Insuring progress…

To explore their unique philosophy: “We take on the responsibility of risk so that our clients can take on the responsibility of making things happen”, or “Insuring progress” for short, FAnews spoke to Mike Durek, CEO of ACE Insurance South Africa about t

FAnews: Tell us more about your business model.

Durek: ACE Insurance is a global company, founded in Bermuda in 1985, which initially provided casualty insurance for Fortune 500 companies. A couple of companies formed a mutual to offer excess liability cover and from there, ACE carried on growing, eventually listing and offering various types of primary insurance.

Our business model is a straightforward one: we do underwriting and we pay claims. This model is backed by investing our clients’ money conservatively and using the best securities with regards to reinsurance. As a global group, we offer primary short-term insurance, reinsurance as well as life insurance.

FAnews: What would you consider as the company’s areas of expertise?

Durek: ACE has a long history as a casualty insurer. Today, we cover much more. We literally offer, or can offer, the full spectrum of short-term insurance products. We are also growing our life insurance footprint abroad. In each of these lines, we seek to offer premium products.

In South Africa, we predominantly offer property insurance, Casualty, Directors and Officers Liability, Professional Indemnity and Commercial Crime on the property and casualty side of the business. On the Accident and Health side of the business, our primary focus is on Corporate Group Personal Accident and travel, as well as leisure travel.

FAnews: ACE South Africa has a strong international link. Is this an advantage?

Durek: Most definitely! Successful insurance today depends on capital availability and track record. While ACE South Africa has the autonomy to gear its products and solutions to the requirements of our local client base and the market, we also have access to the reserves of the international entity as necessary. This was evidenced recently by a R35-million injection which provides the basis for the capital adequacy necessary for our growth ambitions.

Furthermore, in the event of large-scale disasters, every insured party should have the peace of mind that their insurer can process and pay all claims quickly. A strong balance sheet and a recent upgrade of our global core operating entities by Standard & Poor to AA- is a clear differentiator in giving clients the peace of mind they need in case of catastrophe.

The recent disasters in the USA, Australia and New Zealand have put ACE to the test. While such events are unlikely in South Africa, business is global. ACE was swift to pay a South African-based client affected by the Chilean earthquake last year.

FAnews: How important are credit ratings in the industry and for ACE Insurance as a company?

Durek: Credit ratings are absolutely critical. They are a scientific, independent assessment of the confidence in which an organisation may be held. In other words, ratings provide a sound indication of the risk associated with the organisation with which you are doing business. Insurance is supposed to mitigate risk - if something goes wrong, you want assurance that your insurance company can pay out, even at scale.

Presently Standard & Poor Ratings Services rates ACE Insurance as ‘AA-‘ for our global core operating businesses. In South Africa, most insurance companies are rated by Global Credit rating. Since inception, we have held a strong A+ rating.

FAnews: What differentiates ACE South Africa as a company?

Durek: ACE is not a ‘volume insurer’. As a niche player, we provide very specific insurance solutions to our clients which are not readily available elsewhere. Not only does this mean we can provide the cover clients need, it also means they can expect a more personalised service. And the value of insurance becomes most pronounced when it is time to claim: we process claims rapidly, efficiently and fairly. Our focus is not to match premiums and compete on price – rather, our focus is on being in a position to pay out claims when they are made. If the premium isn’t correctly priced, business very quickly becomes unsustainable. Our focus, therefore, falls on pricing accurately for risk.

FAnews: How strong is the commercial side of your business in South Africa?

Durek: The commercial sector is, in effect, the SME market, slotting in below ‘corporate’ in the South African context, which means more ‘medium’ business than ‘small’. We regard ourselves as a niche insurer and our strategy is to understand the vertical markets within commercial lines and gear insurance cover accordingly. With that, we carry over the commitment to relationship building and quality customer service. We’ve made and will make further key appointments to carry this part of the business forward and have enjoyed a sound market response. This is a growing contributor to our business and it will become a central focus as our product set has wide appeal for this sector.

FAnews: What would you say are the most significant successes achieved and challenges faced by the company?

Durek: The South African market is highly competitive and ACE entered late, in 2006. Despite that, with a globally recognised brand, we have established a meaningful business in this short period. This is the benefit of a targeted strategy, which doesn’t seek to compete head-on with the three insurers that together control close to 70% of the local industry. It is also the direct consequence of our focus on client retention and the building of long-term relationships based on mutual exchange of value.

As a niche player, the major challenge is reaching our target markets and driving up brand recognition. However, since our target markets are clearly identified, sound progress is being made.

FAnews: What does the future hold? Where are you taking ACE in the next few years?

Durek: The company is on a growth path which is set to accelerate in the next two years. Right now we are looking at anything between double-digit growth to potentially doubling our business volumes over the next two to three years. To date, growth was exclusively organic.

To achieve the kind of growth we are seeking, the company is now also looking to acquire businesses in South Africa and expanding into Africa. More regulation, Solvency Assessment and Management (SAM) and other dynamics in the market place could cause these developments to advance quite quickly.

On a more personal note:

FAnews: Tell us about your career.

Durek: After university, I started work in Germany in 1987 in the logistics industry. For the first 12 years I worked with multinationals like Schenker, Kuehne & Nagel and Lufthansa. After settling in South Africa in 1991, I remained in logistics, until I was approached to join the insurance industry in 1999, initially with Alexander Forbes, followed by GlenrandMIB. Leveraging this experience, I joined ACE at the beginning of 2008.

FAnews: How do you do to relax after a hectic week at the office?

Durek: I’m a keen cyclist. At the moment, it is the road bike more than the mountain bike, but I enjoy both. In addition to spending time with my family – I have three children – I also enjoy good friends, good food and good wine.

FAnews: And your life philosophy?

Durek: Cross the bridge when you get there.