The corporate insurance market has become much more difficult today. The market is soft, due, among other reasons, to the fact that losses are low. This is probably a consequence of a lack of economic activity. To that fact we must add the severe crisis that Spain is going through. It directly affects our clients and, consequently, it affects our own activities too.

We are witnessing a trend to launch tenders for insurance programmes. In these tenders, the work of brokers is not properly evaluated, and the only variable that counts is final premium prices. Of course there are exceptions to the rule, but it is certainly a current trend.

RA: Is the market for industrial insurance hardening, softening or stable in your key territories and what is the pricing outlook?

JHL: The market is soft. What we have noticed, though, is a hardening in the acceptance of some sorts of risks. Insurance companies are making a better selection of risks, which means that for some risks rates are on the rise, although it is still not difficult to find coverage. We believe that the market will remain soft for the remainder of the year.

RA: Have you seen tighter capacity and coverage terms offered by the industrial insurers as a result of the big catastrophe losses suffered last year and/or Solvency II and if so where are the main problem areas?

JHL: Natural catastrophes do not have an effect on the Spanish market, but we have observed effects in some Latin American countries where conditions have been significantly tougher, even though there still is coverage and capacity available in the market.

RA: What are the major risks faced by European corporations currently and how does this differ from five years ago?

JHL: For Spanish and European companies alike, risks remain the same as five years ago. However, market developments, new technologies, new business models and regulatory changes have created some new risks and made others more serious. In Spain, the risk of default has increased, and, consequently, terms have become tougher. Environmental risks, which already existed, have been made more serious by current legislation. Risks derived from new technologies could have an ever-higher intensity.

RA: Which emerging risks need better and broader coverage? What are you doing about these key areas for your customers: supply chain, cyber risks and reputation?

JHL: We work with all risks that our clients demand, and also with those where we identify new opportunities in the market. In areas like supply chain, we have several projects under way. In fact, external factors, such as the Japanese earthquake last year, have boosted the number of requests for information about this coverage. However, it is difficult to adapt certain insurance solutions to the needs of our clients, especially in times when companies are going through economic adjustments.

In the current business environment, where there is a growing demand for ethics, transparency and corporate social responsibility, reputation risks are becoming an opportunity for companies to create and protect value—in the context of their risk management efforts. So we help our clients to identify and analyse these risks, as well as to look for the best solutions available.

RA: Are brokers fairly remunerated currently for the services offered to customers and insurers? Is it correct that brokers are paid by both customers and insurers? How could this system be improved?

JHL: Not at the moment. The soft, competitive market and extremely demanding clients require services to be offered with the lower possible costs. Furthermore, the quality of the service, professionalism and experience of brokerage teams are not evaluated in detail.

It looks right to me that brokers are paid by the insurance company and clients. Some insurance programmes demand a high level of dedication, plenty of investment and follow-up. Commissions may not be enough to pay for the work of brokers, and then fees come into place. Effective communication with clients and transparency make it possible for the two models to coexist. In Spain, the model by which insurance companies pay commissions for brokers has worked well. We, as brokers, do not limit ourselves to placing the risk. We do a lot of work offering advice before and after the contract is signed. We keep in touch continuously with our clients to help them identify their risks. And insurers increasingly outsource their services, which then need to be performed by brokers. This is, in the end, a good thing, for the added value that we provide to our clients. But it has a significant cost, which we seldom transfer to the client.

RA: Have you had more problems with claims in the last year and what could brokers and customers do to ensure claims are dealt with more effectively and faster in future?

JHL: Of course the reduction of premiums gives way to a more detailed, sometimes exaggerated, analysis of claims. Measures to prevent frauds, which are necessary in my opinion, sometimes permit abuses, creating unpalatable situations where the virtuous pay for the mistakes of the sinner. As a rule, this takes place in the business of small, mass risks, and especially in car insurance.

With large risks, even though the analysis of claims is becoming ever more exhaustive, the processing is in the hands of capable professionals who strive to help the parties reach an agreement, and claims have been paid on time.

ADECOSE, the association of Spanish brokers, of which ARTAI is a member of the board, has signed with insurance companies a guide to good practices in the settlement of claims. Both insurers and brokers have an obligation to promote a proper exchange of information about the processing of claims, so that their management is efficient, and the rights of clients are protected.

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