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Technical Excellence – Principles and Practice

12 April 2021 Allianz Global Corporate & Specialty (AGCS)

Technical excellence is a term that is often cited in insurance, and especially so in relation to AGCS’s international clients with their complex risk profiles. But while it is frequently used, what does it truly mean in this context? AGCS’ Chief Underwriting Officers, Renate Strasser and Tony Buckle, who are jointly responsible for technical excellence as a core element of the NEW AGCS strategy, share their perspectives.

AGCS’ risks range from aviation flag carrier fleets to pharmaceutical manufacturers, from investment banks to offshore wind farms, and beyond. This extraordinary variety presents a unique challenge for an insurer: How to assess, cover and price such risks, individually and across a truly global portfolio, while offering compelling value for customers balanced with sustainable profitability for long term security?

It’s this challenge that is at the heart of AGCS’s drive for technical excellence (TEX), as Renate Strasser explains: “This isn’t simply an internal improvement initiative – it’s rooted in the partnership that is at the heart of complex risk insurance. Simply put, we transfer insurable risk from businesses to our balance sheet. The principle is simple, but the variety and complexity of these risks makes it much more challenging in practice. That’s why the better we are at truly understanding and framing complex insurance risks, the better will be our offering and the more sustainable will be our customer relationships. TEX in insurance is what differentiates the leader from the crowd.”

As Strasser points out, this extends beyond the core underwriting business: “TEX is often linked primarily to risk assessment and pricing, but it has to extend across the whole value chain, from product design, sales and distribution through underwriting, claims and reinsurance.” AGCS is currently investing across this spectrum, from teams harnessing insights from data, developing new forward-looking pricing tools or creating a harmonized global product framework, to practice groups leveraging shared expertise on specific risks or sectors.

Data is a constant theme in the cross-functional quest for technical excellence as Tony Buckle highlights: “Being data-driven allows us to make better decisions on exposures, enabling us to serve our clients and brokers more quickly.” External data can add great value, too. For example, third-party data now supports the assessment of cyber exposures, monitoring hacker activity on the dark web; ESG performance indicators are utilized in D&O underwriting; and data sourced by remote monitoring enables a comprehensive assessment of numerous company sites without field inspections.

UNDERWRITING PRINCIPLES

Buckle explains that while these new capabilities are essential, for an underwriting company like AGCS, they need to be underpinned by a shared professional credo – what he and Strasser refer to as “underwriting principles”: “Underwriting is a profession that combines both art and science and this requires strong standards and principles. It should never be a box ticking exercise, but more of a skilled assessment using the best inputs available. And as such, we at AGCS focus on five core principles that represent our core underwriting philosophy.”

These principles focus on technical competence, insurance risk, a structured approach in assessing risks, authority and accountability to the frontline, and emphasis on portfolio management.

Buckle says these go hand in hand: “In a nutshell, our underwriting should focus on our core competence and match expertise to exposure. We should focus our cover on the exposures we truly understand so that our clients benefit from our expertise and we take on their insurable exposures with a good understanding how those could potentially develop. “

Strasser elaborates what this means in practice: “First we have to ask ourselves: do we fully understand the risk and exposure, and do we have appetite for it? Only then should we look at the coverage we provide and on the price we need to charge to ensure a fair risk-reward balance.”

The AGCS underwriting principles aim to move authority and accountability to local underwriting teams allowing for quicker decision making and direct communication towards clients and brokers. “The individual underwriter is best positioned in their local markets to assess the risk and rate it accordingly – and drawing on global expertise where needed,” Strasser emphasizes.

The final principle ‘portfolio management’ reflects the global nature of AGCS’ business: underwriting should target a balanced and diversified portfolio, maximizing AGCS’ role as a lead insurer and absorbing larger losses for clients, rather than day to day operational losses.

Buckle stresses that this combination of consistent underwriting principles and technical excellence is the foundation of AGCS’s strategy and value proposition to clients: “We are dealing with sophisticated international buyers who are responsible for some of the world’s most complex risks. Therefore, we need to make sure we are best in class in technical excellence, delivering sustainable profit for our shareholder and being a reliable long-term partner for our clients with market-leading solutions.”

 

Quick Polls

QUESTION

Covid-19 may accelerate certain industry trends. What are we likely to see?

ANSWER

Adoption of contactless technologies and digital experiences will likely be accelerating emerging technologies further
The consumer will expect safety and precautionary measures, driving the need for enhanced surveillance policies and technologies, which may pose potential privacy concerns
Rising activism among consumers and employees could drive an increased focus on corporate purpose
Value chain disruption is likely to lead to an increase in creative partnerships, which may in turn cause organisations to further invest in developing the mindset and agility to collaborate across sectors in the ecosystem
Cost management will be a critical priority to ensure business continuity based on cash flow requirements, to manage lower margins and revenues during a downturn
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