of furthering economic, social, cultural and political integration interna- tionally. Its key aspects are defined as "trade and financial transactions, capital movement and investments, migration and movement of people and the dissem- ination of knowledge." 2
At the time, the intention of the imperial powers in establishing new communication routes would have been to organise and Following Kaiser Wilhelm II’s 1899 visit to perpetuate their colonial rule in a context → Pedro Castro Caldas was born in Sultan Abdul Hamid II - the ‘Caliph of the of peace, replacing the inefficient older Lisbon in 1950. He has a degree in Faithful’, the Deutsche Bank supported practices of organising their trade along Mechanical Engineering from the by investors from Germany, Austria, ‘military and war-like lines, as an additional Instituto Superior Técnico de Lisboa Switzerland and other nations founded the activity to that of pirates and privateers, (IST) and complementary training in Imperial Ottoman Company of the Baghdad armed caravans, hunters and sword-wielding Project Management in Switzerland. Railway. All supporting the venture saw the merchants, armed city-dwelling bourgeois, → He worked as project manager potential for a major trade route to support adventurers and explorers, plantation in Mague´s Energy Division until colonial growth1, crossing the Austro- owners and conquistadors, and slave 1987 when he joined the insurance ‑Hungarian Empire, Romania, Bulgaria, capturers and traders’. industry as Technical Director of Turkey, Armenia, Syria and Iraq (then in Non-Life Insurance and Reinsurance the Ottoman Empire). The Imperial Ottoman Company of the at Tranquilidade and at HDI Mutual Baghdad Railway would be a more efficient Insurance Company. From 1993 In practical terms, the Germans hoped to exploitation of their domains through the to 2013 Pedro Castro Caldas access Iraq’s oilfields and connect to the pacification and submission of indigenous worked at Ocidental Seguros port of Basra, ensuring better access to people and better access to their respective and other Millennium bcp bank the eastern part of the German Colonial natural resources. While it may have been insurance partnerships. From 1994 Empire without having to go through the unintentional globalisation, it became an to 2004 he was a member of the Suez Canal. In addition, the Ottoman unstoppable consequence of this goal to Risk Management Group of the Empire wanted to maintain control over improve efficiency. Pan-European insurance Group Arabia and extend its influence through EUREKO, where he collaborated on the Red Sea into Egypt, which had come However, notwithstanding the pernicious and was responsible for several large under British control. effects justifiably attributed to ‘globali- insurance and reinsurance projects sation’ (caused by the partial loss of (public and private partnerships) in Promoted as a means of bringing knowledge national sovereignty due to the emergence property and engineering risks such and the latest western developments in of supra-governmental organisations as the Metro do Porto network. science and technology to the region, the beyond state and democratic control), → Up until 2012 he coordinated project also threatened the British colonial weaker states now have facilitated access several Technical Commissions at the status quo in the Middle East, and became a to knowledge through new information Portuguese Association of Insurers source of international tension in the years technologies and free circulation; access (APS). leading up to the First World War. Indeed, that, even if they so desired, ‘stronger → Since 2013 he has devoted his some historians believe it could have been states’ would be powerless to prevent time to Risk Management study and one of the main catalysts for the war (when through recourse to increasingly inefficient consultancy. European operations extended into the and frowned-upon new ‘walls’.
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Generally speaking, human geography to expeditiously dispatch colonists and across the various regions and continents, gain easy access to natural resources but, and Europe in particular, is the result of rather, as a process of circular migration cultural and ethnic miscegenation caused facilitating new opportunities for by a never-ending stream of invasions and multilateral interchange between peoples. migrations over the centuries. In the case of Europe, there is no need to go back as far as The host nations could see opportunities the barbarian invasions that gave rise to the from a demographic and productive new nations born of the ruins of the Roman contribution by this huge mass of humanity Empire or, in more recent history, the bearing hope and “western knowledge." diaspora caused by religious persecution, Another opportunity, following the to see that the ancient imperial states not desirable return home of these immigrants, only promoted emigration beyond their could be the prospective fostering of cultural boundaries but also absorbed waves of relations and international trade in a immigrants within their domains. possible future of peace and reconstruction of the war zones which gave rise to these Whether as a result of invasion or migratory movements. Or, to put it another persecution, new communities were formed way, it is by correctly assessing strengths creating opportunities for progress through and weaknesses that opportunities are built the dissemination of shared knowledge and threats are reduced. • and peacetime trading. Notwithstanding, “adjustments” that were more or less circumscribed and violent caused by ethnic or religious antagonism and disputes related to trade and territorial interests.
Nowadays, as though reversing the flow of our recent colonial past, waves of migrants are arriving on Europe’s doorstep, 1 In a similar aim the British planned the Cape to Cairo generating tension that many see as a Railway to achieve expeditious access to their colonial domains, unifying their African possessions, facilitate threat to peace and security. A hundred governability, and allow the army to move swiftly to critical years on, and in an ironic twist of history, areas, assisting with colonisation and fostering trade. the migrants from the Middle East are now tracing the same route towards Berlin as 2 In AL-RHODAN, Nayef R.F, STOUDMANN, Gérard – that taken by the Baghdad Railway. At the Definitions of Globalization: a comprehensive overview and a proposed definition. time of its building, the unilateral aim was undoubtedly to provide the German Reich with access to its colonies and raw materials Bibliography – troubling the status quo of the British JASTROW, Morris – The War and the Bagdad Railway: Empire to the extent that it felt threatened the story of Asia Minor and its relation to the present and war ensued – but it was also seen idealis- conflict. [S.l.]: Lippincott, 1918. tically as a means of bringing “western MCMURRAY, Jonathan S. – Distant ties : Germany, the knowledge” to the “cradle of civilisation”. Ottoman empire, and the construction of the Baghdad railway. Westport, Conn.: Praeger, 2001. ISBN However, unlike those who feel a threat to 0275970639. their status quo, the more enlightened, in POLANYI, Karl – A grande transformação : as origens Berlin and elsewhere, see this traffic along políticas e económicas do nosso tempo. Lisboa: the “new Baghdad Railway” not as a means Edições 70, 2012. ISBN 978-972-44-1660-1.
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R FUSE: FORESIGHT-DRIVEN UNDERSTANDING, STRATEGY AND EXECUTION Devadas Krishnadas has an established KRISHNADAS, Devadas reputation as a thought leader and Singapore: Marshall Cavendish frequently speaks at international Business, cop 2015. conferences and forums. ISBN 978-981-4721-12-7 In March 2014, Devadas was invited to make a presentation on the future of China at MDS Talks’ (a discussion forum on current relevant issues organised by MDS Group). Devadas Krishnadas is the founder and He covered three aspects of strategy for the CEO of Future-Moves Group. He played an 21st Century; first, the strategic principles instrumental role developing Singapore’s which determine success in the new century, fiscal and social policy. He is the author of second, how can governments, corporations Sensing Singapore: Reflections in a Time of and institutions be better placed to deal with Change, and has been cited and published change and finally, the shifting political and in international publications on foresight economic repercussions on Asia and how and strategy. decision makers can better judge market We live in an increasingly complex and entry into China. uncertain world but unfortunately most businesses and organisations do not take this into consideration when planning their strategies– they still perceive the world as straightforward and static. It is essential to accept and prepare for a future that is ever-changing and unpredictable. FUSE offers a view on how to tackle problems and incorporate uncertainty into analysis. This book is invaluable reading for any business leader or manager. It provides practical advice on the strategic skills and insights necessary to help decision makers understand and prosper in today’s complex world.
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Good For the Money is the story of at work, sometimes in quite a different way. Benmosche’s career, what happened This book details research data from behind the scenes at AIG and his fight 20-30 countries in a way people can relate against a hostile board, a combative to and understand. Congress and an uncharitable press. It is a In this globalized world, business has story of perseverance and hard knocks, of a no boundaries; it is therefore becoming self-made man (an “American Hero”, increasingly important to have the skills to in Andrew Ross Sorkin’s book Too Big navigate through cultural differences and to Fail) who did all he could to salvage understand the ‘hidden code’ of foreign AIG, its good name, its people and their cultures in order not to make an error that morale. The book is the vision of a leader, can sink deals or ruin a career. a man that lived by his principles and his People may get lost in translation; as unrivalled lessons in leadership. Erin says: “If you go into every interaction assuming that culture doesn’t matter, your Be sure to read (or reread) FULLCOVER Nº5 default mechanism will be to view others 2012 Special Feature on Robert Benmosche through your own cultural lens and to judge where we get to know the man and his vision or misjudge them accordingly.” for AIG’s recovery: “I believe we are what we The book contains several examples choose to make ourselves.” of these cultural clashes; Americans GOOD FOR THE MONEY: usually precede anything negative with MY FIGHT TO PAY three nice comments so that when they BACK AMERICA get to the point – the bad bit – someone from another culture may overlook the real BENMOSCHE, Bob message as they focus on the positive. St. Martin’s Press, cop, 2016. Alternatively, the French, Dutch, Israelis, ISBN 978-1250072184 and Germans go straight to the point “your presentation was simply awful” which may cause awkwardness and distress for people from other culture not used to This is the story of AIG’s recovery from this mindset. impending bankruptcy told by the man who The book provides an analytical pulled it back from the brink of a financial framework with practical, actionable meltdown. advice for succeeding in a global world. In 2009, at the peak of the financial crisis, AIG was sinking fast. The Company In 2015 Erin Meyer was in Porto at the was hit hard by the subprime mortgage Católica Porto Business School Oficina de crisis of September 2008, as a result of Líderes programme presenting her book the role of AIG Financial Products Unit, Culture Map and talking about the impacts of and was only saved by a bailout of US $182 cultural differences in a globalized world and billion from the Federal Government. how we must overcome stereotypes if we want When he was called out of retirement THE CULTURE MAP: to expand our business worldwide. and invited to take the helm, replacing BREAKING THROUGH THE former CEO Ed Liddy, the plan of action INVISIBLE BOUNDARIES was to have a quick-fire sale of assets to repay the Government as quickly as OF GLOBAL BUSINESS possible. But Benmosche had other ideas. His plan was for AIG to defy the odds and MEYER, Erin pay the loans in full. And that’s exactly New York: Public Affairs, cop. 2014 what he did. He set out policies and in a ISBN 978-1-61039-250-1 matter of months, changed things around. Within three years, AIG had fully repaid its staggering debt to the US Government - with interest. By the time Benmosche Erin Meyer is an Affiliate Professor in the stepped down in 2014 after five years in Organisational Behaviour Department of charge, AIG had paid back US $94bn of INSEAD business school in Fontainebleau, emergency loans to the central bank and France. In her new book, The Culture Map, allowed the Government to withdraw its she describes how people from different US $68bn equity investment at a profit. cultures communicate and consider ideas
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