PAGE FOLIO

Insurance Hub Cologne

Open for Business insurance-hub.cologne | 1 | SOURCE: © City of Cologne_Christoph Seelbach

| 2 | insurance-hub.cologne CONTENTS

‘Insurance Hub Cologne’...

...is the first publication published by Rubicon Media and Calixa Creative on behalf of the City of Cologne (Stadt Köln) Dr. Frank Grund and Cologne Chamber of Commerce and Industry (IHK). of BaFin: What The publication forms a central part of a joint campaign to expect from backed by the two bodies to raise the profile of Cologne as the regulator an important and vibrant German and European insurance and reinsurance centre. 4 Insurance Hub Cologne is supported by the creation of its own dedicated website insurance-hub.cologne and ongoing news and events.

Communications team Adrian Ladbury, founder and Editorial Director of Mayor Henriette Rubicon Media Ltd., publisher of Commercial Risk Europe, Reker extols Commercial Risk Asia, Commercial Risk Africa and International the benefits Programme News, is a journalist and publisher with over of Cologne 30 years-experience of the European and international risk and insurance market. 10 Adrian is a regular host and speaker at leading risk, insurance and reinsurance events in Europe and worldwide and of Rubicon’s own range of industry events. Adrian has produced the content for this report in his capacity as an independent consultant to the Insurance Hub Cologne campaign. Contact: [email protected] 00 44 7818 451 882 Dr. Werner Görg of Alan Booth, is the Creative Direcor of Calixa Creative, and a IHK and Gothaer specialist communications consultant, focused on editorial welcomes fresh design excellence, servicing the business journalism, risk and insurance, and automotive sectors. Alan is a highly competition experienced newspaper and magazine design specialist and has led design teams for news publishers including The Wall 12 Street Journal Europe, Politico and The Sunday Times. Contact: [email protected] 00 44 7817 671 973

Cologne team Sebastian Pitzler: Reiner Gleiss Cologne the Insurance Consultant InsurTech hub Economic Ambassador for Germany [email protected] 00 49 221 28275586 18 Alexander Hoeckle Director International Chamber of Commerce and Industry, City of Cologne [email protected] 00 49 221 16401550 Manuel Wirtz: Michael Josipovic Newline selects Deputy-Director Office of Economic Development, Cologne Cologne, the “magnet for [email protected] insurance talent” 00 49 221 22126123 20 images: © Wikimedia Commons 2018, unless stated insurance-hub.cologne | 3 | COMMENT

But, if you consider the arguments in more detail, perhaps Cologne has a stronger case than appears at first glance for international insurers and reinsurers trying to work out their optimal strategy post-Brexit on a longer-term basis.

Perhaps also Brexit could be described as something of a red herring. The real question is surely not how to respond to Brexit in the short term but really how to build your business in the EU for the long term. Adrian Ladbury CASE FOR COLOGNE

Economics and politics The case for Cologne in this observer’s view is based on suggest serious local three key arguments: u REGULATION: It will be increasingly difficult for presence needed international insurers to justify their EU subsidiaries based in low-tax specialist insurance centres when to win in European all the real work is still done back in London; insurance game u DISTRIBUTION: Commercial and corporate customers and their brokers want to deal with local insurers who understand their increasingly complex needs and can design bespoke solutions. The capital backing these solutions may be international, but, the customer wants to deal locally drian Ladbury, risk and insurance in the design stage; journalist with some 30 years- experience, founder and Editorial u TECHNICAL EXPERTISE AND director of the Commercial Risk group of titles and INNOVATION: The rise of new Aeditor of this publication, argues that, while the short- risks such as cyber demands a term solution to Brexit may be found in Luxemburg or far higher level of expertise from Brussels, in the longer run insurers that are serious insurers than in the past. This about the huge EU market will need a proper base in a expertise needs to be supported by Gabriel Bernadino leading European city such as Cologne. investment in the latest technology (InsurTech) to better identify, analyse, price and When the City of Cologne delegation led by Mayor Reker package the risk. Hubs such as Cologne and Madrid visited London and presented its case to Lloyd’s and in Europe, Dubai in the Middle East and Singapore wider London insurance and reinsurance market as a in Asia can, and do, attract the skilled staff needed potential new home post-Brexit in February 2018, one to deliver this. London is no longer the ‘only game leading London insurance executive understandably in town’ for international specialty insurance and asked the blunt and obvious question: “Why? Surely the reinsurance and this trend will continue. horse has bolted and most London-based international insurers and reinsurers have already decided to set up The latter two arguments – distribution and proximity their EU operations in Luxemburg, Dublin or Brussels?” and technical expertise and innovation – are strong longer-term arguments for a regional insurance hub This was a fair question to ask. The attractions of such as Cologne. This is fully supported by the range of Cologne as a serious EU-based insurance hub in the interviews carried out with leading local players within heart of one of the world’s biggest and most dynamic this publication. economic regions with plentiful skilled and highly educated workers and a dynamic InsurTech sector are One may argue that the leaders of international clear to see. insurers and reinsurers based in the city itself are bound to argue its case. The simple economics, however, surely dictate that established ‘onshore’ EU specialist insurance and But, only two years ago, the London market itself reinsurance centres such as Luxemburg, Dublin or even published an important report produced by Boston Malta seemingly offer a far more cost-effective option Consulting called ‘London Matters’ and came to this for those international insurers and reinsurers keen to very conclusion: The London market needs to work out retain access to the massive EU insurance market. how to cope with a shift in buying trends whereby risk

| 4 | insurance-hub.cologne COMMENT and insurance managers and their brokers the world over want he arrived backed in 2002. Some individual Lloyd’s insurers, to deal directly with local insurers and not a wholesale market notably Hiscox and Catlin, did set up operations in Germany thousands of miles away. and have done well because they have invested in people on the ground. But, little was achieved on a market-wide basis. SHIFTING BUYING TRENDS BREXIT: DECISION TIME This is why Lloyd’s of London, the historic centre of the London market, has invested heavily in recent times to build platforms So, we reach a point where the UK is about to leave the in Singapore, Dubai, Brazil and more recently Mexico and China, European Union and all those international insurers and with varying degrees of success. reinsurers that chose London as their obvious base to access the huge flow of international business that still comes to the The core reason for the historic success of the Lloyd’s market market need to make a decision about where to base their EU is its ability to gather together a deep and broad pool of operations and maintain access to the EU. expertise and capital in a competitive and vibrant market and distribute its capacity and products worldwide via a wide range As noted above, the obvious response was to set up a of wholesale international brokers and retail brokers ‘on the subsidiary in an existing ‘onshore’ EU specialist insurance ground’. and reinsurance centre such as Dublin or Luxemburg (and now Brussels), meet the local supervisory requirements at The rise of more local markets and regional buying habits minimum cost and reinsure the business back to London where coupled with rising protectionism in local the world over all the real staff – sales, underwriting and claims – remain. threatens the validity of this basic model. But it seems that over time this may not be such a simple Another big challenge for a global wholesale insurance market and cot-effective strategy. The various national European such as London is the fact that risk and insurance managers insurance supervisors and EIOPA, the pan-European body want and need better and more efficient service responsible for ensuring that the EU’s rules from their insurers, particularly when it comes to are properly and fully implemented on a paying claims. consistent basis across the EU, are already asking questions about the validity of this The arrival of new technologies such as the model. distributed ledger system Blockchain offers a vastly improved, faster, more transparent and TEST OF TIME lower cost means of achieving significantly improved contract and coverage certainty. Recent statements from EIOPA itself, national supervisors such as BaFin in Germany and Trying to get the entire Lloyd’s market to market experts suggest this could become agree and sign up to a co-ordinated, efficient an increasingly contentious area and make Felix Hufeld and customer-friendly way of adopting such it difficult for the insurers and reinsurers to technologies is terribly difficult. economically justify this approach.

The German model of creating digital hubs at a Federal EIOPA and BaFin have already strongly and publicly stated that government level that led to the formation of the networking they will not accept ‘letter box’ insurers that reinsure 100% platform InsurLab Germany that brings together the traditional of the business back to London. EIOPA has repeatedly stated insurance market with start-ups and venture capital looks like that it wants to see at least a 10% minimum retention and a a much more efficient way of going about this investment in ‘meaningful’ level of staffing and management on the ground. the future. Some have suggested already that 10% is only the start.

UNDERWEIGHT IN EUROPE Gabriel Bernadino, chairman of EIOPA, kicked off the debate as early as June 2017 on the very day of the last UK general Thus, the arrival of Brexit has simply added another difficult election at a conference in Madrid. conundrum for the London market as it struggles to find the best strategy to cope with the ongoing evolution of the global “At this point in time, our priority is focused on the supervisory risk and insurance market. approach towards the insurers based in the United Kingdom seeking relocation of subsidiaries in the 27 European The Lloyd’s market has always been seriously underweight in Union Member States…Empty shells or letter boxes are Continental Europe when compared with its traditional core not acceptable. Sound supervision demands appropriate international markets such as the US and Canada, Australia, location of management and key functions including sound South Africa and other former colonies and English-speaking outsourcing and reinsurance policies. EIOPA intends to publish markets. in due course guidance for national supervisory authorities on sound principles for authorisation and supervision and will Former Lloyd’s chairman Lord Levene challenged the market subsequently closely monitor their implementation,” said Mr to raise its profile and business in mainland Europe when Bernadino. insurance-hub.cologne | 5 | COMMENT

CORPORATE SUBSTANCE insurance undertaking is a company under Solvency II-rules [not one based in a third country as the UK will become post-Brexit].” In October of last year Dr Manuela Zweimüller, Head of Policy Department at EIOPA, gave a keynote speech at the 12th Annual Henning Schaloske, Partner in Clyde & Co, Düsseldorf, said: Insurance Risk Conference in London and strongly made this “EIOPA has already warned that it may insist on at least 10% local point again. retention for such operations to ensure that they are ‘proper’ insurance companies and not just brass plates. Yes, I think there “EIOPA expects undertakings to show an appropriate level of will be pressure on local regulators to ensure a level playing field.” corporate substance; EIOPA will not accept characteristics of an empty shell. The supervisors should carefully scrutinise And the BaFin itself, as a leading member of EIOPA, will clearly any transfer of risks and require a minimum retention of risks use all its substantial muscle power to prevent a slippage in from the authorised undertaking. As an indication, a minimum standards. retention of 10 % of the business written could be envisaged. Outsourcing of undertakings’ important functions should be During a conference in London In October of last year, news subject to the full responsibility of the management body for the agency Reuters reported that Felix Hufeld, the President of BaFin outsourced activity and shall not materially impair the quality said that the German supervisor and other EU regulators would of governance, increase operational risk, impair the ability of not tolerate "empty shells or letterbox models." supervisors to monitor compliance or undermine continuous and satisfactory service to policyholders,” said the EIOPA executive. STRATEGIC RETHINK?

“The principles set out in our Opinion will support the national The broader trends developing in the European and international supervisory authorities to secure sound and convergent insurance and reinsurance market as described above coupled practices. Sound supervision demands appropriate location of with the more direct regulatory impact of Brexit strongly suggest management and key functions. Empty shells or letter boxes are to this observer at least that international insurers and reinsurers not acceptable,” stressed Ms Zweimüller. are going to have to think long and hard about their strategies for Europe in the coming months REGULATORY ARBITRAGE and years.

Then in March of this year the message was The rapid rise of emerging economic regions of repeated again by Katja Wuertz, Head of the world such as South East Asia and Africa Consumer Protection Department at EIOPA obviously offer rich potential opportunities for during her speech at the European Consumer international insurers and reinsurers and they Protection Conference, in Prague. will continue to seek the most efficient ways of tapping this growth. On the matter of Brexit, she said: “This raises particular stresses and strains, on issues such But, Europe and its huge and mature insurance Theresa May as contract continuity, but also in view of the markets such as Germany, still offer great impact it can have on the single market and the dangers of opportunities for growth. As Thomas Buberl, former head of AXA regulatory arbitrage arising should firms decide to relocate and in Germany based in Cologne and now CEO of the French-based start jurisdiction shopping. In such a situation coordination and global insurance group, stated in his latest quarterly statement convergence are even more critical, as conduct risks can quickly to analysts: “France and Europe have shown a very, very strong escalate to widespread consumer detriment. EIOPA is therefore performance and it also shows that mature markets does not already working hard with NCAs [national insurance supervisors] mean no growth. Mature markets mean that you have a strong to ensure consumers are not the ones to pay the price of Brexit position and that you can also achieve a strong growth both in through broken promises or falling standards.” topline and underlying earnings.”

As with Brexit itself, it is far from clear exactly how this will But to win the game you have to enter and you cannot seriously pan out over time. Some believe that EIOPA will have neither enter the European insurance game by standing on the sidelines the desire, resource, political unity or actually strength of case or sitting on the bench. Customers and brokers expect and need to prevent the creation of letter box insurers and regulatory you to be on the pitch, accessible and willing and able to properly arbitrage. Two leading German insurance lawyers expressed service their risks. interesting and differing views when asked about this topic for this publication. The good folk of the City of Cologne, Cologne Chamber of Commerce and Industry (IHK) and the various market leaders Asked whether EIOPA will tolerate low cost subsidiaries in low tax interviewed for this report argue that to realise this potential a centers if virtually all the business is reinsured back to London, serious long-term insurer or reinsurer needs a solid position on Frank Puettgen, Counsel with CMS in Cologne, said: “To my mind the ground, staffed by skilled and experienced experts with easy EIOPA should accept such solutions. Far reaching reinsurance and direct access to customers and the brokers that serve them. solutions are already now well-established market practice. From Where better than a long established, dynamic, cosmopolitan, Section 7 Solvency-II-Directive 2009/138/EC it could, however, forward looking and centrally located European city such as be derived that a 100% fronting is only feasible if the accepting Cologne?

| 6 | insurance-hub.cologne ZURICH

Zurich commits to Cologne with construction of new regional HQ in MesseCity © KSP Jürgen Engel Architekten © KSP Jürgen : SOURCE

eading Swiss-based international insurance group Zurich In- tivities and communication. Another benefit is the close proximity surance has given the city of Cologne a further big boost of the ICE express train and access to the motorway that will make as it promotes itself as a leading European insurance centre travel to our German headquarters in Frankfurt easier.” by starting work on its new Rhineland headquarters right in The fact that Zurich’s new regional headquarters is part of the the heart of the ancient trading city. wider MesseCity reconstruction project is also good news for the in- Zurich’s regional headquarters is currently in Bonn, the old surer. One of the first stages of this wider project – due for comple- West German capital and only a short drive or train jour- tion at the end of 2019 – is the construction, for example, of a new ney from Cologne. It also has an existing and significant parking complex with capacity for up to 600 of the planned 1,000 operation in Cologne that lies at the heart of the huge industrial parking spaces for the exhibition centre and MesseCity. and commercial region of North Rhine Westphalia (NRW). The MesseCity Köln project covers some 5.4 hectares of land and Zurich decided to combine the two operations into one brand new includes 135,000 m2 of floor space. It includes up to 16 new build- office complex right next to Cologne’s world class trade fair and ex- ings that will house offices, hotels, restaurants, small businesses to hibition centre – Koelnmesse – a complex that is itself undergoing service the business quarter and even a cinema is planned. a huge rebuilding and regeneration project that is backed by some “A new hotspot in the shape of MesseCity Cologne is emerging €600m of investment and runs right up till 2030. opposite Cologne cathedral between the Cologne Messe/Deutz sta- Zurich’s new offices will be in the heart of MesseCity Köln, a vi- tion and the Koelnmesse (trade fair). More than 100 years ago, con- brant new complex including offices, shops, homes and leisure fa- struction of the Hohenzollern bridge routed European rail traf- cilities that is situated between the exhibition centre and the major fic from north to south and east to west via the Deutz junction, and transport hub of Köln Deutz train station shortly thereafter the imposing exhibition buildings of the 1920s Work began on the Switzerland-based international insurance were constructed as a milestone at the entrance to the city. Since group’s new base earlier this year and is timed for completion at then the current site of MesseCity Cologne has been firmly imprint- the end of 2019. It is one of the biggest construction projects in ed on the memory of every visitor to Cologne,” explains the trade Cologne and will deliver some 60,000 m2 of office space for some fair’s website. 2,700 Zurich staff and will include a 60m high tower. “MesseCity Cologne connects the exhibition entrance to the sta- Marcus Nagel, chairman of the board of Zurich Group Germany, tion. It will create more than 5,000 jobs with an urban lifestyle and said that he was delighted with the decision to build the new head- good transport connections with high amenity value. In short: Mes- quarters in Cologne. “The merging of the previous management seCity Cologne connects people. This special site, created as a link- teams from Cologne and Bonn in a modern new build will vast- ing element in a central location, opens up the chance to write a ly improve communication. This will support our ongoing develop- successful new chapter in the city’s history with the development of ment process in a modern working environment that will facilitate this new district quicker decision-making and more efficient processing in daily ac- in Cologne,” it adds. insurance-hub.cologne | 7 | EXECUTIVE VIEW

VOX: SCHALOSKE Rhineland ‘talent pool’ key to success for German and regional insurance market: Clyde & Co Cologne and the surrounding North CNA, Liberty and WR Berkley in Cologne times and Mr Schaloske does not believe Rhine Westphalia (NRW) region is a and Chubb and QBE in Düsseldorf. These that BaFin is a barrier. great base for international insurers companies sit alongside many of the large Asked about the timing and process and reinsurers that want to access domestic players such as AXA and Gothaer involved with a license application Mr the huge German and wider European in Cologne or Ergo and Arag in Düsseldorf. Schaloske said: “It depends. My average Union insurance market according to a The region is the most densely populated estimate is 6 to 12 months. In terms of partner with one of the world’s leading part of Germany with approximately costs, administrative fees are not relevant, insurance and reinsurance law 18 million people and many of internal and external costs for preparing firms that is based in the Germany largest corporations application are decisive. The administrative region. nearby. BaFin, the German fees for a BaFin authorisation to conduct Henning Schaloske, insurance supervisory insurance business in Germany are Partner in Clyde & authority, is also located €10,000. This applies also in cases where Co’s Düsseldorf office, in the region, in the city of third country insurers want to conduct says that the deep local Bonn,” said Mr Schaloske. business in Germany and are therefore insurance tradition, The respected lawyer required to obtain an authorisation for this excellent talent pool agrees that one of the key purpose,” he explained. backed by a number of local advantages offered by Cologne Mr Schaloske was asked why an insurer universities offering specialist and the wider region is its talent based in the UK or anywhere else keen to insurance education, top class regulator pool. “It is the talent pool in the Rhineland access the German and wider European and direct access to the huge local – with many more universities including Union market should not go down the industrial and commercial market makes Cologne, Bonn, Düsseldorf, Bochum, cheap and relatively easier route of setting the region a truly serious option for any Munster and others – and the large up in Luxemburg, Dublin or Brussels. international insurer. insurance market. BaFin is here, many “A few questions in relation to the “Germany is one of the most clients are here, too. The Rhineland is assumption: Is it cheaper and easier sophisticated insurance markets. It is centrally located in Germany with good really? Is the market standing and Europe’s largest economy and has a long infrastructure, easily accessible airports. market access the same? Is there a insurance tradition and great talent pool. Düsseldorf (which is also the state sufficient talent pool to set up sizeable Indeed, a base in Germany will often be capital) belongs to the most attractive organisation?” asked the lawyer in necessary to attract business with many cities in the country and Cologne has a response. of the large and medium internationally unique atmosphere. There is also lots of Mr Schaloske is also one of a growing operating clients. Also, BaFin is a highly culture with numerous theatres, operas, number of market experts in Europe who professional and reliable regulator. All in museums, sports events and an attractive believe that the European Insurance and all, there is a very good infrastructure for countryside,” he continued. Occupational Pensions Authority (EIOPA), insurers,” said Mr Schaloske. In the past, there has been a perception the Frankfurt-based body responsible Cologne of course has a long and deep that the German financial and insurance for ensuring that the European Union’s tradition in the insurance and reinsurance supervisor – BaFin – has not been easy insurance rules are implemented business as home to the world’s first to deal with, bureaucratic, slow and consistently across Europe by national professional reinsurance company – expensive. Such a perception could supervisors, will look more closely at the Cologne Re – and leading insurers such as be a serious barrier to attracting new so-called ‘quick-fix’ solutions offered by Gerling (now part of HDI) and Colonia (now carriers to the country because of Brexit the specialist insurance centres, especially part of the AXA group). The city’s insurance or any other reason especially when it is if the insurers use a skeleton staff and market writes over 10% of all German ‘competing’ with other specialist insurance reinsure all the business back to London insurance premiums. centres such as Luxemburg or Dublin that or another international centre. Mr Schaloske recognises the big are keen to attract the new business. “EIOPA has already warned that it may benefits offered by the city itself, but, also As described in the interview with Dr insist on at least 10% local retention for points to the wider advantages of being Frank Grund, head of insurance at BaFin, such operations to ensure that they are based in the NRW region. “The Rhineland in this publication, the German supervisor ‘proper’ insurance companies and not just with Cologne and Düsseldorf is a very will certainly not relax or bend its rules brass plates. good base. The Rhineland has a long to attract new business to Cologne or any "Yes, I think there will be pressure on insurance tradition. Many international other German city. But BaFin has become local regulators to ensure a level playing insurers have their branches here such as more flexible and user-friendly in recent field,” he said.

| 8 | insurance-hub.cologne BY THE NUMBERS

Prime Rent ( €per m per year*)

Q4 2017 Q4 2016 Q4 2015

Central London 1,404 1,579 1,672

Amsterdam 410 385 367

Brussels 310 275 265

Dublin 670 630 592

Luxembourg 600 564 540

Central Paris 850 800 800

Berlin 396 342 300

Frankfurt 492 462 456

Hamburg 318 312 306

Munich 444 432 426

Cologne 262 258 252

SOURCE: BNP Paribas Real Estate

SOURCE: © City of Cologne

insurance-hub.cologne | 9 | MAYOR’S PERSPECTIVE

Cologne is positioned as serious, long term EU option for insurers

he departure for any international insurers of the United or reinsurer keen to access the Kingdom from the German and wider EU market. European Union These qualities include: (Brexit) means that u A rich and deep history the UK will become of insurance, Cologne was a third country and home to the world’s first

companies based COLOGNE OF CITY © SOURCE: professional reinsurance there will therefore, under company; “no deal” conditions, no longer u Unrivalled specialist insurance have direct access to the massive training and education EU insurance market, they will supported by two universities; lose their passporting rights. u Sharp eye on the future Home to the 330 year-old through Germany’s Cologne- Lloyd’s market, London is one Henriette based InsurTech hub InsurLab; Reker of the leading international u Direct access to the huge insurance and reinsurance Most of the London-based regional economy of North markets that attracts huge insurers and reinsurers have so Rhine Westphalia (NRW); amounts of business from all over far opted for the relatively cheap u Positioned at the heart of the the world, including the European and easy options of specialist European Union with rapid Union. For this reason, it is home insurance EU-based centres and easy communications with to a large number of international such as Luxemburg, Dublin and the rest of Europe; insurers and reinsurers that want increasingly Brussels. u An open and cosmopolitan to underwrite the international But, while these lightly staffed environment attractive to business that arrives in London and capitalised operations may expatriate staff and their plus use the UK’s membership maintain access to the EU in the families. of the EU to also underwrite short-term, they are far from ideal For this reason, Stadt Köln business across the European bases to build a solid long-term teamed up with the Cologne Economic Area (EEA). position in the mainstream EU Chamber of Commerce and Brexit is a big deal for this markets such as Germany. Industry, to launch a campaign to community because it means that It did not take the city of promote the city and so Insurance UK and international insurers Cologne’s mayor – Henriette Hub Cologne was born. and reinsurers need to find a new Reker – and her team at the Stadt The campaign was effectively EU base if they want to maintain Köln to work out that their city launched with a trip made by direct access to the EU market. had all the qualities required Mayor Reker and Cologne city

| 10 | insurance-hub.cologne MAYOR’S PERSPECTIVE

Cologne is positioned as serious, long term EU option for insurers

colleagues to London in February of this year during which she presented the city’s case to the Lloyd’s and wider London market represented by the International Brexit is a big deal for this community Underwriting Association (IUA). because it means that UK and international Insurance Hub Cologne editor, Adrian Ladbury, carried out an insurers and reinsurers need to find a new interview with Mayor Reker following her visit to London EU base if they want to maintain direct and found the Mayor remains access to the EU market.Most of the highly enthusiastic about the strengths and qualities offered London-based insurers and reinsurers by her home city have so far opted for the relatively cheap Adrian Ladbury (AL): and easy options of specialist insurance Why did you travel to London to meet representatives of EU-based centres such as Luxemburg, the London insurance and Dublin and increasingly Brussels... reinsurance market?

Henriette Reker (HR): Insurance companies that want to 12

insurance-hub.cologne | 11 | MAYOR’S PERSPECTIVE

11 continue doing business in the EU after Brexit can no longer do so from London. They will need an EU license and that means they need a physical location within the EU. This also applies to German insurance companies that wish to underwrite business in the UK market. We went to London to draw attention to Cologne as one of the major insurance centers in Germany and show this important market what we have to offer.

AL: What was the goal for the trip?

HR: Our goal was to make contact with UK and international companies and convince them of the qualities that Cologne has to offer as an insurance centre. Unfortunately, Cologne is not sufficiently well- known as an international business location outside of Germany. With this visit, we wanted to explore how a win- executives as well as the lively association – is based close to win situation can arise, how both existing industry. The lifestyle of Cologne in Bonn. sides can benefit from each other. the city is important too because We were very encouraged by our it makes it easy to recruit people AL: Why would a UK positive meetings. for positions in the city. insurance company decide Cologne is already one of to locate its EU operation AL: Why would any UK based the most important German in Cologne rather than a insurance company want to insurance centers. About 25,000 low tax and arguably more locate their EU operation people work in the insurance lightly regulated domicile in Cologne? What does the sector in Cologne, excluding such as Luxemburg or city and wider region have agents and brokers. Germany Dublin? to offer? has 670 insurers registered with the federal financial supervisor HR: Some UK insurance HR: Insurers that seek a presence BaFin, 73 of them are registered companies have decided to set in Germany, the EU’s largest in Cologne, another 60 have up their ‘European’ offices in market, will be well advised to branch offices, and more than 20 Dublin, Brussels or Luxemburg have a look at Cologne. The international groups are present with the intention of driving the historic trading city has a strong in the city. Industrial insurers will business from London as much as tradition in insurance as well as find a large proportion of their possible. However, the European a bright future. Among the key customer base in Cologne itself insurance supervisory authority advantages are its workforce, or within easy travel distance. (EIOPA) has already signaled the geographic position, It is perhaps no coincidence that so-called ‘letterbox’ solutions excellent travel connections, two that the GVNW – the German are not acceptable in the long- universities training insurance risk and insurance management term. In order to build functional

| 12 | insurance-hub.cologne MAYOR’S PERSPECTIVE

think Cologne offers a better option?

HR: Based on number of employees, Munich is just ahead of Cologne. But in terms of the number, international nature and breadth of insurance companies, Cologne is much better positioned better positioned than any other city in Germany. Cologne also offers decisive advantages over other German cities in terms of the availability of qualified employees. Without qualified staff, no industry can thrive, especially in the digital age. Cologne has long been known as one of the most important locations for insurance in Germany. A big ‘win’ for the city was the decision in April 2017 for Cologne to be the prime location for a digital insurance hub in Germany by the German Federal Ministry for Economic Affairs and Energy under its “de:hub” initiative. and viable long-term operations, HR: International companies This joint initiative backed by skilled workers are needed. have often used London as a several German and international Cologne, with its diverse training bridgehead in the past when insurers headquartered in and facilities and existing experienced they first entered the European around Cologne, Universities, and educated workforce, has market. Because of Brexit, such start-ups and supporting private much more potential than most companies must now reorient companies is called InsurLab other locations. Our city connects themselves and seek a firm Germany. people, companies and networks. foothold in continental Europe. InsurLab Germany will enable Business opportunities abound in Germany, as the economic both national and international Cologne. The access to efficient heavyweight, is the first to start-ups to work in close and business-friendly authorities offer this opportunity. Given collaboration with the German is as significant factor as the the quality of its location, first insurance industry and universities possibility to establish quick and class business infrastructure and and ensure that Germany remains productive business contacts. skilled workforce, Cologne is at the forefront of innovation in undoubtedly a first choice. But this critical industry. AL: More generally what do these qualities must be better This is a great example of how you intend to do to attract known and promoted, hence our Cologne is equipped, prepared international insurance trip to London as a first step in and ready for the huge challenges and reinsurance companies this process. that face the insurance and wider such as those from Asia to financial services industry in the locate in Cologne to access AL: What is the main future and we are very happy that the huge German market competition in Germany as Newline has decided to operate and service their domestic an insurance centre such the European activities from customers in Germany? as Munich and why do you Cologne in the future. u insurance-hub.cologne | 13 | VIEW FROM THE TOP

Fresh competition viewed as healthy as Cologne insurance market prepares for expansion: Dr Görg

erner Görg, insurer looking to relocate to Chairman Cologne because of Brexit or of Cologne- any other international insurer, based German from China perhaps, looking insurance to gain access to the German group Gothaer, and wider European insurance has no problems whatsoever market by setting up in inviting rival UK based and Cologne. We help them reach other international insurers and all the necessary authorities reinsurers to come to his city such as BaFin in nearby Bonn and set up their German and that is necessary to create an European Union headquarters. insurance company here in Dr Görg, is also President Germany,” explained Dr Görg. of the Cologne Chamber of “If a Chinese insurer, for Commerce and Industry (IHK) Dr Werner Görg example, wanted to use Cologne and so has a clear interest in as its base to access the German promoting the historic German otherwise, he believes that it’s a and European Union market trading centre that sits at the case of ‘the more the merrier’. and came to the IHK to ask for heart of the massive North Rhine Cologne is already a vibrant help they would find the support Westphalia (NRW) economic insurance and reinsurance centre that they needed in all ways, region and, along with Munich, and has been for a very long real practical help to found a is the leading insurance centre in time. The arrival of newcomers company in Cologne,” he added. Germany. – such as US-owned Newline Asked why, as leader of a top But, wearing his daily ‘hat’ as that recently confirmed that it local insurance group he would leader of one of Cologne’s and had gained approval to set up its want to invite fresh competition Germany’s leading insurance HQ in Cologne – will only add into this back yard, Dr Görg groups you could be forgiven for to the range of options available was quick to answer in a positive thinking it rather odd that Dr for customers, further establish manner. “This is not a question Görg, a highly respected industry Cologne as a sophisticated and of location, competition takes veteran of some 40 years- truly European insurance hub and place wherever a company is experience, would invite rivals attract more business and skilled based on the modern insurance into his own back yard at such a people to the city and wider market. This is a business that is competitive stage in the history region, he argues. mainly distributed by agents and of the market. But Dr Görg sees “The IHK would be more than brokers. In the commercial and the bigger picture and, Brexit or happy to help any UK-based corporate business in particular

| 14 | insurance-hub.cologne VIEW FROM THE TOP

the client is looking for the right company to carry their risk that offers the range of products and services they need and of course Fresh competition viewed the security. It really does not matter where that carrier is based – London, Paris, Madrid as healthy as Cologne or Cologne. For this market I only see positive effects from quality new arrivals. The range of insurance market prepares insurance options for brokers and clients will be wider which will naturally attract more business to the city as a whole. This can only for expansion: Dr Görg be good for the city of Cologne and the wider German economy,” he said.

BREXIT FACTOR Cologne’s new push to attract fresh insurance business to the city was originally sparked by the decision by a small majority of the UK electorate to depart the European Union. This historic vote set off a chain of events that looks increasingly like a hard Brexit, that is one that does not give the UK any kind of special status with the EU. It will be treated as any other third country and from an insurance perspective this means that UK insurers will lose passporting rights (the ability to underwrite EU business directly from the UK. Likewise, German and other EU based insurers will no longer be able to underwrite UK business directly from their home “If a Chinese insurer, for example, wanted to market. use Cologne as its base to access the German This means that UK-based insurers that do underwrite and European Union market and came to EU business will need to create the IHK to ask for help they would find the a fully- fledged EU-based company or at least a subsidiary. support that they needed in all ways, real Most of the main London- based carriers have taken the practical help to found a company in Cologne,” subsidiary route and have chosen specialist insurance centres such as Luxemburg, Dublin and DR WERNER GÖRG more recently Brussels because authorisation is relatively swift and painless and the bulk of the 16

insurance-hub.cologne | 15 | VIEW FROM THE TOP

15 subsidiaries,” said Dr Görg. a factor for any company when business can be reinsured back “Cologne is extremely considering where to locate. But to London meaning that staffing attractive for insurers because it he does not believe that tax alone requirements are not high. has the best universities that offer provides a solid business case As noted in the comment specialist insurance education for any insurer that is seriously earlier in this publication it so we have a highly educated committed to the European seems increasingly likely that workforce and pool of young insurance market for the long the European Insurance and people who want to work in run. Occupational Pensions Authority the insurance and reinsurance “Luxemburg and other similar (EIOPA) will take an increasingly industry, a very big advantage,” centres in the EU is home to hard line on so-called ‘letter box’ he continued. a number of insurance and insurers. It has already made “There is a very wide range of reinsurance companies only really it clear that it wants to see a brokers and last but by no means because of special tax rules that minimum retention of 10% least there are over 70 leading do not apply elsewhere in the EU. at least before the business is insurance operations already It is possible to build up tax-free reinsured back to HQ. Do not be based in Cologne. For employers equalisation reserves to a very surprised to see this requirement the city is very attractive with a high level in Luxemburg. This rise over time. high standard of living and so it applies in Germany of course and Dr Görg agrees that this is never difficult to attract and elsewhere but in Luxemburg it could lead to a second wave of retain the high quality people you is outstanding. For me tax can relocations as London-based need to run a modern insurance never really be a real reason for and international insurers and business on a national and building a business. The number reinsurers decide that their longer international basis,” added Dr one consideration is people,” he term option actually needs to Görg. explained. be based in a major European The head of the IHK concedes Cologne does, however, offer a economy such as Germany. that other German cities have very strong case when it comes Dr Görg, as with every large and sophisticated insurance to costs overall. The city is one of European business leader that markets such as Munich and the most cost-effective business this reporter has interviewed Hamburg in the marine sector in centres in Europe as shown in over the last couple of years, is particular. But he stressed that the table earlier (page 9) in not a fan of Brexit and all the the availability of quality and this publication. For Dr Görg uncertainty it brings, likewise educated staff really is the key this matters in the modern-day the rising protectionsm and factor and gives Cologne a true economy. increasingly bitter trade battle edge in Germany. “There is a “Cologne is very cost efficient sparked by Donald Trump’s natural tendency among students as a city. The costs of doing election to the White House. to remain in the cities where they business such as office rentals, But, business leaders such as studied. The universities here in cost of living for staff and the Dr Görg need to be pragmatic Cologne offer specialist insurance like are very low compared with and react and adapt to changing and reinsurance education and other leading European cities circumstances however for brokers and agents. The such as London, Madrid, Paris or unpalatable and seek opportunity students that come to the market Munich,” he said. from adversity, benefit from are therefore experienced and Nobody in Cologne wants to be risk. Hence the longer-term knowledgeable to a level not drawn into a battle with Munich opportunity identified by the comparable in other German big for supremacy in the insurance City and IHK for Cologne from cities such as Frankfurt or Munich market. But the question has to Brexit. or international centres such as be asked: Why set up shop in “Brexit is coming and whether Madrid or Paris and certainly Cologne rather than Munich? it’s hard or soft UK insurance not Luxemburg,” pointed out Dr For Dr Görg, apart from the operations will need a European Görg. lower costs there are a couple risk carrier within the EU to One of Luxemburg’s attractions of other important reasons why underwrite and service EU as a base to access the EU market Cologne has the edge. risks. Cologne is one of several is, of course, its low tax rate and First, Munich is dominated feasible bases for such EU Dr Görg recognises that this is by the two giants of Allianz and

| 16 | insurance-hub.cologne VIEW FROM THE TOP

Munich Re which “does not leave local access and relationships with that are set to transform this a lot of room for the others”. the largely independent brokers industry. We as IHK fully Second the Munich economy is that service the Mittelstand in support this initiative with much less diverse as beyond the particular remains as important funding and also with the transfer city limits there is little serious as ever. of know-how. This is a very industrial activity. Cologne sits The traditional values positive development for Cologne at the heart of the massive North epitomized by the Mittelstand and the wider German insurance Rhine Westphalia industrial such as loyalty, service and industry,” explained Dr Görg. region. quality are still strong and “The fact that the wider Third, Cologne is home to a need to be respected by key insurance industry is prepared thriving media and technology service providers such as to give financial support to this sector and of course is home insurers. But the fundamental initiative is also very important. to Germany’s state backed reason why German business It shows that Cologne is very InsurTech initiative – InsurLab. has done so well over the open-minded to start ups. “If you look at other cities past 200 years and has such a Perhaps 90% will fail but we in Germany they are more or strong reputation worldwide is have to be prepared to risk and less mono structured. But in because of its willingness and invest in innovation for the Cologne and the surrounding ability to innovate and adapt to future,” he added. area there are a huge number changing economic and social It is clear from this interview of hidden champions, hidden circumstances. with Dr Görg that Cologne because they are usually family has all the attributes needed to owned that are often over 200 REVOLUTIONARY maintain and develop its existing years old. These companies – InsurTech is already position as a key German and the so called Mittelstand – are revolutionising the way that European insurance hub and exceptionally stable and because life, health and personal lines the support of the key City they are family-owned they insurance is designed, distributed institutions such as IHK and tend to invest for the long term and underwritten in ways that Stadt Cologne to make it work. and not just short-term gains. were unimaginable 20 years ago. But Dr Görg understands that This gives Cologne and the This revolution is coming to the this is not a short-term plan. He surrounding region remarkable commercial and corporate market does not expect there to be a stability. The huge diversity of too if in a less obvious and flood of applications from UK or the businesses also adds to that dramatic manner. other international insurers as a stability. I was recently at dinner Insurers such as Gothaer result of Brexit. This is more of a with Chancellor Merkel and she need to embrace the power and longer-term project that requires asked me about the membership opportunity offered by new a continuation of the joined-up of the IHK. I was proud to tell ways of identifying, measuring, approach that we are currently he that our 155,000 members managing and transferring risk witnessing. represented more economic and so they have to invest in the “Cologne is prepared for a plan value than the entire economies InsurTech revolution and take it of work that will take time. This of the five newest EU members. seriously. is not a two to three-year plan, She could not believe it!” said The fact that Cologne was this is a long-term project. But Dr Görg. chosen as the hub for InsurTech I am convinced that in the long The other related advantage in Germany by the Federal run this will be a success. Step by of this region of course is access government two years ago gives step the London market will lose to the local business itself both the city another potentially its importance and alternative personal lines such as health, powerful edge, says Dr Görg. insurance centres will emerge. motor, household and life for “The creation of InsurLab We will not see a huge number of the 17 million inhabitants and Germany was a very important insurance companies relocating of course the commercial and and exciting development for to Germany or Cologne straight corporate insurance for the Cologne. This shows that we are away but in the longer run the huge numbers of businesses not only an industry with a long competitive advantages of this that operate in the region. In and deep tradition but also open- city will become clear,” concluded Germany, as elsewhere in Europe, minded to new developments Dr Görg. insurance-hub.cologne | 17 | EXECUTIVE VIEW

VOX: and work experience,” he said. Europe, the fifth largest market with regard The ability to communicate directly and to primary insurance (including life business) PRZYBYLA easily with local brokers and customers and the third largest market for non-life Access to brokers remains critical in the commercial and primary insurance worldwide based on 2016 corporate insurance market. And so, figures. Without any doubt Germany is an and customers for MSIG, being based in a leading interesting insurance market and insurance remains European city such as Cologne, hub in general, but Cologne in particular rather than a cheaper is an attractive location. Besides Munich, key for MSIG specialist insurance centre Cologne is one of the two main insurance such as Luxemburg or centers in Germany,” he said. Japanese insurance giant Dublin, was not a difficult Cologne has a number of advantages Mitsui Sumitomo has a decision to take. over other German cities for any insurer or long history in Germany “In the heart of Europe reinsurer considering their options post- and the rest of Europe as Cologne is an excellent Brexit or simply to gain access to the huge it supported the European location for us as a German and wider EU insurance market, activities of its core Japanese Continental European insurer. according to Dr Püttgen. The main ones are corporate customers. The group’s We strive to keep close contact to the fact that Cologne boasts a truly vibrant activities in Cologne and Germany as a our clients of which the majority is located international market already, excellent whole took a big step forward back in 2012 in Germany. We have seven branches, which communications with the rest of Germany when it formed it MSIG Insurance Europe are located all over Continental Europe. and Europe and of course its big and highly AG, based in Cologne. Cologne – with its excellent transport links educated workforce, he said. Klaus Przybyla, Chairman of the – offers us the possibility to reach all our “More than 25,000 employees currently Management Board at MSIG Insurance clients and colleagues in a short time. work in the insurance sector in Cologne. Europe, explained that the Japanese insurer We take this proximity and the human The city has a large diverse insurance took advantage of the availability of a rich resource element as more relevant for industry with innovative market players vein of talent in Cologne following the our long-term business success than and a good insurance community. Various Hanover-based Talanx group’s acquisition any allegedly cheaper specialist bases,” US and UK based insurers already possess of the Gerling group of companies. Cologne concluded Mr Przybyla. subsidiaries and branch offices in Cologne was the obvious choice for a base in the (Mitsui, Liberty, CNA, Newline etc.). Due to huge German market. its favorable location, European business can “The city of Cologne is a very good location VOX: be coordinated particularly well. Flights to for our business. MSIG Insurance Europe the UK only take an hour. Other big European AG was established after Talanx took over PÜTTGEN cities, such as Paris, Amsterdam, Brussels Gerling and most of our first employees live Top quality regulation or Frankfurt, can be reached very quickly as in this area. That was a win-win-situation for well,” pointed out Dr Püttgen. our company and the employees. They had should not be overlooked Another positive factor in Cologne’s favour the opportunity to stay in Cologne and we when considering Cologne is the wide and deep range of specialist got very well-trained staff for our business,” support services on offer. The cosmopolitan said Mr Przybyla. as option: CMS nature of the city also makes it attractive to "Proximity of core customers in the expatriate workers, he added. massive North Rhine Westphalia (NRW) Dr Frank Püttgen, attorney with leading “In Cologne insurers can take advantage economic region and availability of highly international law firm CMS, is based in of a good and well-established working skilled and educated local insurance talent Cologne and believes that the infrastructure. Insurance business are key advantages offered by Cologne," huge German economy and has a long history in Cologne. explained Mr Przybyla. Cologne in particular offers Companies are particularly “Cologne and the wider NRW region the ideal location for any well represented in Cologne, are an economically successful area with a international insurer or many service providers very good infrastructure and a short distance reinsurer keen to gain have adapted to this. There to many of our clients. Furthermore, many access to this market. are a large number of of the insurance He also pointed out that actuaries, auditors, lawyers experts of tomorrow receive their education the German financial and insurance specialists in Cologne. The Technical University and supervisor – the BaFin – which new insurers can the University of Cologne offer several offers an increasingly co- benefit from. Moreover, Cologne degree courses in the field of insurance operative and high- is a tolerant and cosmopolitan city and many promising talented individuals quality approach that should be with an excellent infrastructure which expats graduate from there. In cooperation with regarded as a positive not negative will appreciate,” said Dr Püttgen. the Technical University, for example, factor by any insurer considering Most UK-based insurers and reinsurers we offer an underwriter trainee program, the Germany as an option post-Brexit. have thus far chosen specialist insurance perfect combination of university knowledge “Germany is the largest economy in centres such as Dublin and Luxemburg and

| 18 | insurance-hub.cologne EXECUTIVE VIEW © Pixabay : VOX: Many people SOURCE TESCH consider Cologne as History and future the German ‘capital combine to support of insurance’ with Cologne’s “convincing” its large number case: Atradius of insurance firms

Cologne is the German headquarters of are traditionally an industrial and Atradius, the global trade credit insurer manufacturing hot spot, spanning key trade that is now part of Grupo Catalana sectors such as automobiles, engineering, Occidente, one of the largest Spanish chemical, machinery and metal production. insurance groups. The company’s For Atradius, this ‘Rhine Ruhr’ region roots are deeply embedded in has therefore always been an Cologne. It was originally interesting area to operate,” founded in 1954 as he continued. Gerling-Konzern Speziale “Atradius’ branch office Kreditversicherung (GKS), in Cologne in the district the trade credit insurance of Deutz is very close to division of the Gerling two main train stations in Group, itself founded in Cologne with regional and Cologne in 1904 by Robert international connections. Gerling. This makes it easily reachable Andreas Tesch, Chief Market for customers and employees who Officer at Atradius, explained that GKS commute from outside the city. The “Konrad was the first non-state owned, trade credit Adenauer” international airport can be insurance company which secured sales on reached in 15 minutes, and the massive open credit terms for client companies on Cologne Trade Fair grounds and buildings increasingly Brussels as the locations for an international scale. (Koelnmesse) are actually just across the subsidiary operations to maintain access It was renamed Atradius in 2004. In 2010, street from the office,” added Mr Tesch. to the European Union market post Brexit. Grupo Catalana Occidente became the Apart from the obvious economic and Dr Püttgen said that the German financial principal shareholder of Atradius. communications advantages, the fact that supervisor – BaFin – offers a high quality and Mr Tesch explained that Atradius is a Cologne is already a truly international flexible approach that means that Germany worldwide B2B insurance company with insurance market and a great place to live should not be ruled out as an option. offices in more than 50 countries, providing and work are further big advantages offered “Dublin and Luxemburg might customer-oriented and tailor-made trade by the city, said Mr Tesch. have a reputation in particular for credit insurance, bonding and collections “Many people consider Cologne as simple authorisation procedures solutions for its clients. Cologne is Atradius’ the German ‘capital of insurance’. This for insurance companies. It should, German headquarters and the largest reputation stems from the large number however, not be overlooked that as branch office in Germany with more than of insurance companies located here. well the German Federal Financial 450 employees. The Cologne office also acts For them and the many well-established Supervisory Authority (Bundesanstalt für as the regional headquarters for Atradius in companies from across the business Finanzdienstleistungsaufsicht, BaFin) the region Central and Eastern Europe. spectrum, Cologne offers a lot of follows a cooperative supervisory approach Cologne’s central position in the opportunity,” he said. according to our experience. BaFin’s massive regional economy and excellent “Equally important are the so-called role within the “college” of the European communications with the rest of Germany ‘soft factors’ that make Cologne such regulators is very significant. and Europe make it a great base from which a convincing location: It is a tolerant, Further, the German Insurers Association to operate an insurance business, explained cosmopolitan city with inhabitants stemming (Gesamtverband deutscher Versicherer, Mr Tesch. from all over the world. Additionally, it GDV) as the lobby organisation of German “The history of Atradius is closely has a huge and continuously expanding insurers, is very renowned and ensures connected with Cologne, because it was media industry, along with an increasingly that the interest of German based insurers here where Robert Gerling established the prosperous local economy. Its geographic are well represented and that its members company. Atradius and its employees have location, highly-skilled workforce, solid rail are comprehensively informed in particular a strong emotional link to Cologne and its and aviation infrastructure, unique culture about new European regulations. Cologne as unique and vital culture,” he said. and – last but not least – the political will to location is perfect to take advantage as well “The city of Cologne and the state strengthen investment, make this city highly of these features,” he pointed out. of North Rhine Westphalia (NRW) attractive for insurers,” explained Mr Tesch.

insurance-hub.cologne | 19 | SUPERVISION BaFin: Door is open for new business

he door of the German financial supervisory body – broker Marsh as CEO Germany from 2001 till 2010. BaFin – is open to any international insurer or reinsur- Mr Hufeld and his senior team have stated strongly and repeated- er that is keen to investigate the potential for using Europe’s ly that BaFin will not engage in a heavy marketing campaign to at- biggest economy for their European Union base, according to tract banks, insurers and other financial firms from London to Ger- Frank Grund, head of insurance at the Bonn-based regulator. many on the back of Brexit. But BaFin is making an effort to be Dr Grund made it very clear that, as the supervisory au- more open, flexible and easier to deal with. thority, he could not support any particular location in Ger- This was confirmed by Manuel Wirtz, CEO of Newline, the inter- many over another. But, from a personal perspective, he did national specialty insurer, that was formally give the green light to concede that, as with other German cities, Cologne is an attractive commence its German and EU operations in Cologne at the end of place to do business. May this year (see interview with Mr Wirtz). “Cologne has a long and rich history of educating the insurance Dr Grund explained the BaFin’s approach. profession here in Germany. There are a large number of local and “There is no interest in gold-plating, no interest at all. I do accept international insurers already based in the City and wider region that sometimes we Germans can be a little bit legalistic. But when and it has the infrastructure and support services needed to describe EU rules are translated into VAG (German Insurance Supervision it as a significant market,” he said. Act – Versicherungsaufsichtsgesetz) we do stick to the rules as they Further, Dr Grund noted that any insurer keen to expand into the are written. If written reports have to be filed each quarter then that huge German market really does need a presence on the ground, is what needs to happen,” he said. particularly if they want to reach what remains the backbone of the More generally Dr Grund said that the BaFin’s door is definitely German economy – the Mittelstand (independent and mainly pri- open but again stressed its job is not to market Germany but make vately-owned middle SME and middle market). sure that it is as safe an environment for policyholders as possible. The supervisor, a former senior insurance executive with the Co- “We are very happy for companies to come here, we are very open logne-based insurer Gerling that was ultimately acquired by Han- to insurers and appreciate it when insurers contact us to enquire nover-based HDI, was asked what he believes are the advantages of about opening here in Germany. We are more flexible than we per- being based in Germany. haps used to be and language is not a problem. The bulk of UK “This is a country with 80 million inhabitants and is the larg- banks are going to Frankfurt to set up their EU operations which est market in the EU. The Mittelstand remains the backbone of the makes sense and is clearly good news for Frankfurt. We are there- economy, is still quite traditional and tend to use local brokers to ar- fore, in principle, very open-minded about Brexit,” he explained. range their insurance that they have worked with for many years. “All of us would have preferred no Brexit at all but it is happening As a non-German insurance company there are obstacles to over- and Germany is clearly a high quality and well-regulated option for come and a local presence and relationship is key,” he said. international insurers and reinsurers. Our job is not to promote Ger- But, Dr Grund was again keen to stress that the BaFin’s job is many, our job is to protect policyholders and the system as a whole. not to promote Germany, Cologne or any other city or region in But, if a high-quality insurer contacts us we are happy to discuss the Germany. “Our job is to protect policyholders – personal and com- options,” continued Dr Grund. mercial – by ensuring that insurers that offer their services and products are properly capitalised and managed. This is our number BREXIT STRATEGIES one priority,” he said. Germany has attracted a number of international insurers already There is, it appears, an increasingly fine line to tread for financial on the back of Brexit. Newline in Cologne and Markel in Munich to supervisors in this regard in this ever-more competitive global econ- name two recent arrivals. omy in which nation states are effectively competing for investment. But, to date, the majority of UK insurers and reinsurers that As Dr Grund was quick to stress the prime job of the insurance write EU business have opted to create new subsidiary operations in supervisor is clearly to protect the policyholder. But in some cas- the specialist (and low tax) centres of Luxemburg and Dublin and es, notably so-called low tax specialist financial centres, it is felt by more recently Brussels, notably Lloyd’s of London itself that is cre- some that the regulators work too closely with the market itself to ating its new EU subsidiary for the historic London market. Barcelo- promote the sector and so naturally this leads to accusations that na has also attracted a few companies as has Malta. they drop standards to help boost business. For anyone closely involved with the European and international Historically the BaFin, along with other national supervisors in insurance and reinsurance market these domiciles make sense. Dub- leading European states such as the UK and France, have been ac- lin and Luxemburg in particular have long served as a base for spe- cused of trying too hard to be seen to be doing the ‘right thing’ or cialist insurance and reinsurance vehicles such as insurance and re- ‘gold plating’ regulations and making it unnecessarily complex, insurance captives that make tax efficient use of capital to help time-consuming and expensive for new entrants, pushing them in- corporates, insurers and reinsurers manage their risks. evitably towards easier and cheaper options. These specialist centres clearly have to abide by the same pan-Eu- ropean supervisory rules – not least Europe’s new capital adequacy CULTURAL CHANGE and reporting regime Solvency II – as mainstream markets such as The culture at BaFin has changed in recent times, however, Germany, France and Italy. and notably after the arrival of President Felix Hufeld who But the application process in these specialist financial arrived in 2013 after having worked at Boston Consulting centres is generally swift and slick, capital and staffing Group, Dresdner Bank and notably leading global insurance requirements tend to be proportionately lower and of course

| 20 | insurance-hub.cologne SUPERVISION the costs of doing business considerably cheaper. that is half full. We do not have 100% conver- There is a rising feeling among many in the gence yet but it has improved substantially in insurance market, however, that these suppos- recent times, particularly since the creation of edly easier options may not be that long-lived EIOPA back in 2011.” and will not prove quite so neat and simple a The supervisor added: “But we must not for- solution for London-based international insurers get that not all markets are equal. There may be that are keen to maintain access to the EU. good reasons for differences such as the application It did not take long for Gabriel Bernadino, head of of German Gaap, requirement for local reserves here the European Insurance and Occupational Pensions Au- Dr Frank Grund in Germany for non-life insurers which some international thority (EIOPA), the body responsible for ensuring consistent im- insurers will see as an obstacle because there are no dividends un- plementation of EU insurance and pensions rules, to warn nation- til adequate local reserves are built up. There is also the special sit- al supervisors and the market as a whole that the creation of shell uation of German life insurers for which the rules are very prudent. companies within the EU, that effectively reinsure 100% of the But I can say that convergence is the number one topic for EIOPA business back to London, would not be acceptable. these days and we are all committed to this. What does this really Last July Mr Bernadino said: “Sound supervision demands appro- mean can be unclear because the devil is always in the detail.” priate location of management and key functions. Empty shells or Based on this interview with Dr Grund, recent public statements letter boxes are not acceptable.” from his fellow managers at the BaFin and feedback from the mar- EIOPA said that local regulators “should carefully scrutinise any ket as whole one has to conclude that entering the German market transfer of risks and require a minimum retention of risks from the to access the huge business opportunities offered locally and across authorised undertaking. As an indication, a minimum retention of Europe is certainly not a simple task because this remains a very 10% of the business written could be envisaged.” strongly and well-regulated market. But it is also clearly easier than the in past. LEVEL PLAYING FIELD BaFin, as with any decent financial supervisor, quite rightly, does Dr Grund understandably did not want to comment specifically on not believe that it is its job to promote the German insurance mar- the approaches of other supervisors within the EU. But he did say ket to the wider world and make it as easy as possible for any inter- that EIOPA is working hard on convergence to make sure that the national insurer or reinsurer to set up shop in Cologne or anywhere EU rules are applied as consistently as possible across the entire Eu- else in the country. ropean market. But the supervisor is working hard to make sure that, so long as Asked whether he feels that there is a level playing field across the applicant company fulfills the strict capital, management and Europe from an insurance supervisory perspective Dr Grund diplo- reporting requirements that are clearly laid out, then it is willing matically replied: “This is a matter of opinion. It really is whether and able to work constructively and relatively flexibly to get the job you think the glass is half full or half empty. Personally, I see a glass done. As Dr Grund stated: The BaFin’s door is open.

BaFin issues guidance for insurers in Germany, post Brexit As part of the BaFin’s wider effort to make must be examined in each case. However, it setting up in Germany is whether there itself more approachable and ‘easy to use’ might be possible to accelerate the approval is a requirement for members of the it has created a special contact address for process by taking account of relevant PRA management board (or other persons who financial services firms considering moving evaluations,” states BaFin. effectively run the undertaking) to have their their registered office or operations to principal residence (or a residence at all) in Germany because of Brexit, or for any other OUTSOURCING Germany. reason. Another important question for UK-based BaFin explains that there is no specific Companies can submit their enquiries firms that are looking at their options to supervisory provision that requires all to BaFin via [email protected] or can maintain access to the EU post Brexit in management board members or individuals alternatively use a contact form to the most efficient way is the outsourcing of who effectively run the undertaking to communicate directly. BaFin commits key functions to avoid having to build a full have a residence in Germany. As with the to responding to all enquiries within two infrastructure from the ground up. outsourcing requirements, the decisive business days. On this key point, BaFin explains that in factor is whether those people in charge “This contact facility is particularly aimed the case of a ‘hard’ Brexit, the UK would no can ensure that business operations are at firms considering relocation from the longer be a member state or EEA signatory conducted “properly in line with supervisory United Kingdom to continental Europe due state as defined by VAG but would be a third requirements.” to Brexit. The new contact address can, of country. course, be used by all foreign financial firms If this is the case then the insurer has to MINIMUM RETENTION interested in Germany as a financial centre demonstrate that the risk is being managed The same principle applies to the use of and in the supervision BaFin provides,” properly and a proper control framework is reinsurance. BaFin clearly states that it explains the supervisor. applied that the BaFin is able to properly and will not permit foreign companies (UK or “Supervisory law provides for a period fully monitor. otherwise) to set up in Germany and then of six months for the approval process. simply reinsure 100% of the business back This may be preceded by a pre-application GERMAN RESIDENCE home, again creating a ‘letterbox’ insurer. phase. The processes and embedding of the Another important question for the It cites the same general rule that EIOPA risk model in the risk management system management of insurers that are considering advises – a minimum 10% retention.

insurance-hub.cologne | 21 | INSURTECH Germany plays central role in leading insurance industry onto the “next level”: Sebastian Pitzler

nsurLab Germany, the Cologne-based plat- Google and the like seek to use their power and form that connects the insurance and reach to effectively compete with and work with fast-rising InsurTech world with each oth- the insurance market using the new technologies er, has a central role to play in the future and distribution methods. transformation of Germany’s huge insur- Second, the established insurance industry is ance market as it works out how to adopt working out how to apply the new technolo- and implement new technologies and gy and data to vastly improve the way in which business models and deliver what the modern is captures, analyses and prices risk information. consumer and business needs and wants, according As this process gathers pace experts hope that it to Sebastian Pitzler, the platform’s recently appoint- will enable the market to cover risks that up till now ed Managing Director. have been uninsurable and thus support the growth and Mr Pitzler’s appointment was announced in December development of the economy as a whole. 2017. He joined from ERGO, Munich Re’s primary insurance oper- Third, insurers and reinsurers are investing heavily in new tech- ation, where he was in charge of the insurer’s Digital Lab in Berlin. nology to improve the processes and systems that underpin this fa- He assumed the role at InsurLab Germany in March of this year. mously slow-moving and bureaucratic industry that is hampered by Mr Pitzler explained the fundamental goals and role of the rapid- the continued use of legacy systems. ly-growing InsurLab Germany that revealed in August that it had “It is really important that top management attention is given to now has more than 60 members from both the traditional insurance this area because there is a lack of open standards, web interfaces market and InsurTech world. and the like and then when you add legal, procurement and IT da- “InsurLab Germany is an initiative of the German insurance in- ta security into the mix this becomes a complex transformation to dustry, currently supported by 61 insurance companies, industry-re- make. We can help the start-ups that can help with this task make lated service providers, universities and dedicated InsurTech start- the right connections and speak the same language as the insurers,” ups,” explained Mr Pitzler. explained Mr Pitzler. “The association is part of the digital hub initiative "de:hub" that The application of the distributed ledger system Blockchain, was set up by the Federal Ministry of Economics and Energy and is for example, to complex industrial insurance programmes that are an official competence location for the InsurTech scene in Germa- bought by larger corporations could also potentially lead to huge ny. The initiative was founded in 2017 by the City of Cologne with improvements in the speed, efficiency and accuracy of the whole the full backing of Mayor Reker, Cologne Chamber of Commerce process and deliver far greater contract and coverage certainty for (IHK), Cologne University, Cologne Technical University, insurance customers. Blockchain could also finally see an end to the tiresome companies and startups,” he continued. and time consuming annual renewal process and free up risk and in- Mr Pitzler explained that InsurLab Germany is essentially a think surance managers time to focus on what really matters: Identifying tank and networking platform for innovation and digitisation that and managing risk. promotes sustainable cooperation between start-ups and established These three core trends combined represent a revolution in the insurance companies. The InsurLab Germany Campus in Cologne, role played by the risk management and transfer market and capa- for example, offers 50 workstations for InsurTech startups and digi- bilities it can offer both personal and corporate customers in Germa- tal departments of the member companies. ny and worldwide. “The plan is to strengthen the insurance industry in Cologne and “InsurTech comes in many different forms. If we, for example, across Germany, our members come from across the country. The create new insurance products based on sensors that helps make the idea is to push networking and collaboration between start-ups and shift in emphasis from claims and the associated frictional costs to the old economy, to enable them to join forces and work out how to loss prevention, using the technology to avoid the damages occur- make best use of new technologies and business models for the ben- ring in the first place. Consider recent rapid advances made in the efit of all,” said Mr Pitzler. health insurance sector using things like Apple watches to moni- “The insurance industry is very important in Germany and will tor individuals, how sensors can be used to identify problems before play a vital role in the future success of the economy and nation as a they arise, and when they do occur, identify the cause, solution and whole. InsurTech will drive the future of the industry and, through compensation so much more quickly and efficiently,” said Mr Pit- InsurLab Germany, we want to create the new success stories and zler. help build this exciting future,” he added. “I really think that this represents a fundamental shift in the role The application of new technology to the insurance industry is of the insurance sector. It is realising that, in the digital age, its role coming in three fundamental forms. is more about preventing damages rather than simply dealing with First, there is a core change in the make-up of the market itself the aftermath. The success stories such as Uber and Airbnb are all as big technology companies and platforms such as Amazon, IBM, about customer centricity and the insurance market wants to make

| 22 | insurance-hub.cologne The founders of InsurLab Germany SOURCE: © City of Cologne this transformation too. Using the technology to make better prod- the C-suite executives access to other competence centres and re- ucts and vastly improved analysis, pricing and underwriting of risks cently teamed up with FinLeap in Berlin for example. We want to will support this transformation,” he continued. offer something for everyone,” said Mr Pitzler. The emerging cyber risk market is a good example of how the age FinLeap is a company builder that specialises in the financial ser- of Big Data and application of InsurTech will push back the bound- vices industry. Its goal is to help entrepreneurs build sustainable, aries of insurability to the benefit of society as a whole, says Mr Pit- customer-focused and technology-rich businesses. It offers an inte- zler. grated development platform for start-ups, best practice process- “The use of this technology can support the creation valuable new es, extensive expertise in the financial services sector and access to categories of insurance such as cyber. This is a growing market in top talent and this is now also available to the members of InsurLab both primary and reinsurance terms and of course is critical protec- Germany. tion for modern day businesses that are so dependent upon data. In In less than four years, FinLeap has already successfully brought order to analyse and price these risks efficiently and thus offer an 15 companies to market including the digital insurance broker adequate depth and breadth of cover the insurance market needs ex- Clark, the digital insurance platform ELEMENT with its own BaFin perience and data so they need to work with people and companies licence and Perseus, a cyber security club for SMEs. that can help them find and analyse this data,” he explained. InsurTech is of course no respecter of national boundaries. This is This is where InsurLab Germany plays a vital role as ‘matchmak- a truly global phenomenon and so InsurLab is not merely focusing er’ between the traditional insurance companies and start-ups that itself to Germany. can potentially lead to ‘marriages made in heaven’. In March it joined the Global InsurTech Alliance (GITA), a body The popularity of InsurLab Germany’s regular networking events that was created to promote cooperation between InsurTech eco- is proof of the validity of the concept, said Mr Pitzler. systems worldwide and to coordinate the activities of the individual He explained that just two weeks before our meeting at InsurLab countries and maximise their impact. Other members of GITA are Germany’s HQ in Cologne it had hosted a meeting on the applica- FintechNZ, Insurtech Australia, InsurtechAsia, Instech London, In- tion of Artificial Intelligence (AI) to the insurance industry. “This surtech Ireland and Insurtech Lab Munich. meeting was again fully booked out with members, start-ups, ven- InsurLab Germany is also working with other industry bodies ture capital and business angels and students. The event involved with major industry events such as the second Insurtech Week that keynote presentations and most importantly networking. A real suc- took place in Cologne in early June and attracted over 600 visitors cess in a dynamic environment,” he said. from across the industry. This event was organised together with InsurLab Germany is holding four such workshops this year on North Rhein Wesphalia’s largest start-up incubator and accelerator core topics including digitisation of customer service, AI analytics, STARTPLATZ. Blockchain and fraud detection and prevention. These workshops Mr Pitzler said: "As co-organiser of InsurTech Week 2018, we are an important part of the initiative's broad portfolio of events and brought our members - including 30 insurers and several universi- workshop formats. We like to think we know what is going on and ties - together with promising students, as well as a large number what our members want but we ask them for appetite and demand. of start-ups and other experts from the insurance industry in a very It is a two-way process,” he said. short time. Especially formats such as the InsurLab Germany De- Another key role played by InsurLab Germany is that it closely sign Sprint with selected students of the Cologne Technical Univer- monitors the InsurTech community and ecosystem, identifying the sity provide insurers with direct access to innovative, new approach- local and international start-ups that offer real potential and invite es and young talent." them to come and show their wares. “This is really valuable because The next big event is EXECinsurtech in Cologne November 21- if we do not invite them and bring them together with the insurers 22 which will again attract over 500 visitors, over 30 exhibitors and then it simply would not happen. This is not about having nice days a range of top speakers. This event will bring together the insurance chatting about the future but about creating real projects and get- industry, start-ups, investors, students and other key stakeholders in ting things done,” explained Mr Pitzler. the InsurTech revolution and InsurLab Germany is playing a central One interesting recent development is that InsurLab Germany is role to help drive the industry onto the “next level”. also reaching out further in both geographical and sectoral terms, “This will be the most relevant InsurTech event in Germany and a very important development as the old silos of business rapidly probably in Europe. Our mission is clearly to push the insurance in- break down. dustry onto the next level, creating success stories and really help- Most of InsurLab Germany’s events are naturally in Cologne but ing to make a positive change to the insurance industry. There is so it has also recently hosted and joined meetings in Hannover, Dussel- much potential and so many great ideas in the areas of loss preven- dorf, Berlin and other venues. It is reaching out to the wider com- tion, protection, new products and services combined with technol- munity and working increasingly with the other hubs created by the ogy. We are really seeing a hunger from the insurers to work with us Federal government across Germany. and the start-ups and take full advantage of the technological evolu- “We are spreading out all over Germany. We also wanted to give tion,” concluded Mr Pitzler. insurance-hub.cologne | 23 | PROFILE: NEWLINE Newline selects Cologne— the city acts as a magnet for insurance talent: Manuel Wirtz

pecialty insurance group Newline, with a focus on life sciences business as well part of the Odyssey Group and as clinical trials. Today, Newline’s team in Canadian financial services Cologne is comprised of seven employees group Fairfax, has selected Cologne including claims, office management and as its European Union insurance underwriting support. hub and is in the process of creating a subsidiary that will be capitalised, licensed AL: How important is the German market and regulated in Germany. to Newline and why did the group feel the The company set up a branch office in Cologne need to set up a company on the ground in December 2016, in an effort to provide its in Cologne. Why not try to underwrite policyholders and brokers with a local underwriting the business from a specialist center such as and claims handling team. Luxemburg or Dublin as other are trying? CEO of Newline Group, Carl Overy, explained: “Cologne is a natural choice for us, given our existing presence and the support MW: The German market has been very important to Newline we have from the local market. This new platform will enable Group. Since 2002, Newline has provided underwriting capacity for us to provide seamless and continuous service in the post-Brexit financial lines to two German MGAs. During this time Newline has environment.” insured over 2,000 policyholders in both Germany and Austria. The Newline’s General Representative for Germany, Manuel Wirtz, plan to open an office in Germany was based on Newline’s desire to added: “This decision is a testament to our clients and brokers in strengthen its relationship with its clients and brokers. Newline sees Germany, Austria and neighbouring countries for placing their great value being present where its clients are located, allowing us business and trust in us.” to deliver a more local and personalised solution to their insurance Mr Wirtz told Insurance Hub Cologne Editor, Adrian Ladbury, needs. about the group’s background in Cologne and Germany, why Newline chose the city as its EU base and what the plan is for the AL: Why did Newline choose Cologne rather than Munich or specialty insurer in future. Frankfurt for example? What are the benefits of being based in Cologne? Adrian Ladbury (AL): What is your background and experience and when and why did you join Newline? MW: In terms of a direct insurance market, Cologne is the largest insurance city in Germany. With some very large domestic and Manuel Wirtz (MW): I began my career in the insurance industry international insurance companies located in Cologne along with in 1999. After spending six years in various positions at the two universities focused on insurance business, Cologne is a magnet Cologne-based insurer Gerling and studying at the University for insurance talent. The city is also quite convenient from a travel of Applied Science, I served as a Management Consultant at perspective as one can reach three international airports in less than Bearing Point for two years. In 2007 I started my financial lines one hour. Even the Cologne airport has many flight connections career at the MGA DUAL. During my nine-year tenure, I spent to key European cities. Cologne has some beautiful spots, but the the last three years heading the operation as DUAL’s Managing benefit of living and working here is driven by the culture and Director. I was attracted to Newline’s long-term approach in their open-mindedness of the people. various markets and their commitment to underwriting discipline, exceptional service to clients and superior claims handling. AL: What products and services do you offer and how has the business performed since creation? AL: When did Newline set up in Germany and why? What was, and is, the plan? MW: We currently offer financial lines (D&O, E&O, POSI, Crime etc.) and general liability, with a focus on life sciences and clinical MW: I began working at Newline Group in October 2016 with the trials. While the first year in business is likely the hardest for any objective to set up a branch of Newline Insurance Company Limited company, we were very pleased with our performance. In less than in Cologne. Underwriting commenced in January 2017 after two 12 months, we built an entire insurance operation that offers a full financial lines underwriters joined the team. A few months later, a range of services from underwriting to claims. We are offering local senior underwriter was hired to begin underwriting general liability, products in the local language for our local clients, and the feedback

| 24 | insurance-hub.cologne PROFILE: NEWLINE we have received from our valued brokers is outstanding. This has been great motivation VOX: GÖTTING and, at the same time, is our driving force to work even harder to meet our clients’ needs. Local presence needed AL: How do you market and distribute for insurers to deliver on your products and services? customers’ needs: XL Catlin MW: When speaking about the industrial insurance industry, Germany is still a “face- XL Catlin, the leading international specialty and reinsurance group to-face” market. It is dominated by highly- that will soon become part of the AXA insurance group following the skilled insurance brokers who are able to major acquisition announced earlier this year, has been present in give advice to their clients on suitable risk Cologne and the German market for over 15 years. transfer. We are only a broker market, and Dr Thomas Götting, Country Manager, Germany – Insurance, says we work with our brokers to mutually that the commercial and corporate tailor solutions that best suit a clients’ insurance market remains very needs. We are fortunate to have operated much a ‘people business’ as in Germany and Austria for over 15 years. insurers such as XL Catlin With this longevity in the market, we work closely with brokers are known to many market participants, and customers to design however, we need to continue to work hard and implement highly to strengthen Newline’s brand in Europe. specialised bespoke To accomplish this, we are participating solutions for their in important market events, networking increasingly complex and with our brokers and of course, consistently cross-border risks. delivering exceptional service day-in and Cologne’s central day-out which speaks for itself. Referrals and position and close proximity positive commentary from clients are the to a massive regional market best advertisements. plus the availability of highly educated local talent, not least that AL: What are your big plans for the rest provided by the city’s two universities, of 2018 and into 2019? mean that the city is the place to be for insurers and reinsurers serious about this market, he explained. MW: The first priority is to continue “With around 17 million people within a radius of 100 kilometres, working with Newline Group to deliver Cologne sits at the centre of a very important economic region with a a sustainable post-Brexit solution for our huge number of multinational companies as well as a strong middle clients. Therefore we will soon finalise the market. We have had a presence here for more than 15 years and have application process to create an insurance built strong relationships with businesses and local decision-makers. company in Germany. This will give us a “We place a huge value on these relationships because we know sustainable access to the EU they are fundamental to our ability to provide new and innovative Secondly, we will look to draw upon the insurance solutions for the future. We started with only a handful extensive underwriting expertise of Newline of lines and continuously increased our local team of experts and in London bringing more of the Newline product offering through the years. product suite to the German market. “Today, Cologne is by far our biggest office in Germany, and we have further offices in Hamburg, Frankfurt and Munich,” said Dr Götting. AL: How is it possible to profitably “Insurance is still a people business when it comes to complex expand in such a competitive risks. And when clients and brokers are looking for tailored solutions commercial and corporate insurance instead of standard products you have to be where they are and listen market? carefully. “Cologne is home to companies spanning a sizeable amount of MW: Newline has successfully adapted industries that form our client base, and it has been an attractive to changing market conditions while insurance location for decades. This is why so many brokers, insurers maintaining a consistent, disciplined and reinsurers have local offices here,” he added. underwriting approach. This has not And, of course, the excellent local technical educational facilities changed, despite the extraordinary length help deliver the skilled staff that modern day insurance companies of the current soft market. Armed with need to succeed in such a competitive local and global market. our local market knowledge, innovative “Cologne also offers excellent technical education opportunities thinking and our service proposition, we are for young insurance professionals through two great universities. able to find the business that meets our risk Quite a few of our colleagues joined XL Catlin because of the good appetite thus offering our clients long-term relationship we have with those universities,” concluded Dr Götting. financial security. insurance-hub.cologne | 25 | EXECUTIVE VIEW

VOX: “In terms of human resource VOX: procurement, the University of Cologne GERETY boasts a specialist insurance faculty, which SCHROEDER Skilled workforce, central is feeding the City’s insurance market Tradition, scale, with newly qualified talent. Cologne was location and proximity to also appointed host city for InsurLab, the sophistication and customers make Cologne digital think-tank that promotes digital proximity to clients transformation within the insurance sector, ideal base: Liberty something which innovative insurers and all in Cologne’s Liberty Specialty Markets, the reinsurers are looking for. favour: Schroeder international specialty insurance Many German, as well as international and reinsurance arm of US insurance insurers and reinsurers, have chosen French-based global insurance giant giant Liberty Mutual, created Cologne as their base; the City AXA is one of the leading insurance its Cologne operation back in has developed into an own groups in Germany and is firmly based 2003 and says that access to micro insurance market, in the insurance hub of Cologne. Stephan the highly skilled workforce attracting both German and Schroeder, Regional Commercial Manager that is locally available and international insurance at the Cologne base of AXA Corporate the city’s central location buyers to Cologne, due to the Solutions, the insurer's corporate insurance in Germany, make it high concentration of locally arm, explained the group’s long and deep the ideal base. available insurance capacity,” history in Cologne. Ronan Gerety, General he noted. “It started in the year 1837 when King Manager for Liberty Specialty Most London-based UK and Friedrich Wilhelm III of Prussia issued the Markets, Germany explained: “Since international insurers and reinsurers ‘Mobiliar-Feuer-Versicherungswesen Act’ 2003, Liberty has established both direct have thus far decided to protect their to protect the domestic insurance industry and reinsurance businesses in Cologne. Our access to the European Union markets by from foreign competition and foreign carriers. decision to locate to Cologne was mainly setting up subsidiary operations in relatively Two years later, well distinguished business driven by the availability of high skilled cheap specialist insurance centres such as people under the leadership of the Bank insurance people and the gateway Cologne Luxemburg or Dublin. Mr Gerety believes Sal. Oppenheimer founded the ‘Kölnische- city provides for accessing both the German that to succeed in a major EU economy such Versicherungsgesellschaft’, called Colonia,” insurance and reinsurance markets.” as Germany an insurer needs real presence explained Mr Schroeder. Mr Gerety said that the long tradition of on the ground and so Cologne offers a “Over the years the insurance market (P&C insurance in Cologne and its position at the perfect base. and life) in Cologne, as well as in Germany, heart of the massive North Rhine Westphalia “Irrespective of where an insurance or had grown significantly. However, competition (NRW) economic region are critical factors. reinsurance carrier eventually chooses to led to synergy pressure which was the reason “Cologne is Germany’s fourth largest domicile within the European Union, be it that Colonia grew by acquisition and took over, city and is steeped in history as being one Dublin, Luxemburg or Cologne, the success amongst other carriers Concordia of the country’s main insurance centres. In of the operation will critically depend upon Life, Nordstern and Albingia fact, the first ever independent professional how it arranges its distribution network and Versicherung. German reinsurance company (Cologne Re) was interacts with its European targeted market. reunification and established in Cologne in 1846. Cologne is Crucial for transacting business successfully other developments the largest city in North Rhine Westphalia in Germany, will be to demonstrate a in the European with a city population in excess of 1 million, physical presence in the German market. Union brought new increasing to over 30 million within a 100km By positioning large teams of German challenges to the radius,” he said. insurance and reinsurance executives at insurance industry as “Cologne has a strong industrial our offices in Cologne, Liberty is more than well as to Colonia. This based economy with large chemical, well positioned for accessing the German was the reason that that pharmaceutical and motor manufacturing insurance market via its Cologne office national owned French insurer companies located within the city gateway,” he said. UAP took over a majority share of Colonia. surroundings, as well as a being a centre for This consolidation process was finalised with German media industries and services such the take-over of UAP through the French AXA as insurance,” added Mr Gerety. Group, of which Colonia became a part in A skilled workforce and innovative Cologne [has a] 1997,” continued Mr Schroeder. adoption of latest technology will be the long tradition of The sheer size and sophistication of the key factors in the success of any insurance Cologne insurance market, availability business in future as the industry evolves insurance and of well-trained and educated staff and of to meet the challenges and opportunities [is well place] at course designation of the city as Germany’s offered by the global digital economy. InsurTech centre by the Federal government Cologne offers key strengths in this regard the heart of the and creation of InsurLab Germany are all too, said Mr Gerety. north Rhine region major attractions of the city as an attractive

| 26 | insurance-hub.cologne EXECUTIVE VIEW

insurance hub, said Mr Schroeder. “With about 25,000 employees working in the insurance industry, Cologne is the second largest insurance hub in Germany [though arguably the first as the Munich market has such a high proportion of reinsurance business generated by Munich Re]. But, it is not only size that matters, it is the well- developed insurance infrastructure itself. A lot of carriers and brokers are domiciled in Cologne and the wider region,” he explained. “In addition, Cologne and it’s cultural offering as well as the universities (teaching insurance, economics, jurisprudence and the like) attracts young people and potential talent for the insurance industry, not to mention the latest developments around InsurTech and other insurance related tech start-ups,” added Mr Schroeder. The central position of Cologne at the heart of the huge North Rhine Westphalia regional economy is also a very important factor, said Mr Schroeder. “Being based in Cologne and the wider North Rhine Westphalia region is also connected with ultimate proximity to the most populous area in Germany, hence ultimate VOX: to the German market,” he said. proximity to clients and potential prospects Mr Knüpling said the fact that Cologne as far as retail business is concerned. In KNÜPLING sits at the heart of a significant regional addition, the North Rhine Westphalia region European insurance and reinsurance hub, is the industrial centre (traditional industry SCOR committed the availability of young talent and the rise as well as media, service & consultancy, new to Cologne for of its “blossoming” InsurTech industry technology) of Germany that is very attractive make the city a very attractive base. for the industrial insurance industry that the long-term “Cologne and its surrounding area, is transforming into new industries as well Leading Paris-based international including Aachen, Bonn and Düsseldorf, as maintaining service for the traditional reinsurance group SCOR moved its is a major national and international and industry,” he added. German branch from Hanover to Cologne reinsurance centre and provides all of the As insurers and reinsurers consider their after it acquired the German-based advantages of a closely-linked network. options post Brexit, Mr Schroeder says entities of Revios in 2006 and The city and its thriving financial services that Cologne offers a highly competitive Converium in 2007. sector continues to attract young alternative to other European centres. Frieder Knüpling, Chief talent from universities and “Cologne’s price level with regard to Risk Officer of SCOR and colleges, and in the last costs of living is relatively low compared member of the group’s few years has become a to other major European and German executive committee, is blossoming InsurTech hub,” metropolitan areas. Infrastructure (roads, based in Cologne and he said. airports, rail, education and the like) is very explained how important Mr Knüpling said that well developed and can compete with any the operation has become Cologne actually compares major centre in Continental Europe,” he for the group and proof of its “quite favourably” with concluded. long-term commitment to this other European insurance and important market. reinsurance hubs in terms of costs, not “We have maintained our presence in least office rents which are substantially Cologne since the acquisitions in 2006 lower than other leading European cities. The creation of and 2007. This provides continuity for our Other non-financial considerations such existing staff and we have developed the as the city’s vibrant and cosmopolitan InsurLab in the city combined operation into a regional hub culture, central location and excellent [makes Cologne] with both local business responsibilities communications with the rest of Germany and global functions. More than 10 and Europe and easy direct access to the as an attractive years later, our continued presence huge regional economy also add to the insurance hub demonstrates our long-term commitment city’s attractions, he pointed out.

insurance-hub.cologne | 27 | EDUCATION Intense battle for talent in insurance sector gives Cologne critical edge

ne common question that this reporter asks is supported by Gen Re through a grant that helps it to invite when interviewing leaders of German and international scholars for one year as visiting professors. international insurance and reinsurance Professor Schradin, who arrived at the university in 1999, companies is: In which areas do you need explained that the university’s approach differs to the more specific to invest to ensure that you remain relevant, insurance education offered by the University of Applied Sciences retain your position and grow in today’s hyper- (TH Köln) because it forms part of a wider curriculum that includes competitive, global and fast-changing economy? banking, marketing, tax, supply chain and other critical elements of The answer to that question is remarkably consistent: Talent and business. technology. Today’s insurance industry leaders have worked out that “We have produced a large number of senior executives in the they can no longer rely on regularly healthy investment returns and industry. My former assistant is now the CFO of AXA in Germany occasional dramatic spikes in prices following losses to generate here in Cologne, graduates are in senior positions at Zurich and of decent returns. course Oliver Bäte, CEO of Allianz since October 2014, was They know that they need to attract and retain the a teacher here at the university for 8 years right up until brightest talent to help them harness the power of the he took on the top job,” explained Professor Schradin. digital age and deliver a more efficient, transparent, Professor Schradin and his team encourage the innovative and truly customer-focused offering that continued input of former students and teachers, will deliver improved returns for all stakeholders. In such as Mr Bäte, and this makes sure that the this sense Cologne enjoys a significant competitive education offered remains founded on the real- advantage over other insurance hubs in Germany world reality of business and not just high theory. and across Europe. At the same time the executives gain from exposure The city boasts a number of important institutions to latest thinking and research in a virtuous circle, he explained. that offer aspiring and established insurance professionals Professor Professor Schradin also stressed the important role top class education and training at all levels. Heinrich Schradin There are vocational colleges for young people working played by the the German Association of Actuaries (DAV) under training schemes in companies, and the industry itself has a that is also based in Cologne and other bodies that play a vital role number of initiatives that help to deliver the core talent required. in the training of insurance professionals and ongoing professional Ongoing professional training is offered by industry bodies such as development as their careers progress. the German Actuarial Association that is based in Cologne. When asked what insurers are looking for from their students And, in the higher levels of academic work the city in today’s market, professor Schradin said: Talent. “There boasts two universities – Universität zu Köln (Cologne is a lot of competition to find the best talent and this University) and TH Köln/University of Applied gives Cologne an edge because many of the students Sciences – that both offer world class training and educated here want to stay and live here,” he said. education in risk management and insurance as well Why Cologne? was the next obvious question. as broader management and business skills. “If you look at the job of the modern-day manager, This means that Cologne is genuinely regarded whether in insurance or any other sector, it really as a ‘talent hot’ spot, as one of the contributors to does not matter that much where you are based but this report described it, and a great place to base an for family and things that surround your business life insurance business with its eye on the future. it does matter. There are many international schools here and a strong international community. Cologne Cologne University – Professor enjoys a central location in the heart of a very important Producing the leaders of the future Rolf Arnold economic area, has great high-speed rail connections to Cologne University, that traces its roots back to 1388, Frankfurt and elsewhere and air links to a number of produces professionals in insurance management, insurance law close airports,” explained Professor Schradin. and insurance mathematics. The university is one of the largest and Another important element of the Cologne ‘offer’ is the creation highest ranked universities in Germany and has been honored as a of InsurLab Germany and focus on the InsurTech that is clearly a ‘university of excellence’, making it one of the top 10 universities in critical foundation stone for the future of the industry in Germany Germany. There are currently almost 50,000 students enrolled, with and worldwide. up to 15% from outside Germany. “It was a great idea to have the InsurTech hub here in Cologne The chair for insurance business goes back to 1903. Since 1999, and it is great for the students to be directly involved. What we the internationally renowned economist Professor Heinrich Schradin have to remember is that InsurTech is not always about ground- has been the head of the Institute for General Economics, Risk breaking revolutionary ideas but also continued improvement Management and Insurance Economics. Between 150 and 200 highly qualified economists graduate every year. The institute CONTINUED ON PAGE 26

| 28 | insurance-hub.cologne EDUCATION

The former Rheinauhafen – among others nowadays the address of XL Catlin in Cologne

SOURCE: © City of Cologne_Christoph Seelbach VOX: BOSCH Tradition, access to market, education and InsurLab all make Cologne ideal location Cologne Re, the oldest reinsurance company in the world, “In North Rhine Westphalia (NRW) many academic institutions has been part of Berkshire Hathaway’s General Re since 2003 relevant to the insurance industry, such as mathematics, and in July of 2010 formally became General Reinsurance AG. business administration, law, IT and natural sciences, offer a Achim Bosch, Executive Director General Reinsurance AG, wide range of training and opportunities for a career in insurance. explained how the company came about in the first place and Around 770,000 students were enrolled in NRW, predominantly at the significance of Cologne as a reinsurance and insurance the renowned universities of Cologne, Aachen, Bonn, Düsseldorf centre. and Münster in the 2017/2018 winter semester,” he explained. “Following the catastrophic fire in Hamburg in 1842, and “The amount of academic institutions is unique in Cologne, as a result of the growing requirement for insurance cover and we benefit from excellent contacts and the exchange with in commerce and industry German insurers considered their the University of Cologne's Institute of Insurance Economics and practice of mutual risk-sharing as no longer adequate. For this the Department of Insurance Studies at Cologne University of reason, in 1846, the ‘Kölnische Rückversicherungs-Gesellschaft Applied Sciences. And last, but not least: We appreciate Cologne's Aktiengesellschaft’ (Cologne Re) was founded as the world's openness to the world with citizens from many different first independent professional reinsurance company, countries,” continued Mr Bosch. which in a way makes Cologne the birthplace of The reinsurer was asked why an international reinsurance business,” said Mr Bosch. insurer or reinsurer would consider an ‘onshore’ “Cologne has always been a trade centre since base for their German and EU operations such earliest history because of its location alongside as Cologne rather than a cheaper specialist base the River Rhine. It experienced an economic boom such as Luxemburg or Dublin. in the 19th century as a result of industrialisation For Mr Bosch the answer to this question is and the expansion of the railway network,” added relatively simple: Cologne offers the infrastructure Mr Bosch. and forward-looking environment that is needed for “For the headquarters of a reinsurance company it its any insurer or reinsurer. always convenient if other insurance companies are located “Cologne is a centre of the insurance industry with a long in the neighbourhood. And this is still true today: Cologne is the tradition. To this day, not only important companies in the industry second largest centre for the insurance industry in Germany are based here, but also training institutions, associations and – not only for German, but also for international insurers and think tanks related to the insurance industry,” he said. reinsurers,” he continued. “Last year InsurLab Germany was established in Cologne. We Mr Bosch said that Cologne offers everything that an believe it strengthens Cologne not only as a digital but also as internationally active company needs. “Located in the centre of an insurance hub. InsurLab Germany is open to companies in one of Europe's most important economic conurbations it offers the insurance industry along with start-ups and related service the neighbourhood of other insurance companies and industries providers. Gen Re is one of eight founding members with an as well as a highly developed infrastructure with excellent train insurance background. As a top ten reinsurer with a global connections and three airports within easy reach,” he pointed out. network, we have a strong interest in promoting collaboration "The existence of a range of world class educational institutions between start-ups and the insurance industry – to the benefit of is also a big strength", added Mr Bosch. both sides,” explained Mr Bosch.

insurance-hub.cologne | 29 | EDUCATION

MediaPark Cologne – Seat of insurance companies such as CNA Hardy and Liberty Specialty Markets

SOURCE: © City of Cologne_Jens Willebrand

CONTINUED FROM PAGE 24 German Insurance Association (GDV) to create a branch orientated and the way we do business on a daily basis. In this sense it is not high school curriculum centralised through TH Köln. The profile really new. As a well-managed company you have to look at process and reputation of Cologne as an insurance centre of excellence was improvement all the time. I am also head of the supervisory board therefore further enhanced. The number of international students of HUK Coburg and 15 years ago we founded HUK 24, the digital attracted to the university has grown over the years to reach 10% insurance company. This is now called InsurTech and considered today and this has been supported by the creation of an English revolutionary. But really that was about differentiating the company language programme focused on risk and insurance,” he said. and just improving what was already on offer,” said Professor Professor Arnold explained why higher education is more Schradin. important than ever before in the modern, global and technology driven market. TH Köln – Close partnership with industry is key to success “A practical, modern and high-value high school education TH Köln, also known as the University of Applied Sciences, was in insurance and the broader area of risk management is more originally founded in 1971. important than ever given the need to understand the complex The existing ivwKöln has now become part of the economics and relationship between many overlapping and critical areas such as legal faculty offering offering undergraduate and master studies with mathematics, economics and the law,” he said. a focus on risk and insurance management, reinsurance, insurance Higher professional and business education, however, is not law, actuarial methods in risk management and the insurance market. going to deliver what business needs unless the courses and It is the largest dedicated university institute in the field of insurance teaching methods reflect the real world. Professor Arnold is well in Germany and is led by Professor Rolf Arnold, director of insurance aware of this. studies. “The insurance business needs students with an understanding Professor Arnold explained that there are 17 professors and 40 and appreciation of the value of team work, combined with lecturers, dealing with reinsurance, insurance marketing and many technical knowledge and excellence, in order to deal ever evolving other subsections of the industry’s activities at TH Köln. A large business and economic conditions. The ivwKöln delivers this number of students study part-time alongside their jobs in insurance through a combination of higher technical education in risk and companies. insurance through 17 outstanding professors in various disciplines Together with Limerick University, TH Köln offers a course that supplemented by a programme of interactive learning and social provides the qualification of Master of Law (LL.M.) for Insurance Law. events,” he explained. Since April 2018, Dr Torsten Oletzky, previously Chairman of Ergo “The ivwKöln has constant and consistent contact with the Deutschland, the primary insurance group that is part of Munich insurance industry and support service professionals. We have an Re, is now a board member in charge of management strategy and advisory panel comprised of some 150 members from the sector process management. and working groups to make sure that our programmes are Professor Arnold described the history of the university, how it has discussed and updated on an ongoing basis. Our 17 professors have developed over the years and how it has become more internationally frequent independent contact with the industry as they work with focused. teachers on their courses from the sector. We work very hard to be “With the creation of TH Köln in 1971 came the decision of the as relevant and up to date as possible,” added Professor Arnold.

| 30 | insurance-hub.cologne EDUCATION

90 minutes each. our independent research and Focus on practice-oriented education in AL: What other the area of reinsurance both reinsurance reinsurance-related with ideas and finance. activities do you offer The funds are used to at TH Köln at the Institute? cover the expenses of excursions that form part SM: I think it is fair of both the Bachelor’s and rofessor Stefan Materne, FCII is to say that our Cologne Master’s program as well as Chair of Reinsurance and Reinsurance Symposium various educational costs that Director of the Cologne has become a well-established exceed the standard budget. The Professor Research Centre for event in the German and Sponsoring Group Reinsurance Reinsurance, Institute German-speaking reinsurance Stefan Materne currently comprises 93 companies, of Insurance at TH Köln/ markets since 2004. This year’s 60 of which are risk carriers and Cologne University of Applied 15th Cologne Reinsurance Symposium on representing roughly 88% of worldwide Sciences. He told Adrian Ladbury 5th June 2018 was attended by some 530 premium. about the wide range of education on visitors. Thanks to the support of a sponsor offer and how it is critically important to (this year VIG Re) and the Reinsurance AL: Are these companies just paying retain close and constant links with the Sponsoring Group, the Symposium has for your activities? market to ensure it offers maximum value been free of charge for its visitors. By means to all. of simultaneous translation into English SM: No, there is actually more to it. We are language we have been able for the last ten in constant contact with them about what is Adrian Ladbury (AL): When did the years to invite also non-German speaking happening in the market and what is actually specific reinsurance-related education panelists and attendees. not happening in the market. To give you at the Institute start? an example: Why has there been no price AL: Who have you had on the panel movements in the recent renewals despite the Stefan Materne (SM): The first full-time during the event over the years? major catastrophic losses in autumn 2017? professor for the subject of reinsurance Does this perhaps mean that reinsurance was appointed on 1st August 1998. I felt SM: Overall we have welcomed 151 panelists honoured and delighted to be offered the companies should adjust their business model in total and if you would like me to do some Chair for Reinsurance and gladly accepted, in times of quantitative easing by central as I felt it challenging and rewarding at the name dropping: Torsten Jeworrek from banks? It makes a lot of sense and provides same time to combine independent research Munich Re was there five times, Willi Zeller comprehensive insight to compare notes and teaching with my knowledge of the three times, Christian Mumenthaler twice, between the practical perspective and the reinsurance market and industry. In total I Tad Montross, Denis Kessler, Peter Lütke- world of models and systems, just to avoid worked for 14 years at Cologne Re/General Bornefeld, Joe Brandon, Monica Cramer- the term 'ivory tower'. Re in various management positions in Manhem, Ulrich Wallin three times, Greig Cologne and abroad. Before 1998 the subject Woodring and Emmanuel Clarke twice, AL: Can you give me any famous names of reinsurance was taught at the Institute by Peter Gerhardt, Amer Amed, Tom Bolt, Dirk within the reinsurance market who several guest lectures. Lohmann, the German Insurance Regulator have graduated from your institute ? Frank Grund twice, and many, many more. AL: What reinsurance-related studies SM: Well, Willi Zeller (the former CEO of are available at the Institute ? AL: Are you also doing research? Hannover Re), Alex Wettemann, head of the business division CIP at Munich Re, and SM: Within the Bachelor’s degree SM: In 2008, the Research Centre of Dirk Spenner, who is running Central and programme, the undergraduate students can Reinsurance was established and is now Eastern Europe plus Turkey as Managing choose (as one of their three major subjects) staffed with nine part-time research associates Director for Willis Re are examples, amongst a three-semester reinsurance study course. and two administration staff. To date, we others. In general, our graduates have This course is conducted by myself and have published a number of articles covering filled many middle management positions four lecturers from the reinsurance industry various aspects of reinsurance such as (regional or departmental CUOs, COOs (e.g. Dr. Christoph Lamby, CEO of R+V securitisation of insurance risks, reinsurance or heads of business divisions) and highly Re) and covers various aspects and facets of in China, the amendment of the insurance specialised positions just like the project reinsurance. These include underwriting, supervision law, the European Commission’s manager for the Hyperloop cooperation reserving, portfolio steering, alternative risk business insurance sector inquiry, reinsurance at Munich Re. I am delighted to see that transfer, insurance linked securities (ILS), law, business models of reinsurers, etc. and my excitement about the international contract types such as obligatory versus. very specific topics such as bus passengers' opportunities and challenges of reinsurance facultative reinsurance, propotional versus liability in China or correlations between occasionally spills over to the students. When non-proportional reinsurance, international the quality of ratings and the domiciles of I visited the Asian reinsurance conference contract law, supervisory law, accounting and reinsurance companies. The Research Centre SIRC in Singapore last year, I bumped into so on. This Bachelor reinsurance study course of Reinsurance and in general all acitivities the aviation underwriter of Hannover Re amounts to 84 lectures at 90 minutes each beyond teaching are fully financed by the responsible for this region, the CUO Asian over three semesters. Remember: the recent Sponsoring Group Reinsurance. Pacific of XL Catlin Re, the facultative World Cup had only 64 matches! Within underwriter for this region of R+V Re, a cat the Graduate Master’s degree programme, AL: What is that? modeller in Munich Re's Singapore office and reinsurance and the securitisation of the Asia Pacific head of property at Swiss insurance risks are compulsory subjects which SM: The Sponsoring Group Reinsurance Re CorSo – all former students who I have amount to 28 lectures at (Förderkreis Rückversicherung) supports known from the lectures. insurance-hub.cologne | 31 | PAGE FOLIO © KölnTourismus GmbH_Dieter Jacobi GmbH_Dieter © KölnTourismus : SOURCE

www.insurance-hub.cologne

| 28 | insurance-hub.cologne