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EDITOR'S LETTER

All around us the world is changing, and so is the risk landscape. The pace is overwhelming; the last few years have changed the way we communicate, the way we buy things, how we take care of our health and our plans for the future. New diseases or new forms of old diseases have appeared, new concepts such as ‘digital’, ‘artificial intelligence’ and ‘sharing economy’ have become part of our vocabulary, sci‑fi­ ideas such as autonomous vehicles and cyber attacks have now become realities and this is before we mention the deep unrest within the geopolitical landscape. The West is no longer the ‘centre’ of the world as activity in the East and South have a greater influence on the worldwide economy. It’s good to know that, in the midst of all this chaos, great, reliable institutions such as insurers are still just that – reliable, having bravely overcome the financial crisis with their reputation intact. Even if, as Oliver Bäte, CEO of Allianz Group tells us in this exclusive interview, they are constantly adapting to the new challenges, namely that of a digital world. While survival demands constant adaptation to disruptive environments and technologies, we should never forget the human factor, and there’s no one better than Ralph Mucerino, a senior AIG executive and longtime friend, to tell us how this was always his priority during a highly successful career. At FULLCOVER we always keep pace with the times, looking JOSÉ MANUEL FONSECA forward, bringing you the latest news on risk and insurance MDS Group CEO and sharing views on this changing world. Among the many interesting articles we have selected for you, you’ll find ‘Anticipation is not solution’ by Devadas Krishnadas, an article discussing new ways to transact insurance in ‘The Sharing Economy’, an interview with Gabriel Bernardino, the Portuguese chairman of European supervisory authority EIOPA, a piece about Mozambique and its developing insurance sector and our usual technical dossier – this time dedicated to aviation risks – with information that varies from the date of the first insurance of an aircraft to solutions for new realities such as space mining. Other articles include the latest news about our Group and Brokerslink with a special piece about our partner in Poland, EIB. With FULLCOVER 11, as usual, we promise to take you on a journey highlighting the recent developments in risk and insurance. So fasten your seat belt and enjoy the flight!

7 05 28 50 EDITOR'S LETTER DIGITAL RALPH MUCERINO CAPABILITIES IN CONVERSATION WITH ERNEST LEGRAND By Armin Shaefer 08 and Carin Gantenbein OLIVER BÄTE 54 Exclusive interview with Allianz CEO 31 LONDON, THE EU, AGEAS GROUP AND THE WORLD From Belgium to the world By Steve Hearn Introducing Steven Braekeveldt, 20 Ageas Portugal Group CEO ANTICIPATION IS NOT SOLUTION 57 By Devadas Krishnadas DOSSIER 44 AVIATION RISKS ARCHITECTS Safety as Top Priority OF THE FUTURE Are You Strapped In? 26 Interview with Johan Willaert, From Space To The Grounds FERMA President THE SHARING Aviation Claims: Location, ECONOMY Location, Location By Joana Campos Carvalho Environmental Aviation Risk: A Serious Business The Era of Drones What’s Next?

Director José Manuel Fonseca • Editor in Chief Paula Rios • Editorial Committee Ângela Fonseca • Carla Gonçalves • Jacqueline Legrand • Liliana Baptista • Susana Neiva Contributors AICEP • Alex Wise • Anna Boron • António Vasconcelos • Armin Schaefer • Carin Gantenbein • Devadas Krishnadas • EIB • Ernest Legrand • Filipe Fernandes Francesca Breeze • Gabriel Bernardino • Havan • Jean Fournier • Joana Campos Carvalho • Joaquim Maqueto Langa • Johan Willaert • Jorge Luzzi • Mário Lobato de Faria Mark Sperring • Nick Redgrove • Oliver Bäte • Paulo Almeida • Paulo Varela • PwC • Ralph Mucerino • Samuel Martins • Sara Evans-Lacko • Stephen Andrews • Steve Eagle Steve Hearn • Steven Braekeveldt • Tendayi Viki • Victor Garibaldi • Title THE FULLCOVER • Edition number 1st Edition (FULLCOVER 11) • Publisher MDS Group • Place of Publication Porto Date of Publication April 2018 • Circulation 4000 • Design Dobra • Printing & Finishing Lidergraf Sustainable Printing • Legal Deposit 374241/14 • ISSN 2184-1136 89 113 154 REGULATING BROKERSLINK REMEMBERING FOR THE FUTURE POLAND BELMIRO Interview with Gabriel Bernardino, EIB — Energo Inwest Broker DE AZEVEDO EIOPA Chairman Polish Insurance Market By José Manuel Fonseca Torun: the hub of Polish brokers 92 156 HAVAN 125 LEGAL CORNER A BRAZILIAN RISING STAR BROKERSLINK History in the making Global Conference 2017 Jacqueline Legrand New CEO 159 96 OLÍMPIO MENTAL ILLNESS A GROWING RISK MAGALHÃES By Dr Sara Evans-Lacko 139 By António Vasconcelos MDS GROUP Christophe Antone drives the digital transformation 99 Thiago Tristão leads corporate 160 DOSSIER risks in Brazil Booming Brazil: Insights for READINGS MOZAMBIQUE foreign investors A land of multiple opportunities The challenges of the Mozambican insurance sector EMOSE, State-owned insurer leads the way Energy will modernise Mozambique

INTERVIEW WITH ALLIANZ CEO

OLIVER BÄTE

For over 125 years, the financial services giant Allianz has been providing global insurance and asset management support to more than 86 million clients in 70 plus countries. FULLCOVER speaks to Oliver Bäte about the path to this success and how he intends to ensure Allianz remains a market leader in the digital world. m d s m a g a z i n e • f u l l c o v e r

Before choosing a career in insurance around digitizing our business in order In addition to natural catastrophes, you worked for a bank and served to provide the best service possible to climate change and a changing with the German Air Force. How did our customers. A service that meets geopolitical landscape are key risks. you end up working in this sector them where they are, whenever they What role, if any, does the insurance and becoming CEO of Allianz? want and goes beyond the traditional sector have in mitigating these risks, After my apprenticeship in a bank and set of products. This implies simplifying what do you consider are emerging university studies, I went on to work for the entire product set value chain, risks and what is Allianz doing to McKinsey & Company and I was originally collaborating across countries to bring minimise their impact through eying the investment sector because the best of Allianz to scale for our insurance solutions? I thought it would be very attractive in customers everywhere. We have also Climate­‑related risks, including natural terms of career opportunities. Then I sold activities, including Life insurance catastrophes, are rising, as is geopolitical was given a task in the insurance sector operations in Korea and Taiwan, that uncertainty. Insurance can’t cure these and quickly realised that insurance is a will permanently lift our earnings ills but it can mitigate the impact and really exciting and rewarding business. power and boost our capital position. help people and businesses to become Insurers help customers in need and We are making good progress on more resilient. Insurers are crucial to can help them navigate difficult life this journey. helping economies and societies bounce circumstances. It’s a rewarding business back after such set­‑backs. New threats to be in and there are a lot of opportunities Your partnership with Brokerslink include the risk of cyber‑hacking.­ Allianz to improve topics like processes and ensures Allianz has greater access is a leader in cyber insurance, protecting productivity. It’s a challenge I could not to MidCorp customers within 100 companies and governments from the resist. Having served this industry for 25 countries, working towards your consequences of online attacks. More years now, I never had a moment of regret. increased growth objective. than simply offering financial support, As far as Allianz is concerned, I always How do you see this partnership insurers also offer a wealth of expertise admired the integrity and competence working now and in the future? and advice on how to prevent risks. We of its people. It’s one of the most resilient I truly believe this partnership is a great work hand‑in­ ‑hand­ with customers on institutions I know. So, when the opportunity. Brokerslink combines an mitigating risks and improving resilience. opportunity to join arose ten years impressive global reach and capabilities Plus, as an insurer and long‑term­ investor ago, I didn’t have to think twice. for commercial enterprise clients. we also help to stabilize markets. Allianz provides worldwide expertise What was the appeal of the insurance and market access. We already see Do you see any other challenges industry and in particular a senior growth resulting from our partnership and threats to society, companies, role with Europe’s largest insurer? and this is just the start. As part of our insurers, mankind or our world today? What makes the insurance sector most strategy we want to expand our solutions I’d probably highlight two issues: one is appealing to me is very simple: Insurers for MidCorp customers and we also like climate change and the other is rising are the backbone of society: no large to grow in the so­‑called growth markets. inequality –­ and here specially the uneven infrastructure project is possible without access to education. Both issues are at the the involvement of insurers, we are long How have the recent natural core of many troubles we are facing today. term investors and also bring stability catastrophes – the Mexican On both, Allianz has a role to play and to markets, we use our assets to support earthquake and hurricanes Harvey, engages actively through either insurance greater good. That includes throwing our Irma and Maria – impacted upon or investments. Here more dialog with weight behind environmental, societal these targets and your growth stakeholders is needed to address the issues. and governance topics. And while potential? Are we hopeful for the future – yes! But individuals might not wake up thinking Allianz saw natural catastrophe losses it is not getting easier, because climate about buying insurance, most people rely of 530 million euros this fall compared protection and greater equality seemingly on it to secure and grow their assets. to only 30 million one year earlier. face short term trade­‑offs. Here our long­ That’s a huge difference. There were ‑term perspective helps to keep working on When you were appointed Chief the three hurricanes you mention, those topics steadily. Executive in 2015 you launched plus two earthquakes in Mexico and your Renewal Agenda strategy heavy storms in Europe. The amount As Europe’s largest insurer by market with objectives to increase growth, of destruction brought to lives is capitalization, how do you intend lower costs and drive digitalization. devastating. It’s exactly in such moments to maintain growth? How are you going to achieve that I know what Allianz’s purpose is: Allianz will continue to grow in numerous these objectives and how is this to help people get back on their feet. ways. The best growth comes from serving progressing? Those events will not deter us from clients well, because if we do, they will stay Yes, two years ago we decided to shape our 2018 targets nor will they have any with us, recommend us and trust us with our own future success and launched impact on our future growth potential. more of their assets. We also believe scale a set of efforts under our “Heritage and If anything, the third quarter 2017 matters and as such we are always looking Renewal” program, many revolving confirmed just how resilient Allianz is. for the right partnerships and potential

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Above: Allianz SE global headquarters in Munich Below: Global Digital Factory, located in the eastern part of Munich in a former production factory

13 m d s m a g a z i n e — f u l l c o v e r

complementary fits to our portfolio. We by larger players, who have more money to attract customers and increase will grow, but we will do so prudently and to invest in innovation and brand. We customer loyalty. In doing that, for not get into acquisitions that are expensive also see the first insurtechs with cutting­ Allianz, digital and global go hand in and create no clear strategic value. ‑edge technology ready to attack the large hand. For example, we just released a inefficiencies of the insurance market. motor claims app globally, starting in UK Do you think there is a difference We believe that Europe remains a great and Austria. It was developed together between the long and short term place to do business despite a somewhat by Allianz entities across the globe management perspectives of lower growth perspective, as freedom through our Global Digital Factory and European and American insurers? to operate and flexibility to underwrite supported by the internal IT provider If so, how do they differ? business in the various EU countries is Allianz Technology. The customer gets The fundamental differences are limited in many dimensions superior to what is everything with one click: coverage as customer behavior and innovation are required in the US to operate in all states. details, claims status, their Allianz agent the key drivers for the future of insurance ­– and of course emergency assistance. in all markets. Your vision to create ‘the most digital But as a global, customer–driven­ project, There are some differences in insurance company in the world’ is it‘s flexible enough that we can offer it in demographic dynamics and the place widely reported, as well as is your many markets with easy modifications. granted to the private sector. The presence operation in India being the driver of insurance businesses will remain higher behind Allianz’s global digitalization How quickly do you expect your in the US with much larger business and Turkey responsible for your CX – subsidiaries and global functions opportunities for insurance due to the more customer excellence – software which to adopt digitalization and what litigious environment. The demographics, gathers feedback prior to product innovations will you expect them the culture of entrepreneurship and development. Can you explain more to embrace? innovation gives the US a larger growth about what’s happening in these Our Group­‑wide “single digital agenda” potential for the business, too. Along these countries and the initiatives they focuses on both frontend and backend lines we can see the potential for M&A and others are developing? digitalization and the plan is for our remaining larger in the US, with a lot of To be the most digital insurer is not our subsidiaries and global functions to adopt small/mid‑size­ companies under threat priority, we rather look at all the aspects all relevant elements as soon as possible.

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The subsidiaries are embracing and African businesses are currently not innovation that allows them to focus insured, or underinsured. They have no Insurers are the backbone better on the customer needs while at the safety net when they are hit by a loss. of society: no large same time increasing overall efficiency. Insurance also plays an important macro­ At Allianz, we know that increased ‑economic role: it is a savings aggregator infrastructure project productivity and increased customer that reinvests in infrastructure, local is possible without the centricity are not mutually exclusive: we equity, etc. Therefore, developing the need to achieve both with digitalization, insurance sector will contribute to involvement of insurers, simplification and innovation. accelerating Africa’s development. we are long term investors As you steer Allianz towards a digital During your recent speech in South and also bring stability transformation, where do the changes Africa you said ‘Africa is poised to to markets, we use our need to be made, how will they lower costs become the digital insurance leader’ and what are your key areas of focus – why is this? assets to support greater organisationally and geographically? Anybody who comes to Africa these days good. That includes Changes are already being made and will to do business would agree with me that the continue to be made in how we serve our dynamism and optimism tangible across throwing our weight customers. In order to have a systematic the continent are impressive. Africa has behind environmental, Group­‑wide approach, we have created become a place of bold entrepreneurship customer journeys for retail, starting in and striking innovation – especially in societal and governance one region then rolling out globally. These the digital space. In fact, “mobile” is topics. new digital journeys enable more direct everywhere. It is the fastest growing sector interaction with the customer which and innovation enabler in Africa. Already reduces transaction costs—both for today, the continent is leading when it Allianz and our partners. On the other side, comes to mobile payment. This enables digitalization also means standardizing huge opportunities for insurance too, the backend systems to allow more with the possibility to take out insurance automation. This speed of processing not policies and handle claims by mobile. only provides a better customer experience, As a leading pan‑African­ insurer, Allianz but also allows us to leverage the benefits will need to offer digitalized products and of scale resulting in lower admin costs. distribution channels that meet the needs We expect that digitalization will also of African customers. increase our revenues. Not only do costs go down, but with new products, services and At the last FERMA conference, there solutions delivered in a customer‑centric­ was talk of customers looking to manner, we expect business will increase insurers to provide more insight and as we attract new customers. data to help them manage their risks more effectively. How do you see this Like MDS Group, Allianz is expanding evolving and how are you planning its footprint in Africa. What are your to manage their expectations? thoughts on its long­‑term potential? Since our foundation 128 years ago, data Allianz has been in Africa for over 100 has been one of our biggest assets to help years. Today, we are present in 17 countries our customers. The rise of Big Data will with 1,500 employees across the region. now lead us to an even superior delivery We believe in the outstanding long‑term­ and further expand our services – as potential of the continent and specifically expected by our customers. For example, of its insurance sector. That’s why we via an insurtech application we identify actively invest in Africa. Over the last five next generation liability risks for business years, Allianz successfully expanded in customers far earlier than by relying only South Africa, Congo Brazzaville, Mauritius, on current methods. Or we develop a big Ghana, Kenya, Morocco and most recently data tool that will use over 30,000 public in Nigeria. Our strategy is clear, we want to sources to identify and visualize supply continue to enlarge our footprint in Africa chain risks for our customers. At Allianz, in the coming years, make a significant we are dedicated to supporting our clients contribution to the development of the by working with them to deliver the best African economy and above all offer much possible solutions for the management, needed protection to the African people. control and reduction of risks – wherever Apart from South Africa, most Africans and whenever these occur.

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The partnership with Brokerslink is a great opportunity. Brokerslink combines an impressive global reach and capabilities for commercial enterprise clients. Allianz provides worldwide expertise and market access. We already see growth resulting from our partnership and this is just the start.

16 Allianz Arena in Munich, home of FC Bayern München o l i v e r b ä t e

Similarly, a change in consumer behaviour and how they interact with insurers is greatly impacting the insurance market – what do you see as the key issues and how are you tackling them? I see two main areas: First, how customers think about their lives, safety and values in general, and, secondly, shifting expectations towards service providers, regardless of industry. On the first, it’s often been quoted that millennials are less willing to plan or bind themselves for the long term, and would generally question traditional value models. I’d be careful to generalize here and it needs to be seen how such observations develop as Generation Y customers grow up, found a family, etc. Coming to my second point, I’d like to point Global Digital Factory, located in the eastern part of Munich in a former production factory out that tech companies in fact have already altered expectations on customer interaction. Also, social media and comparison platforms New digital solutions allow our request a quote, they can decide how they provide unprecedented transparency on sales people to spend less time on interact with us, whether via their mobile, offer, price, and customer satisfaction. administrative tasks like appointment via a bot, via email, or, if they prefer a more Without a doubt, todays customers are preparation and rather focus on advice. personal touch, there will always be an much more empowered. For generating leads, for example, option to contact a call center, their agent, These customers expect much more we optimize our digital marketing or their broker. Customer centricity means simplicity, speed and flexibility in capabilities for better client targeting. giving the customer the choice over how interaction. Frankly, that is something We also have improved many digital they experience insurance. insurance has not been famous for. We are support tools. All of this frees up time investing to transform from a “push” to of our sales organization to really focus In the last few years, Allianz has a more attractive “pull” business model. on advisory. Needless to say that we are invested in emerging countries such That needs a truly integrated distribution continuously training our people to equip as China. Where and what markets do approach which after all will allow agents them with the right skills and capabilities you believe will develop further and to spend more value added time with to become superior advisors. And last what is your strategy to support them? the customers. but not least, we measure the satisfaction Allianz Group has been active in many level of our customers with the so­‑called emerging markets for many years, You’ve called for the business to Net Promoter Score and permanently and we aim to further strengthen our be more client service than sales learn from it. presence in promising economies in focused and suggested more client­ Asia, Africa and South America. This ‑facing personal advisory roles are How does this more customer­‑centric follows our strategy of expanding necessary. How are you preparing your approach fit with your strategy for our footprint beyond our historical organization for this transformation? increased digitalization? The use strongholds in Europe and enhancing It is about enabling customers to get in of impersonal software to calculate our profile for long‑term,­ profitable touch with Allianz and to buy our products premiums and process claims could growth. But we are not under pressure and services anywhere and anytime. The be seen to contradict the more and would only go for acquisitions or “pull” model implies that customers come personal touch you’re calling for? partnerships that clearly fit in strategic, to Allianz because they get simple and easy No, by digitalizing our business we financial and cultural terms. to understand products as well as superior increase our customer centricity. The two We do believe that bringing our risk service and advisory that exactly meet go hand in hand. Digitalization gives the management expertise, combined with their needs. customer more options for when and how our sustainable, long‑term­ perspective, We have started this transformation they get in touch with us. It’s all about the to these markets is also supporting them quite some time ago, for example, with interfaces. The process itself has already on their journey for building the necessary a needs­‑based advisory approach in been automated for the last 20 to 30 years. environment for business growth and Germany or a modular product offer in Through digitalization we can offer to create better living standards, health Italy that allows customers and agents to customers the choice. When the customer systems and financial safeguarding for easily configure products they like. reaches out, whether to make a claim or their people.

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In 10 years time, what type of Can you tell us more about your urgency exists in the organization and technology do you think people will operation in Portugal and whether creating a vision, a purpose that is worth want to use to manage their insurance you have any expansion plans? coming to work for every day is a key portfolio? Our operation in Portugal has been priority for me. We expect digitalization will continue running quite successfully over the to evolve as an integral part of our lives years. Allianz is a reference in the local What drives you to succeed? and our customers’ lives. Doing things market, both in terms of performance and It’s the sense of doing something that will in a digital way will be the prevailing way. innovation. In fact, we are front runners impact lives for the better. As a leader, The number of connected ecosystems on digital insurance transformation I have to see the bigger context in which will increase as the Internet of Things in Portugal, putting us in a privileged we operate and I have to communicate allows more devices to be connected position to continue to gain market and stay in dialog with our employees, and utilized for insurance as a service. share, addressing new agents’ and customers, investors and parts of society This will create even more interfaces for clients’ demands. to understand and balance needs and the customer to interact with us, when Considering our track record, the interests. Ultimately, life is not about and how they choose. Customers will consolidated operation and the current premiums and operating profit, it is about have a wide choice of what interfaces signs of economic recovery in the country, doing something you are proud of. they could use to interact with us or Allianz will continue to promote growth manage their insurance portfolio ranging in Portugal. The insurance sector is not seen as one from their mobile phone or connected of the most appealing sectors to work watch, through to TV, car or maybe even You’ve talked about the need for in. How can we change this perception their toaster. greater social mobility, is this why and attract the best talent? However, I believe that face­‑to­‑face Allianz is involved with the investment As the competition is intense, insurers interactions on issues that truly matter ready programme ‘Encouraging have to come up with fresh ideas to attract will increase. Future Generations’? Can you explain scarce talent. It takes more than posting what this is, when it started and how job ads and going to university fairs, For years, there has been a special you see it developing? neither typical marketing campaigns will relationship between Sonae SGPS For many years, Allianz supports children show effects as talent gets bombarded (one of the MDS Group shareholders) in need all around the globe. In our latest with such initiatives. What will stand and Allianz. At first, Belmiro de project, Allianz investment ready program, out to talent will be how a company acts, Azevedo was a member of the Allianz we are assessing start­‑ups with innovative whether what they read about it matches International Advisory Board, but solutions to improve life conditions for the experience they or their friends now it is Paulo Azevedo, Sonae Group underprivileged young adults. have with the company. Having modern co-CEO. Can you tell us more about The project was launched in August communication tools like chat bots, this Board and the contributions 2017, and over 90 start­‑up­‑teams have presence on social media channels etc is from Belmiro and Paulo? applied. The winner will get funded one thing, but giving the future talent a Firstly, please allow me to express how with startup capital of 40.000 euros taste of our values and commitments at deeply saddened I am by the passing of and be supported by Allianz mentors every touchpoint of interaction is the key Belmiro de Azevedo. I send my heartfelt and business angels. This approach is differentiator. With Allianz, top talent condolences to his family and friends. very successful, because it is more than will often find their own values matching It was an honour to have known him, classical charity and generates long‑term­ those of the company. Values of trust, he was a great person and we will miss impact in the local communities. integrity, competence and responsibility him. I always had the highest respect towards society. for the guidance we were receiving What are the main challenges you face from Belmiro as well as from Paulo, leading an organisation that’s nearly who followed his father as member of 130 years­‑old? Has there been our International Advisory Board in a cultural shift since you arrived? 2012, especially on the international Our current business strategy is still spot­ market for insurance for small and ‑on, while the challenges are amplifying: mid‑sized­ enterprises. This board is Political uncertainties are at higher levels, advising the Board of Management of financial markets are still far from back Allianz SE, regarding strategic topics and in balance and technology companies are particularly the international activities increasingly revolutionizing one industry of Allianz Group. We are very lucky that after another. However, Allianz shows with Paulo we can continue to count strong financial success. This means that on the valuable market knowledge we can embark on our transformation regarding Portugal and many other from a position of strength — it should countries. I am looking forward to not mean that we can sit back and enjoy further expanding our collaboration. the ride. Making sure a healthy sense of

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Allianz Treptowers, Berlin

What advice would you give to anyone considering or starting a career in the insurance industry? The rise of Big Data will now lead Times have never been better for us to an even superior delivery and starting a career in the insurance sector. Digitalization and changing customer further expand our services – as needs are disrupting the industry and expected by our customers. (...) will keep creating new job profiles in the next decade. The transformation At Allianz, we are dedicated to additionally leads to agile and open supporting our clients by working company cultures and attracts a broader spectrum of candidates. To succeed in with them to deliver the best possible insurance business talents will need solutions for the management, more than good grades, they must be willing to take on responsibility, work control and reduction of risks – collaboratively, be willing to learn every wherever and whenever these occur. day and show that they can implement great ideas sustainably.

How do you relax after a day’s work? Do you have any hobbies? My first thought after work is my family and thanks to modern technology, I check in with them every day. Spending quality time with my family and travelling are my favourite activities. I also enjoy tennis and some Yoga and a good dinner among friends. •

19 The Allianz Group is a global financial services provider with services predominantly in the insurance and asset management business. 86 million retail and corporate clients in more than 70 countries rely on their knowledge, global presence, financial strength and solidity. Allianz SE, the parent company, is headquartered in Munich, Germany.

As an insurer and long­‑term HIGHLIGHTS investor, social and environ­mental responsibility is fundamental to OF ACHIEVEMENTS our day‑to­ ‑day­ business

128.2 bn eur Sustainable and Responsible Investments (SRI) across 508 AllianzGI and PIMCO Insurance and investment transactions assessed for ESG risks 156 Sustainable Solutions generating 1.1 bn EUR 55.3mn Customers in the emerging consumer market 100% Score for ESG in ‑25.3%­ insurance integration CO2 emission reduction by Dow Jones per employee since 2010 Sustainability Index

Source: Allianz Group: facts & figures. August 2017.

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ALLIANZ IN NUMBERS

A company with over Trusted Partner for more than Among the top 3 Property and Casuality 140,000 86 million insurers globaly employees costumers

Among the top 5 in the life / health business Present in over Europe largest insurer globaly 70 based on market value countries

Global leader in travel Among the top 5 insurance, assistance asset managers services and credit globaly Gold rated in the Dow insurance Jones Sustainability Index In business for over 125 years

ALL SEGMENTS DELIVER REVENUE 2016: EUR 122.4 BN OPERATING PROFIT 2016: EUR 10.8 BN

BY SEGMENTS BY SEGMENTS4

Property / Casuality 42% Property / Casuality 46%

Life / Health 53% Life / Health 35%

Asset Management 5% Asset Management 19%

Corporate and Other < 1%

BY REGIONS4 BY REGIONS4

Germany 26% Germany 25%

Western & Southern 32% Western & Southern 30% Europe Europe

USA 13% USA 13%

Growth Markets1 9% Growth Markets1 5%

Anglo Broker Markets2 5% Anglo Broker Markets2 4%

Specialty Insurance3 16% Specialty Insurance3 13%

Property and Casualty insurance Life and Health insurance Asset Management → 2016 internal growth stays strong: 3.1 percent. → 2016 investment margin drives rise in operating profit → PIMCO flows stay positive in 4Q; → Combined ratio for the full year improved by 0.3 → Shift toward capital­‑efficient products was reflected → Efficiency improves points to 94.3 percent. in the rise of the new business margin to 2.7 percent → Full year 2016 sees better cost‑income­ ratio.

1 Asia­‑Pacific, Central and Eastern Europe, Latin America, Middle East and North Africa 2 Australia, Ireland, UK 3 Allianz Global Corporate & Specialty, Euler Hermes, Allianz Worldwide Partners, Allianz Re 4 Relation of positive parts of operating profit. By segments: without Corporate & Other; All figures as per December 31, 2016

21 m d s m a g a z i n e — f u l l c o v e r ANTICIPATION IS NOT SOLUTION THE WORLD AS WE KNEW IT

BY DEVADAS KRISHNADAS

Over most of the last 25 The post­‑world war II period referenced deployed to the Indian Ocean, the Pacific years the United States has the perceived mistakes of the inter‑war­ and the South China Sea, defence pacts years. It also saw the advent of defining with Japan and South Korea. dominated the geo­‑political features of modern times – leadership of Over most of the last 25 years the scene. It has consistently the United States and the promotion of United States has dominated the geo­ internationalism. ‑political scene. It has consistently upheld upheld its policy of promoting The United States did not withdraw its policy of promoting free trade and free trade and supporting from the international scene but took supporting international frameworks on the mantle of leadership. such as the UN, the World Bank, NATO and international frameworks It based substantial military forces in the International Monetary Fund or IMF such as the UN, the Western Europe, established the North where the US has the largest share of votes. Atlantic Treaty Organisation or NATO and For more than half a century these have World Bank, NATO and the introduced the Marshall Plan to reactivate been the defining geo­‑political, geo­ International Monetary Fund the devastated economies of the West. In ‑economic and geo­‑strategic parameters Japan, it similarly established permanent and references. The US led with an or IMF where the US has the bases and made significant interventions emphasis on shared commitment to largest share of votes. – political and economic – to redirect the Trade even if not always Free Trade, future of Japan away from the militarism recognition of the value of International of its past. Order manifested in tangible frameworks, The United States also strongly stability under a benevolent security supported the formation of the United umbrella and the preservation of moral Nations, the Bretton Woods Monetary ideals as a premise for the use of force. agreement and the sustained promotion of free trade. The United States projected its leadership through the agency of security umbrellas such as NATO, its naval fleets

22 d e v a d a s k r i s h n a d a s

Weak Signals importance than to exaggerate it and risk building up unsustainable expectations Weak signals are harbingers of change. domestically. Whereas in hindsight all may be clear, in The lesson from rapid change in foresight we take risks in detecting weak social make­‑up is that identity politics is signals and in assigning them meaning. visceral and animal like. Once awoken it is difficult to put back into its cage.

Lessons from Disruption The Time of Trump In the United Kingdom, in a range of Western and Central European nations The domestic focus of the Trump – the National Front in France, the AfD administration and its explicit in Germany, the PVV in Netherlands – nationalism would imply a diminishing we have and are seeing the rise of the of US attention if not commitment to the new right wing. Brexit and the Trump stability and security of Europe and Asia. Presidency are perhaps the most obvious The Trump administration’s abrupt manifestations of this weak signal. lurch and shifts in its foreign policy, while These right­‑wing forces are disrupting confusing and sometimes perplexing, traditional political trajectories. They indicate a general lack of interest are anti‑globalisation,­ nationalistic, amounting to carelessness of foreign policy. FUSE is an invaluable reading for anti‑immigration,­ and anti‑progressive.­ President Trump, in one of his first any business leader or manager. They are also unenthusiastic about actions as President, withdrew the US It provides practical advice on internationalism and its associated from the Trans Pacific Partnership or TPP the strategic skills and insights frameworks. negotiations when it was already at its necessary to help decision makers There are several lessons to be drawn mature stage. His ‘America First’ message understand and prosper in today’s from the phenomena of the rising right. confuses and irritates America’s trading complex world. First, political leaders and their parties partners who understand that trade have to deal with issues at the practical rewards all parties, even if unevenly. level and not be limited to ideas and The mixed messages from various theories. Policies need to be translated institutions – the White House, the into tangible day to day benefits to the State Department and the Department individual citizen and not merely appear of Defence – on foreign policy intent desirable at the conceptual level. reduces the credibility of the United Second, maintaining a large political States and increases the danger of centre is in the interest of all mainstream strategic miscalculation. political parties. A growing middle class with a healthy sense of optimism is critical to ensuring a broad political centre. Third, alongside inclusive economic Devadas Krishnadas → Devadas is the Founder and CEO of growth, maintaining a broad political Chief Executive Officer, Future Moves Group Pte. Ltd (FMG), centre is also about pacing the change Future Moves Group Pte. Ltd. a strategic management consulting in social norms. Changing long standing firm. He is also an Independent social norms often results in political Director of the reinsurance firm push back. PartnerRe Asia Pte. Ltd. and the Fourth, acceding to rapid changes in direct insurer, Auto & General the social make­‑up through immigration Insurance Singapore Pte. Ltd. makes the mistake of assuming a stable → Prior to founding FMG, Devadas society is a self­‑enacting phenomenon. spent over 15 years in the Singapore Far from it, societies are fragile and do not Government, playing a key role in react well to abrupt changes especially developing Singapore’s security, on the ‘street level’ where the world fiscal and social policies. rather suddenly looks and feels different. → Devadas is also a recognized public Fifth, managing the internal intellectual and author. His perception of how a country is being latest book, The Seduction of the treated on the international stage can Simple, an anthology of his public be a double­‑edged sword. It is better commentaries, was released in 2016. for a country to be modest about its

23 m d s m a g a z i n e — f u l l c o v e r

The Coming of China Chinese leaders, almost incredulous over the advent of Trump and the Brexit FMG – FutureMoves In contrast, the Chinese increasingly appear decision, and more than a little alarmed Group pte. Ltd as rational, stable and more strategic. these resulted from democratic processes, The Chinese are pursuing a complex feel embolden to take advantage of the Headquartered in Singapore, and multi‑dimensional­ strategy of flux. It has strengthen their conviction FutureMoves Group has an extending their sphere of influence through that the centralised authoritarian model international consulting deepening financial, economic, political of governance is justified. practice and executive and security linkages. China’s characterisation of itself is education service spanning both China has formed strategic linkages best thought of in terms of its historical the private and public sectors. with countries who are sources of raw persona of a benevolent tribute demanding FMG provides expertise and materials to feed its hungry economy ‘Centre’. Those who position themselves bespoke services in corporate and who have young populations who as tribute nations will benefit while those strategy, strategic planning, will serve as sources of demand for its which choose to resist or to challenge will advisory, data analysis and products. Across Africa, in South and feel the full pressure of its displeasure. public policy. Central America and in South‑East­ Asia The Chinese can be expected to countries are all increasingly caught in push for the Regional Comprehensive FMG is also Southeast the Chinese economic net. Economic Partnership or RCEP. This is an Asia’s first consultancy to China is not an inert large player. It ASEAN wide Free Trade Agreement with develop and deploy its own has ambitions and these are geared by a Australia, China, India and South Korea. foresightdriven strategic world view which is informed by history The Asian Infrastructure Investment management tool, and a visceral sense that they represent Bank (AIIB), the Silk Road Fund and the FUSE®: Foresightdriven, a civilisation not just a country. One Road, One Belt strategies are practical, Understanding, Strategy and China’s strategic perspective is truly tangible and sizable commitments China Execution ­– a methodology global. In March 2017, the first freight rail has made to the future of greater Asia. that ties the core essentials link between Western Europe and China of foresight, in­‑sighting, was initiated between London to Beijing. strategy formulation as well It has taken ownership or is the key Resetting the Compass as operational execution to operator of several major transport nodes equip every organization with – the Greek port of Piraeus, the Pakistani Countries do not make strategic a systematic and practical port of Gwadar, the Sri Lankan port realignments lightly. However, after the framework to understand and of Colombo are only the more notable neglect of the George Bush years, the manage reality in order to examples of China’s so called ‘String of rhetoric centric Obama administration change and transform and be Pearls’ strategy. and the erratic nature of the Trump prepared for future challenges. The new transcontinental rail link term, the compass needle of geo­‑political For more information, please and the maritime initiatives are closely alignment is spinning from West to East. visit www.futuremoves.com. associated with the better known “One Belt and One Road” strategy which represents President Xi Jinping’s vision Anticipation is Not Solution of the economically networked China and Eurasia. The Chinese are not waiting for Foresight requires us to confront events to shape themselves but actively unpalatable prospects and places the driving the realisation of this grand vision. onus for action squarely upon our own Their approach is foresight in action. shoulders. Paying attention to weak signals – political disruption from rapid change, geo­‑political realignments and growing uncertainty, is critical to anticipation. But anticipation is not solution. For that, we must be prepared The lesson from rapid to respond and to engage in and with change in social make­-up an increasingly uncertain world. • is that identity politics is visceral and animal like. Once awoken it is difficult to put back into its cage.

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Learn more: argolimited.com m d s m a g a z i n e — f u l l c o v e r THE SHARING ECONOMY A CHALLENGE FOR THE INSURANCE MARKET

BY JOANA CAMPOS CARVALHO

The terms sharing economy and platform serves only as a meeting point Nevertheless, improved use can be collaborative economy have been used between the parties (in the case of Olx linked to this simple business model, to refer to companies such as Airbnb, or Craigslist). On the other, the platform due to it being less cumbersome than the Uber, Taskrabbit and Craigslist who, by assumes a leading role to such a degree traditional model or by granting greater breaking the mould of traditional business that it must be considered part of the responsibility to the parties, allowing more models, have come to revolutionize the main contract (as in the case of Uber, with efficient access to a product or service. This way in which we access goods and services. whom the passenger concludes a transport is the case in the insurance sector, as we Many companies seek to be part of contract). Between the two extremes there shall see later. this phenomenon, since it associates are platforms that influence the main The shared use of goods is increasingly them with innovation or even disruption, contract by defining applicable contractual based on the fact that people value access increasing the popularity of their brand. terms, setting prices and withholding to goods rather than possessing them. An The sharing economy is trendy – though payments in the event of a dispute, etc. example cited by Rachel Botsman and no one is clearly saying what the sharing The existence of the platform as a third­ Roo Rogers, in one of the most important economy exactly is. The definitions are ‑party in the contractual structure poses books on this subject (What’s mine is multiplying, with scholars seeking to major challenges to contract law, which yours, Harper Collins, 2011, p. 83), is that introduce rigor to allow them to study essentially means to regulate contracts a person does not need a drill, there just the phenomenon and companies seeking concluded directly between two parties. needs to be a hole in the wall. Similarly, to extend and blur its limits in order to For example, in many cases the third­ people do not need to have a car, they join this trend which has conquered ‑party turns out to be the player with the need to be able to move around by car younger generations. greatest power within the relationship, and and they do not need DVDs, only the Most definitions of sharing economy it seems unfair that this party receives the movies they contain. This paradigm shift include business models where a digital profit (arising from commissions) without is what allows for the success of streaming platform is used to connect people, accepting part of the risk of the contract companies such as Netflix and Spotify allowing a better use of goods and services. completion between platform users (for and carsharing firms such as Citydrive Digital platforms serve as intermediaries, example non‑compliance).­ and Drive Now. allowing them to connect more efficiently The second feature of the sharing Finally, a significant part of the sharing the demand and supply of particular economy is the fact that the business economy platforms are peer‑to­ ­‑peer (P2P), goods or services. However, caution is model allows a more efficient use of goods which means contracts are concluded needed by those who view such platforms and services, acknowledging the fact that between two private people, as opposed (and the companies operating with them) many fail to maximise their potential to the traditional structure of business­‑to­ as mere intermediaries. (idling capacity). ‑consumer (B2C), between a professional Analyzing the reality, we conclude This more efficient use can be achieved and a consumer. For example, if I list my that the platforms in fact, have differing through the shared use of a particular asset house on Airbnb, the contracts I conclude degrees of intervention in the contract (type of access) or its reuse (for example by with the guests are P2P, as house rental is between users. On the one hand, the purchasing second‑hand).­ not an activity I engage in professionally.

28 t h e s h a r i n g e c o n o m y

COLLABORATIVE previous model, only part is placed into funds belonging to different groups PLATFORMS of customers. Lemonade is an example of this type of business. The third is the self­‑management business model. This is where the company limits itself to provide a platform through which people can communicate, enter into and fulfil contracts. Groups are formed and each comprehensively defines the applicable rules (what is covered by the insurance, what documentation needs to be sent to the group, admission of new members, payment terms, etc). Usually no premiums are paid, instead members must have a certain amount available in their virtual wallet which is associated with their profile. When a claim is reported, members vote to decide whether it should be covered. An example of this is Teambrella where payments on this platform are made using Blockchain technology, ensuring members do not escape their payment liabilities. Being a relatively new concept, it is very difficult to predict how the sharing economy insurance business models will In the last year we have seen the rise evolve, but I think I can safely say that the of several sharing economy platforms insurance market of the future will pass – such as Lemonade, Uber,AirBnb Netflix, Friendsurance, Spotify to a greater or lesser extent – through this. •

The sharing economy and handling. The remaining amount is insurance transferred to the insurance company. The business managing the platform Joana Campos Carvalho Contrary to what one might associate classifies customers into different groups with such a traditional and apparently and creates a fund into which it puts inflexible sector, this phenomenon has a percentage of the premium that was already arrived in the insurance industry. retained from each of them. During the Some companies use digital platforms year, this fund is used to cover claims to conclude insurance contracts, costs and at the end of the year, what’s implementing business models that left in the fund is distributed among challenge the traditional structure members of the group. The insurer is only of the insurance contract. required to intervene when the amount Currently, we can separate these business available in the fund is insufficient to models into three different types. cover all claims. A similar business model The first is the company that is also followed by the English company manages the platform and acts as an Guevara and the French Inspeer (both intermediary, as in the case of German only for car insurance). company Friendsurance. This business The second is when the platform establishes partnerships with several manager is the insurance company insurance companies, offering insurance itself. The business model is similar to Joana Campos Carvalho is a PhD candidate services at the same price customers the previous one, the difference is that and visiting professor at the Nova Law would pay if they transacted directly the platform only offers the insurance School, in Lisbon. Her research focuses with the insurer. From the premiums services of this company. In addition, the on contracts concluded through online paid, the platform manager takes a company manages the entire value of the platforms, especially those of the so­ commission and a percentage for its premiums, though, as in the ‑called sharing economy.

29 m d s m a g a z i n e — f u l l c o v e r DIGITAL CAPABILITIES A REVOLUTION IN THE MAKING

BY ARMIN SHAEFER AND CARIN GANTENBEIN, Zurich Commercial Insurance

Technology is changing Retail insurance has reached mainstream Dealing with unstructured data the insurance industry in adoption in many of these areas. For large commercial and international program Insurers are faced with large quantities fundamental and exciting business, digital transformation is now of unstructured data. For instance, ways. Customers are starting to happen, with an accelerating submissions come in a variety of formats, pace over the last 12 months. This revolution to be manually reviewed by underwriters forging new expectations is powered by new technologies that are and risk engineers, who structure and based on their experiences changing the business model, increasing manually key these data into the various efficiency and consistency, improving underwriting, pricing or risk engineering with other sectors. New service quality and making it possible for systems. risk ecosystems are insurers to better interact with a whole range of stakeholders. Cognitive computing (CC), more emerging, challenging specifically natural language processing traditional value chains. (NLP) capabilities, bring unstructured Optimizing a fragmented data sources together, distil the intended And our role as risk experts IT landscape semantic and properly structure the is being expanded by information to support risk and claims In large commercial business, insurers often experts with their risk assessment and sensors, mobile technology face a complex, fragmented IT landscape, decision making. NLP capabilities can and big data capabilities including IT legacy systems with limited also be applied to automated research automation capabilities. Many highly of internal or external data, to provide that are redefining the very repetitive tasks in the end‑to­ ­‑end process insurers with relevant supplementary notion of insurance. are manual and include a significant information and create a holistic amount of data re­‑keying from one system customer risk profile. This can include to another. Robotic Process Automation financial reports, news feeds, expert (RPA) is a great enabler to driving efficiencies reports, audit reports, or internal and improving speed and quality of service analytics sources. delivery. It can optimize this landscape, with its capability to take on many of the repetitive processes, freeing up highly skilled people to work on more complex and bespoke aspects of an international program.

30 d i g i t a l capabiities

Armin Schaefer Improving consistency Industrialisation, already common in between customer intent the retail segment, is now being applied to and coverage the international program space. Examples include self­‑servicing channels leveraging International programmes are highly smart chatbots, cognitive algorithms complex processes and for risk and analytical capabilities providing the managers it is crucial to have certainty potential for a fully automated risk selection that their original intent is reflected and insurance purchasing process. in all the various insurance policies, New technologies can also reduce the ensuring there are no coverage gaps. distance between customers, brokers Even in this highly complex area CC and insurers. Thanks to Application can enable an automatic review of the Programming Interface (API) and key elements of an insurance program Distributed Ledger/Blockchain (coverage, exclusions, deductibles technology, all collaborating parties can or limits) across all local policies. become much more interlinked. Whilst Various jurisdictions, regulations and today’s information and transactional languages can be taken into account exchange is largely defined by email Armin Schaefer is Head of Digital & when comparing the local policies with and attachment traffic, it is now New Technology for Zurich Commercial the master policy, as well as with the moving towards a system‑to­ ­‑system Insurance / International Programs. He original customer intent. connectivity and ultimately towards a is responsible for driving the digital ‘platform‑type’­ thinking. This creates agenda for the international program a completely new ecosystem, where all business and related B2B channels. He Turning data into insights players are interconnected in real‑time,­ holds a Master in Computer Science from all sharing the relevant source of truth, the University of Karlsruhe (Germany) Insurers, brokers and customers are revolutionizing the insurance industry. and has 15 years IT management experience starving for meaningful insights and across the non­‑life insurance segments. industry benchmarking capabilities. Big data and analytics can shape the Challenges and Opportunities huge amounts of data available in the Carin Gantenbein industry into meaningful insights. The exciting digital transformation They give customers a clear overview of journey in international programs has their portfolio, help them to anticipate begun and is picking up pace. There are risk trends and developments within challenges along the way. Data standards, their company, industry or geographies governance, regulation, ownership, and enable them to put in place data and cyber security all need to be appropriate risk mitigation actions. addressed in this process. One thing is Insights also support underwriters, risk clear though: digital capabilities bring engineers and claims handlers in their opportunities that insurers cannot ignore; risk assessment, pricing or decision­ they enable compelling new set­‑ups and ‑making. business models and create efficiencies in the value chain. Industrializing the current They will play a role, they are relevant, business model and creating and they are here to stay. • a new ecosystem Note: Excerpt from the article "Digital capabilities transforming global programmes" previously published in Commercial New technologies enable a high Risk Online. Carin Gantenbein is Head of Business level of processing and decision­ Development and Transformation, ‑making automation even for the International Programs for Zurich highly complex business segment Commercial Insurance. In her role, of international programs. Taking she is responsible for driving the these technologies to the next level strategic agenda for the international not only builds the foundation program business. She holds a PhD in for self­‑servicing capabilities and finance from University of St. Gallen straight­‑through quoting and claims and a Master’s degree in business handling processing –­ but can also turn administration, psychology and machines supporting decision‑making­ art history from Ludwig Maximilian into machines making independent University in Munich. decisions.

31 Publicidade Advanta_new.pdf 1 17/05/2016 13:02:25

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STRUCTURAL CHANGES

FROM BELGIUM TO THE WORLD

FULLCOVER MEETS STEVEN BRAEKEVELDT, AGEAS PORTUGAL GROUP CEO m d s m a g a z i n e — f u l l c o v e r STRUCTURAL CHANGES IN THE PORTUGUESE MARKET

Over its past three issues, Insurer partnerships move away sector which reverberated throughout the fullcover has profiled from banks insurance industry. National financial groups faced serious shake­‑ups; one the top 3 groups at the There have been many changes in the dramatic example was on 3 August top of the Portuguese Portuguese insurance sector. In 2010 – 2014 when Banco Espírito Santo was the year Portugal faced a major financial incorporated into Novo Banco (Espírito insurance market. crisis that took four years to reverse – life Santo owned Tranquilidade, T­‑Vida and We started with Fosun business in the insurance market was BES Vida, rebranded as GNB Vida). On 15 worth 16,340 billion Euros. Seven years December 2015, the bank Banif was sold (fullcover #9), which later, it had dwindled to 11,55 billion. This to Santander and its insurer Açoreana was holds Fidelidade, looked dramatic downturn reflects the appeal put under the control of Apollo Global of different financial products in the Management. at Tranquilidade and market. For non‑life,­ the 2017 market was Apollo Global Management worth 4,49 billion Euros. The top 10 insurers in 2009 represented Insurance and banking (fullcover #10) and 78.5% of the market. With the exception separate wrapped it up with the of Allianz and AXA, most Portuguese insurers were owned by banking groups Between 2014 and 2017, some two billion profile of Ageas Group and along with Santander Totta Seguros, Euros changed hands in Portuguese (fullcover #11). were supported by foreign capital. In insurer acquisition deals. Bank­‑led 2017, only BPI Vida e Pensões (life and financial conglomerates felt the need pensions) and Bankinter Life Insurance to release capital to comply with Basel (a joint venture between Bankinter and ratios and banking union standards. “It’s Mapfre) were owned by a banking group all about regulations. Banks must have and no insurer had Portuguese­‑majority ratios conforming to Basel solvency rules capital investment. The top 10 insurers and the stakes they have in insurance account for 79.86% of the market. companies do not count towards the The financial collapse in 2008 and capital ratio. Therefore, when they sovereign debt crisis of 2011, which led to exchange shareholdings for money, they intervention by troika in Portugal (a team end up with capital that is not recognised comprising IMF, Central European Bank by regulatory ratio requirements,” and European Commission members), says Carlos Maia, partner at PwC and had major repercussions for the banking insurance industry specialist. The capital

34 a g e a s g r o u p

Changes to solvency rules requirements demanded by Solvency II companies will now be branded Aegon and difficulties in meeting have motivated banks to sell off insurers, Santander Portugal Vida and Aegon opening up the market to new players. Santander Portugal. Another market premium growth targets will These businesses resort to the newcomer is the Chinese group Fosun; it lead to mergers. Companies bancassurance blueprint; insurers owns Fidelidade, an insurer that secured exclusively agree to distribute products 31.59% of the market in 2016 — 3.8% more will grow in size leading to through bank networks, securing access than 2009. Apollo Global Management theoretically, consolidation to significant distribution channels, while also made an entrance by acquiring strengthening their capital control of Tranquilidade, Açoreana, T­‑Vida and and stronger businesses these operations. Advancecare. It established the holding in the long run. Scale may Such changes pose new regulatory company Seguradoras Unidas and in 2016 challenges. Lawmakers must not only secured 6.7% of the market. Ageas took help, but scale alone is not assess how well new shareholders over BCP­‑connected insurers and, more the key to success. Efficient know the sector and its regulation, recently, Axa Seguros, which provides it but ensure their medium to long‑term­ with a 19.07% market share. organisations, regardless of business strategies are robust. Gabriel The largest insurers in Portugal now their size, have a competitive Bernardino, chairman of EIOPA, which belong to foreign shareholders. Those regulates insurance in the EU, informed currently with Portuguese shareholders advantage and that’s the Jornal de Negócios: “These elements are CA Seguros, CA Vida, Caravela, driver of growth. are key to insuring sound, prudent and Lusitania, Lusitania Vida, and Real Vida. sustainable business management; they Low profitability on equity due to slim identify potentially disruptive factors and technical and financial margins has made conflicts of interest and guarantee risk­ national insurers vulnerable. This equally ‑taking doesn’t jeopardize policyholder applies to some multinational insurers, protection.” who with little market penetration in Portugal has chosen to pull out and invest in markets with greater strategic value. Leaders and innovators More recently, Global Seguros was acquired by Açoreana, Real Seguros and Changes to solvency rules and difficulties N Seguros by Lusitania and Real Vida in meeting premium growth targets by Patris. The German group Ergo sold will lead to mergers. Companies will Victoria in 2011 to French group SMABTP. grow in size leading to theoretically, Sagres rebranded itself Caravela consolidation and stronger businesses Companhia de Seguros, Groupama sold in the long run. Scale may help, but scale its Portuguese operation to the Chinese alone is not the key to success. Efficient company China Tianying, and the Lone organisations, regardless of their size, have Star fund (US), having acquired Novo a competitive advantage and that’s the Banco through Nani Holding, will now driver of growth. You can expect — and control the insurers GNB Vida and GNB this has happened before — that niche Seguros. In September 2017, the Mutual companies will emerge, assessing risk in Benefit Organization Montepio Geral, highly‑sophisticated­ areas or with highly­ which owns the Montepio bank and ‑automated business models supported insurer Montepio Seguros e Futuro, by innovative technologies. You can also Sociedade Gestora de Fundos de Pensões expect new kinds of collaborative projects (pension fund management), entered such as competing insurers sharing into partnership with the Chinese group, back­‑office services and differentiating CEFC China Energy. In November, a themselves through their relationships capital increase of 150 million Euros gave with distributors and customers. CEFC China Energy a 60% control of the insurance group which includes Lusitania Seguros (non‑life),­ Lusitania Vida (life) and Extending the global reach N Seguros (Auto via remote channels). •

These businesses have attracted new international players to the sector such as the Dutch insurer Aegon which, having acquired a 51% stake in Santander Totta, returns to the Portuguese market. These

35 AGEAS IN THE WORLD

Luxembourg Nº1 in Life

Belgium Nº1 in Life Nº2 in Non­‑Life

United Kingdom Nº2 in Motor

France

Portugal Nº2 in Life China Nº3 in Non-life Nº6 in Life Nº2 in Health Nº1 in Pensions Turkey Vietnam Cambodia Nº4 in Non­‑Life India The Philippines Belgium

UK Thailand Singapore Nº2 in Life Malaysia Continental Europe Nº4 in Non­‑Life Nº5 in Life Asia Nº3 in Non­‑Life

KEY FACTS

40,000 38 Top 20 employees million insurer customers in Europe.

Founded in 2017 business 1824 volume approx. €34BN (+7%)

36 a g e a s g r o u p AGEAS GROUP FROM BELGIUM TO THE WORLD

Our success is the result Strategy for success growth in Asia, a solid performance in of great teamwork by many continental Europe, thanks to increased Looking ahead, the business has a clear healthcare, motor and household policies skilled and experienced people strategic growth plan. Called Ambition sales in Portugal and a solid performance from diverse backgrounds. 2018, it represents a roadmap with key in motor and home insurance in Belgium. strategic targets aimed at achieving success and delivering to stakeholders. Bart De Smet Portugal’s strategic potential The strategy focuses on seven key areas: CEO Ageas → Long‑term­ partnerships, collaborating Having been in Portugal since 2005, with best in class local partners. supporting brands such as Ocidental → The right balance between mature and Médis and through its partnership Ageas describes itself as an international markets and growth markets across with Millennium BCP, the Ageas Group insurer with a local identity. For a Europe and Asia. has always recognized the Portuguese business whose heritage spans some 194 → Offering a wide variety of insurance market’s strong strategic potential. years, it has a clear strategic vision and products and services for retail and Demonstrating its ongoing commitment a simple premise and goal; to provide business customers. to partnership development, in 2015 customers, at every stage of their life, → Meeting the demands of our Ageas acquired AXA Portugal; a business with peace of mind when they need it customers, for simple, convenient with remarkable synergies. most. As a result, Ageas is able to say that and personalised insurance products Continued investment has earned it ranks among the market leaders in all and services. Ageas Portugal client and market respect, the countries in which it operates. → A disciplined approach to sharing delivering numerous accolades. Today, The business today is one of Europe’s knowledge and implementing Ageas is second in the Portuguese larger insurance companies offering innovative ideas across the Ageas insurance market, an innovator for life and non‑life­ insurance products Group. pensions and controller of leading health to a range of personal and business → Tailored distribution to the local insurance brand, Médis. customers in 15 countries around demands of our customers. Customers Ageas in Portugal is one of the main the globe from its home domicile of decide what, where, when and how contributors to the Group’s strong global Belgium, across Continental Europe and they want to interact with the business. performance and is recognised for its Asia. It operates successful businesses → Offering products that appeal most outstanding performance in several areas: through a combination of wholly‑owned­ to customers and where the company the management of profitable companies subsidiaries and long‑term­ partnerships believes they can make a difference. and wide­‑ranging service providers, with strong financial institutions and its innovation, omni‑channel­ brand key distributors in Belgium, the UK, management strategy and the active role Luxembourg, France, Portugal, Turkey, Sustaining growth it plays in addressing social issues. • China, Malaysia, India, Thailand, Vietnam, Laos, Cambodia, Singapore, The figures speak for themselves. In the and the Philippines. last quarter of 2017, the business reported Ageas is a major international a far higher than expected net profit insurance group and one of the top 20 which rose 23 percent to €241m – beating insurers in Europe. In 2016, Ageas posted the predictions of a number of analyst over 32 billion Euros in business volume. firms. This figure represented strong

37 m d s m a g a z i n e — f u l l c o v e r

Steven Braekeveldt, Ageas Portugal Group CEO

38 a g e a s g r o u p AGEAS PORTUGAL INTERVIEW WITH STEVEN BRAEKEVELDT

fullcover talks to As a Belgian financial services market; people do not seem interested Steven Braekeveldt, professional with extensive in the detail of what they’re buying or experience in banking and insurance what they really want it for, even though Ageas Portugal Group in Europe and Asia, how do you feel fundamentally we’re talking about CEO, about the company's the Portuguese market has evolved protecting our loved ones. On the one since you first came into contact with hand I see a society that is extremely investment strategy in it in 2007? family‑oriented­ but on the other, there’s Portugal, market trends As we all know, Portugal went through complete indifference when it comes to one of its deepest crises and is today protecting the same family (where the and the growing role of recovering strongly. During this time, cheapest price seems the best outcome innovation. Ageas needed to adopt a strategy which for most). As an outsider, I find it difficult focused less on growth and concentrated to understand. more on understanding customers’ financial problems and finding a You came to Portugal in the early days solution to benefit all parties. While the of the 2005 alliance between Fortis Portuguese insurance market is clearly (now Ageas) and Millenniumbcp. back to growth, the overall penetration What did the organisation look rate in comparison with other OECD like back then and how have things countries remains unacceptably low. changed over the past decade? This raises a delicate issue that needs to Little has changed with our partners be addressed by all –­ namely the absence ­– one of the biggest developments over of financial literacy. Overall, people in the past 10 years is the fact that Ageas Portugal do not save, they have one of the Seguros has become part of our family lowest saving rates in Europe –­ creating in Portugal. Although there were certain one of the country’s biggest challenges shareholder changes, the fundamental ­– a pension‑scheme­ that will not last. success of our business is based upon In addition, while the State educates respect and transparency for all. We’ve and invests in people for many years, experienced a technological revolution it does not teach them how to manage that has changed our business landscape; their salary, protect their assets or buy customers are far more demanding when the appropriate insurances. I recently it comes to service and rightly so, and the spoke with a lawyer who was happy internet makes everything much more he’d bought the cheapest car insurance accessible. This doesn’t however impact in the market but was unable to say if our values of discussing problems and his wife or children were insured in the topics openly with respect and dignity event of an accident or if they needed and how we work together –­ these are the surgery. Clearly we are talking about an key pillars of success which everyone educated person here, but this reflects can adhere to. most of the cases I have witnessed in the

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In recent years there has been great In the life sector, 2016 premium You recently said Ageas was open consolidation in the insurance volume was half of 2010. Unit­ to new acquisitions but that there sector and leading insurers now have ‑linked products have helped their were no non­‑life insurers for sale. international, rather than national recovery, improving 2016 and 2017 Do you think this will prompt more shareholders. In 2016, five major performances, but they do present international companies to leave groups were responsible for around a greater risk for policyholders and the sector and provide Ageas with 76% of total life insurance premiums beneficiaries. How are you going to more opportunities? What do you and 66% of non­‑life business, attract more risk­‑averse customers mean by ‘a very strict discipline including Fidelidade of the Chinese and is a savings and pension fund for acquisitions’? Fosun Group, Ageas and Seguradoras (PPR) a better alternative? As I’ve mentioned before, we’re open Unidas, part of the North American The changes in the Portuguese social to profitable investment opportunities, Apollo organisation. What impact do security system, as well as the need as long as they align with our Group’s they have on the Portuguese market? to maintain a standard of living after strategy and policy. 2016 witnessed a change in the structure retirement age, have fuelled the of the Portuguese insurance sector when importance and growth of private Although non­‑life business continues market concentration contributed to retirement savings products. Unlike to grow, profitability remains a fewer companies operating in Portugal. other financial products, Retirement challenge, particularly in auto and During this consolidation, the important Savings Plans (PPRs) have, since their workers compensation. Having thing to ensure was that there were no inception, been a privileged vehicle for acquired AXA, over 50% of your negative impacts on customers. I believe private medium to long‑term­ savers, premiums are for auto insurance. the sector behaved in an exemplary contributing to their retirement income. How will you make this business manner as was acknowledged by the For example, with Ocidental, we provide profitable and sustainable? latest European Customer Satisfaction a Retirement Savings Plan –­ known as Naturally, the national and international Index (ECSI –­ Portugal 2017), which a Structured Savings Collection Facility economic situation has impacted the measured client satisfaction for the (ICAE) –­ which is an insurance contract insurance sector. Non‑life,­ traditionally quality of goods and services available linked to investment funds. Each financial more reliant on economic and labour in the national market. product consists of four investment market progress, has seen positive growth funds: the Aggressive Strategy with a in direct insurance at +5.0%. The non‑life­ Ageas is the second biggest player in maximum of 55% in shares, the Moderate technical account results however have the life sector and the third in non­‑life. Strategy with 30% and a Protection not kept up with this growth; results for What prompted the company to invest Strategy and Preservation Fund Strategy the global non‑life­ segment dropped from in Portugal and how do you view its with a maximum of 10% in shares. 107 million Euros in 2015 to –9­ million growth potential against, for example, Each investment strategy – linked to an Euros in 2016. your markets in Belgium? autonomous fund based on deposits, When we acquired Ageas Seguros, The Ageas Group has operated in Portugal bonds or equities – is determined by we were aware of the need to recover for a number of years (through brands the saver’s investment policy. Such profitability, but we had to start with like Ocidental, Médis and our partnership Retirement Savings Plans are for people the basics: successfully launch a new with Millennium BCP) and sees it as a with medium to long‑term­ risk tolerances. brand to the market and share it with potentially high‑growth­ market. Because Ocidental’s Increased Savings Insurance our customers and partners while we already have a good understanding (Seguro Poupança Crescente) is a medium ensuring our data systems were fully of the market, our latest acquisition fits to long‑term­ capitalisation insurance autonomous (to do this we constructed well with our global strategy. A strong product which invests the total guaranteed a new Ageas data centre in Portugal, network of professional, specialist agents capital. Part of the applicable subscription courtesy of our Carve Out programme). complements our existing distribution fee is invested in an autonomous fund This first, giant leap allows us to plan for channels enabling us to offer customized at the end of each financial year and the the future, update platforms, increase IT services through varied contact and Fund’s rate of return is determined after management efficiency and optimize IT interactive platforms, while focusing the financial management fee is deducted. architecture. Both challenges have been on customer relationships and quality. Is all of this enough to encourage a overcome through exemplary leadership. I believe there’s a long way to go in savings culture within the majority of the Portugal to increase awareness of the need Portuguese population? Probably not, Alongside this, we immediately started for protection and it is our responsibility, but it certainly goes some way in trying to a business transformation programme, as part of our core business, to invest achieve this reality. As an organisation, we following certain parameters, to and stay in this market for the long term, are committed to improving savings and turnaround less profitable lines, reduce continuing to grow sustainably and play our aim is to continue to develop new and costs and take the first steps toward an active part in society. innovative retirement and savings plans. profitable growth. Today, the Ageas Group The key is to make more people aware of in Portugal has a new organisational each and every plan – and this depends on structure; our business units have a clear how good a job we do. focus on sale and distribution channels

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Paula Rios, MDS Group and Steven Braekeveldt

and are working together to adopt and → Digital platforms. We have a private client labour, housing and transport sectors, for replicate best practice activities across website, apps, digital documents, a strong example, indicating automated detection all areas (life, non‑life,­ health, B2C and social media presence, including customer and the use of predictive and analytics partnerships). In addition to this, different service, and GPS car tracking options. models is the way forward to prevent and business units (including non‑life)­ can → Prevention. The PAR – prevention fight fraud (assuming IT has a bigger role obtain leverage from a number of added­ and risk analysis service for corporate within fraud units). Data efficiency is the ‑value propositions, such as: clients. We want our customers to see most important challenge. us as business partners, particularly When it comes to protection and privacy → A strong partnership policy. For in the reduction of workplace risks (the European insurance industry is heavily example, we’ve established various and accidents. regulated), access to external data sources strategic partnerships with professional and the quality of internal data, requires associations: doctors, dentists, Our strategy is clear, supported by strong special attention. The development and veterinarians, pharmacists, nurses, foundations and a solid international construction of new data models are biologists, economists, judges, Group. This I believe can deliver sustainable based on increasingly robust, fast and psychologists, architects and solicitors. growth and value to our customers. intelligent technologies. In spite of the → The ‘Ageas Seguros’ card gives technological advances, fraud detention customers direct access to a network Alongside life insurance, fraud is a cannot be reliant on pure analytics. Human of 40 reputable national partners with key issue within the auto and workers factors will continue to play an important discounts in the areas of health, auto, compensation markets, how can fraud detection and risk assessment role. beauty and wellness. technology help fight against this? While data can accelerate the detection ­→ Professional and accredited agent and The crucial challenge is for the insurance of fraudulent activities and patterns, broker network, bringing the company industry to understand what type of people will always be vital in translating and the Ageas brand closer to local fraud is its biggest threat and how to use reports into actionable intelligence. partners across the country. This is technology to cope with it. The increasing In a world where consumers are using strategically important to the growth use of analytics (Big Data) presents a new technologies to communicate, the of our brand and we are therefore world of almost limitless potential for challenge can be difficult. Effectively committed to a long‑term­ relationship. the insurance industry. We are seeing fighting fraud is an ongoing process of We want to be an agent’s first choice. advances in digitalisation within the adaptation and optimization.

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Within the next five years Ageas Responsibility. Further announcements and being easily accessible to both, plus Portugal has a goal to be a major player to follow. This has led to recognition from being relevant as a service provider. Both in the pensions, health and home third parties in Portugal, which is good digitalisation and digital are on the top of insurance markets, how do you plan for the Group, and in line with our global my agenda as CEO, and I am constantly to do this? strategy, we’ve consistently pursued challenging the organization to embrace The Ageas Group in Portugal is already innovative business partnerships. These innovation and digitalisation/digital. number one for pensions and we have are but a few ways Portugal can support We are presently developing health and a leading health brand, Médis, offering the Group and the country is now one life projects which will transform the various customer‑centric­ multi‑risk­ of the main contributors to global insurance experience into an emotional insurance products. We will continue business volume. one, so yes, we are already writing the to innovate, provide outstanding client future of our business models, and I am and partner service and keep abreast of Ageas also pledged to invest €75m sure Ageas will make a difference and be technological developments that impact, per year in innovation for three years. recognised as the main player in this area. albeit differently, upon our numerous Within Portugal your ambition is If Uber in the insurance world is going to business lines. Our strategy moves us to lead in this area and stimulate appear somewhere, strictly speaking this forward and sets us apart. innovation and entrepreneurship would be great. Uber connects those who within your business. How is need to move from one place to another In a 2015 interview, you mentioned this progressing and how are you with those who have a car and can fulfil ‘Occidental has a very good strategy’ attracting talent? that need, offering a seamless digital and was profitable even during the Within the scope of our strategic goals, experience, with the customer at the very financial crisis. How will you help innovation is a top priority – alongside centre. Uber is, in that sense, a broker. Ageas achieve this growth and move our desire to differentiate ourselves in the Brokers have existed in insurance since its away from what some may describe market and be recognised as enterprising beginning so Uber is an inspiration of what as a ‘problematic Axa legacy’? professionals. a future broker might be. This would be a As I said before, we have a clear strategy To encourage an entire organisation giant step towards customer centricity, but to focus on recovering profitability and to engage and participate in helping us not a disruption. Generally speaking, Uber sustainably growing Ageas Seguros. Now, meet these goals, we are channelling may well be viewed as a disruptor by an it’s integrated into our organization (and their energies towards innovation. industry with legacy mentalities, but it will Ocidental is a good example of solidity Part of our innovation programme happen. Where, when and how, nobody and profitability), we can optimize and focuses on internal incentives, via an knows, but we are looking forward to it. introduce historic examples of ‘best online platform, which ensures everybody Our feet are in the present, but our eyes are practice’ initiatives among companies can contribute ideas, comment, vote always on the future. within our Group. In addition, the Ageas and be recognised. Outside the company Seguros agents & brokers distribution we partner with firms that will help How have you managed to meet the channel is central to customer protection. raise our profile, such as Healthcare requirements of the three pillars of the City (which Médis co­‑founded), Solvency II Directive? Are there any In September 2015, Ageas launched ColorADD –­ advocates for more elements you would like to change and its ‘Ambition 2018’ strategy which inclusive communication with people what has been most relevant? focuses on seven strategic choices. who are colour‑blind,­ ANF –­ a business Ageas Portugal Group started to develop These include investing in core partnership representing unknown a Solvency II Programme in 2009. Six insurance skills, strengthening market innovators and Universidade work streams inputted to the three pillar relationships, expanding in mature Nova –­ specialists in training, areas and they ensured a reliable, safe and growth markets and establishing development and recruitment. and timely transition to the new solvency centres of excellence to facilitate regime. The goal of the project, developed knowledge sharing and innovation. Does the onset of digitalisation mean in line with the Ageas Group, was to How is Ageas in Portugal contributing Ageas will have to rethink its business meet the Directive requirements and to to this? models, the technical support it proactively integrate risk management Ageas in Portugal is one of the main gives to the ‘client journey’ and its into all company processes. The contributors to the Group’s strong global relationship with consumers? Is there transition from Solvency I to II covered performance. And we have been leading likely to be an Uber in the insurance capital management, product design on several fronts: in the management world? and profitability, investment strategy of profitable companies, innovation At Ageas we have digital and digitalisation and regulatory requirements. Internal (partnerships, services, products), the – two different things –­ at the core of resources with strong management management of diversified offerings our strategic priorities. Digitalisation and technical skills, actuarial and and omni channel brand management, is the road to developing processes and risk management experience, and plus taking an active role in society, improving efficiency, Digital is a driver the support from Ageas Group, were such as with the Fundação Ageas and to grow business by improving the key to accomplishing this successful our global strategy for Corporate Social customers and distributors’ experience implementation.

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Ageas Portugal has strong capital ratios Seguros (insurance). So Ageas Seguros and a wealth of knowledge and experience was born. We were also motivated by the ­– competitive strengths not easy to find, fact that this brand conveys the essence Ageas Portugal has particularly in the Portuguese insurance of our business: lines connecting and strong capital ratios and a market. It is one of the best prepared representing our dynamic and wider insurers, ready to face the challenges of network of partners, their energy and wealth of knowledge and this new competitive environment. diversity. Lastly, we wanted to bring some experience ­– competitive colour to the Portuguese insurance world. What business processing challenges Even with its logo, the brand stands out strengths not easy to are posed by the distribution directive with a spectrum of colour forming part find, particularly in the and regulations surrounding of its identity. European data protection? Portuguese insurance Before anything, we need to understand How do you see the insurance industry market. It is one of the best that the distribution directive should – insurers and brokers – evolving? be applied nationally. The main goal of Today the market is positive, boosted prepared insurers, ready this directive is to harmonise the playing by price increases caused by a lack to face the challenges field for everyone selling insurance. of profitability in mandatory lines Furthermore, we should consider the of business. However, in the near of this new competitive concept of distribution; pre­‑contractual future the technological evolution and environment. information and other related points more demanding costumers will lead of potential conflict of interest. General to consolidation among insurance data protection regulation applies companies and brokers. The survivors directly – because it’s a regulation and will be those who are already preparing not a directive, standardising data to respond to customers in a fast, clear protection in all European Union and effective way using more than one countries. Both will affect the market distribution channel. ­– our main business processing challenge will be balancing them! Even more important will be the capacity for innovation; people will search for new Financial services providers tend to products motivated by new necessities, favour a single brand. Why does Ageas so insurers must be able to market use several brands in Portugal and effectively, and distributors, whether would you consider using one? Can agents or brokers, must offer consultancy you tell us about the choice of colours services that increase consumer loyalty. for the Ageas logo and what they In the near future, motor and house mean? insurance will be commodities and the Ageas is a believer in market autonomy role of the insurance industry must and partnerships – in management reach new levels –­ retirement products, and brands. The rationale is simple: home assistance, servicing, prevention if there are strong local brands, why and risk analysis and the ability to deal change? This is the case with Médis, with natural events, will be the main a reputable, established brand, and competitive differentiators, together with Ocidental, who enjoys a very positive how we manage the challenges of our reputation. On launching the new Ageas ever‑evolving­ climate and population. Seguros brand our thought process was equally simple: we needed to break with former stockholder (AXA), retain the corporation’s identity for its wide­‑ranging services, products and distribution channels (essentially agents, consultants and brokers) and seize this opportunity to introduce the Ageas brand more forcefully to the market (taking into account the Group has been in Portugal for more than 10 years and intends to keep growing here). We thought it would be right to adopt the main brand, Ageas and introduce a sector identifier

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Ageas Seguros building in Lisbon

What have you learned from Ageas and MDS formed a partnership Portuguese insurance companies? many years ago. How has this I believe there are still I believe there are still too many relationship developed? What do too many insurance insurance companies active in the you value most in MDS and why Portuguese market and they will find it is it different to other players? companies active in the difficult to comply with the multitude of Our two companies have a committed Portuguese market and new incoming national and international and long‑standing­ relationship, both legislation. The insurance industry set in retail and projects, yet over the years, they will find it difficult to a great example when supporting victims we’ve evolved. comply with the multitude of the terrible fires last year, but to prevent future catastrophes, we should Ageas has become the second insurance of new incoming national lobby the authorities for infrastructure provider in Portugal and is looking for and international changes. Improving national insurance new opportunities; MDS has become an literacy will be beneficial for everyone international broker and is the country legislation. and it’s important our industry publishes leader. Today MDS has a complete supply the high number of claims directly chain, enabling them to respond to all paid to customers, dispelling the myth customer needs, no matter what sector. that insurance companies do not pay Clearly we have the same kind of DNA claims. People always complain when and we hope to develop our partnership a claim is rejected, usually because they further. We are in the market for the long­ did not want to pay for the cover at the ‑term and believe such partnerships add beginning, yet few publicise claims that value to both parties. We are in the same were immediately paid by the insurer. sector and are in no doubt that MDS is a Those who do not get paid always take central player who will work effectively centre stage. and continue to grow with Ageas.

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FERMA ARCHITECTS OF THE FUTURE

Johan Willaert talks to Jorge Luzzi about his role, the emerging insurance and risk management issues and how FERMA – Federation of European Risk Management Associations can guide Europe through this period of change.

What is FERMA’s focus today and objectives, thus demonstrating how it for the future? How do you work with can add value to the company, processes FERMA works together your members? and strategy, but also to contribute with its member Our focus is to have a world where to and promote a risk culture and risk management is embedded in embed risk awareness across the whole associations to raise the the business model and culture of organisation. profile of the profession organisations. Last year, FERMA began FERMA works together with its a new journey with a fresh strategic member associations to raise the profile through education and by vision and goals to increase leadership of the profession through education and sharing knowledge and in risk management and enhance risk by sharing knowledge and examples managers’ strategic influence. of best practice and innovation. examples of best practice Today, these goals are particularly and innovation. relevant in what is an ever‑changing­ What in general, do your members landscape. Our world is in transition, and European risk managers bringing opportunities for risk currently view as the main risk and managers, and the profession must insurance issues? Why and what can adapt and respond positively to the be done about them? increasing demands put upon it. We are According to FERMA’s European seeing a move away from a time when Risk and Insurance Report 2016/7: risk managers were mainly insurance economic conditions, limited growth buyers; they now manage companies’ opportunities (low interest rates and risks and, to comply with their risk a slowing of the emerging economies), management strategies, transfer business continuity disruption and elements of these risks to insurers. political/national instability (Brexit, While this strengthens their position, Trump’s second year in the White House, it poses a challenge for the profession; rising tensions around North Korea) there’s a need to not only ensure risk are considered the biggest risks to management is among the business organisations.

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It is extremely difficult today to management community on how captives predict how to address them. Companies support the operations of their parent clearly need to be more resilient to organisations. We are very pleased to Our world is in transition, external threats (industrial damage and be shortlisted for this year’s European bringing opportunities catastrophic events such as the recent Captive Awards –­ a recognition that hurricanes Irma and Maria) and have by bringing together the expertise and for risk managers, and the greater awareness of their vulnerabilities experience of our network, we can drive profession must adapt and following global cyber attacks, WannaCry things forward and make a difference. and PetrWrap. respond positively to the In order to do this, companies must; Are you working with any other increasing demands put → Align risk management to their regional or global associations, such business objectives and understand/ as PARIMA/RIMS/ALARYS or IFRIMA? upon it. have a good knowledge of the objectives Since April 2017 I´ve been president of so the function can support the the International Federation of Risk and decision‑making.­ Insurance Management Associations → Have a holistic view of the strategic (IFRIMA). My objective is to strengthen impact of risks – i.e. those that can affect and reinforce dialogue and cooperation their ability to achieve objectives. among risk management associations Johan Willaert → Embed risk awareness across the worldwide, ensuring consistency in our President of FERMA whole organization and ensure risk actions and global development. To managers develop scenarios/stress do this, I will build on my experience as tests and rehearse them regularly with president of FERMA since 2015. stakeholders. Other relevant topics are: → Understand the risks they are exposed → Captives –­ with many jurisdictions to – this will ensure they can source around the world adopting the BEPS tailor‑made­ insurance cover that’s recommendations, FERMA presented right for the business. Insurers tend its report at an IFRIMA meeting. to underwrite in silos but insurance → International Insurance Programmes buyers need a more global/holistic ­– under the leadership of the German insurance product. You can’t put risks insurance association (GVNW), into silos. IFRIMA received a mandate to develop a proposal for joint action between Can you give examples of your work brokers and insurers to modernise with national associations? international insurance programmes. Strengthening FERMA’s lobbying A steering group is being set up to do this. activities is a priority. FERMA acts as the → Education –­ in addition to FERMA, interface between national associations global risk management bodies RIMS and European and international policy­ (Risk Management Society), PARIMA ‑makers and to support this, we rely on (Pan-Asian Risk and Insurance the national associations’ input and their Management Association) and member feedback. ALARYS (Latin American Insurance Cyber risk and captives are two and Risk Management Association), examples of what can be achieved by have developed professional risk Johan Willaert has been president of the working together. management certification. Establishing Federation of European Risk Management Because cyber risk management is links to connect these certifications is Associations (FERMA), since 2015, and a corporate issue, we proposed a new certainly the way forward. president of the International Federation European model of cyber risk governance of Risk and Insurance Management with the European Confederation of Are you working with insurers Associations (IFRIMA), since 2017. Internal Auditing Institutes in June. and brokers to better support your He is also a board member of the Belgian To raise awareness of the importance of members? How does the FERMA Risk Management Association (BELRIM). having a suitable governance framework conference help and what is their As Agfa­‑Gevaert corporate risk manager, for cyber risk management we presented future role? Jo is responsible for developing global our model to EU stakeholders at a Nurturing a true European risk risk management and insurance programmes European Parliament conference. management community with our risk for the Imaging Solutions Group. He joined Our paper on captives is the industry’s partners is important and something Agfa­‑Gevaert in 2001. first report on captive re­‑insurance FERMA supports and encourages. We A law graduate, Jo spent the early stages arrangements, representing the strength have a close relationship with our risk of his career in broking with companies of opinion within the European risk partners in the insurance industry and which are now part of Marsh and Aon.

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beyond and appreciate the support they event with this in mind. For example give us in our projects. an industry‑sector­ breakfast for risk Considering the situation We are aware of the enormous expertise managers only is a great way to discuss from a European business, that exists within these companies from shared interests. which we can benefit – and they too can Because it is a European event, our risk management and benefit from our experience. This is why speakers represent different industries, insurance perspective, FERMA and Commercial Risk Europe sectors and sizes from across Europe. This launched the European Risk Management ensures the Forum provides broad points FERMA’s role is to Awards. Introduced last year it was a of view for each topic. lead the way in this great success and the increased number of applications already received this Are you confident the insurance journey utilizing year shows how important this initiative market will be able to deliver for expertise, experience, is for the European risk management members post Brexit? Are you community. By rewarding organisations lobbying government for continued communication and that innovate and deliver excellent service, ‘passporting rights’? education. we encourage others –­ in the spirit of According to FERMA’s European Risk healthy competition –­ to emulate them. and Insurance Report 2016, political and I believe in a risk management community. country instability is the third largest In the future, the insurance world will risk facing risk managers across Europe. be as important as it is now but it will be Brexit is one of the biggest political risks different. We have two levels of insurance the EU has ever encountered and it will products: have insurance and risk management → standardised products for private implications for years to come. individuals and smaller companies The impact of Brexit is still a massive → tailor‑made­ products for large unknown, but the real danger is that companies and specific markets companies stand still whilst waiting for In the future, insurance managers will clarity. FERMA will continue to monitor become increasingly important as they will the latest Brexit developments and what it risk manage their companies’ exposures. means for insurance programmes and risk In the past, insurers offered products that management. insurance managers tried to adapt to, now insurers must work more closely with Do you believe FERMA can guide clients to provide global solutions. Europe through this period of change? Insurers are preparing for the future; I remember the experience, especially they are hard working and more focused in the days before satellite navigation, of on selling a service. Cyber policy is a arriving at a crossroads where it was hard good example with insurers offering a to tell which direction to take. Perhaps the crisis management service. The rationale signs were unclear or roadworks blocked behind Kidnap & Ransom is to bring the route I once knew. Now of course, you people back safely, the challenge is to sell have GPS and while the computer will this value­‑added service. take you through the shortest route, it can The same applies to brokers. They are still take you down an unmade road at now working as advisors because they some risk to your suspension. are close to their clients. Brokers can help Today, in many ways, we are at such risk managers define their exposures and a crossroads. Our ultimate destination source market solutions asking ‘What is a prosperous and sustainable products do you have for these exposures?’ future for Europe, our enterprises and communities. In order for this journey Why are conferences like the FERMA to be successful, we will have to positively Forum important for risk managers? manage our risk taking and make The FERMA Forum is the sole pan­ decisions about the route. I believe that ‑European risk management event the risk management community is in a – the next one will be in Berlin in 2019. strong position to support those making The FERMA Forum is networking the decisions. ‘par excellence’: a big attraction is the Considering the situation from a opportunity for risk managers to meet European business, risk management colleagues and senior business partners and insurance perspective, FERMA’s role from around Europe and we design the is to lead the way in this journey utilizing

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expertise, experience, communication European leaders seem to agree that and education. At the end of our the EU is the best way to protect, build About FERMA time together, I believe you will have resilience and seize the opportunities confidence in the value of our chosen created by these challenges and the digital FERMA – Federation of European profession(s) and view us among the world. The new leaders are well‑educated, Risk Management Associations guides for future travels. Let me quote (the Erasmus generation) and speak represents the risk management Matthieu Ricard, a Nepalese French English (the language of business). They profession at European level. scientist and Buddhist monk: “At each are young, have grown up as Europeans point in our lives, we are at a crossroads. along with their own nationality and, even It brings together 22 risk We are the fruit of our past and we are though we know it will not be easy, can management associations the architects of our future...” influence the Union’s direction. in 21 European countries, Their positive economic outlook and representing nearly 4800 risk Taking into account how fast confidence in a better future blows a wind managers active in a wide range technology is progressing and what’s of optimism over Europe. As European of business sectors from major happening now, what are Europe’s Commission president Jean‑Claude­ industrial and commercial challenges for the future? Juncker said in his annual State of the companies to financial ‘Europe at a crossroads’ was the title of European Union speech: “The wind is institutions and local our keynote session during our last Forum back in Europe’s sails. But we will go government bodies. It provides in Monte Carlo and given the scope and nowhere unless we take hold of that wind.” the means of coordinating risk pioneering nature of the European Union, For our members and friends outside management and optimising the it’s not surprising to find it’s encountered the EU: Russia, Turkey, Norway, impact of these associations difficulties since inception. But the EU Switzerland and soon, I regret to say, at a European level. has always emerged strengthened. Brexit the United Kingdom, a stable and and the risk of fragmentation within the prosperous European Union makes for Among its goals FERMA seeks to Union has awakened other EU Member a good neighbour and trading partner. share knowledge, risk management States to the need to be positive about the methodologies and their future of Europe. For business development going benefits to business and the Many of the great challenges of our forward, where should we focus risk community, by participating in time however, are not regional but global: management? meetings and discussion groups. security, migration, climate change, digital As I mentioned, technological FERMA holds its Risk Management technology and economic and financial development. We are on the threshold of Forum every two years. volatility. The world is going through a a Fourth Industrial Revolution with great period of profound transformation and scientific and technological changes that nationalism, populism and protectionism are taking us in unpredictable directions. are responses to such uncertainty. They We’re already seeing digital currencies increase levels of unpredictability and and blockchain technology coming create potential sources of conflict. into use and slightly further ahead of us At the same time, rapid technological on the road are the internet of things, development is aggravating economic and applications of artificial intelligence and social differences. Africa has technology further exploitation of Big Data. For this, innovators with great potential that are we do not have ready‑made­ maps. We contributing to economic growth in many know they offer exceptional opportunities, African countries, but it is uneven, and but alongside the cyber risk exposures are many people on the continent still face many unintended consequences, both existential risks such as food and water positive and negative. insecurity, widespread disease, corruption However, risk taking is essential to and armed conflicts. Parts of the Middle business sustainability, and not in spite of East are still held back by conflict, and its environment, because of it. As Andrew many people who should be knowledge Harmstone, managing director, Morgan sharing and boosting the economies of Stanley, said recently when discussing those countries have died or fled. cyber security, ethics and sustainability: In Europe, we have other pressures. “The risks and costs to companies of not Our cohesion is being stretched by revived keeping up with change are great, be it nationalism and the number of people from fines and reputational damage or wanting to come here. Businesses face lower productivity due to cyber attacks – disruptive technologies, cyber risks, data each can erode companies’ profitability.” security issues and threats to business The contributors to business value continuity and reputation. today are increasingly fluid; there’s a

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m d s m a g a z i n e — f u l l c o v e r

wide division between capital‑intensive­ important as ’risk’. The risk manager underwriting based on claims data and industries and the growing number which should also be able to communicate business lines limits how we can develop generate returns from intangible assets, how risk management adds value to opportunities in the Fourth Industrial human capital, brands and reputation. the company, its processes and strategy, Revolution. How can insurers underwrite Some of the latter, in business terms, how it helps executive management risks associated with artificial intelligence don’t even own much physical property. achieve its objectives and highlight applications if they have no experience They hire what they need and like to use the key risks of success so they can be to rely on and want them all to fit into independent contractors, rather than controlled. This level of leadership property, casualty and transport silos? employees. requires what I call a ‘risk control’ We understand that in these We cannot manage or insure – and I’ll approach to supporting decision‑making.­ circumstances, insurers do not believe it come back to insurance later –­ the risks Having started with the EU, I would is right to expose so much of their capital of these enterprises in the same way we do like to refer to it again in parallel with our to such uncertainty and offer meaningful factories, warehouses and multi‑million­ role. Ultimately, in order to succeed, the capacity to corporate clients, but for Euro machinery. The value of their EU must demonstrate it contributes to the companies with large balance sheets, proposition can suffer damage almost growth and prosperity of its companies borrowing a small amount of capital from overnight from a reputational attack. and citizens, and that it is not just a an insurer is not the most effective way At the same time, the millions of small regulatory body that members consider to manage material risks. and medium sized enterprises that still restrictive. Likewise, as risk managers Insurance is at a crossroads, but not at generate a great proportion of Europe’s we play a valuable role; it is our duty a dead end! We encourage the industry to GDP and employment need insurance to inform about risks and compliance, follow a different route, one that expands in a coherent cost­‑effective package. but we must also have the confidence the range of solutions on offer and to develop this part of our work and provides services such as data sharing and What is the ultimate goal FERMA has demonstrate how the management technical expertise, in partnership with for members when it comes to market of risk­‑taking is positive and essential their corporate clients. • challenges? Does FERMA have official to company sustainability. certification for its European risk Our ultimate goal is to incorporate managers? risk awareness throughout the entire Professional risk management is also organisation. To do so, the risk manager at a crossroads – and we have to ask must be in contact with the sales division, “where is it heading in this changing which take the risks, and develop world?” We have acquired considerable scenarios and stress tests beyond this experience in the application of risk to ensure the strategy continues to management and we now have an meet company objectives. We must also opportunity to demonstrate how, work with other functions related to when faced with unpredictability, risk management, for example, internal the fundamental principles we apply audit, human resources and IT – this is an can be used to develop a successful aspect FERMA is developing throughout future strategy. Europe. Effective communication with There are opportunities and all company stakeholders is of vital consequences of exploiting these importance; by doing so risk management In risk management, opportunities, some potentially negative can become the company’s risk leadership in ‘management’ and severe, so identifying and mitigating intelligence centre. these risks is crucial to company success. is as important as ‘risk’. The board of directors and senior Within the insurance market and The risk manager should management need to have knowledge particularly insurers, brokers, etc, and experience to apply these principles what should be their current and also be able to communicate to the company's performance and they future focus? how risk management adds should be aware that this is equally the Our closest partners on this journey are in risk manager’s role. Do we emphasize the insurance industry –­ insurers, brokers value to the company, its this enough? Do we speak their language? and experts –­ they are our co­‑pilots, processes and strategy, We need to understand the company’s navigators and even mechanics. No one strategy and objectives so that we can questions the contribution insurance how it helps executive demonstrate how risk management has made to the evolution of enterprises management achieve its aligns with these objectives. – even going as far back as sailing ships. As you know, my focus as president of Yet risk managers express frustration objectives and highlight the FERMA is on leadership, communication that insurance is not moving at the same key risks of success so they and education. In risk management, speed as the industries they support. leadership in ’management’ is as The insurance model of traditional can be controlled.

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PUB m d s m a g a z i n e — f u l l c o v e r

A PASSION FOR COMPASSION RALPH MUCERINO IN CONVERSATION WITH ERNEST LEGRAND

Company leaders often combine successful When thinking of insurance, the layman business careers with very rich personal may imagine a confusing world of numbers, charts, and figures that makes experiences. We at MDS have been privileged their head spin. The reality of insurance enough to have had many such leaders share is that it’s the perfect place for intellectual thrill‑seekers­ to feed their need for their experiences, their vision of the markets innovation, creativity, and change, they have worked in and the challenges they but also leave a positive mark on society. And that’s where Ralph W. Mucerino, have faced. AIG President, Distribution Partners and Major Accounts comes in. With a fascinating 38­‑year career in insurance, With the launch of our new collection of he has seen it all, done it all, and helped interviews, called Faces of Insurance, we have develop the landscape of insurance we know today. moved a step forward. In this first conversation, Speaking with this respected leader Ralph Mucerino, AIG President, Distribution leaves one with a deeper understanding of human nature, compassion, ambition, Partners and Major Accounts tells Ernest and adaptability, and how they all Legrand about the lessons he has learned combine to create a successful business person with an eye on improving lives and the wisdom he has gained over the years and providing stability through analytics, and the importance of the ‘human factor’ in careful planning, and expert execution. He shared with me how he achieved such making business decisions. His true life lessons success and how you can, too. will be published in the book, “A passion for compassion – Ralph Mucerino with Ernest A thoughtful approach Legrand” by MDS Publications. Here we share to success an excerpt from the book. Ralph is passionate, attentive, and understanding, and he brings his unique view of the world to every aspect of his life. Early on, he didn’t just react to the world around him; he watched, learned, and took action to help transform his own life and career. While it may seem to an outsider that he simply made great

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decisions with an uncanny natural ability, career? Many executives try to separate To illustrate these points, we have the truth is that each choice he made was their personal lives from their work, only to look at his life for examples. born from the critical need to provide for but most of the traits that make a great He speaks fondly of his childhood and as himself and his growing family. human being also translate perfectly a husband and father, citing his family Careful planning was both a blessing to the business world. His success was as a stabilizing factor that helped him focus and a curse, but for him, security was key largely due to his personal rules: on his long nights studying at St. John’s to survival and success, and he put forth University, working his way up in the great effort to ensure he and his family → Trust people, and allow them to trust insurance business, and developing true had that security. Earning his colleagues’ in you connections with nearly everyone he’s respect was another integral part of → Move through life with honesty worked with. his success, but he did so in a genuine and integrity Simply put: Ralph learned about people way, thanks to his upbringing and early → Always listen with compassion and their unique needs by immersing life. People were drawn to him and his tempered with accountability himself in a world populated by all kinds honesty, and still are to this day. → Plan, plan, plan of people from different walks of life. But how did he manage to make his → Adapt and be ready to change He understands that society is a living, personal outlook such a big part of his the plan when necessary breathing ecosystem that is constantly changing and growing, and he was eager to go along for the ride and help bring a sense of security and stability with him. He didn’t cling to old ideas simply because they were familiar; he embraced the natural changes in life and used them to launch his career straight to the top.

Using society’s evolution to advance

Looking back on his past, he said, “Insurance wasn’t the industry that it has become today. It has gained in respect. It has gained in importance. More people understand what insurance adds to our daily life.” And he was a part of making that happen through his process of watching, learning, planning, and executing his plans all without losing the human factor. After all, insurance is about protecting people. “I don’t believe there’s an aspect of society that we don’t touch ” he said. “When you go back to 9/11, for example, [it] was obviously a horrific event. Many people lost friends, relatives, my nephew was killed at Cantor Fitzgerald at the time. The world came to a stop in many respects. The planes stopped flying and the airlines were uninsurable. Then Hank Greenberg, CEO of AIG, Martin Sullivan, CEO of AIU, and Tom Tizzio, Chairman of Domestic Brokerage Group, stepped in and worked with the reinsurance market to put capacity together and get the airlines and the industry operating again. “It’s a very unique view of how important insurance is to the functioning of society. I think it’s an attractive industry for young people to come in and influence.”

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Ralph Mucerino is one Ralph has a lot of hope for people service they need. We, as an industry, of the true professionals entering the insurance industry these must understand that, and start to adapt days. He speaks of Millennials’ unique our products to this burgeoning group of of the insurance industry. views on the world, current events, and customers out there.” He is unique in his capability their desire to do more and change the By watching the trends in society, things that just don’t work any longer. companies can better serve their of blending corporate and He believes they are, perhaps, more customers and their employees. “We personal relationships together socially aware than previous generations must understand what’s important to this and can look at insurance for what it segment of population and how to present so that everyone who deals provides for society. our products and services that meets with Ralph receives equality It’s that new social awareness, that their wants and needs. At the same time, openness that Millennials possess that they’re coming into the workforce, and and 100% of his time and effort. will help change the face of insurance when you look at what has traditionally for the better. And in turn, that shift in been important to people within a respect for insurance has helped the company, there’s a change there too.” James W. Crystal industry grow and change to reach more Once again, I was able to see how his Crystal & Company people, bringing even more stability strong family ties and drive to do right by to previously underserved segments. others affected his view of work life. He Chairman & Chief Executive Officer “I think Millennials can look at went on to talk about some of the specific insurance for what it provides in support changes in how companies treat their of society and, as such, become excited employees and how that’s affected not about a career in insurance. At the same only their productivity and satisfaction at time, this same group has a different view work, but also improved their home lives. of how they want to buy a product, how More time off, flexible hours, and they want to buy a service, what kind of an understanding that personal life

Robert Benmosche; José Manuel Fonseca; Jamie Crystal and Ralph Mucerino @Brokerslink Conference, Madrid, 2012

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shouldn’t suffer to get ahead at work, as a person who can fill the gap, who’s Ralph Mucerino are all acknowledgments of the change in not afraid to step up to an additional society’s expectations and the importance assignment, somebody who is willing of a healthy work­‑life balance. Beyond to work. . . That gets recognized.” simply coexisting, work and personal Along with working hard, finding ways lives should complement one another. to fill in the gaps, and advocating for He told me of a recent trip to Seattle that yourself, Ralph said, “Check your ego at helped drive this fact home for him, the door. If you let your ego manage how pointing out the impact of even a small you behave, if you think of yourself as the change in society’s expectations having most important person in the room, or lasting, positive effects on employees you’re indispensable, you’re likely to make and consumers. some bad decisions and you’re not going to “I visited Amazon in Seattle last year. be very pleasant to work with.” I walked up to the reception counter to Respect and courtesy are common check myself in and there was a bowl themes in Ralph’s life, in both personal of something where you normally see and work environments. Being able to mints in many companies, instead there collaborate with the team and showing were little dog treats. They allow their respect to leaders in the company, go a employees to bring their dogs to work. long way in making a person easier to There’s a population of people where work with and more likable. Ralph Mucerino is President of that’s an important element. I think, from He uses the same thinking when it Distribution Partners and Major Accounts a standpoint of creativity, they bring a comes to family life and experiences at AIG. He joined the company in 1979 different perspective. They’re much more outside of the office. That human factor — and has held various senior management inquisitive, they’re challenging.” being compassionate, understanding, and positions in the United States and abroad, Innovation, creativity, and fresh ideas supportive while expecting accountability including in Europe as manager of European are a big deal to Ralph, and he looks for and self­‑advocacy — is what Ralph operations and in Asia as President of the those qualities in the people he works with. attributes to business success. • Far East Region. Being able to think outside the box, as they Ralph also served as Chief Distribution say, is what helps the insurance industry Officer for AIG Property Casualty stay essential to a stable modern life. Commercial Insurance, Chief Operating Officer at Chartis International (ex­– AIG) and Chairman of Global Marine and Energy. The human factor is good for business As a mutual friend once said, Ralph is a true titan of the Ernest Legrand One of Ralph’s greatest values is his faith in humanity and his understanding of insurance market. Ralph people. He is genuinely a “good person” matches vast knowledge with in the sense that he keeps a positive outlook and tries to understand people, experience and an abundance no matter the situation. Business, of course, of humanity. is important, but he values the human beings who make the business work and Truthful, straightforward the consumers that the business protects. and fair, Ralph is devoted to It’s all a balance and learning to keep it that way is one of the keys to success. knowledge, not only technical He also has advice for those seeking to but also human and social, grow a career in insurance, but he believes Ernest Legrand believes that business his wisdom can be used in any field: which he generously shares experience will light the way toward a Advocate for yourself, seek help when you with colleagues and friends of more inclusive and interdependent world. need it, and be ready to fill in the gaps. He is a French­‑American CEO and writer, “If you see a vacuum, fill it. It doesn’t all ages. A role model to us all. born in Saigon, raised in Paris, and mean as if I’m looking for another job currently lives in New York. Through within the company, but how can I candid, one­‑on­‑one discussions with top help fill a vacuum that’s beneficial to José Manuel Fonseca executives, he hopes to share with a broad the company? I know that may sound MDS Group CEO & Brokerslink audience, the personal thoughts of leaders very sophomoric, but that’s one of my responsible for transforming the business life’s learnings. If you become known Founder and Board Member infrastructure of modern society.

55 m d s m a g a z i n e — f u l l c o v e r LONDON, THE EU, AND THE WORLD BY STEVE HEARN, ED BROKING

Not knowing is the hardest part. The longer. For a London insurance business and my characterisation of London as a London insurance market will survive planning for the future, the environment glass brimming half full, were rebuffed Brexit: it is resilient, and will find is tricky indeed. I honestly believe it will as insufficient. Already capacity and risk opportunities no matter what the be all right on the night, but collateral have shifted from London to Europe, the outcome. Provided it holds its focus on damage is being inflicted while we argue client retorted, and the continental drift customers, it will remain an important amongst ourselves. is on the rise. centre in an increasingly global market. Our challenge as broking leaders is to The finance officer insisted on knowing In the interim, however, the enormous guide businesses – our own and those how London will remain relevant, but in uncertainty over Britain’s future of our customers – through the transition this period of voluntary uncertainty over European trading position is both period. The job is made frustratingly Britain’s future trading relationship with difficult and damaging for the brokers, difficult by the current uncertainty. It is Europe, I found it impossible to say more. risk carriers, and others who comprise impossible to know what steps we should I have little doubt that this conversation London’s still‑thriving­ international take to prepare, but our customers expect is being repeated between large European re/insurance market. us to offer something more than a very companies’ risk managers and their For now we cannot know what the wide range of possibilities. Large clients London brokers every day. Unfortunately World will look like when we reach plan their risk management programmes we have no credible answers, even to our the end of the process of Britain’s exit years in advance, but at present we can own questions. People in places with from the European Union. As a nation, give them no guarantees about the London a more concrete future will continue to we haven’t united behind a vision. Market’s future ability to trade in Europe take London’s business for themselves. Considerable debate remains, even in without friction. Some are – proactively My greatest Brexit­‑related plea is to have corridors of influence, over our most and understandably – considering moving the answers sooner, not later. desirable post­‑Brexit relationship with the their business elsewhere. All that said, as a market we have EU. Within government, preferences for I spoke this week to a longstanding done well in the business of Brexit. Most ‘hard’ or ‘soft’ are as polarised as those for customer in the Netherlands, one that companies have a plan in place. Those cheddar or brie. Some still believe – with for decades has placed a significant organisations that have lobbied the UK perhaps hopeless optimism – that Brexit proportion of its business in London. government on our behalf have managed can be averted. Others think a ‘no­‑deal’ The company’s finance director to ensure that insurance­‑related issues outcome is in some way acceptable. challenged me to articulate London’s will be placed relatively highly in the Even when some agreement is reached, relevance to them in the future, given negotiators’ priorities: the vulnerabilities the ‘deal’ seems likely to be put, at the the UK’s inevitable exit from the single as well as the strengths of the London very least, to a parliamentary vote, which market. My soap­‑box responses about Market have been recognised. That in will sustain the uncertainty for even London’s strengths and Fortress Britain, itself is a major achievement, but as I

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write, detailed negotiations have not the choices, and ultimately will be the Our challenge as broking begun, so the uncertainty remains winners. As agents of our clients, that leaders is to guide businesses unaddressed. should be our overriding interest. London Market players can take some In this new international insurance – our own and those of our solace in the reality that continental market, asking how Brexit will affect customers – through the Europe has no equivalent to London for London is to pose the wrong question. I insurance and reinsurance, as their array shall not toll the bell for London, which transition period. (...) It is of choices for new European domiciles will continue to thrive if it is able to put its impossible to know what has underlined. Other financial services customers’ interests first. A gargantuan sectors may logically and relatively effort is underway to ensure that it does, steps we should take to easily migrate to specific centres such as and when it does, it will continue to prepare, but our customers Frankfurt, but London’s insurance market compete, sometimes successfully, with cannot suddenly be recreated elsewhere. other insurance markets around the expect us to offer That is a weak strength at best. world. Clients will choose London when something more than a very Another side to the Brexit saga is more London’s offer is best. I sincerely hope positive. Businesses that use the London we will know the context in which those wide range of possibilities. Market tend to be global companies better offers can be made much sooner, seeking multinational risk solutions. not later. In the meantime, we must smile The biggest buyers in London have assets in the face of uncertainty, answering and risks in continental Europe that clients’ earnest and legitimate questions need to be covered, as well as in Asia, as best we can, and knowing that whatever the Americas, and elsewhere. The solution the outcome of the Brexit negotiations is not to introduce another stage to the for our industry, London will remain process, one which will inevitably bring an important centre for risk within the complexities and opportunities for things global market. • to go wrong. The solution is to redefine the process itself. It is here where the opportunity lies for brokers and insurers in London and elsewhere in the world. Ed is a global wholesaler. We offer our customers access to the global marketplace. London will continue to be an important part of that proposition, and Ed will access London’s talent and capacity when it is most suitable, regardless of the outcome of Steve Hearn the divorce. But even before Brexit threw Group CEO of Ed Broking a rather large spanner into the London Market’s works, its competitive position Steve is Group CEO of Ed. Prior to joining relative to the regional markets of the Ed in November 2015, Steve served as Deputy world was undergoing a dramatic shift. CEO of Willis Group Holdings. He joined Insurance ‘hubs’ elsewhere in the Willis in 2008 as a result of its acquisition of Hilb Rogal & Hobbs (HRH) and held a number world are maturing to become fully­ of senior roles including Chairman and CEO ‑fledged global centres of risk­‑transfer of Willis Global, CEO of Willis Re excellence. They are following Bermuda’s and CEO of Willis Limited, the Group’s lead. We have placed German marine principal UK regulated entity. Prior to its business straight into Hong Kong and acquisition by HRH, Steve was Chairman and Singapore, without a stop in London. Such CEO of privately owned London wholesale placements are happening increasingly insurance broker, Glencairn Limited. Earlier often. London has for years – perhaps in his career, Steve was President and CEO decades – had a tendency to offer of Marsh Affinity Europe, having previously customers only what London wants to held a number of positions at Marsh and Sedgwick Limited. He has served as Chairman give them, rather than what they actually of both the London Market Group (LMG) and the want or need. London’s attempts to move London & International Insurance Brokers’ physically closer to customers have met Association (LIIBA) and as a Vice President with muted success, and the market has of the Insurance Institute of London. Steve lost its monopoly over large, difficult, is executive director of global broking group international risks. Customers make Brokerslink.

57

DOSSIER AVIATION RISKS

SAFETY AS A TOP PRIORITY MÁRIO LOBATO DE FARIA

ARE YOU STRAPPED IN? MARK SPERRING

FROM SPACE TO THE GROUNDS NICK REDGROVE

AVIATION CLAIMS – LOCATION, LOCATION, LOCATION STEVEN EAGLE

ENVIRONMENTAL AVIATION RISK – A SERIOUS BUSINESS STEPHEN ANDREWS

THE ERA OF DRONES JEAN FOURNIER

WHAT’S NEXT? ANNA BORON SAFETY AS A TOP PRIORITY

In aviation, the goal is to run operations with minimal risks. This article discusses how Management, Repair and Overhaul (MRO) activities ensure the safety of planes and ultimately that of passengers, and how risk management is integrated into Safety Management Systems. by Mário Lobato de Faria · TAP Air Portugal

2017 was the safest year in world aviation since 1946 and ever since we started keeping records on aviation accidents and incidents, considering both the number of events and the victim total.

SOURCE: AVIATION SAFETY NETWORK Mário Lobato de Faria is 55, married with two children and has a degree in mechanical engineering (thermodynamics), from the IST, Lisbon. He started his career in 1988 as an engineer with Profabril, responsible for mechanical equipment, and in January 1989 joined TAP as an engines and fuel systems engineer, where he stayed until 1993. In October 1993 Mário was asked by Portugália to manage its engineering services and in 1995 he became maintenance and engineering director. In July 2006 he was invited by the shareholder Embraer to join OGMA as vice president of industrial operations and following a company restructuring, Mário became vice president of the MRO unit. An approach by TAP’s CEO saw Mário return to the company in March 2014 as executive vice president of maintenance and engineering. He is now Executive Vice President of TAP Engineering and Maintenance.

86 “We need some As managers, we never tire of hearing AIRCRAFT MAINTENANCE testimonies about the link between PROGRAMME (AMP) blindness when success and a desire to take risks. In reality, risk is inherent in everyday The maintenance of aircraft, engines and we take risks” life and all human activities. However, components is necessary, not only to in aviation and particularly when ensure the safety of people and cargo, but Bill Gates. undertaking Maintenance, Repair also for economic reasons, as in the long– & Overhaul (MRO), the goal is to run term they are not disposable goods. operations without risks or with The AMP is the key reference point acceptable risks. for MRO activities; it is a document In light of the potential for disastrous approved by the aeronautical authorities consequences, the operational culture and produced by operators following must be one of risk aversion. This means aircraft manufacturers’ guidelines. a thorough and consistent approach Known as MSG3 it defines which tasks to risk management; from identifying must be fulfilled and how. the risks and measures to remove and In reality, this wasn’t always the mitigate them to creating indicators case. Until the advent of jet aviation, that allow us to monitor the success of it was the mechanics themselves the actions implemented. who empirically developed aircraft Because safety is the top priority maintenance programmes. Later on, for all aviation activities, this risk during the development of the B747 management process is integrated into project, Boeing felt the need to produce a Safety Management System (SMS). something more robust. Today, maintenance activities analyse all of the plane’s systems, taking into account the safety, operational and economic risks and their consequences, whether visible to the crew or not. This means all maintenance activities connected with aircraft, engines and

87 components are nothing more than the A safety­‑focused organisational careful risk management of the planes’ structure has the following features: systems, operating or at rest. a. Specific procedures for the Maintenance intervals are measured in recruitment, integration, training hours of flight time, cycles (one taking­ and development of employees ‑off and one landing constitutes one b. Management and employee safety cycle) and calendar days. Experience awareness training and probability models determine these c. Early monitoring procedures and parameters. corrective actions for equipment, system or service safety failures d. Means to monitor and record safety SAFETY MANAGEMENT standards SYSTEM (SMS) e. Effective management of resources to correctly identify safety threats Safety management is the systematic and to analyse and control risks management of risks associated with f. Change management strategies MRO activities to ensure the highest levels g. Processes that enable employees of protection. SMS in any airline or MRO to voluntary report safety­‑related organization is one of the responsibilities issues to line managers for solving of senior management who must publish a and monitoring actions taken In 1922, the first safety policy and manage it as an integral h. Regular exercises to test the part of the business. effectiveness of emergency southern Atlantic It is important the SMS follows quality response plans journey took place. management protocols and is considered i. Safety impact assessments on trade by differing management levels as an policies Portuguese aviators essential strategic tool, as for example, an accident or near accident may have Effective monitoring systems should: Gago Coutinho and serious financial consequences. a. Analyse and monitor flight records Sacadura Cabral If a culture of safety exists at all levels in order to assess performance and within an organisation, it will strongly detect any unreported safety issues flew a plane from influence its working practices. b. Collate and document all safety reports Lisbon, Portugal, The SMS should be both proactive and c. Focus on safety audits results and reactive, providing via processes and problems as they arise to Rio de Janeiro, procedures, mechanisms to predict, d. Publish the results of internal safety Brazil. prevent and mitigate the effect of safety investigation processes and any hazards. Implementation success is respective corrective actions SOURCE: MARINHA PORTUGUESA closely linked to three pillars: corporate e. Share safety data when evaluating safety compliance, a safety­‑focused organisational performance and organisational structure and effective include structural changes within monitoring systems. the risk management process

The requirements of corporate safety Finally, a robust SMS must have in place compliance are: processes to consistently promote a. The publication of the differing safety and evaluate the results management safety responsibilities achieved, adopt the best industrial and main stakeholders practices and use an independent b. A definition of the requirements of body to periodically review their the safety person in charge effectiveness. c. An ability to demonstrate the For the aerospace industry and its management team promotes a MRO activities, risk management is an positive safety culture throughout essential safety tool and key contributor the organization to business success. Such is the level of d. Evidence that safety is top priority in attention it requires and in recognition all business policies, principles and of the importance of the processes and practices technology involved, and its economic e. A commitment to a process of impact, SMS was given ISO 9110 independent safety monitoring, not accreditation in 2016. · dependent upon managerial strategies f. Regular analysis to improve safety plans g. Formal processes for safety analysis

88 89 ARE YOU STRAPPED IN?

Risk management, compliance and safety intelligence are intrinsically linked with aviation insurance. Find out how these crucial elements work together to keep AIG ahead of the underwriting market. by Mark Sperring · AIG

The aviation insurance industry aircraft is four to six times greater. This demonstrated profitability over the data is based on a relatively short time years spanning the early part of span (three years), given the relative this decade, driven from the 09/11 infancy of composite fleets, but the rating environment. Behind this was potential impact to an insurer is clear. the airline industry’s sterling safety Other factors that are likely to change record, which had been driven by a the claims picture are the emergence combination of technological and of a more litigious judicial system, managerial improvements across the characterised by a rise in class actions globe. The high cost of oil had boosted and an increase in the size of liability the introduction of a new generation of settlements, as well as a sharp increase fuel­‑efficient aircraft, while a proactive in the number of flights and passenger and systematic analysis of safety movements. The Boeing 2017 Market trends had dramatically improved risk Outlook predicts passenger numbers to mitigation within airlines – 2012 was so increase by 4.7% per year over the next far, according to IATA, the best year in 20 years (based on revenue passenger the history of aviation safety with one kilometres (RPK)). This growth will be Mark Sperring started his accident every five million flights. supported by an additional 40,000 new Aviation Insurance career at Ace However, 2013 was the year that aircraft deliveries through to 2036. At Global Markets in 2001 before marked a turning point, as market the same time, consolidation amongst quickly moving on to the Aviation conditions started to deteriorate. airlines will tend to reduce premiums Underwriting team in Lloyd’s. This was not because of an exceptional further. In the absence of evasive action, From there he saw a wide range increase in major loss events, the market is heading for a crash. of business from airlines, GA, but following years of continuous aerospace and war. In 2006 Mark reductions, premiums had just was part of the team that formed become too low in the face of any AVOIDING A COLLISION QBE’s Aviation Syndicate where loss against attritional claims and he specialised in Airports and with the backdrop of marketplace Albert Einstein is sometimes quoted Products and drove a market commoditisation. With market saying: The definition of insanity is doing leading facility which showed mutualisation a distant memory and the same thing over and over again and QBE’s leadership skills. Mark an increase in insurer capacity, prices expecting a different result. joined AIG Europe as UK Head of continued to drop. Put bluntly, that is what the aviation Airports and Products with a Looking forward, exposures will insurance industry has been doing. particular emphasis in improving inevitably continue to rise with But there are signs that this insanity is the Aerospace portfolio, which increased hull values, especially with the about to come to an end. particular emphasis on growing introduction of difficult and expensive There is no magic recipe for turnaround, the product offering and service to repair composite materials. Recent but risk selection and adherence proposition. industry analysis suggests that although to underwriting discipline will most we are seeing fewer major events due probably be key factors of success in to the overall improving technology both the insurance and reinsurance in the industry, the per­‑hull cost of markets. Insurers will have to learn repair for a composite airliner versus to say “no” again, and look to protect similar structural damage to an alloy their bottom line with underwriting

90 discipline. In addition, cost control will standard, with gap analyses used for and who simply wait for a hypothetical inevitably increase as margins reduce. actuarial study. market turn are likely to face turbulent This needs to be done while paying Underwriters themselves need to stay times. The focus has to be on close attention to service, as insurers on top of market developments, a sustainability and thus profitability need to recognise that clients now responsibility made easier by various rather than top line growth. In the same have a wider choice of options when market publications and social media way that the aviation industry has deciding on the signing of their channels covering the aviation industry made constant and successful efforts policies as insurance is effectively in more detail than ever. The onus is also to improve safety to an unprecedented a service industry. To avoid the on clients to ensure their employees are level, so insurers must pay them the further commoditisation of their aware of these market developments. compliment of showing the same product, insurers will have to move Insurers can also provide customised dedication, underwriting discipline and the discussion with clients away from safety and risk management training imagination. · one which is focused solely on price to courses for employees at every level of emphasise the other benefits they can the organisation on a variety of leading­ offer, such as superior claims handling, ‑edge safety topics. client risk solutions, industry expertise Simply put, it is probable that those and underwriting excellence. insurers who are not prepared to adapt Innovation will also represent a key to success. The aviation industry has seen spectacular technical and commercial progress over the years. Insurance must embrace that trend.

MOVING THE NEEDLE

A number of insurers have already made significant investments in order to differentiate their offering to the market and provide more holistic solutions, as they position themselves to aviation insurance buyers as strategic partners in managing their operational risks. Some insurers, such as AIG, now offer safety consulting and data services in partnership with specialist risk management consultants who provide a full range of innovative, state­‑of­‑the­ ‑art loss control tools. With the regulatory environment constantly changing, compliance is a key issue. In addition, robust risk management programmes need to be adopted by all clients whatever their size of business. Buyers should expect a comprehensive onsite audit to verify that their operation complies with the International Standard for Business Aviation (IS­‑BAO) protocols toward their certification. This would include a gap analysis of their systems, policies, processes and procedures, either onsite or remotely. Other important tools include safety intelligence reports and pilot and aircraft safety surveys. Insurers can offer access to the largest, most up­‑to­ ‑date database of charter operators, pilots and aircraft, allowing airlines to create due­‑diligence reports for every flight against their company’s safety

91 FROM SPACE TO THE GROUNDS

Compared with other main markets the Aviation Insurance market is relatively small but as soon as there is an aircraft accident it very often becomes big headline news. There are not many classes of insurance where this happens in quite the same way. by Nick Redgrove · Ed Broking

Although airline companies and aircraft to logistics companies delivering goods manufacturers purchase sizable third airside at an airport. party liability limits in­‑case an accident Banking and finance companies that are occurs, safety and regulation is involved in aircraft leasing is another paramount within the industry. Whilst it exposure that you may not realise comes is not entirely natural for human beings under aviation coverage. Although the to be sitting in a missile shaped object aircraft are generally insured by the moving at 500mph up at 40,000 feet operator/lessee for hull, liability and it is an extremely safe way to travel, war risk per the lease agreement, it is in especially when you consider you are the best interest of the lessor to seek 7.5 miles above terra firma. In fact, contingent hull and liability coverage in Aviation terms 2017 was one of the for their asset, this policy would also safest years on record with no jet airline cover possessed aircraft for hull, war risk passenger fatalities. and third party liability that have been As with many product lines, aviation returned from lease. keeps evolving, aircraft are safer, larger, A policyholder may not own or operate Nick Redgrove is the Managing can fly further, while being quieter an aircraft but they may have aviation Director of the Ed Aerospace team. and more fuel efficient than their exposure elsewhere and that their general He joined Lloyd’s of London in 1981 predecessors. For passenger airlines liability policy could exclude the coverage. and started his broking career with the experience on board is also more A prime example is an insured that Bristow Syndicate. He moved to a refined for passenger comfort. manufactures a component (sheet small Reinsurance Broker called metal or fasteners for example) that Harrington Austin in 1983 and was is used in the automobile industry but appointed Aviation Director in 1987. ANYTHING THAT FLIES somewhere in the supply chain may end In 1990 Nick joined Fenchurch which up also being used within the aircraft then merged with Lowndes Lambert to The perception of aviation insurance industry. A full breakdown of parts sold become Lambert Fenchurch and then is “anything that flies” but there are to customers and the end product is vital merged with Heaths to become Heath many coverages that fall within aviation to understand the risks of your insured. Lambert. liability insurance including products, In 2002 Nick was asked to start up an premises and hangarkeepers liability, Aerospace department at Cooper Gay maintenance, repair and overhaul, (now Ed Broking) to where he remains. airport liability, air traffic control Nick is responsible for the broking liability, service providers airside and client servicing of many of our including refuellers, refiners, fuel major clients which include Airports, storage, baggage & cargo handlers, Airlines, Aircraft Manufacturers and aircraft cleaners, construction Aircraft Leasing Companies companies working at airports, down

92 KEEPING PACE WITH THE RATE autonomously in the near future. OF CHANGE Fuel efficiency and protecting the environment from emissions and Of course with every new aviation also noise pollution are also a major product that enters the public domain research and development directive we also need to ensure that the for manufacturers as well as being an insurance industry is ready for the important topic for aircraft operators exposure of the new product. /owners. The more information we can provide to the underwriter the better understanding they will have to RECOGNISING WHERE determine the exposure. A RISK EXISTS One area which is seeing a great deal of research and development is Unmanned Sometimes it isn’t obvious that a client Aerial Vehicles (UAV); the various civil has an aviation exposure. As I have aviation authorities have a busy time illustrated above there doesn’t actually regulating UAV use. have to be an aeroplane involved. It’s Are there many people that would fly important to understand what the on an aircraft that does not have a policyholder’s end product or service pilot? Well, commercial aircraft do fly will do or where it will end up. And of automated but personally if I’m on a course, it is always a good idea to speak plane I have more peace of mind if a to a broker with aviation or aerospace pilot is sat in the cockpit as backup! expertise to help work through the risk However, I can see cargo being flown exposure. ·

A BREAKDOWN OF AVIATION/AEROSPACE COVERAGES

Airlines Space Airports & Ground Service Operations . Aircraft ‘all risks’ hull . Pre­‑launch . Airports . Comprehensive airline liability . Launch and in orbit . Air traffic control . Aircraft hull war risks . Space third party liability . Refuellers / refiners . Excess war (AVN52) liability . Service providers . Deductible buy back insurance General Aviation & Executive Jets . Products liability . Loss of use . Aircraft ‘all risks’ hull . Airport premises liability . Personal accident / loss of license . Aviation liability . Hangarkeepers liability . Mechanical breakdown . Aircraft hull war risks . Excess war (AVN52) liability . Excess war (AVN52) liability . Airport contractors Products Liability . Deductible buy back insurance . Prime airframe manufacturers . Personal accident / loss of license Banks, Finance Houses, . Major engine manufacturers . Mechanical breakdown Aircraft Leasing Companies . Sub­‑airframe manufacturers . Contingent aircraft hull . Component part manufacturers Helicopters . Contingent aircraft liability . Electronics / avionics . Aircraft ‘all risks’ hull . Repossessed aircraft hull . Maintenance, repair and . Aircraft liability and liability overhaul (MRO) . Aircraft hull war risks . Aircraft hull war risks . Excess war (AVN52) liability . Political risks Coverages . Deductible buy back insurance . Residual value insurance . Product liability . Personal accident / loss of license . Excess war (AVN52) liability . Grounding liability . Airport premises liability Remotely Piloted Aircraft . Hangarkeepers liability Systems / Unmanned Aerial Systems . Working parties liability . Aircraft ‘all risks’ hull . Excess war (AVN52) liability . Third party liability . Products recall . Manufacturers hull risks . Manufacturers hull risks

93 AVIATION CLAIMS LOCATION, LOCATION, LOCATION

Using a case study, this article demonstrates the importance of a specialized broking team when handling an aviation claim. by Steven Eagle · Ed Broking

When you mention aircraft, many people have a mental picture of bright, shiny, The Concorde, passenger jets, landing at modern, well the one aircraft equipped, airports in prime locations, that could fly like New York, Dubai, or London. faster than the This is a great image and would reflect some of the larger aviation risks, but Earth rotates, aviation insurance is an incredibly operated without diverse sector and many insureds operate a vast variety of aircraft types incident for 24 to numerous destinations with complex years. The only jurisdictions that can complicate matters, when claims occur. fatal accident it Steven Eagle heads up Ed’s was involved in Here are brief details of a claim and the Aerospace Claims team in London and real issues that arose: he has been with the company since occurred in the 2008. Steven has over 40 years year 2000, at the A few years ago, in a North African experience of handling claims in a country, an aircraft was chartered to variety of Senior Management roles Charles de Gaulle carry a group of prominent politicians with major Lloyd’s brokers. He airport in Paris, on a tour of villages in a remote region. also represents Ed Broking on the Unfortunately, whilst carrying out Aviation Claims Sub‑Committee­ of because another the tour, the aircraft took off in poor LIIBA (London and International weather and crashed into a mountain Insurance Brokers Association). airplane leaked top, totally destroying the aircraft and oil onto the killing everybody on board. tarmac. As the London brokers, we arranged hull, liability and crew personal accident SOURCE: FEDERAL AVIATION coverage, on a full reinsurance basis, ADMINISTRATION for the local insurance company. The reinsurance was subject to a claims control clause, that gave reinsurers full control over the instruction of experts and subsequent claims agreements and settlements.

A prompt advice was given to the reinsurers and they instructed the London office of a major international adjuster.

94 As the country where the incident The London underwriter quickly agreed not from the country, so there was occurred was the subject of sanctions, the claim and a release was obtained to extensive liaison with their embassy there were immediate problems for the allow the claim to be collected. and it was a protracted process, before adjuster, in obtaining the necessary settlements could be arranged. visas and arranging travel to the Whilst every collection is subject to In the meantime, claims were being region. In the end, this took around sanction checks, this particular claim presented from the families of the three weeks and the visas were only was being paid to a sensitive area, so deceased passengers and the adjuster’s obtained with the assistance of the local particular care had to be taken by all investigation was in progress, with the insurance company, who had excellent involved, the underwriter, adjuster and first priority being to seek legal advice connections in the government of the us as brokers, to confirm the status of on any legislation that was applicable to country. the insured and the loss payees. When air travel, in this location. the checks were finalised to everyone’s Unfortunately, by the time the adjuster satisfaction, the collection was As this was an internal flight, the arrived, the official investigation had completed and a payment sent to the adjuster found that there was local been completed and the remote site appropriate parties. legislation, that provided a fixed level had been abandoned. The adjuster was of compensation, equivalent to around advised that this was because of local Moving on from the hull claim, the EUR 26,000.00, at the current exchange insurgent activity, so sensibly decided adjuster then focussed on the rates. Accordingly, when the adjuster to remain in the capital and meet with passenger liability and the crew responded to representatives of the the insured and members of the local personal accident, which would be passengers, they offered this figure. Civil Aviation Authority investigation handled by their specialist liability team. team, instead. With fixed benefits, any crew death Surprisingly, the offer was rejected claims under personal accident and the lawyer who was acting for the From the discussions, it was possible coverages are normally simple to claimants, started legal proceedings. to confirm that the aircraft had crashed collect, just requiring death certificates, due to probable pilot error and this the identification of beneficiaries and In response and with underwriter’s allowed the adjuster to report and then the collection. Unfortunately, in agreement, the adjuster contacted a recommend a hull total loss settlement. this instance, the deceased crew were local lawyer, who was instructed to

95 96 respond to the complaint. It was hoped the adjuster and us, which resulted in that the process would be simple, but reinsurers granting an authority to try this did not prove to be the case, as and settle the matter. The figure was the plaintiff lawyer contended that below the court award, but was made the limitation act had not been legally on the basis that underwriters could issued. The defence lawyer argued back, continue to appeal and it would take that if this was the case, then earlier several years to go through the higher legislation existed, which provided even courts. lower limits (around 20% of the amount mentioned above). After much discussion, between the local lawyers, the negotiated figure At this point, the plaintiff lawyer, was finally accepted and the collection somehow, discovered that the crew process began. In this instance, around benefits had been settled at three hundred individuals were named EUR 60,000.00 and demanded a similar as beneficiaries, so protracted sanction payment for each of the deceased checks were required, before the claim passengers. Matters took a turn for the was finally collected and distributed to worse and court accepted the plaintiff the appropriate people. arguments and agreed that this should Alberto Santos be the settlement figure. In comparison to many western jurisdictions, the final settlements Dumont, Brazilian Somewhat bemused by the decision, were relatively low, but this case was inventor and the defence lawyer filed an immediate an interesting example of how the appeal and further hearings were interpretation of local law is sometimes airman, designed, arranged, to review the matter. It was not as clear cut as you would hope. believed that the defence was still The insured, ceding company, adjuster built and flew the strong, so the appeal was viewed with a and defence lawyers, did a great job first gasoline­ degree of optimism. defending the claims and they might, reasonably, have hoped for a better ‑engine airships Again, there was a surprise, as the first outcome. Fortunately, we had reinsurers having won the appeal was rejected and the lower court that understood the region and were decision was ratified, so a further appeal prepared to support the insured and Deutsch de la was filed and the matter was taken up to the local insurer, by paying “above the Meurthe prize in the next level. odds”, to conclude the matter. 1901 for a flight It still seemed that there was no basis of As brokers, we are aware that local that rounded the law for this award and it was hoped that courts can be unpredictable, so even more senior judges would recognise this with the best defence lawyers, results Eiffel Tower. fact, but this was to no avail. might not go as planned. In that situation, it is good to have supportive SOURCE: SMITHSONIAN OFFICE The defence team’s frustration reinsurers, with a realistic view of the OF EDUCATION increased, as the claimant’s lawyer jurisdiction. · moved to enforce the awards and sought to freeze the assets of the Insured and the Ceding Company, to compel settlement.

Unfortunately, it became clear that the decision of the court would not be changed, so urgent meetings were held to try and find an appropriate resolution to avert the financial orders against the Insured and the Ceding Company.

Luckily, the lead underwriter was highly experienced in handling claims from this region and agreed that it was time to increase the offer and negotiate a resolution, rather than keep launching appeals. Conference calls took place, involving the local insurer, reinsurers,

97 ENVIRONMENTAL AVIATION RISK A SERIOUS BUSINESS

On a cold and windy day 115 years ago this December, Orville and Wilbur Wright made the first successful flight of a self‑propelled,­ heavier‑than­ ‑air­ aircraft. That momentous day in Kitty Hawk, North Carolina, spawned an industry that is now worth hundreds of billions of dollars a year. It has changed the way we not only travel but also how think about the world. by Stephen Andrews · Aspen Insurance

Stephen Andrews is Head of in New York, London and Paris International Environmental and focused on the development at Aspen Insurance. He has of international environmental responsibility for Aspen liabilities, international Insurance’s portfolio of specialty products, growth environmental accounts across strategies and underwriting. Europe and the London Market. He sat on the Insurance Europe Stephen has over 25 years of global environmental task force regarding environmental experience including the Environmental Liability insurance, as well as within Directive. Stephen holds a industry as an environmental Bachelor of Engineering degree, specialist, regulatory consultant Chemical Engineering, from Stevens and chemical engineer. Prior to Institute of Technology, in joining Aspen, Stephen worked Hoboken, USA.

Cyber attacks on the aviation industry have become a serious concern. As increasingly complex and integrated information systems are adopted by the aviation sector, the threat of vulnerability to cyberattack increases. It has been estimated that the aviation sector faces over one thousand attempted cyber attacks each month.

SOURCE: CLYDE & CO NEWSLETTER, JULY 2017

98 From that first landing on sand after a POLLUTION FROM AVIATION A London based company which 12­‑second flight, aviation has become SECTOR AND POLLUTION FROM supplied and distributed fuel at an one of the world’s biggest and most ‘FIXED BASE OPERATIONS’ airport severely polluted groundwater important industries, with associated with at least 139,000 litres of fuel, at a sectors from safety, refuelling, inflight When looking at the aviation sector, we rate of seven litres a second. The leak entertainment and refreshments, to air need to question what are the prevailing was inadvertently discovered during an traffic control and baggage handling. environmental exposures? Are airport investigation into an unrelated incident. The link between aviation and pollution owners and operators exposed to The fuel is likely to be recovered at 80 liability was late being made, with environmental risks? Is there insurance litres a week, or slower, at a cost of environmental impairment liability protection in general liability policies? around £1m. insurance not being introduced until Pollution can be introduced into the the late 1970s. But there are many environment from many sources in the De­‑icing factors that those involved in aviation­ aviation sector. For instance, those An airport executive was fined for ‑associated sectors must bear in mind introduced over a widespread area such polluting a river by irregular release of today. as aircraft emissions and vehicle traffic de­‑icing compounds from activities on in and around an airport. There are also a runway. Contamination of 85 times Environmental risk exposures for those resulting from more specific the acceptable level were found after companies (and their risk managers) activities at an airport (a ‘Fixed­‑Based a control process to avoid spills broke continue to increase due to changes Operator’), for example: down. The airport was warned after a in legislation and an increase in social . Fueling operations previous event approximately a year awareness and public pressure. In . Fuel storage and hydrant systems earlier and the incident was noticed due addition, there is anecdotal evidence . Operation of aircraft to monitoring controls. of an increase in consistency in . Aircraft and ground service enforcement in many markets of new equipment maintenance Fire fighting environmental regulation. . Firefighting training areas A Port Authority recently detected Overall, we see two main pillars that . De­‑icing activities contaminated soil and groundwater at drive the discussion of environmental . Terminal operations including waste one of their Airports, which has been risk and increase the value of specialized management traced back over 50 years. environmental insurance programs. They entered into a voluntary clean­ These can all be exacerbated by ‑up agreement primarily focused 1. Increase in frequency of claims –­ construction and expansion activities on chemical compounds PFOS as new regulations emerge and take including the acquisition of additional land. (perfluorooctane sulfonate) and hold, coupled with public awareness Costs arising out of pollution events PFOA (perfluorooctanoic acid). An and consistency in enforcement, can include: investigation into the extent of the we see a future of increased claims . Third­‑party bodily injury claims contamination is ongoing. PFOS and activity. Although one could question . Third­‑party property damage PFOA have been classified as a potential the pace of this increase, it would . Investigation, clean­‑up and threat to health, wildlife and the be hard to argue that there would remediation costs environment. There is concern that be an actual global decrease in . Oversight and monitoring costs these could contaminate drinking water. claims activities for companies that . Legal defense costs The chemicals do not readily breakdown, fail to manage their environmental . Loss of use and business interruption so airports should be prudent about exposures properly. expense costs their existence, even if their use has 2. Increase in claims complexity/cost . Natural resources and environmental been phased out many years ago. It is ­‑ our experience illustrates that as damage claims likely the contamination stems from fire time goes forward, claim complexity training as far back as the 1960s, when increases. This is primarily as a foams that contain PFOS and PFOA had result of the implementation of REAL EXAMPLES TELL been used to extinguish fires. new regulations, globally, and the THE STORY OF RISK increased number of stakeholders Ground transportation involved when a pollution incident or Construction work Late last year, a ground transportation environmental damage event takes In the case of a contractor working at company at a major UK airport was place. an airfield, 36,000 gallons of fuel leaked fined when staff poured waste material into the ground rather than being directly into a river, rather than taking it So overall with a trend in increasing delivered to aircraft. An investigation to a regulated disposal site. While it may claims frequency coupled with an found part of a drilling machine stuck seem quite difficult to trace the cause increase in claims complexity, we can see into the fuel pipe. Even after mitigation of pollution, environmental regulators that the demand for education around measures, the pipe still continued to have the technology and skills to environmental exposures and available leak. The incident raised questions identify the sources of contamination. environmental insurance coverage will around underground hazards, and the continue on its growth path. role of site owners and contractors. Fuel Distribution

99 GENERAL LIABILITY AND SPECIALIST ENVIRONMENTAL AVIATION INSURANCE MARKETS MARKETS

Environmental coverage in “traditional” The specialist environmental market’s property and casualty policies is products on the other hand are designed certainly inconsistent across global around a broad range of environmental markets. Additionally, the coverage liabilities and impairment risk. Specialist is typically not comprehensive with environmental underwriters, often regards to relevant environmental with environmental consulting and exposures. engineering backgrounds, have the In some cases, there is no pollution expertise to understand and provide coverage except if caused by hostile coverages for some of the more complex fire, and often then just limited only to elements. Coverage can include: third­‑party bodily injury and third­‑party . Gradual and S&A pollution property damage – not including any . Clean­‑up costs first party clean­‑up coverage. . Natural resources/biodiversity Some extensions provide coverage for damage named perils such as fire, windstorm, . Business interruption expense lightning, explosion, or collision, but are . Third­‑party bodily injury and property still limited only to third­‑party bodily damage injury and third­‑party property damage. . Legal costs Broader forms can grant some type of . Transportation The greatest sudden and accidental (‘S&A’) coverage . Non­‑owned waste disposal site aircraft ever with strict requirements for discovery liability and reporting periods, but again often . Underground storage tank liability built was the Graf limited only to third­‑party bodily injury . Pre­‑existing conditions Zeppelin II (LZ­ and third­‑party property damage. More specifically in the aviation Policies can be tailored to the owner and/ ‑130) airship, insurance market, one can often see or the fixed based operator’s liability which boasted the application of a restrictive AVN 46B but also to contractors’ coverage for (Noise and Pollution and Other Perils liability arising due to claims resulting an impressive Exclusion Clause) wording. This states from exacerbation of existing pollution that the policy does not apply to claims or other release caused by construction, 245­‑meter length directly or indirectly occasioned by, development or remediation activities. and a 41.2m radius. happening through or in consequence There are a number of actions that of pollution and contamination of any can be taken including ensuring that SOURCE: GUINESS WORLD kind whatsoever unless caused by pollution and environmental risk OF RECORDS or resulting in a crash fire explosion are evaluated properly, including or collision or a recorded in­‑flight historical contamination at the site. emergency causing abnormal aircraft It is also important to review if the risk operation. management practices used to manage Regardless of coverage in a “traditional” environmental risk are adequate. property and casualty policy, there Risk transfer and indemnification are still significant exclusions and language in vendor FBO (Federal exceptions such as gradual releases, Business Opportunity) contracts first party coverage, regulatory liability, should also be reviewed for adequacy waste disposal or natural resource and and consideration should be given to biodiversity damage. mandating insurance requirements In some cases there may be coverage for vendors and contractors. It is also “buy backs” for some elements of recommended that there is a review on statutory environmental liability the reliance on airport sovereign and and even natural resource and governmental immunity. environmental damage claims, but It is always good practice to review usually with low sub­‑limits and current insurance coverage for gaps and irrespective of the operation’s true consider the availability of specialist exposure. environmental insurance. ·

100 101 THE ERA OF DRONES

Three years ago, drone operators considered that the lack of availability of appropriate insurance was a major problem hampering the development of their business. Today, this concern is gone but major changes are ahead of us. A scan from the past to the future helps understanding how this evolution happens. by Jean Fournier · Global Aerospace

Jean Fournier is Managing Director of the French branch of Global Aerospace. Prior to joining Global in 2009, Jean was a Managing Director at Marsh where he spent 19 years, including 10 years as Head of the French Aviation and Space team and 3 years in charge of Innovation. Earlier in his career, he worked at Airbus on military and space programmes. Jean is a graduate engineer from Arts et Metiers, and holds a Master degree from Stanford University and a DESS in Finance from Sorbonne University. Jean is a member of the board of UVS International. FLYING DRONES ARE AIRCRAFT Systems (JARUS) published in summer they consider that the risk is not higher 20171. This document recommends a risk than the ones they already cover in a A debate took place in the early days assessment methodology to establish factory or a construction site. To the to figure out if the flying component of a sufficient level of confidence that a contrary, their use usually decreases Unmanned Aircraft Systems (UAS) – specific operation can be conducted the exposure of workers to hazardous i.e. the drone – was indeed an aircraft. safely. situations. Light devices designed for leisure These evolutions are major changes for Aviation insurers, with specialised were presented as toys or flying robots the aviation community. The transition professionals and limited resources, to avoid the application of aviation period needs to be managed as time is focus on more specific operations, such regulations. needed to accept the new environment. as long range mapping or flights over The clarification took place when cities. These operations should be carried administrations stated that whatever out by entities that are flight safety the weight and the use, a flying device THE ADAPTATION OF savvy, a point that aviation insurers is an aircraft subject to the related THE INSURANCE SECTOR check before underwriting the risk. regulations. This comprehensive and adapted Simultaneously, it was recognized that Insurance companies support these insurance approach is disseminated by the pace at which the sector grows, efforts with a balanced approach aiming the European Commission through the requires a considerable change to the at facilitating the experiment of new DroneRules.eu3 project. way these regulations account for new applications, while disseminating the devices. Where the sky accommodates safety culture of manned aviation to hundreds of thousand aircraft of all kind new comers to this field. WHAT IS NEXT? worldwide with well-established traffic The first step in the European Union regulation procedures, the challenge was to make clear that Regulation (EC) The change in mindset is happening. is to accept millions of drones without 785/2004 applies to drones that are Now that drones designed to transport impacting flight safety. recognised as aircraft. passengers have flown in China 2017, the safest year ever for airline For aircraft with a Maximum Take or in Dubai, voices are heard from passengers, recorded no fatality on Off Mass (MTOM) below 500 kg, the individuals saying that they are willing jet aircraft for more than 4 billion insurance in respect of liability for to use them. The aviation community passengers transported, and 2 fatal damages caused to third parties (airlines, air forces, airports) recognizes accidents of small turbo-prop aircraft shall be no less than 750 000 SDRs2 the potential of these aircraft and resulting in 13 lives lost. corresponding to approximately want to cooperate to speed up their How to manage the growth of a 900 000 EUR. This limit of insurance can deployment. promising activity in an economic sector be provided by any liability insurer. In such positive environment, capability where professionals have contributed Amongst the short list of exemptions, to detect and avoid other aircraft to reach such a high level of safety, is the one concerning model aircraft remains critical. This concern – common the challenge that the Civil Aviation with an MTOM of less than 20 kg was to autonomous car manufacturers – Authorities (CAA) currently face. controversial. The debate is hopefully should foster the efforts of tech firms in now closed on three grounds: this area. Flying without third party liability Aviation insurers will stay tuned SEGMENTING THE MARKET insurance is inconsistent with the to facilitate these changes while safety culture that the authorities want continuously promoting flight safety. The CAAs recognize the need to limit the to implement; this culture is based on This is our commitment at Global application of prescriptive regulations responsible behaviour. Aerospace worldwide. · currently used for manned aviation A restrictive application of this to drones that are designed to be exemption limited it to aircraft flown in integrated into the existing traffic. model aircraft associations or clubs, 1 https://rpas-regulations.com/wp-content/ uploads/2017/07/170626_JARUS_Specific- More flexible rules should apply to light which promote flight safety and provide Operations-Risk-Assessment_SORA_v1.0.pdf drones that are flown in a segregated insurance when you become a member. 2 Special Drawing Rights: http://www.imf.org/ environment, namely below the A wider reading of the exemption external/np/fin/data/rms_sdrv.aspx 3 http://dronerules.eu/en/ minimum altitude below which manned extended it to aircraft used for aviation should not fly except for take- recreational purposes; insurers off and landings. providing private liability insurance can A distinction should also be made insure such flights of light drones (MTOM between drones operations. Professional below 2 kg – 95% of the existing fleet) as use over cities should be subject to long as they remain within VLOS. This is greater constraints than occasional use done through private liability insurance, for leisure within Visual Line Of Sight which penetration should be increased (VLOS) in non-populated areas. in many European countries. Hence the concept of Specific Operation Most professional uses of light drones Risk Assessment (SORA) that the Joint can also be covered by general liability Aviation Authorities on Unmanned insurers. With the support of reinsurers, WHAT’S NEXT? TRENDS, EMERGING RISK AND OPPORTUNITIES FOR AVIATION AND SPACE INSURANCE by Anna Boron · Lloyd’s

Lloyd’s has always had a reputation demonstrating strong underwriting for innovation and is a pioneer when it discipline and sophisticated pricing comes to insuring aviation and space modelling techniques. Currently Lloyd’s activities. maintains one aviation and four space realistic disaster cenarios to stress The first­‑ever aviation insurance test both individual syndicates and the policy was written by Lloyd’s in 1911 and market as a whole. although it stopped writing policies a year later after bad weather caused a series of crashes, in 1919, far­‑sighted underwriter Cuthbert Heath started the British Aviation Insurance Association. The first­‑ever In 1965 the first space satellite Anna Boron is an Executive in the insurance was placed, covering physical aviation insurance Innovation team at Lloyd’s where damage to the Intelsat 1 on pre­ policy was written she supports horizon scanning ‑launch, and from 1974­‑1982 the market and the delivery of the thought underwrote other satellites for up to by Lloyd’s in 1911. leadership reports. Subjects US$100 million each. In 1984, Lloyd’s covered recently include: stranded launched a successful salvage mission SOURCE: LLOYD’S WEBSITE assets (the transition to low to reclaim two rogue satellites, sending carbon economy), the exploration of a shuttle and five astronauts into orbit. aggregation modelling methods for liability risks and the application With expertise earned over centuries, of counterfactual risk analysis in Lloyd’s is the foundation of the the insurance industry. insurance industry and the future of it. Prior to joining Lloyd’s Anna was a Led by expert underwriters and brokers Policy and Research Officer for the who cover more than 200 territories and Principle for Responsible Investment countries, the Lloyd’s market develops Initiative where she worked on the essential, complex and critical the integration of environmental, insurance needed to underwrite human social and governance (ESG) factors progress. Lloyd’s can develop tailor­ in financial decisions. Previously ‑made policies for every customer in she held roles at the Chatham House every sector and it covers more than and the Financial Times. 60 lines of insurance and reinsurance Anna holds a BA in Languages, including space and aviation. Economics and Legal Institutions in Eastern Asia from Università London underwrites 60% of the global Ca’ Foscari and Beijing Language aviation market. In 2016 aviation University. In 2012 she obtained an accounted for more than US$1.2 billion MSc in International Management for in gross written premium for the China from the School of Oriental Lloyd’s market, with space contributing and African Studies (SOAS) followed US$200 million gross written premium by an MSc in Energy Management from to the total. Multiple syndicates at ESCP Europe Business School. Lloyd’s underwrite space and aviation,

104 AVIATION AND SPACE Trends As China’s air passenger market is set to triple over the next 20 years, China The world’s airlines carry more than Aviation will continue to invest in airports, three billion passengers a year and Low­‑cost carriers and ultra­‑low­‑cost airlines and aircraft in order to develop 50 million tonnes of freight. These carriers are still gaining market share a modern and sustainable aviation services generate 9.9 million direct jobs from the dominant full­‑service carriers. industry. Development is happening within the air transport industry and In the US, a wave of consolidation has so quickly that Li Jiaxiang, head of the support 2.7 trillion (3.5%) of the world’s resulted in 80% of US domestic travel Civil Aviation Administration of China, gross domestic product (GDP). Globally, being controlled by four major carriers. recently said: “We are still unable the UK has the third largest aviation They are, in order of passenger traffic, to catch up with demand for airport network after the US and China. American Airlines, Southwest Airlines, construction.” Delta Air Lines and United Airlines. In 2015 the space sector accounted Emerging markets are also driving Boeing and Airbus have forecasted for US$330 billion globally, with the US aviation growth. This year, passenger China will replace the US as the most space sector worth US$43 billion and traffic in China’s domestic aviation valuable market in the world for the UK space sector worth US$18 billion. market grew by 15.1% year­‑on­‑year, passenger jet deliveries by about The UK Government’s stated goal is to beating India’s 14.6% growth, according 2030. Recently, Airbus struck a deal to grow the space business to US$53 billion to data from the International Air increase the number of planes it makes by 2030. Transport Association (IATA). in China. China is also slowly developing a national commercial aircraft

105 manufacturing sector. The Commercial ‑flight connectivity is changing from nanosatellite launches. For example, Aircraft Corporation of China estimates being a luxury to a necessity as Wi­‑Fi in December 2017 China launched that Chinese airlines will need 8,575 new becomes more in demand than in­‑flight Algeria’s first communication satellite, planes worth US$1.21 trillion over the meals and in­‑flight entertainment. Nigeria has successfully launched next 20 years as strong travel growth Connected airports, encompassing five satellites from foreign territories continues. smart landing (which alerts pilots if in less than a decade and in May 2017 As aviation is one of the most energy aircrafts are approaching the runway engineers in Ghana converted an old and carbon­‑intensive forms of too high, too fast or are improperly telecommunications dish into the transport, whether measured per configured for landing), lighting control continent’s first functioning radio passenger km or per hour travelling the (which enables control and monitoring telescope outside South Africa. ongoing growth in travel and freight has within one series circuit), advanced put the spotlight on its environmental visual docking guidance system to Rapid technological developments impacts. Direct emissions from aviation optimise gate operations, mobile in satellite construction and launch account for about 6% of total UK devices to navigate the airports and infrastructure have enabled the emissions in 2014, 3% of the EU’s total face recognition systems will transform increasing use of nano/micro satellites greenhouse gas emissions and more how airports respond to passengers and (1 to 100kg). According to SpaceWorks’s than 2% of global emissions. The aim aircrafts needs. forecast: “2017 will be a record year is to reduce aviation’s CO2 emissions for nano/microsatellite launches, and then stabilise them at 2020 levels Space with 182 satellites expected to launch, (carbon­‑neutral growth) using aircraft In the space sector, new areas of representing an 80% increase from 2016. and operational efficiency, alternative business include emerging space The full market potential for the industry fuels as well as emission trading programmes in Africa and South remains high, but this year predicts and offsetting schemes (e.g. the EU America, and emerging private space only 10% growth year over year in the Emissions Trading System and ICAO’s companies and start­‑ups active in future.” Launch delays are the major CORSIA scheme). a variety of services such as human contributing factor to reduced market spaceflight, mining lunar and asteroids growth. In 2016, the US dominated the Overall a megatrend for the entire resources, suborbital and orbital management of nano/micro satellite aviation industry is connectivity. In­ launch services of small payload and launches (63%), with China second

106 (13%). Between 2009 and 2016, the for aeronautics and US$161 million for commercial sector accounted for 40% of space (January 2017 data and exchange The first space nano/microsatellites, forecasted to rise rate). A further US$66 million in loans to 70% by 2019. That leaves governments has been allocated to the UK aerospace satellite insurance with 10% and academic with the rest. industry under the Europe’s programme is placed, covering for small and medium­‑sized enterprises This next generation of satellites is (COSME). physical damage supporting another area of business: monitoring. The UK Space Agency has Brexit might have significant impacts to the Intelsat 1 awarded a $19 million contract for a new for both aviation and space, but at the on pre‑launch,­ satellite monitoring programme, which moment its exact effects are uncertain. aims to protect 300 million hectares of and from 1974­‑1982 tropical rainforests across the globe. In terms of space, the UK wants to stay the market will Advanced use of earth observation data involved in the EU Copernicus, Galileo from satellites, aerial surveys, ground and EGNOS programmes, but questions underwrite others sensors and other sources will support remain as to what extent UK space for up to $100m decisions and actions for disaster companies will retain access to the EU response and security. For example, the single market. each. In 1984, NASA Disaster Applications programme Lloyd’s launches was able to create a Damage Proxy Map According to IATA, the regulatory depicting areas of southwestern Florida, impacts will depend on the nature of a successful including Key West and Naples, that were the future Brexit agreement and access salvage mission damaged by Hurricane Irma (Category 4 to the European Single Aviation Market. at landfall in Florida). The London Market IATA has modelled three different to reclaim two Association’s claims committee and scenarios and even in the case of a Lloyd’s have agreed to support and fund “hard” Brexit the UK passenger market rogue satellites, the satellite imagery service provided is expected to be 45.5% larger in 2035 sending a shuttle by McKenzie Intelligence Services. The than it was in 2015 (a “soft” Brexit would service attracted the broad support result in 55.2% change). and five astronauts of the Lloyd’s market, with 44 out of a into orbit. possible 59 managing agents having Nevertheless the UK and the EU would signed up by the time the hurricanes benefit from ongoing collaboration. SOURCE: LLOYD’S WEBSITE struck. Looking ahead, the race to Mars is also fuelling the development of THE CHANGING RISK methane­‑burning rocket engines and LANDSCAPE competition between SpaceX and BlueOrigin. The Google Lunar XPRIZE, What future risks and opportunities the sponsored by Google, has ignited trends discussed above will bring for global participation of privately funded space and aviation? spaceflight teams with five teams left in The following is an overview of these, the competition. Overall, the idea of low looking at three main categories: cost access to space and NASA’s support natural environment, technology, and for private spaceflight has paved the society and security. way for private sector investments, In 2016, 40 initiatives received US$1.5 billion in funding, down from 46 and Natural environment US$2.3billion in 2015. In December 2017, NASA announced its investment Climate change and solar weather in concept developments for the next As discussed earlier, increasing CO2 decade: a return mission to sample a levels are a concern from a sustainability comet and a drone­‑like helicopter that perspective, but climate change could would explore potential landing sites on also affect aviation by increasing clean­ Saturn’s largest moon, Titan. ‑air turbulence, cause injuries, delays, higher fuel consumption and increased Brexit emissions on transatlantic routes by the Under the 7th Framework Programme middle of this century. for Research and the Horizon 2020 Framework Programme for Research and Like weather on the earth, space Innovation (2014­‑2020), EU funding to weather comes in different forms and UK entities amounts to US$270 million

107 different strengths. Solar flares, coronal Similar to traditional mining, materials, airports in May 2017. BA cited “a mass ejections and geomagnetic technical mining skills, a licence to major IT system failure that caused storms could potentially create huge operate and financing will play a crucial severe disruption to flight operations disturbances in the transport, aviation role in making commercial exploitation worldwide” originated by a power and power sectors by interfering with of asteroidal resources a reality in the supply issue that led to an estimated ground technology, GPS systems for coming years. US$102 million loss. navigation and satellites. The risks posed by space weather are now In regards to regulations, the US and The year before, following a power also magnified through what some Luxembourg are at the forefront of control malfunction, critical systems commentators have called “creeping developing the regulations for asteroid and network equipment failed to switch dependency”, which means the growth exploration and exploitation. over to Delta’s backup systems. This of interconnected systems that In 2015 the Commercial Space Launch incident issue highlighted the airline’s business and other activities rely on. Competitiveness Act was approved reliance on ageing technology and the in the US with the aim to “facilitate interconnected nature of its systems, Another issue is asset stranding. a pro­‑growth environment for the and led to almost 1,000 flights being The world has a budget of estimated developing commercial space industry cancelled and delays of almost 3,000 carbon dioxide it can emit while still by encouraging private sector others worldwide. The airline was quick limiting the rise of temperatures over investment and creating more stable to deny a cyber­‑attack was the cause. 2C above pre­‑industrials levels. To stay and predictable regulatory conditions, In the same year Southwest Airlines within the budget countries will have and for other purposes.” It granted US grounded more than 2,000 flights due to to pursue further emission reductions. citizens rights to own, use, transfer what it described as a technical glitch This means that some fossil fuels and sell mined space resources without with a router. will be phased out of the economy granting exclusive ownership over the and assets such as airplanes that celestial bodies in compliance with Cyber­‑attacks and cyber security are still require them, will gradually lose international treaties such as the Outer rapidly developing issues and in 2014, value or become obsolete – becoming Space Treaty. the Aviation Information Sharing and “stranded”. This is why alternative, Analysis Center was created in the US low­‑carbon jet fuels will play a key role Since July 2017, Luxembourg has to act as the focal point for security in meeting the aviation industry’s target provided space law expertise and it is information sharing across the aviation of carbon neutral growth starting in the first European country to adopt sector. Two years later the European 2020. Electric planes will also play a legislation regulating the ownership Centre for Cyber Security in Aviation was role, for example EasyJet has recently of resources acquired in space by created by the European Aviation Safety partnered with Wright Electric to commercial companies. Agency. develop battery­‑powered planes for its short­‑haul flights such as London to The Internet of Things Amsterdam or Paris. Technology When looking at the Internet of Things (IoT) there are projects to improve Space mining Cyber threats and business every aspect of aviation: passenger Asteroid mining is another opportunity interruption experience, baggage handling, in the space sector. Asteroid resources In July 2015 the Prudential Regulation equipment monitoring, and improving include materials such as sulphur, Authority (PRA) at the Bank of England fuel efficiency. platinum, cobalt, ferrous metals and published a policy statement, which organic carbon. For example, according mentioned that casualty (direct Virgin Atlantic’s Boeing 787 uses IoT to Asterank, a scientific and economic and facultative), marine, aviation sensors to gain real­‑time data for a database that provides information for and transport lines are potentially number of things from performance to more than 600,000 asteroids, Asteroid significantly exposed to “silent” cyber maintenance (for example, detecting 162173 Ryugu would be the most cost losses (i.e. cyber exposures in insurance if the performance of a jet engine mid­ effective to mine with an estimated policies that may not implicitly include ‑air is not up to standards and sending value of US$82 billion and an estimated or exclude cyber risks). With aviation a message to airport engineers to be profit of US$30billion. companies relying on IT systems ready when the plane lands). The kind that are crucial for ground and flight of data collected by this sort of system Deep Space Industries and Planetary operations, cyber risks pose a major would help to boost engine efficiency, Resources are first movers and have threat as they can cause breaches and reduce travel times and cut fuel costs. already identified attractive asteroids. disruption, and can directly impact Companies such as Rolls Royce and services, reputation and financial General Electric use IoT technology to Despite large potential profits, in 2012 a performance. monitor the performance of jet engines. Keck Institute for Space Studies (KISS) study calculated that the cost for a For example, a technology failure at In 2015, Lufthansa Airlines launched the future mission to identify and return a British Airways (BA) led to delays, airport RIMOWA electronic tag, which enables 500­‑tonne asteroid to low earth orbit congestion and flight cancellations travelers to check in their luggage from would be US$2.6 billion. for thousands of customers at London the comfort of their home from their

108 smartphone via Bluetooth and hand in They could be solar­‑powered to pollinate have occurred if various influencing their luggage at a check­‑in station upon crops as the number of honey bees factors had been different. arrival at the airport. Helsinki Airport declines. In the case of a drone flying within 20 uses sensors in its terminal to track meters of a plane on the approach to passengers through their smartphones In 2015 a Lloyd’s report identified three Heathrow, a post event analysis could in order to help prevent queues and key areas that must be developed for take into consideration the proximity tailbacks and also be able to send the effective provision of insurance for to the plane as a severity measure notifications to passengers using their drone operations: and statistics of near misses as an locations. . Regulation, through the estimation of likelihood of a collision. implementation of a robust, This would help to understand potential As aircraft, ground facilities and other internationally­‑harmonious total economic loss and insurable losses critical infrastructures are vulnerable to framework from a catastrophic event on a scale of cyber­‑attacks, the risk could increase . Safety, through the continued the one that almost took place. with connectivity. However, as systems development of training and licensing become more interconnected, more schemes, and further enhancements Drones UK regulation is also changing. In up­‑to­‑date data becomes available and in ‘sense and avoid’ technology July 2017 the UK Government announced loss prevention services are developed. . Security, through the application of measures to place new responsibilities on This is an opportunity to better sufficient cyber security measures drones weighing more than 250g ­‑ such as understand risks and trends as well as mandatory registration of the individual planning mitigation and information As it’s a relatively new risk, claims owner and safety awareness tests. sharing frameworks. history for drone insurance is sparse. Finally, as mentioned in Lloyd’s 2017 In the case of drones, which have come report “The rise of the drone insurance Drones close to causing civil aviation disasters, market”, insurers might consider whether Drones are now used for a range of a downward counterfactual work would they can incorporate drones into their activities including military, agriculture, be insightful. own business model to collect quickly public services, wildlife protection large amounts of data to price risks and and research. The sector is expanding A downward counterfactual analysis, as process claims. This means that insurers rapidly with global expenditure set to explored in Lloyd’s report Reimagining might invest in drones with a view to double to US$91 billion over the next history published in 2017, is a different generate cost savings, reduce risk and decade. In the future drones could be way of exploring past losses or near­ provide a better service to clients. used to deliver parcels, move freight ‑misses by treating the past as one and carry people singly or in swarms. possible version of many that could

109 Flying cars Society and security Flying cars have been a popular theme Currently, the in science fiction and every day, Terrorism millions of hours are wasted on the road Recent attacks and threats to flights and world’s longest worldwide. In 2014 America’s drivers airports ­‑ the three coordinated suicide flight is Qatar wasted 6.9 billion hours stuck in traffic. attacks targeting Brussels’ Airport and Projects such as Uber Elevate that Zaventem and Maalbeek metro stations Airways route look into vertical takeoff and landing in 2016, and the arrest of Jaber al­‑Bakr, aircraft are currently being developed. 22, from Syria, who was allegedly between Doha At the moment there are several market planning to blow himself up at a German and Auckland, feasibility barriers including battery, airport, for example ­‑ demonstrate how air traffic control, safety, cost, noise, aviation and potentially space might New Zealand. The emissions and pilot training. continue to be targets of future attacks 9,032 mile trip with consequent psychological and Space manufacturing economic effects. takes nearly 17 Material from asteroids could be Another trend is the use of new hours and is flown processed directly and terrestrial technologies such as drones and manufacturing techniques could be terrorists’ tactical and technological by four rotating shifted into orbit. Moving factories into knowledge and experience accumulated pilots. space could reduce the need to open in conflict zones. In November 2017 new ones on earth but transport costs the US National Terrorism Advisory SOURCE: FLYING TIME AVIATION might offset any emissions reductions System stated that “some terrorist unless powered by sustainable energy. groups overseas are using battlefield In 2014, a 3­‑D printer was installed on experiences to pursue new technologies the International Space Station (ISS) and tactics, such as unmanned aerial and it validated the process for printing systems and chemical agents that in orbit, critical to making longer could be used outside the conflict journeys to Mars for example. zones. Additionally, terrorists continue

110 to target commercial aviation and losses due to cancellation and re­‑routing air cargo, including with concealed costs are being developed. The increasing explosives”. use of nano/micro satellites could generate more pre­‑launch and launch Space tourism insurance opportunities. Drone Space tourism has been developing deliveries, self­‑driving flying taxis, since the 1990s, but significant and Mars travel are also in the pipeline, uptake is yet to be seen. In 2001 and insurance will be a crucial component Dennis Tito became the first to visit in their viability and success. the International Space Station (ISS) through Space Adventures where he The challenge for insurers if they want stayed for seven days, becoming the maximise these opportunities is to first “fee­‑paying” space tourist for ensure their products keep pace and Only 5% of the US$20 million. Virgin Galactic, founded remain aligned with their customers’ world’s population by Richard Branson (Virgin Group), Blue insurance needs. They will need to make Origin founded by Jeff Bezos (Amazon) sure they have enough capacity to take has ever flown and Space X founded by Elon Musk on these new risks and to do so, ensure on an airplane. (Tesla and SolarCity) are all developing their models are up to date and fit for reusable suborbital launch systems purpose. New approaches to modelling However, at the specifically to enable space tourism. losses that have not yet occurred same time a small might be needed for space­‑related SpaceX has recently been approached to business, such as business interruption minority of the fly two private citizens on a trip around and environmental liability for space world’s population the Moon in 2018, while for US$250,000 mining missions, personal accident and Virgin Galactic offers a two and a half third­‑party liability for space tourism fly very regularly. hour flight after three days’ training. and space­‑specific travel insurance (including repatriation!). SOURCE: BAA TRAINING Moreover, the idea of developing a commercial lunar depot to provide How this all develops in reality is anchorage for significant lunar business unknown but one thing is for certain, development (hotels, for example) was insurance will be a key part of any future confirmed by Bigelow Aerospace and that unfolds. Those insurers who start United Launch Alliance in 2017. to think today about what is coming over the horizon tomorrow will be those best placed to take advantage of the many CONCLUSIONS new business opportunities that soon will surely be speeding into view. · From creating an aviation space consortium to insuring against airlines defaulting on loans for new aircraft Editor’s Note: Footnotes included in the article are available in our digital edition @mdsinsure.com/ to paying claims for tens of millions en/fullcover/ of dollars for a spaceship test flight programme accident, the London market and Lloyd’s are already deeply involved in insuring aviation and space developments. London in particular is the epicenter for space and aviation activities given the presence of infrastructure and expertise to support these sectors.

However, as this article shows, these sectors are entering a new age as risks mature and evolve. This represents a substantial opportunity for insurers in a number of business lines.

For example, business interruption products to insure airlines against large events (such as volcanic ash clouds, severe winter storms) that lead to

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Accident and Health | Aviation | Credit and Political Risk | Crisis Management | Cyber | Energy and Construction Environmental Liability | Excess Casualty | Marine | Professional Lines | Railroad Liability | Surety 12314 MDS Lloyd's Broker Ingles Fullcover 220x280.pdf 1 12/02/2018 15:36

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EIOPA REGULATING FOR THE FUTURE INTERVIEW WITH THE CHAIRMAN OF EIOPA, GABRIEL BERNARDINO

The European Insurance and Occupational Pensions I believe the main Authority (EIOPA) is responsible for the roll‑out­ of challenges faced by the Solvency II and regulatory reform. fullcover spoke to insurance sector are to chairman Gabriel Bernardino about his career and role, do with the impact of future challenges, the progress of Solvency II and the new new technologies and European Personal Pension Product to launch this year. big data.

When did your career in the insurance and Occupational­ Pensions Supervisors sector begin? Tell us more about your (CEIOPS) and in 2009 I was elected journey and becoming president chairman of the CEIOPS board. Finally, of EIOPA. in 2011, I ran for president and was elected I started my career in 1989, in a pension to serve the newly‑formed­ European fund/insurance actuarial role with the Insurance and Occupational Pensions supervisory authority, which was then Authority (EIOPA). I have been president called the ISP – Instituto de Seguros de since then. Portugal (Portuguese Insurance Institute). In 1996, I managed supervisory teams In 2016, you were elected for a second and in 2000, was appointed head of term in office, how would you rate development, responsible for all regulation. your progress at EIOPA since 2011? In 2007, I was appointed director‑general­ for Modesty aside, I feel that my first development and institutional relations. mandate was rather positive. It advanced Throughout my career, I kept up­‑to­ EIOPA as a competent, credible and ‑date with new international regulatory modern European regulatory authority, trends and from 2002 onwards, regularly a major force within the insurance contributed to European and international sector and a respected voice in the working groups. In 2006, it was my honour financial services industry in Europe and privilege to be appointed leader of and beyond. the Committee of European Insurance

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What has EIOPA brought to the system that incorporates risk and capital­ of Solvency II has made a significant insurance sector? What do you see as ‑related concerns into strategic decision­ contribution to the implementation of your main challenges in the future? ‑making. Corporate culture plays a big a risk­‑based business culture and an The main contribution was, no doubt, all role, but there’s still a long way to go. improved risk­‑management capability. the work to develop and introduce the new In this context, and when compared to its risk­‑based regulation regime, Solvency II, How do you now see the market in international competitors, the European which is a major step forward in protecting terms of regulation? Do you believe insurance sector enjoys a competitive policy holders and the insurance single­ it requires new reform or do recent advantage. ‑market in the European Union. changes address regulatory needs? Currently, I believe the main challenges In my opinion, the European insurance In June this year you won the Person faced by the insurance sector are to do sector benefits from modern, solid of the Year Award at the Melhores with the impact of new technologies and regulation in most areas. EIOPA’s strategic Fundos 2017 (Best Funds 2017). big data. Digitisation and the increasing priority for the coming years is to move Given your track record in the sector, use of new technology is a reality all of forward with unifying the European how do you feel about this award? society now grapples with, and in the Union’s regulatory framework. To this It was a great honour to be given this insurance sector, it’s bound to impact end, EIOPA recently published a paper award. It’s very rewarding that my the entire supply chain. on the key characteristics of a common contribution, to provide financial stability Innovation can be beneficial to EU framework, covering such issues as; and protect consumers with insurance consumers, it makes products and ensuring equitable conditions, avoiding and pension funds, is recognised. services more widely available, better regulatory arbitrage and securing similar serving their needs, while for insurers levels of protection for all insured We know you’re a movie buff and and brokers, it allows them to implement and beneficiaries. enjoy insurance­‑related movies. more efficient processes, reducing What movie has made the strongest overheads. At the same time, we must You’re currently involved with the impression on you? And why? assess and manage new emerging risks development of a European Personal Among insurance­‑related films, the one such as; meeting ethical standards Pension Product (PEPP). What are its that made the strongest impression on when using personal data, the possible benefits and key features? When do me is Billy Wilder’s Double Indemnity. exclusion of certain consumers based on you expect to take it to market? A great classic, co­‑written by Wilder and their traits and the cyber risks associated The PEPP will be a long‑term,­ secure, the superb novelist Raymond Chandler. • with large amounts of data stored by transparent, cost­‑effective retirement insurance companies. savings product, giving European savers In my opinion, regulation should a new individual savings opportunity manage different business models and thus addressing the long‑term­ impartially. It’s essential to develop savings deficit in the European Union. a balanced regulatory framework The PEPP will be authorized by EIOPA that permits high levels of consumer and can be sold throughout the EU, protection while at the same time, not taking advantage of economies of scale unnecessarily hindering innovation. to provide better returns for consumers. The European Commission’s proposal, The Solvency II regime came into based on EIOPA’s work, is currently being force in Europe in 2016. How discussed by Member States and the important is the application of this European Parliament and we expect it to regime, in your view? How would be approved in the second half of 2018. you assess its progress so far? Solvency II has been applied with How do you view the European great success. Despite a rather difficult insurance sector in comparison with The European insurance macroeconomic climate, with historically the global market? What do you think sector benefits from low interest rates, the new regime rolled are the greatest challenges facing the out without a hitch, thanks to timely sector in the future? modern, solid regulation preparation and adequate transition The European insurance industry, on in most areas. EIOPA’s periods. the whole, seems robust and resilient, The new system, by means of its three although I do see significant challenges, strategic priority for the pillars, substantially modifies sector namely the long‑term­ persistence of coming years is to move regulation. In terms of solvency, the low interest rates. There has been a European insurance sector has on sustained approach to adapt business forward with unifying the whole, adequate ratios. One key models accordingly and the industry has the European Union’s implementation point is the need to equip responded positively to new challenges. companies with an effective governance The development and application regulatory framework.

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The European Personal Pension Product will be a long­‑term, secure, transparent, cost­‑effective retirement savings product, giving European savers a new individual savings opportunity and thus addressing the long­ ‑term savings deficit in the European Union.

Gabriel Bernardino Chairman ​of EIOPA

Gabriel Bernardino is Chairman of the hearing held on 1 February, 2011. European Insurance and Occupational Mr. Bernardino assumed his responsibilities Pensions Authority (EIOPA). He is on 1 March, 2011 for a first five­‑year responsible for the strategic direction term. On 16 December 2015 the European of EIOPA and represents the Authority Parliament confirmed the re­‑appointment of at the Council of the European Union, Mr Bernardino for a second five­‑year term, the European Commission and the European which started on 1 March 2016. Prior to Parliament. Mr. Bernardino prepares the his current role, Mr. Bernardino was the work of EIOPA’s Board of Supervisors and Director General of the Directorate for also chairs the meetings of the Board of Development and Institutional Relations Supervisors and the Management Board. at the Instituto de Seguros de Portugal Mr. Bernardino is the first Chairperson (ISP). He has served in several positions of EIOPA. He was elected by the Board of of increasing responsibility since he Supervisors of EIOPA on 10 January, 2011. joined the ISP in 1989 and represented His nomination followed a pre­‑selection of EIOPA’s preceding organisation, CEIOPS, the European Commission and was confirmed as Chairman between October 2009 and by the European Parliament after a public December 2010.

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A BRAZILIAN RISING STAR HAVAN, A COMPANY AHEAD OF ITS TIME

Luciano Hang at the inauguration of the Itaquaquecetuba shop, in São Paulo.

Trailblazing, innovation and commitment Three years after opening, their 45m2 Our story is built on the are the foundations of Havan’s success – a store couldn’t keep up with the huge dedication and commitment Brazilian department store described as customer demand or accommodate its ‘a modern company ahead of its time’. rapidly expanding product range. They of every employee. Havan’s story begins in 1986. At the age of moved to a larger building which, to this People who see Havan as a 24, entrepreneur Luciano Hang realized day, houses the company’s head office. that the town of Brusque, deep in the In the early 1990s, on a trip to South home from home and who go state of Santa Catarina, was enjoying an Korea, Luciano spotted a new market above and beyond the call of economic boom driven by tourists who opportunity. Taking advantage of new liked to shop. With his partner, Vanderlei import regulations on foreign products duty in order to delight their de Limas, he opened a small fabric store. and to meet Brazil’s retail needs, he customers. They came up with the brand, Havan, by imported in‑bulk,­ fabrics and low‑priced­ combining the Ha from Hang and the Van items. Havan, who opened a store in 1986 from Vanderlei. with a single employee, has now grown into a company with 12,000 employees in branches all over Brazil; demonstrating its continued expansion.

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Pará

Tocantins

Pernambuco

Bahia

Acre

Goiás Rondônia Espírito Santo

Mato Grosso

Rio de Janeiro

Minas Gerais

São Paulo

Mato Grosso do Sul Santa Catarina

Paraná

Havan footprint in Brazil

Impressive figures People who see Havan as a home from Today, Havan stores, in addition to home and who go above and beyond their 100,000 strong extensive product Annually, Havan welcomes over 100 the call of duty in order to delight their range, offer other services, such as million customers; they come to customers. It is this set of attributes insurance packages for Extended browse more than 100,000 national — our people, spirit of adventure and Warranty, Financial Protection and more and imported products –­ from clothing, courage — that enables Havan to be an recently, Multi-Insurance. Havan’s close appliances, toys and baby/childcare amazing retailer,” says group chairman, relationship with MDS means all work products to technology, tools, household Luciano Hang. as a team, promoting, running and goods and decorations. It is Brazil’s managing joint campaigns and in‑store­ one­‑stop shop. Recently, it started a new workshops in nearly every company outlet business line – the Havan Viagens travel A successful partnership and working together to monitor results. agency –­ offering customers even more with MDS The partnership with MDS has products and services. Such freedom continually improved Havan’s results, of consumer choice is represented by The relationship between MDS Brazil with a remarkable 191% growth in affinity the Statue of Liberty which sits outside and Havan is a time­‑honoured one. service sales in the past year. its stores and has become a symbol As the number of stores increased, The service sector now represents for the Havan brand. Hang looked for other ways to optimize a substantial part of the Havan Group’s After more than 30 years of trading, business potential. His innovative spirit income, making it a significant contributor Havan has more than 100 stores, giving has been instrumental to the brand’s to the bottom line. it a presence in 15 Brazilian states. success; always anticipating market “Our story is built on the dedication demands and introducing new products and commitment of every employee. and services to clients.

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Social responsibility for Professional Apprenticeships (SENAC). Havan’s future Havan trains young people aged 14­‑24, Since its inception, Havan has embraced via internships in a variety of company Havan’s expansion plan includes the social responsibility, viewing ‘giving departments, giving them marketable opening of 100 more mega‑stores­ by 2022. something back to society’ as an important skills. In seven years, 1863 young people “Over the next five years, we’ll do what it part of its activity. Among Havan’s started their careers with Havan as took us 31 years to accomplish. We expect several environmental and community interns and the company currently in 2022 to have 25,000 direct employees support initiatives (particularly social, employs 336 of them. and 100,000 contractors, and we’re going cultural and sports­‑related projects) is Programa Entra 21, something to open in new states and new cities,” Troco Solidário (Solidary Penny), where Havan also supports, follows a similar says Luciano. customers are invited to donate the employment format. It empowers He concludes: “We’re confident about change from their purchases. Launched 300­‑plus young people from poorer the future and are motivated to focus in 2010, the initiative has raised more than backgrounds to engage with the our energies on the coming years and R$18 million which has been donated to technology sector. Not only does Havan commit to investments we’ve currently charities wherever Havan operates. support the project with a monthly overlooked. We’ve witnessed changes It also supports the training and financial investment, but it also invites in consumer expenditure, there’s more professional development of younger some trainees to join the company. growth, and this increasing consumer people through Programa Menor Aprendiz Programa Entra 21 is funded by Santa confidence reflects the country’s (Young Apprentice Project) and Projeto Catarina’s state government and the economic trends.” Pescar (The Fishing Project). City Council of Blumenau and is also Luciano Hang’s vision for the future Menor Aprendiz, a youth apprenticeship supported by local businesses who goes beyond giving customers what they programme, is developed through commit to employing some of the young need – it’s to offer services and solutions partnership with the National Service people trained by this programme. that innovate and amaze. •

Havan store in Barra Velha, Santa Catarina state

122 Peça_Revista.pdf 1 05/03/2018 10:42:58

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AXA Seguros S.A, CNPJ: 19.323.190/0001-06, Av. Presidente Juscelino Kubitschek, 1600 – 15º andar. Ouvidoria: 0800 AXA HELP (0800 292 4357). Susep.gov.br. Registro SUSEP: 02852. Ranking BCG Most Innovative Brands 2016 m d s m a g a z i n e — f u l l c o v e r MENTAL ILLNESS IN THE WORKPLACE A GROWING RISK

BY DR SARA EVANS‑LACKO

Employers, managers and Mental illness and substance use will feel more comfortable in discussing co­‑workers can play an disorders are the leading cause of any potential mental health issues early disability worldwide. In Europe on and will have better chances at getting important role in supporting alone, almost 165 million people have the help and support that they need employees with mental experienced mental illness during the to recover. Responses, such as flexible past year. In 2010, this was associated working hours, may be helpful but are health problems. Working with an estimated cost of €461 billion.1 not necessarily sufficient to support environments that promote In Portugal, the rate of previous year the employee with the mental health mental disorder is around 22% which is problem. It is critical that managers and social acceptance of relatively high in Europe and is associated co­‑workers also provide support and an employees with mental with significant levels of disability in open environment in addition to flexible the workplace in addition to personal working hours. health problems may and family life.2 Much of the costs In a study of seven European countries5 mitigate the adverse impact associated with mental illness result which focused specifically on depression, from productivity losses associated with we investigated the social and economic and risk of mental health absenteeism and presenteeism (i.e., impact of depression in the workplace problems in the workplace. workers with mental health problems and access to support and/or treatment attending work whilst unwell) in the in order to mitigate the risk and impact workplace. Nevertheless, despite the high of depression in the workplace. We found prevalence and significant economic that about 20% of employed respondents costs, mental illness is an issue which is reported having a previous diagnosis of often underestimated in the workplace. depression. Among employees with a Some data suggest that absenteeism diagnosis of depression, between 20 and and early retirement as a result of mental 55% reported taking time off of work due illness, appear to be increasing across to depression. Europe.3 In Germany, for example, the Employers, managers and co­‑workers contribution of mental illness to the can play an important role in supporting cost of permanent disability pensions employees with mental health problems. has tripled in the past 20 years. Manager Working environments that promote responses which focus on offering help social acceptance of employees with to an employee with a mental illness mental health problems may mitigate the can help to increase positive attitudes adverse impact and risk of mental health about people with mental illness in problems in the workplace. Both manager the workplace4 and also, openness and reactions and organisational factors disclosure of employees with mental may influence how people with mental health problems. By doing so, employees health problems are perceived and treated

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A positive spirit At MDS our ethos is to break barriers, solutions to help our people develop in insurance and other areas we consider a more positive attitude. We’re relevant to society. That’s why in also actively promoting debates and late 2016, we adopted mental health as sharing information about mental our corporate responsibility focus, health. After all, as Filipa Palha, supporting ENCONTRAR+SE, an association president of ENCONTRAR+SE, says: dedicated to helping people with mental “A mental illness is like any other illnesses and their families. illness and it must be treated as Being MDS, we wanted to go further than such.” At MDS, we wholeheartedly simply supporting an organization; agree, and together with ENCONTRAR+SE we wanted to know more and involve will continue to inform and discuss ourselves and our teams. Together with what we believe is one of the most ENCONTRAR+SE we are raising company serious health problems affecting awareness of mental health and through our society. our project Positive Minds, promoting

in the workplace and hence openness In particular, three areas of focus could Dr Sara Evans­‑Lacko and disclosure among employees with lead to improvements: (1) support and mental health problems. These factors are training for employees, managers and important facilitators of social inclusion, other relevant staff; (2) complete support which is what a person with mental health from the top of the organization through problems needs. A better option to tackle enactment of supportive policies and mental illness in the workplace is for practices for both prevention and managers to offer direct help to depressed treatment of mental illness and (3) a employees. Managers who avoid focus on earlier support and intervention discussing an employee’s depression are to reduce the gap between recognition only adding to the general ignorance and treatment. In view of increasing of mental illness and not helping either absenteeism attributable to depression the company or the staff member. and the economic consequences Other research has emphasised the associated with this, the need for better importance of positive attitudes in workplace policies is evident. • relation to social acceptance of people with mental illness as a key factor driving 1 Wittchen H­‑U, Jacobi F, Rehm J, et al. The size and burden stigma and discrimination and has of mental disorders and other disorders of the brain in Dr Sara Evans­‑Lacko is an Associated Europe 2010. Eur Neuropsychopharmacol 2011; 21: 655–79. shown a direct link between attitudes and Professorial Research Fellow in the the experiences of people with mental 2 Graça Cardoso, Miguel Xavier, Gemma Vilagut, Maria Personal Social Services Research Unit illness. Anti‑stigma­ interventions which Petukhova, Jordi Alonso, Ronald C. Kessler, José Miguel at the London School of Economics and challenge myths and misperceptions and Caldas­‑de­‑Almeida. Political Science, with a particular Days out of role due to common physical and mental promote social contact between people interest in the role of health services conditions in Portugal: results from the WHO World Mental with and without mental health problems Health Survey. British Journal of Psychiatry Open and social support in the prevention and have made important steps in addressing Feb 2017, 3 (1) 15­‑21 treatment of mental illness. stigmatising attitudes, yet stigma is still a major barrier in the area of employment 3 McDaid D, Curran C, Knapp M (2005) Promoting mental well­ ‑being in the workplace: a European policy perspective. and many employers are not dealing with Int Rev Psychiatry 17: 365­‑373. Url http://sites.google.com/ it adequately. site/fpcerhto/McDaid2005.pdf In the context of what we know, recommendations can be made for 4/5 Evans­‑Lacko S, Knapp M (2014) Importance of Social and Cultural Factors for Attitudes, Disclosure and Time off Work employers and policymakers about how for Depression: Findings from a Seven Country European to best translate evidence about workplace Study on Depression in the Workplace. PLoS ONE 9(3): mental health into practice and to improve e91053. doi:10.1371/journal.pone.0091053 the workplace context for people with mental illness and businesses.

125 PUB DOSSIER

MOZAMBIQUE

A LAND OF MULTIPLE OPPORTUNITIES

THE CHALLENGES OF THE MOZAMBICAN INSURANCE SECTOR

EMOSE STATE-OWNED INSURER LEADS THE WAY

ENERGY WILL MODERNISE MOZAMBIQUE m d s m a g a z i n e — f u l l c o v e r

128 d o s s i e r m o z a m b i q u e MOZAMBIQUE A LAND OF MULTIPLE OPPORTUNITIES

BY AICEP – AGENCY FOR INVESTMENT AND FOREIGN TRADE OF PORTUGAL

Given Mozambique’s Its location, strategically placed to current level of development build relations with Southern Africa, Since 26 August 1995, Mozambique the Middle East and Asia, is considered has been a member of the Banco and its natural resources – ideal for entry into the Southern African Africano de Desenvolvimento (African including huge off‑shore Development Community (SADC), Development Bank – AfDB), the which collectively has more than 305 Banco Islâmico de Desenvolvimento natural gas fields – the million consumers1. Its resources (Islamic Development Bank – IDB), country has become a focus however are not only limited to gas the Organização das Nações Unidas fields; Mozambique is a leading coal (United Nations – UN) and its for international investors. producer, aluminium transformer and specialized agencies (Funds, The International Monetary ruby supplier (reaching substantial Programs, Specialized Agencies prices at international auctions). and other UN Entities) and the Fund (IMF, Outlook April The country is equally recognised for Organização Mundial de Comércio 2017) predicts 14.9% its energy production capacity, various (World Trade Organization – WTO). river basins, extensive coastline and In November 1995, it was admitted economic growth by 2022. the development of its ocean‑based­ as a full member of the British economy. There is also growth potential Commonwealth and since 2006 has via agriculture and tourism. held observer status at the While maintaining its traditional Organização Internacional da links with Portugal and South Africa, Francofonia (International Mozambique has sought to develop Organisation of La Francophonie). strong relationships with multiple On a regional level, Mozambique leading partners such as the World is part of the Comunidade para o Bank, the African Development Desenvolvimento da África Austral Bank, the European Union, the USA (Southern African Development and Japan. To complement this, Community – SADC), the União Mozambique’s foreign policy focuses its Africana (African Union – AU) and efforts on finding new business partners the Comunidades dos Países de Língua and investors in Brazil, China, India, Portuguesa (Community of Portuguese South Korea, Thailand and Turkey. Speaking Countries – CPLP).

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Economically, Mozambique and its endeavours to ensure a stable pricing population of some 28 million people environment. Mozambique’s credit Economically, company and an estimated nominal GDP of reference rating is now among the investment and business 11.5 billion USD2, is still a small‑sized­ highest in sub­‑Saharan Africa yet the opportunities can be found market. Productivity is supported average rates of loans from regional in a variety of business mainly by agriculture and service commercial banks are unsuitable for sectors, namely: industries, but the exploitation of the private sector. A stronger exchange natural resources and its younger rate, a rise in inflation and lower → Infrastructure (accessibility, generations bring huge potential for levels of credit could contribute to an including highways, railway, future growth. economic downturn, so to prevent this, ports, water and sanitation) Despite the Mozambican economy coordinated and decisive fiscal policy → Energy (both in terms of registering an average annual growth actions are necessary. production, transportation rate of 7% between 2010­‑2015, it is In terms of GDP per sector, 2016 and distribution and a currently experiencing a slowdown. estimates show the Service sector specific focus on renewables) In 2016, the growth rate was 3.8% – contributed 54.9%, despite employing → Machines and equipment for caused by a price drop in raw materials only 13% of the workforce. It is followed industry – construction and which impacted exports (primarily by Agriculture at 25.3%, employing 81% mining (the development of commodities). A consequence was the and Industry at 19.8%, employing 6%. coal exploration and major postponement of investment decisions In light of the country’s vast available public works projects will relating to large projects exploiting mineral resources (particularly coal increase demand in the mineral resources, substantially and natural gas which potentially coming years) reducing the inflow of Foreign Direct ranks Mozambique as one of the → Housing (growth trends are Investment (FDI). largest suppliers in the world and the not only in the major urban Adverse weather conditions and portfolio of investment projects already centres of Maputo and Matola, public financing limitations, such as underway), the GDP from Industry is but also in the new growth the suspension of international donor expected to continue to increase (in hubs of Tete, Pemba/Palma support, have also contributed to an 2015, it recorded a 9.1% growth). and Nampula/Nacala) economic slowdown. But, there is the → Agriculture (although limited, belief that Mozambique can return continued growth is a priority to its vibrant growth of recent years. for the Mozambican authorities) 2017 expectations are moderately → Tourism (growth potential positive due to a first­‑quarter GDP due to an increase in the growth of 2.9%, more than double supply of accommodation the previous quarter’s increase. The in major cities and greater metical, which steadily lost value awareness of the country’s against the dollar during the first 10 natural landscape) months of 2016, is now more stable after → Logistics and other commercial strengthening 28% against the dollar in services (will support the recent months. This monetary growth increased economic activity was fundamental to change, helping to and transportation of goods slow inflation in mid‑2017­ prompting expected in the next predictions of an average inflation rate few years) of 5.9% by 2021. International reserves → Consumer products (to cope are also recovering (as long as exports with the demand of a growing increase), supported by a price increase middle class) in commodities and a rallying coal Despite these improvements, industry. Imports however, remain more the Mozambican economy is dependent and limited. Despite these improvements, the still exposed to some risks; Mozambican economy is still exposed 2017 first quarter growth to some risks; 2017 first quarter growth remains below levels seen in recent remains below levels seen in years and a fluctuation in international recent years and a fluctuation commodity prices contributes to economic uncertainty. Inflation at 18% in international commodity remains high, impacting Mozambican prices contributes to families, and this restrictive monetary policy, while supporting foreign trading, economic uncertainty.

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While maintaining its With energy, the gas industry will With the monetary policy, the central play a major role in its medium‑term­ bank will follow its two main objectives: traditional links with growth; there are plans for ExxonMobil restoring price stability and supporting Portugal and South Africa, (USA) and Anadarko (USA) to develop domestic demand. For export trade, coal major operating export/facilities of has already increased growth in this Mozambique has sought to liquefied natural gas (LNG) and for Eni area and it will overtake aluminium as develop strong relationships (Italy) to construct offshore and in the Mozambique’s leading export product future, onshore installations. Due to in 2017 (several coal mining companies with multiple leading partners project complexities, LNG production are increasing production in response to such as the World Bank, the will not start in the short to medium­ international prices). ‑term, but development work will support Countries within the European African Development Bank, growth from 2018 onwards. The Eni­ Union (EU) and Africa, the Caribbean the European Union, the USA ‑led consortium, which includes Galp and Pacific (ACP) have signed new Energia, the Chinese National Petroleum Economic Partnership Agreements – and Japan. To complement Corporation (CNPC), the South Korean APE (in Portuguese) – removing this, Mozambique’s foreign Korea Gas (Kogas) and the Mozambican immediate and/or progressive trade National Hydrocarbons Company barriers and improving cooperation in policy focuses its efforts on (ENH),will invest 8 billion dollars in the related areas such as standardization, finding new business partners Coral Sul project, installing a sea‑based­ certification and quality control, floating platform to extract, liquefy, store, competition and consumer protection. and investors in Brazil, China, unload and export natural gas (by sea) to A consequence of this – it is hoped – India, South Korea, Thailand its final destination. The first shipment will be greater trade relations between of liquefied natural gas is scheduled the two economic regions. and Turkey. within five years and over 20 years BP will Mozambique is a land of multiple buy the entire production. In addition opportunities but it is vital companies the Government and its partners, led by prepare themselves before entering the ENI and Anadarko oil companies, have market. In order to do this, contact the formalized LNG licensing agreements for AICEP delegation in Mozambique. • unloading plants for material and the sea 1 Source: SADC Statistical Yearbook, 2015. terminal within areas one and four of the 2 Source: EIU Forcast for 2016. Rovuma Basin in Cabo Delgado, boosting the economy.

Aicep Global Portugal EPE, Agency for Investment and Foreign Trade of Portugal – its main functions are to support the globalisation of Portuguese companies and their export activities, help with structural investments and build Portugal´s reputation with value­ ‑creating initiatives for the country.

AICEP is the result of the merger in 2007 between API (Portuguese Agency for Investments) and ICEP (Foreign Trade Institute of Portugal).

It is a public business entity, dedicated to the development of a competitive business environment that contributes to an internationally­‑focused economy. AICEP has a delegation in Mozambique, located in Maputo.

The official business consultant, Ana Maria Rosas can be contacted: [email protected].

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d o s s i e r m o z a m b i q u e THE CHALLENGES OF THE MOZAMBICAN INSURANCE SECTOR by PricewaterhouseCoopers (PwC)

Following uninterrupted GDP growth comprises micro­‑businesses that do Although the per capita premium ratio since 2010, Mozambique’s economy not produce or trade enough to generate is low, there is a desire for lower‑income­ began to show signs of a slowdown in meaningful added value. citizens – the most economically and 2015. Foreign investment dwindled – Despite the economic environment, socially vulnerable – to access insurance largely because of an unacknowledged data from the ISSM – Instituto de products and so mitigate the poverty public debt totaling 1.4 billion USD – the Supervisão de Seguros de Moçambique spiral caused by adverse events. currency (metical) has depreciated, (Insurance Supervisory Board of In order to develop the insurance inflation has risen and the Government, Mozambique) shows that, in contrast to market in Mozambique, there is a corporations and families have little the GDP decrease, the insurance market need to extend the consumer base of purchasing power. grew 13.3% in 2016, a 3.2% increase on companies and individuals; those with This unrecognized public debt has 2015. Non‑life­ insurance is the main the financial means and literacy skills turned Mozambique into Africa’s most contributor to this growth. to purchase insurance products. There heavily‑indebted­ country. The IMF In 1991 there was only one insurer in is also much to be done to ensure greater describes Mozambique as a country in Mozambique, so the insurance sector product diversity and universal access debt distress and rating agencies place in the country had far from achieved to insurance. This explains why the it in the restricted default category. maturity. However, since then, the supply and demand of life and non­ Mozambique now needs to pay off number of insurers has grown; the ‑compulsory property insurance is its public debt. With the economy market now boasts 19 insurance limited. The penetration rate, measured in recession, restrictive budgetary companies (11 non‑life,­ four life, four by the ratio of gross premiums issued policies are vital. The Poverty Index mixed), and a micro­‑insurance business. to GDP, hovered around 1.5% on 31 in Mozambique is admittedly difficult Despite the increasing number December 2016, reflecting the low ratio to improve and it is equally difficult of operators in Mozambique, four of per capita premiums. to increase the spending power of a insurance companies account for 80% Non‑life­ and life represented close to beleaguered middle class. of premium income. 83% and 17%, respectively, of insurance The Mozambican economy is lightly The purchase of insurance products, sector productivity on 31 December 2016. industrialized and relies mostly on normally measured by per capita mining and agriculture. Its potential premiums, is linked to economic growth for energy production and tourism has and the population’s living standards yet to be explored. The entrepreneurial and support they receive, as measured community of Mozambique primarily by the Human Development Index.

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ISSM Annual Report About PwC The main property lines are auto, fire and natural hazards, injury/casualty and PwC is a network comprising workplace accidents. independent firms who are present On the life side it’s mainly temporary, in 157 countries with 223,000 whole­‑life and income products. Due to the employees; their shared goal is to socioeconomic issues mentioned above, provide quality audit, consultancy investment vehicles have yet to develop. and tax advisory services. In addition, brokerage has gained PwC employs cross­‑disciplinary ground in the market, responsible for professionals who can help about 46% of the sector’s output. One (re)insurers convert their challenges of the main challenges in Mozambican to opportunities and support society is improving financial and the development of key business insurance literacy. This would help functions, namely risk management, the more vulnerable people in society actuarial, internal audit and become better informed about the compliance. benefits of property, health and life PwC has extensive experience in; insurance and how their purchase business development strategies and could prevent them from falling into a management consultancy, assisting poverty spiral. It is in this context that and implementing risk management micro­‑insurance has been discussed in and internal control systems, ORSA Mozambique and for two years now, the processes, process improvement, ISSM has advocated for micro­‑insurance stochastic risk modeling, capital by setting caps for insured capital. This management policies, financial In order to develop the enables citizens with lower incomes and audit and advice, IFRS/IAS, insurance market in smaller entrepreneurs, particularly those IT audit, data analytics, tax in agriculture and livestock rearing, advisory and transaction support Mozambique, there is a need to engage with the market. etc, outsourcing internal audit to extend the consumer base Another challenge is the insurance and compliance functions and sector’s sustainability and the risk of consultancy on regulatory matters of companies and individuals; insolvency for a number of insurers – relating to insurance activities those with the financial currently the object of ISSM intervention. (eg Solvency II, Personal Data A smaller number of market players would Protection Regulations, IDD, means and literacy skills to help increase profitability and solvency for PRIIPs, PEPPs etc). purchase insurance products. the remaining operators so in the medium PwC also retains renowned term, we should expect future moves to financial reporting specialists, There is also much to be done consolidate this sector further. namely on IFRS 17 and IFRS 9. to ensure greater product Finally, as the banking and digital Only a highly knowledgeable sectors become increasingly dominant in organization such as PwC can add diversity and universal access the future, insurance companies will have value to your operations. It has to insurance. This explains to meet the challenge of diversifying their the best professionals in the distribution networks. • sector to help you manage your why the supply and demand business. of life and non­‑compulsory For more information, go to property insurance is www.pwc.pt/seguros limited. The penetration rate, measured by the ratio of gross premiums issued to GDP, hovered around 1.5% on 31 December 2016, reflecting the low ratio of per capita premiums.

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THE INSURANCE MARKET MARKET SHARE OF THE TOP 4 INSURANCE COMPANIES

2015 2016

Global Alliance 23,2% Global Alliance 26,8%

EMOSE 20,3% EMOSE 22,8%

SIM 18,5% SIM 19,3%

Hollard 12,7% Hollard 12,5%

INSURANCE COMPANIES AMOUNTS IN MZN MILLIONS

IN MOZAMBIQUE EVOLUTION +14,5% +13,3% 10617 2016 19 11 4 4 9374 8514 2015 18 10 4 4 7073 2014 16 PUB9 4 3 2013 16 9 4 3 7682 8784 7281 (82%) (82,7%) 6131 (85,5%) (86,7) Non-Life 942 1233 1692 1833 Insurance Companies Life (13,3%) (14,5%) (18%) (17,3%) Life

Non-Life Mixed 2013 2014 2015 2016

37.2% LIFE AND 32.9% 31% NON-LIFE 22.7% GROWTH 18.8% 14.3%

Non-Life Life 5.5% 8.3%

Source: ISSM – Instituto de Supervisão de Seguros de Moçambique (Insurance Supervisory Board of Mozambique), Annual Report 2016 2013 2014 2015 2016

135 m d s m a g a z i n e — f u l l c o v e r EMOSE ­ STATE-OWNED INSURER LEADS THE WAY

fullcover interviewed chief executive Joaquim Maqueto Langa of EMOSE, to find out more about the business and the insurance sector, the challenges ahead, his future strategy and how the industry contributes to the country’s economic development.

Tell us about your career and how you on a strong team of highly experienced What for you, are the main challenges ended up as chief executive of EMOSE? insurance market professionals. the Mozambican insurance sector I joined Empresa Moçambicana de faces? Seguros (EMOSE) in the first half of How do you assess the condition The main challenges are: 2017. Prior to this I was a university and evolution of the Mozambican → To create awareness within society professor. I spent a short time in the insurance sector in recent years? about the importance of insurance. private sector at the beginning of my In recent years, the insurance sector in This is a crucial challenge and an professional career, in the engineering Mozambique has seen new insurance enormous task, given as I have just and business management department companies join the market and mentioned, the very low penetration of a multinational oil company. brokerage services stabilise. About of personal and business insurance I never thought about entering the three reinsurance brokers have entered in Mozambique. insurance industry, but the shareholders the country and we believe another → Associated with the awareness issue – of State­‑owned EMOSE, recognised my reinsurer may arrive soon. to provide and promote a wider range management experience and strategic With products, the market continues of insurance products and enable us vision to make the company more to trade traditional policies and there to protect the economies and lives of dynamic – something I realise is a great is no product or service innovation. citizens with low incomes. challenge. But now I have come to love my Although there have been market → To train competent experts in the role and I feel comfortable navigating the entrants (referred above), this has not field of insurance – there are still few biggest ship in Mozambique’s insurance encouraged a widespread take­‑up of specialists in this area. sector ‘ocean’. What inspires me most is cover or increased insurance penetration → To review and optimize the insurance an overwhelming willingness to raise the in the country. Going forward, we will industry’s legal framework, protecting profile of EMOSE, and perhaps the entire focus on developing new products, for the interests of citizens and the State insurance industry in Mozambique, and example, specialist products for the oil while at the same time, encouraging to reach new heights. To do this, I rely and gas industry. healthy competition.

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→ To create the technical capacity How can the insurance sector be Do you believe greater cooperation to respond to clients’ mega‑project­ a springboard for the country’s between international companies insurance needs, now and in the economic development? can provide the Mozambican future, particularly those investing Insurance, from an economic perspective, insurance sector with the expertise in oil, gas and other natural/energy acts as the protector of investments. and experience it needs? resources. This means that if a person or business, One of the major constraints in the → Finally, though no less important, in the course of their duties, has assets insurance industry is a lack of specialized to increase the purchase of insurance or investments to protect, they must professionals with the knowledge, for agriculture and weather risks. insure against acts of nature or any training and experience in their chosen It is well‑known­ that 80% of the other unforseen risks that will cause, sector. Partnerships with international Mozambican population is employed sometimes irreparable damage. Insurance entities, such as insurers, reinsurers, in agriculture and that Mozambique can not only guarantee the partial or consultants and risk analysts are therefore is prone to natural disasters. total replacement of the damaged assets, crucial. At EMOSE we highly value our preventing further new investment by the partnership with MDS Group; we rely on How has EMOSE contributed to the individual or business owner, but it can MDS Re as our reinsurance broker and development of the sector and what keep a business running. The insurance count upon other Group companies, such is your strategy for the future? industry must therefore continue to as MDS Mozambique, for technical input. EMOSE is positioning itself to meet develop initiatives and increase the We believe this enhances our technical the challenges of the market and the number of people and companies that use capacity. EMOSE is also committed to government’s agenda. insurance as a tool to protect their assets. furthering relationships with national With gas and petroleum, EMOSE has EMOSE’s participation in the national technical and higher education since 2013, taken the initiative to create strategy for financial inclusion 2016­‑2022 institutions, calling for them to include capacity in this area. We developed a (ENIF) is without a doubt, a step in the insurance tuition in their curricula. strategic partnership with Empresa right direction to make insurance more EMOSE is already the largest and most Nacional de Hidrocarbonetos EP (ENH), widely available and increase insurance financially secure insurance company in creating a captive insurance company, penetration. If we develop products and Mozambique, but we also want to be the and worked in partnership with the services that are more inclusive and best; a goal the country can count on government, particularly the Ministry accessible to people with low incomes us to achieve. • of Mineral Resources and Energy and and small and microenterprises, we the National Institute of Petroleum. Other will contribute to the country’s socio­ initiatives include developing relationships ‑economic development. with operators such as Anadarko and ENI and for the latter, insuring 10% of the Coral South Project, covering the risks associated with the floating Liquefied Natural Gas Plant in Palma. From a strategic positioning and technical expertise viewpoint, since 2014, Joaquim Maqueto Langa EMOSE has invested in staff training to ensure those working in our specialist Joaquim Maqueto Langa has a doctorate office providing insurance for the gas and in Agricultural Extension and Rural oil sector, have unrivalled experience and Asset Management and a post­‑graduate knowledge. Our partnership with MDS, diploma in Business Administration. for insurance and reinsurance broking, In 2007, he managed a project to create consulting and training, fits well with and establish the Eduardo Mondlane this strategy. University School for Rural Development Looking to the future, EMOSE is (Escola Superior de Desenvolvimento undergoing a process of organisational, Rural da Universidade Eduardo Mondlane), cultural and technological change. In becoming its first director and serving order to achieve maximum efficiency from 2008 – 2013. and increase our responsiveness, we In March 2017, Maqueto Langa was are transforming EMOSE into a holding appointed chief executive officer company with specialist and additional of Mozambican insurance company EMOSE. support business areas. Our focus is to consolidate our leadership across all areas of the Mozambican insurance market while recognising the active roles other insurers have to play.

137 m d s m a g a z i n e — f u l l c o v e r ENERGY WILL MODERNISE MOZAMBIQUE BY PAULO VARELA

It is said that energy is While the challenges are large and Central to this project, however, are the the industry that drives complex, the opportunities are even major industrial gas liquefaction units to be greater. But these ventures will only built on land in the Cabo Delgado province. all others. In the case of be successful if robust governance and Galp is an active participant in the Area 4 Mozambique, this statement prudent management is in place. Yes, this project; led by Eni it has a 10% stake tree will bear fruit, but only if the correct and ExxonMobil, which is finalising its is truer than in any other seeds are sown. involvement, will lead the construction and part of the world. The The most important project, involving land infrastructure operations. The Korean Galp as a sponsor is, without question, the company, Kogas, and ENH, owned by the country’s energy potential, development of the reserves of around state of Mozambique have identical holdings both in hydrocarbons and 85 trillion cubic feet (tcf) of gas identified of 10%, while the Chinese company, CNPC, in Area 4 of the Rovuma basin and the 75 has an indirect stake of 20%. hydroelectrics is huge. The tcf of additional reserves in an adjacent This project will also be crucial to the ongoing projects in this block, Area 1. Mozambican population, impacting several Collectively, the reserves in these generations. It is therefore an objective of area will truly transform two blocks are equivalent to the total Galp and its partners to ensure that the said Mozambique and such is consumption in Germany, the United impact is as positive as it can be. Kingdom, France and Italy for 20 years, Although there is presently an their power, they will dictate propelling Mozambique as one of the abundant supply of gas at a global level, the future direction of the most important regions worldwide for worldwide consumption is expected to natural gas production. increase significantly in the coming years, entire country’s economy. The size and quality of these resources primarily due to its low environmental enable Galp to develop a large­‑scale footprint which makes it a key element in project at very competitive unit operating the transition to a low‑carbon­ economy. costs in a strategically significant location In order to meet the South Coral field (in the context of other LNG1 projects) as development projections (via the floating it is equidistant from the European and liquefaction unit), and the Mamba project Asian markets. (based on land liquefaction units built The first gas shipments are expected to in the Afungi peninsula in Palma), the be delivered to the market in 2022, using Government of Mozambique may receive an innovative floating unit that converts tens of billions of dollars in tax revenues, natural gas to a liquid state, enabling its royalties and profit throughout the export by sea to anywhere in the world. projects’ lifespan.

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This project will also be crucial communities, connecting power supplies Paulo Varela to among others, healthcare centres, to the Mozambican population, schools and water pumping systems. impacting several generations. Mozambique is the only African market where Galp is present in both ends of the It is therefore an objective of supply chain. It is a significant market for Galp and its partners to ensure Galp and one which continues to grow through substantial investments for that the said impact is as example in logistics and infrastructure positive as it can be. and through the construction of terminals for the storage of liquid fuels and bottled gas (LPG2) in the country’s main ports. In addition, multiple industries in the Galp is also increasing its capacity for region will be competing to access to the storage and filling of LPG bottles, this energy, improving their efficiency replacing domestic consumption of coal, and bringing development to one of the wood and electricity. This enhances country’s most impoverished areas. the population’s quality of life, tackles However, such transformational deforestation and reduces pollutants. challenges are not limited to these And Galp continues to significantly big projects; there are opportunities expand its network of stations and shops for development and modernisation in Mozambique; it currently has 50 further down the supply chain, namely stations and 41 shops and by 2020 expects in the import, storage and distribution to more than double the network it had at of fuel. Galp has been involved in this the beginning of 2016. Paulo Varela has a Law degree from since 1957 and is a long‑term­ investor in This demonstrates Galp’s commitment Portugal’s University of Coimbra and Mozambique, contributing to its social to further developing an energy sector completed post­‑graduate courses in and economic development and adoption that moves Mozambique forward on Business Management and Administration of suitable energy solutions. a wave of modernisation and above all, at the Catholic University and AESE. Within its corporate social improves the living conditions for all He is the administrator of Galp responsibilities, Galp has introduced, Mozambicans. Marketing Internacional, responsible for in cooperation with the Government’s This is where we focus all our energy. • East Africa, a representative for Galp FUNAE department, the installation Energia and president of the General 1 Liquified Natural Gas of photovoltaic solar panels in rural 2 Liquiefied petroleum gas Assembly of CCIPA – the Portugal­‑Angola Chamber of Commerce and Industry. From 2002 to 2014, Paulo was vice­ ‑president of the Board of Directors of the Visabeira Group and since 2006, has been president of the Board of Directors of Visabeira Global SGPS. From November 2009 to May 2014, he was president of the Board of Directors of Vista Alegre Atlantis. From 1999 to 2014, Paulo was president of the Board of Directors of Visabeira Moçambique and from 2002 to 2014, president of the Board of Directors of Visabeira Angola. He was also non­ ‑executive administrator at the Banco Único (Mozambique) – Parque de Ciência e Inovação Aveiro.

Offshore gas platform

139 Brasil A elegância traduzida em experiência agora no Rio de Janeiro.

PUB

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ALT 18.52.0057 - Anúncio FullCover.indd 1 09/02/18 12:48 f u l l c o v e r

Brasil A elegância traduzida em experiência agora no Rio de Janeiro.

EIBBROKERSLINK POLAND

Conheça o La Réserve, um espaço privativo dentro do resort Club Med Rio das Pedras (RJ) com suítes e penthouses de frente para o mar. Desfrute uma piscina e bar exclusivos, serviço de massagem* no quarto e uma equipe dedicada à sua disposição.Além de poder aproveitar toda a infraestrutura do resort com o sistema Premium All Inclusive, UNSTOPPABLE ENERGY: FROM CAPTIVE TO GLOBAL BROKER gastronomia internacional, open bar, diversos esportes e atividades. Garanta já sua viagem! www.clubmed.com.br | 4002-2582 Consulte o seu agente de viagens. POLISH INSURANCE MARKET PRIVILÉGIOS exclusivos piscina privativa | concierge | recepção exclusiva | spa in room* | serviço personalizado TORUN: THE HUB OF POLISH BROKERS Exclusive Collection Rio de Janeiro Punta Cana Marrakesh Ilhas Valmorel Val d’Isère Ilhas Cancún Cefalú around the world Brasil Rep. Dominicana Marrocos Maurício França França Maldivas México Itália

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ALT 18.52.0057 - Anúncio FullCover.indd 1 09/02/18 12:48 m d s m a g a z i n e — f u l l c o v e r EIB – ENERGO INWEST BROKERS UNSTOPPABLE ENERGY: FROM CAPTIVE TO KEY PLAYER

Founded in 1994 in Torun, For over 22 years EIB has been insurance property & casualty and credit & surety EIB has expanded its adviser to Poland’s largest companies insurance, plus employee benefits etc. and financial services groups. Founded EIB works in partnership with clients business over the last in 1994 in Torun, EIB initially focused on from numerous sectors, operating in decades and is nowadays the energy sector, providing an in‑house­ Poland and abroad, and gives insurance broking service to a Polish public energy advice and support to around 750 recognised as a multi­ company. Building upon its success, EIB firms and financial services groups. ‑specialist insurance broker started to expand its activity, working Client sectors include; energy, heavy with other sectors of the Polish economy. industry, construction, manufacturing, adviser to some of Poland's Over two decades later, EIB is recognised food, plastics, wood, furniture, shoe largest companies and as a multi‑specialist,­ comprehensive and textile production, agriculture, insurance broker and adviser with a wide­ leisure and servicing, transportation, financial services groups. ‑ranging client portfolio. pharmaceuticals, healthcare, utilities, The company has developed mainly local government and financial services. through organic growth; EIB is one of Within the Polish insurance sector, EIB Poland’s biggest insurance brokers with has a reputation for service excellence expertise in building and developing and unrivalled knowledge and its brand specialised programmes to protect the is synonymous with the provision of a financial interests of clients. Over the superior quality service. EIB currently last three years, EIB has continually protects assets of more than EUR 150 billion been ranked among the top five Polish and the health and lives of over 100,000 insurance brokers for income revenue. people, making it one of Poland’s largest The firm specializes in providing insurance brokers working closely with business insurance and employee the Polish insurers. benefits services to upper middle market The company employs over 150 companies and calls itself a ‘one stop professionals including 100 licensed shop’, meeting the needs of clients brokers and 10 legal counsels – all requiring a range of cover including providing the highest level of service.

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Rafał Kaszubowski, EIB CEO

EIB annually places some EUR 80 million investment project in central‑eastern­ brokers need to possess higher levels of clients’ premiums into the insurance Europe valued at nearly EUR 3 billion and of expertise. In response, EIB ensures market, making it an important partner adjusted the biggest claim in the history employees not only have the education, for stakeholders with leverage and buying of Polish insurance. While this evidences skills, knowledge and experience the power to secure the best terms and outstanding credentials and experience, market requires, but also an in‑depth­ conditions for customers. EIB knows it needs to be dynamic and understanding of; insurance products, client­‑focused in order to grow. It recently the markets they’re working within, the moved into trade credit insurance – a fast clients´ business model and risk exposure Creative solutions growing market demanding high levels and their protection needs. In order to of expertise in order to secure robust maintain that competitive edge, EIB The diverse and growing needs of clients coverage and to be able to adjust claims continues to invest in employees’ skills coupled with a rapidly developing market, accordingly. A further portfolio addition and IT solutions while enhancing their inspires EIB to create new solutions is the Pension & Benefit programme market knowledge and legal and technical and continuously improve its service protecting 100,000 client employees. competences. The company’s strong provision. In a tough market saturated by To maintain growth, EIB is constantly international presence is facilitated by brokers, and in order to retain its leading developing its client services and IT Brokerslink membership, enabling it to clients and win others from rival firms, its innovation and has what it describes as provide unrivalled services wherever focus is on core competencies, specialist ‘the most advanced in‑house­ insurance clients undertake their business. areas and the competitive advantages of and claim management system’ directly EIB recognises clients today expect its superior client service. EIB annually accessible by clients. their brokers to provide the IT tools that measures client retention rates and is EIB appreciates that Poland’s highly allow them to monitor their insurance proud to admit that in recent years, it competitive, complex and modern programmes, activity and progress. equates to around 97%. economy means insurance brokers can In response, the firm employs five EIB is renowned for its expertise within no longer survive with personal customer programmers, who working alongside major construction projects, big industrial contact and commissions generated by their broking colleagues, deliver new IT risks and public tender activities. simple insurance placement. In order to solutions to meet clients’ expectations. It successfully designed and placed an grow and meet customers’ complex risk insurance programme for the biggest management and transfer requirements,

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1994 1997 EIB founded as an in­‑house broker for one of Poland’s Service expands biggest energy companies. into new sectors.

1996 2001 New branches open in Employee recruitment main cities of Warsaw and begins with first Katowice. Launch of CRM internship program and electronic document for students. distribution. EIB 2012 Risk engineers department created.

2011 Management and employee company buyout (MEBO) 2015 from public sector, giving management greater motivation EIB becomes a member to improve profitability and of Astreos Risk, giving value. wider access to the credit insurance market. Capital group established, comprising all the companies, including a reinsurance broker and multi-specialised agency.

144 f u l l c o v e r 2006 International client 2002 management department created. Employee development program implemented EIB negotiates with insurers with continuous training to include own policy terms and workshops. & conditions wording for key clients. Receives Information Security Management System – ISO 27001:2005 – accreditation. 2005 New offices open in the cities of Cracow, Wroclaw, Gdynia and Rzeszow. EIB

2010 Acquisition of smaller Polish brokerage firms 2007 and retention Joins Brokerslink. of key employees.

2009 Develops claims tracking IT solution for clients.

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Brokerslink enables the building An innovation pioneer significantly. A broker should treat every of international connections customer as an individual, meeting In order to provide customised specific insurance and risk management After many years of being a major brokerage services, EIB became an needs. EIB recognises this and designs player within Poland’s domestic market, innovation pioneer in the field of and delivers tailor‑made­ programmes EIB took the strategic decision to computer administration. In response and insurance solutions. Nowadays, join Brokerslink. Membership of this to the growing needs of customers, EIB companies expect their insurance broker global broking company enables EIB to developed an Insurance Management to provide a more comprehensive service continue to further develop, grow and System (IMS), enabling clients to manage and act as a consultant and specialist in build relationships with other specialists and administer their insurance contracts many related fields. around the world. and claims handling. One such area EIB specialises in is Being part of an international broking The IT platform gives clients unlimited insurance law. Thanks to investment company means EIB can respond to on‑line­ access to a comprehensive in its advisory business, customers do the specific needs of Polish companies portfolio of insurance and claims not have to use additional consulting requiring global support. Its relationship documents, enabling them to monitor firms, giving them significant savings. with international brokers in foreign all activities undertaken by EIB within EIB’s professional advisers are experts markets and ability to expand its service a client‑broker­ ‑insurer­ context. This with many years’ experience of working and solutions portfolio enables EIB innovative IT solution allows them to in insurance­‑related sectors. They have to create and successfully implement view; insurance documents, assigned unrivalled knowledge about market international programmes for Poland’s tasks, training/courses and presentations conditions, including complex cases, leading companies operating in related to their insurance cover, and so can help EIB source the appropriate different sectors. The local handling of instructions on what to do in the event insurance cover and develop solutions multinational programmes by Brokerslink of a loss, loss adjusting documents/ suitable for each particular client. partners allows EIB to provide tailor‑made­ correspondence and relevant statistics. EIB also provides legal counsel support services for even the most demanding In addition, the EIB­‑developed system by professionals with detailed knowledge clients. In addition, the support of provides full claims management support. of today’s insurance market – and there’s Brokerslink ensures EIB­‑brokered The claim notification starts with a simple an investment advisory service to help solutions meet local law and market on‑line­ form and as the claim progresses, clients with their asset management and requirements; giving the client’s business clients can access all claim documentation protection in the construction sector. For the cover it needs, reinforced with an enabling a real‑time­ monitoring of Construction/Erection All‑Risk­ (CAR/ effective risk management process. EIB activity. The basic principle of the EAR) insurance clients, this involves When managing international system is to record every piece of claim helping them prepare tender documents insurance programmes for multinational activity from the inputting and copying (including insurance clauses), analysing companies, EIB can extend its local of correspondence (in digitised form) to contracts to determine risk exposure and broker service by liaising with Brokerslink every telephone conversation, etc. This responsibilities and supporting financial partners to offer a broader range of global database access ensures broker and client stakeholder negotiations. Guidance from solutions that fill any cover gaps in their can monitor the claim’s progress and be an experienced specialist can ensure the master policies. International broker alerted to any loss outcomes. correct risk management policies and cooperation provides a platform to share The System shows what premium is processes are in place. knowledge and gives EIB access to the paid for each policy and automatically Included within its advisory service world’s best solutions for non‑standard­ summarises and notifies clients when provision, EIB monitors Poland’s risks cover – something not available to upcoming payouts or instalments are legislation, including insurance law and local Polish brokers. due. IMS is not only an effective tool for the broader civil, economic, tax and other Being a member of Brokerslink gives overseeing and managing the work of areas. If there’s a change in the law that EIB a competitive advantage; it enables EIB and its claims adjusting services, affects the responsibilities or rights of the company to gain new experiences and but it also increases the quality of its clients, EIB advises them of their new work with insurance brokers around the service provision and streamlines the risk legal situation, highlighting the associated world, increases its potential for client management process for clients. benefits and threats. With Polish expansion and strengthens its position legislation constantly changing, this type among its domestic competitors. EIB’s of assistance is vital for businesses. long association with Brokerslink and Meeting client expectations its shareholder status has strengthened – intermediary or consultant? market awareness and international recognition of EIB as an experienced In today’s developing economy, Polish and reliable partner. companies perceive a brokerage service to be more than an intermediary negotiating the cost and scope of insurance cover. Expectations over the years have changed

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Center of Warsaw

Insurance education develop additional services to support the standard broker model. In doing so, it will EIB equally recognizes the importance of meet the needs of the most conscientious insurance education and how increasing and demanding client and meet EIB’s insurance awareness ensures business goal to provide comprehensive insurance continuity, and so offers clients seminars, solutions for every client – from the courses and training sessions. In addition, smallest to the most complicated. clients have the support of a risk engineer In order to enhance its global brand who can advise on the often complex awareness, build upon its experience and technical aspects and safety requirements extend its client base, EIB will continue to of their particular business activity. expand its international partnerships. These services are examples of how The aggressive competition between Polish insurance brokers can enhance brokers in Poland benefits strong their everyday role of; risk analysis firms such as EIB; it increases market and identification, the sourcing and consolidation and small to medium placement of insurance programmes, broker acquisitions, expanding staff mediating and managing the purchase of numbers and the customer portfolio. insurance contracts and other activities EIB realizes the most important surrounding insurance provision, claims business resource is its people and so will management and adjusting. continue to focus on organic growth and create a work environment for employees who want to learn and develop their skills. Keeping pace with change The broker is also aware that Poland’s economic situation and insurance market EIB is one of Poland’s leading brokers and is rapidly evolving and only someone who aims to strengthen its market position keeps pace with the surrounding changes by attracting new customers from will be recognized as a trustworthy differing sectors. One way to secure this business partner. • competitive advantage is to consistently

147 m d s m a g a z i n e — f u l l c o v e r THE POLISH INSURANCE MARKET

Key players between motor insurance and all other Mandatory insurance non‑life­ products. Over the last year, the The Polish insurance market is the 15th former witnessed a dramatic rate increase, There are over 150 mandatory insurance largest in Europe with EUR 12,5 billion boosting total premium volume (this policies in the Polish market – the second gross written premium. Life insurance trend continues). Other non‑life­ products largest number in Europe behind France. accounts for EUR 5,2 billion while non­ report a steady growth even though the Typically offered by commercial insurers, ‑life is valued at EUR 7,2 billion. While market remains soft – a result of proactive there are no single providers specialising the market is supported by a large and intermediaries increasing awareness. in this cover alone. buoyant economy, it is restricted by a Legislation surrounding mandatory low insurance penetration. Gross written insurance is very complex and requires life and non‑life­ premiums in Poland Claims ratios the skills of a professional broker to total EUR 325 – per capita yearly –­ an interpret properly. The vast majority estimated sixth of the EU average. This Claim ratios in 2016 were: 77% for life of this mandatory cover is within the figure is a result of demand restraints insurance, 67% for motor insurance and professional indemnity area. In most from a developing economy. Most major 44% for other non‑life­ business. Due to a cases, policies offer a wide range of cover, international insurance groups are claims ratio permanently exceeding 100% meeting legal requirements, and a low present in Poland and offer a full range for motor third‑party­ liability, insurers were minimum guaranteed sum. An example of products. The Polish market is full of forced to significantly increase rates. Now of this is the need for fire insurance for opportunities with great long‑term­ growth the claim ratios are considered healthy, farm buildings. potential, particularly as demand for the underwriting policy can stay as it is Companies required to have this type insurance is growing alongside an increase for a longer period of time. The remaining of cover should work with their broker in risk awareness and disposable income. figures are steady year upon year, however to assess exactly what is needed. The there are times when non‑life­ business is broker can then design a comprehensive impacted by a rare natural disaster. Poland insurance programme that combines Life insurance is not in a seismic region but flooding can mandatory and non‑mandatory­ policies, be an occasional issue. The non‑life­ sector optimizing cover and premiums. The life insurance market was growing remains very soft in terms of premium rapidly but began to significantly decline rates, but there are some early signs of a over the last few years mainly due to harder approach being taken. Non­‑admitted insurance legislative changes that led to fewer sales There are 27 life insurers operating in of unit­‑linked insurance. Traditional life the Polish market; the six largest account As Poland is a member of the European insurance however, continues to grow for two­‑thirds of gross written premium. Union, it enjoys freedom of service within and in addition, insurers are developing The leading life insurer is PZU Zycie SA the insurance sector, and because there a commercial medical insurance policy with a nearly 30% market share, this is are no specific regulations for non­ making it a topic of conversation. The followed by AVIVA and Metlife. ‑admitted cover from a legal perspective, market size is over EUR 130 million and In non‑life­ there are 31 insurers; PZU it is possible for non‑Polish­ firms to enter has huge growth potential. SA is the market leader with more than a the market and take advantage of the 30% share, next are Ergo Hestia and Warta dramatic increase in awareness of the (Talanx Group) who are similar in size. need for insurance. Many companies Non­‑life insurance The five biggest insurers account for more operating in Poland however, face strict than two­‑thirds of gross written premium. cover requirements associated with, but The non‑life­ market in comparison has not limited to, third party liability. Cover experienced a steady growth over the last restrictions can come from financing 10 years. Premium income is evenly split parties, public and private buyers,

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landlords, etc., so it is vital businesses (boosted by individual motor insurance, are now becoming standard even within use a skilled and experienced local which is an important part of the market). small and medium‑sized­ businesses, insurance broker to ensure all their key Corporate insurance is very different especially in large cities with low risk exposures are covered. If there is a and due to the complexity of the risk, is unemployment rates. In the past, growth in non‑admitted­ cover it is likely dominated by brokers. Poland’s top 10 employers offering such programmes to hinder those keen to build a strong corporate brokers handle most of this were recognised as exceptional, but as business presence. Premiums and payouts business. awareness about benefit programmes are not taxed in Poland which makes it has grown, it is very likely that during the a good base for international insurance interview an employee will ask what the programmes. A developed product Employee benefits employer will provide. Employers who portfolio with very competitive rates and are keen to recruit and retain suitably low deductibles are also key attractions. The unemployment rate in Poland has qualified professionals should consider continued to fall over the last 15 years introducing quality employee benefit and was of 6.9% at the end of 2016. In programmes. Distribution channels order to attract potential employees Health benefit programmes are the they must be given incentives – most most popular in Poland; between 2015 and Poland’s three main distribution channels commonly life and health benefits for 2016 the number of people with health are similar to most European countries; them and their families. Both types of policies grew by almost 27% and the total direct, sales via agents and sales via cover are beneficial for employer and number insured was 1,48 million people. brokers. Polish regulations however, employee. Employer‑funded­ benefits This increase is in response to public consider brokers to be buyers, rather than are tax deductible in Poland and health health sector concerns around limited sellers, so they should not be viewed as a policies reduce levels of sickness absence access to specialist doctor consultations single distribution channel. as they enable employees to talk to and and hospital and outpatient procedures. It is a very competitive market. There arrange an appointment with health In order for an employee benefit are over 16,000 businesses registered as professionals immediately and attend package to be well designed, effective multi‑agents­ (agents representing more any follow‑up­ medical examinations. It is and contribute to long‑term­ employee than one insurer), 17,000 sole agents, 800 compulsory for health policies to provide satisfaction, it should be developed using individual brokers, 400 corporate brokers an occupational health service, which can an experienced insurance broker. • and more than 120,000 people registered save time and support HR processes. as agents. This figure almost recently Benefit programmes were typically doubled due to changing legal regulations offered by large corporations but they concerning bancassurance and insurance distribution. This fierce competition is driving brokers to extend their service provision, but it is the larger and more GROSS WRITTEN PREMIUM (BN EUR) technologically advanced brokers that have the edge and as a result, the market is starting to consolidate. While the number 10,00 of businesses and agents are likely to significantly decrease, this should be beneficial for clients. With life insurance, agents are the 7,50 main distribution channel, responsible for around 60% of premium income. Brokers – mainly focused on group life insurance organised by the employer 5,00 – are responsible for less than 10% of the market but this figure is growing alongside increasingly popular employee­ ‑funded health insurance programmes. 2,50 Direct sales account for the remaining 30% of the market. The non‑life­ market is slightly different; direct sales are steadily falling 2006 2008 2010 2012 2014 2016 and currently account for 15% of total premium income while the brokers share Life insurance Non‑life­ (excluding Vehicle insurance vehicle insurance) is increasing and is now close to 20%. Agents control over 60% of the market Source: Poland Financial Supervisory Authority

149 m d s m a g a z i n e — f u l l c o v e r TORUN: THE HUB OF POLISH BROKERS

Warsaw and Vistula river

Poland is centrally located in the heart Poland has been a member state of teachers and there are currently two of Europe at the crossroads of several the European Union since 2004 and is a million people studying in Poland (one major transit routes. Its closeness to the member of the World Trade Organisation of the highest Gross Enrolment Ratios in Baltic Sea gives it a natural link to the and Organisation for Economic the world). Recently its software engineer Scandinavian countries and its long Co­‑operation and Development, qualifications have gained recognition border ensures easy access to the biggest confirming its strong international and this is why Google for example, has EU economy, Germany. Poland can also position. Poland is a North Atlantic Treaty opened a research & development centre easily access southern and eastern Europe Organisation member evidencing its in Cracow employing coders. via its borders with Ukraine, Belarus, security and authority. Poland currently has a stable economy. Russia to the east and Slovakia/ Czech Since joining the EU, the country When the last financial crisis hit the Republic to the south. has enjoyed constant and sustainable EU countries, Poland was the only EU Poland’s total area equals 312 679 km2 development. Almost all the major cities member not going into recession and making it bigger than the UK (242 900 km2) (16) have their own airports, there are was described as ‘the green island on the and similar in size to Italy (301 336 km2). three main sea freight ports (Gdansk, red map’. The Polish banking sector was The country’s population is 38.5 million; Gdynia and Swinoujscie) and recently equally unaffected by the global crisis. more than Canada (35 million) and almost a direct freight train connection has In addition, EU structural funds support double Australia (22.9 million). Poland is opened between Chengdu (China) and Polish growth and from 2013­‑2020 it will ranked as the sixth largest market in the Lodz (Poland). This takes 14 days and is a provide EUR 106 billion. The government EU and 33rd in the world in terms of Gross great alternative to sea freight (that takes is also boosting domestic growth with Domestic Product (GDP). It is the 24th largest a minimum of 45 days). The roads are infrastructural investments; EUR 25 billion economy in the world. improving constantly and highways and a year is to be invested primarily in the After the collapse of communism in expressways are completed every year. energy sector and road, rail and aviation. 1989 international investors started to There are 470 higher education appear and now major global companies institutions offering nearly 200 subject have established a presence in Poland. areas, schools employ over 100,000

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Torun – a city of tradition academic centre; Nicolaus Copernicus University with its 15 departments and Economic data (2016) Torun is one of those rare cities having some 40,000 students has been Poland’s been given UNESCO World Heritage leading university for over 40 years. → GDP growth 2.7% status. Founded in the 13th century on the Alongside the magnificent cultural → GDP value USD 469.8 bn banks of the Vistula river, over the years heritage, Torun is renowned for its highly (current prices) it has become a flourishing commercial developed broking market – and is called → Inflation 0.5% centre yet evidence of its historical past the hub of Polish brokers. The main Polish at the end of 2016) survive to this day. Its unique character insurance brokers are based in Torun → Exports USD 203.7 bn is due to its well‑preserved­ monuments; and according to latest statistics, Torun → Public debt/GDP 51.1% Gothic churches, Baroque granaries and and the capital of Poland – Warsaw, (at the end of 2016) charming townhouses. Many of which generate the majority of premium income → Unemployment rate 6.9% have stayed the same for centuries. for insurers. A rich history of brokerage (at the end of 2016) Torun is the birthplace of the great services in the city can be traced back to astronomer Nicolaus Copernicus. essential support from the university, During a visit to his family house (now a where almost 25 years ago and in a museum), you can experience his life and revived free market economy, academic work, his family environment and the era authorities in the field of insurance law that influenced him. co­‑created the insurance market. The city is a lively cultural centre where Torun is a place where the past meets numerous festivals, exhibitions, concerts the present and business works in and artistic meetings take place. During harmony with culture. Its old town is festivals, concerts in the historic interiors full of charm and encourages everyone of urban architecture play music from to follow the footsteps of its European the Renaissance to more contemporary heritage. • periods. Torun is also an important

Nicolaus Copernicus statue in Torun

151 IFRS 17 is coming in. Are you prepared?

PUB

IFRS 17 will definitely shift the insurers’ financial reporting from a traditional retrospective view to a prospective one, and indeed it goes far beyond the financial reporting itself. It is an opportunity to integrate and modernise the finance, risk and actuarial in an end-to-end manner.

We can help navigate this complex standard and assist you implementing it.

Visit our dedicated insurance website www.pwc.pt/seguros to find out Follow us on social media how we can assist your Company turning the challenges laying ahead in opportunities.

© 2018 PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Anúncio PwC seguros_2018.indd 1 06-02-2018 17:46:16 BROKERSLINK

HISTORY IN THE MAKING

GLOBAL CONFERENCE 2017 MARRAKECH

JACQUELINE LEGRAND NEW CEO

NEW BRAND AND WEBSITE

153 m d s m a g a z i n e — f u l l c o v e r HISTORY IN THE MAKING

2004

CREATION OF BROKERSLINK

1st Brokerslink Meeting Porto, 9 July Brokerslink was created by MDS (Portugal) that invited Pérouse and Firstassur (France), Artai (Spain) and Lazam­‑MDS (Brazil) to follow the portuguese broker in this adventure.

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BROKERSLINK EXPANDS TO ASIA

During the PanAsian Alliance summit in Shangai, Brokerslink 2007 and PanAsian Alliance sign a partnership protocol that formalises the discussions initiated in 2006 with their respective leaders, José Manuel Fonseca and Hei Wong.

2008

BROKERSLINK BECOMES A GLOBAL NETWORK

During a conference held in Bangkok, Brokerslink, PanAsian Alliance and Alinter, a Latam network, decided to merge their networks and to operate under the single Brokerslink brand as one global network.

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2009

1st BROKERSLINK GLOBAL CONFERENCE

June, Hong Kong Linking Clients, Markets and Knowledge. 50 members from around the world attend the conference.

BROKERSLINK USA

Crystal & Company joins Brokerslink paving the way for the US market.

Incorporation in Switzerland FROM AN with 5 prominent shareholders: ASSOCIATION TO MDS Group, Crystal & Company, 2015 A FOR­‑PROFIT Filhet­‑Allard, Ed. Broking, Nova ORGANIZATION Insurance.

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2016

A GLOBAL BROKING COMPANY

After a private stock offering, Brokerslink is owned by 55 shareholders from 40 countries all over the world.

157 m d s m a g a z i n e — f u l l c o v e r GLOBAL CONFERENCE MARRAKECH, SEPTEMBER 2017

In 2017, the Brokerslink Global Conference was held for the first time in Africa; an important indication of the organisation’s strong ambition to develop its footprint in the region. The Conference has become a major event in the insurance industry calendar and, each year, attracts an increasing number of attendees ranging from Brokerslink members, clients and carriers, to risk managers and partners from around the world. This event took place at the exotic Es Saadi Palace in Marrakech and brought together almost 300 attendees from 60 countries, to discuss crucial and innovative issues affecting the insurance and risk management community. As well as international carriers, some of the most prominent African insurance companies including SUNU Group, AMSA Assurance, La Société Centrale de Réassurance – SCR and RMA – Royale Marocaine d'Assurance, had a strong presence at the Conference.

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BROKERSLINK LAUNCHES RISK MANAGEMENT FORUM Another first for the event was the launch of the Brokerslink Risk Management Forum. A small group of leading Risk Managers from around the globe and various industry sectors shared insights and perspectives on a range of current risk and insurance topics. Attending this first Forum were, Franck Baron of PARIMA; Manuel Padilla from MacAndrews; Forbes; Jorge Luzzi of Brokerslink and APOGERIS; Cristiane Alves from Companhia Siderúrgica Nacional and ABGR; Javier Mirabal of FUNDALARYS and Mirabal Risk Management; Thiago Amorim Santana of Suzano Paper and Pulp; Zaiella Aissaoui from Bouygues Construction and; Maurizio Castelli of PCA SpA.

NEW AFFILIATES

Brokerslink expansion continues and during the Marrakech Conference, four new affiliates had the opportunity to introduce themselves to the audience:

→ PERAJ (India) The oldest intermediary services company for retail and commercial insurance in India.

→ EPPIONE (United Kingdom) A UK and Ireland based specialist employee benefits broker that offers a unique online platform to help clients manage HR and Employee Benefits.

→ STP (United States of America) A technology‑led­ insurance platform focussed on building global programs and products for new economy and technology businesses.

→ NIKOLOZ GROUP (Georgia) Established by Nikoloz Kitiashvil, a highly experienced insurance professional, the company provides its corporate clients in this rapidly developing nation with full insurance and reinsurance services.

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THE CONFERENCE ATTRACTED RENOWNED KEYNOTE SPEAKERS

“The insurance industry needs to work harder to get a seat at the table and get in the ear of CEOs. In company boardrooms, insurance can sometimes be considered a necessary evil or even an unnecessary cost.” Steve Hearn Group CEO at ED “Brokers should spend more time discussing the benefits of multinational insurance programmes with mid­‑market companies.” Stephen Morton Head of Complex Multinational Accounts for AIG Continental Europe, Middle East and Africa

“From an insurance and reinsurance perspective, the intermediaries of the “Private equity has been playing a major future are going to be heavily focused role in the brokerage sector, namely around innovation and not selling products. allowing independent brokers to maintain For many of our clients it is much more a competitive edge in a rapidly growing about advice. Data processing and digital landscape, and the Brokerslink model is technology is going to be fundamental the ideal strategic solution to achieve going forward.” that.” Jonathan Prinn Group Head of Broking at ED Daniel Zilberman Head of European Business at Warburg Pincus

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“Managing general agents (MGAs) will align with alternative capital as the evolution under way in the MGA sector continues and more and more insurance business is placed through such channels.” Gary Corke CEO of Global Underwriting at ED

“Digital technology is a key driver for growth and operational efficiency. Insurance needs to migrate more customers to digital platforms and stimulate customer behaviour to drive transactional growth.” Moruf Apampa MD/CEO at SUNU Nigeria “Communication is the key for success and digital activities can positively impact traditional organisations.” Filippo Cinelli Head of Broker Relationship Management at Generali Group

“Future, effective risk management requires a holistic approach and risk “Insurers have plenty of levers to fight managers playing a central role in back against climate change and help strategic planning.” businesses mitigate associated risks; Wendy Liu Head of Global Employee Benefits parametric insurance is a key tool.” Solutions at Zurich Tanguy Touffut CEO of AXA Global Parametrics

161161 m d s m a g a z i n e — f u l l c o v e r

JACQUELINE LEGRAND SUCCEEDS JOSÉ MANUEL FONSECA AS BROKERSLINK CEO

Jacqueline Legrand has been appointed Brokerslink CEO, succeeding José Manuel Fonseca who is stepping back to focus his efforts on managing the significant growth of the MDS Group, a Brokerslink shareholder. José Manuel Fonseca is CEO of MDS Group and as founder of Brokerslink will remain a board member, demonstrating his ongoing commitment to the company. Jacqueline Legrand is a board member at MDS, overseeing business development and operations in Portugal and Brazil. During the past nine years, she has worked closely with José Manuel Fonseca, more recently as regional director Europe, and will continue to further enhance Brokerslink’s global offering, extending its reputation for specialist industry expertise and access to the world’s insurance markets. José Manuel will continue to play a key role in shaping the future of Brokerslink.

www.brokerslink.com

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BROKING THE FUTURE NEW BRAND AND WEBSITE

Brokerslink has undergone a significant branding review. The new corporate identity, that reflects Brokerslink’s commitment and involvement in the risk and insurance landscape, was unveiled during the 2017 Brokerslink Global Conference in Marrakech. This new identity supports the evolution of the business. Since its launch in 2004 as a network, Brokerslink has transformed itself into a successful global broking company. The brand refresh allows Brokerslink to retain its established value while it develops a new identity to suit its new business model. This branding process is further evidence of Brokerslink’s continued global development and supports its vision for the future.

Stronger together, but flexible and colourful in parts

Brokerslink is today a global broking company with partners and affiliates that are leading brokers in each market, offering a real alternative to the established listed global brokers. With a distinctive colour scheme, the new brand is design to be adapted to each individual Brokerslink firm’s own branding. This clearly represents autonomy and flexibility, the perfect combination of global and local. The new website has been developed on a leading edge platform to showcase the roughly 10,000 talented individuals that work for the 100 companies that comprise the group. It illustrates what really can be achieved through teamwork combined with independence.

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MDS GROUP

CHRISTOPHE ANTONE MDS’ NEW DIGITAL DIRECTOR

THIAGO TRISTÃO LEADS CORPORATE RISKS IN BRAZIL

BOOMING BRAZIL: INSIGHTS FOR FOREIGN INVESTORS

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CHRISTOPHE ANTONE DRIVES THE DIGITAL TRANSFORMATION AT MDS

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With an eclectic career history in insurance and new technologies, MDS Group’s new digital director, Christophe Antone, is bringing his enthusiasm for digital projects to Portugal’s leading broker. He firmly believes that as we approach the much‑heralded­ era of digital disruption, the adage ‘High‑Tech,­ High‑Touch’­ will gain even more value. In his opinion, the fact that ‘machines’ can potentially replace or modify certain parts of our supply chain reinforces the necessity of business expertise, collaboration and innovation. He is convinced that the more we resort to using complex systems for certain functions, the greater the need for human intervention to be at the core of the process.

Passion – a driving force America!” Eager to share his knowledge, doing more in IT development and project he wrote a book aimed at colleagues and management than insurance. The idea of Christophe enjoys discussing when he peers called “Agents, courtiers, comment working with one of Europe’s ‘big five’ in first started in insurance, over 20 years vendre sur Internet?” (How to sell on the insurance sector seemed an obvious ago now, and how much he enjoys the the Internet for agents and brokers), next step and a challenge.” distribution area. Having obtained a which was published by Editions l’Argus diploma in marketing from a business de l’Assurance in 1997. A user’s guide school, he began his career in 1993 as a for a profession that was discovering A new perspective general agent with AXA Assurances in the media and its potential. “I was in France. While working with this highly­ demand for years to speak on Internet Christophe reminisces about his years ‑respected insurer he learned the ropes strategies at conferences attended by as a consultant in the early 2000s: and perfected his sales methods. When professionals who were discovering this “When I joined Capgemini, I was able the Internet first appeared in France he new distribution channel.” to see things from a completely new had a ‘Eureka’ moment, which he likes Over the years and in a bid to keep perspective and discover a wide range of to compare to those truly important ahead of the competition, Christophe companies, strategies, organisations and occasions in life when you look back years used specialist companies to manage information systems. This was a hugely later, you know exactly where you were the increasingly complex projects: “In valuable time for me in terms of acquiring when they happened. “I can describe the early days of the Internet I could knowledge around methodology, exactly where I was and the exhilaration do just about everything myself. Today organisation and project management.” I felt when I saw a search engine for the however, designing, promoting and At the time, Christophe specialised in very first time in my life and realised how maintaining a professional website customer relationship management it could benefit the insurance business.” requires a combination of many specialist solutions, providing support for major Since then, his passion for the web skills.” For one of his projects, Christophe insurance companies in their customer continues. Despite having no specialist worked with Capgemini, a leading transformation projects, call centres, programming knowledge, in 1995 he French consulting and technology back office and distribution networks. “I developed France’s first online insurance company, who offered him a position remember that when it was time to explain website. “At the time, we were the only with its consultancy teams supporting to the agent networks that their company ones, which may seem unbelievable companies in the finance sector. “It was a had decided to install a new collaborative today.” His recollection of those early days very intense time and I was doing a lot of solution, nobody wanted to go. I was the DRIVES THE DIGITAL is one of amusement: “The first time we computer‑related­ work. Fortunately, my one always sent into the fray on the pretext received a quote request form by e­‑mail, wife, who is also a broker, took care of the that I was fluent in ‘general agent lingo’ TRANSFORMATION AT MDS you would have thought we’d discovered operational side of our agency... I was now and would manage to survive!”

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‘MDS Lab’ is a space for Christophe continues: “What time that can be put to good use by our fully exploring innovative is interesting about the arrival of staff, improving relationships with technological change, as we have today customers and partners etc. These are ideas. From the original with digital, is that by shifting the the true advantages of the technological idea to deployment by boundaries and creating opportunities avalanche we find ourselves within.” and risks, this evolution forces us to way of benchmarking and question ourselves about the meaning proof of concept, we have of things. In other words, if we have new Portugal, merging ideas tools and new digital powers, what are with digital a tool at our disposal that we going to use them for? To what end? will allow us to exploit the What are the fundamental principles that In addition to his consultancy firm, will help us use these new capabilities Christophe and family moved to southern opportunities afforded by conscientiously?” Portugal in 2014 to set up a branch of his the digital age. In 2006, still fired by his passion for French broker with the aim of offering writing, Christophe’s second work, insurance solutions to French‑speaking­ “Organiser le CRM dans l’assurance” expats.­ At the time he met with the MDS (Organising CRM in insurance), was team, who were developing a similar published by Editions L’Argus de initiative. Christophe looks back on his l’assurance. As he explains: “For me, first meeting with José Manuel Fonseca, the process of writing is inextricably Jacqueline Legrand, Ricardo Pinto dos linked to action. We are terribly fond Santos and Carlos Bianchi de Aguiar: of pigeonholing people but I am both “It was in Porto and we were immediately a field man and a broker who needs connected. Our business models, which to get actively involved; I also need to at the time were competitors, turned out manipulate concepts, play around with to be very complementary and we quickly ideas and explore. When I have the time, decided to combine our efforts and, writing is a good way of doing this”. especially our ideas, to secure a position of leadership in the expat market. Over the following months, we also discussed The business bug aspects of our strategy and the direction the Group was taking. “The fact I was After several years as a CRM consultant both broker and fluent in ‘techno­‑lingo’ for Capgemini, Christophe reignited gave us the idea for a digital division that his passion for business by launching would allow us to coordinate the many his own freelance strategic insurance already ongoing projects and formalise consultancy. Alongside this, he and our thinking.” Having ideas and plans his wife founded a new French broker is very dear to Christophe’s heart and specialising in affinity solutions. “At the he explains why: “In the context of beginning of the 2010s, the social side current technological growth, having a of the web was growing in importance future strategy is essential for informed – many online insurers were still trying decision‑making. We are not ‘digital’ to create decent, but classic, websites, because it’s fashionable but, rather, at a time when the famous web 2.0 was because we think that certain strategic already churning out all sorts of new uses, directions produce, or will produce, marketing and approaches.” Christophe shared benefits for our staff, customers says a common thread running through and partners.” With the recent creation his various projects is his passion for the of ‘MDS Lab’, the digital director hopes to way technology can change practices involve the entire Group in the innovation and cause models to evolve, “especially process: “The ‘MDS Lab’ is a space for the ones we believed were written in fully exploring innovative ideas. From stone”, he quips. “My interest in the new the original idea to deployment by way of technologies has absolutely nothing to benchmarking and proof of concept, we do with their make­‑up but, rather with have a tool at our disposal that will allow the opportunities for change they bring us to exploit the opportunities afforded by to our business. For me, they are nothing the digital age.” • more than a means to serve a variety of ends: strengthening the broker’s role, creating new services, freeing‑up­

170 Global broking, local brokers.

Brokerslink is a global broking company that brings together market-leading, independent brokers from 97 countries. We support them with world-class, central risk management and insurance services, from Enterprise Risk Management consulting to unparalleled network connections and markets expertise. Together we provide a genuine alternative for multinational organisations. e d . e s r v G . A l r i g h t s e r s l i n k A o k PUB B r 1 8 2 0 / © 0 2 o m c e r s l i n k . o k . b r w w w m d s m a g a z i n e — f u l l c o v e r THIAGO TRISTÃO LEADS CORPORATE RISKS IN BRAZIL

Working in the insurance market since leaving university, Thiago Tristão has built a successful career with a number of high‑profile­ insurers. Having been with MDS Brazil since 2014, he’s had the opportunity to immerse himself in the broking sector –­ another area of the insurance world and something he considers vitally important. MDS is delighted to have welcomed to its ranks a highly experienced professional with a unique outlook.

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A bright future The MDS challenge in this context includes working more closely with customers, utilising their “In my university days, I did not After 18 years working for insurers, resources, sharing its risk­‑management have a clear idea of what I wanted to Thiago decided to take up the challenge expertise, minimizing the possible risk of do with my degree and so talked to of joining MDS team and gain experience loss through effective programmes and people who were close to me, including in the broking world. Having worked managing clients’ operations. family members, to find inspiration. with a number of insurers, he believed “In the current climate, it is I was impressed by the experience this would be a wonderful professional increasingly urgent to redesign policies of one of my uncles who chaired the opportunity: “MDS is a fast­‑moving, and risk­‑management programmes English company, General Accident. technically‑skilled,­ excellently­ to optimize coverage and control the He talked about the characteristics of ‑structured company, and through operation as a whole. In Property & the insurance sector, its challenges, Brokerslink, a global player. Its different Casualty, Herco, thanks to its technical opportunities and above all, its bright Group divisions, such as the reinsurance capability and experience across various future. This influenced my thinking business with MDS Re and Ed and its industries, has played a significant role. and a few days later, I applied for a engineering and risk management In health insurance, we act through a position with General Accident, who solutions with Herco, were very highly‑skilled­ technical and medical team took me on as a trainee.” attractive to me.” that puts together detailed studies on Thiago admits he is still fascinated Today, Thiago says this was a good meeting client needs and for new clients, by the insurance sector, even now. decision: “We are an extremely flexible we design and offer alternative products One of the main attractions is its company that follows high standards of for national emerging risks such as Cyber, dynamism. A market, conservative in professionalism and competence. This Weather Risks, Credit Insurance and nature yet with innovation at its core allows us to compete with any player out others. In addition, we take advantage and an ability to develop products, there.” of our relationship with Brokerslink services and solutions that meet the Thiago cites a number of MDS members who extend our product evolutionary challenges of a globalised highlights: “The turnaround of the Rio portfolio.” world. “It is a fascinating market,” says de Janeiro operation, repositioning MDS Over the next five years, Thiago says Thiago. And he appreciates the social in the insurance sector and regaining the insurance sector will face huge responsibility issues, valuing company the trust of our customer portfolio challenges, particularly those posed by sustainability and working to ensure and, of equal importance, bringing political and economic issues. This will society has a future: “By replacing a back the glint in my team’s eye after however, generate opportunities. loss, insurance helps rebuild companies accomplishing significant goals, like and brings families and even countries securing important clients and major back together. It has become one of the events such as the 2016 Olympics.” The personal view most important economic contributors At MDS, Thiago leads a 72‑strong­ to our world’s future wellbeing.” team. At the heart of his success is the First­‑born son of a Rio de Janeiro family, During his career in the insurance spirit of teamwork and cooperation. Thiago spends his free time with his sector, Thiago worked for major “These are undoubtedly the key factors. family, especially his three­‑year‑olds­ international companies whose Our success over the past few years is who “not only fill my daily life with joy cultures and business strategies were due to a technically‑savvy,­ competent but have also replaced the gym,” he says, very different to each other and that and experienced team who are very jokingly. “I also like to travel locally and of Brazil. “I managed teams at Spanish knowledgeable about the insurance play sports like volleyball and tennis Mapfre, American Liberty and AIG, market. We are among the top brokers with friends.” national Porto Seguro and the German in the country for volume of managed With a wealth of experience in the Allianz.” A journey which has given premium and our speedy processes and insurance sector and a lengthy journey him an in‑depth­ understanding of high technical proficiency help us stay through the corporate world, the motto many aspects of the insurance sector ahead of the pack.” for this executive has to come from writer, and its product lines: “… from Varejo teacher and administrative consultant at Porto Seguro (retail), to Liberty’s Peter Drucker, the ‘father’ of modern middle market and larger risks at The Brazilian market management: “There is the risk you Allianz.” Thiago recalls one particularly cannot afford to take and there is the risk memorable experience with Allianz: The greatest challenge for the Brazilian you cannot afford not to take.” • “In September 2014, not long before I insurance market is to balance a left the company, I was ranked first in need to raise premiums and fees (and an internal survey completed by my so address recent local and world subordinates. My team named me the deficits) with companies who, due to best­‑rated leader throughout Brazil for the current economic climate, may among many things, my results and not have the financial capacity to pay. management style.” MDS Brazil’s strategy to sustain growth

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Jorge Luzzi to lead Apogeris

One of the greatest risk management specialists in the world, Jorge Luzzi, has become the new president of the Portuguese Association of Risk Management and The only Portuguese Insurance (APOGERIS). His tenure began in May 2017. Established in 2002 under the guidance of MDS Group speaking Lloyd's Broker CEO, José Manuel Fonseca, who was president until then, APOGERIS endeavours to promote the disciplines MDS was recently registered as a Juan Arsuaga, president and CEO and application of risk management and insurance in Lloyd’s broker – such status opens of Lloyd’s Iberia comments: “It is the corporate world and wider society. doors to the largest specialised a pleasure to announce MDS as Among initiatives developed by APOGERIS was the insurance market in the world, our sole Portuguese Lloyd’s broker. organization of the 2005 FERMA Forum – the largest ensuring access to professionals Lloyd’s places all its risks through risk management forum ever held in Portugal and renowned for their management of intermediaries; alongside our 258 attended by 1,500 people from over 20 countries. emerging and complex risks. brokers, we have 99 syndicates and Jorge is also chairman of Herco Global, an MDS Group This means MDS can now directly place 3,859 coverholders in more than company that specialises in risk consultancy, and a wide range of more challenging risks, 200 territories. MDS will now be able heads the risk management teams at Brokerslink. such as environmental, cyber, natural to help the Portuguese market find disasters or major industrial, without insurance solutions, particularly when having to rely on foreign broker a large capacity or solid financial intervention. ratings are required or when dealing MDS is the only Portuguese­‑speaking with highly specialised risks. We wish broker among 258 that work with Lloyd’s MDS the greatest success and hope it of London worldwide and says it has will give us continued access and the contributed to ‘history in the making’, ability to work with the Portuguese not only for the insurance sector but insurance and reinsurance market.” also for the Portuguese economy.

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Beatriz Cabral appointed Head of Marketing and Human Resources in Brazil

In November 2017, Beatriz Cabral became head of the newly­‑created Marketing and HR department at MDS Brazil. This new role and function will strengthen the company’s New corporate website identity in Brazil and support internal cooperation and collaboration among its group companies. MDS Group has launched a new In addition, it shares its team’s Beatriz joined MDS in 2014 as Marketing, corporate website, confirming its expertise and their specialist areas Communication and Organizational leading position in the insurance via opinion articles and promotion of Development manager. market and continued investment in the Group’s FULLCOVER magazine – all innovation and technology. important ways to share knowledge. The website is part of a project This site is the first in a project to to increase the Group’s presence redesign a number of local websites, in the digital world, explore new namely in Portugal, Brazil and Angola, communication opportunities, bring which address the needs of each MDS closer to customers and further market and bring MDS closer to existing develop its business. as well as potential customers. Described as dynamic and user­ Visit the new website at: ‑friendly with a totally responsive www.mdsinsure.com. design that suits any device, the site promotes the Group’s global offerings and showcases its international reach and scale, with dedicated pages for each area of expertise and specific companies.

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José Manuel Fonseca, MDS Group CEO, takes on additional executive leadership role in Brazil

MDS celebrates Taylor’s 325th anniversary

MDS celebrated Taylor’s 325th anniversary of the first time Port was shipped from Portugal to England by supporting sailor Ricardo Diniz in his journey from the Gaia pier in Portugal to London on the sailboat #TAYLOR 325. The sailor had a 30­‑litre cask of Taylor’s Port which he delivered to London, from the same pier where, 325 years ago, Taylor’s sent its first shipment to the English market. In September 2017 José Manuel has strengthened its national Fonseca, MDS Group CEO, took on presence and customer relationships additional executive leadership role by opening new branch offices with at MDS Brazil, replacing Hélio Novaes, additional staff. who had served as CEO since 2010. This expanding operation benefits MDS Brazil is going through a vibrant from the MDS Group’s resources and growth period with a strategy global reputation enabling MDS Brazil to take the lead in its specialist to establish itself as a leader in the practice areas, and as a result, Brazilian market.

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MDS Brazil welcomed 2018 by expanding MDS continues its business and opening three new offices in Recife, Salvador and Belo its strategic Horizonte. The regions have high growth potential expansion and these branches enable MDS to share its expertise, establish closer in Brazil working relationships with clients and meet the needs of the business community. In an increasingly dynamic and demanding insurance market, this investment is a logical step forward, following the MDS strategy to focus on innovation and deliver services which bring the business closer to customers.

th MDS at 12 Brazilian Thomas Tescaro Risk Management appointed Head Summit of Retail in Brazil In August 2017 MDS participated in the 12th Brazilian Risk Management Summit. Organised by the Brazilian Risk Management Association (ABGR), the São Paulo event was attended by more than 2,600 international specialists who were keen to discuss the biggest challenges in risk management today. Gustavo Quintão, Head of Health and Benefits at MDS Brazil, delivered an address focusing on ‘risk management and benefits contract negotiation’, highlighting the importance of corporate investment in risk management and how it increases competitiveness and productivity. He pointed out that, by taking With nearly 20 years’ insurance sector experience advantage of the opportunities created by and a degree in business administration and software technology and artificial intelligence and using engineering, Thomaz Tescaro is the new Head of Retail data analysis, it is now possible to predict at MDS Brazil. serious cases and complications in chronic He has worked with major financial corporations illness, preventing future claims. including Alelo, Santander and Itaú (Garantec) and between 2012 and 2015 was affinity manager at MDS. Thomaz is now back with the company and his goal is to enhance customer service in retail and affinity projects.

177 m d s m a g a z i n e — f u l l c o v e r BOOMING BRAZIL INSIGHTS FOR FOREIGN INVESTORS

BY SAMUEL MARTINS AND VICTOR GARIBALDI

The Brazilian insurance market is in a state of permanent evolution. Within some areas, cultural and market maturity issues means penetration has not yet reached its full potential. However, for property and life protection, where cover should be taken without question, there’s room to reach the same penetration level as other countries. Global insurers have recognised this and seized on the new business development potential in Brazil to offer new products and increase their market share.

Pricing is a challenge in Brazil. Factors choose the most cost­‑effective, needs­ such as violence and political or economic ‑orientated protection packages. instability drive up costs. This leads to For Samuel Martins, international clients failing to buy insurance or they account executive at MDS Brazil and opt for policies with limited cover. This is responsible for managing global where brokers have an essential role; by programmes for Brokerslink partners, supplying clear and objective information, the next two years will be intense for the they can help clients better understand sector as a whole. He comments: “We’re the wide range of risks they’re exposed to. seeing slow signs of an economic recovery Another area where brokers add which means we are less of a risk to significant value in the Brazilian market is international investors. For this we can their ability to tailor products to address breathe a sigh of relief. While the election the needs of each specific client. Not only period and a change in government do they ensure global products meet the generate uncertainty, in general, I believe legal and regulatory frameworks of their we will see a growth in different sectors country but they also help customers as we move forward.”

178 b o o m i n g b r a z i l

Global factors with brokers from different backgrounds. Samuel Martins This enables MDS to offer a wider range International Account Executive at MDS Brazil In Brazil, the insurance market is also of protection and services, meeting impacted by global factors; political the specific needs of each customer and economic crises, terrorism, and ensuring access to international environmental issues, new technologies insurance, reinsurance and risk and cyber risk. MDS Brazil has recognised management programmes. All are however that, after the damage caused developed in coordination with national by the 2014 economic crisis, a new cycle specialists in each country, guaranteeing has begun, with confidence returning and a local, personal service. foreign investors again taking an interest Samuel concludes: “The role played in the country. by MDS within Brokerslink allows us As a result, the insurance market to create meaningful international must develop policies that meet the partnerships and consolidate privileged needs of all companies and comply with access to highly specialised services. Brazilian legislation which, in many cases, This enhances the solutions we deliver represents a significant challenge. In some to market and makes us stand out at cases, there is no insurance solution in a challenging time where ever more place to reduce the impact of a particular customised services are in demand.” risk on a business so demand is forcing specialists to develop new innovative solutions as quickly as they can. The local market For example, the political scandals that gripped Brazil over the past few years An important aspect to consider when affected global risk management and, as developing a global insurance programme Samuel Martins has a degree in actuarial a consequence, exposure to image and is local legislation. Brazil, like so many science, focusing on general business, reputation now appears in a significant others, is a non‑admitted­ country from Dorset College, Ireland. He joined number of policies. Demand is highest which means it is necessary to issue a the insurance market seven years ago from the industry and service sectors. local policy to cover risk on national working for Metlife, specialising in Such matters of image and reputation territory. The few exceptions are oil and employee benefit products. He then moved should be key elements within senior aeronautical risk. to Seguros Martins & Bononi, focusing executive and professional protection Victor Garibaldi, International Business on executive projects to streamline policies. Samuel states: “The demand for Partner at MDS, reminds that world operational management and in 2015, D&O insurance, for example, has grown programmes must comply with the joined MDS Brazil. Samuel is currently considerably over the last couple of years. country’s terms and conditions and so an international accounts executive, I believe this momentum will continue, policies must be issued locally: “In some responsible for managing global especially when you consider the level of cases, in order to meet the programme’s programmes for Brokerslink partners. demand from multinational corporations specific terms and cover needs, MDS in the country.” provides local insurers and regulators Renewable energy businesses also with the solutions.” create opportunities for MDS to stand out Victor also reveals that MDS takes a from the competition and offer innovative corporate risk management approach solutions, particularly as Brazilian when underwriting insurance: “Our bureaucracy and legislation in this engineering experts give substantial sector requires a trained eye to anticipate support to customers in assessing their non‑apparent­ risk. Local specialists are needs and developing policies to reduce, therefore indispensable, as off­‑the­‑shelf control and transfer risks.” solutions do not provide the flexibility To Garibaldi, this sort of work is that’s needed here. fundamental to ensure policies cover New and disruptive technologies the quantified risk. The insurance represent another challenge for brokers. policy is then an accurate reflection of For example, offering insurance to a the policyholder’s internal risk control drone company wishing to operate locally mechanisms, giving the client the requires specialist knowledge; Brazilian necessary peace of mind. legislation does not regulate this specific Victor also points out this particular technology. approach puts the broker ahead of With MDS being part of Brokerslink, the competition in several areas: “Our it is able to connect and share insights methodology, which is embedded across

179 m d s m a g a z i n e — f u l l c o v e r

the business, puts MDS at the top of Victor adds that what’s happening in the class when it comes to insuring the country poses a major challenge to property, liability, transportation MDS – there’s a need to use new strategies and financial risk etc.” to develop tailored solutions for each When discussing reinsurance client and reduce costs. in Brazil, Victor explains that, He concludes: “There is no such thing since Complementary Law 126 was as a formula. We have to study each introduced in 2007 – opening up a customer, their population profile and reinsurance market, which until then plan use, not just the company healthcare was virtually monopolised by the plan, but their overall benefits package. Brazilian Reinsurance Institute (IRB) – Then we can develop the most fitting it has undergone significant evolution. solution that reduces costs while at the Different classes of reinsurer have been same time, reassures the end user their identified, along with offer and retention benefits have improved.” • preferences for each class. He says: “This 10­‑year evolution is a direct consequence of Law 126. Not only Victor Garibaldi has the reinsurance market become International Business Partner more competitive, but it has introduced at MDS Brazil more products and cover with new underwriting dynamics. New players coming into the market also extended the product portfolio.”

Healthcare

One of the market’s most important sectors is health insurance. Victor explains that Law 9.656 introduced in 1998, regulated healthcare plans: “The current level of cover provided by healthcare plans in Brazil is governed by the National Health Agency (ANS), Victor Garibaldi has more than 13 years’ which sets out what procedures and experience in the insurance sector. He examinations etc the plans must include.” has worked for companies such as Allianz To Victor, the corporate sector is one and ACE and has extensive knowledge in of the most significant niches within the underwriting Property & Casualty, energy, health insurance market and tailoring engineering and aeronautical risks. He services for human resources managers is also experienced in developing risk is key to remaining competitive: “MDS inspection and risk management programmes Brazil offers consultancy services to and creating global reinsurance An important aspect to companies using a unique tool to help programmes. consider when developing a HR develop and deliver flexible benefit Victor has regularly given presentations programmes with policies suitable for at FERMA, ALARYS and the Brazilian global insurance programme each employee. In addition, features such Risk Management Association (ABGR) is local legislation. Brazil, like as our concierge doctor, second opinion conferences. He joined MDS in 2009, and workplace medicine services, among building a client base through so many others, is a non­ others, ensure we are taking the lead in bancassurance, partnership and affinity ‑admitted country which the management of company benefit distribution channels. programmes.” Victor also has employee benefits means it is necessary to He points out that Brazil, much like experience, including health management, issue a local policy to cover other countries around the world, now actuarial studies and eligibility deals with an aging population. While this criteria. He has a degree in mechanical risk on national territory. positively reflects improving standards of engineering and a post­‑graduate degree The few exceptions are oil living and new healthcare technologies, in business administration, having spent the impact on increasing claims and plan four years in the auto and ammunition and aeronautical risk. costs is driving up insurer costs. industries.

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182 remembering b e l m i r o d e a z e v e d o

REMEMBERING BELMIRO DE AZEVEDO BY JOSÉ MANUEL FONSECA

It is with great nostalgia that I pen this Belmiro had an understanding of A true entrepreneur, Belmiro took tribute to Belmiro de Azevedo, ‘The insurance strategy, from business chances, daring to innovate and take the Engineer’ as we affectionately called him. continuity, asset protection and employee initiative. He turned many of his managers He was a remarkable entrepreneur, safety to the reputational impact of a into entrepreneurs themselves, and they a leader, a visionary who challenged us claim and the consequences of exposure are now respected market leaders. constantly and someone who always due to inadequate contract wording. Speculation did not please him – he’d wanted to do more. He was extraordinary to work with. MDS rather create value through employment I met him in my youth, during the today owes a great deal to the seeds he and investment. Always far‑sighted,­ vibrant 1980s. Spending even a minute sowed in the early years: challenging us he led the way with his vision for retail, in his company gave you a feeling of to innovate, operate internationally and industry, telecommunication, real estate excitement –­ if I could only convey his create outstanding teams. He knew all and of course, risk management and strength of personality, the depth in his too well about the complexities of our insurance. eyes and the mischief in his smile. business and the powerful impact it could To Belmiro de Azevedo education was I seized an opportunity to join the Sonae have on companies and societies. a lifelong passion; he tirelessly supported Group 18 years ago. As was the dream of I recently spent time rereading the executive training in Portugal as well as many professionals, it came true for me. speech he gave at the 20th­-anniversary in leading international schools. He was ‘The Engineer’ himself interviewed me party for MDS, in June 2004. We were a well‑informed­ man, with a profound for the job, to this day, it was one of the building the foundations for Brokerslink knowledge of corporate culture, yet most remarkable conversations I have at the time and it seemed almost a always keeping his ear to the ground in ever had – it filled me with motivation and dream that was shared by a small group this changing world. excitement –­ even joy. I will never forget of brokers who wanted to conquer the In a little over five decades, the Group he it. Nor will I ever forget his exemplary world. His speech outlined the plans built from small foundations now has over morals and the culture of ethics and and ambition behind what is our global 40,000 employees in around 90 countries, independence he fostered. brokerage firm today. That speech moves with two holding companies trading in It was my good fortune that, as CEO at me to this day. stock exchanges. To this day it is a family­ MDS, then a small captive broker, he and Belmiro was a role model as an ‑controlled, professionally managed group. I would discuss all the insurance and risk entrepreneur. He always considered his He was the greatest Portuguese issues affecting the Group. I immediately companies to be active contributors to the entrepreneur of the past 100 years. Many realized I was facing a rare corporate country’s economy and was proud to be of us now miss him. We miss the voice, the leader. He viewed risk and insurance as the largest private employer and tax payer. smile and the challenges. his responsibility; not the financial or He help to improve the markets, make procurement director’s, but his. How right them more efficient and ethical, operating Thank you, Belmiro de Azevedo. • he was, and how rare is this attitude. And independently of the State, cartels and the culture he supported still exists in the monopolies. He would always invest Group he founded. where there was balanced competition.

183 LEGAL CORNER 2018 BRINGS NEW CHALLENGES

Data Protection

On 27 April 2016, the European Parliament status. This includes a ’right to oblivion’ measures may incur additional costs. and European Council approved the on the part of the data subject and a Regulatory fines are heavy – a maximum General Data Protection Regulation. This requirement for each user to consent to of 20 million euro or, in case of a revokes Directive 95/46/EC and comes the processing of personal data (which multinational company, four per cent into force on 25 May 2018. will have to be explicit when it comes of worldwide turnover. Such is the territorial scope of the new to sensitive data, clearly identifying With the post­‑Brexit deadline Regulation, that some data controllers the specific purpose intended). These approaching, the Queen’s speech of last and subcontractors based outside the guidelines are more stringent than what June revealed the United Kingdom’s EU whose processing activities relate has been in force up until now. intention to include the new Regulation to offering goods or services (even Although the new Regulation is within its internal legal framework (whose free of charge), will need to appoint a an important step towards personal rules will continue to be in force after representative within the EU. Another data protection, it brings an increased its withdrawal from the EU). This move substantial change, among others, is for administrative burden for data controllers, puts more emphasis on London receiving subcontractors to maintain a physical subcontractors and the regulatory information than supplying it, because in register of each data controllers’ activities, authorities. According to a report anticipation of its treatment as a non-­ and appoint if necessary, a data protection presented by Verizon, in 2016 there EU country, the Government intends to officer or notify the data controller were about 1,935 security breaches in 82 create a high‑quality­ system for personal immediately upon detecting a personal countries. Given data controllers and the data protection. data breach. supervisory authorities must comply Cyber risk insurance with cover for third A breach of personal data should also, with the deadlines for notifying breaches, parties is one mechanism to compensate whenever possible, be reported to the it is expected that most reports will be for and mitigate losses associated with data regulatory authority within 72 hours of brief in detail. The person in charge will breaches. Policies available on the market becoming aware of it. In the event of the most likely seek to demonstrate – to the support the client with services that offer breach affecting personal security or satisfaction of the regulatory authority advice and help prevent technological privacy, the data subjects must be notified – that adequate security measures were failures. In a broader perspective, this immediately by the data controller. implemented and they were in use at the new Regulation reflects the European In order to safeguard personal data time of the breach in question. The effects legislator’s commitment to cyber security. access and transparency, the new of this administrative burden therefore, Regulation aims to extend the rights of are likely to extend to all involved parties the data subjects and enhance their legal and those showing a lack of effective

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Changes in Distribution

Also in 2018 is the new (EU) 2016/97 In order to ensure the product is right for Insurance Distribution Directive (IDD), the consumer, the intermediary must which replaces Directive 2002/92/EC, inform the client of its specifications combats the fragmentation of the European and while noting a specific interest, the insurance market and promotes trade opportunity to acquire it elsewhere. This between Member States. And as did the type of sale with personalised or tailor­ former Directive, it also applies to the ‑made advice is not often promoted by distribution of reinsurance. agents; it is however given by brokers who On 21 September 2017, an additional have a greater influence and can impose regulation to complement the IDD conditions on the insurance company. was also approved. Following the The role of an exclusive agent is to focus commission’s proposal to postpone on offering advice and product/benefit the IDD’s effects until October 2018, information. this regulation will be in force from The suitability of products for different 1 October 2018, it aims to ‘specify the types of customers is dependent upon criteria and practical arrangements for their needs and the policies’ complexities, rules concerning conflicts of interest, but there is an expectation that the target incentives and the assessment of market for more simplistic products suitability and appropriateness’. will expand with a greater emphasis on When it comes to market behaviour, identifying potential customers. The real the guiding principle will be ‘know your focus of the IDD however, is to put the consumer’, particularly when it comes to contracting decision and communication price discrimination and cross­‑selling. flow into the hands of consumers. •

Paulo Almeida

Paulo has extensive experience in advising insurance and reinsurance companies on policy provision and developing/revising products for various lines of business, particularly in the financial chapter. Areas of focus include; professional civil liability, directors and officers, plus commercial and corporate law, including banking litigation. He was a lawyer at Lisbon City Council, partner of Almeida & Athayde, and is currently a managing partner of Kennedys Portugal. Paulo is a member of the International Bar Association, the Portuguese Sector of the International Association for Insurance Law and the Federation of Defense & Corporate Counsel. He was admitted to the Portuguese Bar Association in 1989 and speaks Portuguese, English and Spanish.

185 Porque nunca estamos satisfeitos, os nossos clientes são os mais satisfeitos.

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Pela 5.ª vez, a Generali é a seguradora Líder na Satisfação dos Clientes.

Generali - Companhia de Seguros, S.A. Não dispensa a consulta da informação pré-contratual e contratual legalmente exigida. generali.pt

An 220x280 mm_rev FULL COVER.indd 1 16/02/17 16:22 o l í m p i o m a g a l h ã e s OLÍMPIO MAGALHÃES A HISTORICAL FIGURE IN THE PORTUGUESE BROKING SECTOR

BY ANTÓNIO VASCONCELOS

António Vasconcelos, A man who made the world He inputted to, organised and managed executive director at of insurance his home. conferences – events that were praised by all, including the regulating authorities Portoseguro remembers A man known to his peers and several Portuguese insurers. Olímpio Magalhães, who as ‘Mr Broker’. His fourth conference was the crowning glory: a World Summit (BIPAR served as president of the It was 1967 when I completed my and COPAPROSE) in Lisbon which Portuguese Association university degree and set out to find was attended by the then‑president­ employment. As fate would have it, my of Portugal, Jorge Sampaio, and BIPAR of Insurance Producers first job interview was in a brokerage (European Association of Insurance (APROSE) between 1983 founded by Olímpio Magalhães – Invicta Intermediaries) chairman Kurt Sedler. Seguradora. This was the start of my Olímpio at the time was chairman of and 2000. A larger‑than­ ‑life­ career and I was lucky to have a young, COPAPROSE – a body that brings together figure in the Portuguese enterprising, generous boss who taught insurance producers from Latin America, me a great deal about insurance and the the US, Spain and Portugal. He was an insurance world, he passed discipline of work. outstanding chairman in APROSE’s away in December 2017. Olímpio was a respected and influential long history. figure in insurance; during his career he He devoted much of his life to others was always proactive and along with other and to worthy causes. He founded broker colleagues, founded APROSE the Teatro Experimental do Porto (Portuguese Association of Insurance (Experimental Theatre of Oporto), chaired Producers) in the period immediately the Assembly of Oporto City Council, after the Portuguese revolution of April presided over Instituto Profissional do 1974. He fought for a legal framework and Terço (Professional Institute of Terço) and regulation for the broking profession, served as president of Boavista Football which until then had no guidelines Club and the Clube Fluvial Portuense. of its own. While Olímpio Magalhães has passed He was elected chairman of the on, the cycle of life continues. But Olímpio General Assembly of APROSE and later will remain in our collective memory, sat on several boards. a very real presence to us in the noble Olímpio was a charismatic, hands­‑on industry of insurance. chairman who generated enthusiasm I, who had the good fortune of spending among APROSE associates and was always time with him and learning from him acting in the best interests of broking have lost the benefit of his company, but Olímpio Magalhães entrepreneurs. Olímpio the unforgettable friend lives on. •

187 m d s m a g a z i n e — f u l l c o v e r

READINGS

BUILDING INNOVATION THE AUTHORS DR. TENDAYI VIKI is founder and managing ECOSYSTEMS partner at Benneli Jacobs, a strategy and innovation consultancy firm that helps companies develop internal ecosystems so they can innovate We are living in an era where innovation is like startups. He holds a PhD in Psychology and an MBA. He has worked as a consultant for several imperative. Technology and software have companies including Pearson, Standard Bank, The transformed business, and continue to do so British Museum, The World Bank, General Electric in more and more dramatic ways. Corporate and Whirlpool. He is also a Contributor at Forbes Magazine. Dr Viki co­‑designed and helped implement leaders have to respond. Innovation is no longer Pearson’s Product Lifecycle, which is an innovation How established companies can develop a sideshow. It is now the way all companies have framework that won Best Innovation Program 2015 at successful innovation ecosystems to do business in the 21st century. the Corporate Entrepreneur Awards in New York.

1 The Corporate Startup describes how DAN TOMA comes from an entrepreneurial Tendayi Viki companies can put in place an innovation background – having been involved with Hi­‑Tech & Dan Toma Internet start­‑ups across the world and being a Esther Gons ecosystem. Rather than having innovation as a one­‑off activity, companies should have entrepreneurship community leader in Europe – Dan Toma has a clear understanding of the challenges a repeatable process for turning ideas into involved in building sustainable businesses profitable business models. The book describes from the ground up. In the years following his the five core principles that companies can graduation from a top MBA program, he started focusing more on enterprise innovation management, use to build their innovation ecosystems. specifically on how disruptive new ventures can be The Corporate Startup approach allows large built in a corporate setting. VIKI, Tendayi companies to compete with startups, without TOMA, Dan having to act like startups. ESTHER GONS is co­‑founder of NEXT Amsterdam helping startups from ideas phase to working GONS, Esther According to the book, companies have to align business model, she developed the entrepreneurship Deventer, the Netherlands: corporate strategy with innovation strategy. course for the HvA, is an international speaker, Vakmedanet, 2017 Companies also have to develop unique ways to organised the first StartupBus Europe tour in 2011 and acts as lead mentor at Rockstart ISBN: 978 94 627 6195 7 manage innovation that are distinct from how Accelerator. As a visual spatial thinker she was they manage their core products. Lean, agile and part of bringing the lean startup movement to the design thinking have to become practices that Netherlands. Esther has mentored over 100 startups so far and still acts as advisor for many of them. permeate all layers of management. • Connecting coporates to the startup ecosystem is important to NEXT and thus she is also frequently BY TENDAYI VIKI involved in corporate innovation.

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FROM SCIENCE FICTION TO REALITY

The foreword of this book takes us back to 1903, Among the pages of this book several experts when a young H.G. Wells gave a lecture on the (one to two per chapter) share their views on risk of global disaster at the Royal Institution in how to tackle the risks that, in their opinion, London. He said: “It is impossible to show how will be catastrophic for the 21st century – from certain things should not utterly destroy and geophysical and volcanic processes, hazards end the human race and story… something from from comets, asteroids and solar flares, climate space, or pestilence, or some great disease of the change, plagues, pandemics and Artificial atmosphere, some trailing cometary poison, some Intelligence to social collapse, nuclear war and great emanation of vapour from the interior of nuclear terrorism, biotechnology and biosecurity the Earth, or new animals to prey on us, or some risks, nanotechnology and the threat of drug or wrecking madness in the mind of man.” totalitarianism. More than 100 years later, we can only marvel Highly interesting insight into risks that while BOSTROM, Nick at how accurate his description of catastrophic seemingly more related to sci­‑fi movies and CIRCOVIC, Milan M. events still remains, perhaps with the exception books than day­‑to­‑day reality, could well Oxford: Oxford University Press, 2011 of technology risks – cyber risk for instance is become catastrophic in our time. • ISBN: 9780199606504 something no one could have possibly predicted.

A CHANGE OF PARADIGM

The book introduces us to Case’s view that we For Case, this goes beyond just the internet­ are entering a new paradigm called the ‘Third ‑of­‑things, it is more a movement towards Wave’ of the internet. Steve Case is an American completely digitized products and services. entrepreneur, best known as the co­‑founder The Third Wave can be summarized by this quote and former chief executive officer and chairman from the book: “The moment where the internet of America Online (AOL). In 1980, futurologist transforms from something we interact with, Alvin Toffler was already describing three types to something that interacts with everything of societies based on the concept of ‘waves’ around us.” (agrarian revolution, industrial revolution, post­ Steve Case was a pioneer of the internet age. ‑industrial society, information age). Steve Case His perspective is valuable and adds insights drew his inspiration to share his vision of the into what’s next: “Incumbents often fail because future from this concept. they underestimate the speed at which the The ‘first wave’ saw operators lay the foundation future is approaching...Too often corporate for users to connect to the internet. The executives are too shortsighted to understand ‘second wave’ saw companies such as Google how technology that is disrupting a different and Facebook extend this further by creating industry might be adapted to do the same in search and social networking capabilities, their own. So put down this book. Pick up your while apps like Snapchat and Instagram then smartphone, your notepad – your blowtorch... CASE, Steve leveraged the smartphone revolution. Now, Take action. Be fearless...Keep going. Keep New York: Simon & Schuster, 2016 Case argues, we’re entering the ‘third wave’: a tinkering. Build something that makes you ISBN: 978‑1501132582­ period when entrepreneurs will vastly transform proud.” • major ‘real world’ sectors of health, education, transportation, energy and food ­– and in the process, change the way we live our daily lives. Case outlines his history at AOL, tying it to the ‘first wave’ of the internet era; however the book is really about what Case calls the ‘third wave’.

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