FULLCOVER 10 | English Version by MDS Global Insurance & Risk Consultants

THE Sharing our passion for insurance

#10 Spring 2017

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Illustration by JosĂŠ Cardoso

will be there! This is the motto of the MDS Group, which goes so well with the launch of FULLCOVER 10. We have arrived at edition number 10 in what has been a great and fantastic adventure. We created this magazine with the world in mind, using our ideas, images and design to transform it into something for every market, region, partner, expert, culture, risk and history. This 10th edition is special, as it should be. Starting now, we can set our sights on number 20, continuing to reaffirm FULLCOVER as a vehicle for sharing knowledge, innovation and opinions, and recognising the contribution that one of society’s most beautiful, humane and important sectors makes to the economy. It is also an opportunity to acknowledge and thank everyone who helped us make this dream come true, one edition after another. First, the entire MDS team in charge of the project. FULLCOVER is indeed a homemade product, put together with passion, energy and enthusiasm; it’s a great dedication to our profession of insurance and risk specialists. I wish to send a warm embrace to everyone involved over the years. To everyone who contributed with ideas, texts, pictures, interviews and images. In our midst we have had leading market personalities, experts from different areas and regions, consultants, researchers, insurers, reinsurers and brokers. To everyone who has invested in and supported the different editions of FULLCOVER, with its brand, image and advertising, bolstering our magazine’s reputation and visibility. This 10th edition has three main themes: QBE, the Future and 10, and I invite you to discover them. José Manuel Fonseca MDS Group CEO

EditoriaL

John Neal Interview with QBE CEO

Mastering Pillar 3 reporting

Shades of Grey: Macro outlook 2017 By Devadas Krishnadas

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By Antoine Bourdais

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director José Manuel Fonseca · editor in chief Paula Rios · editorial committee Ângela Fonseca · Carla Gonçalves · Jacqueline Legrand · Liliana Baptista · Susana Neiva contributors Alex Wise · Antoine Bourdais · Christian Wertli · David Butterfield · Devadas Krishnadas · Doug Alexander · Francesca Breeze · Hélène Chauveau International SOS · Jamie Crystal · Joel Cleto · Juerg Trueb · Marine Charbonnier · Pedro Castro Caldas · Phillip K. Schulz · Shivaun Moreno · Steve Hearn Tanguy Touffut · Vincent Vandendael · Zurich · title FULLCOVER · author MDS Group · edition number 1st Edition (FULLCOVER 10) · publisher MDS Group place of publication Porto · date of publication April 2017 · circulation 4000 · design Studio Dobra · printing & finishing Lidergraf Sustainable Printing legal deposit 374241/14 · issn 2183-6787

74 Dossier

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10 Brokerslink Faces

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Overview Changing the standards Blockchain New risks in a changing World Driverless cars Share economy for business travel Reducing the risks from rapid demographic change Regulatory risks and their impact on the reinsurance industry Standing up to the weather

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The Brunel of Bridge building Manchester by Roger Potts

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10 FULLCOVER Editions

Brokerslink Conference 2016

INTERVIEW WITH QBE GROUP CEO

JOHN NEAL QBE has had an international dimension to its operations for over 113 years, and today this extends across 37 countries and employs 14,500 people. fullcover speaks to John Neal about how the business has evolved and grown as a global insurer, the importance of culture and diversity, and what drives an Englishman, now living in Australia, working globally and with a love of Portugal.

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Acclaim and QBE Singapore have a relationship that goes back decades. However, in recent years, we have seen QBE responding to our Acclaim team in Â proactive ways, serving the needs of our Â clients in Singapore and the Asian region. They are prepared to break the boundaries to craft creative risk solutions, responding to the challenging needs of our corporate clients. Anthony Lim Acclaim

QBE's Group Head Office, in Sidney, Australia. Photo by David Clare, First Light Photography.

* The names behind QBE: The Q was taken from Queensland Insurance, B from Bankers' and Traders' and E from The Equitable Probate and General Insurance Company, the companies that gave origin to QBE.

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The positive outlook for Asia Pacific will clearly continue to drive increased competition. Against this backdrop, QBE for its part is excited about the wide‑ranging opportunities presented in Asia Pacific for our broker partners to build and expand market share. The Agency space remains the primary source of intermediated business with local brokers looking to global networks like Brokerslink to help provide cross‑border solutions for customers. Doron Grossman Head of Distribution, Brokers and Agency – Asia Pacific, QBE Insurance

QBE* has been through a process of simplification and refocusing of its international operations. Can you tell us more about the QBE of today; its ethos, capabilities and aspirations? How have these changed from when the company was founded 130 years ago? We have always had an international aspect to the business. An office was opened on Fenchurch Street in London in 1904, and some of the offices in Asia date back over 100 years. We grew dramatically throughout the 1980s, 1990s and early 2000s with acquisitions; there were 150 in a 25‑year period. So this growth effectively constituted an international insurance company. Over the last four years we have been trying to crystallise the value of what a global, opposed to an international, insurance company looks like, focusing on where we want to be and where we do not. This goes to the heart of our business culture, the vision and values, how our customers perceive us and how our people think and feel about the business. So in some ways our legacy has been helpful. It is great to have such a footprint, to be able to play in the world of insurance rather than be limited by geography or product. But, it’s almost as difficult to flip this on its head and ask how should we think and act as a global insurer. Anything we do in insurance isn’t complicated but it is complex. Markets are different; each will have their own views. We are able to look at global insurers through particular lens. We can certainly view them through the lens of the customer; so what’s the value of being global to the customer? We can also look at it from a diversity perspective, a development perspective for our people. But in reverse, I’m one of the people that doesn’t believe in global product management. I think geographies are different. Yes, property & casualty insurance is property & casualty insurance, but the way in which it’s translated and distributed can be very distinct in different geographies, and I think you have to respect that. So, for me, it is about having a global capability behind the organisation but with an exclusive basis of delivering locally; that’s got to be the end product. It’s been an interesting four years; sort of re‑engineering the company to be global. QBE has a presence in all the major insurance hubs in the world. We can legitimately face off to the broker and their customer and say, if you have got a multinational interest then we have a capability to deal on that basis. Our emerging market footprint is 22 countries across Asia and Latin America which is different and hard. If you say that one of the values of being global is the ability to translate uniformly then geography adds complexity. If you set up a multinational capability in London then you are doing this through the lens of one country. You do that in our emerging markets and you are doing it multiple times. But, I think we would be naïve to run the business for the short‑term, you have to run with the longer term in mind and doing that means those emerging markets will translate into success.

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Our three developed markets are roughly the same size for us. We write roughly AUS$5bn in UK and Europe, with a strong focus on the London market, and AUS$5bn in North America and AUS$5b in our home market of Australia and New Zealand. We have a 30% share of the commercial market in Australia. We are a big ticket and recognised brand and that brings with it quite a lot of social responsibility. You need to be thoughtful about how you position yourself, being very conscious of the service proposition to the customer and what the company stands for. So it brings a different set of challenges. But the QBE business, I feel, is nicely set. Our spread across markets is exactly what we want so, to my mind, the diversity by geography and product aggregates enables us to be consistent in terms of the expectations of our shareholders and our customers. The global markets remain challenging on a number of levels and with the ‘traditional’ risk pricing environment no longer operating in identifiable cycles, how does QBE ensure its pricing and risk selection processes respond to these aspects while remaining profitable? In my 30 years in insurance, I have never seen price as challenged as it is today, never. It’s a tough, tough place to be. The QBE team is hyper disciplined in how they go about their business, we have been able to think through this approach as we’ve gone through the process of deciding what we want to be. We are very strong in terms of benchmark pricing and technical pricing, and understanding how we deploy capital and what that means, and the team has done that very well at a tough point in the cycle. There are some things you have to do in business because you have to run your organisation well. But, ultimately, you are trying to facilitate and create the optionality around growth. At different points in the cycle that is difficult but if you can grow, you’re away. I think if anything in the macro environment changes, for example, the moment you see just the hint of interest rate increase coming, it changes the model, and that can make it just that little bit more manageable. Any change in the pricing would give us the ability to grow quite quickly. It is dependent on where you operate. In the Australian home insurance market we saw inflation come through in the claims line for the first time in probably two decades, driven off the currency falling – it is an import economy so all costs increased and that came through in the claims line. This is what we think we will see in the UK post Brexit; we are already seeing some movement in the motor business line. In Australia you can change price. We saw a move from negative to positive in just six months, you can play a harder price card to get it right. It is slightly more challenging in the UK. As Steve Hearn at Ed has said nothing has changed the market in the last 30 years other than an event. The market will continue in this malaise,

regrettably, until an event. In my view it will take a major world event to turn the market. Our assumptions are that QBE can grow but relatively nominally at about 3% top line per annum. This will be fuelled by two things ‑ emerging markets where growth is expediential, about 11%, and a real focus around client retention. Then outside of these areas, we have to be smart in terms of capital and cash management, tight on business operational management and make sure claims are well paid for the right customer and where there are challenges we are tough on that. People get confused sometimes that it’s all about cost cutting. We spent AUS$365m setting up our service centres in the Philippines and that was about delivering business efficiency and scalability. That’s how we look at it. The needs of global clients are evolving, so being able to respond effectively to meet their requirements is critical for brokers. How have their needs evolved and how are QBE’s servicing capabilities able to support brokers in delivering these requirements? I think, increasingly, the successful businesses are multinational; whether that’s importing or exporting or physically having people on the ground in different countries. Part of our solution is to be more technologically savvy in the way we can support brokers and their clients. For a multinational it becomes hugely complex when you start issuing policies across multiple geographies, particularly with aspects such as tax and licensing. What we want the broker and the client to see is what’s happening. Therefore, we set up our systems to allow broker and client to be able to see these areas and how policies interlock, right through to being able to show what is happening with a claim. These factors create a speed of access that provides a comfort that, despite the complexity of the business, there is clarity ranging from jurisdictional compliance through to a clear line on claims. From an underwriting proposition we need to be a little more joined up about the approach to a client; it should not all be about underwriting. Who leads our conversations with the broker should depend upon their needs. That might mean be an underwriter or a claims specialist or a risk analyst. We are happy to do it any which way to respond to what is most important to the broker and their client. That is important for all of us because, if you can provide that right level of service, whether you’re broking or underwriting, the longer you retain the client the more valuable the client becomes to you. The trust is greater and it is a fairer understanding, so I think you can actually, whether you're broking or underwriting the risk, make a better margin.

Working with QBE Brazil strengthens the commitment to offer quality products to our current and future clients. Hélio Novaes CEO, MDS Brazil

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Editorial

QBE's Group Head Office, in Sidney, Australia.

For Latin America as a whole, the economic and the political environments show signs of improvement in a couple of key markets, with the average GDP growth expecting to rebound to around 2% next year. Our strategy is on the lines of business where we see the highest potential for profitable growth, where there is the closest connection to QBEâ&#x20AC;&#x2122;s core capabilities and where the best opportunities for building the strongest partnerships with intermediaries including brokers and with policy holders in general. Juan Suparo Head of Major Trading Partner Engagement, Latin America, QBE Insurance

QBE has focused on stabilising its North American operations. What opportunities do you see for speciality lines growth in this market? North America has been interesting for us in that we had a really focused business in the region. Then around about 2008, we became quite expansive in our acquisitions. We went from 300 staff in one office to 3000 staff in almost 100 locations at just the time when the market became challenging. We got ahead of ourselves in what we might have wanted to do, so North America for us has been a fundamental rethink of the business. We have narrowed the market down to commercial, corporate and specialty, where we think we have a brand and recognition, and we have restructured to be positioned in those market sectors. Our capabilities, customers and brokers match. We have mirrored the way brokers deal with the US by taking a regional perspective. We have set up in the major hubs with a very clear understanding of the environment and market segments that we want to participate in. While the North American market has regulatory complexity with quite archaic processes, it is an innovative market and quick to latch on to new products. Once you understand the market, you are in the rhythm of it, in many ways it is more stable and predictable.

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We are currently writing about US$5bn and we can probably write between US$5bn and US$8bn. By focusing on the biggest brokers, the wholesalers and the super regionals we can have relevant interaction with them and, despite the overall scale of the market, still play an important role. I think we now have a good North American business – and we now have another couple of years to improve the margin.

We have been lucky to have been in Asia for a long time. We have not had to buy into that market or not had problems with joint venture partners that some have. It makes the rhythm of the business easier, and the returns are great. Growth is challenging; the markets in Hong Kong and Singapore are as competitive as anywhere in the world. People think Asia is an easy ride, it is not. It’s a strong market for us and we are committed to it.

QBE has seen some strong growth in Latin America in the first half of 2016. Do you see this as a continuing key emerging market going forward? And what about the role of Asia? If you look at the QBE business today, 15% of what we do is in emerging markets; this is roughly split equally between Asia (predominately South East Asia) and Latin America. Latin America is important to us with about AU$1bn of premium income there. In my view it is a much harder market for us than Asia. You have to grapple with economic challenges that we are not used to dealing with. For example, if you run a business in Argentina your wage bill will double every three years because wage inflation runs at 30%. You have a challenge both in managing the cost line of running the business and on the claims line because that same inflationary factor is impacting your claims cost. You have very different dynamics in running the business there. The specialty type insurance products are really yet to materialise so you are looking more at the retail and commercial insurance. So the economies in themselves are challenging but in our view it is worth the invested time.

As an international insurer, diversity and inclusion are no doubt important areas of focus. How do you ensure these are reflected and embraced at all levels across the business, and at the interface with your customers? One of the exciting things about running a global business is when you talk about diversity – at QBE we get that almost by virtue of who we are – it is really what the business is trying to achieve. You need different cultures and different thought processes and these also bring innovation into the business. If everyone looks like me, then we’re in trouble! That doesn’t reflect the world we operate in, and that’s across every generation. It was interesting for me moving to Australia as there is a very strong gender agenda. Not that gender should be about targets, that’s not always that helpful, but gender targets have been in place for seven or eight years there. In the banks the split will be 40% female – in our head office in Sydney the split is 35%. Because it has been an area of focus, you think about the value you get from it. Our board meets around the world – much like Brokerslink’s – and I get asked if it is

Roger Potts (Bridge) with John Neal (QBE) and Paula Rios (MDS Group).

QBE is one of the companies best suited to develop new market segments, thanks to its capacity for innovation. Enrique Schoch Filhet-Allard MDS

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diverse? While it may not reflect gender diversity as much as we want (currently 25% of the board are women), we have Americans, Australians, British, Hong Kong Chinese, German and a Brazilian so if you doubt for one moment that we are not getting a diversity of thinking coming across the board table, then don’t. But I think it is an interesting position around diversity and the development of businesses. If you talk to our Latin American business about diversity, they wonder what on earth you are going on about, why you are even talking about this? It’s just the way business is there. I think it’s the younger businesses, who are more diverse and inclusive by design. It’s the way they’re set up. It is the older, more established businesses that are more challenging. In some ways, whilst we are preoccupied with trying to think how we will deal with millennials at one end, we should equally be thinking about how we maintain the knowledge bank the older generations represent. QBE has created a reverse mentoring programme, this is where we pair a younger, junior employee, to act as a mentor to share expertise with an older, senior colleague. Of course, the two ends of the spectrum are connected. There is certainly an opportunity for our industry here. Another important factor to drive diversity is to think about talent development in a holistic basis; if you think smartly around talent then you will create diversity. Unfortunately, if you just think of diversity in number terms it becomes a bit awkward and the business just doesn’t feel comfortable.

The Continental European market in general is seeing a strong drive towards product and client segmentation, which means clarity on risk appetite, a clear value proposition and an efficient service offering are critical to success. QBE is well positioned to take advantage of the significant development opportunity that Continental Europe presents and is looking to develop a strong focus in various niches areas in Construction, Life Sciences, Cyber and Real Estate. Chris Wallace Director of Continental Europe for QBE Insurance Group

We went down that road a little bit but recognised that we needed to be careful. We now have a broad‑based discussion around talent. By doing so it falls into place, naturally. To reflect this our group executive used to be our diversity and inclusion counsel but they are not anymore, they are our talent counsel. What key attributes and capabilities will future insurance leaders need to have to succeed? The first thing I want to see in future leaders is authenticity. I want to see a real person and sense that it is really them, the person you are going to see consistently each day. Next, they need to be smart; that doesn’t mean they have to a have a PHD or similar but, that there’s just an interest, something that shows there are likely to tackle a problem differently. They need a lot of energy and should be inclusive; whenever they have an idea or a thought their immediate next step is to share; if you put an idea on the table and develop it, it does come through. The ability to care is so important. When we look at our staff engagement surveys two things matter; does the company’s vision resonate and do people actually believe in it? And do you care? If you get those things right in any organisation, then your workforce is in great shape and you interface with your customer will be better. QBE expects our leaders to adapt; to have the capability to adapt. For example, I certainly feel that where we have been able to persuade and support leaders to work in different geographies and cultures they become more thoughtful and considerate, and a lot more open‑minded as a result. There are clever ways to achieve this and I admit we used to be unsophisticated in the way we did it. Before we might have said “This opportunity has come up in Singapore you’ve got to go there.” What you might come back to if you go, we don’t know, go and see what you come back to. Now we can do assignments of six weeks, three months, one year or even two years. It’s a great opportunity and the experience coming out of that is valuable. How do you see the dramatic changes we have experienced in the political, social and technology landscapes impact on global insurers and brokers over the next few years? I think you have got an interesting voice coming through in the world. Whether it is Brexit, or President Trump in the US, or what we have seen in Italy and are about to see in Germany and probably in France as well, politicians have got to listen and try to understand those concerns. I think there is a chance for us (the insurance industry) to be part of that voice. A little known fact, I think, is that the total money that life and non‑life insurance companies control in the world is the same size as the world’s pensions funds. So we control a third of the world’s investment capability. I think there is a macro responsibly on us as well to be socially and not just economically aware, and just thinking a bit more broadly on some of the bigger themes in the world and what we can do to help.

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That works both ways. It’s for us to engage with government perhaps more effectively that we have done in the past and vice versa for governments to engage with us. To me what helps in that respect is the more unified we are – thinking of Brokerslink – the more complete you can present yourself then the more likely you are to be listened to. QBE sees the world as more global in terms of how customers behave. We might have a debate about what is going on in the world around globalisation and immigration but that’s a whole different debate. At the customer level the ability to be able to say “yes, we can service your needs” is really quite important. Broker models are also changing. One example is Brokerslink’s transformation from a network of independent brokers into a truly global broking business. Can this model successfully challenge the traditional international broker structures? Ultimately, I think, as the two largest brokers have got more powerful it has created more opportunity for all the other brokers. They have fire power and capabilities to invest in technology and analytics and do what they do very well but that provides space for the others, who can personalise the way they do business with the client and get to know them that much better. We can get to know a selective number of markets better and create the connection more strongly and with greater confidence. I think that’s the opportunity that’s there. To me, Brokerslink becoming a global broking company is the opportunity. There is a massive bank of clients that want to be looked at and treated individually, that want to have a real connection with the broking firm they select to partner and feel as if they can have a greater degree of intimacy with the market, more personal, and that their business is being considered individual. Brokerslink can join up a capability globally so can do everything anybody asks for with a greater personal connection, you’ve got an advantage. And actually that to us as underwriters makes a difference. If we feel that a broker has a genuine understanding of the client they’re representing then we will price the risk accordingly. The ‘piece of paper’ doesn’t tell you about the client, the numbers don’t tell you about the client – that is lagging data, it’s not leading data. So what Brokerslink can provide, with their more intimate knowledge of the client, is leading data. If underwriting is all about maths then we will lose money because the market generally prices at a lower level and everybody cuts the price. I can tell you what the technical pricing for a risk is and you never quite get there. It really is about understanding the client and the best we can do that, and the way we have chosen to do that, is through the broker. I think Brokerslink’s ability to do that more intimately than a larger broker because they have to do things a certain way, is important to us. If you then join that with the global capabilities it puts you in a very different space.

Disruption takes many forms and its potential impact on the insurance industry is well‑documented. How do you see disruption – a threat or an opportunity? I think it is important for us to embrace the disruptors and work with them. Ultimately, we have the clout and the capability in the market place, and they bring a different way of thinking and probably new technologies, so if we partner with disruptors rather than feel intimidated by them, there is an opportunity, and that’s certainly what we are doing at QBE. In fact, we are about to have our first ‘hack‑a‑thon’ to work out how and where we will invest our money in terms of supporting disruptors. For me, it’s about where they are channelling distribution and how they might distribute products differently. There is some smart work taking place in the retail space, around being able to provide insurance almost without asking a question. QBE is working with a US partner to consider if we can actually provide business insurance on this basis, and we think we can. If you take a photograph of the premises you want to insure, let’s say it’s a shop. The photograph instantly has a GPS (Global Positioning System) code so you know exactly where the property is located. You can access civic data; see the property’s construction, its size and space. You can then go into their website to see the types of products they sell, you can access their filed financial accounts, go into any Dun & Bradstreet data. When you look at all this data it is probably 50% to 60% more information than we could gather by asking questions. So there is definitely a different way to go about insurance. I have always had a bit of a ‘bee in my bonnet’ around an annual insurance contract. I think the one thing that should never happen is issuing annual insurance contracts, even for a business. Businesses might want to deal with their insurances in line with revenue cycles, so why not? They may want to make the contract continuous. There are plenty of places in the world, where we do some of the most complex construction contracts taking place today, and they’ll run for 15 years without batting an eyelid. We insure Crossrail in the UK (one of Europe’s largest railway and infrastructure construction projects) and have done so since 2005. The project completes in 2017 with the link under London. We’ve insured the third runway at Hong Kong, 4th extension at Chengi airport in Singapore. But we won’t insure someone’s home for more than a year; what’s that all about? If you are a bank customer, then you either want to pay for your insurance in line with your pay cycle so it may be monthly or fortnightly. Or if you want to borrow money to buy a car and the loan is for four years then you insure the car for four years. So you have to stand back and think, why not any insurance? So in some ways the disruptors are like a variation on diversity in the workforce, they are just forcing you to think differently which, ultimately, is a good thing.

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The evolution of Cooper Gay into Ed has attracted a lot of attention. Alongside the new brand, Steve Hearn, Ed’s CEO, has said the firm is redefining broking and building the broker of the future. A bold claim but is this a realistic proposition? I think what Steve Hearn has done, quite smartly, is create noise around Ed which is ultimately what the objective was. You have to create the noise if you want to “shake the tree”. In a way it has surprised me that the wholesale broking model has survived for as long as it has unchanged. I was predicting the end of it in the 1980’s but it is still going strong now. But I do think wholesale needs to be reinvented. It is self‑ evident to me that there is value in a “brokers’ broker” with access to a range of markets and a broader understanding of opportunity, this is clearly adding value. This is essentially what they have done in the past but it now has got to be done more efficiently. That is what Steve and Ed are doing. The Lloyd’s market is a wholesale, subscription, sharing market. When we talk about Uber and AirBnB as the sharing economy, Lloyd’s should be on that list, and it has been around doing it for over 300 years. It’s kind of not a new idea. Lloyd’s, like any business, has to continue to reinvent itself, to create greater efficiency in the operating model. That’s the challenge for us. Some of these challenges have been forced on us. Regulation, for example, has added a degree of complexity and cost to the business. Some is necessary, but some is completely spurious. We have got to find a way to take some of the frictional cost out of how we do business. That’s ultimately our disruption risk. Someone will come in and say “I spend a dollar, and you guys take 35 cents out of it between the two of you, and I’m not happy with that”. That’s the issue we have to solve. Which is what, I think Steve, is sat in the middle of.

Employee volunteers from QBE North America participate in home builds to provide low income and impoverished families with the opportunity to become homeowners.

QBE’s vision is to be the insurer that builds the strongest partnerships with customers. How does that manifest itself in the day to day activities of the business? The most important point for me is the customer point of view, and that starts with the broker, we have to listen. It is not for us to define our products and just put them on the table. We have to be prepared to adapt our products to meet the changing dynamics of the market. I’ve talked earlier about how we lead the client/ broker conversation reflecting what is most important to them. Another example would be in London where we underwrite roughly 50% on Lloyd’s paper and 50% on QBE’s. We are completely agnostic about these markets. Our view, and the way we run the business, is our underwriters are dual accredited to write on both and we allocate the same capital and same cost irrespective of what paper is used. What we might use on a risk will be completely led by the customer.

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The only two things I think that differentiate insurers and brokers are what our customers think and say about us and what our people do.

In one of your tweets you say every organization needs to understand and communicate its purpose and why it exists – how would you define QBE’s purpose? The only two things I think that differentiate insurers and brokers are what our customers think and say about us and what our people do; that ultimately is what will differentiate us from the pack. When you think about renewal you want to begin that process almost the day after you’ve renewed the policy – reviewing what went well, what didn’t go well? If you want to connect with the customer you work across the area that didn’t go quite so well, then that next renewal will be fine. To me it’s really just getting the intimacy with the customer. On the people front, it is just making sure they are equipped to have that kind of conversation. On the one hand they have to have the technical capability to do the job you are asking them to do. On the other they’ve got to have customer intimacy capability. If we don’t put the customer at the centre of our vision, then we are in a bit of trouble. The QBE business lights up when you talk about the customer. People say that’s what we are here to do.

QBE employees participate in a local school refurbishment programme in Manila, Philippines.

Community support and sports sponsorship are part of QBE’s DNA. Why are initiatives such as Premiums4Good (where 25% of insurance premiums go towards social investments) so important to the business? Premiums4Good (P4G) came out of one of our leadership forums. We had a Dragons’ Den type assessment of ideas and three came through of which P4G was one. At the time it was called “Policy with a Heart”. Essentially, what we say to someone who buys insurance with us is that we will invest 25% of the premium into socially responsible investment strategies. We invest directly into projects which deliver benefit to communities and the environment, rather than into general ethical or environmental funds. That could be social impact bonds, green bonds or bonds behind renewal energy and infrastructure. The process is very transparent and we provide the customer with annual update on the investments so they gain an understanding around the projects being

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The QBE business lights up when you talk about the customer. People say that’s what we are here to do.

supported and can use the data in their own corporate social responsibility performance reporting. P4G resonates really well with some business sectors, for example, consulting and professional firms. It is also great for our own people, providing a real sense of respecting the communities in which we operate. In 2011, we established our own global foundation. As well as in the Group, it operates in each of the divisions; Europe, North America, Australia and emerging markets. We put between 0.5 and 0.6% of our profits each year in the foundation, so about AUS$5m to AUS$6m. The total fund is divided between the divisions. Each division has employee‑run counsel to decide how to allocate the funds. Although they were working autonomously, interestingly, each division has ended up with the same approach. They have each chosen a main charity they want to support for the year with the remainder getting distributed across a plethora of organisations. In total, across the year, we support about 300 charities. You have to be careful as the CEO that you don’t over engineer these kinds of opportunities. They have to be led by the people in the business. It is about allowing your people to do what matters to them. I think this approach is a lot more valuable for our employees and the communities they operate in as opposed to supporting just one charity. What have been the professional and personal highlights during your 13 years at QBE? If I have to choose, firstly, what we have been able to achieve with the UK and European business. We have pulled together a disparate set of businesses across these territories, unified them under one brand and really present a strong value proposition. The second has been going through the thoughtful process of re‑establishing QBE as truly on a global map. That has been exciting to do. Third is around talent. Setting up our own leadership academy, developing our own underwriting academy has been great. I really feel as if, in this respect, we are investing in the industry and not just in QBE.

How do you unwind and relax after a day at the office? It is the simple things in life that make a difference to me; good food, good wine, good conversation. I think having a broad base of friends makes all the difference. They enable you to get outside of your own world. So a decent set of friends sat around the table with a good meal and glass of Douro, and the world’s a different place. That to me, is the best way to relax. My great friends have nothing to do with insurance. You are who you are with your friends; you are not a name tag, and that is important. Life brings its own challenges, you have to be careful as everyone has something going on in their lives at some time. It’s being content, being you with your friends that makes the difference. FULLCOVER understands you have a close personal affinity with Portugal. Can you tell us more about your relationship with and interest in the country, its people, culture and its food and wine? I do. My favourite place is in the Algarve. It all started when we went with some neighbours of ours in UK who used to visit there a lot. We just thought, this place is perfect. I think the Algarve has more days of sunshine than anywhere else in the world. You have the sea, you can play golf, and it’s very easy. I have had a place in Quinta do Lago for 10 years and try to visit there three times a year. The Algarve is where I feel most relaxed. It is just somewhere I’ve liked for a long while. It ticks all the boxes for me ‑ a wonderful climate and incredible people. I think the Portuguese are just outstanding. They are welcoming and easy to deal with. The food and wine are just brilliant. Wherever I am, I will always look out for Portuguese wine, a red, a decent Douro, on any wine list. I enjoy the opportunity that my role creates to experience different places and cultures that you wouldn’t otherwise see. [John spends at least half his time each year travelling across the globe]. However, I think a legacy of travelling has meant the thought of going on a plane to explore some deep jungle or such like in my own time, just doesn’t appeal. I get accused of being very boring but I would rather rock up in Portugal where I know what to expect and can relax. If there is any regret it is my Portuguese. It is frankly rubbish which I know is a cardinal sin. •

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worldwide QBE Insurance Group was founded in 1886 by two young Scotsmen, James Burns and Robert Philp. The growth of QBE, nationally and internationally, is the story of an institution that for more than 127 years has played a significant part in Australian commercial history. Nowadays, QBE is one of the worldâ&#x20AC;&#x2122;s top 20 general insurance and reinsurance companies, with operations in all the key insurance markets, growing its gross written premium from $1 billion in 1994 to more than $14 billion in 2016. They are present in 37 countries and headquartered in Sydney.

Operational Highlights

Countries

269

Offices Globally

14,226

Overall Workforce 53% Female â&#x20AC;&#x201D; 47% Male

28%

Women in Management 1% more than 2015 Gross written premium and net earned premium (US$M) 2016

Net earned premium

2015

Commercial & domestic property

31.4

31.0

11,066

Motor & Motor casualty

18.3

17.7

Agriculture

10.8

15,092

Public/product liability

10.1

10.7

12,314

Workers compensation

7.4

8.3

Professional indemnity

6.3

5.6

Marine energy & Aviation

6.3

6.6

Accident & Health

4.6

4.0

Financial & Credit

4.0

4.1

Other

0.8

1.3

5% 10%

Source: QBE Annual Report 2016 & Annual Review 2016

2016

14,395 2015

Gross written premium

Gross earned premium by class of business

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Markets at a glance North America

Europe

Emerging Markets

North American Operations is a specialist insurer and

European Operations’ business units are aligned by

This division has a meaningful footprint with leading

reinsurer with a full scope of commercial, personal and

geography and/or distribution characteristics. Retail

positions across many of the world’s most attractive

specialty lines capabilities and a focus on delivering

distributes commercial and specialty products in the

emerging markets. With its customer base, distribution

a comprehensive suite of products through a targeted

UK and continental Europe. International Markets is a

partners and product range, it is uniquely positioned to

distribution model.

global specialty business using the Lloyd’s platform (and

continue to deliver profitable growth over the long-term.

includes Canada) and QBE Re is a global reinsurance business. Gross written premium

Net earned premium 1

Gross written premium

Net earned premium 3

Gross written premium

Net earned premium 1

US$ million

4,647

2% from 2015 2

Combined operating ratio

97.8%1

99.2% in 2015

3,318

1% from 2015 2

Insurance profit margin

4.7%1

2.5% in 2015

Bermuda

4,076

7% from 2015 4

Combined operating ratio

93.6%3

89.1% in 2015

3,115

10% from 2015 5

Insurance profit margin

10.1%3

13.4% in 2015

1,632

6% from 2015 7

Combined operating ratio

99.5%

99.2% in 2015

1,328

8% from 2015 8

Insurance profit margin

5.5%

4.9% in 2015

Equator Re

Australia & New Zealand

Equator Re, as part of the broader Global Reinsurance

A diversified general insurer providing cover for

Operations team, is instrumental in managing the

commercial and personal risks. The strong customer

Group’s exposure and reinsurance risk appetites. In

focus, disciplined underwriting and strong capital base

doing so, Equator Re works closely with divisions to

assists consumers and business to mitigate and manage

bridge the gap between their risk appetites and that of

risk while delivering strong and stable returns.

the Group. ¹ Adjusted for transactions to reinsure run-off liabilities. ² Prior period comparable figures exclude premium associated with the sale of M&LS in 2015. ³ Adjusted for transactions to reinsure UK long-tail liabilities. 4 Down 3% on a constant currency basis. 5 Down 6% on a constant currency basis. 6 Adjusted for North American Operations loss portfolio transfer transaction. 7 Up 10% on a constant currency basis. 8 Up 8% on a constant currency basis. 9 Up 5% on a constant currency basis.

Gross written premium6

Net earned premium 6

Gross written premium

Net earned premium

US$ million

1,349

34% from 2015

Combined operating ratio

70.7%6

89.0% in 2015

468

28% from 2015

Insurance profit margin

35.0%6

28.1% in 2015

3,933

4% from 2015 9

Combined operating ratio

92.7%

91.3% in 2015

3,410

4% from 2015 9

Insurance profit margin

12.3%

14.2% in 2015

Illustration by Tiago Galo

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DEVADAS KRISHNADAS

shades of grey: Macro Outlook 2017 BY DEVADAS KRISHNADAS

2016 was a year of surprises. Several political and economic constants have shifted fundamentally.

Fragmentation First, Fragmentation. In the aftermath of the Second World War there was a general trend towards international frameworks followed by an exuberant rush to globalisation after the end of the Cold War. Old geo‑political rivalries gave way and entire new markets became available for development, investment, production and consumption, resulting in bilateral and multilateral trade, political and monetary frameworks. However, we are now witnessing a rising tide of populism. This has been simmering for a long while, before coming into the mainstream and triumphing in electoral politics. The election of the improbable Donald Trump as America’s 45th President is perhaps the most prominent indication that populism and the creep of the political margins towards the centre is now in unabashed full gallop. Trump has committed himself to building a ‘wall’ along the US‑Mexico border, renegotiating NAFTA and disavowed the Trans‑Pacific Partnership (TPP). He has expressed scepticism about

NATO and indicated a disinterest in the historical security guarantees given to Japan, Taiwan and South Korea. The populist wave which has brought Trump to the Presidency has given resolve to similar movements in Western Europe. These may lead to political success for the far right in France, the Netherlands, Germany and Italy in 2017. Democracies will once again elect its own greatest cynics.

Calibration Second, Calibration. South East Asian nations in particular, but governments more broadly, are reassessing their long held political and economic assumptions about frameworks, systems and relationships. Donald Trump is a game changer, and the ripple effects are likely to be more tsunamic than gentle. 2017 is likely to be characterised by a growing ambiguity over global leadership. Who really is leading the world? How do we think about the future of American leadership that will likely be more transactional than strategic under Trump? Where can economies – particularly those that are heavily

…we are now witnessing a rising tide of populism. This has been simmering for a long while, before coming into the mainstream and triumphing in electoral politics. external trade dependent ‑ find sources of demand that are relatively tariff free and accessible to fuel that future growth? Where will smaller nations, particularly in Asia and Africa find a security partner that is reliable, predictable and capable? The answer, vigorously self‑promoted, is China. China is pointing to developments in the West– promoted as erratic, unreliable, anti‑free trade and militaristic – as a sign that countries need to find a more stable, predictable, pro‑trade and reliable ‘big brother’. China’s characterisation of itself is best thought of in terms of its historical persona of a benevolent tribute‑demanding ‘Centre’. Those who position themselves as tribute nations will benefit while those which choose to resist or to challenge will feel the full pressure of its displeasure.

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2017 is likely to be characterised by a growing ambiguity over global leadership. Countries do not make strategic realignments lightly. Trump’s reign is likely to be the tipping point towards a recalibration of longer term strategic geometries with the compass spinning from West to East. With the future of the TPP in question, the Chinese can be expected to fill the vacuum with support for the Regional Comprehensive Economic Partnership or RCEP. This is an Association of Southeast Asian Nations (ASEAN) wide FTA with Australia, China, India and South Korea. The Chinese will also use its strengthening economic and military ties with its contiguous countries– Myanmar, Laos, Cambodia and Vietnam – to shift the reference point for ASEAN’s direction from consensus to compliance. The Asian Infrastructure Investment Bank (AIIB), the Silk Road Fund and the One Road, One Belt strategies are practical, tangible and sizable commitments China has made to the future of greater Asia on the land side. Its assertion of maritime dominion in the South China Sea through its island bases and self‑declared Air Identification Zone – are more problematic.

The benign statements by Trump on and about President Putin have also alarmed Western Europe. The EU convened an unprecedented Foreign Minister’s meeting following the November 8th US Presidential election specifically to discuss the implications on Western Europe of a Trump presidency.

Shades of Grey Fragmentation, Calibration and Confrontation. These shifts are likely to be enduring critical uncertainties which will force governments and transnational corporations to relook at their exposure to risks but to also search for opportunities. These uncertainties are notable in being about fundamental and core issues long held to be stable – Global leadership, geo ‑political frameworks and globalisation. Where there had been more of a black and white picture for several decades there are now varying shades of grey. For ASEAN nations those opportunities are to be found in finding ways to strengthen their linkages with China. The rewards they can expect, like the penalties, will be tangible and practical. The benefits will also be unencumbered by ‘linkages’ to thorny issues such as insistence on ensuring human rights, reducing corruption or guaranteeing political freedom as has been the case vis‑à‑vis the United States.

Fragmentation, Calibration and Confrontation. These shifts are likely to be enduring critical uncertainties which will force governments and transnational corporations to relook at their exposure to risks but to also search for opportunities.

Confrontation This raises the third structural shift – Confrontation and with it the rising danger of miscalculation. With so many long‑term stable features of the geo ‑political and geo‑economic frameworks now in flux, there is the danger of not only wrong calls but also rapid escalation. The United States continued efforts to ensure freedom of navigation in the South China Sea, especially in the context of an erratic and sensitive new President, sets up a tinderbox scenario where an operational situation such as the 2001 Hainan Island incident can rapidly escalate into a wider confrontation.

FMG – FUTURE‑MOVES GROUP PTE. LTD → Headquartered in Singapore, Future‑Moves Group has an international consulting practice and executive education service spanning both the private and public sectors. FMG provides expertise and bespoke services in corporate strategy, strategic planning, risk advisory, data analysis and public policy. → FMG is also Southeast Asia’s first consultancy to develop and deploy its own foresight‑driven strategic management tool – FUSE: Foresight ‑driven, Understanding, Strategy and Execution® – an essential framework that prepares organisations to take the initiative for their futures. For more information, please visit www.future‑moves.com.

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DEVADAS KRISHNADAS The China Play However, this is not to suggest that China will have it all its way. The leadership of President Xi Jinping appears to be evolving to a departure from the 10 year rule norm. He may well be positioning himself to be a perpetual leader now that he has consecrated himself as a so called ‘Core Leader’. We can expect to see high level political chess moves in 2017 as Xi continues to consolidate his authority. The Chinese financial sector has considerable opaqueness and its relationship to the investment‑led model of growth increases its exposure to systemic risk as the economy continues to decelerate. The housing overhang in secondary cities could be a trigger for a deflation of the asset bubble that is the wider Chinese property market. In their growing boldness in their assertion of sovereignty and what they see as their correct place at the world table, the Chinese may overreach by moving too aggressively. For many nations the dangers of American withdrawal have to be balanced against the risks of triggering an overreaction by the US to provocative Chinese moves. These macro risks are likely to be masked by the performance of the US equity markets and to a lesser extent its real economy, which has been recovering through the 8 year period of the Obama administration. The stock markets are likely to view a Republican administration as a net positive for the economy and are pricing in expectations that Trump will deregulate aggressively and swiftly. In particular, the financial and mining sectors are poised to see market confidence in their prospects zoom if Dodd‑Frank is rescinded and the climate management related limits on mining lifted. Expectations that Trump will launch, a deficit‑driven, expansive fiscal policy concentrated on infrastructure will boost business sentiment. The multiplier effect from infrastructure investment – if productive and not pork barrelled – could be significant. While there is unease over the details on how Trump will ‘put America first’ by discouraging American companies from outsourcing, the potential long‑term

The outlook for 2017 is thus one of strategic shifts that will coincide to reshape the geo‑political and economic landscapes for the longer term. These shifts, will elevate uncertainty and increase risks. costs to competitiveness and public revenues will be obscured by the short ‑term euphoria that he is reconstituting American manufacturing, thereby ‘saving jobs’ and ‘Making America Great Again’.

Reshaping Landscapes The outlook for 2017 is thus one of strategic shifts that will coincide to reshape the geo‑political and economic landscapes for the longer term. These shifts, will elevate uncertainty and increase risks. Governments everywhere are operating with the expectation of crisis, finding themselves forced to rethink fundamental positions and long‑held relationships. Shades of Grey shattered by the occasional burst of white lighting of crisis will continue to colour the world view for the near future. •

DEVADAS KRISHNADAS Chief Executive Officer, Future‑Moves Group Pte. Ltd. → Devadas is the Founder and CEO of Future‑Moves Group Pte. Ltd (FMG), a strategic management consulting firm. He is also an Independent Director of the reinsurance firm PartnerRe Asia Pte. Ltd. and the direct insurer, Auto & General Insurance Singapore Pte. Ltd. → Prior to founding FMG, Devadas spent over 15 years in the Singapore Government, playing a key role in developing Singapore’s security, fiscal and social policies. → Devadas is also a recognised public intellectual and author. His latest book, The Seduction of the Simple, an anthology of his public commentaries, was released in 2016.

icons

Porto

Porto is just a certain way of taking shelter in the afternoon, of sheathing myself in silence and trying to bring to the surface a few words, with no other purpose than to oppose the thick body of these walls with the rebellion of my gaze. Porto is just this attention fixed on listening to the footsteps of the old, who at certain hours cross the street in order to pass their days in the café over there, eyes empty, all the tears of the children of St. Vitor flowing in the furrows of their melancholy. Porto is just the little square where for so many years I have been learning methodically to be a tree, approaching in this way, more and more, the morning rustle of the sparrows, those rascals who, however much they flutter away, come always back into my life again On poor terms with the city, I look at the vestiges of youth in the palm of my hand, and of that unruled passion I will let a single petal, for its whiteness, float to rest.

Eugénio de Andrade – in The Slopes of the Gaze (ed. Focus 1992)

Eugénio de Andrade One of the most important names in 20th century Portuguese culture, while not born in Porto, is irrefutably, its greatest poet, Eugénio de Andrade (1923‑2005) came to live in the city in 1950 and immediately fell in love with it and would spend the rest of his life in, what he described as “the little town square where, for so many years, I have been methodically learning to be a tree”. The poet would dedicate many of the pages and verses that he wrote to the scenarios and landscapes of the borough, to Porto’s people, its identity and to the friends he made there. He also bequeathed the city one of the most beautiful books about Porto, the “Daqui houve nome Portugal”. •

Casa da Música One of Porto’s most iconic elements is its trams which have been rolling through the city since 1895. For decades, the main tram shed and workshop for the public system was located in the Boavista roundabout. The site was redeveloped at the beginning of the 21st century and in its place is one of the most emblematic buildings in Porto, the Casa da Música (literally The House of Music). Inaugurated in 2005 with a concert by Lou Reed, the structure was conceived by Dutch architect Rem Koolhaas and its construction presented many new engineering challenges. The New York Times described the Casa da Música as “one of the most important show theaters built over the last 100 years”. Coincidentally, José Manuel Fonseca, MDS’s Group Chief Executive, was President of Casa da Música from its foundation until 2014. •

The city of Porto The birthplace of MDS

Porto has never faltered in stressing its main vocation as a merchant centre and port (as perpetuated in its name). First established in the Bronze Age, over 2,500 years ago, on a strategic hill above the estuary of one of the greatest rivers of the Iberian Peninsula, the city grew considerably during the Roman period (when it was first named “portus”). By the end of the Middle Ages, Porto had experienced new and important urban developments responding to the increasingly dynamic and pioneering spirit of its merchants – which would lead to the maritime expansion that the Portuguese would be recognised for from the 15th century on. The people’s entrepreneurial and nonconformist characteristics, forever marking the spirit and identity of the city, were fundamental by the 19th century for the establishment of liberalism, for a new industrial period and, later, for the triumph of the republican regime. The old Penaventosa hill, crowned by the medieval cathedral, has witnessed all this development and, since 1996, has been a UNESCO World Heritage site. •

Casa da Música, ©Matilde Ramos

São João (Saint John's) Festivities Although “Our Lady of Vandoma” (whose medieval image can be found inside Porto’s cathedral) is the city’s patroness, the most popular saint in Porto is Saint John Baptist. Celebrated on the 24th of June, his festivities were already deeply embedded in Porto by the 14th century. Fernão Lopes, a chronicler who wrote the history of Portugal, described the pagan roots of these celebrations held in the summer solstice. Saint John’s festivities bring hundreds of thousands of people on to the streets, mixing traditional gastronomy with music, dancing, campfire jumping, fireworks, processions and “scent exchanges” between people who carry leeks, aromatic herbs and basil flowers. The National Geographic magazine considers this one of the world’s most unmissable events. •

Belmiro de Azevedo Born in Marco de Canaveses near Porto, in 1938, Belmiro de Azevedo is one of Portugal’s most successful businessmen. A chemical engineering graduate, he assumed control of Sonae in 1974 and the year after, specialised in business management at Harvard University. His rare entrepreneurial capacities, his pioneering vision and the culture he implemented at Sonae, transformed the group, growing from its Porto base into one of the most dynamic companies internationally. Sonae is a multinational company managing a diversified portfolio of businesses in retail, financial services, technology, shopping centres and telecommunications. He is one of the most respected people in Portugal, recognised for his boldness and spirit, non‑conformity and relentless defense of his values, strongly represented in the group he created. He was also linked to several international organisations and received praise for his work in several countries, such as Spain and Brazil. •

Ângelo Paupério, Paulo Azevedo and Belmiro de Azevedo. ©Pedro Granadeiro 34

Port Wine Whilst a secret since the Middle Ages, it took the interest of British merchants in the 17th century, for it to become famous worldwide. Port wine is impossible to copy anywhere else on the planet. Produced over 200 kms away from Porto, in the vineyards of the Douro cliffs – an ancient and regulated demarcated wine region – Port is transported and aged on the estuary of the city’s great river, in the cellars that have turned that area into a UNESCO World Heritage site. Port is the best of two worlds: a very sweet nectar and, simultaneously, a high alcohol content. It is also the origin of some of the best wine ever: bottles of Taylor and Fonseca vintage from 1994 were awarded a prestigious 100 points from Wine Spectator magazine. •

Written by Joel Cleto Joel Cleto was born in Porto in 1965. With a degree in history and Master of Archeology from the University of Porto, he is a college teacher of Art and Heritage. He is an author and host of the acclaimed TV show “Caminhos da História” which airs on the Porto Canal TV network.

Manoel de Oliveira

Eduardo Souto Moura Continuing the architectural theme, another Pritzker prize winner with close links to Porto was honoured in 2011. Eduardo de Souto Moura, born in the city in 1952, became only the second winner to receive their Laureate from a serving US President. Barack Obama described Souto Moura as someone who “is never satisfied with easy solutions”. The architect of the Municipal Stadium of Braga and Casa da Histórias Paula Rego in Portugal and projects all over the world, Souto Moura was responsible for the rehabilitation of emblematic and historical buildings in Porto such as the Prison of Relação (Cadeia da Relação) and The New Customs building (Alfândega Nova) and the city’s award‑winning subway stations. •

Casa de Chá da Boa Nova Built between 1958 and 1963 and just two meters above the ocean in one of the rockiest areas of greater Porto’s Atlantic coast, the Casa de Chá da Boa Nova (literally the Tea House of Boa Nova) is an architectural and gastronomic delight. Architect Álvaro Siza completed the building in 1963 and then over 50 years later, transformed the space into a restaurant for Portuguese chef Rui Paula, who recently (2016) secured a Michelin star. •

Casa de Chá da Boa Nova. ©Nelson Garrido

When Manoel de Oliveira passed away in 2015 at 106 years of age, the country took the news with difficulty. The filmmaker and director who was born in Porto in 1908, had come to be viewed as an immortal figure by the Portuguese. He remains the oldest director in history, with the longest career in cinema. He started out as an extra at Invicta Film, a pioneer of Portuguese silent movies. His first movie – “Douro Faina Fluvial” (1931) – was a silent film but he then lived through the history of 20th century of analogue cinema, directing essential works such as “Aniki ‑Bóbó” (1942), “Amor de Perdição” (1979), “Francisca” (1981) and “Vale Abraão” (1993). He directed 32 feature films, his last one was in 2014. Awarded the Golden Lion of the Venice Film Festival, Manoel de Oliveira directed internationally renowned actors such as Marcelo Mastroianni, John Malkovich or Catherine Deneuve. •

Álvaro Siza In 2005, Álvaro Siza, one of the most highly regarded architects of his generation, was awarded the keys to the city of Porto. Born in 1933, in the neighbouring coastal town of Matosinhos, Siza credits the area’s linear and artless maritime landscape as the spirit of his creativity, although, he doesn’t deny the influences of other architectural greats such as Adolf Loos, Alvar Aalto and Frank Lloyd Wright. In a way, Siza synthesized these 20th century masters with a very personal language and appearance, which, since the 1960s, has firmly evolved into a worldwide reference. This was recognised in 1992 with a Pritzker Architecture prize – considered the Nobel Prize of architecture – and in 2009 when he was presented with the Royal Gold Medal for Architecture by Queen Elizabeth II. •

Architect Álvaro Siza. ©Arquivo Siza Vieira

mds magazine

Mastering Pillar 3 reporting Insurer Challenges BY ANTOINE BOURDAIS

Antoine Bourdais, director of banking and insurance at software solution provider Invoke, discusses how to master Pillar 3 reporting, explaining the challenges and why businesses must future‑proof their processes.

Illustration by Tiago Galo

Solvency II, Pillar 3 regulatory reporting requirements came into force on 1st January 2016. As a result, in addition to the Quantitative Reporting Template (QRTs), firms must produce two key narrative reports; a Solvency & Financial Condition Report (SFCR) – disclosed publically on an annual basis – and a Regulatory Supervisory Report (RSR) – disclosed privately in full to a supervisory body every three years and as a summary once a year.

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ANTOINE BOURDAIS Looking back at 2016, what main challenges did insurers face with Pillar 3 reporting? After years of preparation, the Solvency II regime brought the European Union (EU) insurance market the most complete reporting package the industry has ever known. Based on the experience of the 2015 preparatory phase, insurers appeared ready to face the first challenges of Pillar 3 reporting. The main issue, however, came at the end of 2016 when the regulation required the submission of annual 2016 data reports. The first day one and quarterly submissions under Solvency II were made in May 2016. While the latter were pretty close to what insurers experienced during the 2015 preparatory phase reporting exercise, the challenge was to be fully prepared for the first annual Solvency II submissions based on December 2016 data. For clients, one of the key factors of success was to not underestimate the workload required for this first annual report. Part of the challenge was to efficiently re‑organise the company’s internal resources so they could cope with the multi‑faceted burden of Pillar 3 reporting. They had to not only meet the 2016 regulatory requirements and prepare their 2017 submission, but also anticipate any additions to regulation. These included a number of main requirement updates and additional reporting obligations, such as the National Specific Templates (NST), mandatory in Ireland in 2016 and France in 2017. While large companies created distinct teams dedicated to tackling these issues, smaller entities faced a real organisational challenge, delegating responsibility for producing present reports and preparing for future ones to the same person. The next challenge for insurers is to further industrialize their reporting production processes. Very few are 100% ready to automate the production of the whole set of expected reporting templates.

For clients, one of the key factors of success was to not underestimate the workload required for this first annual report. Part of the challenge was to efficiently re‑organise the company’s internal resources so they could cope with the multi‑faceted burden of Pillar 3 reporting 39

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ANTOINE BOURDAIS → Director of the Banking and Insurance Division at Invoke – a European software provider specializing in financial, tax and regulatory reporting, Antoine Bourdais participates in XBRL Europe and XBRL International working groups dedicated to regulated information. → Antoine graduated as a mathematical engineer from the French engineering school INSA and with an MBA. After several years as a project manager in financial reporting at Invoke, he was promoted product manager for the Reporting & Consolidation software range, reinforcing his collaboration with the R&D department. Today he is responsible for driving the Banking and Insurance division overall product strategy.

In 2016 insurers had to report additional statistical data (new reporting requirements of the ECB and FSB) some of which could not be retrieved from existing Solvency II material. The challenge therefore was gathering data for Solvency II, enriching it with additional information and making sure it’s of sufficient quality to form a report. It’s important to bear in mind that the volume and scope of requirements will continue to increase, rather than decrease. The introduction of the additional Financial Stability reporting templates by the European Central Bank (ECB) is a typical example of this, and Solvency II regulation will undoubtedly be subject to further enhancements of this kind in the future. We are currently leading projects among insurer clients that are much more than just initiating the automation of regulatory reports production. They use the Invoke regulatory reporting platform further upstream in their information systems as a regulatory data warehouse. The Invoke platform enables them to collect, store and process the necessary data to meet the initial EIOPA Solvency II requirements, and the statistical data required to meet the additional reporting requirements of the ECB and the Financial Stability Board (FSB). Data is sourced from a wide range of systems and held centrally in the data warehouse. Software then undertakes cross‑system data consistency checks and validates data quality. Data quality is the hot topic, particularly as regulators repeatedly communicated to the industry that, while some progress had been made, the quality of the data submitted was not sufficient. The goal is to move from a pure reporting system to a comprehensive regulatory platform to ensure data quality prior to report production. What is the key to a successful Pillar 3 reporting strategy? No matter the company or the context, the target stays the same: achieving full automation of Pillar 3 reporting. The question is how to get there smoothly. Insurers must have a clear assessment of their IT system maturity. Only then will they be able to identify which data is Solvency II ready and which is not mature enough to be used for automatic report production. For processes to evolve, relevant milestones have to be defined. Some insurance companies have decided their system is not Solvency II mature enough and prefer to use a ‘tactical’ software solution for Solvency II reporting right now. They prepare data manually and use software such as Invoke ‘e‑Filing Insurance’, our cloud portal solution, to transform the Excel data into the expected XBRL format. More mature clients who use the Invoke’s ‘strategic’ regulatory reporting system manage and centralise all of their data, which in turn enables them to not only produce regulatory reports that meet Solvency II’s quality criteria, but also satisfy their internal reporting requirements. •

APOLLO GROUP

A major investor in the portuguese insurance market

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apollo group Apollo Global Management is a leading worldwide asset manager. The American private equity firm has a long history of raising, investing and managing funds for some of the world’s most prominent institutional (blue chip) and individual investors, including large‑scale American pension funds and sovereign wealth funds. In Portugal, Apollo has increased its investment in the insurance sector. After investing in Tranquilidade in 2015, Açoreana Seguros followed in 2016 and by the end of the year both were merged into a single business under the Seguradoras Unidas umbrella. Tranquilidade and Açoreana however were kept as commercial brands. Gustavo M. Guimarães, President of the Board of Directors of Seguradoras Unidas, speaks to FULLCOVER about the continued growth of the Apollo Group and its investment strategy in Portugal.

Established in 1990 in the USA by a group of experienced investors, Apollo manages a portfolio of assets covering private equity, credit and real estate. Apollo is present in three continents – North America, Europe and Asia – and has a network of 15 offices. The financial sector was, from the start, a priority in its development strategy and its first investment was in an insurer. Banking and insurance feature prominently in its investment portfolio; Athene USA, one of the biggest fixed annuities (pension plans) insurers, is currently the biggest asset managed by Apollo. Even the tough economic conditions of the last few years have not prevented Apollo registering significant growth; assets worth $160 billion were under management in Q1 2015, by the end of 2016, it was $192 billion. Gustavo Guimarães explains how the firm manages to sustain continued growth and deliver exceptional results: “Apollo integrates all its operations, believing this is the key differentiator. Its investment strategy, applied successfully over the years, enables it to identify good investment opportunities, provide capital to support and create leading companies and add value for investors across several sectors”. Gustavo also mentions Apollo’s flexibility in how it approaches and invests in various company set‑ups and during differing market cycles, evidences its strong market expertise. Gustavo M. Guimarães, President of the Board of Directors of Seguradoras Unidas.

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Equally strong collaboration between company management teams ensure group portfolio integration which further contributes to its global development. “The integrated business model combines the strength of private equity, credit and real estate platforms with important factors such as long‑lasting investor relations (including many important pension/global sovereign funds and institutional/private investors), a long‑term capital base, a strong reputation and a team with a great know ‑how,” he says. Outside the financial sector, Apollo has interests in other areas such as distribution, transport, media, telecommunications, industry and natural resources. “Apollo is very committed to Portugal, there is a desire to invest medium to long term in the country and to diversify into other sectors,” Gustavo states.

A different approach

Investment Plans

For Gustavo Guimarães, the Apollo Group has a different approach to the investment process: “It starts with the autonomy it gives the management teams of companies it invests in. Apollo believes in a model that, while as shareholder it may contribute with capital, knowledge and better working practices, it also values the independence of the companies’ management teams and local managers. It is they who should define the strategy, without conflict of interest, receiving incentives which ensure shareholder and company objectives are fully aligned.” Apollo operates in sectors which can be complex from a regulatory, supervisory and legal perspective. Gustavo assures: “The operation is always intent on minimizing the risks and sharing its vast experience in governance models, compliance and managerial ethics with the companies it supports.” The business is equally experienced in carrying out investments during times of economic and financial market uncertainty and finding business opportunities that not only add value for investors, but also for the countries it invests in. Gustavo adds: “Apollo has a history of being a responsible, result‑oriented investor with a long‑term development perspective and a constructive approach to the managed companies it works with. This can already be observed in its affiliates in Portugal.”

Apollo started investing in Europe in 2001 and since then has been growing in highly regulated sectors such as banking and insurance, with acquisitions in the United Kingdom, Italy, Germany, Spain and Portugal. Having bought Tranquilidade in early 2015 and Açoreana in 2016, these investments now position both companies as the second largest non‑life insurance operator in Portugal, holding more than 15% of market share. Adding to this investment is the purchase of AdvanceCare’s business – shareholders in Europ Assistance – giving the group further interests in the insurance and health sectors. Gustavo confirms: “These investments by Apollo are a sign of the trust this important international investor has in the national economy and especially the Portuguese insurance sector.” We asked Gustavo Guimarães what Apollo’s future plans are for Tranquilidade and Açoreana. He replies: “We have clear objectives of growth and to take a leading position in Portugal. We want the best people, with the best practices, demonstrating a culture of innovation. We want to be recognized as the market leader for collaboration, efficiency, service quality and solvency. Our ambition is to be the investor of choice for partners and clients and to be the insurance company that delivers outstanding value”. Gustavo concludes the insurer sector and, specifically, the Portuguese market, are amongst Apollo’s strategic investment plans: “Apollo is very committed to Portugal, there is a desire to invest medium to long‑term in the country and to diversify into other sectors. This is evidenced by the recent acquisition of Veralia, a leading company in the glass packaging market, located in Figueira da Foz. Within the Portuguese insurance market, Apollo’s investments confirm its commitment to develop a sector which faces a lot of challenges.” •

Apollo is very committed to Portugal, there is a desire to invest medium to long term in the country and to diversify into other sectors

Illustration by Tiago Galo

$192 billion of assets under management (as of December 2016)

Company listed in the New York Stock Exchange (NYSE)

A team of 986 employees, including 376 investment professionals

Global company with 15 offices in 3 continents

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maintaining that competitive edge INTERVIEW WITH JAN DE POOTER, CEO OF TRANQUILIDADE Established in 1871, the Tranquilidade brand is well‑known in all business sectors for its portfolio of comprehensive and specialist insurance for individuals and companies. Its products are distributed via a network of brokers and agents who are respected for their industry knowledge and expertise. With Tranquilidade’s 145‑year history, detailed market knowledge, steady growth and reputation for innovation it aspires to be the insurer of choice for clients and partners. The merger of Tranquilidade and Açoreana – another centenary brand – in 2016, created Portugal’s second biggest non‑life insurance company with a market share of more than 15%, some 1.4 million clients and almost 650 million euros in premiums volume. This alliance has scale to grow and invest; its plan for the coming years is to embrace the opportunities that present themselves within its chosen markets, maintain its competitive edge and follow clear strategic priorities of growth, profitability, simplicity and service quality. Jan de Pooter, the insurer’s ceo, discusses with FULLCOVER the challenges, the areas and opportunities for change and his leadership goals.

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You’ve been Tranquilidade CEO since 2015. Having worked in so many different insurance areas and countries, why did you accept this challenge ? Tranquilidade is a brand with history; it’s very strong and well‑recognized in the market and being able to be a part of this project, leading its transformation and consolidation, was irresistible. Besides Portugal, where else have you gained your experience? I worked in Asia, spending three years in Kuala Lumpur, where I launched the first bancassurance partnership of the Fortis Group in Asia with one of the biggest banks in Malaysia, Maybank. Living and working in other places is an enriching experience, not only professionally but also personally. The Apollo Group is now a shareholder of Tranquilidade. How does this impact on the company’s strategy and how is it adapting to a different organizational culture? The Apollo Group is not an insurer, it is an investor and this factor enables it to recognise and respect Tranquilidade’s existing culture, supporting it with new perspectives and knowledge. Having a new shareholder allows access to partners, suppliers and the best managers in the world, which is clearly an advantage for the company. Furthermore, we can share the good practices and experiences of other countries. Stability and growth are the two key‑words Apollo Group brings to Tranquilidade. In 2016, Açoreana joined Tranquilidade. How does this acquisition add value to the Group and to the insurance market? The acquisition of Açoreana was a very important milestone in 2016; Tranquilidade and Açoreana are two centenary brands, with a history of experience and expertise that positions them as leading players in the Portuguese insurance sector. After the legal merger at the end of the year, we became the second biggest non ‑life national insurer. Our expanded operation ensures we are better prepared for future growth; we can build upon our market presence, increase efficiency and our competitiveness and invest more in technology, new processes, products, quality of service and information. This creation of a very strong operator in the market also brings added value for our clients, associates and partners.

The Portuguese market has been highly concentrated. What is the impact of this upon the national insurer market? I believe the consolidation process is a natural step in a mature market such as Portugal and it will of course have an impact. Recently we have witnessed a high concentration of insurers; in 2008, the top five non‑life insurance companies, held 52% of the market share and now this has risen to 70%. The markets predict this trend will continue. As far as I am concerned, a market with little growth and profitability/low interest rate challenges can only encourage businesses to deliver greater efficiency and competitiveness and create potential for bigger investment capacity. How did Tranquilidade prepare itself internally for the Solvency II requirements? What was the impact on the company and markets worldwide? Preparation for Solvency II has been in progress for some time before the 2015 deadline. Tranquilidade has been implementing several initiatives gradually and defining policies in fundamental areas, such as investment and risk management, reinsurance, remuneration, outsourcing, compliance and auditing. The new system is more than an internal regulation and the procedure of evaluating processes and risks has created opportunities for improvement. For example, risk planning enables us to revise our sales strategies and product design to optimize risk capitals and price premiums more competitively. To me, the biggest impact of Solvency II, which is risk‑based capital, is the need to adjust the capital to the risk profile. In market terms, this implies several companies will have to adjust their strategies, not only on a national scale, but also internationally. On the other hand, it may also facilitate increases in capital; something that will occur across Europe. Another consequence of Solvency II is the need for greater information transparency, with detailed solvency reports available for the many stakeholders. This, together with optimizing companies’ risk capital (as mentioned before), delivers peace of mind to our insured and investors, plus it’s an instrument that creates value.

Stability and growth are the two key-words Apollo Group brings to Tranquilidade.

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apollo group

Paula Rios of MDS Group with Jan de Pooter and Cristina Brandão of Tranquilidade.

Tranquilidade has a history of developing innovative solutions. It was, for example, the first insurer in Europe to launch personal accident insurance for ‘Pokemon Go’ players. What is the strategy that enables you to respond to the needs of more informed and demanding consumers and also place yourself ahead of the competition? We anticipate the emerging market trends with products, services and initiatives that meet the new needs of our clients. Technology and how consumers react to it is constantly evolving; there are new business lines and new risks. Being aware of what surrounds us, finding new business opportunities and looking at products, services and processes ‑ always from the client’s perspective ‑ are the determining factors for success. By combining our technical expertise with our capacity for innovation, we are clearly setting ourselves apart and we will continue to do so. Our key focus is to improve the consumer’s experience, develop specific products for strategic segments and to ensure our non‑compulsory insurance proposals add value.

Our key focus is to improve the consumer’s experience, develop specific products for strategic segments and to ensure our non-compulsory insurance proposals add value.

Recent studies point out to a paradigm shift in clients’ relationships with insurance companies and an increasing reliance on the use of digital tools. What challenges does this present to insurers, is technology disrupting the traditional business methods and how is Tranquilidade adapting to this new digital era? It is indeed, a challenge for the market and naturally, for Tranquilidade. The market is changing sharply, with consumers becoming increasingly sophisticated in their buying patterns, which we have to know better. In an industry with multiple players and complex processes, we have an ambitious goal which is to increase the efficiency and agility of our processes and ensure a relevant and effective follow‑up for our clients and brokers. I trust that over the next few years, technology will simplify processes and products further and greatly impact the after‑sales service. We shall continue to focus on these areas, launch new products and services and continue to simplify our processes. One of our top operational priorities is to improve the client’s experience with the company in two key areas; how we service and how we simplify client communication/enable better access to information. We have several ongoing initiatives for simplifying and optimizing processes all relating to products, subscription, after‑sales and claims. These include; the upgrading of systems, new health, home and life products and services, moving from paper to electronic communication with clients and brokers, launching an e‑learning platform and looking into new ways of monitoring clients’ claims.

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And is there any area where you see digital being the dominant channel? Claims is an area where digital interaction with the client is perfectly possible. We are already seeing examples of this, such as when opening claims’ cases by simply sending a photo to the insurer. Another area is in information provision; with more and more information becoming easily available, there’s greater capacity for analysis. I think process simplification and data analytics are probably the most important components of the new digital age and these will add huge value, both for the client, the companies and distribution networks. Tranquilidade has been awarded several prizes. It was elected Superbrand 2016 and was given the portuguese Best Big Non‑life Insurer accolade from Exame magazine for the sixth time. What is the importance of this brand recognition from consumers? I consider these prizes to be recognition for our work. They are important distinctions and, to quote our advertising campaign, ‘bring more responsibility to us and more tranquility [translation of Tranquilidade] to our clients’. They are stimuli to continue improving our services and products. We have a history of almost 150 years and will continue to be the insurer of choice for our clients and partners. We want to be leaders in client satisfaction and profitability, unrivalled in the quality of the partnerships we establish with brokers and agents and ahead of the market for the support we give and receive from our employees. Being recognized is very gratifying. You are implementing the Ambição 2020 [Ambition 2020] project. What are the goals behind this strategy? Ambição 2020 is a project we launched in early 2016 and it will be our strategic pathway for the next few years, providing a platform for growth. This project involves all within the company (over 100 employees are directly involved), and analyzes the national and international market trends and their impact on or business. This in turn, defines our future strategic direction. Ambição 2020 has five key foundations; the first is technical excellence – everything related to claims and pricing sophistication, the second is to simplify and digitalize processes and services, third is to focus on strategic segments and products, fourth is to continue to develop the most efficient distribution networks and last but not least (on the contrary) is to further develop our staff. We have well defined goals and all involved are aware of the role they play. Progress is already very noticeable and this will certainly be evidenced in our results in the next few years.

In 2016 you attained growth in your results and your client base. What is Tranquilidade’s plan for the future? The Ambição 2020 vision is a strategy for growth. We intend to grow in market share, volume, quality, profitability and service. Traditional companies have been more focused on compulsory lines – auto and work related accidents – giving us an opportunity to grow in non‑compulsory lines, by launching innovative services and products. We want to develop in strategic areas, such as health and life and focus on innovation and insurance which adds more value to everyone. We want to anticipate and meet the needs of clients in all sectors offering simplicity, innovation and professionalism – even in product lines such as car insurance that will inevitably become a lower priority within insurers’ portfolios. In your view, what are the future challenges and opportunities in the insurance industry and how do you see the role of brokers? We will have an increasingly complex market, characterized by digital and emerging risks. In the corporate area there are cyber risks and threats arising from globalization. I believe brokers will have a stronger role in the management of their clients’ insurance portfolios, offering differentiating products and complementary services that allow risk prevention and mitigation. And do you foresee any changes for insurers? In Portugal, the consolidation process will have a great impact on the market during the next few years; new players ‑ of a bigger dimension and scale – will emerge and the resultant shareholder changes will bring more rationalisaton and efficiency to the market. I think insurers will revise their risk assumptions, given the new risk based capital regime, leaving some to focus on other areas of risk. Then, as I already mentioned, there will be greater process simplification, more use of digital channels to communicate with clients and partners and increased transparency and quality with after‑sales services.The opportunities presented by data analytics and new risks are also important. Tranquilidade and MDS have worked very closely together throughout the years. How would you describe this relationship? The relationship between MDS and Tranquilidade is very important; our ethos of co‑operation, trust and professionalism has enabled us to support MDS in the different business areas it has developed, such as those managing contracts with State and public entities, the network of agents and partners and of course, brokerage. It is a partnership we are committed to and one we wish to develop further.

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apollo group In recognition that education is a key element of your corporate social responsibility policy, you recently established a partnership with Universidade Nova – School of Business and Economics. What are the goals of this partnership? Nova‑SBE is one of the most reputable and innovative institutions of higher education in Portugal and is ranked amongst the best business schools in the world. Tranquilidade’s support of a new Nova‑SBE university campus, which is being built in Carcavelos, near Lisbon, is part of a partnership that includes training, talent management, digital transformation, consumer analytics and distribution networks. Our ‘consulting labs’ program is also part of the partnership. Here, Tranquilidade will present challenges to Nova‑BSE students and teachers, giving them experience of working with business professionals while within a university environment. This will be reflected in the student’s Masters Thesis which while covering a relevant area and meeting demanding criteria, bring the fresh vision of young people into the company. The insurance sector must better promote the benefits it brings society. Do you agree? Yes. The image of the insurance sector has been improving but there is still a lot of work to be done. The importance of insurance, whether covering an individual life/families’ lives or protecting companies’ assets is not always properly acknowledged. Our sector and the essential role it plays within the economy must convey this message more effectively. It is clear insurance is a business, but it also adds value to society and is fundamental to the sharing of information. Most people do not appreciate the value of the claims we pay and what insurers return to society. This communication is everyone’s responsibility: the Portuguese Insurers Association, insurers, brokers and agents. On the other hand, it is also important to attract new talent to the sector, showing how interesting it can be to work in insurance and how it encompasses numerous knowledge areas. Our partnership with Nova‑BSE will help promote this. •

Century-old brands, Tranquilidade and Açoreana have a long history and emotional connection with Portugal and its people. They operate across all business areas offering a wide range of products, including specialist insurance, distributed via a network of brokers and agents who are renowned for their expertise. Tranquilidade and Açoreana’s profound market knowledge, solid foundations for growth and brand reputation ensures they are the insurer of choice for clients and distribution partners. The merger of Tranquilidade and Açoreana in 2016 formed the second biggest non-life insurance operator in Portugal; it has more than 15% market share of non-life business, some 1.4 million clients and receives almost €650 million in annual premiums. Tranquilidade and Açoreana aspire to be the market leaders for client satisfaction and profitability; something that will be achieved due to the unrivalled quality of broker partnerships and employee support.

We want to be leaders in client satisfaction and profitability, unrivalled in the quality of the partnerships we establish with brokers and agents and ahead of the market for the support we give and receive from our employees.

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Insurance Development Forum â&#x20AC;&#x201C; IDF

Illustration by Tiago Galo

Closing the gap

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idf At the June 2015 Summit in Schloss Elmau, Germany, G7 leaders pledged to increase the number of people in the developing world who are insured against the negative impact of climate change. Known as the G7 InsuResilience target, they set a goal ‘to insure 400 million more developing nations’ citizens against the effects of climate change and related natural catastrophes by 2020’. To achieve this, the G7 committed to intensify its efforts to help vulnerable countries manage climate change‑related disaster risk and build their resilience. Protocols such as the Sendai Framework for Disaster Risk Reduction 2015 – 2030, Sustainable Development Goals 2030 and the UN Conference of the Parties (COP21) Paris Climate Agreement are already in place and form part of the Post 2015 Agenda – a UN‑led process to identify global and national development priorities. The G7 leaders concede however, they need to learn from and extend already existing risk insurance facilities such as the African Risk Capacity, the Caribbean Catastrophe Risk Insurance Facility and other initiatives to develop insurance solutions and markets in vulnerable regions. Their desire to optimise insurance industry collaboration and their ethos of ‘think together, act together’ prompted a number of global insurance and reinsurance experts, including XL Group executive deputy chairman, Stephen Catlin, to form the Insurance Development Forum (IDF).

Stephen Catlin, IDF Chairman & XL Group Deputy Chairman

About the Forum The IDF is a partnership between United Nations’ (UN) leaders, the World Bank Group and the insurance industry (which takes the lead role). It was developed with the support of the UN‑backed Political Champions Group for Disaster Resilience, first announced at the UN COP21 Summit in December 2015 and officially launched at a high‑level UN meeting in April 2016. Members comprise the chief executive officers/chairs and presidents of 14 global insurance firms. Inter‑ Governmental Organisations are represented by The Financial Stability Board, the UN Developmental Program and Word Bank Group. Global insurance industry supporters include the International Insurance Society (IIS), The Geneva Association, The International Co ‑operative and Mutual Insurance Federation and the Association of Bermuda Insurers and Reinsurers. The driver behind IDF is a High Level Steering Committee comprising industry, UN agency and World Bank leaders who establish priorities and mobilise resources. Chair is Stephen Catlin (also incoming chair of the IIS), co-chairs are Helen Clark, administrator, UN Development Program (UNDP) and Joaquim Levy, managing director and chief finance officer of World Bank Group. Alongside insurance industry representatives, members include Mark Carney, governor of the Bank of England and chair of the Financial Stability Board, Dr Robert Glasser, special representative of the Secretary General for Disaster Risk Reduction and head of the UN Office of Disaster Risk Reduction (UNISDR), David Nabarro, special adviser of the Secretary General on the 2030 Agenda for Sustainable Development and UN member and Stephen O’Brien, under secretary general and emergency relief co‑ordinator and head of the Office for the Co‑ordination of Humanitarian Affairs (OCHA).

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Closing the protection gap According to a study published by the Global Facility for Disaster Reduction and Recovery, the cost of natural disasters has risen tenfold since the mid 1980s. Global insurers estimate the average economy losses from disasters in the last decade were around $190billion annually while average insured losses totalled $60bn. Swiss Re reports 70% of economic losses from natural hazards remain uninsured and in middle/low income countries, this often exceeds 90%. The company also reports life and non‑life insurance penetration – a measure of premiums as a proportion of GDP – in South Africa in 2014 was 13%, Kenya 3% and Nigeria 0.3%. Insurance Europe 2015 reports life/non‑life insurance penetration in Europe was 7.46%. Research undertaken by Lloyd’s shows a 1% increase in insurance penetration can reduce the disaster recovery burden on the taxpayer by 22%, illustrating why countries with insurance cover recover faster from disasters. It is no surprise therefore to find the overriding priority for the IDF is to close the burgeoning protection gap that exists between high and low income nations and to use insurance/risk management to build greater resilience and protection for vulnerable people, communities, businesses and public institutions against climate, disaster, wider risk and economic shocks. In the past, efforts to improve global resilience and address the protection gap have been undertaken by a handful of private/public stakeholders and while insurers have called upon governments to ‘step up global efforts to build resilience against natural disasters’, the formation of the IDF ensures greater co‑ordination and collaboration between those with the expertise and experience necessary to address this complex issue on a wider scale. The formation of the IDF also responded to calls from the former UN secretary general Bank Ki Moon for insurers and reinsurers to do more to help counter the threat posed by climate catastrophes.

Stephen Catlin IDF Chairman with Ségolène Royal, French Minister of Ecology, Ban Ki‑moon, former Secretary‑General United Nations and Yong Kim, President World Bank @The Climate Action conference in Washington, May 2016.

Greater experience At the Sendai Risk Reduction conference delegates were reminded that insurers and reinsurers have more collective information and more overall experience in identifying, assessing and managing risks than any other organisation in the world, including most governments. Given the huge protection chasm between the ‘haves’ and have nots’, it is clear why the IDF is so necessary. Stephen Catlin affirmed this point in an impassioned speech to delegates at November’s Development Finance Forum in Frankfurt, Germany: “The insurance industry’s core expertise of underwriting and managing risk positions us strongly to help build the resilience capabilities that are needed today, and we are encouraged by the central role that risk management plays in the UN Sustainable Development Goals and other global frameworks.” In an interview with the Financial Times in June 2016, Stephen observed: “For years the insurance industry has been very poor at describing the value proposition of insurance, but now the UN and other agencies are starting to understand what we can do for them.”

Areas of focus The global resilience challenge Economic and humanitarian risks associated with catastrophic weather and climate‑related hazards are increasing,

representing a major challenge to global resilience, particularly in middle/low ‑income countries. This challenge was highlighted by the recent adoption of global agreements (Sendai Framework for Disaster Risk Reduction 2015‑2030, Sustainable Development Goals 2030 and the COP21 Paris Agreement) which form the UN Agenda 2030. The protection gap Close the protection gap, build global resilience and protect economies. The role of insurance Growing evidence indicates that countries with greater penetration of insurance coverage have faster economic recoveries from disasters and rebuild with greater resilience to future disasters. A key goal of the UN Agenda 2030 is to take a risk‑based approach to manage the risks of extreme events and climate. Within this framework, insurance is explicitly recognised as a key vehicle to enable the risk sharing and transfer solutions required for greater global resilience. The need for greater coordination and collaboration Given the scale, scope and complexity of the resilience and protection gap challenge, a coordinated and collaborative approach bringing together the insurance industry and relevant stakeholders is recognised as critical to meeting the goals of the UN Agenda 2030.

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idf Priorities and targets The IDF will initially focus on building greater resilience to climate and natural hazards risks in line with the G7 InsuResilience target of extending climate risk insurance coverage to an additional 400 million people across vulnerable countries by 2020. To achieve this target the IDF will coordinate and implement insurance related risk management capabilities across the following two priority working initiatives: Technical Assistance Facility (TAF) The TAF will develop a platform that helps governments assess and understand their risks and develop and deploy effective integrated insurance solutions tailored to their unique challenges. The TAF will serve as a central mechanism to integrate all relevant IDF activities with the aim of helping governments extend insurance coverage to 300 million of the world’s most vulnerable people. Microinsurance The Microinsurance initiative will work together with private, mutual, governmental and civil society partners to extend relevant ‘on‑the‑ground’ insurance solutions to an additional 100 million vulnerable people. While the IDF will initially contribute to the achievement of the G7 InsuResilience target, its scope is expected to expand in time to include additional insurance ‑related priorities across the wider UN Agenda 2030.

of agreed targets and objectives. Chaired by Rowan Douglas, Willis Towers Watson and co‑chaired by Quentin Coolen, UNDP and Samuel Munzele Maimbo, World Bank Group.

Working groups Since April 2016, over 200 experts and practitioners from industry, governments, international institutions, NGOs and academia have been engaging across different priority areas. These priorities are assessed and driven forward by seven dedicated working groups whose evolving membership is drawn from private and public institutions. • Technical Assistance Facility (TAF). Objective is to establish a (TAF) for (sub‑sovereign) risk transfer supported by the insurance industry, donor governments, the World Bank and the UN. This will help low‑and middle‑income governments as well as humanitarian actors (i) to better understand their natural catastrophe risks and (ii) to scale‑up the use of risk financing instruments. Chaired by Ivo Menzinger of Swiss Re.

• Risk Modelling & Mapping. Objective is to reinforce global understanding and quantification of disaster risk, particularly in developing countries, in order to support and enable decision‑making on mitigation, adaption and transfer. Co‑chaired by Ian Branagan of Renaissance Re and Dr Alana Simpson of the World Bank’s Global Facility for Disaster Risk Reduction. • Insurance Regulation & Resilience Policies. Objective is to explore the role of insurance regulation and public policy in promoting sustainable development and enhancing economic and social resilience to large‑scale disasters. Chaired by Bill Marcoux of DLA Piper. • Insurance & Humanitarian System (IHS). Objective is to provide policy support and broker technical assistance to help humanitarian actors establish and scale‑up appropriate insurance tools to complement current financing mechanisms, improving predictability, reducing costs, and increasing the impact of humanitarian programmes. Chaired by Kenn Crossley of the World Food Programme and co‑chaired by Sophie Evans of Willis Towers Watson.

IDF structure The IDF’s governance structure has been designed to ensure efficiency in communication, coordination and collaboration among all stakeholders. The IDF is driven by a Steering Committee and supported by an Implementation Group. Steering Committee ‑ industry leaders, UN agency leaders, international institutions and others – their focus is to establish priorities and mobilise resources. Implementation Group ‑ reports to the Steering Committee ‑ responsible for recommending responses, overseeing the IDF Working Groups and driving delivery

Heavy flooding in Tawung, Lopburii province, Thailand.

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Sipaghat bazar, Kavreplanchok, Nepal after an earthquake.

• Microinsurance. Objective is to coordinate and collaborate on microinsurance projects and to maximize the impact and efficiency, both in technical assistance and funding, of resilience building programmes which are operating in communities vulnerable to climate change. Co‑chaired by Shaun Tarbuck, CEO of the International Cooperative and Mutual Insurance Federation, and Dr Joan Lamm Tennant, CEO of Blue Marble Ventures. • Indicators and Development Metrics for Resilience and Insurance. Objective is to support development and implementation of official resilience and insurance indicators into the proposed international monitoring frameworks of the Sendai Framework, Sustainable Development Goals (SDGs) and Paris Climate Agreement. Chaired by Marc Gordon of the United Nations Office for Disaster Risk Reduction. • Insurance Communications. Objective is to support coordinated,

targeted, impactful and measurable communications to the IDF’s key external stakeholders and support efficient internal communication among the IDF’s Working Groups, Management Committee and Secretariat members. Chaired by Fid Norton of XL Catlin.

Social responsibility A core driver of the IDF is social responsibility with members keen to share their knowledge and expertise in order to safeguard the well‑being of those most vulnerable when disaster strikes. This collaborative ethos ‑ a move away from the silo mentality and competitiveness commonly found in some elements of the financial services sector – is already recognised as crucial to building resilience. The World Bank in its 2016 Report ‘Unbreakable – building the resilience of the poor in the face of natural disasters’ discusses how insurance plays a key role and that ‘for large shock, insurance products can provide

protection at a lower costs than savings or borrowing.’ It says ‘Over the medium term, a firm with business interruption has a significantly higher likelihood (by 15%) of enhanced productivity and improved performance after a disaster’ and reiterates ‘private insurance is part of the solution package… demonstrating its effectiveness as a mechanism for the financial protection of individuals, businesses and government assets’. The Report highlights how risk pooling schemes can be used to transfer excess risk, confirming ‘The value of access to this global pool of risk capital was demonstrated after the 2010 Chile earthquake where an estimated 95% of the $18billion in insured losses was passed out of the domestic market onto international reinsurers, protecting domestic carriers’. The IDF will expand access to risk pooling mechanisms for members of the most vulnerable countries, allowing them to share the burden of catastrophic risks such as earthquakes and flooding.

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idf Good practice The Report cites examples of good public private/partnerships, quoting the Turkish Catastrophe Insurance Pool and the Mongolian Livestock Insurance Pool. In both cases the domestic insurance market provides the mechanism through which governments are able to reach households and businesses with insurance products to expand their financial resilience to disasters. Both partnerships have substantially increased insurance penetration at a local level. Index‑based cover is another good example. Underwriting variables such as rainfall deficit and wind speed etc and agreeing a minimum threshold to trigger a pre‑defined payment, ensures greater control over losses (as they do not need to be measured), encourages individuals to take preventative measures (not dependent on losses or risk mitigation) and simplifies the payment decision. The Government of India launched a pilot of the weather‑based crop scheme in 2007, insuring over 10 million for a range of crops. It is clear the potential for resilience building is huge and not just with disaster risk insurance; health insurance‑helping those who are injured or disabled – can prevent families spiralling into debt. But the social responsibilities do not end here; they extend into helping educate people in risk management, enabling them to make informed decisions. The World Bank Report explains: ‘When insurance providers price the risk correctly, the price itself indicates the risk level which helps people and firms make better‑informed decisions about risk taking and risk mitigation investments. For example, a potential buyer may buy not a home because of high insurance costs against floods, even if the flood risk information is not easily available. Insurance can create a powerful incentive for people to manage their risk better and reduce losses’. The World Bank Report shows just what can be achieved when key stakeholders commit to proactive partnerships – they support the wellbeing and recovery of vulnerable nations. The world is watching to see whether this unique public/private sector partnership can deliver results that will use insurance industry risk

management skills to build resilience that benefits economies and families. However judging from some of the IDF’s partners feedback, hopes are high.

Making a difference Helen Clark, IDF co‑chair and administrator of the UNDP comments: “For many developing countries with scarce resources, rebuilding is often beyond their means. Typically, a disaster is followed by appeals to bilateral, regional, and international partners for aid relief and financial support. This support, however, often falls well short of what is required. Systemic lack of funds and recurrent inefficiency of recovery initiatives on the ground impede progress. Insurance can be an efficient, fast‑disbursing mechanism to build back better in vulnerable countries and communities hit by disasters, but also to reduce risks and the costs of risks in the long term. I agreed to co‑chair the Insurance Development Forum because I believe it can make a real difference in addressing these challenges.”

Redoubling efforts Rowan Douglas, chair of the Implementation Committee opines: “We all recognize a unique moment and opportunity to make a huge step forward in the protection of lives, livelihoods and communities – realizing the benefits of insurance across public, private and mutual and cooperative sectors. We will redouble our efforts between now and our next major milestone and the World Bank‑IMF Spring Meetings in Washington DC next April.” The last word has to be from Stephen Catlin: “My grandchildren expect me to make responsible decisions that affect their future and this applies globally. Insurers’ risk management skills help us assess natural disaster risk and this can be exported to allow governments at all levels to reduce future losses by designing resilience into infrastructure projects and increasing their use of insurance as a pre‑disaster resource. I am confident that this strong public‑private partnership can make a significant impact in increasing global resilience to better protect citizens’ properties and assets.” •

Sharing prosperity Joaquim Levy, IDF co‑chair and World Bank Group chief financial officer states: “Many emerging markets and developing countries lack sufficiently developed insurance markets, which stifles growth and has a negative impact not only on business but on general welfare, notably among the poorest. The lack of insurance instruments or broader risk‑pooling or risk‑mitigation mechanisms is also evident in the public sector, affecting government’s ability to respond to natural disasters and other large‑scale events. The World Bank Group is engaged in more than 40 countries in the design of financial protection strategies, including reforms on public financial management and financial instruments and also in the development of risk‑mitigation strategies. But more needs to be done, and we cannot do this alone. We stand with the Insurance Development Forum and its partners to facilitate our activities and use risk management instruments in helping eradicate poverty and raise shared prosperity.”

The broker of the future

The London (re)insurance broking world is at a crossroads. It needs to be redefined. Our clients have told us in no uncertain terms that their requirements have evolved. They want to partner with people who understand their region and the nuances of their cultures, who can speak their language and who are located proximate to them. To date, the London broker has often only paid lip service to these developments. Change has been slow, stymied by outdated practices. The broker of the future will meet and then surpass these requirements. We recognise this, as do some of our peers. However, Ed is uniquely fortunate. We have the necessary global capabilities, but are unencumbered by the bloated models of our larger peers, which prevent largescale change and contain conflict. We are untrammelled by legacy business and can act swiftly and decisively. And we are debt free, we can realise the ambitions, to which many of our peers also, in part, aspire, but lack the resources. We have already made significant headway in building a new kind of wholesale broker.

BY STEVE HEARN

Illustration by Tiago Galo

The broker of the future will empower retail brokers globally with specialist intellectual property and afford them access to the worldâ&#x20AC;&#x2122;s marketplace. A proposition which only places risks through London is no longer sufficient nor relevant. It must allow access to all of the major hubs. Local insurance intermediaries know their clients better than anyone else. In the future, these regional experts will have access to all major (re)insurance hubs through Ed. They will be able to call upon the requisite expertise to enable them to provide the best possible service for their client and to adapt to their clientsâ&#x20AC;&#x2122; evolving needs. They will also not have to compete with this expertise. Ed is not, nor will it ever be, a retail insurance intermediary. We are

The broker of the future will empower retail brokers globally with specialist intellectual property and afford them access to the worldâ&#x20AC;&#x2122;s marketplace

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STEVE HEARN a wholesale insurance and reinsurance specialist. We will not compete with our customers. We will work with our regional partners around the world. Our proposition will recognise that they are best placed to serve their customers and we will afford them access to the global marketplace. The bigger brokers cannot do this. Their business models do not allow for it. I have seen this first ‑hand. They are not incentivised to put the customer first, nor do they have the reporting lines or necessary technology to achieve this. There are several key ingredients which will make this vision a reality. Historically, our industry has been slow to embrace new technologies. Other industries, from travel, to telecoms and taxis, have undergone revolutionary changes. This has been driven by disruptive technologies. Our own industry has also evolved. In the last two decades the advent of comparison sites and affinity businesses have broken the status quo in personal lines. The international insurance and reinsurance world has been slow to recognise this. We continue to ignore the potential impact of new, more tech savvy entrants to our marketplace at our peril. Instead the broker of the future will embrace technology. It will challenge outdated practices and view the swift adoption of disruptive technologies as a way to differentiate itself, rather than attempt to retrofit creaking systems, which are not fit for purpose. The demographics, backgrounds, ethnicities and genders should reflect those of our clients. At present, in London, there is a shortage of the skills and competencies which will make this a reality. The broker of the future will be housed with individuals who can speak to our clients in their language and who understand their culture. Teams will be tech savvy and will represent a diverse mix of the best talent available, irrespective of gender, nationality or ethnicity. Significant strides have been made in making our industry more inclusive, however much more can be done to promote insurance as a career path and showcase the exceptional benefits which our market has to offer.

STEVE HEARN

→ Steve is CEO of Ed. Prior to joining Ed in November 2015, Steve served as Deputy CEO of Willis Group Holdings. He joined Willis in 2008 as a result of its acquisition of Hilb Rogal & Hobbs (HRH) and held a number of senior roles including Chairman and CEO of Willis Global, CEO of Willis Re and CEO of Willis Limited, the Group’s principal UK regulated entity. Prior to its acquisition by HRH, Steve was Chairman & CEO of privately owned London wholesale insurance broker, Glencairn Limited. Earlier in his career, Steve was President & CEO of Marsh Affinity Europe, having previously held a number of positions at Marsh and Sedgwick Limited. He has served as Chairman of both the London Market Group (LMG) and the London & International Insurance Brokers’ Association (LIIBA) and as a Vice President of the Insurance Institute of London. → Steve is Executive Director of global broking group Brokerslink.

Data has become a buzzword in our industry, with organisations across the sector looking to see how their businesses can be improved by better use of data. The broker of the future will be fuelled by it. Insight and analytics will underpin every aspect of the service we provide our customers and partners. The quality of the data, along with the people who analyse and deliver will represent a key differentiator. We will also stop viewing regulation as an impediment to business. Instead we will embrace quality regulation. Providing an efficient and effective service which maintains the highest level of regulatory compliance and which can be evidenced to the regulator, customer and carrier

will be a differentiator. It will provide a competitive advantage. It will allow brokers who ascribe to this standard to save their clients’ money. It will win business. Those which do not will falter. These are a number of the key elements on which the broker of the future will be built. This will not happen overnight, however we at Ed have made significant headway. Over the coming years, the difference between us and our peers who rely on scale and who refuse to challenge outdated practices will become ever more stark. The (re)insurance broking world needs to be redefined. I believe that through Ed, and our like‑minded partners in Brokerslink, this has now begun. •

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Bradesco

a leading insurance company Bradesco is one of the biggest financial groups in Brazil and part of this organisation is Bradesco Seguros – a leader in the Brazilian insurance market. With multi‑line operations and a presence in every region of the country, it draws business from 4,600 branches of the Bradesco Bank, looking after around 50 million clients. Commercial general sales manager, Marco António Gonçalves, discusses with FULLCOVER the strategy, performance and challenges of this group.

We have a long-standing relationship with Bradesco. Apart from being a solid company offering high technical quality – characteristics that have earned it a place as one of the most important in the industry – we have an excellent relationship with Bradesco's executives. Thanks to this relationship, we do not simply have professional colleagues; today, we have friends in whom we believe. This trust is bearing fruit in the form of excellent business opportunities for both companies. Hélio Novaes CEO, MDS Brazil

Marco António Gonçalves, Bradesco Seguros and Hélio Novaes, MDS Brazil.

Almost two years ago you were appointed commercial general sales manager for Bradesco Seguros Group. What have you learnt during this time when the country has experienced so much turmoil? Brazilians still have a long way to go to match other countries where insurers are more active in the protection of the commercial and personal assets of its citizens. This does however make Brazil ‘a country of opportunity’ for the insurance market. It currently contributes 2% of global premiums, is recognized as the 14th largest insurance market in the world and is predicted to rise to eighth position in the future, even with its challenging economical scenario. An indicator of growth is that in 2015 the insurer sector accounted for 6.2% of Brazilian Gross Domestic Product (GDP), in 1990 it was 1.3%. There are still over 140 million Brazilians without life assurance, 35 million without vehicle insurance, 50 million homes without buildings or contents insurance and three million companies without property insurance. We still have a lot to do, always keeping in mind this will be medium to long ‑term policy growth.

The company has approximately 40,000 active brokers. How is your relationship with them? Brokers are an important link in the market and are crucial for solid growth. Since 1991, the Bradesco Seguros Group has brokers present in every branch of the Bradesco Bank (controller of the Insurer Group) and over 30 thousand professionals work with us outside the branches. This ensures we have a direct link to clients and can respond quickly to any requests. We are keen all brokers take advantage of our training and refresher tools which are available via differing communication platforms, including online. We are always looking to add new tools to ensure we can share our unique client vision, which is to integrate multiple products and solutions into a single platform, enabling us to meet all their needs. In 2004, for example, we created UniverSeg – a staff and partner broker management information portal that offers courses and online tutorials to improve technical expertise. This free tool enables professional growth in several areas for all who are part of our sales force.

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São Paulo skyline.

In 2013, Bradesco Seguros streamlined a number of its commercial lines. What impact has this had? Investments in new platforms and the unification of all commercial insurances into a single Bradesco brand ensures we offer clients a single Bradesco experience. From a customer perspective, they interact with a single provider, no matter what their requirements; we have the people, technical expertise, IT and insurance programmes in place to support them. As a result, we’re more agile, inclusive as an operation and better placed to resolve insurance issues to the insured’s satisfaction. We deliver a ‘real time’ service to brokers and clients, providing answers and immediate solutions for all requests. The Insurer Group closed 2015 with a turnover of R$ 64.3 billion, signaling a growth of some 20%. For financial insurance products and pension plans, turnover was up 15.1% on the previous year. These results, above the Brazilian insurance market (which grew 11.7%), represented a clear out ‑performance and a decade of annual growth has secured us a market share of around 25%.

Bradesco Seguros is one of the biggest financial groups in Brazil and from its solid foundation has been looking after the interests of its clients since 1943. Bradesco Seguros is the leader in the national insurer market. Part of the Bradesco brand, it provides financial insurance products and pension plans for people across Brazil. Its multi‑line operation and presence in all of the country’s regions, helped Bradesco Seguros achieve within the first nine months of 2016, a turnover of R$ 50.2 billion. This represents a growth of 10.3% over the same period last year.

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bradesco What strategy have you followed to become the biggest insurer in Latin America? There are a number of contributors to Bradesco Seguros Group being the biggest insurance conglomerate in Latin America; it has financial solidity of the brand, a presence in every region of the country and multiple business lines such as; Auto, Non‑Life (excluding accident and workmen’s compensation), plus Health, Life, supplementary retirement products and other financial insurance products. For 15 consecutive years, the Group has appeared as ‘the most recalled brand by consumers’ in the Insurance category of the prize awarded by the reputable Instituto Datafolha. This is an important indicator of the synergy we have with an increasingly dynamic, demanding and well‑informed Brazilian society. With its market share in the region of 25%, the Insurer Group registered in 2015 a turnover of R$ 64.3 billion, financial assets of R$ 192 billion and technical reserves of R$ 178 billion. Bradesco is leader in the health segment. How has this been achieved? Bradesco Seguros Group leads the private health insurance Brazilian market. We insure over 4.2 million people and have access to a wide range of medical facilities including some 16,000 office‑based doctors, 1,800 hospitals, 1,700 emergency rooms, 19,000 clinics and 11,000 imaging and lab analysis services. Such a comprehensive network means we can tap into the expertise of over 107,000 doctors and health professionals. In 2015 the Group registered around 134 million services and procedures – involving appointments, hospitalisation, tests and support programmes ‑ for health insurance clients. This is a key differentiator; access to unrivalled levels of information and services ensures companies’ human resources departments can better support and manage the health of their employees. The SIGE system, for example, has a ‘Juntos pela Saúde’ (Together for Health) programme that allows companies to see how much is being lost through sickness absence, details their existing health strategies, provides a risk management programme so they can identify ‘at risk’ areas and formulates plans on how to deal with them and prevent future sickness absence (via health promotion actions). There’s also the medical‑hospital care network management programme ‘o Meu Doutor’ (My Doctor), the Second Medical Opinion and others, which aims to improve the quality of the service provision and rationalise assistance costs, which have been increasing in volume and breadth of cover. A further differentiator is that within our health area, we run a corporate client relationship management programme – Multirramo – which is managed by the sales team. Their goal is to evaluate client satisfaction, relationship‑build and improve retention rates.

What is your biggest challenge? As the market matures and evolves, it is important we offer products, services and benefits that match the profiles of those within our Brazilian society. We have a wide presence across Brazil, have a market‑leading portfolio of solutions and are well‑known in the market, so I’m confident we will continue to develop and offer insurance and service‑led solutions that meet the needs of all our clients. We are also committed to reaching out to younger people, using newer communication platforms. Despite handling great volumes of information daily, younger people still don’t have an awareness of the need for insurance. Are there new products which should be implemented in the market? The main issue isn’t the new products but the extent they are taken‑out by Brazilian society. As I said before, all classes of insurance still have a lot of room to grow. In the beginning of 2015, for example, we introduced Total Auto Assistance – a popular product for vehicles up to 15 years of age which is very simple to take‑out. This still has huge growth potential, alongside a range of other policies, including specialist dental insurance for companies and individuals (with varying levels of payout) aimed at higher‑income groups. Bradesco Seguros is a pioneer in developing and introducing new products and refining existing ones. But for strategy reasons, new products and services are only brought to market after extensive testing and analysing; qualitative feedback is essential for the operation’s success. What other insurances are popular at the moment? Nowadays, Brazilians’ priorities are changing and there’s more emphasis on the need to put in place financial support for private pension plans, life, health insurance and dental care. These classes of insurance will always have more clients than others; it’s a natural thing, as we are living longer and everyone’s dream is to be able to enjoy that longevity in good health. As for auto insurances, these depend more on economics and people being able to increase their level of income so they can afford such cover. Home insurance with accidental cover has become more popular over the last few years, mainly because Brazilians are placing greater importance on the need for this type of protection in their day‑to‑day life. They appreciate that having this cover in place will prevent them paying the often high costs to repair damaged assets which can impact on their family’s financial wellbeing.

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The new office in Alphaville, what was the idea behind its construction? The new office in Alphaville, São Paulo, signals a special moment for the company, bringing all our business areas together into a single location. The building now integrates, apart from Bradesco Seguros Holding, all the Insurer Group companies based in São Paulo and just like our Rio de Janeiro office, this newly integrated group will ensure greater synergy with over 200 branches in all the Brazilian states. This move to a new ‘intelligent building’ confirms our commitment to invest in new platforms and realign processes so we can enhance our capabilities and continue to offer protection to the insured in all required areas. The building was built by BSP Real Estate Venture, a company of the Insurer Group, that has around 800 properties in its portfolio. Alphaville achieved the national LEED Green Building Gold For New Construction award, given to buildings which follow the sustainability standards in every stage of construction. Alongside the new office, Bradesco has a new client vision. Can you tell us more? Our client vision is being able to integrate multiple products and solutions into a single platform and location. This gives us clear advantages and additional benefits for the insured. The products and services under the Bradesco Seguros brand must mirror what the market needs. By sharing this vision with our clients we can analyse exactly what they need and create insurance and risk management packages to match their financial capabilities. Bradesco Seguros has assigned its high‑risk portfolio to Swiss Re Corporate Solutions. What was the strategy behind this? This joint venture confirms Bradesco Seguros Group’s strategic vision to provide clients with the biggest and best range of insurance products in all lines of business. The choice of partnership with Swiss Re Corporate Solutions aligns with our strategy to extend our expertise and geographical reach via a great international partner. Insurance is a fundamental part of the Bradesco Organization and this joint venture strengthens our belief that high risk insurance is a growing market in Brazil. After the approval of the regulation agencies, the partnership will result in the creation of one of the three biggest high risk insurance companies in Brazil. What are the expectations of this joint venture? The joint venture will extend our operation in the high risk market and confirm our long‑term commitment in this area. As both groups have complementary competences and portfolios we will be even more agile at developing solutions for clients and the high risk market. It will enable us to offer more innovative products through a consolidated distribution network of Bradesco Seguros Group, the country‑wide Bradesco bank and the 40,000 registered brokers who partner with us.

Do you see mergers and acquisitions taking place within the Brazilian insurance market and would Bradesco be interested in this? There isn’t currently a wave of mergers and acquisitions, but they may happen, as the market is cyclical and Brazil represents great potential for insurers. Bradesco Seguros Group is always alert to opportunities that may arise. What about the future? Governance will be a key focus as well as the processes of expenses control; automating administration, centralising operational activities as well as the installing new systems. This will improve efficiency and the way we communicate with clients. It is worth mentioning that Bradesco’s capacity for the distribution and placement of products has been its greatest competitive differentiator; we have the capabilities to service the needs of clients in 5,500 Brazilian districts/municipalities. We have also increased the use of digital channels by around 40%, using advanced solutions for product placement in internet banking, business portals and mobile apps. About three years ago we integrated our commercial business into a single multi‑branch structure. Called 360° vision, it offers clients, in a single location, all the insurance product solutions they need protecting their assets, their future and their life. Today, that integrated sales unit has matured, having increased its client intelligence and capacity for data analysis. This translates into improved protection and commercial coverage, better cross‑selling and more cost reduction. Following the acquisition of HSBC Bank by Bradesco (a natural fit with us) we are looking forward to a new and promising stage in the company’s life, hoping to contribute, more and more, to a consolidating insurance culture in Brazil. •

MIL EST

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TO NES

Over the last 30 years MDS has grown, innovated and expanded its activity and portfolio. Today, MDS is a global company and its pathway has been filled with moments of strategy, vision and audacity that have become important milestones in its history.

1997 At the cutting edge of risk management In 1997, MDS was pioneer in creating a risk management consultancy team that later became the driving force for the creation of APOGERIS, the Portuguese Association for Risk Management and Insurance. APOGERIS is a member of FERMA, the Federation of European Risk Management Associations, where MDS Group CEO JosĂŠ Manuel Fonseca was Board member for several years. Two years later, MDS implemented yet another innovative project - the launch of one of the first captives in Portugal: SONAE RE, the captive reinsurer of the Sonae Group, based in Luxembourg and presently in run-off.

2001 Internationalisation From Portugal to around the world, the desire to support clients has always made MDS go further. The internationalisation process began in 2001, when MDS took an equity in FIRSTASSUR, a leading French broker in the areas of affinity and internet. The following year MDS expanded into Brazil with 45% purchase of Lazam, a Brazilian broker, giving rise to Lazam-MDS. Today, MDS is one of the largest and most respected players in this market.

2005 Leadership 2004 Global Broking Company An idea conceived in Porto in 2004 gave rise to a global broking company. Led by MDS, in conjunction with a small group of founding brokers, Brokerslink entered the market with a clear mission: to create an alternative type of global broker. A visionary idea that led to the creation of what, today, is one of the largest global insurance brokerage companies.

With the acquisition of Unibroker â&#x20AC;&#x201C; a slightly smaller broker - MDS became the sector leader in Portugal. Since then it has consistently retained that leadership position.

2007 Partnerships Since 2007, MDS has had a stake in Ed, a respected wholesale and reinsurance broker. This relationship brings shared know-how, technical expertise and collaboration on an international level. MDS considers that is quite important to have a growth strategy based on partnerships with leading players across a range of key sectors, such as the jointventure with Filhet-Allard in Spain and ISEM in Africa.

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2008 Knowledge In 2008 we started working on the first edition of FULLCOVER. A bold idea led to the birth, in 2009, of an innovative and ambitious publishing project with the aim to promote knowledge sharing in the areas of insurance and risk. Today, FULLCOVER celebrates its 10th edition, having built a reputation for excellence within this sector’s publications. As XL Catlin’s Andrew Vigar says, “FULLCOVER is the Vogue of insurance!”It is a project that has only been made possible due to the commitment, collaboration and expertise of the entire MDS team.

2009 Investment 2009 was marked by the investment from the Suzano Group, one of Brazil’s oldest privately held business groups has a strong presence in the paper and cellulose industry, which took on a 49.99% stake in MDS Holding, clearly demonstrating this market leader’s confidence in MDS.

2010 Multi-Specialisation In 2010 we started the process to create HighDome, a Protected Cell Company that has enabled the MDS Group to expand its sphere of activity through the creation of sophisticated risk retention solutions. This insurer and reinsurer, along with Herco, a risk consultant specialist, and MDS RE, a reinsurance broker, demonstrates MDS Group's capacity to innovate and to be multi-line specialists.

2011 Technological Innovation MDS invests in technology because innovation is in its genes. The constant challenge of exploring new technologies to transform clientsâ&#x20AC;&#x2122; risk management experience led to the launch of Proximity, in 2011. This innovative online portal was developed exclusively for clients to enable them to manage their insurance portfolios anytime and anywhere. Proximity embodies MDS's cutting-edge position in this sector.

2013 Expansion After Brazil, MDS entered into the Angolan market in late 2013. MDS Africaâ&#x20AC;&#x2122;s operation is today a consolidated project with a direct presence in Angola and Mozambique. MDS is currently present in eight countries: Portugal, Brazil, Spain, Angola, Mozambique, the United Kingdom, Switzerland and Malta, but operates all around the globe through Brokerslink.

Illustrations by JosĂŠ Cardoso

Risks of the future We all have our own opinions on what the risks of the future will be. For some insurers there are clear emerging risks, while for others, it’s more complex. FULLCOVER asked insurers Swiss Re, Lloyd’s, Zurich and Hannover Re and global medical assistance firm, International SOS for their views on the top five risks of the future. The majority of respondents cited cyber/data security as the number one risk, highlighting digitalisation, FinTech, sharing economies and the ‘internet of things’ as key components. Second was extreme weather, including a failure of climate change mitigation/adaption, third, political risk, including social instability and fourth, terrorism. From here the future risk landscape differed. Respondents suggested; regulatory, macro‑economic, operational, financial repression, large‑scale involuntary migration, human‑induced earthquakes, trust in public/international institutions, natural disasters, growing urbanisation and beef consumption litigation. On the medical side, day‑to‑day risks of road safety, malaria and cardiovascular disease were identified. When asked what they were doing to assess and measure the impact of these risks, the response was ‘there isn’t one tool to measure the impact of risk’. Various approaches, from surveys/ metrics, collaboration with experts, data sharing (including historic data) and social media to continual research, monitoring/evaluation, scenario planning and modelling are used. All concede there are challenges in assessing the impact of emerging risks that are yet to materialise into insurable losses. In response to how can we change these risks into opportunities and are you developing insurance solutions to transfer these risks, respondents agreed ‘the nature of global risk means they are interconnected and so difficult for any country, company or business to mitigate’. A multi‑stakeholder approach, effective risk management and risk transfer can all address the risk. Solutions include; having strong digital security and managing breach costs through cyber insurance, risk management in the supply chain combined with business interruption cover to address natural disaster risks and new product development to address emerging risk from legal rulings and the impact of legislation. When asked how will big data and analytics transform the insurance industry, the consensus was ‘big data will fundamentally sharpen the industry’s understanding of risk’. Data generated by mobile devices can be used to better price risks and products can be delivered, any time, through multiple distribution channels increasing access to new markets and reducing transactional costs.

Analytics allows insurers to understand the risks and their portfolios in a more granular way so they can work more closely with customers to identify and develop effective and efficient risk management strategies. It can also help identify new risk pools and innovative products/services to mitigate them, resulting in greater operational efficiency and accuracy with pricing/claims handling. But there are big data risks ‑ the hype for data can lead to the ‘manufacturing’ of phoney data and false modelling that does not reflect reality, resulting in risk mispricing. The final question, are traditional insurance companies prepared to deal with the risks stemming from the ‘uberisation’ of society prompted ‘digitalisation will create new distribution and sales models opening up many opportunities in risk assessment, underwriting, claims handling and operations’. The ‘fourth industrial revolution’ is changing the way people work and live. Connectivity makes remote working easier, creating greater global competition, yet lower‑skilled workers are more likely to see their jobs disappear to automation. Our move to a sharing and collaborative economy increases the number of jobs that fall outside the standard employment contract model, the so‑called ‘gig economy’. Societal changes, such as the emergence of the sharing economy, impacts on liability issues and so the industry must respond with appropriate insurance products. Whatever the model, the need for specialist underwriting will always be there.

TOP 5 RISKS OF THE FUTURE:

* Such as regulatory, macro-economic, operational, financial repression, large-scale involuntary migration, human-induced earthquakes, trust in public/international institutions, natural disasters, growing urbanisation and beef consumption litigation, day-to-day risks of road safety, malaria and cardiovascular disease

Risks of the Future

Emerging Risks

Changing the standards Changes to the risk landscape, emerging risks and the future of non-standard solutions By Christian Wertli

Predicting the future is the job of a psychic, not an insurer. However, unless insurers are aware of future risks it is difficult to provide the right kind of support to their clients. By understanding how to analyse big data effectively, and having a clear view of all the risks that currently affect clients, insurers can have a pretty good stab at predicting emerging risks â&#x20AC;&#x201C; but it does mean thinking outside of the box. Providing an established product as a solution to a problem is the traditional approach to insurance and risk management. This will not be enough in the future. Insurers will have to

Christian Wertli is global Head of Innovative Risk Solutions at Swiss Re Corporate Solutions. His team is responsible for marketing, structuring and underwriting of custom-made risk and capital management solutions for corporate clients. Innovative product offerings include tailor-made re/insurance, captive solutions, parametric covers, structured credit, run-off and many others.

develop new customised solutions and support, turning risk into opportunity. This means really getting to grips with all the headaches their clients face. Relationships will no longer be based on the buying and selling of products. Insurers will need to grasp their role as strategic partners, creating innovative solutions for more sophisticated risks. So what does this all mean? Letâ&#x20AC;&#x2122;s start with some of the emerging risks that weâ&#x20AC;&#x2122;ve already identified, and possible non-standard solutions.

Digital disruption Traditional business models are being challenged by the “uberisation” of society. The internet of things, or the networked connectivity of everyday items, is moulding a new economic platform. Uncertain and unstable economic periods in recent years have pushed society into thinking of new ways to do business. Entrepreneurs and disruptive start-ups are changing the face of commerce.

Natural catastrophes (NatCat) The complex changes in weather patterns have also had huge ramifications on the number of NatCat occurrences, which appear to be increasing. The loss of life and crumbling buildings may initially be the main impact of tropical storms or earthquakes (which are of course not related to the weather). However, the consequences are much wider, affecting supplier production, crops and products and consumer interest.

Advances in technology have meant that real-time data of behavioural patterns can be combined with mobile applications, which can be overlaid with dynamic pricing, and the net impact is a business that really understands its customers. Traditional insurance players will be left behind, as new enterprising businesses disrupt the value change and forge a way into the market, with a more specific, targeted and attractive offering. Insurers need to interpret the impact new risks will have on their clients’ cash flow, for example risks that affect more that physical assets. Then they can develop new solutions to meet these new challenges.

Case study: A luxury retailer in Tokyo found their cash-flows severely affected by NatCat events. The main worry was not physical assets but rather the impact on buyers’ moods. Understandably, fewer people felt like shopping after an earthquake, even if the buildings were safe. After scrutinising the issues with the client, and talking to risk managers and marketing managers about matters that disrupted cash flow, a loss of earnings based cover was developed, triggered by the intensity of an earthquake.

Climate change New evolving weather patterns have caught the media’s eye and raised the profile of climate change. Winters are warmer and summers are wetter than 20 years ago. When a weather related episode occurs, the damage to businesses is very real, from disruption to the supply chain to consumer buying patterns. Case study: A British brewery with a chain of pubs was concerned about the impact of weather on the beer drinking volume in summer. It was discovered that people are less likely to drink beer if the temperature is above 28C, as they seek more hydrating beverages. Cold summers were a problem too with sales dropping once the temperature dropped to below 16C, as people became less sociable. The solution was to create a customised non-standard cover to address the loss of sales. This was triggered by an agreed temperature threshold.

Political risks Current conflicts and military action in various parts of the world, and the risks imposed by emerging markets, have led to several major issues: the threat of terror attacks, an increase in migration and an adverse reaction to immigration.

provide cover for loss of earnings. This would be triggered by specified events of a certain defined severity. Insurance is no longer just about physical loss. Understanding your clients’ pain points is the start of the journey. Emerging risks are only threats to the insurance industry if insurers don’t rise to the challenge and take the opportunity to create innovative solutions tailored to the needs of their clients. Insurers need to become more investigative in their approach, to find their clients’ revenue risks and make them insurable. The aim is to reduce the volatility of the underlying business. Insurers have to be close to customers and work with them as the business model changes, if they are to continue to be relevant. The ones that will survive are the ones who can develop creative solutions to help customers stay in business. However, success is not achieved by just understanding your clients’ needs. The next step is to deliver.

Note: For more in-depth information on emerging risks please visit Swiss Re Corporate Solutions SONAR research report

For business this can have the knock on effect of disrupted supply chains, high turnover of staff from a mix of cultures and damage to corporate reputations when things go wrong. The impact of regulatory reforms, created to address some of the political risks, also restricts an organisation’s freedom. Case study: A national railway system identified three non-damage risks that would have a huge impact on earnings; i) regulatory action, which could mean the government shutting the railway if they perceived a risk, such as a threat of terrorism, likely to impact health and safety, ii) The impact of a NatCat flood, avalanche or landslide, iii) cyber-attack that impacted the security and safety of the rail network. A customised nonstandard solution was developed to

Risks of the Future

The raise of a digital society

Blockchain The Next Disruptor? By Doug Alexander

Doug Alexander Doug is an Enterprise Architect at XL Catlin working to define and implement its digital strategy.Â He joined XL Catlin in 2001 and has been involved in architecting, building and supporting global (re)insurance systems during various stages of business growth. Prior to XL Catlin, he had IT management and engineering roles at several financial services companies.Â

Multi-party commercial insurance is extraordinarily process intensive. Quoting, binding, servicing and managing a commercial insurance program is a complicated tangle of communications and transactions between clients, brokers, direct insurers, co-insurers, reinsurers, cedents, captives, network partners, claims adjustors, outside attorneys and tax and regulatory authorities. Mountains of data are shared, numerous contracts are signed and executed, and monies are transferred between different participants. Also, the volume and complexity of these communications and transactions grow exponentially as clients’ businesses become more global and include operations in multiple countries. Could blockchain make it possible to manage these intricate, multi-party transactions more efficiently and securely, and at a lower cost? It’s not just about the cryptocurrencies Some commentators have characterized blockchain as the fifth major wave in computing, after mainframes, personal computers, the Internet and social networks, and predict it will be broadly disruptive in many industries, including insurance. Blockchain was originally developed as the technology underlying Bitcoin transactions. And while Bitcoin and other cryptocurrencies continue to evolve – recent hacks notwithstanding – tech professionals are increasingly interested in how blockchain’s flexibility and resilience could enable greater efficiency, transparency and security in a wide range of industries. So what is it? A blockchain is a shared permanent record of transactions between multiple parties where authorized users can access the history of a business transaction providing greater transparency and simplified reconciliation between all of the parties. In a blockchain, a batch of valid transactions, or “blocks” are linked together to form a chain, hence the name. Each block is “time-stamped” and includes the unique signature (or “hash”) from the previous block; these serve to uphold the integrity of the chain.

Every member of a blockchain owns the database yet no single entity controls it. Also, every authorized user always has an updated copy and new transactions cannot be validated until they are reconciled with the last version. That means fraud is practically impossible, and an intermediary isn’t needed to verify information between parties. And because information added to a blockchain cannot be altered, it provides an unchangeable and auditable record of all transactions. Finally, blockchains are extremely flexible and can be used not only to document the course of a commercial transaction but also to keep track of physical assets such as land deeds, leased equipment and valuable items like fine art or gems. Upending insurance processes? Blockchain technology offers the possibility of simplifying transactions between multiple parties in insurance contracts and improving the way companies delegate authority, process payments and reconcile business. The potential benefits include shorter turnaround times as well as increased data quality and security. For example, each participant in a multi-party insurance contract could access identical copies of the exposure data and legal documents, thereby streamlining the process of quoting, negotiating and binding a policy.

Blockchain and smart contracts could also offer benefits for insurers working with delegated authorities like managing general agents (MGAs) or third-party administrators (TPAs). In these operating models, insurers and brokers typically pay third parties to aggregate and validate data coming from MGAs and TPAs; a blockchain linking insurers and delegated authorities could eliminate the need for such intermediaries. The technology also lends itself to “smart contracts” where a blockchain is programmed to execute specific actions after a set of conditions is met. With blockchain-enabled smart contracts, for instance, payments between clients, brokers and (re)insurers could be triggered automatically once certain conditions are fulfilled. For example, a blockchain could be created to automate claims payments when coverage and quantum have been validated; that could benefit clients by reducing time to settlement and (re)insurers through efficiency savings. The technology could also be used to issue certificates in multiple countries or for moving monies between a captive and parent company. For now, these and other potential applications are just that – potential – as the (re)insurance industry is only starting to use blockchain in a few test environments. In this early phase, most attention is focused on transactions where multiple parties are involved, and a verifiable, indisputable historical record is needed. For transactions and processes lacking these characteristics, traditional databases or third-party service providers will likely remain a simpler and easier option. Disrupting other sectors? There is also growing interest in blockchain technology in other industry sectors. Coindesk, an online site that follows cryptocurrencies and blockchain, reports that through Q1 2016, “total venture capital investment in Bitcoin and blockchain startups now exceeds $1.1bn.” And recent investments have gone overwhelmingly to blockchain‑related startups while investments in Bitcoin‑related startups focusing on payments and trading are declining. The next generation of blockchain applications, for example, could facilitate real estate deals by streamlining transactions between buyers, sellers, intermediaries, banks and title insurers, and by documenting the contract history and actual ownership of the properties. In fact, some observers have suggested that blockchain could preclude

the need for title insurance as the “facts” about a property are validated and stored in a blockchain. Blockchain can also be used for asset tracking. Major diamond clearinghouses, for instance, now routinely “fingerprint” their diamonds to prove provenance, and this data could be stored securely in a blockchain that is available to buyers, brokers, insurers and law enforcement agencies. The same approach could be used with other valuable commodities as well as with fine art and artifacts. Leasing companies are also looking into blockchain as a simpler, more efficient mechanism for keeping track of their assets. And blockchain could be used to monitor equipment and materials at construction sites, and facilitate scheduling on projects where there are many contractors and subcontractors. It’s the end of the world as we know it (and I feel fine) Bitcoin and the underlying blockchain technology were introduced as open-source software in 2009. Since then, there has been a growing realization that a decentralized, secure ledger that tracks assets and transactions is a powerful and flexible tool. Observers are divided, however, on whether the potentially radical and transformative effects of blockchain technology will be realized in the near-term, one-two years, or are still five-ten years distant. Whatever the timeframe, XL Catlin is interested in the possibilities, and we are actively exploring several blockchain initiatives to understand where and how the technology could be most relevant. And while it’s too soon to say how quickly blockchain will be implemented in (re)insurance and other industries, we believe it will be as disruptive to multi-party financial transactions as spreadsheets have been to accounting. Source: State of Blockchain Q1 2016: Blockchain Funding Overtakes Bitcoin. (n.d.) Retrieved from www.coindesk.com/state-of-blockchain-q1-2016/ Note: This article was first published in Fast Fast Forward.

Risks of the Future

The raise of a digital society

New risks in a changing world Protecting global economic growth By Vincent Vandendael

Vincent Vandendael joined Lloydâ&#x20AC;&#x2122;s in December 2012 as Chief Commercial Officer, having previously been Chief Executive Officer of Global Corporate business for Zurich Insurance in Asia Pacific, based in Hong Kong. Vincent is responsible for promoting and protecting Lloydâ&#x20AC;&#x2122;s business across the globe, seeking new business opportunities and monitoring the development of emerging markets, whilst also managing Lloydâ&#x20AC;&#x2122;s international operations. Vincent started his insurance career as a financial lines underwriter and has more than 22 years of underwriting and general management experience with both Chubb and Zurich Insurance. Having lived and worked in Belgium, France, the United States, Switzerland and Hong Kong, he has gained extensive international experience and foreign business culture expertise. Vincent holds a commercial engineering degree from the University of Leuven in Belgium.

The world is changing like never before. Businesses and insurers are facing huge challenges as the key drivers of change – globalisation, digitalisation and urbanisation – are quickly changing the nature of global risk and forcing the industry to question existing business models. Looking at the macroeconomic landscape, the balance of power in the global economy is shifting. Between now and 2025, McKinsey calculates that 440 cities in developing countries will generate nearly half of global GDP growth, and that nearly half of new big businesses – over £1 billion in revenue – will be headquartered in the developing world. By 2025 São Paulo will have three times as many of these businesses based there as it has today, and Beijing and Istanbul are likely to have twice as many head offices. As these emerging economies begin to realise their true economic potential, their growth is increasingly at risk from natural and manmade threats and, of course, significant economic and geopolitical disruption. These risks are exacerbated by low insurance penetration.

Cities as economic engines Another important trend is urbanisation. Cities have become the key engines of growth, with a growing concentration of labour, economic capital and physical infrastructure. And their concentration of a country’s economic output is also increasing. For instance London’s share of the UK output increased from 15% in the 1960s to 45% today. Because cities are now emerging as international hubs of global wealth creation and commercial activity, any impact on their economy would have a direct impact on the country’s economic growth. This is making economies more vulnerable to catastrophic shocks.

The digital revolution New technologies are disrupting traditional business models. Since computers and the internet were invented in the mid-1970s, the world has undergone a significant transition from the physical to the digital, fuelled by what has been called the Digital Revolution, or the Fourth Industrial Revolution. This surge in the use of digital technologies has driven us forward into an age of unprecedented connectivity. In just 15 years it is expected that there will be 500 billion connected devices, creating a vast “Internet of Things”, and this increasing digital connectivity is fuelling a data boom. According to IBM, every day the world creates 2.5 quintillion bytes of data – so much that 90% of the world’s data has been created in the last two years. The International Data Corporation estimates that the global data created is doubling every two years, coming from everywhere: smart sensors, GPS systems, financial transactions, internet use, connected devices and of course social media.

In the business arena, the global trend is the increasing movement of assets and infrastructure from the physical to the intangible. The nature of this change is striking when you look at the components of the S&P500 market value, split between tangible and intangible. In 1975 the split was 83% tangible, 17% intangible. Last year we saw that now just 16% of the components of the S&P500 market value are tangible, with 84% intangible. What’s at stake? As the world becomes more interconnected and businesses trade globally, their economic exposure is also increasing and systemic shocks can have multiple consequences – one example would be the floods in Thailand causing major business interruption in Japan. The Lloyd’s City Risk Index 2015-2025 analysed for the first time the potential economic impact of 18 threats on 301 of the world’s leading cities. Lloyd’s worked together with Cambridge University to analyse the effect of both man made threats such as cyber-attack, oil price shock, terrorism and pandemics, as well as traditional physical catastrophes like earthquake, hurricane and flooding on the cities GDP. The study shows for the first time the true economic cost of these threats and the massive global economic exposure to risks: $4.6 trillion of the forecasted global GDP could be at risk. Globally, all manmade threats together in the study are associated with almost half of total GDP@Risk. Despite the fact that manmade risks are an increasing concern, emerging threats are also having a growing impact. Cyber-attack, human pandemic, plant epidemic and solar storm represent nearly a quarter of total GDP@Risk globally. These findings show a need for innovative product development in the insurance industry to protect against these manmade risks.

Building resilience Building resilience starts long before a catastrophe. In today’s increasingly interconnected global economy we have to pay more attention to the risks threatening our economic engines. We must develop a deep understanding of the impact of severe events in order to develop appropriate risk transfer solutions for growing perils such as cyber-attacks and terrorism. Insurance has a key role to play in helping to mitigate the high cost of these risks when they do occur. Lloyd’s research shows that a 1% rise in insurance penetration translates into a 13% reduction in uninsured losses – a 22% reduction in taxpayers’ contribution following a disaster. Insurance claims payouts are a key source of capital injection after a catastrophe and aid in the recovery and reduction of the economic costs to governments, business and communities. But insurance is just one piece of the puzzle. Half of total GDP@Risk can be protected by improving all aspects of cities’ infrastructure and crisis management, underscoring the critical role of governments and businesses. No municipality or insurer can act alone. Resilience is the collective responsibility of all sectors of society, and we must work together to address the critical threats facing our cities.

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Risks of the Future

The raise of a digital society

Driverless cars What is the future of motor insurance business? By Hélène Chauveau

Hélène Chauveau started her career in 2001, first as Business Analyst at Société Générale and at AXA in 2004, in the internal Reinsurance entity. She joined AXA France in 2008 as Internal Auditor. Working in AXA Group Risk Management since end of 2011, she is in charge of several transversal projects and also in charge of Emerging Risks management for the AXA Group since 2013, which encompasses Risk detection, monitoring and operationalization across the Group. Hélène holds a M.Sc. in Political Sciences (Sciences Po Paris).

Considered as an idea straight out of science fiction at the beginning of the century, driverless cars are on the way of taking an important place in the society in a close time horizon: according to the Institute of Electrical and Electronics Engineers (IEEE), 70% of the cars will be driverless by 2040. This technology actually represents one of the current biggest concerns about the future of insurance system in P&C. This new technology, supported by artificial intelligence and robotics, allows driving cars without human intervention. The technology contains sufficient devices (e.g. numeric captors) and equipment (e.g. processors, sophisticated software) that are able to treat and analyze the car’s environment to adapt autonomously the driving. Considering that 90% of accidents on the road are caused by human error (according to a KPMG 2014 study), driverless cars are seen as a good opportunity to reduce the number of accidents and improve the road safety. For automobile manufacturers, or other industries (e.g. Google, Tesla, Uber), this is also an opportunity to increase mobility by developing new products and meet new technological challenges in a competitive context. While some industrials have already designed driverless cars and are at the stage of testing and pilot commercialization, States are still working on specifying the legal framework for on-road testing of driverless cars. For now, the rule is simple and still requires the driver to keep control of the car at any time. At the same time, semi-autonomous car technologies already exist and are commercialized (e.g. simple speed regulator, driver assistance systems). The emergence of driverless cars can disrupt motor insurance business. Simplest conclusion is to state that with a significant decrease of claims induced by driverless cars, insurers will observe lower risks (lower claims frequency) and then lower the level of premiums asked to customers, leading to a loss of 60% on the market of motor insurance by 2040 (as predicted by KPMG). But this is without taking into account the new threats that will emerge, notably on the cyber risk side: what about the emergence of a natural catastrophe-like event where all cars are hacked at the same time? And although frequency of accidents is expected to decline, the cost of physical damage to cars themselves could become higher than it currently is due to the costlier and more numerous embarked technologies.

Decrease of premiums is not the only threat related to driverless cars for the insurance sector. In the insurance sector, there is an on-going debate on the attribution of liability after a driverless car accident. Who will be considered responsible: the car owner, the driver, the car manufacturer, software suppliers or operators, or organizations responsible for infrastructure maintenance? Lawyers and insurers seem to agree that the responsibility will move from personal owners to car manufacturers, or car operators, but that anyway long-lasting procedures will take place to determine final responsibilities. In this context insurers will play a key role in building an insurance scheme which is viable from the society perspective and ensure injured people are protected at any time and victims are immediately compensated, not experiencing any delay related to long-lasting legal procedures. In view of a future decrease of the motor insurance business, insurers have to re-think their motor insurance business model and take opportunities to innovate and adapt to their clients’ needs. Insurers are used to accompany innovation, and here again, AXA, and the whole sector, will play their role to ensure that manufacturing defects, hacking threat and new liability insurance covers are set up to protect both citizens, drivers and motor manufacturers. The driverless car opportunity is also an emerging risk which is one of the first real-life cases of larger debates on artificial intelligence and the way robots with machine-learning features make their “own” decisions: who will then be liable for the risks they entail? This is a question that is currently being debated at the European Parliament with the objective to create a more adapted legal framework. Emerging Risk Management at AXA AXA’s Emerging Risks team focuses on risks associated with a significant level of uncertainty on their future impact and likelihood. Their associated potential losses are difficult to quantify due to the lack of historical data. The team detects and monitors weak signals and variations of key words occurrences in scientific or legal sources mainly realized with a daily automated internet screening platform. It contributes to their anticipation and the set-up of early action plans in AXA entities around the world and to the examination of selected risks to assess the potential impact on the AXA Group. Up until now, 150 emerging risks are being monitored. Some of them will even never emerge but it’s important to be aware and informed of these risks to be able to protect AXA’s clients.

Risks of the Future

new challenges for people

Share economy for business travel Benefits, risks, and legal considerations By International SOS

Peer-to-peer sharing of goods and services, including transport and accommodation facilitated through companies such as Uber and Airbnb, has transformed leisure travel in unprecedented ways. While business travellers have not yet embraced such services to the same extent, experts believe it is only a matter of time. Peer-to-peer services leverage the use of technology that matches consumers with service providers, offering greater flexibility, ease of use and, more often than not, increased overall value for money. Now that the share economy has reached a level of widespread consumer confidence, these disruptive intermediary companies are turning their attention to business travellers.

With share economy service providers now offering dedicated business travel solutions and integrating with other business applications, including expense reporting and traveller tracking, more organisations are finding strong business cases to at least give such services a chance. However, a financial incentive should never be the only consideration in trying new services. Using share economy services for businessrelated travel creates new risk challenges for employers that need to be managed and mitigated. Before enabling employees or contractors to use share economy services, particularly transport and accommodation services, for business purposes, organisations need to determine the business reasons for doing so in the context of existing policies and procedures.

1 Travel Sharing Economy survey is an International SOS survey conducted among 707 people globally, mainly executives managing business travel or travellers themselves. Research was conducted online in the period 26 April – 20 May, 2016.

An organisation’s exposure is wide and predicted to grow: research1 conducted by International SOS in 2016 found that 27% of business travellers used shared transport services, like Uber, while travelling abroad, and almost half anticipate their usage to increase. A further 22% anticipate increasing their usage of shared lodging services, like Airbnb. The research indicates that as many as 75% of organisations do not have clear policies or procedures for staff using these services for business-related travel. This lack

of clarity appears to directly affect employees, with nearly 40% responding that they did not know whether their organisations deem these services to be ‘safe’. Steve Bell, Partner at a leading international law firm, Herbert Smith Freehills, said: “Local law will struggle to keep pace with developments in social and economic services. Employers sending workers overseas should understand the laws in their destination country, the relative risk profile of sharing economy services compared with traditional services, and above all be guided by their duty of care to their workers. In all, this requires a sophisticated risk management approach.” When considering the risks associated with accommodation, the advantages of cost savings and convenience that are associated with apartment or house shares need to be compared to the business grade hotels which are most likely operated by internationally recognized companies. These generally have higher security standards including access controls and the ability to respond to emergencies. Organisations also need to give consideration to ridesharing services, which are more commonly used by business travellers than share accommodation services. Ride-sharing services such as Uber in countries that have

low to medium risk ratings can offer travellers additional personal security features through car and driver verification, GPS tracking and cashless transactions. At the same time, however there can be uncertainty about the background and skill of the driver as well as the safety of the vehicle. Transport and accommodation selection should always be appropriate for the local conditions and the profile and itinerary of the traveller. The use of shared travel services may be appropriate in some locations but not others. There is no one-size-fits-all approach to travel risk management, and policies need to relate not only to the specific locations and risk environments to which an organisation sends its business travellers, but to the individual travellers themselves. Age, gender, health, sexuality, ethnicity and travel experience all influence a person’s risk profile, as will what they are doing, why and for how long. There is little doubt that share economy services are here to stay and will continue to evolve in other service industries, creating alternate options for business travellers and their employers. How organisations choose to make use of these services requires careful assessment and consideration by office bearers, risk managers and business travellers alike. To further support organisations undertaking this assessment, security experts at International SOS have developed a report including policy recommendations and comprehensive checklists highlighting what to consider for the specific purpose of businessrelated travel.

About International SOS International SOS is the world’s leading medical and travel security risk services company. They care for clients across the globe, from more than 850 locations in 92 countries. They have unique expertise: more than 11,000 employees are led by 1,400 doctors and 200 security specialists. Their teams work night and day to protect their members. They pioneer a range of preventive programmes strengthened by their in-country expertise. They deliver unrivalled emergency assistance during critical illness, accident or civil unrest. They are passionate about helping clients put ‘Duty of Care’ into practice. With them, multinational corporate clients, governments and NGOs can mitigate risks for their people working remotely or overseas. About International SOS and Control Risks The alliance brings together two of the world’s leading medical and security specialists. Their combined resources and expertise are well placed to meet the customers’ growing need for integrated travel security risk services. Their solutions ensure that mobile employees are safe and productive and help employers with their duty of care obligations. 50 dedicated experts, located across the globe with access to over 200 dedicated travel security experts through 27 regional assistance centres and a partner network of over 700 accredited providers, produce global travel security information and analysis 24/7. They also provide travel security training, preventative travel assessment, support with the development of travel security risk policies, evacuation plans and the latest technology to enable clients to track and communicate with their mobile employees.

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Risks of the Future

new challenges for people

REDUCING THE RISKS FROM RAPID DEMOGRAPHIC CHANGE By Zurich Insurance Group

Zurich Insurance Group is a leading multi‑line insurer that serves its customers in global and local markets. With around 55,000 employees, it provides a wide range of property and casualty, and life insurance products and services in more than 210 countries and territories. Zurich’s customers include individuals, small businesses, and mid‑sized and large companies, as well as multinational corporations. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872. The holding company, Zurich Insurance Group Ltd (ZURN), is listed on the SIX Swiss Exchange and has a level I American Depositary Receipt (ZURVY) program, which is traded over ‑the‑counter on OTCQX. Further information about Zurich is available at www.zurich.com.

We are entering a period in which the West’s postwar social welfare system is under growing threat as the global demographic structure is being turned upside down. And it is not just the West, but also China and other middle-income powers who will have to deal with an aging workforce and unsustainable health and pension costs in the next decade. For sub-Saharan African countries whose birthrates remain high, overpopulation carries big costs not only for them, but for the rest of the world, which will depend on them for a growing proportion of the world’s workforce. It is clear that managing demographic risk will be critical to every country’s future. Not making the right choices now can lessen economic potential for decades. The World Bank defines high‑income economies ($12,763 or more in gross income per capita) to include most Organisation for Economic Cooperation and Development (OECD) and European Union countries, Gulf states, Israel, and the Russian Federation. Middle‑income economies are broken into two groups. Upper‑middle‑income economies ($4,126 to $12,735) include China, most Latin American countries, and a number of Middle Eastern nations such as Iran, Iraq and Tunisia. Lower‑middle ‑income economies ($1,046 to $4,125) include many of the Central American, Central Asian, and Caucasus countries in addition to India and Nigeria. Low‑income economies (41,045 or less) are concentrated in sub ‑Saharan Africa. Afghanistan is also in this low income group. Biggest risks now for high-income economies How prepared are high-income economies for the increased costs of pensions? In the fifty years between 1960 and 2010, public pension expenditure as a percent of gross domestic product (GDP) doubled for high-income countries from 4 to 8 percent. By 2035 the GDP share of public pension expenditure is forecast to grow another 3 percent at a time of shrinking workforces. These increased pension costs are coming at a time of rapid extensions in life expectancy. Since 1990, lifespans increased more than 2.5 years per decade on average. Increases in pensionable ages for all high income countries, on the other hand, averaged 1.8 years per decade. Life expectancy in some individual high-income countries increased at an even more rapid rate. There is a similar story for health care spending. The increasing proportion of those aged eighty and over – a consequence of increasing life expectancy – will necessitate more extensive and expensive health care needs, such as in-home or long-term care. With health care

costs rising, retiree savings will be depleted, putting the onus on governments to pay a larger share. But governments will be increasingly strapped: government spending is forecast to cover less than half of the health care spending needed – down from 62 percent in 2015 to 49 percent in 2035. With demand growing for pension and health care spending, high-income countries, especially, face a Catch-22 dilemma: cutting education, research and development (R&D), and infrastructure spending risks undercutting the higher productivity needed to offset declining workforces. With labor-driven growth increasingly behind us, high-income countries will have to boost productivity to compensate for declining labor forces or face slowing economic growth. Emerging labor-saving technologies – robotics, increased automation, and more sophisticated artificial intelligence – could help offset the declines in workforces. But past technology breakthroughs have also led to new employment demands. Will there be enough skilled workers for high tech industries if health care and pension costs swamp national budgets, squeezing revenues for education and R&D? Crunch comes later for middle and low-income countries Most middle-income countries have proportionally larger and younger workforces, putting them in a better position to prepare for the inevitable aging process. For countries with fewer dependents, there is higher saving potential and more growth capacity. However, middle-income countries will soon face many of the same demands for increased government health care spending as highincome countries. The share of health care

spending in upper-middle-income countries will slowly decline because of a government inability to keep up with increasing demand. Upper ‑middle‑income countries will also face pressures to increase public pension spending. Need for pension spending as a share of GDP will increase by close to 5 percentage points by 2035. Most low-income countries have the opposite problem. Instead of aging, their populations are youthful. The sooner they can bring down their high birth rates, the sooner they can move into the demographic bonus years where they have the opportunity to boost growth. So long as fertility remains high so do health care costs. Forty-eight percent of Afghanistan’s population is under the age of fifteen and infant care is estimated to account for over 40 percent of the country’s total health care costs. The more that resources can be devoted to education, the more low-income countries can maximize the approaching demographic bonus years. Still, low income countries will have a hard time matching the resources that high and middle-income countries can devote to the educational needs of their large youthful populations. With Africa forecast to provide one out of every four workers by 2050, a poorly educated African workforce has negative implications for long-term global growth potential. High levels of unemployed youth lead to civil conflict. One hundred percent of the states marked as Very High Alert or High Alert on the Fragile States Index compiled by Foreign Policy and the Fund for Peace have very youthful age structures. Risks and Benefits of Demographic Changes Health Care Extension of healthy old age High may mitigate temporarily Income Countries expected health care increases

Pensions

With exception of China, these countries have time to prepare; China’s aging accelerating health care pressures Improving spend- Least burden Lower and smallest to-needs ratio Middle with youth bulges increases with Income ample time Countries Easing growth in Relatively small health care costs proportions so long as there of retirement Low is lower fertility; populations even Income in 2035 with continued Countries high fertility, burdens spiral Upper Middle Income Countries

High Risk

Education

Decreasing educational needs, but risk of failing behind if spending decreased too much Fewer resources Larger than high income expenditures to fund pensions; could close educational gap China risks runaway pension with high-income countries gap by 2035 Viability of pension funds would be threatened absent drastic reform

Some Risk

Spending will go up, but it will be hard to catch up Lowering fertility will help increase spending per student, but continued high fertility would increase spending gap on education

Growth Must boost productivity to compensate for no employment growth Likely productivity increases could partly compensate for waning employment growth Employment growth continues a couple more decades Labor contribution still strong at midcentury

A sense of urgency needed by all Political and economic measures can make a critical difference to whether we all end up poorer and more unstable, or able to fully enjoy the benefits of growing longevity. • With the aging process in full swing, high-income countries face a particularly difficult task of raising retirement ages, implementing efficiencies in health care, and reforming pension systems if they are to avert an economic slowdown. • Middle-income countries have more time, but the accelerating aging process means they need to move quickly to align pension schemes to increasing longevity and build efficient health care systems. They have a big opportunity in closing the education gap with high-income countries, boosting their productivity levels and attractiveness to foreign investment. • Migration into societies with declining labor forces can relieve many of the economic growth and financial pressures associated with that decline, but can also create many social problems, especially when cultural and socioeconomic differences with the host population are great. Countries will need to balance these issues carefully and make decisions that consider the longer term, not just the immediate impacts of migration. • Low-income countries need to bring down fertility quickly and increase educational standards if they are to maximize their advantages during the demographic bonus years. Firms have a key role to play in managing pension schemes that take into account likely extensions in longevity. While raising the retirement age faces strong political opposition, firms can help encourage workers to remain at work longer with more flexible workplace schemes. Increases in government funding for education in the highincome economies are likely to be limited, if any, so firms should prepare to offer more on-the-job training of new entrants and reskilling of older workers. By contrast, in upper-middle-income countries, firms have the opportunity to recruit an increasingly better educated workforce. Demographics does not have to be destiny if we take action now to ensure the promise of longer and healthier lives does not turn into a net cost for society, putting an extra burden on future generations.

Low Risk and Possible Benefit 99

Source: "Reducing risks from demographic change", by Zurich Insurance Group, the Atlantic Council. Zurich Insurance Group and the Atlantic Council are engaged in a multi-year thought leadership effort to quantify aggregated global risks. They use an extensive quantitative model pioneered by the University of Denver’s Pardee Center for International Futures to explore the economic benefits and costs of demographic risks.

Risks of the Future

THE SIDE EFFECTS OF NEW REGULATIONS

Regulatory risks and their impact on the reinsurance industry Protectionist trends in Latin America and Asia By Phillip K. Schulz and Shivaun Moreno

100

Phillip K. Schulz, LL.M. has been an acting Senior Legal Counsel with Hannover Rück SE since 2012 where he is responsible primarily for the Regions USA and Bermuda and acts in a supportive role for the Region Latin America. He is a member of Hannover Re’s “Emerging Risks Committee” where he focuses mainly on regulatory, energy and pharmaceutical risks. He studied law in the USA, Germany and Finland.

Shivaun Moreno acts as Senior Legal Counsel at the head office of the Hannover Re Group. She is responsible for all legal matters arising from operational business in the Region Latin America and handles inter alia regulatory issues, litigation and contract negotiations. She joined Hannover Re in 2002 and is a German-qualified attorney at law. She studied law in Germany, Spain and Ireland and is a Spanish national.

In recent years, reinsurers increasingly have directed their attention to so-called “regulatory risks”. Typically regulatory risks will arise anytime an unexpected change takes place in a state’s supervisory or regulatory environment which prospectively may negatively impact the reinsurance sector. In many countries, such regulatory changes are driven by the desire to protect domestic markets. In the past decade, protectionist measures have affected the reinsurance market generally, although this trend is most clearly observable in Latin America and Asia. In these regions specifically, reinsurers have been compelled to rethink their transnational business strategies comprehensively, including especially the manner in which they provide reinsurance protection to local cedents. The following sections will examine recent protectionist trends affecting the reinsurance industry in Latin America and Asia. Latin America In Brazil, the monopoly held by IRB Brasil Resseguros SA ended in 2008. However, the legal framework for foreign reinsurers remains quite restrictive. Under the new regime three classes of authorisation were (and still) are available to reinsurance companies: local reinsurers (with a local head office), admitted reinsurers (with a local representative office) and eventual reinsurers (merely registered with the supervisory entity). Initially local reinsurers had the “right of first refusal” by which local insurance companies had to make a preferential offer to them of at least 60% of total premiums ceded per risk. Currently the local insurance companies are obliged to cede at least 40% of each reinsurance cession to local reinsurers. Intra-group cessions were originally prohibited. This rule was partly lifted in 2011 and risk transfer from insurers and local reinsurers to companies based abroad and belonging to the same financial group was permitted up to 20% of the premium corresponding to each cession. Recently, these restrictions have softened. In 2015 the cession limits for intra-group transfers were raised from 20% to 75% and the compulsory level of reinsurance to be placed with local reinsurers dropped from 40% to 15%. These proposals are to be gradually implemented across a five-year time-frame.

In Argentina after the liquidation of the reinsurance monopolist INDER (Instituto Nacional de Reaseguros), the regime allowed foreign reinsurers to operate from their home country, either upon registration with the regulator or via an authorised broker. However, following the Brazilian trend the Argentinean regulator in 2011 prohibited almost all cross-border reinsurance operations and established a class system concerning authorisation for reinsurance companies to do local business: local insurance companies were obliged to cede reinsurance risks only to local reinsurers and admitted reinsurers were limited to offer retrocession coverage to local reinsurers. Similar to Brazil intra-group risk transfers were limited to 40% of the annual premium and local reinsurers had to retain at least 15% of the reinsurance premium ceded to them. Now, with the change of government, in Argentina too there is a trend in reopening the market for foreign reinsuers. As of January 1, 2017 local insurers are allowed to place 10% of their ceded premiums directly with admitted reinsurers, this percentage gradually increasing to 80% over an eight-year period. Ecuador too saw new regulations as of 2014 by which the outflow of reinsurance premiums from the country were to be reduced. Maximum cession percentages were established for certain lines of business, alternative risk transfer reinsurance was prohibited and a basic minimum commission was introduced for quota share reinsurance contracts.

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Asia

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As in Brazil and Argentina, the Indian reinsurance regulatory regime establishes a hierarchy according to which domestic insurers must offer reinsurance cessions. Under the Indian system, domestic insurers must offer all reinsurance cessions initially to domestic reinsurers. If domestic reinsurers do not accept the business, Indian insurers are permitted to offer the respective reinsurance business to foreign reinsurers who have established a branch office in India. Only after respective foreign reinsurers also reject the business will domestic reinsurers be permitted to offer reinsurance cessions to other foreign reinsurers. The system de facto establishes a preferential right of first acceptance for domestic reinsurers and a secondary acceptance right for foreign reinsurers with an established presence in India. Compared with Latin American models, the Indian system appears less rigid in retaining local reinsurance cessions. As few domestic reinsurance carriers exist in India (General Insurance Corporation of India Re currently is the only major carrier), initial offers often reach the second stage of the hierarchy consisting of foreign reinsurers with a local branch office. Foreign reinsurers willing to invest in a local branch office therefore will be well-placed to receive a considerable share of India’s domestic reinsurance business.

While protectionism presently contributes towards regulatory risks in the reinsurance industry and will continue to do so in the future, two very different protectionist trends are likely to influence the regulatory regimes in Latin America and Asia. The intensity of protectionist measures in Latin America appears to be linked to the preferences of changing political administrations. As a consequence hereof, the new governments in Argentina and Brazil respectively have and likely will continue to lead to a certain liberalization of the market in the near future. By contrast, the strict protectionist models in India and Indonesia have influenced the regulatory environment in numerous Asian countries. It therefore is probable that many regions in Asia will tend towards greater protectionism in the immediate future.

By contrast, the Indonesian legislature has enacted a stricter, more protectionist regime. The Indonesian system requires local insurers to cede 100% of so-called ‘simple risks’ exclusively to domestic reinsurance companies. Simple risks include in particular health and accident insurance as well as credit /surety business. All other risks are qualified as ‘non-simple risks’. At least a 25% share of these risks must be ceded to local reinsurers. The obligatory cessions policy allows for no practical exception, so that consequently, foreign reinsurers effectively are forced to conduct business via retrocession. The Indian and Indonesian models are noted in other Asian countries and may well gain greater recognition moving forward. In this vein, the Vietnamese government has announced its intention to institute an Indian or Indonesian style system in the near future. Although presently no corresponding regulatory system has been established, this appears to be only a matter of time.

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Standing up to the weather By Juerg Trueb

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Juerg Trueb is Head of the Environmental & Commodity Markets team at Swiss Re Corporate Solutions. The team develops tailor-made weather and weathercontingent commodity price products which help protect energy and agricultural firms from adverse earnings caused by sales volume and commodity price risks. These solutions are available globally in the form of derivatives, insurance and reinsurance transactions. Prior to his current role Juerg set up and managed Swiss Reâ&#x20AC;&#x2122;s weather & power outage solutions. He was also previously responsible for the global agricultural and atmospheric perils units at Swiss Re. During that time he developed risk assessment and pricing tools for European windstorms, tropical cyclones and methods to steer portfolios of natural catastrophe reinsurance contracts. Juerg holds a PhD in Atmospheric Physics from the Swiss Federal Institute of Technology and a Masterâ&#x20AC;&#x2122;s degree in Environmental Sciences.

Adverse weather forces companies to look for protection The number of extreme weather events worldwide has increased more than fourfold since 1980, causing losses in the billions, of which only a fraction is insured. On the global average, 55% of windstorm losses and 86% of flood losses are not covered by insurance. The levels of protection differ widely between mature markets (Western Europe, North America, Japan) and developing markets (Latin America, emerging Asia), where up to 80 and in some areas even 100% of the economic losses still remain uninsured today.1 Climate change will further aggravate the situation. Swiss Re identified climate change as an emerging risk more than 25 years ago and integrated it into its long-term risk management strategy and insurance offerings. Today, Swiss Re Corporate Solutions is among the market leaders in providing â&#x20AC;&#x153;weather protectionâ&#x20AC;? solutions and has pioneered various truly innovative transactions. Extreme weather events can affect profitability of almost any industry Climate change is not only leading to more frequent extreme weather events but is also prompting critical deviations in weather patterns. Apart from storms causing property damage, typical extreme weather events include prolonged periods of drought or heatwaves, while climatological deviations range from milder winters to summers with more rain and unusually calm periods with little or no wind. Agriculture, construction, retail and the travel industry are the most obvious victims of such changing weather patterns. However, other sectors, such as the energy industry, are also negatively impacted.

Weather derivative solutions can bring relief from whatever risk nature has in store Worldwide, an abundance of data has been gathered on all aspects of weather over the years. This allows us to back-test and check the effectiveness of a given risk transfer solution against previous years to determine how this protection solution would have performed. Analyses of this kind allow companies to quantify potential losses and savings with ease. Conversely, weather data can also be used to identify opportunities where a certain change in weather patterns may effectively boost sales or productivity.

The types of damage triggered by these events range from property damage to business interruption, fluctuations in demand and supply and price volatility on the commodity market. Even events on a smaller scale can drastically affect sales and create severe losses for an enterprise.

1 Swiss Re sigma 5/2015: Underinsurance of property risks â&#x20AC;&#x201C; closing the gap. Risk perceptions and buying behaviour, limitations to insurability, and undervaluation of assets are all causes for underinsurance.

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Examples of weather risk protection Energy Weather risks have risen to the top of the agenda of many executives in the energy sector. The World Energy Council study Financing resilient energy infrastructure emphasizes the need to implement innovative risk management solutions for extreme weather and price risks.2 The main weather risk in the energy sector is the impact of air temperatures on retail energy demand. This demand uncertainty puts a serious strain on supply management and procurement, and this in turn has a significant impact on price hedging and margins. The tools to address weather risks in the energy sector include contract flexibility, storage and financial solutions such as weather derivatives. Utilities worldwide can insure themselves against the risk of poor energy sales in warm winters when customers spend less on heating. By the same token, they can compensate for an unplanned and expensive spike in energy demand for air-conditioning, when a summer is hotter than usual. In the renewable energy sector, wind power producers have started to buy weather protection products to manage wind volatility. These products provide compensation for days with little or no wind, when wind turbines stand still and generate no power. Agriculture Farmers around the world can protect their income with insurance covers that link crop production to weather-related data from weather stations or satellite images. For example, a sugar beet grower in Russia automatically receives compensation if a severe period of frost lasts longer than what is agreed to be normal in his region. Meanwhile, a pineapple grower in Indonesia will be indemnified if satellite images confirm that precipitation was below the agreed usual levels during the critical pineapple growing phase.

Crop producers are not the only party along the agricultural supply chain who are able to benefit from weather protection products. Input providers, crushers, silo storage facility managers, financiers and millers can all protect themselves against unfavourable weather conditions and thus guarantee income linked to a minimum throughput. Weather protection can also be implemented in conjunction with commodity price volatility to guarantee revenues for crop producers. Further applications of weather-index products go far beyond energy and agriculture sectors. For example, brewers in the UK can buy risk cover against cold wet summers which would hurt sales in their pubs. In France, construction companies can purchase insurance against days with too much wind, when workers cannot use overhead cranes on construction sites. Despite growing awareness of the possibilities of weather protection, many companies still fail to manage their weather risks properly. We see it as our task to continue explaining the extent of global weather-related exposure and the vast opportunities available beyond traditional insurance offerings. What may have been considered uninsurable risks can indeed be protected effectively with a combination of creativity and solid risk management expertise.

Know more about Weather Protection

2 World Energy Council 2015: The road to resilience â&#x20AC;&#x201C; managing and financing extreme weather risks.

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Parametric Insurance A well-adapted solution for emerging risks By Marine Charbonnier and Tanguy Touffut

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Marine Charbonnier joined AXA Corporate Solutions in 2013 as Head of Risk Financing Solutions for AXA Group clients. Her role is to help them to identify financial solutions for some of their specific risks and so organize optimized homemade policies. Marine has been evolving in the Alternative Risk Transfer market since the beginning of its career in 1992 in terms of advice, negotiations, setting up and management of such dedicated solutions. She works closely with the Parametric team on integrated solutions as well as other lines of business ie Property for NCBI, Liability for penalties in order to enlarge and structure coverages close to the specific needs. Marine is a graduate in Finance, Management and Econometric Sciences.

Tanguy Touffut is Global head of Parametric Insurance at AXA. He is based in Paris. He focuses on the development of various parametric solutions, including weather derivatives to protect companies against weather anomalies, weather insurance in emerging markets, and on Public Private Partnerships with international institutions, as well as the development of new insurance approaches through the use of Big Data. Today, AXAâ&#x20AC;&#x2122;s parametric department is active in more than 28 countries worldwide. Tanguy began his career at Oliver Wyman Financial Services as a Project Manager specializing in banking and insurance, working in a dozen countries across Europe, North America and Africa. In 2010, Tanguy joined AXA as Head of Global Property and Casualty Strategy, before moving to AXA Corporate Solutions in 2013. Tanguy holds a Masters Degree in Science in Management from HEC Paris.

Parametric insurance: building a seamless customer experience The parametric insurance product is a tailor-made cover designed by using an independent parameter, generally a weather index, which is correlated to the clients’ revenue stream or cost structure. Once the agreed-upon index is reached, payout is triggered and clients receive compensation within only a few days, providing a truly seamless customer experience. This insurance product can be applied to many different types of clients in numerous industries. That being said, in today’s changing climate and in the face of the green energy transition, parametric insurance is a particularly welladapted risk management solution. The renewable energy sector in today’s volatile climate Increasing weather volatility and weather extremes are causing a surge in demand for renewable energy insurance. In the past two years, investments in renewable energy surpassed those in non-renewable. Per Bloomberg energy finance analytics, in 2015 alone, more than twice as much money, about US$ 260 billions, went into clean energy compared to non-renewable energy. Additionally, due to today’s changing climate, the occurrence of weather anomalies has increased greatly. According to the Intergovernmental Panel on Climate Change, weather anomalies have increased fivefold in the past 50 years. For that reason, renewable energy production is highly intermittent – the sun does not shine every day, all day, the wind does not blow all the time, and heavy rainfall and drought events are increasing worldwide. Due to this increased unpredictability of energy production, securing investments is key.

How does it work? Let us take the example of a solar photovoltaic plant, seeking revenue insurance against lack of solar irradiance. A solar plant is highly exposed to the risk of the sun not shining, which will impact its revenue month-to-month and year-to-year. In order to create the most relevant cover, AXA CS works together with the client to best understand their insurance needs. Their data science experts model photovoltaic production, and their team of underwriters agree upon the risk period by studying the plant type, location, and installed capacity. To design the best index for existing plants, the parametric team uses the plant’s historical production data over the longest period and correlates it to their weather data. As such, parametric insurance is a means of smoothing revenues year-to-year. Without a parametric cover, the client would be left with highly volatile, unpredictable revenue depending on weather conditions and other factors. With AXA’s parametric cover, the client can guarantee smoothed revenues.

“Certain renewable energy projects would not have seen the light of day without an insurance dimension, which reassures the investor on the sustainability of the project.” — Tanguy Touffut, Global Head of Parametric Insurance, AXA

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“This mechanism, combined with traditional covers, builds an integrated, legally and regulatory compliant solution to exactly fit the client’s risk exposure profile.” — Marine Charbonnier, Head of Risk Financing Solutions, AXA Corporate Solutions

Using sophisticated data for the most accurate product Through satellite imagery, AXA’s team of experts are able to capture and work with more and more sophisticated weather data. Satellite images give access to wind speed, wave height, solar radiation, precipitation, and many different indices that, combined with sophisticated Big Data processing methods, enable the development of extremely accurate parametric insurance products. The team expects that, thanks to the continuous advancements in technology and Big Data processing methods, parametric insurance will continue to grow greatly. Over two years, AXA’s parametric team has developed the global reach and technical expertise to manage various risks in this evolving industry, and today the team operates in over 27 countries worldwide. In addition to traditional parametric transfer, completing covers with Alternative Risk Transfer allows to meet each company’s unique needs Today’s fast-evolving, complex world generates an ever-increasing number of risks that cannot be covered by traditional insurance or financial products. Corporations are increasingly interested in Risk Financing Solutions and Alternative Risk Transfer (A.R.T.) solutions to mitigate the impact of losses on operating accounts (loss of income, loss of profit, additional working costs, costs & expenses, loss of assets), by providing a dedicated budget to finance future losses and pooling the exposures of various subsidiaries and/or operating entities. This is also an important concern for renewable energy activities. Those risk financing facilities provide organizations with protection against financial loss arising from risks including penalties, non-damage business interruption, loss of access, reputational or brand damage,

supply shortage, loss of footfall arising from a wide range of events such as changes in legislation/ regulation, political risk, cyber-crime and IT failure, pandemic/epidemic, terrorism threat, exceptional climatic events in addition or alternative to traditional parametric transfer. AXA CS’ A.R.T. department works closely with clients and brokers, utilizing their vast experience to design tailor-made mechanisms to smooth P&L volatility. The A.R.T. experts are able to design and implement structured protection programs with or without captives, integrating risk financing for non-insurable risks with traditional covers to set up a holistic solution. Combining parametric insurance and A.R.T – opening up a world of possibilities Combining parametric solutions with A.R.T. is especially interesting for clients for a few reasons. Firstly, parametric insurance is extremely flexible in terms of budgets. Premiums, capacity, triggers, and limits are entire malleable. The risk manager, captive manager, broker, and insurance company work together to co-construct the best-fit solution financially. Secondly, parametric insurance is flexible in terms of geographies and types of risks. Parametric insurance can be adapted to risk anywhere in the world, in many geographical zones or in one specific location. Additionally, parametric insurance can cover multiple types of risks, as long as it is based on an independent and verifiable index. Finally, parametric insurance combined with A.R.T. is a means of opening new frontiers of insurability. Parametric insurance allows to cover risks not typically covered by standard insurance policies (e.g. property). Combined with captives, this brings a new frontier of insurability, opening up a world of possibilities.

Know more about Parametric Insurance

In December 2016, AXA Corporate Solutions (AXA CS) won Commercial Risk Europe’s 2016 “Emerging Risk Solution of the Year” award for their innovative work in parametric insurance.

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R(Evolution) Using Parametric Insurance Solutions to Insure CAT Risk By Jamie F. Crystal

Jamie Crystal, Executive Vice President, is a thirdgeneration principal of Crystal & Company, a leading strategic risk and insurance advisor addressing clientâ&#x20AC;&#x2122;s risk management, insurance brokerage, and employee benefits consulting needs. He's a member of the Board and is responsible for the financial success and growth of the New York office and surrounding region. He works with Unit Leaders to drive regional P&L performance, recruit senior insurance professionals, identify acquisition opportunities, and develop and maintain strategic relationships with clients, prospects, and insurance carriers.Â He also manages the firmâ&#x20AC;&#x2122;s international operations and served as Chairman of Brokerslink. Jamie is an industry veteran of over 25 years. Prior to joining Crystal & Company, he worked as a senior property and casualty underwriter and assistant manager with the Chubb Group of Insurance Companies. His extensive knowledge in supply chain risk management and parametric insurance solutions has led to several speaking engagements and media interviews. He received his Bachelor of Arts in Economics from Princeton University. He is a past-Governor and member of the John Street Insurance Association for leadership in the Insurance Industry. He also serves on the Board of Trustees for The Education Alliance and Primary Care Development Corporation.

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Why do we insure catastrophe risks such as earthquakes, windstorms, and floods excess of such large deductibles? Why canâ&#x20AC;&#x2122;t we provide ready and rapid access to capital to our clients in their greatest time of need? Why is so much information needed to underwrite CAT Risk and then again to pay a claim? What if there was a better way? CAT insurance without a deductible? CAT insurance that provides capital within 10 business days? CAT insurance that can be priced within days, without needing to provide highly confidential or difficult to obtain information?

We are on the cusp of a new era of insurance for catastrophes, which will enable risk management professionals to provide simple, direct insurance where and when clients need it most. The solution, Parametric Insurance is a natural evolution of the capital markets embrace of Catastrophe Bonds. CAT Bonds are an example of an Insurance-Linked Security which transfers a specific set of risks (generally catastrophe and natural disaster risks) from an issuer or sponsor to investors. In this way investors take on the risks of a specified catastrophe or event occurring in return for attractive rates of investment. Should a qualifying catastrophe or event occur the investors will lose the principal they invested and the issuer (often insurance or reinsurance companies) will receive that money to cover their losses. Catastrophe bonds are used predominantly by insurance companies as an alternative to reinsurance in order to hedge risks of hurricane, earthquake, typhoon, windstorm, thunderstorm, hail and even life insurance related risks such as longevity and health insurance claims. More recently, other large buyers of reinsurance such as the New York Metropolitan Transportation Authority (MTA), and AMTRAK (the National Railroad Passenger Corporation that provides medium- and longdistance intercity service in the contiguous United States) have also used CAT Bonds to provide ready access to capital for storm surge risk in and around Manhattan, a region where they have the highest concentration of assets and infrastructure. More recently, member

countries of a catastrophe risk facility in the Caribbean received a pay out of US$29.2 Million within 14 days for claims associated with hurricane Matthew. While many insurers view CAT Bonds solely as a way to reduce their reinsurance costs, leading insurance companies are finding ways to leverage their existing capabilities and balance sheets by creating Parametric Insurance solutions to create new markets for their capacity. One of the main challenges with CAT Bonds is that they take a lot of time to structure (often 90+ days), and are suitable only for large transactions due to frictional costs associated with investment bankers and legal advisers. For organizations that cannot benefit from CAT Bonds but want to capture the benefits of CAT Bonds, Parametric Insurance can be a very interesting solution. Like CAT Bonds, Parametric Insurance can be structured on an annual or multi-year basis (typically 3-year policies with annual installments). The insurance can be custom designed to provide coverage for an entire property portfolio, sub-segments or a property portfolio, for property damage or just business interruption, or even solely for contingent business interruption exposures arising out of an organizationâ&#x20AC;&#x2122;s supply chain. One recent innovative use of parametric insurance was to insure the earthquake risk associated with a large financial institutionâ&#x20AC;&#x2122;s mortgage portfolio. The bank wanted ready access to capital in the event of a large earthquake so that they could fund their mortgage workouts. More

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typical uses of parametric insurance include funding or buying-down the earthquake and windstorm deductible for industries as diverse as real estate and large energy companies. Unlike traditional insurance, no underwriting data is required and the insured does not need to disclose any information to underwriters regarding their property portfolio as the insurers are underwriting the probability of the event triggering coverage as opposed to trying to ascertain the damage that will be caused. Since the triggers of coverage are critically important, most organizations will want to utilize an independent CAT modeling company such as AIR Worldwide to model the organizationâ&#x20AC;&#x2122;s exposure at various triggers. The models can then be utilized by the organization to optimally structure the trigger that is most suitable for them as opposed to the underwriters. For example, a typical program could be structured to provide coverage in the event of a 7.5 magnitude earthquake (trigger 1) within a 75-mile radius of San Francisco (trigger 2). More complex programs can also be structured with more than two triggers, for example in the event of both an earthquake in one region and a windstorm in another region.

Parametric Insurance can also be proactively disclosed to both regulators and to shareholders to address CAT risk concerns. Regulators will consider the insurance as support for capital adequacy models, and shareholders can be reassured that there is insurance in place in the event of a major CAT event. Of increasing importance, Parametric Insurance is also consistent with and supports most organizationâ&#x20AC;&#x2122;s enterprise risk management practices. As more organizations seek solutions that better address their exposure to significant financial losses from CAT risks, Parametric Insurance solutions can be utilized to provide ready access to capital in the event of a catastrophe without the complexity and cost associated with CAT Bonds. As more insurers and brokers begin to embrace Parametric Insurance solutions, the R(Evolution) will come when mid-market companies gain access to these powerful solutions to the CAT risks associated with their operations.

Since coverage is typically based on a magnitude trigger and radius, Parametric Insurance provides contract certainty. Simply put, if the triggering event occurs, payment is made. Adjusters are not needed as there is nothing to calculate. Due to this simple structure, Parametric Insurance provides ready access to capital after a triggering event, with claims paid in full in as few as 10 business days of the triggering event. Funds can be utilized, as needed, for any purpose.

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BROKERSLINK UK

bridge The Brunel of Bridge Building Manchester by Roger Potts UK Insurance Market

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THE BRUNEL OF BRIDGE BUILDING INTERVIEW BY DAVID BUT TERFIELD

Roger Potts doesn’t need to rely on a talismanic performance to swing Bridge Insurance Brokers kicking and screaming into 2017. He has always approached his mission and vision as company chairman in the way he has addressed other challenges in his life. With diligence and a determination to succeed. Ask anyone at Marsh or Willis Towers Watson where he spent twenty‑five years learning his craft. Roger Potts admitted recently that he always wanted to be a civil engineer. He was probably, like many schoolboys, a big admirer of Brunel1. Well, if you’ll forgive me for saying, civil engineering’s loss was broking’s gain and what an impact he and his colleagues have had navigating these past eight years. Bridge has become the go‑to insurance solution not only in Manchester, of which more later, but across the four corners of the world. This is no exaggerated claim, if you’ll pardon the pun. The global economy has almost turned on its axis and those BRICs that former Goldman Sachs economist and Treasury minister Jim (now Lord) O’Neill first alerted us to will, by 2050, become the world’s dominant suppliers of manufactured goods and services.

And wherever there are people, goods and services in abundance, there is Bridge: transforming lives with reassuring, relevant and cost‑effective cover across continents; across sectors; across great divides. Look no further than Brokerslink for evidence of this transformation. Created just three years after O’Neill’s formulation in 2004, Brokerslink is now a global broking company managing a network of independent brokers which “integrated best‑in‑class risk expert firms to become a strong alternative to mainstream models in the insurance market”, they say. “The Brokerslink team, under the leadership of its CEO, Jose Manuel Fonseca certainly made a smart choice with their second city selection, which

fairly reflects Manchester’s financial optimism and broking wizardry, tethered to a willing Porto partnership of substance and creativity”, confirms Potts. Why then, the haste to re‑invent the industry with a mainstream alternative that sounds decidedly high risk? Simply put, Potts believes the insurance industry has been “slow to change and invariably loath to adopt modern business practices and principles by moving like the proverbial tortoise when compared with other hare markets.” Thankfully, Bridge will continue to be a family affair as its founders, Mike Backner and Gilbert Cohen have instilled in the management and direction of their business since 1971, when they met for the first time at the Midland Hotel. Arguably Manchester’s most iconic building, Adolf Hitler is thought to have spared it from bombing as he eyed it for the Nazi Party headquarters in Britain should he have won the war. And it has been the setting for countless meetings that have shaped history since the turn of the twentieth century, notably where Mr Rolls met Mr Royce. “Bridge's prestige approach to broking is clearly reflected in a number of long ‑standing relationships with clients to this day”, elaborates Potts.

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“In the 1970s, Lionel Black now 95, bought a small company specialising in waterproof clothing he called Regatta and his son, CEO Keith Black continues to promote the fit, quality and style that underpins his dad’s business who first sought advice from Bridge many years ago, because his belief in family values was shared back then by Backner and Cohen. And still is.” Bridge is especially proud to be associated with Mines Advisory Group (MAG). Newly‑appointed CEO Jane Cocking has 25 years’ experience in the humanitarian sector. “At MAG, we believe that whenever and wherever wars happen, ordinary people should not be the ones who pay the price”, insists Cocking. The issues are almost inconceivable. Wars and conflicts erupt, subside and end. But they leave behind millions of landmines, unexploded bombs and unsecure arms. These pose an everyday danger for decades and disrupt the lives of communities for generations. Backner cites another defining moment when, during the hard market of 1984, Bridge decided to shed 8% of its client base, reducing the number of claims by 40%. Most of Bridge’s custom is corporate clients based in the northwest, including a large property owner’s portfolio, fleet and cyber‑liability risks. “Bridge is moving towards fees for the larger risks, since a fairly hefty chunk of central Manchester is owned by our clients. In 2014, Globalization and World Cities Research Network (GaWC) ranked Manchester as a beta world city, the highest‑ranked British city apart from London”, continues Backner. “And the launch of Bridge London is testimony to our industry credentials. We have developed the operation with a strong work ethic, underpinning highly engaging client services. Six years on and there’s been remarkable progress across both centres of broking excellence where innovation and collaboration are key business drivers. Take a look at the Manchester skyline now” suggests Potts, warming to Backner’s theme.

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Manchester Castlefield.

A futuristic multi‑use arts venue designed by Rem Koolhaas’ Office for Metropolitan Architecture is poised to win planning approval from Manchester city council. The £110 million Factory venue, named in honour of legendary music label Factory Records, is earmarked for part of the former Granada studios site on the edge of the city centre and is being jointly developed by the council and Allied London. Designed to bring together a 2,300 capacity theatre and a separate 5,000 capacity warehouse space for “immersive events” on part of the former TV studios site, it also incorporates a Grade II‑listed railway viaduct that would need to be altered for the scheme.

Government heritage adviser, Historic England said that “subject to high quality materials, finishes and execution”, Factory had the potential to enhance its part of the conservation area by “opening it up to the public and being a cultural focal point” to bring in more visitors. Sir Richard Leese, leader of the city council said it would “make Manchester a genuine cultural counterbalance to London” and help transform the regional economy, attracting hundreds of thousands of tourists and inspiring a generation. “We’re placing Manchester and the north of England firmly on the international stage”, continued Sir Richard.

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The new venue represents part of the government’s “northern powerhouse” project, championed by George Osborne, the former chancellor. Factory is forecast to deliver nearly 1,500 new full‑time jobs and generate £1.1 billion over ten years. Matt Hancock, the culture minister, said: “Factory will provide a further boost to the brilliant arts, culture and technology scene in the north.” “Circle Square set on the former BBC site on Oxford Road is both the hinge and the hub for Corridor Manchester, the UK’s first ever innovation district. Live or bring your business here and we can promise you interesting neighbours”, continues Chris Oglesby, CEO of joint

venture partners Bruntwood, another Bridge client. Expect to find two leading universities, a teaching hospital and health research institute, the Graphene Engineering Innovation Centre, a famous music college, equally famous art and dance schools, a legendary theatre, new arts centre and any number of innovative businesses and talented people. At Circle Square and First Street where you’ll discover Vita Student, offering Manchester’s best student accommodation, there is FlatGuard, a specialist insurance policy developed exclusively by Bridge for blocks of flats, tailor‑made to protect residents, managing agents and freeholders.

Plans for what will be Manchester’s tallest building, an impressive 64‑storey block of luxury flats, have been given the green light. The new Owen Street skyscraper will trump the neighbouring 50‑floor Beetham Tower, designed by the same architect, Ian Simpson. Unsurprisingly, there has been vociferous local objection primarily from, you guessed it, Beetham Tower residents, who thought the development was out of proportion with other local buildings and amenities. Simpson is no stranger to controversy when his tower project at One Blackfriars Road on London’s South Bank hit the buffers in 2010, after the developer failed to secure funding from its Russian

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Old Trafford Stadium.

partner, Mirax. The site was bought the following year by Tony Pidgley’s St George brand which wanted to change the mixed ‑use tower to residential with a boutique hotel as a stand‑alone building. So the Russians are coming? In a word, no. “What’s all change for Manchester is that investors in Owen Street are primarily from emerging BRIC China, Hong Kong or Singapore and the apartments, over 1,400 one, two and three‑bedders across four buildings have already been sold off‑plan, such is the enthusiasm for this style of city dwelling” explains Phil Webster, director responsible for Bridge specialist Real Estate division.

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China’s passion for foreign property is just the start, as cash‑rich buyers are interested in buying‑in to a real life game of Manchester Monopoly. Victor Li, a director of international project marketing for the US real estate giant CBRE, is predicting a surge of eastern investment in British homes over the next decade, as increasingly affluent Chinese investors acquire a taste for international property. And not just property. Tianjin Quanjian FC are in the market for a striker and have been linked with an £80 million bid for Chelsea & Spain forward, Diego Costa that would earn him £30 million a year. So how long before the red and blue clubs of

Manchester are similarly targeted? Setubal’s most famous son moved to Old Trafford last year. José Mourinho, arguably one of the greatest and most successful managers in the world, he's currently plying his trade up the road from Bridge at the aptly named Theatre of Dreams. But it’s not been plain sailing for the broking community. Embracing the digital economy is proving a nightmare, admits Potts. Despite being a former Twitter non‑believer and self‑confessed LinkedIn philistine, he can see the bigger picture which is so much more than the “fluffy stuff”, he explained.

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Bridge has become the go‑to insurance solution not only in Manchester, of which more later, but across the four corners of the world

home, with a flexible monthly premium that can be cancelled or reinstated at a moment’s notice, without incurring penalty charges”, he reveals. This outward‑facing product launch embodies the service ethic and professionalism of an innovative online Bridge presence but, more importantly, demonstrates a seismic shift away from mainstream models in the insurance market. Insurance law has changed. The Insurance Act 2015 came into force on 12 August 2016 and is the biggest shake‑up

of commercial insurance law in over a century. It’s designed to provide a more up‑to‑ date framework for commercial insurance in England and Wales, with a focus on transparency and certainty over the rules that govern contracts between commercial policyholders and insurers. It significantly impacts disclosure obligations when taking out or renewing any business insurance. For example, if a client doesn’t comply with his or her fiduciary duties, insurers now have a new range of “proportionate remedies”, which could include the reduction of claim payments.

“Unlike the 61% of global CEOs still eschewing social media and increasingly out of step with staff and customers alike, according to the World Economic Forum last year”, Potts added. It seems that for most CEOs, social media is still seen as just a distraction; something that junior staff will do when they should be getting on with “real work”. A report from Strategy Analytics shows that more than two billion people throughout the world are now engaged with social media, with users spending an average of two hours per day on these platforms. This is having a huge impact on people’s browsing and spending habits; millions now watch more YouTube than TV and a Market Force study found that fully three ‑quarters of consumers say social media now influences their buying decisions. Two years ago, Worry+Peace founder, James York challenged the insurance sector to embrace digitally enabled innovation and urged proactivity. “There should be much more out there other than blandly‑named online ‘quote and buy’ solutions, which are seen by less visionary practices as a replacement of quality customer service”, continued York. Potts is convinced it’s an overdue step in the right direction, despite the sector’s narrow view of what digital means. “A new Bridge product to emerge from development will soon target two million self‑employed professionals working from

Pub sign.

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And four weeks later at the UK Broker Awards ceremony, a panel of judges comprising highly accomplished individuals from across the broking community presented Bridge with the 2016 Claims Team award. But what might the future hold for the industry? I can now reveal Potts’ predictions, which will have a major bearing on the sector’s progress in 2017. “Look no further than Bell Pottinger’s global FinTech proposition who has gathered the views of industry leaders and influencers such as Bridge, to identify the emerging trends and technologies that will make an impact on financial services in 2017. It’s highly recommended reading.” Claudia Bate, Global Head of FinTech added, “The outlook for 2017 looks strong despite the unpredictable political and economic events dominating the agenda last year. Interest in FinTech continues to grow and we’ve seen organisations fighting to get their opinions across, taking on the industry giants and working collaboratively to drive real change.” InsurTech 2017 claims to be “reimagining insurance” and will evolve into a platform aiming to provide knowledge exchange, foster synergies among market players to find solutions and implement and promote best insurance practices in a collaborative, open and transparent manner. The five hottest trends and breakthrough technologies for 2017: 1. 2017 will be the year of InsurTech 2. Artificial intelligence will take hold 3. An atmosphere of experimentation – getting braver with Blockchain 4. 2017 will unleash the power of data and hyper‑personalisation 5. FinTech takes off in high‑growth markets. Potts still worries that, in this brave new world, too many corporates appear to be making insufficient progress to safeguard and future‑proof online business models, rather than follow the example set by their smaller SME counterparts, who are now rising to the cyber threat.

BRIDGE TIMELINE

“Online security issues have been brought to the world’s attention by a massive data breach at Yahoo! resulting in the details of 500 million user accounts being leaked, which only serves to highlight the vulnerability of businesses to cyber security breaches and the potential consequences that can follow. “There’s now a demand for security incident response (SIR) policies designed to combat the serious risks that companies face such as political, regulatory and terrorism threats. They will help firms fulfil their duty of care obligations to protect people, operations, shareholder value and long‑term brand and reputation”, explains Potts. Speaking of political threats, the arrival of perma‑tanned Donald Trump in the White House might just be the best thing that’s happened to Britain since the Americans entered World War II, according to some observers. Meanwhile, back across the pond, they’re writing a new chapter in the continuing development, growth and evolution of Bridge. “As Bridge adapts to a changing market, acknowledges an evermore discerning client base and develops a new delivery platform, it will continue to think globally but act locally, due in no small part to Brokerslink entrepreneurial partnerships”, confirms Potts. So there you have it. Roger Potts released his inner hare and Bridge has its strategy for success. • 1 Isambard Kingdom Brunel was one of the 19th century engineering giants, in www.ssgreatbritain.org/story/isambard-kingdombrunel

1971 Founded by Mike Backner & Gilbert Cohen; first policy written earns team £4 commission 1988 First acquisition adds 15% to business 1992 Growth of claims and risk management 2004 Move to purpose designed premises at Cobac House, Manchester to accommodate expansion plans 2005 Largest independent broker in Manchester 2006 Second acquisition to grow profile in the North West of England 2007 Appointed Brokerslink representative in UK; acting UK broker for multinational Sonae 2008 Roger Potts appointed CEO and Andre Backner joins dedicated real estate team 2009 Now 100 staff in Manchester 2010 Company receives prestigious recognition as Chartered Insurance Brokers 2011 Awarded Independent Regional Broker of the Year 2012 London office opens as Bridge expands its local and regional footprint 2014 Co‑founder’s son Alex Cohen joins the London office in search of new business opportunities 2016 Now 15 staff in London and awarded Claims Team of the Year 2017 Launch of new innovative online products

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Manchester by Roger Potts A LIFELONG MANCUNIAN* REVEALS WHY THERE’S SO MUCH MORE TO MANCHESTER THAN UNITED

“Red or blue,” is a question I’m often asked. These are the club colours of United and City who regularly attract global audiences upwards of 700 million. Football is big business here, no more so than the Manchester derby. The showdown between José Mourinho and Pep Guardiola has become the most watched live match in top‑flight history. The two most expensively‑assembled squads and the prospect of a thrilling battle for the title will forever keep Manchester on the world stage. My wife and I are big fans of the Royal Exchange Theatre. It’s an ambitious, seven‑sided theatre‑in‑the‑round, designed within a grand Edwardian Cotton Exchange completed in 1976 and deservedly RIBA award winner. The biennial Bruntwood Prize for Playwriting is a partnership between the theatre and family‑owned property company Bruntwood who is a major sponsor of the arts, which highlights the value of nurturing playwrights and their craft. The legacy of Manchester’s Commonwealth Games hosted in 2002 runs on. Put into perspective, this ranks as the third largest sporting event in the world, after the Olympic Games and World Cup. Lasting impact came in the form of new world‑class sporting venues, construction of which kicked‑off a major urban regeneration project and the inspiration behind Sportcity. Created and built in east Manchester, the Etihad Stadium, Aquatics Centre and Velodrome, which is home to the hugely successful Great Britain track cycling team, are in constant demand. Visitors and locals have been flocking to Wilmslow Road in Rusholme, known as Manchester’s “Curry Mile” since the 80s. The local restaurant scene can be traced back to the city’s post‑war rebuilding programme, when skilled migrants arrived from the Indian subcontinent to work in textile mills and settled here. Very much part of our culinary heritage, this vibrant quarter with over seventy establishments serving authentic street food, shines a new light on modern South Asian cuisine and is an unmissable treat.

Much has been written about the Midland Hotel, a grand destination built by the Midland Railway in 1903 and described by one of its guests back then as a “twentieth century palace,” where you must book ahead to eat at The French, which is still Manchester’s finest dining room. The Beatles were famously refused access to the restaurant for being “inappropriately dressed,” but nowadays head chef, Adam Reid strikes the perfect balance between heritage and progressive cuisine, with hand‑picked ingredients and dishes mindful of the changing seasons. Another late‑Victorian, neo‑ Gothic building on Deansgate houses the special book collection at John Rylands Library which is hauntingly beautiful. Expect to see medieval illuminated manuscripts and examples of early European printing including Gutenberg’s Bible. Down the road at Long Millgate is Chetham’s Library founded in 1653, the oldest free public reference library in the UK and still one of Manchester’s best kept secrets. Manchester Airport has now handled 25 million passengers for the first time in its 78‑year history. Direct flights to over 200 destinations worldwide defined the airport’s role in driving northern growth. Dynamic, fast ‑moving and innovative, a four weekly service to Beijing was the first ever scheduled service from anywhere outside of London to mainland China. I’m told the route is worth at least £250 million in economic benefits to the UK over the next decade. Manchester’s rich history has been shaping the developed world we live in today. And we continue to push the boundaries. Creating a growth culture at Bridge has also meant looking much further afield. Manchester, it seems, was just the beginning of our journey. • * Editor's note: A Native or inhabitant of Manchester

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UK Insurance Ma The UK insurance industry is the largest in Europe and the fourth largest in the world. It plays an essential part in the UK’s economic strength, managing investments of over £1.6 trillion and paying nearly £12bn in taxes to the Government. It employs around 300,000 individuals, of which around a third are employed directly by providers with the remainder in auxiliary services such as broking.

1º The UK has the largest insurance industry in Europe and the fourth largest in the world

35 £ bn £35bn is the UK insurers contribution to the UK economy

435 Long‑term Savings Providers

Number of authorised life insurance companies in the UK, of which 195 are UK authorised and 240 are headquartered in another European country and passport in under the EU Third Life Directive.

305,500 Employees

934 General Insurers

Number of authorised general insurance companies in the UK, of which 340 are UK authorised and 563 are headquartered in another European country and passport in under Solvency II. in “UK Insurance & Long-Term Savings Key Facts” report of the Association of British Insurers

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Number of people employed in the UK insurance industry

arket

facts & figures

Market Size Non‑Life

Life

Personal Accident & Healthcare*

Total Market

Premium in GBP mn

143,454.07

40,287.83

6,135.67

189,877.57

% of total market

75.55

21.22

3.23

100.00

Penetration/Density Life

Non‑Life (P&C)

Personal Accident & Healthcare*

Total

PER CAPITA

8.01

3,717.94

2.25

1,044.15

0.34

159.02

10.60

4,921.11

6.29

2,764.66

2.25

989.28

1.83

806.62

10.37

4,560.56

7.64

2,766.43

1.66

603.03

0.15

52.61

9.44

3,422.07

3.34

1,802.26

3.16

1,708.00

4.12

2,225.69

10.62

5,735.95

Source: Axco Global Statistics /Industry Associations and Regulatory Bodies (for the year 2014) * PA & Healthcare data represents PA & Healthcare business other than life riders, whether written by life, non-life or specialist healthcare insurers.

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brokerslink global board brokerslink conference 2016, amsterdam

Global Boa

The new Board members: SUNNY LEÓNS CEO of Leóns, the Amsterdam‑based broker, and co‑organiser of last year’s Brokerslink Global Conference in Amsterdam.

ROGER POTTS Chairman of Bridge Insurance Brokers, a leading independent UK insurance broker.

YOUNESS RHALLAM CEO of Alpha Asssurances, one of the largest independent brokers in Morocco.

Alpha Assurances is partially owned by the Akwa Group, a leading Moroccan conglomerate.

ROHAN STEWART COO of PSC Insurance Brokers, one of the leading and quickest growing independent brokers in Australia.

FRANCISCO VALDÉS Partner in AER – Alternativas En Riesgos, a leading independent Mexican broker headquartered in Monterrey.

ard

Brokerslink has transformed itself into a global broking company with an international reach that provides a serious alternative to the market. Following incorporation in Switzerland in 2015, a successful private stock offering to firms within Brokerslink was completed in 2016. The completion of the stock offering provides capital for investment in personnel, software and branding that will facilitate accelerated growth of the company. Brokerslink has appointed five new members to the Board and in the Amsterdam Conference appointed Grégory Allard, CEO of Filhet‑Allard in France, as the new Chairman of the Board and the new Vice‑Chairman is Patrick Chan, Director and General Manager of Hong‑Kong based broker Nova Risk Services Holdings. The expanded Brokerslink Board provides representation for the larger shareholder base also allowing a globally diversed thought leadership that ultimately works for the benefit of Brokerslink.

Brokerslink Conference 2016, Amsterdam

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Brokerslink The 2016 Brokerslink Global Conference was held in Amsterdam from 20-22 October. Hosted by one of our most committed partners – Léons – the event had a record attendance of almost 300 people; partners, sponsors and guests from 60 countries. The number and enthusiasm of the attendees clearly showed their commitment and support for the Brokerslink strategy. What started as a non-profit association, has now become a Global Broking Company managing a network of Brokers and Risk & Consultancy firms in 95 countries.

DURING THE AMSTERDAM CONFERENCE, BROKERSLINK WELCOMED EIGHT NEW AFFILIATES. THE EXPANSION CONTINUES OVER THE YEARS AND IN THE FUTURE WILL MORE LIKELY FOCUS ON THE SO-CALLED EMERGING REGIONS LIKE AFRICA.

Filhet-Allard Côte d’Ivoire

Karl Köllner

Ivory Coast

Germany

Ansoumana Ndiaye

Stephan Winneg

Client Executive

Managing Partner

Norwegian Broker

Söderberg & Partners

Norway

Sweden

Siri-Mette Amble Senior Brokers International Business

David Strömberg VP Business Development Insurance Consulting

Aktuell

Filhet-Allard MDS

Austria

Spain

Jean-Baptiste Agnès

Enrique Schoch

Viena Branch Manager

General Manager

InterCapital Risk

MDS

Croatia

Mozambique

Kresimir Tomasic

Tiago Mora

Executive Officer

Director at MDS Africa

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The Conference attracted renowned keynote speakers.

“ Brokerslink is the partner of choice for mid-corporate companies because it perfectly combines local expertise with the huge power of a global network.” Jean-Marc Pailhol Head of Group Market Management and Distribution at, Allianz

“ Lloyd’s wants to work with brokers to solve the ‘huge’ innovation gap that exists within the insurance industry and fend off disrupters from the tech world.” Inga Beale Chief Executive Officer, Lloyd's

“ We must take a step further to leverage cultural differences for maximum competitive advantage.” Fons Trompenaars Founder and Director, Trompenaars Hampden‑Turner

“ Insurance is everywhere yet invisible.” “ The insurance industry contributes immensely to the development of the world economy.” Rob Brown Global Chief Executive, AXA Corporate Solutions

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“We are now a broker focused on wholesale, specialist and reinsurance broking and so no longer compete with our retail brokers clients.” Andrew Wallin Group Commercial Director, Ed.

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Brokerslink On the back cover of the book, Sunny Léons wrote some meaningful words - all the more so in light of the current climate of unrest: “What would we do in the face of injustice, tyranny, oppression or random acts of violence? Nobody knows beforehand.

A VERY SPECIAL GIF T When registering for the conference, all participants received a surprise gift – a book with a very appealing cover, featuring the conference logo and a reference to the fact this was a special edition published specifically for the event. Entitled ‘Run hiding places’ and written by Max Léons (founder of Léons and father of the current president and our host in Amsterdam, Sunny Léons) and Arnold Douwes, the book tells the incredible story of two young people who joined the Resistance after Holland was invaded by the Nazis in the Second World War. Their mission was to find homes that would shelter people who were being persecuted by the Nazi regime. While most of these people were Jews, some were not; one of the stories describes how a North-American pilot was hidden and helped to escape from the occupied zone. In addition to the usual difficulties associated with hiding someone, the pilot’s stature made it very difficult for him to go unnoticed. But they finally succeeded in helping him reach his base in England!

The world is, once again, in a state of great upheaval. Nobody wants history to be repeated but, as was the case 70 years ago, the choices we make today will impact upon future generations. Before the Second World War, Max Léons and Arnold Douwes did not know how they would react, nor even what they would be capable of doing. But the war turned them into unknown heroes of the resistance, who risked their own lives to save hundreds of others. In ‘Run hiding places’, they tell their story, exactly as it happened. A very personal and factual account of two people who came to others’ assistance simply because they could. Their story is a lesson in humility and is extremely dear to us. It also shows that family, respect and honesty are values that will always prevail, whatever else might happen. We live and work in accordance with these values, above all because we are a family.” The 2016 Brokerslink conference in Amsterdam was a great event. A coming-together of the great Brokerslink ‘family’, where delegates were privileged to learn the inspiring story of the founder of Léons, a member of Brokerslink in Holland who, at the age of 18, stopped being just a boy living his youth and became a hero.

“ People are actually the biggest agents of change rather than the technology itself. The people who embrace and market the power of the new technology are the real innovators.” Micha Schipper Founder, COZ Innovation

“ Brokers have a unique role to play in helping the insurance industry tackle the global insurance protection gap...” Hanno Mijer Zurich Chief Executive Officer, Corporate Life & Pensions Global Life

“ Insurers have huge opportunities in the African insurance market, but they have to find imaginative solutions to mitigate different risks and make profits.” Emmanuel Brule Deputy CEO, Saham Finances

A very big thank you to Sunny and his team for such a special gift.

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ANA CRISTINA BORGES — THE NEW BROKERSLINK REGIONAL MANAGER FOR MEA Ana Cristina Borges was appointed as the new Regional Manager for Africa and Middle East, replacing Youness Rhallam, who is since September Board Director. Youness will keep a strategic role and will work close to Ana on the challenge of creating and consolidating a strong and dynamic presence in this geography. In 2013 Ana was appointed as CEO of MDS Africa, with particular responsibilities for the development activities in Angola. Since December 2015 she is CEO of MDS Re, a subsidiary of MDS Africa, with direct responsibilities over reinsurance development activities, in African and European markets.

José Manuel Fonseca, Brokerslink CEO

“ Attending the Amsterdam conference gave us the opportunity to appreciate how much Brokerslink has grown and matured. The organisation, speakers and participants all contributed to the outstanding success of this international event. Brokerslink is a reality for the business world and Amsterdam bore witness to the fact. Congratulations.”

“ It gets better every year; a wonderful experience in shared learning, and a great opportunity to strengthen relationships, with our many Brokerslink Partners.” Ney Kindlon Chairman, Kindlon

Esteban Sanchez CEO, Artai

Sunny Léons, conference host

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Attendees give us their feedback on the conference

“ The Brokerslink Conference 2016 in Amsterdam was a great success and another milestone in the history of Brokerslink. The programme was very interesting and diverse, covering recent topics relevant for us insurance brokers to refine our knowledge in order to consult our clients even more effectively in all means. The internationality of the whole event shows how all Brokerslink members come together and work as one. Once again, this event has shown us how well we complement each other and how we can, therefore, offer our clients the best possible consultation for around the globe.” Edoardo Leusciatti Account Executive and Member of Board of Directors, SRB Group

“ Brokerslink is a great partnership of risk related firms to provide services all over the globe. The Amsterdam conference is a great example of a consolidation of this driving force.” Juan Mario Acevedo President, Correcol

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In 2004, driven by the need to provide quality services to international clients, José Manuel Fonseca and MDS set out to find like-minded, independent insurance brokers to forge a regional network. These efforts led to the creation of Brokerslink in Porto. By 2009, Brokerslink has become a global insurance alliance with a presence in over 50 countries, supported by strong reinsurance brokerage. The 1st global conference took place in Hong Kong that year. Since then, Brokerslink has integrated best-in-class specialty broking and risk consulting firms, offering a strong alternative to the mainstream models operating in the insurance market. In 2015, Brokerslink AG, a global broking company was created and a new type of global broking company came into existence. Over the years, the company has evolved and grown because of Entrepreneurial, Truly Committed, Enthusiastic, Collaborative and Renowned Professionals from around the world striving to Excel and to Seize Opportunities. Here is a quick introduction to some of the faces that embody Brokerslink’s DNA.

Anthony Lim

CEO and Chairman of Acclaim Insurance – Singapore Coincidences mean you’re on the right path.” (Simon Van Booy, Love Begins in Winter: Five Stories) By luck or fate, Anthony Lim’s and José Manuel Fonseca’s paths crossed in London in 2006. From this encounter the two “brothers from different mothers” set out on a new path and the first steps for Brokerslink to become global were taken and the doors to Asia were opened. A passionate leader and an entrepreneur, Anthony is one of the most respected professionals in Asia. Known for his expertise – which he enjoys sharing – and a sense of humour, Brokerslink is part of Anthony and Anthony is Brokerslink. •

Anthony Lim and José Manuel Fonseca @PARIMA

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Juan Mario Acevedo President of Correcol – Colombia

Latin American soul Juan Mário Acevedo is an insurance man, an accomplished artist and musician. In close collaboration with his brother, Enrique, he heads up Correcol, the largest independent insurance broker in Colombia. Juan Mário has been a key figure since 2007, when Brokerslink joined forces with a network from Latin America. His reputation in the insurance industry, along with his commitment and desire to share his knowledge, has contributed to Brokerslink’s growth. •

Carla Alves and Juan Mario Acevedo @RIMS

Isidro Garcia

Chairman of Trinity Insurance Brokers – Philippines Contributing to society and the insurance industry The owner and founder of Trinity Insurance Brokers, Isidro ‘Sid’ Garcia, was one of the creators of PanAsian Alliance, a reputable network of independent brokers in Asia. In 2008, he hosted the annual Conference at Boracay Islands (Philippines), where the idea to merge Brokerslink (Europe), PanAsian Alliance and a Latin America network, was discussed for the first time. It was a memorable moment and a milestone in Brokerslink’s journey to become Global. ‘Sid’s’ commitment and enthusiasm towards this project is reflected in the active role he plays as Brokerslink’s Regional Manager for Asia Pacific. He is a distinguished professional, recognized by Rotary International for the contribution he makes to society and his role as ambassador to the insurance industry. • Corey Gooch, Sid Garcia and Paul Bitner @RIMS

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Iulia Simon

VP Marketing at C.H. Toro International - USA Born in Europe, a world‑class professional Headquartered in Miami, C.H. Toro is a longtime member, and one of the most appreciated partners in Brokerslink. Iulia has been part of the C.H. Toro team for more than 20 years. With a contagious enthusiasm, she embraces Brokerslink projects as her own. Always ready to share knowledge and to collaborate, Iulia embodies the organisation’s spirit. •

Liliana Perez, Carlos Toro and Iulia Simon @Amsterdam

Edoardo Leusciatti

Board Member of SRB Assekuranz Broker – Switzerland A Swiss‑Italian “recruited” by a Canadian During RIMS in New Orleans in 2007, the late Richard Snow, Managing Director of Sonae’s broker in Canada at the time and a close friend of MDS and José Manuel Fonseca, recommended Edoardo Leusciatti of SRB Assekuranz Broker as “the perfect Brokerslink partner in Switzerland”. An avid skier, he is a long‑term and highly appreciated member. Edoardo has been key to the success of the incorporation process. •

Ana Cristina Borges and Edoardo Leusciatti @Amsterdam

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sharing Osama Abu Ghazaleh

Executive Vice President of Ace Insurance & Reinsurance Brokers – Kingdom of Saudi Arabia The door to the Middle East ACE joining Brokerslink, with its strong presence in several Middle Eastern countries, opened up a vast and new territory for the organisation. Their outstanding team of professionals including Osama Abu Ghazaleh, anchored Brokerslink’s presence in the region. Osama always has a smile on his face and, together with the ACE team, is always keen to support the organisation, embodying the true DNA of Brokerslink. •

Muchemi Ndungu and Osama Abu Ghazaleh @NY

Steve Jackson Rainmaker – Mexico

A Brokerslink man Part of Brokerslink since day one, more than 12 years ago, Steve Jackson is a renowned professional in the insurance industry and a ‘Brokerslink man’. A former senior executive at Cooper Gay (now Ed.), Steve was in charge of the SONAE account. The close relationship with MDS and José Manuel Fonseca, along with his creativity and knowledge, gave him a special role in Brokerslink history. Part of the Board and Regional Manager for Latin America, he was the “father” of the long-lasting relationship with Ed. He is a strategic partner whose continuous support, although in different companies, has been essential to Brokerslink. • Paula Rios and Steve Jackson @Lisbon

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Sunny Leóns

CEO of Léons – Netherlands Reputation across the borders It was not an easy task to persuade Sunny Léons to join Brokerslink, but he soon became one of its most enthusiastic supporters. As a shareholder and Board member, he has become instrumental in Brokerslink’s growth. Enthusiastic, always with new ideas to improve Brokerslink’s execution and promoting the strategic relationship with insurers, he is among the most influential people in the organisation. The huge success of the 2016 Brokerslink Global Conference in Amsterdam is testimony to Sunny’s and the Leons team’s commitment and friendship. •

José Manuel Fonseca and Sunny Léons @New York

Stephan Winneg

Managing Partner of Karl Köllner – Germany History repeats itself A “property man” at Junge – a company partially owned by Cooper Gay - the young Stephan Winneg was in charge of the Sonae account in Germany. In 2005 he attended the 3rd Brokerslink conference in London as a guest and soon became a strong supporter. He left Junge for a new professional challenge in another broker but he never lost touch with Brokerslink and in 2016 he was very happy to be back when Karl Köllner joined as the German affiliate. •

Ricardo Pinto dos Santos and Stephan Winneg @MDS

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mds ana mota A woman's perspective on insurance andrĂŠ tostes When numbers tell a story MDS Africa â&#x20AC;&#x201C; Growth, opportunities and challenges mds news

mds magazine

ANA MOTA

A woman's perspective on insurance In the year she celebrates a decade at MDS, we talked with Ana Mota about her career in insurance and her unexpected move into a sector which, because of its personal interaction and capacity to make a difference to people’s lives, was very appealing.

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Reach for the stars Ana’s passion for astronomy and her dream of working for NASA seemed to plot the professional path she would follow. “I loved Quantum Physics, anything to do with stars, going to the Moon, to Mars…,” Ana remembers with youthful enthusiasm. Nevertheless, this area was underdeveloped in Portugal and so the need for professional stability prevailed. Ana enrolled in an Economics degree at the Universidade Nova de Lisboa, a course she considers an enriching experience: “It prompted us to scrutinize and question policies and systems so that we became thinkers and not executers,” she says, explaining her choice. Ana’s first role was in asset management at the financial department of Santa Casa da Misericórdia. At a chance meeting with Luís Portugal, a director at the Portuguese Association of Insurers ‑ Associação Portuguesa de Seguradores (APS), Ana was challenged to join APS as an advisor in financial and administrational management that lead her into the world of insurance where she still is after 29 years with the same passion and commitment. Ana recalls: “I started giving technical support to several insurance areas which as time went on, enabled me to acquire a macro‑vision of the insurance market.” In 1985 an opportunity arose for Ana to join the team at Victoria Seguros as Corporate Director – an experience she says contributed to her knowledge of the insurance sector, particularly in the health and life areas. Ana explains: “In Victoria Seguros I acquired technical competences and practical experience in a broad range of areas. I worked with many brokers and multi‑national clients and had the support of great mentors, colleagues who would provide ‘on the job’ training, such as José Ribeiro (Life insurance) and Inês Murteira (Health insurance), who are reputed professionals in their areas of expertise. She continues: “After 12 years at Victoria Seguros, a post‑graduate colleague at the Instituto de Formação Actuarial (Insurance and Pensions Post Graduate course), asked if I was interested in a MDS project to create specific technical areas; something totally unique to brokers, demonstrating MDS’s aptitude for innovation.”

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ANA MOTA By 2007, Ana was asked by MDS Group CEO, José Manuel Dias da Fonseca, to take responsibility for developing its Employee Benefits portfolio, an area which is an important part of the group’s activity. Ana points out: “My years of work in the brokerage area have been very intense, but equally enriching. There are always numerous challenges and a desire to do more to meet the needs of every client. Society’s evolution and the emergence of new risks will always ensure we are constantly learning and motivated to do better and be different.” In this context, she believes brokers will always have a pivotal role: “Our work as brokers allows us to have a global vision of what the market can offer and our closeness to clients ensures we can understand their needs. But MDS is much more than an insurance broker, it is a consultant that helps clients find the best risk solutions.”

A vision of the future We asked Ana about the sector’s evolution over the last few years and what she sees are the future challenges in the Employee Benefits area. “The sector is clearly evolving, just look at the Life & Health area. Nowadays, clients are increasingly looking for insurance which covers medical expenses for serious and incapacitating illnesses. They have greater awareness of the need for this insurance and so this line of business continues to grow.” In addition, Ana highlights the risks associated with the growth in company ‑wide globalization: “As demand increases for insurance to cover trips, expatriates and other situations resulting from market globalization, the market will need to respond with new solutions.” She mentions the new risks associated with longevity: “Living longer impacts pensions’ sustainability and we should also think about how to tackle the physical dependence risks ‑ an area not monitored by the insurance sector. Our challenge is to ensure the market provides the appropriate solutions; we are closest to the clients so we can see how their needs are changing. Existing solutions do not meet those needs.” Will the insurance sector have the capacity to provide alternative solutions or will they complement the Government’s role in the social area? Ana replies:

“The insurance sector has an essential role which can be complementary or alternative. I think it’s possible to develop a short to mid‑term alternative model, and as for the complementary approach, I believe this is also possible. There are already complementary solutions to the Government’s provision, such as pension plans, retirement savings plan and health insurance. However, for them to be efficient, more stable regulation is needed. Insurance can only be seen as a complementary support when it is viewed by society as delivering benefits, which does not always happen.”

Women and leadership This year Ana completes a decade of leadership in the Employee Benefits area at MDS. So how has she created such a successful team? She explains: “It is not about inheriting or creating a team. As I became more involved in the business and client management at MDS, I built the team around me. This enabled me to choose people I felt had the right competences, development potential and ethos for teamwork; all essential factors for success.” Does being a woman create leadership challenges and opportunities and does having a feminine perspective add value to the team? “I have never felt discriminated, positively or negatively, for being a woman. I am not in favour of quotas or the fact that some positions must be occupied by men or women. I do believe however, there are some areas where intuition, sensitivity and one’s affection for what you do, may be different because of your gender. The truth is, not all women have these characteristics. But what is proven is that women, in contrast to men, have multi‑tasking capacity. Nevertheless, I believe in equal opportunities for all people who want them.”

Sporting influences A natural‑born sportswoman, Ana puts what she has learnt from her sporting experiences into her personal life – she has been a gymnast with Sporting Clube de Portugal for over 30 years. Ana confirms: “Sport, and specifically gymnastics, was a major influence in my life.

Outside of my family, gymnastics has been a pillar of strength for me, both in terms of education and the values I gained from it, which I still hold. Gymnastics instilled in me a spirit of sacrifice, the need for dedication and working as a team (I always took part in group gymnastics). We learnt the discipline of time management; sport never stopped me being a good student.” Her years as a gymnast took Ana to many destinations and remarkable situations, which she still remembers nostalgically: “Gymnastics gave me great experiences – getting to know Portugal from the north to the south and international trips, including one to Macau and China in 1984. Representing the club and our country gave us a sense of great responsibility and enormous pride.” Ana’s trip to China was back then, a cultural shock, but also an experience of an 80’s China which will forever be in her memory. She outlines: “We travelled from Macau to Canton in a Second World War bus, a 100 km trip that took 6 hours, crossing villages deep in the middle of China. When we left the bus for lunch, the locals would look at us as if we were aliens from Mars, as it was rare for them to see westerners. Their different tastes also gave us some difficulties. On a couple of occasions no one was able to eat; once we were served a raw fish, still bouncing and another time, a rooster with its comb. When we uncovered the dishes, no one would eat – it was a unique experience that won’t be forgotten.” Ana describes her family and friends as ‘indispensable and alongside this, lists gymnastics, walking mainly on sunny winter days’, books and TV series, especially history and science fiction, as her main hobbies.“My interest in astronomy never faded,” she adds. “I had several life mottos,” Ana confirms, “but as mottos change throughout life, the values remain, so I prefer to be without them.” It is with pride that, what started unexpectedly, has now become a vocation, maybe because of the fascination she has for the ‘human side’ of insurance and her desire to make a difference to people’s lives. “I am motivated by a need to change the image people have of insurance. We do not have a good reputation yet insurance is an important part of society; we are able to support people in difficult situations and help at a time they need us most”, she says. •

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ANDRÉ TOSTES When numbers tell a story

In 2009 André Tostes took over responsibility for managing MDS Brazil’s finances and since then, has played a key role in the company’s development. We talked with André to find out more about his professional career, what led him to accept a role at MDS and what are the challenges for the future.

Family tradition A long tradition of a family of merchants inspired André's interest in the dynamics of business when he was still very young. “I think I was always attracted to the idea of knowing how each business makes money and how they support themselves financially,” he says. “I remember seeing my parents going through the numbers, instilling the importance of financial responsibility upon me and my sister.” His attraction to economics and finance appears therefore, a natural progression. In his curriculum vitae his experience extends to a number of different areas, but an opportunity to workwith BrasilPrev ignited an interest in the insurance sector, combining it with his interest in financial management. “When I came across the private pensions market, my first dealings with insurance, everything was new, complex and very interesting! Things such as mathematical calculations for risk mitigation, actuarial science (something unimaginable for me at the time) and multi‑year planning to assure the business’ long‑term sustainability were subjects which fascinated me. Besides, the insurance sector is very broad and we end up getting involved in several types of businesses, which is very dynamic and challenging. It is an endless learning curve,” he assures.

The challenge of MDS Brazil In February 2009, André joined the team of MDS Brazil with responsibility for the planning and treasury departments. MDS had just acquired two big companies in the south of Brazil and Rio de Janeiro, an acquisition which turned it into one of the biggest players in the Brazilian market. With this acquisition, came the challenge of merging the systems, processes, people and culture of the different companies– which André describes as an ‘unmissable opportunity’: “When I was given this opportunity, my eyes shone! It was a unique project which allowed me to put my experience and learning into practice and be involved in the company’s restructuring, as well as get to know other products, as MDS already had a sizeable portfolio and a respected reputation in

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ANDRÉ TOSTES several sectors of the industry by then,” he reminds. Today, seven years later, André is very proud of what was built: “It was a long process that allowed MDS to differentiate itself from its peers and be recognized by all stakeholders – clients, insurers, shareholders, partners and society in general – as the leading risk consulting and insurance brokerage.

Managing a successful team The work André developed during this time led to continuous promotion within the company. He is currently responsible for an 82‑strong team. We asked André what are the main challenges of team management and what essential factors enabled him to achieve such positive results. He explains: “I still remember the words of my director when I first became responsible for a team ‘now you are a manager, do you want to be successful? Hire better people than you! Don’t be afraid!.’ I never forgot that and every time I’m involved in the recruitment process, I analyze the candidates in that way. I firmly believe success is related to people.” “On the other hand,” he concedes, “all employees must know their role within the company. There is no efficient management without goals and clear objectives or without promoting team spirit and communication. A company isn’t made of independent cells, it’s a chain of interlinked processes, where each staff member can influence the final result. Without this, there isn’t involvement and, consequently, no innovation nor positive results.” André believes people should not act solely as employees of the company they work for, but that they should be ’owners’ of their career. He comments: “I always stimulate self‑evaluation with the following analogy: if your career was a service provider, and you were a client, how would you evaluate it? I do this because in my experience, people who do not think about the service they give usually do not have a future in the organization as they do not have the necessary enthusiasm to be productive and progress in their role.”

Growing in the face of adversity Brazil is living through one of its biggest political and economical crises, something that’s greatly impacting on industry, commerce and services. Brazil’s GDP decreased 3.6% in 2015 and in 2016 retracted to around 3%. Unemployment is some 12%, representing almost 12 million people. Growth in this scenario is surely an enormous challenge. André counters: “But history shows us that great opportunities can arise during the toughest moments. Companies in Brazil are making gains in efficiency and cost adjustments in order to minimize the effect of revenue loss. We have taken advantage of this to offer products and services to clients who, apart from risk protection, want solutions to help them reduce costs and optimize their processes. This brings us even closer to our clients and prospects as we are able to offer the solutions which meet their real current needs.” In this context, MDS Brazil has focused on the development of some specific products, such as credit and liability insurance (such as Directors & Officers and Errors & Omissions also known as professional liability). André suggests: “MDS’ knowledge and expertise gives us the capacity to develop products that mitigate or minimize the risk of revenue loss.” Even during the tough economy of 2016, MDS Brazil delivered growth and André predicts the forecast for 2017 is further continued growth.

The future of the sector Andrés says the evolution and dynamism of the Brazilian market is clearly evident, particularly in recent years where it has demonstrated even higher professionalism. This has been greatly influenced by the increasing demand of clients who seek more than just simple insurance. Andrés believes technology will play a leading role in the insurance industry: “For corporate clients, I believe the future will include increasing use of technological digital platforms which aggregate all services and information. This benefits clients from a financial

and operational perspective, it will automate processes by absorbing some activities, create better fraud prevention and business risks services and consequentially, reduce claims. For private clients, I think there is an increasing pressure to sell insurance directly via a digital platform.” In contrast, Andrés points out that the introduction and use of autonomous vehicles will cause insurers to change current motor and civil liability insurance policies due to the many claims scenarios this new technology may bring. In relation to the broker’s role, André is assertive: “We should emphasize the importance of the broker, both as someone who can offer the best risk coverage according to clients’ needs and when it comes to claims, be able to intervene, defend their interests and ensure a quick settlement of the claim process.

“Being happy for no reason is the most authentic form of happiness” It is in the words of poet Carlos Drummond de Andrade that André looks to for inspiration in his daily routine. With a Portuguese and Italian heritage, André upholds the traditional values and characteristics of these cultures. In essence, family plays a central role in his life and he “does not waiver from family life and playing with his children.” André has the typical disposition of Latin people and their passion for food, “the problem is keeping the figure after”, he shares with humour. In his free time André likes to surf. Football is also a regular presence in his life; he was a federate indoor soccer player and the learning he took from here, such as teamwork and the dedication needed to achieve results, is reflected in his professional life. Music is equally important to André. He was in a band, but nowadays finds relaxation in music and playing the guitar. Questioned about his projects for the future, André concludes: “I hope to continue to serve MDS, maintain its reputation for excellence and service innovation and build its relationships with clients and partners.” •

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MDS Africa

Growth, opportunities and challenges In 2011 MDS started operating in Angola. Nowadays, the activity in this market is consolidated, MDS has broadened into Mozambique and MDS intends to expand into other regions in this continent. FULLCOVER talked to the key players involved in this operation asking them to share some of the milestone events. It was perfectly natural for MDS to be in Portuguese speaking countries in Africa. “These are markets we know well, we’re culturally very related and there is similar legislation to Portugal”, explains José Manuel Fonseca, CEO of the MDS Group. “These are markets where we can grow, add value and become a market‑leading broker, as we already are in Portugal and Brazil.” “It all started some five years ago, in a seminar about energy promoted by the Agostinho Neto University in Angola”, says Ana Cristina Borges, CEO of MDS RE, the MDS Reinsurance broker. Ana and her colleague MDS technical director, Tiago Mora, were in the audience and having made a number of contacts realized: “New challenges were ahead of us and it was clear there were interesting opportunities in Angola for a broker and risk consultant like MDS”. As the group was already keen to expand in Africa, Ana continues: “The next step was to find a local partner, an essential requirement, and start the operation.”

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The expansion to Mozambique and reinsurance

Taking a gamble José Manuel explains why he was happy to take a gamble on Africa: “Africa is a continent of the future; it’s undergoing a transformation and will be a particularly important economy in the next few decades. Angola and Mozambique are young markets with great growth potential and we adopt the same principles we apply in Portugal. This is to be a broker who grows with the market, but also helps the market grow. As an Angolan and Mozambican broker, we are not just a simple middleman and so can retain a local focus, establishing ourselves as a key player and building upon our reputation for strength in technical consultancy, adding value and innovation. Our aim is to develop in these countries in the same way we have grown in Brazil”. In addition, José Manuel says: “As there is substantial Portuguese investment in these countries and we have a wide MDS client base, many companies in our portfolio require a local support service for their operations, specifically in Angola and Mozambique. It therefore makes total sense to be present in these areas. Our vision is to be a crucial reference point in the markets we are present in, a leader broker which contributes to the evolution of those markets, utilizing our products, services, team, brand and resources to do so and further developing trust‑based relationships with the insured.

Ana Cristina explains: “As we have authorization for insurance and reinsurance, we are requested to source and place local cover for both fields of business. As the operation evolved and given the number of clients we had and the accompanying compliance issues, it made sense to separate the direct and reinsurance operations, signaling the birth of MDS RE.” This evolution lead to the creation of MDS Africa, a holding company owned by the MDS Group and its Angolan partner, ISEM, which integrates all investments in Africa, namely in Angola and Mozambique and also MDS RE. Although MDS RE is a subsidiary of MDS Africa, its mission is not just to provide a service in Africa – it is an international reinsurance broker with major clients in Africa, but also working in other markets. Ana Cristina adds: “We are developing our business, aiming to become a key player in the market. We don’t just do brokerage. As part of the MDS Group, we have wider responsibilities such as such as structuring reinsurance packages, undertaking due diligence processes and supporting insurance companies in their new product and business line development. In short, we provide an extensive reinsurance service; analysing programmes, advising clients on the best solutions, offering a range of options and arranging the cover. José Manuel also talks about the ‘youngest child’ of the group, MDS Mozambique: “We recently established a partnership with a local broker in Mozambique, strengthening our commitment in this market. Mozambique and Angola are important elements of our global brokerage company – Brokerslink – reinforcing the presence of the MDS Group within Brokerslink itself.”

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MDS Africa

ANGELINA NASCIMENTO

ANA REBELO

Country Manager, Mozambique

Country Manager, Angola

→ Angelina Nascimento graduated in Law from the University of Coimbra and has more than 10 years of professional experience in several areas of law, acquired in the practice in renowned law firms in Portugal. In addition, Angelina has extensive experience in the Mozambican insurance market. In 2016, she joined MDS Mozambique, after three years at Moneris Mozambique, where she served as a business leader.

→ Ana Rebelo holds a degree in Modern Languages and Literature from the University of Lisbon and holds an Executive Master’s degree in Marketing and Communication from Indeg – ISCTE. Over the past 20 years, she has held various positions in the insurance sector, from Head of Marketing and Communication at Victoria, to the Director of Clients of the International Department of João Mata, most recently serving as Commercial Manager and Quality Control Officer at Aon Angola. Ana Rebelo took on the role of Country Manager at MDS Angola in 2016.

→ The challenge of joining MDS Mozambique: “For me, joining the MDS Group is a wish come true that will mean professional growth and personal satisfaction, specifically the opportunity to gain access to new opportunities, knowledge and resources. The combination of these factors will certainly allow me to contribute to the development and growth of the group, decisively supporting its performance in Mozambique!”

Present and future According to José Manuel: “From the initial push given by colleagues who kick‑started the project to where we are now, consolidating the operation, we have travelled a long way. We are still making strong investments in our African project, particularly through the allocation of our best resources which includes the present CEO of MDS Africa, João Alvadia, that was one of the main executives of MDS Portugal. The fact we have moved someone so crucial to our Portuguese operation, shows the importance and the respect we attach to the African market.” He also points out: “In Angola we are already a ‘go to’ local and global broker. This is illustrated by the breadth and quality of clients in our portfolio, our relationship with the companies we work with and the services we provide, from reinsurance and devising cover packages to risk management and brokerage.

→ A Challenge at MDS Angola “For me, MDS stands for strength, growth, dynamism and, above all, innovation. And it was precisely this innovative and almost provocative facet of constantly challenging the market with different solutions, which led me to choose MDS to develop an exciting career path.”

“Furthermore, all MDS Group’s resources are at our clients disposal in all the geographical areas we are present in; we have a very strong technical team that is highly competent in risk and insurance, and this is supported by strong local teams.” MDS Africa’s CEO, João Alvadia, assesses the past year: “Despite a slowing of the economy, 2016 was the year to consolidate our position within the Angolan insurer and corporate market. The local team was boosted with the recruitment of Country Manager Ana Rebelo and we will continue to invest in qualified people (drawing upon the support of MDS Group’s managerial staff, which adds value to the operation).” He continues: “in 2017 we will begin using Proximity – an innovative computing tool which allows clients to directly manage their MDS insurance portfolio – already widely used in MDS Portugal. “We will equally continue to expand our consultancy role, tapping into the expertise of several companies within

the group, such as our risk management firm, Herco. The Angolan insurance market, with a penetration of less than 1% of GDP, is a market with enormous potential and growth opportunities. We intend to maximize these opportunities, sharing our knowledge and maintaining and building a close relationship with the main players of the Angolan market.” As for Mozambique, João opines: “We set up a team here in 2016, led by Country Manager, Angelina Nascimento. Although the economic outlook for 2017 isn’t that positive, there’s equal growth potential as Angola, so we will contribute to the market in the same way.” João concludes with his vision for Africa: “We are looking at other regions. Our priority was naturally the official Portuguese language countries, but there are other interesting opportunities. The African continent has enormous potential, and we already operate through Brokerslink partners, of which MDS is a reference shareholder.” •

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MDS Group strengthens its position in the Global Insurance Market

MDS news

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In 2016, the MDS Group continued to grow and consolidate in the various countries where it is present; strengthening the position in the business areas of operation. In Portugal, MDS finished the year with yet another record, achieving a turnover of over 25 million Euros and retaining leadership of the sector – a position occupied for the last 10 consecutive years. In Brazil, MDS maintained the trend for sustained growth, achieving a turnover of almost 100 million Reals. Another important milestone in 2016 was an increase of investment in the African market, with the launch of the operation in Mozambique. In Angola, MDS achieved a significant growth rate of 190% and the operation in the country today is strong and fast‑growing. In Spain, a market where the Group has a direct presence through the Madrid‑based joint‑venture Filhet-AllardMDS, the growth rate was 22%, making MDS a force to be reckoned with in the Iberian market. Another 2016 milestone was Brokerslink’s increase in and opening of its capital to members, making it a truly Global Broking Company. Based in Zurich, it owns and manages a network of brokers across approximately 100 countries. Today, the MDS Group has a direct presence in eight countries and operates on a worldwide scale through Brokerslink. MDS has a multi‑specialised team of over 600 employees and manages over 500 million euros in insurance premiums and a portfolio of 1.2 million private and corporate clients. These figures reflects MDS Group global reach and it's strong position as an insurance industry leader. •

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Ricardo Pinto dos Santos appointed CEO of MDS Portugal Following a career path that has demonstrated professional excellence, leadership, business and client alignment Ricardo Pinto dos Santos has been appointed as CEO of MDS Portugal. Ricardo, who joined MDS in 2010, takes over from Jacqueline Legrand, who will continue to play a central role in MDS as COO of the MDS Group, alongside her leadership role with HighDome and active support of Brokerslink. This strategic transition reflects the professional quality of MDS’s senior management. •

Jacqueline Legrand and Ana Cristina Borges named Influential women in Re/insurance The Intelligent Insurer has published its 2016 Influential Women In Re/insurance report, which names executives whose work has stood out on the sector’s international stage and who are considered to demonstrate success and leadership among women. Among the personalities highlighted are Jacqueline Legrand, COO of MDS Group, and Ana Cristina Borges, CEO of MDS RE. In the two editions of the report, 160 women have been identified as successful female leaders in a market that is still traditionally headed by men. •

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MDS supports Joana Vasconcelos Pop Rooster MDS has joined forces with plastic artist Joana Vasconcelos to take her most recent work, Pop Galo, on a world tour. It is within MDS’s corporate responsibility policy to pay particular attention to culture and this insurance cover will safeguard her work. Due to its complexity, size and public exposure, the partnership represents a considerable challenge to the insurance sector. Pop Rooster was inaugurated at the Web Summit event in Lisbon, in November 2016, signalling the start of a tour that took it as far as China for the Year of the Rooster celebrations. It will then head to Brazil. The Pop Rooster sculpture was inspired by the popular Barcelos Cockerel and combines traditional Portuguese tile art with the very latest in LED technology. Standing 10 metres high, the work is covered with some 17,000 hand ‑painted tiles and around 15,000 LED lights, interconnected in a unique way. As a result, this technological creation can be interpreted in different ways as the Barcelos Cockerel transforms itself when day gives way to night. •

MDS and Portuguese President at Chamber of Commerce event in São Paulo

Marcelo Rebelo de Sousa, President of the Portuguese Republic, was the guest of honour at a special dinner organised by the Portuguese Chamber of Commerce in Brazil. Attended by various consular bodies, politicians and Portuguese and Brazilian businesspeople, Hélio Novaes, Jacques Goldenberg and Gustavo Quintão represented MDS at this event, which took place in São Paulo last August. The Portuguese head of state highlighted the bonds between Brazil and Portugal and congratulated Brazil on the opening ceremony for the 2016 Rio Olympic Games. MDS was the broker responsible for providing civil liability and terrorism cover for these Olympic and Paralympic Games. •

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MDS continues to conquer in Latam Insurance Review Awards

MDS Brazil was once again recognised for its innovation, creativity and experience with a triple success in the 2016 Brazilian Insurance Awards. Following its 2015 award for Commercial Lines Broker, the team secured success in three categories, confirming its prominent position in the Brazilian insurance market. As well as retaining its position as Commercial Lines Broker award of the year – recognizing the team’s knowledge and experience and high quality products – MDS Brazil won the Innovation in Broking category for its creativity, originality and well implemented strategy and the Risk Consulting Firm award for the experienced team with brand value and reputation. Promoted by LatAm Insurance Review magazine, one of the most important publications covering the Latin America insurance market, the Brazilian Insurance Awards recognise companies and individuals that stand out in the delivery of exceptional services and solutions for the corporate insurance sector. •

MDS supports Miguel Ramos in the 2017 International GT Open MDS is supporting Miguel Ramos when he partners Danish driver Mikkel Mac in Ferrari’s ‘Spirit of Race’ team at this year’s International GT Open on 29 - 30 April at the Estoril Motor Racing Circuit in Portugal. The pair will be competing at the wheel of a Ferrari 488 in the Championship’s toughest and most competitive ‘Pro’ category. MDS has supported the Portuguese driver in a number of international competitions. Miguel Ramos was the winner of the International GT Open in 2015, the Spanish GT Championship in 2002, and the Italian Championship in 2005. He has also driven in the 24 hour Le Mans races in 2002 and 2005, the GT1 World Championship and, more recently, the International GT Open.

MDS invests in FlexBen MDS has reinforced its position in the Employee Benefits sector with a 45% purchase of FlexBen, a Portuguese-based technology company that develops solutions to help companies design flexible benefits packages for their employees. The FLEXBEN® system allows companies to set up, implement and manage bespoke flexible benefits programmes in an integrated and efficient way, delivering cost savings (through tax breaks) for companies and employees. This investment puts MDS at the forefront of the flexible benefits area; something companies consider essential to attract and retain employees. •

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MDS grew and stablished itself in the market thanks to the investment in its team knowledge and skills and the capacity to attract experienced professionals. More than employees, we have a multi-specialised team from across the world whose contribution has been essential. Get to know some of MDS faces.

Jacqueline Legrand

Carla Alves

Director of Operations, Brokerslink Carla began her career in banking, but soon found her way into insurance brokerage. An MDS employee since 1998, she has worked in many areas, allowing her to get to know the teams and company structure in depth. With a wealth of experience in client management and business development, Carla also contributed to the affinity and online insurance sales areas. Over the years, Carla has been involved in a number of strategic company projects, including Proximity, which she led. In 2014, Carla was appointed Director of Operations at Brokerslink AG, the global brokerage company based in Switzerland with offices in 100 countries. MDS is the main shareholder and founder. With an ever‑present team spirit and drive to overcome obstacles, which she acquired during her time as a volleyball player, Carla dreams one day to open a unique bookshop in Porto. •

Francelina Santos

Filipa Brito

Corporate Risks Coordinator for Lisbon, MDS Portugal Filipa became part of the MDS family in 2004 following a Lisbon broker acquisition. She has always been dedicated to managing clients, particularly large‑scale businesses. Her contagious positive attitude, characteristic energy, cheerfulness and enthusiasm uplift both colleagues and clients. Delivering a client‑focus and quality service comes naturally to Filipa, resulting in unrivalled work practices and dedication. Time socialising with friends is essential in Filipa’s life, as is sport, in particular running. •

Controller for the Financial Department and Management Control, MDS Portugal Francelina joined MDS in 2005 as a result of a broker acquisition and quickly embraced her new company culture. She holds an important position, in which she combines an in‑depth knowledge of the financial sector and numerical proficiency with remarkable dedication and an ability to tackle complex projects. She has a degree in accounting from ISCAP (Higher Institute of Accountancy and Administration of Porto), specialising in Financial Management. Besides spending time with family and friends, she enjoys DIY. Singing is also one of her passions, and Francelina is a soprano in two choirs. • 166

Leandro Freitas

COO MDS Group From New York to Porto – in 2012 when Jacqueline accepted the challenge of taking on an MDS management role it was unheard of in the Portuguese market to have a foreign manager at a Portuguese broker. Her arrival at MDS demonstrates the Group’s ability to attract talent; having recruited a reputable professional who occupied a prominent position at an American broker. Jacqueline has brought insight into other markets and cultures, and extensive experience of international business. Her positive attitude and resilience enables her to focus on solutions and winning strategies, without ever losing enthusiasm or motivation. She is a citizen of the world: of French origin, Jacqueline maintains her ties to the United States, where her family lives and where she pursued a large part of her career. In between trips, she lives in Portugal and spends some of her free time playing the piano, a skill she has for life. •

Financial Lines Manager, MDS Brazil A Portuguese‑Brazilian, Leandro was born in Brazil but immigrated to Portugal when under a year old. He returned to his roots in 2002 to integrate Lazam‑MDS at a time when Brazil was undergoing a period of investment in large infrastructure, and when financial insurance was in demand as a result. He is considered one of the best Brazilian experts in suretyship insurance. Leandro manages the Financial Risk Department at MDS Brazil with enthusiasm and a desire to always learn more; sharing information and knowledge with others. His positive attitude and friendly personality never fails to make people smile. Leandro is seen as a real entertainer – witty, with a magic touch. •

Patrícia Correia

Brokerage Operations Coordinator, MDS Portugal As one of the longest‑standing employees at MDS, Patrícia knows the company like nobody else and is part of its very core. She joined at a young age and progressed within the company in terms of responsibility, leadership, influence and knowledge. Determined to hit targets and aim higher, Patrícia achieves results that are instrumental to the growth of MDS. She is a fan of Benfica, a family woman and everybody’s friend. Patrícia won’t, however, forgive those who forget her birthday! •

Tatiana Carvalho

Pepe Rodríguez

Corporate & International Director, Filhet‑Allard MDS Spain Pepe has over 25 years’ experience in the insurance sector with a special focus on risk and international business management. Before joining Filhet‑Allard MDS, he held senior positions at Spanish and international brokers and in the risk management departments of several businesses. Pepe has remarkable communication and interpersonal skills, establishing and maintaining positive and fruitful relationships with risk managers, clients and insurers. His only problem, really, is that he thinks he’s as good at tennis as Rafa Nadal! He is however, a great connoisseur of fine wines. •

Client Manager, MDS Angola Born in Cape Verde, Tatiana loves living in Angola, where she moved in 2010. She graduated with a degree in law from the University of Coimbra and then pursued a career in the insurance sector. Tatiana joined MDS Angola in January 2015 as Client Manager and considers the need to be constantly informed and up‑to‑date about the global insurance market as ‘thoroughly essential’. She spends her free time at the beach or cinema, but her greatest passion is travelling; Tatiana’s next destination is Greece, but her dream trip is to Florida, USA. •

Victor Garibaldi

Illustrations by Marco Mendes

Pedro Monteiro

Business Applications Coordinator, MDS Portugal Pedro started his internship at MDS while very young, before finishing his Computer Engineering – Computers and Systems course at the University of Porto. He learnt a great deal and quickly progressed at MDS. Today he is in charge of the Business Applications department. Pedro’s involvement in major and varied projects, such as Proximity and Phoenix, has given him an in‑depth understanding of the Group’s structure. Although he abandoned his dream of a meteoric career as a professional footballer, Pedro’s team spirit and good humour have secured him the role of manager of the MDS football squad. •

New Business Director, MDS Brazil Victor is an outstanding professional with remarkable technical skills and client sensitivity. He is always restless when it comes to his projects and constantly has innovative ideas; devising unique and advanced solutions which play a significant role in ensuring MDS gains recognition as a market innovator. Despite his very busy professional and family life (he has four daughters!), Victor manages to find time for his favourite hobby, sport. •

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AT THE FOREFRONT OF THE RETAIL REVOLUTION

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Alexa Shopping in Berlin, Germany

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sonae sierra Sonae Sierra was created in 1989 in Portugal and is owned equal shares by Sonae Group (Portugal), a multinational company managing a diverse portfolio of businesses in retail, financial services, technology and two major partnerships in the shopping centres and telecommunications sectors, and Grosvenor Group Limited (UK), a privately owned property group active in some of the world’s most dynamic cities. Today Sonae Sierra is an international retail real estate services company, present in 14 countries and providing services to clients across four continents. FULLCOVER talked to its CEO Fernando Guedes Oliveira about their expansion strategy and the importance of risk management in international operations.

Sonae Sierra is an international developer and retail real estate services company. Being present in geographies as diverse as Europe, South America, North Africa and Asia, the focus in the geographical expansion will continue to be one of the strategic guidelines of the Company? International growth will definitely be one of the main objectives of our strategy for the following years. As an international retail estate services company dedicated to serving the needs of investors, we are able to deliver a complete range of specialized services in this area across the globe. In different geographies such as Portugal, Algeria, Brazil, Colombia, Germany, Greece, Italy, Morocco, Romania, Russia, Slovakia, Spain, Tunisia or Turkey, with different typologies: from new Centres to refurbishments or expansions and mixed used schemes with retail focus and in different locations: from urban shopping centres, downtown, to out‑of‑town projects or islands. With over 25 years of experience, the combination of our know‑how, our commitment to innovation and our long term approach has enabled us to create a unique business model that embraces Investment Management, Developments, Property Management and Development Services. Financed by a prudent combination of equity and debt, our capital will continue to be employed in a geographically diverse portfolio ranging from greenfield sites to acquisitions with development and/or expansion potential.

Our shopping centre track record, the quality of our services and our ability to create financial and social value for stakeholders throughout the entire asset lifecycle constitute a competitive advantage and have enabled our business to expand across multiple countries and be distinguished by with 160 awards. Our business continues to evolve, and we have seen that market appetite for Sonae Sierra services is strong and growing. As a consequence, we now see investors as our key clients. We want to become more customer‑centric and to be more flexible and agile to suit their needs. All in all, we see Sonae Sierra progressively evolving into a retail real estate services company which also retains investment capital of its own for selective investment in retail assets. Going forwards, we will make a clearer distinction between services and capital. We will continue to operate the four distinct business units and they will maintain greater autonomy, focusing most of their efforts on delivering services to clients, including our own projects. Sonae Sierra Brazil will continue to operate as a unique business unit focusing on the investment, development and management of shopping centres in a country that we believe offers significant potential in the long term. Our capital will target mainly minority positions in core assets and will place more emphasis on new development projects. This means that we will continue to decrease our ownership in the existing portfolio, while securing service contracts, to fund new development projects in Europe and emerging markets thereby creating new opportunities to provide services.

ParkLake Shopping Centre in Bucharest, Romania.

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Risk management plays an important role on Sonae Sierra’s strategy. What’s the role of MDS on this? One of the priorities we’ve identified to deliver shared value for our business, society and the environment is Safe people and Eco-efficiency. Regarding risk management specifically, we operate a best in class integrated Safety, Health and Environment Management System (SHEMS) which guarantees an effective management of the main environmental aspects and safety and health risks during the lifecycle of a shopping centre which enable us to provide a better service and/ or workplace to investors, tenants, shopping centre visitors, professional services clients, employees and suppliers whilst reducing operating costs for our business. With this approach we intend to ensure that risks towards people and assets are minimized. But we approach risk in different ways. Regarding risk related with people, we have to ensure the coverage of visitors and employees in shopping centres in operation, or employees in projects under construction. Regarding risk in properties, we have both to guarantee the coverage of the buildings of shopping centres in operation and also new developments have to be safeguarded. MDS has been an important partner in tracking down the best solutions available on the insurance market, in Portugal and internationally, to address our company’s needs and in terms of safeguarding our property and buildings (assets), as well as covering risks in new projects or in owned shopping centres in operation. With projects being developed and centres operating in seven countries, it has been very important for us to be able to work with a partner who can develop an international insurance programme for us that covers different areas and all the risks associated with our business activities, e.g. property, liability, terrorism, natural disasters, earthquakes and environmental liability. For these major areas, the entire company is protected by a comprehensive range of solutions that allows us to respond to demands on various levels and by different stakeholders. This is why it is so important for us to work with a specialised partner who is entirely cognizant of regulations, standards and local laws and who understands the specificities of each market. For example, banks increasingly value the fact that assets are properly safeguarded when we move forward on the development of a project. Ensuring that we are properly insured internationally has enabled us to meet the requirements of banks, partners and clients. We always ask for the best solutions at the best price; for this reason, MDS has set up agreements with partners in different countries in order to address our geographical dispersion and the challenges that our activity represents. At the same time, it has allowed us to benefit from a combination of agreements that it has in various countries and, consequently, we have been given access to advantageous conditions. I believe that the partnership has been beneficial to both sides insofar as Sonae Sierra’s expansion has also

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led MDS to enter previously unfamiliar markets. In some cases, this has even meant seeking local partners for the first time in order to respond to our needs for risk cover in the countries in question. As Sonae Sierra has expanded into emerging markets outside Europe, this has become an increasingly current reality and one which will continue to characterise our partnership in the future. With your ongoing strategic focus on retail real estate, how is Sonae Sierra anticipating and responding to fast‑evolving retail and consumer trends? We aim to create unique shopping centres and to constantly exceed the expectations of consumers and tenants alike. So far, I feel proud of what we have achieved: online consumer platforms which connect digital and physical retail space; new flexible retail concepts that promote local businesses and offer

Fernando Oliveira, CEO of Sonae Sierra

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sonae sierra consumers bespoke artisan products; a personalised digital fashion service and unique and exciting visitor entertainment propositions, among others. But we currently stand at a confluence amid unprecedented levels of change: technology, demographics, urbanisation, greater global connections and climate change are just five of many megatrends which are significantly shifting the paradigms of consumerism, commerce and real estate. In this context, we have positioned ourselves at the forefront of what is effectively a retail revolution. We are already seeing different retail formats emerging in our tenants’ stores, with retailers offering online shopping in store and giving greater importance to in‑store experience and displays. With our operations now spanning a diverse range of markets, our market intelligence and innovation teams are actively interrogating future trends so that we can evaluate and redefine our value proposition to stakeholders in each market, across all stages of our product lifecycle. We have always been pioneers, and I am confident that Sonae Sierra will continue to bring new and relevant concepts to the market which will allow us to differentiate our shopping centres and better serve tenants, visitors and clients as retail and consumer trends evolve. In fact, our business model supports our vision. It is underpinned by our business and sustainability strategies that aim to deliver sustainable financial returns in the short, medium and long term, while creating shared value for society and the environment.

Over the longer term, environmental sustainability, climate change and related socio‑economic aspects could pose greater challenges both in terms of increased regulation, costs, physical and infrastructural risks to assets and changes in terms of retail logistics and consumer behaviour. In this context, our strategic focus on creating shared value and reducing the environmental impact of our business puts us in a better position to manage these risks. All in all, I believe our company is in a strong position to exploit new opportunities to successfully grow our business over the next five years and beyond. All of our business units have a clear competitive advantage based on over 25 years of experience in the shopping centre business. In our core markets we benefit from strong brand recognition and long‑standing relationships with tenants. Moreover, we remain well connected with a wide ‑ranging network of local and international investors across developed and emerging markets to which we offer our unparalleled breadth of expertise and deep knowledge of development, investment and management activities. •

Looking ahead, what do you see as being the most significant challenges and opportunities for Sonae Sierra, and how are you managing these? In addition to the changes in retail and consumer trends already mentioned, there are other key trends which we identified as posing risks and opportunities for our business strategy, and these have influenced the restructuring of our company. For example, there is currently a lack of development opportunities for shopping centres specifically in mature markets, whilst the trend towards urban regeneration is creating opportunities for developers of mixed‑use schemes. We are now reinforcing our competencies in this area so as to be able to offer development services for mixed‑use schemes where retail is a core component, in partnership with other developers. We have foreseen that greater sector professionalisation may lead to an increase in outsourcing. With growing competition in the market, we are evermore pressured to keep our operations profitable, hence our focus on expanding our services to external clients, which enables us to add volume to our business and allocate our resources efficiently. Nonetheless, as we proceed to operate in a capital light mode, our strategy is to maintain a minority stake in assets and secure long term property management service agreements when we execute disposals.

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1989

1997

1999

2000

2005

Start of operations of Sonae Imobiliária, formerly Sociedade Portuguesa de Centros Comerciais (SPCC)

Inauguration of Centro Colombo in Portugal (the shopping centre with the greatest number of shops in the Iberian Peninsula)

Globalisation begins with entry into Spain, Greece and Brazil

Expansion into Germany and Italy

Sonae Imobiliária becomes Sonae Sierra, seeking to create an internationally-renowned brand in the shopping centre sector

Inauguration of Centro Vasco da Gama in Portugal

Opening of the first shopping centre managed by Sonae Sierra: AlbufeiraShopping, in Portugal (former C.C. Modelo de Albufeira)

Sonae Sierra The Company operates through 12 corporate offices providing services to clients in geographies as diverse as Portugal, Algeria, Brazil, Colombia, Germany, Greece, Italy, Morocco, Romania, Russia, Slovakia, Spain, Tunisia and Turkey. Owned by Sonae, SGPS (Portugal) with 50% and Grosvenor Group Limited (United Kingdom) with 50%

2005 Sonae Sierra awarded ISO 14001 certificate for its Environmental Management System. It is the first company in its sector to achieve this certification at an international level ‘Personae’ is named the Best Social Responsibility Project by AMCHAM 2008 Sonae Sierra is given the ‘Green Thinker Award’ Sonae Sierra achieves the Safety & Health Management System OHSAS 18001 certification; it is the first European company in the shopping centre sector to receive recognition in this area

2009 Sonae Sierra is named the best company in Italy’s retail real estate sector with two awards: Liquid Real Estate and Quotidiano Immobiliare The European Commission commends the company at the Sustainable Energy Europe Awards for its energy management strategy 2010 Sonae Sierra receives the Best Retail Developer’ accolade e in Portugal, Spain and Italy at the Euromoney Real Estate Awards for Excellence

Illustration by José Cardoso

1998 Centro Colombo wins all major awards in the sector – including MIPIM, ICSC and PROCOS

2007

2010

2011

2012

2013

2014

2015

2016

Expansion to Romania with the acquisition of River Plaza Mall

Expansion to Colombia

Expansion to Morocco

Expansion to Algeria

Expansion to Turkey

Starting of Services Provision in China

Development of a shopping centre in Azerbaijan

Opening of ParkLake (Romania)

First investment in Morocco

Key Facts . Operating across 14 countries in 4 continents . 45 owned Shopping Centres . Manage and/or lease 78 Shopping Centres . 15 projects under development (7 for third parties) 5 new projects in pipeline . Sonae Sierra is organised into five autonomous businesses: Investment Management, Developments, Property Management, Development Services and Brazil . More than 160 awards 2016 IN A GLANCE . Consolidated Net Profit of € 181 million (compared to €142 million in 2015 – increase of 28%) . 2,3 million m2 of total GLA managed . More than 9.000 tenant contracts . 425 million visits . More than €5 million in tenant sales at managed Shopping Centres . More than 1000 direct employees

2014 Distinguished with three prizes (two gold and one silver) at the ICSC Latin American Shopping Centre Awards Global 100 Awards: Best Retail Developer – Latin America

2011 Sonae Sierra is honoured by the GRESB (Global Real Estate Sustainability Benchmark) for being the company with the most sustainable real-estate investment funds in Europe and the third worldwide 2013 The company and its Shopping Centres were awarded 17 times, the most relevant: ICSC Europe: New developments category, Medium for Le Terrazze Green Business Index Awards: five distinctions for Sonae Sierra

2015 Honoured for the seventh consecutive year by the Euromoney magazine Real estate Awards, winning Best Developer Overall and Best Retail Developer in Portugal M&A Today Global Awards 2015: Best Retail Developer in Latin America 2016 CIJ Awards 2016 - Best Retail Development & Developer of the year for ParkLake and Sonae Sierra ABRASCE Awards – Two Gold awards and one Silver in the institutional Marketing category for three projects

Illustration by Carlos Pinheiro

PEDRO CASTRO CALDAS → Pedro was born in Lisbon in 1950. He has a degree in Mechanical Engineering from the Instituto Superior Técnico de Lisboa (IST) and complementary training in Project Management in Switzerland. → He worked as project manager in Mague’s Energy Division until 1987 when he joined the insurance industry as Technical Director of Non-Life Insurance and Reinsurance at Tranquilidade and at HDI Mutual Insurance Company. From 1993 to 2013 Pedro worked at Ocidental Seguros and other Millennium bcp bank insurance partnerships. From 1994 to 2004 he was a member of the Risk Management Group of the Pan-European insurance Group EUREKO, where he collaborated on and was responsible for several large insurance and reinsurance projects (public and private partnerships) in property and engineering risks such as the Metro do Porto network. → Up until 2012 he coordinated several Technical Commissions at the Portuguese Association of Insurers (APS). → Since 2013 Pedro has devoted his time to Risk Management study and consultancy.

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TRIVIA

in the post-truth era BY PEDRO CASTRO CALDAS

In ancient Rome, it was a widely-held belief that the population’s true desire was food and entertainment. As a result, the Government kept the Romans happy by distributing food such as bread, at theatrical spectacles staged in amphitheatres. Viewed as ‘circuses’ the events were held in huge arenas and chronicled scenes of bloody combats, battlefields and of everyday violence between humans and conflict between humans and beasts. The outcome – greatly enjoyed by the crowd who feasted on free bread – was usually the death of the weaker antagonists. The masses were led to believed they wielded power and could dictate whether the defeated survived combat, shouting ‘Forgive him’ to those they considered worthy of living, or ‘Slit his throat!’ to those they did not. Acting upon these calls, the Emperor gave a ‘thumbs up’ or ‘down’ verdict, dependent upon what was most popular. At their peak, these grotesque and degenerate ‘amusements’ occupied up to two thirds of the day for Romans, however they were far removed from the Greek traditions of athletics and theatre. Away from this, in ‘reality’, barbarians were ravaging the borders of the Empire and due to a lack of people who believed in or defended it, history says it began fragmenting and ended up crumbling. Byzantium’s theocratic monarchy, to the east, survived the Roman Empire and following its alleged union with God, replaced the bloody spectacles with “heavenly” scenarios, focusing on such topics as what the sex of angels would be. At this time, motivated by a desire to plunder and slaughter its inhabitants, the Ottoman Turks were rampaging what were up to then the unassailable Constantinople walls. A renaissance, era of high morals and ‘seeing the light’ followed. Such enlightenment encouraged people to follow their own direction rather than that of others.

The hallmark of the 20th century – greater civilization – was attained partially through the learning of past mistakes, such as two world wars and multiple civil wars. It was expected humanity would continue to follow this path of reason and not take the opposite direction, following differing forms of subversive thought, often characterised as the post-truth era. In this emerging ‘new world’, the idea to recreate ‘real life’ scenes or reality shows for audience entertainment became popular – similar to the Roman amphitheatre days. In the 1970’s ‘An American Family’ was produced by American TV network PBS; the audience was invited to follow and rule over the day-to-day life of an American family during live episodes. This format inspired dozens of other shows which attracted increasing audience figures. They were supposedly based on ‘real life’ characters who rather than be involved in fictional plots, focused their attention on the banality of everyday life by means of the first person narrative. They concentrated on the tensions, conflicts and distress they experienced daily in their personal or professional life2 and the audience was invited to intervene – similar to the Roman calls for ‘decapitation’ or ‘forgiveness’. Such actions were undertaken with the consent of tv network ‘moderators’ who, provided with a script and a desire to monitor and control audiences, rationed the distribution of favours (similar to Roman ‘bread and circuses’), giving a ‘thumbs up’ or ‘down’ to the reality show participants and rewarding fictional players with prizes, making them believe, deceitfully, that they are indeed in ‘real life’. The post-truth era also saw the arrival of social networks such as Twitter and its list of Trending Topics3, along with other sites which present themselves as useful universal access tools to knowledge and information, democratically available

to any user. These sites encourage spectators and fictional characters who under the cloak of anonymity, can relate experiences, express opinions and create emotions which rapidly become news and topics for debate. When repeated many times, this ‘news’ transforms from a lie to the truth, forming opinions, creating certainties, amplifying reactions and, in the end, influencing history. In this dangerous world of truth affirmation, small and unthinkable events created by individuals who are unable to separate fact from fiction, can have great and unpredictable consequences for others; impacting people’s lives, social groups and nations and threatening the viability and future of organizations and future generations. This is illustrated by Lorenz’s Butterfly Effect - the flapping of a butterfly’s wings somewhere in the world can cause a typhoon on the other side of the planet. In this post-truth era we are witnessing a dominant stream of lie glorification and are left with a narrow path to follow when it comes to risk management, relying on reason, wisdom, objective identification, analysis and elimination or mitigation of the dangers. It is crucial we evaluate the consequent risks of ‘real life’, rather than those resulting from created scenarios based on budgets, fake data and unquantifiable or wrongly quantified dangers. Those who fail to do this could face unpredictable consequences; ‘real life’ harsh realities. • 1 Was an adjective that came up in the ‘Brexit’ context and Donald Trump’s election, chosen as 2016’s word of the year by the Oxford dictionary and defined as a circumstance «in which the objective facts have less influence in the formation of the public opinion than the appeals for emotion and personal belief» 2 MATEUS, Samuel – Reality-Show: uma análise de género Revista Comunicando, nº1, 2012, pp.235-244. ISSN 2182-4037. 3 A list, in real time, of the most broadcasted messages in Twitter all over the world.

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mds magazine

MDS Releases Trivia A book about Risk Trivia – About the nature of things is a collection of chronicles by Pedro Castro Caldas that have been published in FULLCOVER since the very first issue. Trivia stands out for its unique character, a perspective of risk that is both historical and contemporary. Through his shrewd vision and insightful humour, the author leads his readers to reflect on all current issues in the insurance sector. “This book is part of FULLCOVER EDITIONS, a new initiative by MDS that aims to promote knowledge and information across the insurance and risk sector in Portugal. The collection will continue with a compilation of texts from the other sections of FULLCOVER, including the interviews with the heads of the leading players in the insurance industry worldwide,” says MDS Executive Director Paula Rios. Trivia is being published as a single bilingual edition, in Portuguese and English.

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mds magazine

readings The new age of data, devices and the Internet of things is transforming the insurance industry and while analysis is the key to gaining insight and extracting value from data, it is not the destination – it’s what you do with these insights that matter. The effective use of analytics is critical to support and implement strategy, create new tactics and design new best practices. All lead to better profitability, lower cost and less risk for insurers and they enable new products and services to be introduced more effectively.

ANALYTICS FOR INSURANCE: THE REAL BUSINESS OF BIG DATA BOOBIER, Tony London: Wiley Finance, cop 2016 ISBN 978‑1‑119‑14107‑5

The insurance industry however is fragmented and many departments operate in silos. For insurers to become truly analytical in nature, they have to be prepared to take a holistic view of all data and use it effectively (brokers and suppliers being a key part of that data creation). The book is relevant to all insurance professionals, wherever they may work – underwriting, claims, risk, marketing, etc – and it refers to the differing lines of insurance business such as personal, commercial, life and speciality. It is valuable for mature and emerging markets; already the publishers are working on a translation for the Chinese insurance marketplace which is growing at 20% annually. Other emerging nations such as Brazil also have the potential for massive growth which will be fuelled by better analytical insight. It is critical business people understand the technology that will affect the way they work, and for technologists to understand the complexities of insurance like indemnity and subrogation. There’s also a chapter devoted to location analytics which is essential to the insurance sector – after all, isn’t everything and everyone somewhere? Insurance professionals must also remember the role of insurance in society. We already think about the impact of cloud computing, mobile technology and social media but the insurance industry needs to plan for the next

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wave of ‘mega trends’. These will include the connected car, home, person, urbanisation and new distribution models like Blockchain data recording. All have implications on insurance policies, process and practices. The author describes himself in the book as lying awake at night thinking about the convergence between insurance and technology. It’s easy to reflect on the past and present but more difficult to think about the future. Part of the future will involve ‘Cognitive Analytics’ which allows users to analyse data inside and outside their organisation, and to interact with the system using everyday natural language. He already says there are impacts in healthcare and financial services, and insurance will be affected soon. It will not only change the way we work, but also impact on leadership. Tony Boobier is an independent consultant to the insurance industry focussing on data and analytics. A recognised international speaker and industry commentator with 30 years insurance industry experience, he was until recently a worldwide executive with IBM. His first book ‘Analytics for Insurance: The Real World of Big Data’ has received international acclaim and is described by Professor Tom Davenport (Babson College, Massachusetts) as the book insurers ‘need only read if that want to remain in business’. Tom is one of the top three leading international authorities on analytics. •

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readings Fons Trompennars is an influential consultant, trainer, motivational speaker and author on culture and business. He has spent over 25 years helping leaders worldwide to manage and solve business and cultural dilemmas to increase global effectiveness and performance. Charles Hampden‑Turner is a key business thinker, he has worked as a consultant for Shell, BP, Digital Equipment, the BBC, Nissan and many other companies.

RIDING THE WAVES OF CULTURE TROMPENAARS, Fons HAMPDEN‑TURNER, Charles London: Nicholas Brealey, 2012 ISBN 978‑-90483-838-8

THE POWER OF BEING YOURSELF PLUMERI, Joe Boston: Da Cape Press, 2016 ISBN 978-0738218816

In a global marketplace, culture counts. We work with people from other cultures, countries and backgrounds and it is fundamental to understand the differences, so that we can work more effectively and prevent confusion. Nowadays the ability to lead effectively in a global business environment is a fundamental skill in any organisation. In their book, Riding the Waves of Culture, the authors provide insight to help us survive in today’s global work environment. Trompennars and Hampden‑Turner highlight the challenges of leadership in resolving dilemmas relating to different cultural pressures. Everyone, everywhere faces very similar

A widely admired leader in the insurance industry, Joe Plumeri was named one of the “100 Most Influential People in Finance” in 2009 and 2010 by Treasury & Risk magazine’s list. He was also recognised by St. John’s University School of Risk Management as Insurance Leader of the Year in 2006. He is a man known by his contagious optimism and authenticity, the ability of his inspirational speeches to move thousands and a talent for transforming the way companies think and operate. In the book, Plumeri, the former boss of Willis Group and Citibank North America, talks about his experience in the business world – both the good and the bad – and offers his insight on how to stay positive, motivate yourself and others around you, and striving for success in your personal and professional life.

dilemmas in their personal and professional lives. What changes is their cultural background and how that will impact on the way people react; their culture influences, their thinking and behavior. It’s culture that forces our direction in one way or the other. When we have culturally diverse teams how do we proceed? It is fundamental that leaders know how to reconcile differences and are able to create effective change and efficiently manage this in a cross‑cultural business world. Failure to recognise and adapt to cultural diversity leads to a breakdown in communication and trust. Trompenaars and Hampden‑Turner have created a powerful model for understanding cultural differences. With many practical examples and case studies, their book is a helpful tool to leaders and managers from around the world. It conveys the skills, sensitivity, and cultural awareness needed to manage in a globalised, cross cultural world and learning how to take strategic advantage of cultural differences to transform them into competitive advantage for their organisation. •

to have forgotten how to relate to each other, preferring to hide behind the anonymity of their computers. He defends the importance of human connection and the need for people to engage more. The Power of Being Yourself features eight key principles, providing insight into behaviors and motivations that can help everyone get further in their life. The author believes that the secret to success is found not in boardroom strategy or corporate philosophy, but rather in allowing passion, purpose and true emotions into your life. This is reflected in his life motto that everyone should live in the moment and be honest and true in our emotions. •

In Joe Plumeri’s own words, this is not a business or leadership book, it’s a people book. This is a story about finding your passion, following your heart and, most of all, learning how to be yourself. According to the author, we are living in a world ruled by technology where people seem

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FULLCOVER Behind the scenes Illustrations by Marco Mendes

On an August afternoon, something is happening at MDS in Porto.

At a kickoff meeting, there is intense brainstorming to decide which topics to cover in the next edition of FULLCOVER. 184

From Portugal to around the world, at FULLCOVER, we receive contributions from internationally-renowned experts, and travel great lengths to find them.

The big interview with a CEO from a global insurance company is one of the highlights of each edition. We get to know the person, the professional, their journey and the company. 185

FULLCOVER Behind the scenes There is always a lively exchange of views at follow-up meetingsâ&#x20AC;¦ but discussion leads to enlightenment.

The FULLCOVER team is multidisciplinary, and the pace of work is overwhelming. 186

After many intense months of work, itâ&#x20AC;&#x2122;s finally time for publicationâ&#x20AC;Ś

...and the excitement of the moment when, for the first time, we have the new edition of FULLCOVER in our hands! 187

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TIONS

Congratulations to FULLCOVER magazine for its 10th edition and for continuously covering the issues impacting this fast changing industry. Mike McGavick CEO, XL Catlin

Versatile, well‑structured, diversified, interesting content and high‑quality modern design. It makes you want to read it. Magalhães Correia President, Fidelidade

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My sincere congratulations to my friends at FULLCOVER for their 10th anniversary issue. In just a short time, FULLCOVER has become a benchmark publication in the world of insurance. Its contents – always up‑to‑date – and its quality are a reflection of the professionalism that has always characterised MDS. Congratulations!

FULLCOVER is the Vogue of insurance! Andrew Vigar Country Manager, XL Catlin

Alfredo Castelo CEO, MAPFRE Global Risks

FULLCOVER is a comprehensive and well‑designed magazine that gives the reader a global perspective on the market. It is impressive to see that the magazine has reached its 10th edition and I look forward to many more future editions. Enrico Bertagna Senior Vice President, Business Development Group, Allied World

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As a publisher of an award‑winning magazine, I know firsthand what it takes to produce a high ‑quality publication and stay current and substantive at the same time. FULLCOVER turns the mundane subject of risk writing into a gripping journey we can all relate to. The way they dissect real‑time industry issues through the lens of personal and professional experience uncovers the true skill of storytelling in an engaging form. Ken A. Crerar President/CEO The Council of Insurance Agents & Brokers (and Leader’s Edge magazine)

I find this magazine refreshing. It’s a wonderful combination of facts and interviews but written and set out in a way that is both readable and colourful – such a contrast to the usual insurance industry publications which can be heavy and difficult to get through. Simon Wallington Managing Director, Cornes

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From the wrapping paper to the last article of each edition everything is in line with the title of the publication – FULLCOVER. Every time it comes in the post I find myself eager to open it straightaway and dig into the rich and original content. In an era when traditional publications are replaced by digital newsletters and electronic magazines FULLCOVER’s 10th anniversary stands out along with the commitment of MDS to principles and tradition. Here’s to the next 10 years!

#10

Christos Gavriel Managing Broker, Renaissance Insurance Brokers

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