FULLCOVER 9 inglês by MDS Global Insurance & Risk Consultants

MDS MAGAZINE

ANTONIO HUERTAS ON MAPFRE Global business success with society at its heart

ENGLISH VERSION

#9 SUMMER 2016

ACCLAIM

FOSUN

“Mr Singapore” success story

Chinese group on the insurance “super highway”

GEOPOLITICAL RISKS Beware of the new world order

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M D S m a g a z i n e

Director José Manuel Fonseca Editorial Committee Ângela Fonseca Jacqueline Legrand Liliana Baptista Paula Rios Susana Neiva Contributors Adrian Ladbury Alain Simon Anthony Lim Corey Gooch Daniel O’Connell David Anderson Gustavo Quintão International SOS / Control Risks Iulia Simon John Bugalla Jorge Luzzi José Ribeiro Karen Jenner Paulo Varela Pedro Castro Caldas Prakash Ratilal Rob Hough Title FULLCOVER Author MDS Group Edition Number 1st edition (Fullcover 9) Publisher MDS Corretor de Seguros, S.A. Av. da Boavista 1277/81, 1º, 4100-130 Porto, Portugal mdsinsure.com Place of Publication Porto Date of Publication July 2016 Circulation 2500 Design Studio Dobra Cover Photo Pedro Lobo Printing & Finishing Lidergraf Sustainable Printing Legal Deposit 374241/14 ISSN 2183-6787

Partner 4

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Editorial We are delighted to bring another issue of FULLCOVER, the MDS Group’s magazine, to a close. It is distributed in many different countries and is today a benchmark publication on the international market. New for this issue is the fact that instead of a bilingual issue, we are actually publishing two separate versions, one in English and one in Portuguese, the fourth most-spoken language in the world and of which the group is extremely proud. We believe that by doing so we have made the magazine easier to read, as well as improving the graphic and design quality. António Huertas, Chairman and CEO of the MAPFRE Group features prominently in this issue. Our team had a very interesting conversation with him in which he shared his considerable knowledge and enthusiasm for the extraordinary mission that MAPFRE has been engaged in around the world. We bring you first-hand the impressive story of growth of Fosun Group, with special emphasis on the interview with the President of Fosun Insurance Group, Lan Kang, and the President of Fidelidade, the Group company in Portugal, Jorge Magalhães Correia.

JO SÉ M A NUE L F O N SE C A → MDS Group CEO

The issue contains a number of articles that I would like to draw your attention to in particular: the one about Acclaim, Brokerslink’s partner in Singapore and its leader Anthony Lim, a friend and outstanding figure in risk and insurance in Asia; our traditional dossier, which in this issue focuses on geopolitical risk; the importance given once again to Risk Management and ERM; and lastly the first-hand unveiling of the MDS Group’s new image on the market. See it on pages 146 and 147, where you can also read about the continuous innovation in our company and our non-stop growth and expansion. And if you think this issue is special, wait till you see the next one, when we will be celebrating the tenth anniversary of this unique project! WE WILL BE THERE!

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C 9

FOSUN On the insurance superhighway Lan Kang: Fosun playing the long game Jorge Magalhães Correia: Fidelidade – going from strength to strength

EVADING INSURANCE PREMIUM TAX ERRORS By Karen Jenner

ANTONIO HUERTAS MAPFRE’S Chairman and CEO

PEDRO CAMPOS

GEOPOLITICAL RISKS DOSSIER When the news is writing a page of History Managing and mitigating the evolving threat of terrorism

Sailing, risk and passion

Travel security and crisis management Geopolitical risk: what products & coverages?

New ideas for tackling geopolitical risks in business

PEDRO MACEDO

Geopolitical overview

Remembering

ACCLAIM INSURANCE BROKERS

The pursuit of a dream

RIO 2016: MANAGING RISK IN THE OLYMPIC GAMES A view by Jorge Luzzi

Singapore insurance market: facts & figures Singapore by Anthony Lim

ERM Alessandro di Felice: a new model for risk management ERM: giving your firm a strategic edge

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104 FRANÇOIS SETEMBRINO Remembering

107 BROKERSLINK Jirina Nepalova: an example of top expertise in the insurance industry Brokerslink in Africa: Ghana and Tanzania

152 THE BRAZILIAN HEALTHCARE MARKET By Gustavo Quintão

Brokerslink: from idea to reality – a transformation story Brokerslink news

126 ANGOLA: PRESENT AND FUTURE

156 ACE AND CHUBB MERGER Growth, discipline, innovation and service top of agenda for the new Chubb Veronique Brionne on Chubb Iberia

By Paulo Varela

134

A VISION OF (AND FOR) MOZAMBIQUE

162 TRIVIA: THE BAGHDAD RAILWAY By Pedro Castro Caldas

By Prakash Ratilal

138 STEVE HEARN

166 READINGS

Building the broker of the future

139 MDS Jacques Goldenberg: from Egypt to Brazil, a route charted by passion Enrique Schoch: a sailor in the world of insurance The power of will: discover MDS's new brand MDS news

INTERVIEW WITH MAPFRE'S CHAIRMAN AND CEO

ANTONIO

HUERTAS From a Spanish company to a global insurer, MAPFRE epitomises how corporate ambition and success work hand-in-hand with a strong commitment to social responsibility. fullcover meets Antonio Huertas, MAPFRE's Chairman and CEO, to find out more about the company and what drives the man leading it.

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Antonio Huertas interviewed by Enrique Schoch and Paula Rios of MDS Group.

It’s fascinating. When you start getting involved with insurance, you see how you are actually helping people, other companies, and your environment. I think that’s what makes us passionate about our job.

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How did a man from Extremadura who studied Law at University become the Chairman and CEO of MAPFRE? I studied Law, and wanted to be a lawyer. When I finished my studies, I did not know anything about insurance or MAPFRE. I got the chance of working for MAPFRE on a trainee project after reading an article in a newspaper that the company was looking for young people with little knowledge about insurance. So, although it was not my first job option, in the end I was thrilled to work in the world of insurance, and I have ended up loving my work and feeling passionate about the job. We have a great advantage in MAPFRE. It is a company based on meritocracy and professional development which responds to our merits. The company trains us and helps us develop. Those who have the attitude and better use their chances, end up making the most of them. Obviously, not everyone can become Chairman and CEO. In my case, I had mentors that helped me a lot including my predecessor as Chairman, who obviously decided and proposed to the board that I should take the role.

Is it true that most insurance professionals begin their careers indirectly, but end up being enthusiastic about the area? Yes, it’s fascinating. When you start getting involved with insurance, you see how you are actually helping people, other companies, and your environment. I think that’s what makes us passionate about our job. Commercially, we are involved in a huge social activity – we receive premiums from a lot of people and those funds are there to help others in contingency, in misfortune, and in difficulty.

A social role that is not well understood, don’t you think? We probably do not explain it well enough. There are complex relationships. We have to establish a very closed relationship framework that enables us to control our activities in order for this to be profitable, long-term and sustainable for all of us. I think that can be difficult to articulate. This is the great challenge that, in my opinion, we all have. In MAPFRE, we have set up an active transparency project to try to reach all stakeholders more directly and clearly. To try and make them see that there is much more to the insurance business than really meets the eye, and that MAPFRE occupies a model social position for many other activities related directly, or indirectly, to the company that we have to strengthen and support.

What were your ambitions when you finished university? My vocation was clear: to work as a lawyer, and so I started an internship in a law firm. But things moved slowly that way, so when I saw the advertisement I mentioned earlier appear in the newspaper, I applied and I was selected for a MAPFRE trainee project. When you start working in insurance, you do not really know where you will end up. My intention was to try to convince someone that I could work in the claims or legal departments, but that never happened. I was guided in another direction because they saw other skills in me – most likely a vocation for learning. It was an important time for the company and Spanish society. There was the birth of business technology, changes in consumer consumption and much more open competition and the flexibility of the relationship with the client. The Spanish insurance market was an exciting place. When I joined MAPFRE in 1988, it was the benchmark Spanish insurance company and it was clearly a very appealing challenge. My career has not turned out as I originally envisaged, but there is nothing I regret about it. At MAPFRE, relationships are very open and sincere, and so, after only three or four months of starting work, I was having meetings with the general manager. This continues today. Working for MAPFRE gives people lots of opportunities and advantages to grow and develop. I always say that ambition is important, it is not a negative thing. But you need to use it in the best sense. Ambition is not about hindering others; it is the complete opposite. It is about having the capacity to learn, grow, contribute and want to continue to do more things. This does not involve any negative attitudes towards colleagues and team mates. I think camaraderie and ambition are compatible. In reality, a natural process is happening. If we do well as a company, if the human resources management is appropriate and we have the right tools to meet the needs of team members, in the end, we must try to place the best people in the correct positions. The best person is not always the one who is around, or the one who has more knowledge, who displays the most skills for a task. This combination requires a very complex analysis. All of us who have managed people know that this learning process – handling the team – is very important. You need to be able to count on these people later on to help you and to contribute to make the project a success.

Ambition is not about hindering others; it is the complete opposite. It is about having the capacity to learn, grow, contribute and want to continue to do more things.

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When you became MAPFRE’s Chairman and CEO, what were your main objectives and goals? Do you think you have achieved them? I had three basic objectives. You have to accept that you have to gain the respect and credibility of those who you are going to lead. You are going to be the first among equals. At MAPFRE, when you reach a senior position, you have already been working a lot in the organisation, so you have to become the leader of a team in which probably one of the members had been your boss. This is the first challenge. The second is understanding the success model. When I took over the presidency, it was at a very successful period of time in our history, in terms of results and international expansion. Leading a team in which I was the youngest, I had to convince my colleagues and my team that the project had to undergo some changes, some variations, to be able to address the challenges that we ourselves had already determined. We did a strategic analysis at all levels around the world, where we completely reviewed what we were and what we would like to be. This led us to a new business model. The second important objective, therefore, was to reach success with this new business model and I think that we are getting there. The third objective was to enhance MAPFRE’s DNA of being a socially engaged company. Ours is a company with values, with institutional principles and an internal culture that respects these values. We do this both as a company and in Fundación MAPFRE but it all needed to be reactivated at a worldwide level. It is not only about charity and donating money. It is also about being engaged in an effective way to collaborate and improve things. I think that we are reaching this objective too. So, for me, it was all about the people, a business project and the social presence of the company.

Have those values made MAPFRE seem more open now than probably some years ago? I think that we are gaining openness because we are gaining transparency in MAPFRE. MAPFRE has always been proud of its social values, but maybe it has not been able to express them in a practical way because it has been more of a thought rather than a perception. I really think we are now achieving this with our clients, trying to see how they see us from the outside, and we are really trying to correct any deficiencies. We do not want to be a closed company. We open the doors wide to anyone who comes our way, whether it’s a competitor, a regulator, a company from another sector, or the man on the street. But we also have to understand that it is a successful model that has grown over 20 years, and is

transforming rapidly. The world has changed too, look at technology, and access to it, for example. The tools that exist nowadays to help these relationships did not exist in the past. It is not that we did things wrong before, but I believe we were not aware that we needed a little more closeness. In that sense, I think that we are now reaching that much more as a company.

Diversification is the main guarantee of success in what we do – to the extent that, if you do not diversify, you concentrate the risk a lot more and you are not managing it adequately.

Why has MAPFRE decided to become a global company by establishing itself as one of Latin America’s main insurers? Is Asia in MAPFRE’s plans? Diversification is the main guarantee of success in what we do – to the extent that, if you do not diversify, you concentrate the risk a lot more and you are not managing it adequately. MAPFRE reached a very important market position in Spain in the late 1980s, and it realised it had to extend a bit more, and branch out its business. We developed some reinsurance activities at an international level by setting up MAPFRE RE which is now 40 years old. We had gained great knowledge of the Latin American market, obviously because of the closeness of the language and the culture, and because it was an under-developed insurance market. So MAPFRE’s natural diversification process was to go to Latin America, but it was not easy. Growth in Spain meant that resources had to be kept here, so investments in Latin America were low. We bought new companies with problems and little room for manoeuvre, but we had a good spirit and the backing of the mutual that supported the business development. With patience we developed a long-term project that brought us a lot of success. It consolidated us as the largest regional insurance company in Latin America. Then, naturally, through reinsurance and other activities, we saw that we could reach other markets. Nowadays, MAPFRE works with different companies in more than 100 countries worldwide. Today, it is

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present in 50 markets, 50 countries with their own structure. We are a large insurance company in the Northeast Region of the United States and in Europe, even without considering Spain, we have a presence in the UK, Turkey, Germany, Italy, Portugal, and Malta. Asia represents a third of the worldwide insurance market and, as a global insurer, MAPFRE wants to be, and must be present there. We have had a presence in the Philippines for more than 20 years, and 12 years ago, we started in China. At that time, foreign insurance companies were not allowed to operate without a partner, and we did not have one. We decided to get to know the market by launching a service company that provided processing, advisory and call centre know-how services – and we have been doing this ever since. We opened small platforms for the assistance unit and, recently, we have broken into Indonesia with the acquisition of a relevant local company. The immediate future is that we are on the verge of obtaining a license to become insurers in China. Our 12-year working experience has given us the capacity to develop the Chinese business, and we will start with car insurance. We are working, as I always say, for MAPFRE’s next generation. Asia is not going to be important in terms of numbers for this generation’s employees and directors, but it will be for the next one. We have to stay in Asia and we have to get to know it. We have seven regional hubs around the world and one of them is Asia Pacific, based in Shanghai, and this allows us to get to know the area. South-East Asia offers us lots of opportunities, as does China because of its immensity. We are going to work in the Shandong province which has 90 million inhabitants. We are close to receiving the license, and we believe that by the end of next year we will be selling car insurance through a purely digital model.

Nowadays, MAPFRE works with different companies in more than 100 countries worldwide. Today, it is present in 50 markets, 50 countries with their own structure. We are a large insurance company in the Northeast Region of the United States and in Europe, even without considering Spain, we have a presence in the UK, Turkey, Germany, Italy, Portugal, and Malta.

The market for commercial risk and insurance is changing very fast, while very important clients – who are constantly expanding – are looking for wider services and cross-border solutions for emerging risks. What do you think about the development of MAPFRE’s service in this new environment, for example, through a client such as Sonae that is a traditional client of MAPFRE? Major corporations demand that insurance services providers offer the solutions they need. We cannot change Sonae’s business model, we have to learn what it does and stand by them, and every other client, and that requires huge flexibility. Practically everything is personalised and customised for the client and not the other way around, as it is with packaged services –, where we have traditionally been experts. Here we can clearly offer solutions that are successful in

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MAPFRE WORLDWIDE

MAPFRE is an independent Spanish multinational business group with 83 years of activity that operates in all areas of insurance. It originates in a mutual entity created in 1933 called “Mutua Agrícola de los Proprietarios de Fincas Rústicas de España”. MAPFRE is presently in 50 countries, five continents, with a global worldwide net of more than 80.000 agents & brokers, more than 38.000 employees and 34 million clients.

BUSINESS IN MORE THAN 100 COUNTRIES

MAPFRE has a strong presence worldwide and more than 50% of the business comes from this global activity.

+38.400

5.848

80.000

MILLION CLIENTS

E M P L OY E E S

OFFICES

AGENTS & BROKERS

PREMIUMS Brazil

Iberia

4,814.2 (20.0%)

6,696.7 (27.8%)

23,995.9

North America 2,776.8 (11.6%)

MILLION EUROS

Mapfre Re

LATAM (North)

3,731.9 (15.6%)

1,849.6 (7.7%)

A PAC

LATAM (South)

2,030.4 (8.5%)

114.6 (0.5%)

EMEA

1,981.1 (8.3%)

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MAPFRE GROWS IN STRATEGIC MARKETS

PREMIUMS (LOCAL CURRENCY )

S PA I N ⬏

USA ⬏

NON LIFE PREMIUMS

+8.7%

+1.8% H E A LT H

MEXICO ⬏

+7.4%

+62.4%

AUTO

+0.9% BRAZIL ⬏

+3.6%

PREMIUMS DISTRIBUTION

27.8%

TURKEY ⬏

+41.3%

72.2% O U T S I D E S PA I N S PA I N

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FundaciĂłn MAPFRE Madrid.

It is about knowing the specifics, what the client needs, and committing to a longâ&#x20AC;&#x201C;term relationship. We must try to manage the relationship by understanding what they need and expect from the insurer. We thank Sonae for understanding this relationship and of course, the confidence they have placed in us and the continuity over many years of work.

other markets, or which we have already proven, and incorporate them for these risks. For example, cyber security is a big issue for all major companies. We cannot take the plunge without a life vest. We have to learn, and we are testing in some markets with specific clients to see how it works out with the objective of extending the service. It is not a problem of capacity. There is capacity in the market, and MAPFRE cannot provide much more value there because of competition from other players with more capacity than us. It is about knowing the specifics, what the client needs, and committing to a long-term relationship. We must try to manage the relationship by understanding what they need and expect from the insurer. We thank Sonae for understanding this relationship and of course, the confidence they have placed in us and the continuity over many years of work. We show it by working with clients where we are able to keep this long-term trust. And with major risks, we cannot think about short-term. That is neither interesting for the client nor for the insurance and reinsurance world.

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MAPFRE’s three-year global strategic plan is called Focus on Profitable Growth. Growth and profitability are linked. If there is no profitability, we do not want growth. This year we don’t mind sacrificing growth in exchange for maintaining levels of profitability because that is what gives us the capacity to continue to grow without getting nervous when markets go wrong.

What kind of impact has the Spanish debt crisis had on MAPFRE’s financial situation performance, and how has Spain managed this crisis? It has affected us, undoubtedly. Firstly, because MAPFRE’s primary market continues to be the Spanish one, and the Spanish economic situation during these last years has not been good. The insurance market has shrunk. Companies had problems surviving, and a lot of them closed down. Many others cut back on their activities and reduced in scale. The insurance sector had to acknowledge this situation and accept it, not only by trimming policy conditions or limits but also by adjusting market rates. I have to point out that those in the Spanish business sector that have survived, which is the majority, have been tremendously honest and loyal to their insurance providers. This means that there have not been major upheavals in terms of companies moving around, looking for the best price. MAPFRE was substantially affected by the Spanish sovereign debt ceiling, particularly for reinsurance and global risks. This was because the reduction in the rating affected the underwriting capacity. When Spain was downgraded to BBB, we had some problems. MAPFRE Global succeeded in remaining two or three notches above the Spanish sovereign debt, but we had to travel the world, visiting each client and each reinsurer, to convince them that sovereign rating was one thing and MAPFRE’s situation another. We have never had any solvency problems, and our results have been continuously good year after year. We haven’t reduced returns in any year. Our rating has continued to be good, and clients trust MAPFRE.

Would you highlight other impacts? I am a strong believer in the credibility of the image of our country. We are a company of Spanish origin having reached markets where, many years ago, we were appreciated because we were the great European economy that had grown and created a lot of employment. Suddenly, the crisis started to show some uncertainties. To really convince those who were the most critical that we were not an economy in crisis which was what the numbers showed, but that we had the capacity to recover much faster than others – which is what happened. This has really given a lot of credibility to MAPFRE’s image. But, what’s more now only 30% of our business is in Spain, and 70% of our revenue, and the majority of our profits, come from outside Spain. In other words, MAPFRE has the capacity to work in adverse environments in a crisis, such as the one that happened in 2011. It allowed us to say “we are going to do it, and we are going to do it well” and that was an important message for the organisation.

How did it affect your actions? In effect, how could we not be affected by the Spanish crisis? If the GDP was reduced nearly 10%, if three or four million more jobs were lost, if families could not pay for their insurance, if people were becoming unemployed, if there were nearly two million families where all their family members were unemployed, that had to affect us because we lived in that reality. But we also came to accept it and adjusted costs so as to be able to be more competitive and offer lower insurance rates. We modified the products so that they could be more accessible for the consumer and we took an important step in our internal structure to be prepared for new, more flexible, more agile circumstances, such as embracing technology to try to simplify processes. We simplified MAPFRE’s own structure in order to tackle more challenges, and we even had the courage to take on new business models in the most difficult periods of the crisis. The Verti digital distribution model of car insurances was launched in the midst of the crisis. “How do you dare do it?” we were asked. Not only did we launch it in the midst of the crisis, but we believe that the crisis helped us learn and develop this model to export it later to China and the United States.

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Having seen MAPFRE’s first quarter results, could Brazil be a problem in future? Two years ago we grew 16% and now we are growing 1% in local currency, but that is normal. In Spain we have seen decreases for three or four years. It does not scare us. We are told: “If Spain goes down, MAPFRE will no longer be MAPFRE”. No, Spain is simply not going to go down. This is very clear to us. Brazil will not go down, but it needs an important adjustment. It needs to make its labour structures more flexible. It needs to be much more competitive in productivity and it has to gain efficiency. That requires political measures from the government. We are aware that, along with international investors, they do not like the current reality but it is a great country with a significant capacity for productivity. With a huge population and favourable demographics, it can do whatever it sets out to do. Moreover, it has a plentiful natural resources, energy resources, and local market resources. As a result of all that, Brazil should not have a problem. MAPFRE’s three-year global strategic plan is called Focus on Profitable Growth. Growth and profitability are linked. If there is no profitability, we do not want growth. This year we don’t mind sacrificing growth in exchange for maintaining levels of profitability because that is what gives us the capacity to continue to grow without getting nervous when markets go wrong. It allows you to act naturally to tackle problems because you know that the business you have is very safe, and that you can still have some room to manoeuvre with the margin and negotiate with intermediaries and clients so that we can all cope with the most difficult problems. So we have to have confidence in Brazil in the same way that we do in Spain. In Spain, politicians did their work and they also have to do it in Brazil. Not everything is in the hands of the company and society.

MAPFRE headquarters in Madrid.

What do we have to do to prevent a crisis like the one we had from happening again? Society, education, values, a culture of effort, fighting to live in a fairer and more balanced society are all concepts that are essential for society’s stability. If we lose that, crises appear. And it’s not an economic crisis but the economic part is a consequence. We could not have imagined the harshness of the final consequences that countries such as Spain and Portugal suffered, but we undoubtedly knew that we were losing elements of social trust that we have to recover. I think that we have to go further and demand from society and companies that education, training and development must be based on merits, learning, patience and a long-term commitment. This is the main moral lesson that I have seen, personally and in my company.

Fundación MAPFRE has an important role. It is a constant and is MAPFRE’s largest shareholder. This gives us a long-term confidence because the main shareholder shares our business interests and carries out an activity based on giving back to society. It helps to improve what we consider basic in a community – education, health, culture and improved living conditions.

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How can MAPFRE help? Maintaining this policy of standing by our word. We have redefined our values. The first one is solvency and the second is integrity. We said before “integrity is everything; it is any behaviour that involves being respected in the long-term by all stakeholders, supervisors, administrations, everyone”. And we have to be honest at all levels.

What is the role of Fundación MAPFRE? What is its contribution to MAPFRE, as well as to society in general? Fundación MAPFRE has an important role. It is a constant and is MAPFRE’s largest shareholder. This gives us a long-term confidence because the main shareholder shares our business interests and carries out an activity based on giving back to society. It helps to improve what we consider basic in a community – education, health, culture and improved living conditions. Our commitment is to return, or to give back to society. For example, when we talk about accident prevention, private or professional, as well as accident prevention on the road to improve road safety, we are making a huge contribution. We have done this in Spain for 30 years and are now bringing it to all the Latin American countries. In road safety, each little step we take avoids hundreds and hundreds of traffic accident deaths in Latin America. With regard to training, we have general insurance and finance training. We understand that people have made wrong decisions due to lack of training during the crisis. People bought products they should not have due to bad advice but also due to lack of knowledge. We have just created a game, we call it ”PlayPension”, similar to Monopoly, and it helps you learn to make financial decisions in your life. We want to provide it for free to educational centres all over America and Spain so that children can learn that basic financial knowledge is important in order to make appropriate decisions. Culture is very important, too. We know that societies which do not have interest in culture end up losing their personality and their values. Knowing our history helps us avoid future mistakes. In every country, we are working with teachers and local historians who have a slightly more neutral overview of what evolution has been like from the time of Latin American countries’ independence up to modern times. We have our own important art collections that we take all over the world. In Spain and in Brazil, we are staging exhibitions of masterpieces and getting involved in sponsorships so as to be able to help to show these works of art. We are also promoting our healthy lifestyle. We have developed an app with FIFA which is becoming very successful because we presented it with football players.

It tries to show, in a few steps, how to save the life of a child who has suffered a sudden cardiac arrest. In Spain alone, more than 200 teenagers have died because they play football at weekends in fields without a medical service. There are many children with heart problems that have not been diagnosed. We are taking this app all over the world where football is huge. Trying to avoid cardiovascular diseases, trying to avoid obesity – we are very involved in this. Then we collaborate with a lot of institutions that do research. For example, the Pro cnic Foundation led by Doctor Valentín Fuster, one of the world’s most preeminent authorities in cardiovascular research. We are doing a project in Spain called Women for the Heart. This social commitment and an understanding that we have to devote time to help, is important to us. An experience has come from America – that is not very developed here in Spain – the concept of volunteering. In Europe, we traditionally have not been very developed in this field. Society has evolved so much that we sometimes think that everything will be given

We have ambition to grow, but what is important is to continue to be a solid and stable company, with continuity in the long-term. And from a social point of view, to continue to maintain and increase our social responsibility commitment.

to us by the State. In Spain, the family has become more active again because we had to help each other. A volunteering plan, approved by MAPFRE and developed by Fundación MAPFRE, is based on the fact that the company gives extra holidays to those workers who want to do volunteering. Not only do they contribute with their time, but if employees want to use a week of their holidays to do volunteering in a project from Fundación MAPFRE, MAPFRE will give them extra holidays. The social element is very important, as you can see, and we have to make it compatible not only from the Fundación MAPFRE'S perspective but also from that of the company, what we traditionally call Corporate Social Responsibility. In this regard, we have just approved two social commitment objectives. In Spain there is a legal obligation that at least 2% of the staff must be people with disabilities. Few companies comply with this. But we are going to ensure that within

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three years at least 2% of our workforce worldwide will comprise people with disabilities. Our other social objective is to take action to facilitate gender equality. We do not discriminate, but we have to take positive actions. All our human resources departments around the world have a commitment that, in the strategic plan, at least 40% of employees in positions of responsibility must be women. We really think we must always do more than the law currently imposes; it is our own concept of helping to improve equality and the balanced development of the company and of society. In addition to this, we must sell insurance and make money and we must continue to grow. This is the part we, traditionally, know how to do well.

What legacy would you like to leave, both in MAPFRE and in the market as a whole? That it is a healthy and solvent company. We have ambition to grow, but what is important is to continue to be a solid and stable company, with continuity in the long-term. And from a social point of view, to continue to maintain and increase our social responsibility commitment. MAPFRE has a mutual origin, which means that it is in our nature to help each other. Our owners have historically been mutualists. When we demutualised, the objective was to continue to maintain the spirit of mutuality, even as a limited and listed company. We have transferred this spirit to the Fundación MAPFRE and it is the Fundación MAPFRE which helps us understand which social situations to have a commitment to and which to develop, as previously mentioned. My greatest wish is that we continue to be a better company, but become more involved in improving people’s quality of life. We do not have to give up one thing for the other – it’s not only NGOs working for social improvement and companies just doing business. I think that it is an obligation we have at MAPFRE. It has always done that but now I think this is more organised and more visible and has a greater strategic focus. This is my great aspiration for the years I will be in charge of the company.

When you are not leading MAPFRE, what do you do to relax? Many things. Nowadays, with technology, we work even when we do not want to so we have to make time for leisure. The truth is that work absorbs me a lot and I have to try to disconnect occasionally. I am very aware that balancing work and family is important – not only because your family should see you more, but also because you need to have free time. I try to get away in the afternoon at a reasonable time, whenever I can. I never organise late meetings so I can go home or go to the gym and do a bit of exercise. I like reading, walking, and going to the cinema. What I do on any trip, if I have time, is to walk quietly for an hour in any city and get to know it at a street level. If you are stuck in a car you do not actually see what happens in the city. My hobbies are very simple – I like mountain biking with my friends at weekends. I am also tremendously competitive, and I do not like to lose! I try to finish first, although I don’t get there most times. It is a big thrill because it allows you to be very motivated. Having an activity is good because it allows your mind and body to be more balanced. My life is being with my family and my friends.

We have developed an app with FIFA which is becoming very successful because we presented it with football players. It tries to show, in a few steps, how to save the life of a child who has suffered a sudden cardiac arrest.

If you retired today, how would you spend your spare time? I would do exactly what I do now with a little difference, which is when I travel, I would really get to know the places I visit. I would continue to travel, but I would take more advantage of it. I did not change my personal life when I became an executive, or when I became chairman and CEO. I continued to do exactly the same things like going to the cinema and walking around my neighbourhood in Madrid to look for the little restaurants that have opened recently.

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Enrique Schoch and Paula Rios of MDS Group with Antonio Huertas.

If you had to organize a sporting event to raise funds for a good cause, which sport and which charitable cause would you choose? I would choose a sport where teamwork is involved, because it gets across all the values that we normally promote. Sometimes, when you see certain sporting behaviours, even in professional team sports, you say “that shouldn’t be like that”. But any sport, which does not involve revenge, helps get across values. I was recently in Brazil, watching one of the campuses that Fundación MAPFRE has with both FC Barcelona and Real Madrid. In this case, I went to see one of the Barcelona teams and they showed me how they taught children from favelas – slum areas in Brazil. They taught them not to win, that is, not to celebrate a victory. When a child scored a goal and had the impulse to celebrate it, he was expelled from the field. It was not the team which scored more goals that won, but the one which passed the ball most.

Different methods to understand what teamwork is really like – that is important. And for what cause? I think that we always have to help the weakest, and the weakest is always a child. If our children are well taken care of, and well-educated, they have the chance to create a better life. This will certainly help society as a whole. •

My hobbies are very simple – I like mountain biking with my friends at weekends. I am also tremendously competitive, and I do not like to lose!

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O N E O F T H E G R E AT E S T S PA N I S H AT H L E T E S O F A L L T IM E S

Pedro Campos: sailing, risk and passion

One of the top sporting events in the world, the Volvo Ocean Race attracts hundreds of sailors to a nine-month-long regatta that takes them around the world in a number of different legs. During the race they encounter every imaginable type of sea and weather conditions, from the dead calm of the equator to the ‘roaring forties’ around Cape Horn. This is considered to be one of the toughest sporting competitions on the planet. To put it in context, just one leg of the Volvo Ocean Race takes longer than the entire Tour de France cycle race. Not to mention the fact that the sailors in the Volvo Ocean Race are competing for 24 hours a day, something virtually unheard of in other sports. Pedro has his father to thank for his sailing career – he used to take his young son sailing with him in a galeón on the Arousa Estuary in Galicia. And he remembers that at the age of three, he was already bold enough to take the boat’s helm.

Risk and safety Every sport inherently has its fair share of risk, but that risk becomes all the more significant when the sport in question depends on the unpredictability of an element like the sea. It is in this environment, particularly when you consider its severe risks, such as storms, that attention to detail – no matter how small – is crucial. It can be the difference between success and failure. This relationship, between risk and success in a sport like sailing, led fullcover to interview Pedro Campos, the prestigious Spanish yachtsman in charge of the MAPFRE team in the Volvo Ocean Race.

As with any competition, preparation is one of the critical factors for success, and it takes time. According to Pedro, preparations for the regatta begin as soon as the necessary sponsors have been found. First of all, the crew and the boat must be chosen; and it must be done in that order because the most important crew members have a say in the final decision on the boat and its preparation, which can last for months – or even years – before the race itself. Whenever possible, training is undertaken in conditions similar to those that will be encountered during the regatta. All of this work leads to a good knowledge of the boat and its characteristics, which will allow top speeds to be achieved under all circumstances. On the subject of safety, Pedro says this is the most important factor both before and during the competition, so crew training and boat maintenance are fundamental when it comes to reducing risks. He explains: “The limits of boat and crew are one of things the captain must know best.”

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Sailing enthusiast King Juan Carlos of Spain and the MAPFRE team.

Another important aspect is being able to predict the kind of breakdowns or malfunctions that might occur so that the tools and materials necessary for repairs are taken along. This is to ensure as many potential problems as possible can be resolved, helping prevent minor issues from developing into something more serious. Pedro discusses one of the many incidents he has had to deal with and which clearly shows how, when it comes to risk management, you cannot make the mistake of thinking that only the big issues matter. On the contrary, in such a difficult setting and with so many risks, you have to pay attention to everything, including tiny details. Failure to do so could put a major project or undertaking in jeopardy. Aboard the boat, the crew eat freeze-dried meals, prepared with hot water. Normally,

the equipment used to heat water for this purpose was washed at the stern and, once, during training in the South Pacific, many miles from land, it was accidentally dropped overboard. This might seem trivial but it was actually a huge problem because it was the only water heater container on board and without it the crew could not prepare their meals. Obviously, without an adequate diet, the crew’s performance would suffer dramatically and the risk of a serious malfunction would rise exponentially.

When it comes to studying or implementing risk management in an organisation or project, Pedro’s example teaches us two very important lessons:

The problem was solved following discussions with the land-based members of the team who suggested an alternative water heater could be a distress flair container and lots of sticky tape. After this incident, they always carried a container with a handle and kept it permanently tied up with a safety cable so it couldn’t be dropped overboard during washing.

2. When facing adversity, the team was able to react and find an alternative solution. However, since the incident occurred during training, it was not possible to assess what could have happened had it taken place during the race and whether it would have prevented the team from winning a regatta.

1. The risk analysis and corresponding measures taken to address the identified risks were not effective enough - since they failed to identify this particular risk, meaning neither boat nor crew were prepared for the sudden loss of their ability to prepare their meals.

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Lessons learned Pedro talked about the hardest moments in his career and the lessons he has learned. Curiously, the incident he recounts took place not at sea but somewhere completely unexpected - the Entrepeñas Reservoir. He describes it as: “One of the toughest moments of my sporting career.” It was a Sunday in February, and Pedro and his companions were competing in a regatta in a small boat. When they arrived at the club, they boarded a dinghy with an outboard motor to get to their boat, which was anchored nearby. It was very windy and cold and, although the reservoir is small, the surface was a bit choppy because of the strong wind. They had only travelled about 100 to 150 metres and were about half-way to their boat when the prow of the dinghy dipped into the water, flooding and capsizing it in seconds. Luckily, the dinghy’s watertight bottom kept it afloat. Although they were not far from shore, the temperature of the water and their saturated clothing hampered their attempts to swim to dry land. Pedro Campos at the helm.

Apart from the risks, the teams sometimes have to face up to tough legs where they are losing successively but nevertheless are able to ‘change course’ and win. Pedro says: “The source of motivation is the mindset of the team, who train to become accustomed to giving it their all.” There are many factors that help keep the crew motivated, starting with the leadership skills of those in charge and which could be summed up as not being overconfident of victory but not becoming demoralised by defeat. He continues: “You have to appreciate the worth of your rivals and give them all due respect, while still being aware they can be beaten". “Furthermore, the life of the 10 people aboard is tough because the environment is demanding and you always have to be 100% at the top of your game. The crew must be able to get along with each other and this must be achieved before the race begins, while the boat is being prepared and during training.”

When it comes to risk management, you cannot make the mistake of thinking that only the big issues matter. You have to pay attention to everything, including tiny details. Failure to do so could put a major project or undertaking in jeopardy.

As luck would have it, a nearby boat owner was able to reach Pedro and his companions in a little rowing boat. They decided not to try and clamber aboard the rowing boat, not only to avoid sinking it but also because it was tiny and there were a lot of them. Instead, they grabbed onto its sides, keeping their bodies as high out of the freezing water as they could, and made their way back to land without any more mishaps. Pedro recalls one of the crew members had a wetsuit and was able to stay with the capsized and still-floating dinghy, helping the club’s sailor who did not know how to swim. Fortunately, everything ended well and nobody suffered from hypothermia but things would certainly have turned nasty had it not been for the rowing boat. Pedro concedes the lesson he learned that day is that you should never let your guard down, especially in adverse conditions, and that safety rules and standards are sacred and must be followed. Problems can occur when you least expect them.

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Support: the key to victory Out of all the trophies he has won – there are lots of them and they are all very important – Pedro confesses: “My proudest achievement is winning five world championships in a row in the ¾-ton class between 1990 and 1994, in three different countries.” He believes this record still stands to this day. Former King Juan Carlos is a sailing enthusiast and a long-standing friend of Pedro, confirming the Spanish Royal Family’s commitment to promoting the sport in Spain. Pedro agrees: “His regular appearances at the main regattas and his constant support for Spanish sailors have been key factors in the considerable success achieved in our country in every sailing discipline.”

Pedro considers sponsors to be essential for the survival of sports such as this and has no hesitation in saying: “Nowadays, no top-level competitive sport can survive without sponsors and sailing is no exception.” From sailing schools and Olympic sailing to the world championships or ocean sailing, sponsors’ contributions are essential for anyone to be able to compete and have a chance of winning. It is up to the athletes to make the most of these investments.” And he tells us how it all began with Mapfre. The relationship started with a non-stop, round-the-world race - the 2010-2011 Barcelona World Race. The team, sponsored by Olympic champions Iker Martínez and Xabi Fernández, successfully sailed round the world without putting into land. They took second place overall, the first Spaniards ever to do so, and the only ones to date. In conjunction with Mapfre, they are the fastest Spaniards to have circumnavigated the globe. That round-the-world trip was so successful and mentioned so often in the media that the insurance company’s brand visibility dramatically rose. Since then, the collaboration with Mapfre has been so intense that two more round-the-world trips have been undertaken jointly – but with stops this time – in the Volvo Ocean Race. The boat stops at some of Mapfre’s most important markets, such as Spain, China, the United States and the rest of Europe, achieving extremely high levels of brand recognition. Not only is Mapfre across five continents but it has given its name to this ‘round-the-world team’. Such sponsorship has made a huge contribution to the brand’s presence both in the media and in direct customer campaigns.

Pedro Campos as a child when he went sailing with his father.

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The Volvo Ocean Race Mapfre boat.

Essential qualities – in sailing and in business When asked about decision-making in high-pressure situations and the qualities needed to lead this type of team, Pedro confirms decision-making during a competition, whether in a championship or facing difficult conditions, or more importantly, when the two circumstances occur simultaneously, requires: “A cool head, nerves of steel and as much experience as you can muster.” In this respect, the qualities he considers essential are: mutual trust between captain and crew, experience of working as part of a team, in-depth knowledge of the boat and your rivals and the ability to concentrate and keep a cool head, all of which can be acquired with time and practice. He can remember many very tense moments during competitions but highlights the one which probably marked him most, Spain’s first ever participation in the Americas Cup, in San Diego in 1992.

When the regatta started Pedro felt that, as Captain, he had the responsibility for the entire country’s image in his hands, on such a highly significant date: the 500th anniversary of the discovery of America. In the end, it all worked out perfectly, they won the start and the first regatta against the Australians, and that victory gave Spain ‘a foot in the front door’ of the oldest competition in the world. Pedro sees similarities between sailing and the business world, suggesting ocean sailing and business can be easily compared. He says: “First of all you have to face up to the elements, which in the business world would be the market - always changing, sometimes unpredictable and where wind and sea are alternately in your favour or against you - exactly as happens with companies.“ Pedro also mentions rivals, who can influence our strategies and tactics, again exactly as happens with rival companies. And the ultimate goal of trying to do better than your competitors is also the same.

Asked about whether he can see himself leaving the sea one day, Pedro replies: “I have no doubt that moment will come, but I hope it won’t be any time soon! Sailing is a sport that has a big advantage over others; you can compete almost for your entire life, unlike other sports where the physical demands on your body mean you have to give them up much earlier.” He concludes: “In sailing, you have two ingredients that need to counterbalance each other - one is physical fitness and the other is experience. And as one decreases, the other increases.” In sailing, just as in life, you may lose vigour with the passing years, but you gain wisdom. In Pedro’s case, he is in great shape, and fullcover would be so bold as to say that, for the time being, he still has both! We are convinced his childhood passion will remain with him for the rest of his life – you only have to look at Pedro in the photo, firmly grasping the helm at just three years old, to be sure of it. •

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REMEMBERING

Pedro Macedo BY J O S É R I B E I R O

Pedro Macedo, CEO of MAPFRE RE and a highly renowned professional in the reinsurance sector sadly passed away last May. José Ribeiro, Managing Director – Asia Pacific of A.M.Best, former Director of International Markets at Lloyd's, remembers Pedro's professionalism and generosity.

I became professionally acquainted with Pedro Macedo when I was in charge of International Markets at Lloyd’s, a region that essentially covered everywhere in the world except for the USA. In this capacity, I needed to contact MAPFRE at the very highest level to facilitate a meeting in Madrid for Lord Levene, the then CEO, to persuade them to create a syndicate at Lloyd’s. With an anxious boss and a very tight time window I sent an e-mail and I telephoned personally but it was impossible for the person in charge there to receive us that week.

Pedro Macedo.

“Pedro was a tireless worker, excellent professional and a person who was extremely well-acquainted with the world market and, particularly, Latin America.”

It was then I remembered the “Portuguese connection” – Pedro was CEO of MAPFRE RE at the time and an extremely important connection outside our country. I rang Pedro, and basically explained my problem. He immediately offered to help and the next day not only did we have the meeting scheduled but, we also had our hotel booked and a car to drive us around Madrid! That was Pedro, generous and helpful, a great man and a good friend. MAPFRE RE owes a great deal to Pedro. A tireless worker, excellent professional and a person who was extremely well-acquainted with the world market and, particularly, Latin America. He did much to develop MAFRE RE and, under his leadership, it performed very well and increased its geographical exposure. In Latin America, we had the opportunity to meet on several occasions and did a number of deals together. His word was all that was needed for the deal to be closed. He is sorely missed at MAPFRE RE and by all the friends and colleagues who worked with him and knew him well.•

A INS B THE PURS OF A DREA

ACCLAIM SURANCE BROKERS SUIT AM

Anthony Lim speaking at MDS's 30th anniversary.

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Over the past 33 years, Anthony Lim, Founder and Executive Chairman of Acclaim, has built his business into one of Singapore’s leading independent insurance brokers with over 60 staff. fullcover found out more about his route to success and his relationship with Brokerslink.

The pursuit of a dream The journey begins in 1982 with Anthony’s dream ‘to be the best insurance broker he can be’. “I was young, innocent and naive”, he says “but a year later, I set up the Company and made my first transaction in January 1983. I was a one-man band and delivered my first policy by foot. Although small compared to other firms in the industry, my ambition was to become a national company.” One year on, Anthony was still learning how to ‘crawl’ when Singapore experienced its first post-independence recession. In early 1984 there were already warning signs of a slowing economy, but a booming construction industry bolstered the overall numbers. However, by the end of that year the construction market had become saturated and only a few projects were in the pipeline for completion. Singapore was facing a crisis! To keep the Company afloat, Anthony did not pay himself any salary or allowance for a year, but he ensured every member of his team was paid on time. For the Company to grow, it had to be an active player in the market; Anthony joined several organisations, including the Singapore Insurance Brokers Association where he was elected President in 1998.

In the same year he was invited by the Government to serve on several financial and insurance committees (set up to help bring Singapore out of the national crisis) and in a bid to raise Acclaim’s profile internationally, Anthony created the Singapore International Insurance Brokers Conference, attracting delegates from more than 25 countries (the 1998 Conference was so successful it became a major biennial event in the region). In 2003, he was elected Chairman of the World Federation of Insurance Intermediaries, a global insurance brokers and agents’ association with members in over 80 countries. During this period, the world was undergoing intense regulatory changes. Wielding the influence gained in his global roles, Anthony invited world-wide leading insurance practitioners to an Insurance Leaders Forum in Singapore. This not only gave local and regional insurance companies and brokers an opportunity to better understand the impact of the changes and how to act upon them, but it brought insurance brokers and regulators together – enabling open dialogue. While most insurance brokers were still grappling with the consequences of the economic crisis and continuous regulatory changes, Acclaim embarked on a series

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33 years’ service

Jose Manuel Fonseca and Anthony Lim at the Brokerslink booth at PARIMA, Singapore, 2015.

The one-man dream of being ‘the best insurance broker that he can be’, is now superseded by a shared dream of the Acclaim team ‘to be a high touch, high tech leading risk consulting group in the high value space’.

of mergers and acquisitions with local insurance brokers. By building its business portfolios, Acclaim was in a better position to compete in the market. Anthony says: “Where others saw challenges, we saw opportunities; many parts of Asia were still relatively untapped and in varying degrees of liberalisation, and the concept of risk management was beginning to take root in Asia – presenting new opportunities. Singapore was (and still is) well-positioned to work with existing and new players so in order to harness these opportunities, I decided to expand the leadership team. I wanted a person with global experience who had worked in multinational corporations and after three years of head hunting, convinced Tony Lim (no relation) to join Acclaim as Chief Executive Officer (CEO) and shareholder.” Tony joined Acclaim in 2011 as Managing Director and CEO, bringing 28 years’ experience working with some of the top global insurance brokers in all classes of business. His expertise in structuring, implementing and servicing global and regional risk solutions for clients in various industries in more than 20 countries is unrivalled.

This year Acclaim celebrates 33 years in business. One of the largest national independent risk advisors, insurance and reinsurance brokers in Singapore, the Company specialises in risk placement, claims advocacy, consultancy advice and risk engineering. In 2015 its revenue was us $8 million – more than some of Singapore’s international insurance brokers. Over the years, Acclaim has built a reputation for being ‘positively different to other intermediaries’ and is recognised for its high standards, speedy response, competitive pricing, high-performing technology and client/claims management. For Acclaim’s team, top priority is taking care of clients. Known as Client Advocacy, it goes beyond building tailor-made business solutions to meet clients’ needs, it’s about delivering a great customer experience, building strong and powerful relationships and creating emotional equity. Another priority is Claims Advocacy. A process of claims management, rather than claims handling, gives the team a competitive advantage. Tony adds his feedback: “Agility and reinventing the claims experience are key, claims should not be seen as a back-end role that does not add value – they should be positioned as the value differentiator. And it is in this area Acclaim can boast a number of cases of successful negotiation on behalf of clients. Acclaim believes its present and future success depends on the people within. Attracting and retaining talent is ever more important today and it is for this reason, the Company has embarked on a talent recruitment drive, appointing experienced insurance practitioners in specialty areas such as agriculture, aviation, construction, crime, directors and officers, employee benefits, legal liabilities, marine (hulls and cargo), political risk, professional indemnity, property, reinsurance, surety and bonds and trade credit. Each brings different experiences of working with multinational corporations and clients with regional and global offices. Last but not least, technology. Like it or not, it’s a part of our life and one of the key ingredients for survival in this fast-pace environment. As more and more companies expand internationally or regionally, staying connected with clients is imperative.

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Tony explains: “Customers expect brokers and insurers to deliver IT-based reporting and analytical tools to enable them to monitor the performance and progress of their insurance programmes. Acclaim is certainly using technology to improve productivity and enhance efficiency - we are developing a system that enables clients to report claims online and monitor their progress 24/7, from anywhere in the world, when it’s convenient for them. They no longer need to wait for quarterly reports to study claims trends or conduct risk management exercises.” He continues: “This investment in technology demonstrates our commitment to customer service and will help us and our regional and global clients in their external growth strategies. Singapore has a relatively small domestic market, so it is no surprise Asia - supported by the Government signing of free trade agreements and our membership of the ASEAN Community – is an area of focus.”

Over the years, Acclaim has built a reputation for being ‘positively different to other intermediaries’ and is recognised for its high standards, speedy response, competitive pricing, high-performing technology and client/claims management.

Anthony Lim, Tony Lim and Robert Tan at Acclaim's offices in Singapore.

Brokerslink membership – global reach, local touch Membership ensures Acclaim continues to provide exceptional service. It enhances its capacity to design a complete range of global insurance solutions, co-ordinated and managed via Brokerslink’s local partners, and in Tony’s words: “Is just like a multinational corporation without having to bear the cost.” Brokerslink also ensures access to specialised resources in reinsurance, specialized expertise, captive management and modelling. So how did this partnership begin? It was a bitterly cold morning in London in 2006. The first Heath Lambert Global Conference was being held at a London hotel. Anthony was having breakfast and couldn’t help but notice the hotel and its restaurant was bustling with people and activities. It felt unlikely he would be able to connect with anyone in such a hectic environment, yet at that moment José Manuel Fonseca (Brokerslink CEO and speaker at that conference), could not find a seat at an empty table, approached Anthony and asked if he could join him. There was an immediate connection which continued throughout the conference and remains to this day. Shortly after, José visited Anthony in Singapore, setting the foundations for their professional relationship and close friendship, to a point where they joke about being like ‘brothers from different parents’. At the time, José was Chairman of a small European Network Brokerslink and Acclaim was a member of the Asian brokers Alliance PanAsian Alliance (PAA). In 2008, PAA, Alinter (a Latin American broker Network) and Brokerslink merged, establishing Brokerslink. Anthony says: “Passionate as he was about the merger of our networks, José immediately began planning and strategizing for our shared future. When I listened to his vision, I felt sure he was one of those people destined to make a difference.” Anthony believes Brokerslink is unlike other networks: “It’s warm, welcoming and most importantly, its members possess an unequalled passion and motivation. As the saying goes ‘if you surround yourself with dreamers and creators, the results will be exponential. Most of our members are entrepreneurial by nature – they are not merely wealthy – but all of them are set on leaving their mark on this world.”

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A N T H O N Y L IM → Anthony Lim is the Founder and Executive Chairman of Acclaim. He started the company in 1982. → He is the longest serving elected President of the Singapore Insurance Brokers Association since 1997. → He was the first person in Asia Pacific to be elected Chairman of the World Federation of Insurance Intermediaries (WFII), serving his term in 2007/08. → Anthony Lim has a post-graduate degree from the Asia-Pacific Executive (APEX) and a Business Administration MBA programme from National University of Singapore. → He has spoken in many International Insurance conferences and seminars globally. He enjoys a good conversation and is a food enthusiastic. → In his free times he loves yachting. He is Commodore of the Singapore Changi Sailing Club (CSC) since 2009. Acclaim Insurance Brokers sponsored the Acclaim Regatta Event since 2009. → He also enjoys restoring heritage houses. His passion for restoration began when he set eyes on a dilapidated terrace house while hunting for a new home in 1988. “It was dirty, rundown but I saw a lot of charm and beauty” said Anthony Lim.

José Manuel Fonseca and Anthony Lim in Sidney (Brokerslink Asia Pacific Regional Conference, 2016).

ACCLAIM AND MDS – A CLOSE RELATIONSHIP IN ANTHONY’S WORDS “I made it a point to attend MDS’s 30th anniversary, to share their joy and pride. As part of the celebrations, I was invited to conduct a Leadership Forum for more than 20 MDS leaders over two days. I recalled how enthusiastic the MDS leaders were – instead of fixating on their differences, they focused on their strengths and what they had in common. During our time together, they kept open hearts and open minds and worked on integrating each other’s point-of-view. This strengthened their resolve and motivation as a team, paving their way towards success.”

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Anthony Lim, Robert Tan, Tony Lim and José Manuel Fonseca at Acclaim's 30th anniversary.

Describing another milestone moment, Anthony says: “The 2013 Brokerslink Global Conference was the network’s second event taking place in Asia, and Acclaim had the privilege to play host to delegates from over 50 countries. The programmes were a good mix of serious discussions and uniquely Singaporean dining experiences, which allowed our guests to learn more about our culture and history. Despite the many happy memories we made during the Conference, my personal favourite was our ‘sing-along’ session at the final evening’s Gala Dinner. I looked around and saw all the partners singing along to music from our youth, and I marvelled at the fact that the Beatles, Elvis Presley and other musical icons can still bring people of all races and backgrounds together. I look back on this memory in particular with great fondness and I’m grateful to know the relationships across our organisation, and as friends, are thriving alongside our businesses. I believe the mutual trust and reliance we’ve established in Brokerslink is unique and will weather the test of time. I have high hopes for us and look forward to reuniting with business partners and friends at our Conference in Amsterdam later this year.”

Marching onwards The insurance industry is ever-changing at an increasing pace. In 2015 alone, there were infinite acquisitions and mergers and an endless restructuring of international insurers. A situation made more complex by authorities all over the world hardening regulations. The Chinese have a saying, translated it literally means ‘big fish eat small fish’. Being small is being vulnerable and when the big get bigger, the small look even smaller. Accla im’s senior ma nagement is acutely aware of the need for independent brokers to offer a similar range and level of technology-based services as the leading listed international brokers. Being a part of a larger network is the way to achieve this, allowing members to become shareholders and providing the central funding and resources needed to deliver a personalised, yet global service. The one-man dream of being ‘the best insurance broker that he can be’, is now superseded by a shared dream of the Acclaim team ‘to be a high touch, high tech leading risk consulting group in the high value space’. In this connected, highly-competitive and complex economy, Acclaim knows clients

are better informed and sophisticated, so insurance brokers can no longer just be intermediaries, hoping to generate revenue through simple insurance placement. In order to remain relevant and prosper, they must be high-value service providers who drive innovation and collaboration in the industr y. At Acclaim they will continue to do it ‘their way’. Anthony concludes: “We embark on life-long learning and service with all our heart. We integrate our service delivery into clients’ supply chains, but first endeavour to understand our clients’ businesses and their environments before designing tailor-made insurance solutions.” Just as their beloved nation, Singapore, evolved from a tiny red dot in South-East Asia (a struggling seaport in the 1950s with no natural hinterland or resources) to a prosperous independent country, Acclaim has also grown into one of the major players in the Asian market. •

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Singapore By Anthony Lim

Illustration by JosĂŠ Cardoso

One of the best ways to get to know a city is through the eyes of its people. Brokerslink member, CEO and Chairman of Acclaim Insurance, and fine-cuisine lover Anthony Lim is passionate about Singapore and so was delighted to be able to share his experiences and enthusiasm for the city with FULLCOVER. He took us on a tour, discussing its history and pointing out places of interest and his favourite cafes, bars and restaurants.

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ITS HISTORY Singapore’s story began around 200 years ago when Sir Stamford Raffles founded the country as a trading post of the East India Company. When the Company collapsed in 1874, it became a British colony. Singapore gained independence in 1963 and joined the Federation of Malaya, Sabah (North Borneo) and Sarawak in what later became the Federation of Malaysia. Two years later it declared independence. Despite its ownership changes over the past 50 years, Singapore has grown to become a global commerce, finance and transport hub; commentators describe it as one of Asia’s ‘economic tigers’. The country is the classic example of ‘East meets West’. Traditional Asian buildings sit alongside modern colonial architecture. Christened a ‘garden

city’ (due to the high number of trees lining the streets), residents and tourists alike are subject to high standards of discipline and behaviour. Chewing gum is banned and first-time offenders caught disposing of gum in a public place or carrying large quantities can be fined up to US $1000. Littering also invokes fines – US $300 for first time offenders who throw small items like cigarette butts or sweet wrappers. Vandalism is also a serious offence with penalties including fines, jail and three to eight strokes of the cane. In Clarke Quay, where women once laboured on the river, now you will find thriving bars, clubs and posh eateries sitting alongside historic colonial architecture, restored antique shops and the Supreme Court.

PLACES OF INTEREST Kampong Glam Is the stronghold of Singapore’s Malay and Arab community and recognised as its ‘beating heart’. See the palace of Singapore’s aristocratic families, now a museum, and across the road, on the renowned Haji Lane, check out the rows of independent cafes and specialty stores. Here, you’ll find artisan coffee, mint, vinyl records, vintage clothing and knick-knacks from the Himalayas all within a short distance of each other. Around the corner, family-owned stores which have been there for decades line Arab Street. Here you can customize a perfume with oils from Turkey, pick up a handmade wicker-basket or smoke a Shisha – tobacco mixed with fruit and molasses sugar. Admire the mosque at sunset, the palace of Sultans long past, and enjoy a cup of the finest coffee in the city – Anthony promises it won’t disappoint.

Tiong Bahru Is one of the oldest neighbourhoods in Singapore, yet over the past two years, chic cafes and bistros have popped up everywhere, making the area a magnet for food-lovers. Most notable are PS Cafe Petit and Tiong Bahru Bakery, both cult favourites for food and fashion bloggers around the world. And in homage to writers, Books Actually – one of the world’s top independent bookstores, a pillar of Singapore’s arts scene and a refuge for aspiring authors – is located on a quiet slip road off the main street. The art-deco inspired buildings, harking back to the colonial era, share space with up-and-coming cafes and independent boutiques. Walking around the neighbourhood, the buildings take you through a journey in time from the 1950s to the 1970s.

Keong Saik Is a former red-light district and a stone’s throw from Chinatown. A myriad of bars and restaurants can be found in the area’s winding streets, yet the unique drinking places can easily be overlooked; hidden away and only accessible if you know that night’s password. The Library for example, is a normal restaurant in the day with fantastic lunch and dinner set menus, but in the evening bar entry can only be gained using a password given out on Facebook. The password changes daily so if you are successful, the bouncer will permit you to enter the bar through a secret door concealed by a bookshelf. Singapore’s gems are everywhere. Be sure to explore what the city has to offer, and don’t be afraid to ask the nearest Singaporean. Like Anthony, they love recommending their personal favourites to anyone keen on having a good time!

Singapore insurance market: facts & figures

Singapore is slightly smaller than the US City of Lexington, Kentucky, or Lake Taupo in Auckland, New Zealand. In June 2015 its population was estimated at 5.54 million, all squeezed into only 277.6 square miles (719.1 square kilometres).

Its history For a tiny country with few natural resources, the Republic of Singapore is an exceptional success story. Last year, Singapore celebrated its 50th anniversary and while it does not boast a rich history, it is one of the most successful societies in human history.

nation and defined the path to its current success. PM Lee transformed Singapore from a small struggling island nation to a thriving metropolis.

When Singapore was expelled from Malaysia in 1965 and thrust into an unwanted independence, it was a typical third-world country; per capita income was us $500 – at the time the same as Ghana’s – and although not desperately poor, malnutrition was rife. Things however, began to improve dramatically; its per capita income increased from the 1965 figure of us $500 to us $56,000 in 2014 - the highest growth reported by any newly- independent nation.

Singapore is often referred to as the ‘Switzerland of the East’. In a National Geographic magazine article - ‘The Singapore Solution’ - it reports Singapore’s per capita income of its 3.7 million workers exceeds that of many European countries, the education and health system can compete with the best in the West, Government officials are pretty much corruption free, 90% of people own their own homes, taxes are relatively low, the streets and sidewalks are pristine and you will not find homeless people or slums. Singapore also boasts an unemployment rate of less than 3%. Having achieved so much, in such a short time, this growth has often been referred to as an economic miracle.

Comparing Singapore GDP per capita with some developed countries

The following table summarises Singapore’s achievements.

COUNTRIES/ GDP PE R CAPITA (IN USD)

1965

Singapore

516

56,285

Switzerland

2,621

85,594

United States of America

3,665

54,630

United Kingdom

1,851

46,332

Japan

920

36,194

ACHIEVEMENTS

IMPLICATIONS

Second most important global container port.

Strategic location, supporting infrastructure and technologies.

City with the best investment potential.

Favourable operating conditions, strong diplomatic ties, a stable political and economic climate creating an ideal environment to invest in.

Second most competitive city in the world.

The best in Asia due to its; lack of corruption; Government efficiency and global financial market development.

Best global innovation in Asia Pacific and the world.

The best performing Asian country ahead of Hong Kong, Korea and Japan. Excels in Institutions, human capital, research, infrastructure and business development.

Top of Business Environment Risk Intelligence’s Labour Force evaluation measure.

Proven to have a consistently productive and skilled labour force, making a conducive environment for business growth.

Second in world for best labour/employer relations in Asia.

Workplace relationship between employee and employer is the best in the region.

2014

Source: The World Bank 2014.

Today Singapore is the world’s fourth-largest financial centre, operates one of the busiest container ports in the world and is the only Asian country to have a AAA credit rating from Standard and Poor, Moody and Fitch Ratings. In just half a century, Singaporeans have become some of the wealthiest people in the world with the highest number of millionaires per capita in Asia. It is also one of the world’s most liveable cities – rated as the greenest in Asia. One reason for its success is a combination of Singapore’s strategic position on the major sea route between India and China, its excellent harbour and free-trade harbour status (granted by founder Sir Thomas Stamford Raffles). While Sir Thomas created the framework for Singapore’s early success, it was Singapore’s forefather and former Prime Minister, Lee Kuan Yew, who shaped the first quarter-century of existence as an independent

Source: Economic Development Board of Singapore 2016.

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The insurance market

A bright future

Singapore is home to key decision makers - it is the base for numerous multinational corporation headquarters, over 70 insurance brokers and four out of five global brokers have regional hubs here.

At the 12th Singapore International Reinsurance Conference on 6 November 2013, Ravi Menon, Managing Director, MAS, said: “Over the next decade, the insurance business in Asia is projected to grow at about 8% per annum. By 2020, Asia is likely to account for almost 40% of the global market.” He listed three contributory growth factors: Asia is growing, Asia is highly prone to natural catastrophes and Asia is ageing.

The Government has an ongoing commitment to marketplace development; it is establishing research institutions to gather and analyse data in specific areas of risk, is actively promoting Singapore not just as a strategic location, but also as a centre of excellence for innovation, and has set up a Talent Development Framework (a partnership between the Monetary Authority of Singapore (MAS) and the insurance industry) and a Global Internship Programme to ensure Singapore remains at the forefront.

Market breakdown GROSS PREMIUM (IN SGD)

INCURRED LOS S R ATIO

Singapore Insurance Fund

US $3.850B

48%

Offshore Insurance Fund*

US $7.918B

51.7%

Y E A R 2 014

*International / Regional Business coming into Singapore Source: Monetary Authority of Singapore.

Asia’s changing insurance landscape The insurance landscape is constantly evolving and contributors to this include: sluggish economic growth, softening rates and rising claims (pressurising underwriting results), a low interest rate environment (suppressing investment returns) and as the world shifts towards risk-based regimes such as Solvency II, regulatory and capital requirements are being tightened. At the same time, the growth potential has never been better. Much of the world remains under-insured and in Asia, the prospects are especially bright. The Asian risk landscape is transforming rapidly, generating an increasing demand for insurance and reinsurance.

As the leading insurance centre in Asia, Singapore is well placed to serve the burgeoning insurance needs of the region. The insurance industry is one of the brightest stars in the constellation of Singapore’s financial sector. Not surprisingly, in 2015, the Economic Development Board of Singapore reported ‘businesses headed to Asia will do well to tap into Singapore’s prime geographic location in the heart of the region, global connectivity and businessfriendly policies. It is the number one choice for the world’s top global companies in the industrial goods and services sector and among the top five for media and financial services companies.” Singapore is also a member of the ASEAN1 Economic Community (AEC). The establishment of AEC in 2015 is a major milestone in ASEAN’s regional economic integration agenda, offering opportunities in the form of a huge market of us $2.6 trillion and over 622 million people. In 2014, AEC was collectively the third largest economy in Asia and the seventh largest in the world. The AEC is working together on a comprehensive insurance liberalization framework. MAS in 2013 reports ‘insurers can expect to benefit from easier cross-border provision of services and substantial access across the ASEAN customer base from offices in any ASEAN member country’. The country is therefore, well positioned to become the Asian insurance hub and is predicted by MAS to be the next global hub (besides London) in 2020. As the exclusive Singapore member in the Brokerslink network, Acclaim is well-placed to act as the conduit and work with partners who are keen to gain leverage from this global insurance market position. •

1 Association of Southeast Asian Nations

Corporate data

Cybercriminal

Cyber black market

To stop the bad guys, partner with the good guys. Social media, big data or your data: Today’s information technologies promise to enrich every area of our lives. But they also pose real risks – from fraud and identity theft to industrial espionage and cyberattacks. We work together with you to identify the full range of opportunities and threats, with solutions for mitigating them. It’s how we make technology work for you. Learn more at www.munichre.com Coverages are underwritten by individual member companies of Munich Re. Certain coverages are not available in all states. Some coverages may be written on a nonadmitted basis.

NOT IF, BUT HOW

On the Insurance ‘Superhighway’

Fosun building Shanghai.

On the Insurance ‘Superhighway’

Fosun, China’s largest privately owned conglomerate, became a truly global insurance group last year. It further increased its shareholding in Portugal's leading insurer group Fidelidade to just under 90% and bought US insurer Meadowbrook Insurance Group (MIG) and Ironshore, the Bermuda-based international specialty insurer to add to its existing Asian insurance and reinsurance operations. The insurance operations join Fosun’s fast-growing range of industrial, lifestyle and health businesses as Chairman Guo Guangchang pursues his aim of becoming the Chinese Warren Buffett and says the group is now on the ‘superhighway’ of growth. Adrian Ladbury takes a closer look at the group’s insurance and wider strategy and growth in recent times.

M D S m a g a z i n e

Fosun Group was originally founded as a market research company by five graduates of Fudan University, China in 1992 and over the last 34 years has transformed itself into the biggest privately held conglomerate in China. Guo Guanchang, group Chairman and lead shareholder, openly bases his strategy on that followed so successfully over the years by legendary US investor Warren Buffett. Put very simply, Mr Buffett uses the ‘float’ generated by insurance companies that does not need to be paid back to policyholders immediately to invest in a wide range of other businesses in non-related sectors. Those businesses obviously benefit from preferential terms and conditions for their coverage from the group insurers because they know the risk profile of these companies better than any rival. At the same time, the premiums generated feed the float in a virtuous circle. The group also has significant investment and asset management activities that also benefit both the industrial operations and the insurers. Lots of capital is needed to make this system work as the insurers need to be diversified by line and territory to avoid dangerous accumulation, hence the recent international expansion. Apart from the fundamental business strategy, Mr Guo also follows Mr Buffett’s example by writing a long and revealing letter to shareholders along with the group’s annual results. In his latest letter published last month as he revealed the group’s full year 2015 results he explained the strategy as thus: “The Group has regarded insurance as a good means to connect Fosun’s investment capability to high quality long-term capital. On one hand, the insurance companies can improve their profits from underwriting by leveraging on the group’s extensive industrial operations experience and expertise in insurance and finance, and on the other hand may also help the group to realise higher investment revenue through effective investment practices. As a result, insurance plus investment will be our core business in the future,” he explained. Just like Mr Buffett’s Berkshire Hathaway, Fosun is doing rather well in this highly competitive global insurance market. Mr Guo revealed that, as at 31 December 2015, total insurance assets under its management reached RMB 180.6bn (us $27.9bn). This accounted for 44.6% of the group’s total assets and represented an increase from 32.9% at the end of 2014. Total investable assets reached RMB 160.4bn (us $24.8bn), an increase of 50.2% compared with 2014. Profit attributable to the owners of the parent company from the insurance business rose by 88.4% year-on-year to RMB 2.10bn (us $320m) and accounted for 26.2% of the net profit of the group. The profit increased at a compound average growth rate (CAGR) of 100.5% from 2013 to 2015, reported Mr Guo. So how exactly did Fosun build such a presence in the insurance business?

FOSUN MILESTONES 1992 Fundan University graduates founded Fosun with an initial investment of US $4,00

1994 Founded Fosun Pharma and Forte

1998 Fosun Pharma listed in China A-share market

2002 Yuyuan

2003 Nanjing Iron & Steel

2004 Zhaojin Mining

2007 Youg’an P&C Insurance, Hainan Mining

2008 Focus Media

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First step with Yong’an

Second step Pramerica

Xi’an-based Yong’an Insurance P&C was founded in 2003 and was Fosun's first investment in the insurance market. The Group holds a 19.93% equity interest in Yong’an, a national insurance company that underwrites all types of non-life insurance business and was ranked 11th in the P&C market in 2014. The Chinese market is currently highly competitive and profits are not easily found. Financial details are hard to come by for Yong’an, but Mr Guo’s letter accompanying the group 2015 results states that the insurer has ‘taken the initiative’ and will be continuing to ‘adjust and transform’ its business in 2016, indicating that it has experienced a tricky time of late along with the wider Chinese market. The group said that Yong’an has discontinued certain ‘less efficient’ businesses and ‘constantly optimised’ its business portfolio. It has also increased per capita production capacity, reduced claims settlement costs, enhanced innovative development and actively explored Internet applications. Despite the need for ‘adjustment’ Yong’an recorded gross premium income of RMB 8.1bn, net profit of rmb 833.3m, investable assets of RMB 10.9bn, net combined ratio of 98.0%, solvency adequacy ratio of 263.7%. The total investment return reached 10%. So the results show that Yong’an is not doing bad at all.

Fosun’s next big step into the insurance market came in September 2012 when it announced a joint venture with US financial services giant Prudential Financial. The company, named PramericaFosun Life Insurance Company Limited (PFI), is a 50/50 joint venture that started with registered capital of rmb 500m. The company was China’s first life insurer jointly funded by a Chinese private investor and a foreign investor. Mr Guo said at the time: “The life insurance industry in China is experiencing rapid growth, driven by an increasing focus on protecting the livelihoods of families around the country. We look forward to benefitting from PFI’s deep actuarial experience, asset management expertise and 137-year history of success in the life insurance industry, as we move forward together to develop products that address the life insurance needs of this market.” In the latest financial report for 2015 Fosun said that in recent years the premium received by PFI has grown rapidly on the back of several innovative projects. He said that the company continuously promotes product innovation and is also exploring a new sales model of “Insurance + Health Manager + Retirement Community + Overseas Asset Allocation,” and crowd-funding insurance. The group now offers a comprehensive set of product lines that span from life, accident, critical illness to universal life and health insurance. In 2015 the new annualised premium income and the total premium of PFI reached rmb 125.3m and rmb 978.1m respectively (both including universal life insurance policyholders’ deposits). The company also recorded gross premium income of rmb 57.2m, net loss of rmb 113m, investable assets of rmb 1.9bn, a solvency adequacy ratio of 985.5% and the total investment return reached 6.9%.

Climbing to the peak

The biggest step forward in Fosun’s insurance growth story came in May 2014 with Fosun’s completion of its €1.038bn acquisition of 80% of the share capital and voting rights of each of Fidelidade, Multicare and Cares, collectively now known as the Portuguese Insurance Group.

Then in January of 2013 Fosun created Peak Reinsurance Company Limited (Peak Re), a Hong Kong based reinsurer designed to capture the growing demand for modern reinsurance solutions in the Asia Pacific region. The company started with an initial capital of Us $550m. Peak Re is actually held jointly with the International Finance Corporation (IFC), a member of the World Bank Group focused on private sector development. It invested us $82m (14.9%) in the company. At the time of launch Mr Guo said: “Together with Fosun’s other insurance projects, we believe our investment in Peak Re will create an anchor revenue stream from the insurance business to support our investment activities and steadily making inroads to establish Fosun as ‘a premium investment group.’”

M D S m a g a z i n e

The group pointed out that Asia Pacific has been underinsured in general for too long. It pointed out that, in the aftermath of a series of natural catastrophes in Asia Pacific in 2011, including the Thai floods, Tohoku earthquake and tsunami in Japan, New Zealand earthquake and Australian floods, less than 22% of the total economic loss registered was insured. This was significantly below the ratio of insured loss to economic loss seen in the US and Europe at that time, which stood at approximately 63% and 50% respectively. Moreover, in 2010 China suffered its most devastating floods in a decade that caused around us $50bn economic loss, of which only Us $1bn was covered by insurance. Peak Re therefore planned to invest ‘significantly’ in the research and development of risk management solutions for households and business in the region. It said that, in cooperation with IFC and Fosun, Peak Re planned to enter emerging Asian markets including China, India and Indonesia in its first five years. The new reinsurer also said that it planned to grow both organically and strategically via the acquisition of portfolios of profitable underwriting business. Last year the reinsurer took some big steps to diversify itself by territory and product line. It announced its plan to acquire a 50% stake in Caribbean insurance group NAGICO Holdings Limited in July 2015, currently pending for regulatory approvals. Peak Re also set up a Zurich branch in September 2015 to get closer to its clients in Europe and further diversify the book of business. Fosun revealed that the reinsurer’s business in Asia Pacific expanded ‘steadily’ and added that it has also made ‘solid’ progress in Europe and North America. In 2015, the gross premium written from Europe and North America accounted for 41.5% of the total premium income, showing an increase of 24.4% from 17.1% in 2014. By the end of last year Peak Re had served over 285 customers in 47 markets around the world, compared to 175 customers by the end of 2014. The company wrote gross premiums of us $582.7m in 2015 compared to us $288.1m for the same period in 2014. Net profit was us $59.2m, up by us $17.6m on 2014. The net combined ratio was 96.8%, solvency adequacy ratio was 754%, investable assets were us $913m and total return on investment was 6.4%.

2010 Club Med

2011 Folli Follie

2012 Pramerica Fosun Life Insurance, Peak Reinsurance

2013 St. John, Alma Lasers, Saladax, Caruso, Atlantis Resort, Sanya, 28 Liberty in New York, Loyds Chambers in London

2014 Fidelidade, Secret Recipe, REN, Osborne, Studio 8, Tom Tailor, ROC Oil, IDERA, Luz Saúde, BHF Kleinwort Benson Group SA, Hainan Mining IPO

2015 Ironshore, MIG, Thomas Cook, Club Med, Cirque du Soleil, Hauck & Aufhäuser Privatbankiers (H&A), Silver Cross, RPIM, Phoenix Holdings, Zhejiang Internet Commerce Banking Co., Ltd. commenced operation

Based on Fosun Institutional Presentation.

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Xi’an-based Yong’an Insurance P&C was founded in 2003 and was Fosun’s first investment in the insurance market.

Fosun arrives in Europe… Via Portugal The biggest step forward in Fosun’s insurance growth story came in May 2014 when Chinese President Xi Jinping and Portuguese President Aníbal Cavaco Silva witnessed the signing of documents to secure Fosun’s completion of its €1.038bn acquisition of 80% of the share capital and voting rights of each of Fidelidade, Multicare and Cares, collectively now known as the Portuguese Insurance Group. The three companies were wholly-owned subsidiaries of Caixa Seguros e Saúde (CSS), the insurance arm of Portugal’s state-owned bank CGD. Fosun said that, following the successful completion of the acquisition, it had made a ‘major stride’ towards becoming a world-class investment group underpinned by the twin drivers of ‘insurance-oriented comprehensive financial capability’ and ‘profound industrial foothold based investment capability.’ This, said the group, moved it closer towards implementing the ‘Warren Buffett model of development’. The Portuguese Insurance Group’s unaudited total assets reached €12.8bn by end-2013. On a pro forma basis after consolidating the Portuguese Insurance Group, the proportion of Fosun’s insurance assets to the Group’s total assets increased significantly from 3% to 39%. “As insurance is the core business for Fosun’s development, the cooperation between Fosun and the Portuguese Insurance Group will undoubtedly be a long-term and stable one. Meanwhile, Fosun is fully confident about the existing management team and has committed to maintaining the stability of the ongoing business strategy. Through efforts of both parties and synergies derived from shared resources in various aspects, Fosun hopes to develop higher quality products and services as part of its efforts in achieving sustainable returns to our shareholders, employees and customers,” stated Fosun. The Chinese group said that it would also facilitate collaboration and synergy with other insurance companies that it had invested in, again following the Buffett model. “For instance, we will facilitate collaboration with Peak Reinsurance to lower the reinsurance costs and to

cooperate with Yong’an P&C Insurance in technologies, products and sales channels to achieve rapid business development. On the other hand, Fosun will make use of its core investment capability to optimize the investment portfolio to improve the investment returns for the Portuguese Insurance Group, especially combining with Fosun’s global investment strategies. Fosun will also review in at full lengths the investment opportunities across Europe and OECD markets while broadening its business scope, with a view to minimizing systemic risks of geographical concentration through diversification,” explained Fosun. The Chinese group added that it had been actively identifying different types of ‘value investing opportunities’ around the world and decided that, despite Portugal’s recent economic problems, it believed that that country remains a highly attractive key market and matches well with Fosun’s global expansion strategy. “Fosun stays vigilant and is attentive to other investment opportunities in other sectors of the Portuguese market, in particular the sectors of property, tourism and brand products,” added Fosun. Fosun’s representative office was set up in Lisbon from where it would be able to provide better support to the Portuguese Insurance Group and explore investments in other sectors in Portugal and further promote ‘Sino-Portugal’ economic exchange and cooperation, said the group. “This move will also allow Fosun to contribute its effort, albeit minute, to recovery of the economy in Portugal. Fosun aspires to play the role as a bridge that facilitates business developments in China by companies originated in Portugal, and developments in Portugal by companies originated in China,” added the group. In early 2015, Fosun further increased its equity interest in Fidelidade to 84.986%. Fosun Insurance Portugal is now a significant global operator in the Portuguese insurance market. Fosun explained in its latest set of annual results that it sells its products in all key lines of business and benefits from the largest and most diversified insurance sales network in Portugal. This includes exclusive and multi-brand agents, brokers, own branches, Internet and telephone channels. It also has strong distribution partnerships with the post office and Caixa Geral de Depósitos, a leading Portuguese bank. Fosun Insurance Portugal is also active in seven countries on three continents (Europe, Asia and Africa). During the Reporting Period, Fosun Insurance Portugal reported gross premium income of €3.9bn, a non-life business net combined ratio of 98.4%, a solvency adequacy ratio of 215.7% and net profit of €301.1m. “International business of Fosun Insurance Portugal continued to reveal a strong commercial performance, reaching overall €202.1m in direct insurance premiums, an increase of 13.7% compared to 2014,” reported Fosun at the end of March this year.

M D S m a g a z i n e

Next stop United States! Despite the scale of the Portuguese acquisition China’s Warren Buffett was not ready to stop there and the next target was in the huge US insurance market. In July of last year Fosun announced the completion of its acquisition of 100% of Meadowbrook Insurance Group (MIG) for us $439m. “Meadowbrook will further strengthen Fosun’s capability to access long-term high-quality capital and enhance the Group’s insurance business capabilities on both the liability end and investment end. We are committed to leveraging Fosun’s global resources to support long-term and stable development of Meadowbrook,” said Mr Guo. Meadowbrook is a property & casualty insurer and insurance administration services company focused on specialty niche markets. It markets and underwrites specialty property and casualty insurance programs and products on both an admitted and non-admitted basis through a diverse network of independent retail agents, wholesalers, program administrators and general agencies. Critically, Meadowbrook possesses a full range of non-life insurance licenses in 50 states nationwide, which cover admitted and non-admitted product lines. The completion of the Meadowbrook acquisition gave Fosun a strategic insurance platform in the US, enabling the Group to establish a significant presence in the world’s biggest property and casualty market. Last year MIG recorded gross premium income of us $726.5m and net profit of us $34.3m on the back of a net combined ratio of 100.3% and solvency adequacy ratio of 200.3%. MIG has investable assets of us $1,570.6m.

And now international specialty market In February of last year, as Fosun was preparing its acquisition of MIG, it completed the acquisition of approximately 20% of the total outstanding ordinary shares of Ironshore, the Bermuda-based international specialty insurance group. The purchase price was approximately us $466.6m. True to form, in November of last year, the Chinese group completed the acquisition of the remaining interests in Ironshore for us $2bn in cash. Ironshore is a big step forward for Fosun into the highly valuable and currently popular large corporate and commercial insurance market. Apart from Bermuda, Ironshore has operations in the US, Lloyd’s and Ireland. In 2015 Ironshore’s gross premium income reached us $2.16bn and it delivered a net profit of us $57.8m on the back of a net combined ratio of 96.7%. The solvency adequacy ratio was approximately 166% and total investable assets were us $5.1bn.

Given the group’s existing presence in the potentially massive Chinese primary life and non-life markets, the Asian and international reinsurance market, mainland European life and non-life market and the US commercial specialty markets, the addition of Ironshore gave Fosun arguably the final piece in its jigsaw, for now at least. As the Ironshore deal was revealed, Mr Guo stressed the Buffett style synergies that the companies will enjoy within the Fosun family. He said: “Now and in the coming year, Fosun will strengthen its integration and collaboration efforts, seeking to establish a cross-region and cross-industry global insurance and financial group. We encourage our invested companies to collaborate wherever applicable, seeking to connect them to Fosun’s resources with our global insurance and finance platforms to enhance their competitiveness in their respective industries.” And Ironshore did not hang around long to take advantage of its new group potential for in January it announced that its Lloyd’s subsidiary, Pembroke Managing Agency, would set up an office in Shanghai to join the Lloyd’s China platform. The Shanghai Pembroke Managing Agency will underwrite specialty lines of business, initially focused on the agriculture, marine and healthcare sectors. Tracy Ma was appointed underwriting manager of the entity and reports to Hui Yun Boo, managing director of Ironshore’s Asia Pacific region. “Ironshore’s parent Fosun, headquartered in Shanghai, positions us with clear distinction in the local market, allowing us to offer onshore specialist products to meet growing demand within this vibrant city,” said Mark Wheeler, chief executive officer of Ironshore International. Ms Boo said the new Shanghai office complements Ironshore’s existing regional presence in Asia Pacific growth hubs, such as Singapore, Hong Kong, Tokyo, Sydney and Auckland. Interestingly only two months later on March 22, the board of directors of Fosun announced that the Company is considering pursuing an initial public offering of the ordinary shares of Ironshore. “As at the date of this announcement, no final decision has been made by the respective board of directors of the Company and Ironshore on whether, when, or where to proceed with the Possible IPO,” stated the group. Whatever Fosun decides to do with Ironshore it is clear that the Chinese group will continue to build its business in the international insurance space. As Ms Lan Kang states in the following Q&A Fosun will remain focused on this market and use its Portuguese and international bases to seek further growth opportunities. Watch this space! •

fu l l c o v er

GUO GUANGCHANG MEETS ROLE MODEL AT US-CHINA CEO ROUNDTABLE Last September Chinese President Xi Jinping attended the US-China CEO Roundtable in Seattle hosted by the Paulson Institute and the China Center for the Promotion of International Trade. This was the highlight of the second day of President Xi’s visit to the United States. Xi Jinping stressed at the roundtable that, due to differences in stages of development, the Chinese and U.S. economies are highly complementary. He said that there is greater room and opportunity for bilateral economic and trade cooperation. The Chinese President added that China supports large US companies that establish regional headquarters and research centres in China and encouraged more small and medium US enterprises to expand their business in China. Meanwhile, Chinese investments in the United States will also continue to grow, he said. There were 15 CEOs from China’s biggest companies including Guo Guangchang of Fosun who took part in the discussion along with 15 CEOs of the biggest corporations in the US including Warren Buffett of Berkshire Hathaway. Jokingly, Guo Guangchang called himself a student of Mr Buffet at the roundtable as he introduced Fosun’s US investment projects, including the recently acquired

Meadowbrook Insurance Group (MIG) and Ironshore, and its participation in Sino-US cultural and artistic cooperation and exchange programs. At the roundtable, Guo Guangchang said that the United States has the world’s largest concentration of superior resources, and given Fosun’s focus on the four major fields of insurance, private banking, health and happy & lifestyle, the Group actively explores superior projects for cooperation. At that point, Fosun’s scale of investments in the United States had already surpassed US $5bn, creating a total of 4,895 job opportunities, Mr Guo said. Apart from Ironshore and MIG, these investments include: the establishment of three pharmaceutical laboratories in Silicon Valley for seamless 24/7 global research and development as well as over 10 investment cooperation projects, such as the New York landmark 28 Liberty, renowned US womenswear brand, St. John, innovative Hollywood film company, Studio 8, and a number of other venture capital projects. During the roundtable, Mr Buffett and the ‘Chinese Buffett’ had the chance to meet face to face and reached a consensus: Continue to be optimistic for the Chinese economy and continue to adhere to value investing discipline.

M D S m a g a z i n e

Canada

FOSUN Grasping Global Investment Opportunities

2015 Circe du Soleil

UK 2013 Lloyds Chambers 2015 Thomas Cook RPIM Silver Cross

Spain

USA 2013 28 Liberty St. John 2014 Studio 8 2015 MIG Ironshore Ambrx NoMad Luxury Residential Tower at Madison Avenue New York

2014 Osborne

Italy

Illustration by José Cardoso

2013 Caruso 2015 Palazzo Broggi

Portugal 2014 Fidelidade Luz Saúde REN

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France 2010 Club Med

Germany 2014 Tom Tailor 2015 H&A

Japan

Israel 2013 Alma Lasers

Australia Greece

2014 ROC OIL 73 MILLER STREET

Malaysia 2014 Secret Recipe

2011 Folli Follie

Note: The above mentioned companies/projects include investments made by Fosun, its subsidiaries and funds under it's management. * Currently under approval by regulatory authorities.

2014 IDERA

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INTERVIEWING LAN K ANG

Fosun playing the long game

Chinese Conglomerate Fosun Group burst onto the European and international insurance market in 2014 when it acquired leading Portuguese insurer Fidelidade. This was rapidly followed by major investments in Bermuda-based international specialty insurer Ironshore and Meadowbrook in the United States. These international investments add to Fosun’s existing portfolio of investments in Chinese insurers. fullcover interviewed Lan Kang, Vice-president of Fosun Group and President of Fosun insurance Group to discover more about the group’s plans for the Portuguese and international Insurance market and how it fits into the fast-growing group’s wider strategy.

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We need to provide the resources that are needed and create synergies among all of our portfolio companies. We also have to build strong corporate governance and risk management systems and attract and develop global talents.

Lan Kang, Vice-president of Fosun Group and President of Fosun Insurance Group.

Fosun was founded in 1992. Could you share with us how Fosun became one of the largest private Chinese conglomerates in such a short space of time? Fosun’s rapid growth in the past two decades or so has been built largely on the tremendous growth of China’s economy as well as the strategic decisions the company has made along the way, which is equally important to its success. Beginning in 1992 shortly after they graduated from college, the founders of Fosun Group started the business in market research and consulting services with little funding capital. They successfully accumulated some capital and later tapped into the healthcare and real estate businesses, having observed that China was going through a process of quick urbanization. Further investment into manufacturing and resources proved to be also very successful thanks to the booming infrastructure sector in China. Since 2008, as China’s economic engine has been shifting from industrialisation and urbanisation to consumption and personal finance, Fosun continued to invest by ‘combining China’s growth momentum with global resources’.

What are your investment and strategic objectives? When considering investment opportunities, the most important thing to consider is how we can create value through our investments. Nowadays, when capital becomes a commodity, we need to think about why other companies would take our investment versus the ‘others’ and how we can add value in addition to the capital provided. There are three areas of investments that we are focusing on: Health, Happiness, and Affluence of the people. We have already built our competitive advantages in the health and happiness industry. For example, Fosun Pharma is a leading pharmaceutical company in China. We have acquired United Family Healthcare, the leading high-end hospital in China. We have also invested in some ‘internet+ health services’ projects, like Guahao.com. Last year we finalised the privatisation of Club Med, the French holiday resort group, that we believe has huge potential in business expansion globally. Our investment in the financial services sector, in particular the insurance sector, also provides long lasting wealth preservation for consumers.

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What are the selection criteria for your investment projects? For insurance projects, we have 10 investment guidelines. These are: 1. Market leader in the segment; 2. Great management team; 3. A good combination of asset scale and operating capability; 4. Relatively low cost of liability; 5. Reasonable valuation; 6. Prudent risk management; 7. Market opportunity; 8. Controlling stakes to acquire; 9. Potential improvements on the asset side; and, 10. We understand that every project is unique and we always evaluate each project comprehensively and rigorously with, but not limited to, the above mentioned guidelines.

What are the major challenges that Fosun faces with its overseas investments such as Fidelidade, Ironshore and Meadowbrook? For such overseas investments you need deep local knowledge and capabilities to gain access to the best investment opportunities. This is critical because there is growing market competition that is driving prices up. You also need to obtain understanding and trust from foreign regulators and there is increasing complexity in risk management.

What are the guiding principles when you are dealing with your portfolio’s companies? You need to select and/or build a leadership team with strong entrepreneurship and partnership. We need to provide the resources that are needed and create synergies among all of our portfolio companies. We also have to build strong corporate governance and risk management systems and, of course, attract and develop local talents and provide them with a global platform on which to grow.

Why did Fosun choose the insurance market as one of its key markets? How does it fit with the rest of the group’s activities? The insurance sector is the best channel to connect Fosun’s unique expertise in investments and industries with long-term stable capital. On the one hand, given Fosun’s strong industry capabilities in health, happiness, real estate and

wealth management realms, we can help the insurance companies explore synergies in product development, distribution optimisation, integrated finance platform and various other areas. On the other hand, we can help to improve the asset-liability management and investment portfolio of the insurance company by leveraging Fosun’s excellent investment capabilities. Furthermore, for overseas insurance companies, Fosun can provide additional value by connecting China’s momentum with global resources. Fosun is dedicated to helping its portfolio insurance companies to improve underwriting profitability by focusing on operational excellence, strengthen the balance sheet and enhance market competitiveness through innovation and evolution. Then, only when the insurance operational side is sound and profitable, we can utilise the long-term float to achieve better investment returns.

Why did you enter the insurance market when it is so competitive and pricing is so soft especially for non-life commercial business? It is true that global insurance markets, especially developed markets, are facing fierce competition and alternative capital surplus. However, the range between great and mediocre companies is huge. Our task is to identify value investment opportunities despite the challenging market conditions and create value after investment. For instance, specialty insurance has outperformed other lines of business in the United States in recent years. Ironshore, a strong player in this segment, appears to be an interesting and unique opportunity for us. We believe that sound fundamentals, underwriting expertise and excellent management talent are crucial for the success of an insurance company. We are proud to tell that all of our overseas insurance portfolio companies have achieved profitable financials in 2015.

Why has Fosun decided to expand outside of Asia to expand its insurance business, why not concentrate on markets closer to home? Actually, we are not restrained in terms of geographic areas. We select the best opportunities that fit Fosun’s strategy. In 2014, it was Fidelidade in Portugal and in 2015, we invested in Ironshore and Meadowbrook in the United States. Maybe there will be another star performer for Fosun in Asia or somewhere else in the world in 2016. But we have not neglected our home market. Our insurance companies in China and reinsurance companies in Hong Kong have all been managed by strong teams of insurance professionals and have been doing well.

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Could you explain the importance of Fidelidade for the strategy of Fosun? As our first investment in the overseas insurance realm, Fidelidade opened a new chapter for Fosun Group. Simply by looking at the numbers, in 2014, Fosun’s asset had increased by €13bn with the transaction of Fidelidade. And we all know there is much more value embedded apart from the numbers. Fidelidade is a strategic platform in Europe which helps Fosun to better connect China’s momentum with global resources, to better understand the insurance operations in the Solvency II environment and to better implement our ‘Insurance + Investment’ core strategy prudently and effectively. In the past two years, Fosun has provided strong support to Fidelidade to improve its underwriting profitability and financial performance. We fully understand that for policyholders, financial strength of the insurance company is the top priority. We are dedicated to help Fidelidade achieve a stronger and brighter future.

Shanghai: where traditional and new architectural co-exist.

Where does Fosun see the best opportunities for profitable growth in insurance markets worldwide – by geography and line of business? We will be looking for companies with strong leadership, competitive and innovative products and services, as well as operational excellence, more than geography and line of businesses.

Is Fosun keen to expand in the larger corporate multinational insurance space and if so how? Will Ironshore be the main platform for this business? The short answer to the first question is ‘Yes’; but it’s worth further elaboration. Our goal in the insurance sector is to build up a global insurance holding company with world-class insurance management and investment capabilities. We will continue to search for high-quality insurance investment opportunities globally based on our rigorous investment guidelines and prudent risk management. We will never embrace a growth strategy that is aggressive and irrational. •

LAN KANG → Lan Kang is Vice President and Chief Human Resources Officer at Fosun, as well as President of Fosun Insurance Group. She currently serves on the board of 6 insurance companies that Fosun has invested in, including Yong’an P&C Insurance and Pramerica Fosun Life Insurance in China, Peak Reinsurance in Hong Kong, Meadowbrook Insurance Group in the US, Ironshore in Bermuda and Fidelidade Insurance Group in Portugal. → Prior to joining Fosun Group, she was a Senior Client Partner focusing on executive search and leadership development at Korn/Ferry International’s Greater China Office. She also spent over four years working in management consulting at McKinsey & Company’s Greater China office. She assisted many leading multinational and local Chinese companies in strategy development, operation improvement, and change management, and is experienced in talent acquisition and organization development. → Lan Kang spent 9 years in the US, before returning to China in 2002, right after receiving her M.B.A. with Honors from The Wharton School, University of Pennsylvania. She also obtained her Bachelor of Science degree from Zhejiang University in China, and a Master of Science degree from Tulane University in the U.S.

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F O S U N ’S #1 I N V E S T M E N T I N I N S U R A N C E

Fidelidade: going from strength to strength

Jorge Magalhães Correia is Chief Executive Officer of Fidelidade, Multicare and Fidelidade Assistance insurance companies and President of the Board of Directors of Universal Seguros (Angola) insurance company. He is also Vice-President of the Portuguese Association of Insurers (APS) and a member of The Geneva Association. He spoke to fullcover about Fidelidade, its strategy for growth, its work in the Chinese capital market and relationship with MDS.

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In a newspaper interview you once said:”What is expected of us to do in a year would normally take three years to achieve.” Have you been able to keep up with this pressure in terms of results? My quote was intended to demonstrate the level of enthusiasm coming from our shareholders. The entire organisation has adapted quickly, post-privatisation, based on two strong shareholders who complement one another. We have taken advantage of the additional opportunities this new context has brought; not only do we have a more comprehensive view of the insurance business but we are also participating in transnational projects, bringing added value and knowledge to the Company. Apart from this, there has not been any particular pressure from the shareholders in connection with profits, and earnings have actually been retained in the Company to enhance its growth capacity.

Have there been any changes to the Organisation’s culture? Other than the international dimension I mentioned, no. Of course, some things do change, for example, 150 more employees have opted to study Mandarin and we have a China Business Unit operating in Portugal, Angola, Mozambique, Spain and France. But the Company’s culture and management model have not changed - Fidelidade has always supported businesses in the private sector and will continue to be dynamic and innovative. We were responsible for introducing transport insurance in Portugal, were the first to sell life insurance and the first to issue a policy covering industrial accidents. And we will continue to be the main driving force behind innovation and progress in Portuguese insurance.

JORGE MAGALHÃES CORREIA → Jorge Magalhães Correia began his career as a lecturer at the Lisbon Faculty of Law. He also practised law and held management positions at the General Inspectorate of Finance (IGF) and the Portuguese Securities Market Commission (CMVM). → He has held various positions in companies in the finance and insurance sectors, including Administrator and/or President of the Board of Directors of MundialConfiança, Fidelidade Mundial, Império Bonança and Via Direta the insurance companies. → In the hospital sector, he was Administrator of USP Hospitales (Barcelona) and Administrator and subsequently President of the Board of Directors of HPP – Hospitais Privados de Portugal SGPS.

The latest figures show Fidelidade has boosted its market share to around 30%. Is this growth an early reflection of the new management philosophy?

As I said before, there is no new management philosophy. On the contrary, the team is continuing with the groundwork it began prior to privatisation. What has changed is the competitive market, which was unable to cope with the downward spiral of prices and results. In practically every non-life sector, Fidelidade’s management indicators are better than the market average; higher average premiums, fewer new and ongoing claims, more technical reserves and proven better levels of service. If we add to that the strength of the brand and the highly professional broker network, it is no surprise we’ve increased our non-life market share in a new underwriting cycle. In the life insurance sector, however, things are going to be different. In 2016, we will be introducing some

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Oncology insurance responds to the challenge of cancer and is innovative in every respect, from the attention given to preventing the disease, to the sums insured and personal attention given to every case.

Fidelidade is the leading insurer in Portugal, currently holding a market share of 29.8%. The company operates in all lines of business, having the largest network of agencies in Portugal and being present in several countries, including Angola, Cape Verde, Mozambique, Spain and Macau.

FIDELIDADE IN NUMBERS (2015) PORTUGAL T O TA L P R E M I U M S

€3,768M MARKET SHARE

29.8%

changes in terms of strategy and positioning because we have come to the conclusion the new European Solvency II regulations penalise this line of business, making growth difficult in its current format.

Today, Fidelidade operates in the Chinese capital market. What could this mean for the future of the insurance Company and its stakeholders? A number of international insurance companies operating in Portugal have obtained this authorisation. What few people realise is that the Chinese authorities scrutinise every application in minute detail and this process can take months or even years. The fact that Fidelidade has been authorised to operate in the Chinese capital market is further proof of our financial and management capacity and this should be a source of pride for Portugal. We should not forget that China is the world’s second-largest economy and the number of middle class citizens equates to that of the European Union. Although we have the authorisation to operate on the Chinese capital market, we are not yet doing so because the investment opportunities so far, have not justified this.

We have seen the Portuguese insurance market become increasingly concentrated. What is your take on this development? A decade of not-so-prudent pricing practices, a climate of interest rates close to zero and an economy with poor growth perspectives make the process of concentration inevitable. And if we add the challenges of Solvency II into the mix, it’s not surprising the market has contracted quickly. We are very pleased Fidelidade prepared for such issues early on and we are now of a size where we play an important role in the Iberian market.

2016 will also be marked by the Solvency II directive coming into force. How do you view the regulator’s increased stringency? Above all, Solvency II represents higher capitals for the same level of risk; in other words, more protection for policyholders and greater demands on shareholders. Solvency II brings significant improvements in terms of risk management and reporting and management obligations. However, it also introduces new concepts that may have a negative impact on certain areas of the business, such as life insurance, where the essence of the business model may be compromised. When Solvency 1 was in place, life insurers were a stabilising influence in the market; they provided support for economies and overcame the 2008 financial crisis without requiring support from taxpayers.

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How is Fidelidade preparing for this new challenge? Fidelidade began preparing for Solvency II in 2006, almost 10 years ago, by creating its Risk Management Department. Today we have a highly-specialised full-time team for this purpose. In 2014, prior to privatisation, we distributed almost €600 million in accumulated dividends and capital, and in 2015, as planned, our equity capital increased by €520 million. But the structural volatility of the markets in practically every sector and geography, coupled with the market-to-market asset valuation rule (which makes no sense for long-term activity), will bring permanent and unsustainable pressure to bear on the capital of every life insurance company. And this is changing the face of insurance in Europe.

What are your main strategies for growth in the future? We are hoping to grow in every non-life sector, benefiting from the ongoing rate recovery and our increasing competitiveness. Health insurance will continue to gain weight in Fidelidade’s portfolio, as will our activities connected to assistance and service provision in the insurance sector. And we will be increasingly multinational, with 20% - 25% of our premiums coming from other markets. We are making a concerted effort to ensure our technology adapts to the OECD’s predicted fourth Industrial Revolution and are experimenting in big data, digitisation and online platforms. Innovation is certainly in the pipeline.

How do you envisage your relationship with insurance brokers in the future?

Our aim is to be a driving force for innovation and progress in the insurance sector in Angola and Mozambique and to offer insurance options that will be attractive to the new middle classes.

Fidelidade has a significant presence in the Angolan and Mozambican markets. What is the Group’s strategy here? To serve families and companies in the same way we do in Portugal, by offering products appropriate to their needs at competitive prices and with excellent levels of service. Our aim is to be a driving force for innovation and progress in the insurance sector in these countries and to offer insurance options that will be attractive to the new middle classes. We are currently planning how to achieve this and will certainly consider opportunities for growth.

As market leader, Fidelidade has pioneered the development of innovative products and services. Is there anything particular you’d like to highlight? Oncology insurance, since it is our most recently launched product, and because of the joint effort it requires from two of the Group companies, Multicare and Luz Saúde. This type of insurance responds to the challenge of cancer and is innovative in every respect, from the attention given to preventing the disease, to the sums insured and personal attention given to every case.

Our relationship with brokers is currently good but I believe there is still room for improvement, hopefully to be more focused and efficient, creating more value for both sides.

How would you describe Fidelidade’s relationship with MDS? We have a long-standing relationship that goes back to the early days of MDS, in the 1980s. Over these three decades, a true spirit of partnership has been nurtured and strengthened and, in our opinion, this has made it possible to bring value to a considerable number of customers, not just through our unrivalled cover solutions but in our risk and claims management. Our relationship goes beyond the bounds of insurance intermediation, extending into other areas of collaboration such as training and reinsurance, and is cemented in a personal relationship of trust and mutual appreciation at all levels. Such loyalty on both sides has helped our portfolio remain stable during this time, and naturally, the Sonae Group carries considerable weight for Fidelidade; we’ve provided Workers’ Compensation and Health insurance cover for the Group since it was founded. The partnership with MDS however, has made it possible for us to work with a wide range of leading Portuguese firms. The improvements we’ve made to our organisation, processes and products will strengthen our relationship with and benefit our business partners, not only in Portugal but in other external markets were we are increasing our presence; we know this type of collaboration makes sense. •

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Evading Insurance Premium Tax Errors

Illustration by Tiago Galo

Karen Jenner of FiscalReps offers her insight into the emerging risks mounting from Insurance Premium Tax (IPT) mistakes and provides advice on how to avoid them.

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Insurance Premium Tax (IPT) is often viewed as a lower tax cost compared to other taxes imposed on insurance companies, though those writing multinational insurance programmes, including those in the captive sector, face increasing risks arising from IPT errors and non-compliance, which can ultimately impact underwriting profits and bottom line results.

The growth of IPT In the aftermath of the most recent global financial crisis, it is evident that a growing number of governments around the world have either introduced ipt or have strengthened existing ipt regimes. Since 2008 governments across the world have been shifting their attention from the direct taxation of businesses to the taxation of transactions, including insurance transactions, in order to boost revenues. New ipt regimes have been implemented in Hungary, Bulgaria and San Marino within Europe. With regards to increasing rates, in the EU, the Dutch authorities over the last 10 years have increased their ipt rate from 9.7% to 21%; and 2015 saw increases in the Uk, Greece, Slovenia and France as well as many other countries. The increased focus on indirect taxes, and specifically ipt, is further evidenced by a significant increase in the number of ipt compliance investigations and audits conducted by national tax authorities. Audits are not always directed at the insurer, with ipt investigations more recently seen to increasingly arise from audits of a corporate policyholder. These have recently arisen independently from both Belgian and Austrian tax authorities. Not only have investigations sought to review amounts of ipt settled and ensured that there were settled in a timely and compliant manner, but various tax authorities now wish to review and maybe question premium allocations. Uk and German tax authorities have recently been involved in such investigations. With regards to Germany, if as an insurer, premium allocations do not appear to be structured in a way the tax authorities deem not to be a fair

allocation with regard to the risks based in Germany, insurers may find the authorities challenging an underpayment of German tax. Itâ&#x20AC;&#x2122;s key that an insurer must be able to demonstrate a fair and reasonable premium allocation and subsequent amount of ipt to a particular jurisdiction, investigations may require production of calculations, paper work and an audit trail, sometimes going back over several years. Other investigations can cover legacy settlements, policy wording reviews and application of appropriate ipt rates.

IPT Wariness There has also been an increased level of scrutiny around ipt as a recent development allied to concerns by tax authorities, especially in the EU, about the use of transfer pricing. The tax authorities increasingly take the view such costs should be spread across the group on a fair, objective and armâ&#x20AC;&#x2122;s length basis. This more recent scrutiny may well come to impact the methodology behind insurance premium allocation over the next few years as this is something that governments are beginning to look at very seriously. Although corporate policyholders may need to report ipt compliance for their own audit purposes, in Europe the insurance company typically pays ipt, with a few niche exceptions where that may not apply. In practice, the responsibility for ipt compliance rests with both the insurer and the policy holder and both have a measure of responsibility to make sure that the premiums are allocated reasonably and the various factors are calculated correctly.

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The potential impact of mismanaging IPT on the underwriting performance of a multinational insurance programme can be considerable.

K AREN JENNER → Karen Jenner joined FiscalReps as an insurance consultant with over 20 years of experience in the insurance industry. Prior to joining FiscalReps, Karen Jenner was at AIG working in various roles in their Major Accounts Practice, responsible for the global insurance programmes of some of the top 100 FTSE companies.

Implications of non-compliance can impact both the insurer and the policyholder. The ultimate responsibility should fall on the insurance company because it is directly answerable to the tax officials, but there are instances where the policyholder may be pursued. Some EU countries are in the process of revoking the requirement for foreign insurance companies writing business locally to have a fiscal representative, which up until very recently was a legally mandated appointment. So much so, the partners of the firm acting as the fiscal representative are jointly and severally liable for the payment of any taxes incurred on behalf of the foreign insurer. There have been arguments at the EU level that the requirement to force an EU-based, non-domestic insurer to appoint a fiscal representative when the domestic insurer does not have to do so, is unfair. Over the last few years, we have seen a number of countries, usually as a result of pressure applied by the EU, revoke the requirement to appoint a fiscal representative. Spain is a good example of this. In 2010, a case was brought against Spain by the European Commission which argued that it was unfair for Spain to force non-Spanish insurers to appoint a fiscal representative. Last year, Spain finally relented following a second case. But, even though the fiscal representative requirement is no longer in force, as an insurer you still need to file and pay IPT and comply with local regulations. Currently, the average ipt rate in Europe is somewhere between 10% and 15%. This has implications for both providers and buyers of insurance cover. As for a corporate buyer of insurance, especially a multinational corporation, 15% of the total premium amount will be a material figure. It’s key to ensure that the right amount of tax is paid because insureds do not want to pay any more tax than is required. As an insurer, it’s important to ensure you are collecting the full amount of tax payable but also, as an insurer you are allowed to pass on certain elements of the tax cost to the policyholder. Whatever part of that cost the insurer fails to

pass on to the policyholder will effectively come out of the insurer’s underwriting profits which, given the current soft market, are marginal at best. This effectively could mean losing money even before considering business claims and service costs. As both life insurers and reinsurers are often exempt from ipt, the burden of this particular tax falls on non-life insurers, including captive insurance companies.

Avoid IPT Mismanagement The potential impact of mismanaging ipt on the underwriting performance of a multinational insurance programme can be considerable. Based on a typical ipt rate across Europe of 15%, and an average combined operating ratio of 95% across the majority of the Uk insurance market, a 5% ipt error could reduce underwriting profit by 15%. Take the example of an insurance company writing a Us $100m of premium income. With an average rate of ipt in Europe of 15%, there is a potential exposure to ipt of Us $15m. If everything is compliantly and correctly managed with regard to ipt, the exposure is zero. But with any errors, your exposure can increase. If at the same time, a combined ratio is about 95%, meaning that on a Us $100m premium an insurer can make Us $5m of profit, the Us $5m of profit is much smaller than the ipt exposure. Any undue increase in your ipt costs will directly impact profits. Combined ratios of captive insurance companies may differ from those of general insurers – the premium income of captives is known to generally be significant, with the cost of any ipt error equally impacting significantly the profit margin of the captive. Additionally, there is also the question of reputational damage. For example, should an insurer, for one or other reason, leave an ipt demand unpaid in any country in the EU, a precedent set by the European Court of Justice in the Kvaerner case of 2001 gives national tax authorities the right to pursue the insured if the insurer fails to settle up. This is particularly an issue in the current global regulatory and compliance environment when the tax affairs of corporates are under unprecedented levels of scrutiny from both the tax authorities and the media. Insurers increasingly need to consider effective compliance systems because of the severe consequences that non-compliance can bring: fines, litigation and reputational damage can all result from unpaid taxes. •

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DOSSIER

GEOPOLITICAL RISKS

WHEN THE NEWS IS WRITING A PAGE OF HISTORY AL AN SIMON – PHILE A S CON SULTIN G GROUP

MANAGING AND MITIGATING THE EVOLVING THREAT OF TERRORISM DANIE L O'CONNE LL – X L CATLIN

TRAVEL SECURITY AND CRISIS MANAGEMENT INTE R NATIONAL SOS / CONTROL R ISK

GEOPOLITICAL RISK – WHAT PRODUCTS & COVERAGES? BY ROB HOU GH , CGSC

NEW IDEAS FOR TACKLING GEOPOLITICAL RISKS IN BUSINESS DAVID ANDE RSON – ZUR ICH

GEOPOLITICAL OVERVIEW IULIA SIMON – CH TORO INTE R NATIONAL

All illustrations by Tiago Galo

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When the news is writing a page of history B Y A L A I N S IM O N

“The revenge of territories on maps, long arcs of history on short periods, is a bearer of violent conflicts, which accompany affirmations of identity, resurgences all the stronger for having been buried, as a return of the repressed. They destabilize the powers in place that loathe ceding their privileges.”

Geopolitical explanations of risks in the new world order Strange sentiments affect the witnesses and agents in this second decade of the 21st century. The old world seems to them to be unequivocally dead, while the new one is not yet born, with no clear delivery date. The interaction of these two states is often at the heart of much pessimism but also questions, doubts, uncertainties, concerns and understandable but possibly dangerous nostalgia. This is by no means the first time that the generations to whom belonged the second half of the 20th century are faced with critical schisms between the past and future. There was 1989, the fall of the Berlin Wall, the defining symbol of the Cold War. There was 2001, when, on 9/11, we saw tragically that History was not at an end. In these two cases, there were certainly remarkable places and images, but nevertheless understandable and interpretable events. But since 2011, all countries, regions, and continents seem to be in motion simultaneously, without apparent links. This (apparently) senseless motion, almost Brownian in nature, begets anguished bewilderment. We will suggest here that a geopolitical lens can make a small contribution to fashion comprehension from anxiety. Let’s give geopolitics a chance, with the understanding that geopolitics is the composition of geography and history.

The argument that follows will attempt to demonstrate by just a few examples that it is less the world that is changing so radically than the lenses with which we view it, our geographical and historical perspectives, remain stagnant and anachronistic, making comprehension difficult if not impossible. Let us use as case studies three places: Libya, Syria, and Iraq. It is now 2016, five years after the start of what we felt able to call the Arab Spring. What season would it remind us of today? All the readers of this article, as well as the writer, have learned to identify the names of these three countries, to locate them on color-coded maps with names identifying precisely delineated states. There’s no doubt, we were dealing with countries or even states. What is the legacy of this? We see the pieces of a fragmented puzzle superimposed on the names of old ruined countries: in place of exploded Libya there is now Cyrenaica, Tripolitania, and Fezzan. Meanwhile in Iraq and Syria, Sunni and Shia, Arabs and Kurds (the reality is far more complex than this simplification) have by fire and blood torn apart the countries we had become used to seeing. But in reality all these entities existed long before our maps were printed, long before we learned to conceive of the world by their neat lines. Libya, Syria, and Iraq, are in effect voluntary and recent constructs, born out of the desire to overcome old divisions by giving independence to heterogeneous regional agglomerations in the first half of the 20th century. In the first the desire was Italy’s, while with respect to Syria and Iraq it was the Franco-British Sykes-Picot Agreement of 1916 – its centennial being this year – which should be conducive to its co-memorization, meaning the common, popular operational memory. These realities precede our memory. Long before we were demarcating world maps, complicated identities existed in the places we wished to simplify, sometimes with good reason, by a varnish of homogeneity. But the old identities have persisted under the thin layer of the will of men. It is as if we wished to hide wall cracks with whitewash. Everyone agrees that history is written by the victors, we should also add that it is they who draw the maps. But just as the clothes do not make the man, as a beard does not make a philosopher, likewise a map does not create a territory, especially when it tries to agglomerate some and divide others. And identity perseveres, it can be recalled at any time.

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A L A I N S IM O N → Since 1985, Alain Simon is the Managing Director of the Phileas Consulting Group, a consultancy specialized in the globalization process. He previously worked for seven years at COFACE, the French export credit guarantee company. His field is Geopolitics and Corporate Strategies (Video, in French, on You Tube “Clip Alain Simon Géopolitique”). → Currently, he takes part in the decision making process of many French and foreign corporates who want to develop their activities on a worldwide basis. → He has been Associated Professor at University of Rennes 1 (2003-2011) and is for many years a close partner of Essec Executive Education. He published several articles and four books: «Geopolitics and corporate strategies» awarded in 1994 the best French financial book; «The map of the new world» published in 1997; “Geopolitics of a melancholy world” published in 2006 and “A time of discredit” that was published in 2008.

And this is what is playing out before our eyes. We have mistaken makeup for skin, constructed appearances for ancient realities. This incredible illusion causes us to confuse maps and territories. This is my initial hypothesis: we have learned to view the world through the latest maps, while real comprehension requires an appeal to the make-up of the former territories. Rendered myopic by our acclimation short time spans, we are stupefied by the resurgence of long-term realities. On all sides, the tables turn, tossing off tablecloths and dishes. Can we find more examples of what could be called territory’s revenge on maps? These could be countless since the process is at work the world over, we can all discover this process around us. So we see in Africa the reappearance of ancestral rifts between nomads and sedentary peoples, ancient denizens and new arrivals, farmers and stock-breeders, animisto-Christians and animisto-Muslims. And a number of countries recently drawn onto the atlas have already fractured, will they survive? In Europe as well, the fracture lines, hidden from view by the superficial cosmetics of maps, are reopening: we see in the division of Ukraine, which is itself but a constructed aggregate from 1945, the divisions that emerged during the East-West schism of Christianity in 1054, always alive as testified by the meeting between Popes Francis and Kirill in February 2016. This line also went through Crimea, which only became separated from Russia in 1954. Those who have seen but the edited map, are not aware of these circumstances. And this situation is even more extreme for those who have seen only maps created after 1991, they have learned of the world with no cartographic references to the USSR. Just as the sign “Wet Paint” signals that it is best to stay away, we should be wary of “recent maps”. There is not enough space here for many more examples. We will contend ourselves with just a few to highlight how troubling and systematic is the current counter-attack of territories on maps. Greece’s Orthodox affiliation appears in its movement away from the European Union and towards Russia. There is no ambiguity here: what is influential here is not primarily religious beliefs or practices, but, above all, a cultural tropism, encompassing believers, unbelievers, and infidels all. Since the start of 2016 we have seen in Athens a project for the departure of Greece from the Schengen agreement to put it in line with the non-signatory Romania and Bulgaria, recreating the dividing line between the Eastern and Western Roman Empire which dates from the fourth century AD!

As for the independence movements in Scotland and Flanders, notice that these are territories that were not incorporated into the Roman Empire, regions whose people were regarded as barbarian. It appears that the past does not pass. Let us stop the examples there. Do not doubt that each can find in his own geographic environment illustrations of such processes. In the Chinese world, unity does not eliminate the Beijing/Shanghai divisions, nor the peculiarities of identity among the Han and other populations. In Vietnam there is the presence and resurgence of specificities between Tonkin, Annam, and Cochinchina. There are many much more qualified than me who can demonstrate how diverse India persists as just one country. In the United States itself, are we certain that the divisions of the Civil War are forgotten? A recent quarrel over flags gives reason to doubt this assumption. Of course, we gladly admit that there may be counterexamples, we are not proposing an absolute theory but a lens to use as a key, with which we do not aim to open all doors. However, through these examples, several lessons can be offered to readers to inform their viewpoints and reflections on the risks of the world. We offer two: • The revenge of territories on maps, long arcs of history on short periods, is a bearer of violent conflicts, which accompany affirmations of identity, resurgences all the stronger for having been buried, as a return of the repressed. They destabilize the powers in place that loathe ceding their privileges. Even though they are cyclical, decades serve as brackets on history. It is necessary to explain: in all cases, the aggrandizement of tensions leads to an increase in risk and necessitates investigating a broader scope. • A second lesson: the proposed hypothesis shows how dangerous it is to confuse short and long time - the duration of our lives, the length of our memory, and the span of history. It is perilous to consider a volcano extinct just because it has long seemed dormant. This is the same error that leads some to renounce vaccinations, having never experienced an epidemic. A specialist in risk management must then have a memory which extends far beyond his or her birth. Beware, beware of amnesiacs! •

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Managing and mitigating the evolving threat of terrorism B Y D A N I E L O ’C O N N E L L

A volatile and unpredictable risk

D A N IE L O ’C O N N E L L → Daniel O'Connell is Class Underwriter for War, Terrorism & Political Violence at XL Catlin. → He joined legacy XL in 2013, leading the Political Violence team at Lloyd’s. → He has over 10 years’ experience in the insurance industry. He has held senior underwriting positions at Willis and Hiscox. → He served in the Irish Guards after joining the Royal Military Academy in 2001, and was awarded the Military Cross for his services in Iraq in 2013.

Terrorism risk is similar in some ways to natural disasters – both tend to occur with some regularity, and cause significant economic impact as well as injury and death. The nature of the events also tends to follow a few common scripts. With terrorism, it’s bombings and shootings; with natural disasters, it’s hurricanes, typhoons, earthquakes, floods, etc. Where they differ, however, is in their source and predictability. We know, for instance, the conditions that will generate a hurricane, and can predict with increasing accuracy where and when the impacts will occur. We are only starting to understand the conditions that will cause someone to decide to inflict grievous harm on innocent people. And even as we begin to understand the underlying motivations and pathologies, it is extremely difficult to predict where and how a terrorist could strike. But, as with natural disasters, that does not mean companies lack options for addressing the threat of terrorism, as volatile and unpredictable as it may be. In the years following 9/11, a number of prudent actions have been identified that will lessen the possibility of a company being targeted by terrorists, and minimize the physical and financial impacts of a terrorist attack. At the same time, the insurance industry has developed a broader range of options for mitigating potential impacts.

Risk management Terrorism is sometimes treated as an isolated threat, but it is usually better handled within the overall risk management programme. Measures that reduce the risk of attack – such as greater controls over access to premises – are also good practice generally. Steps that companies should consider taking include: • Implement physical security and personnel measures to reduce exposure to attack. • Consider potential indirect impacts tied to nearby targets, or from disruption to transport systems or public utilities. • Ensure that business continuity plans are up-to-date and include terrorism-related measures, such as managing media attention. • Review insurance policy terms and conditions and revise as necessary to mitigate potential terrorism risks. Companies should also consistently monitor possible threat s and assess potential vulnerabilities, especially as the organisation evolves. As with any catastrophe, distance in time from a well-publicised terrorism plot or event is likely to reduce awareness of warning signs, as well as the perceived likelihood of an event taking place.

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Risk transfer A terrorism attack on property or infrastructure is likely to hit many aspects of an organisation’s operations, directly and indirectly, and can cause a wide array of losses including property damage, business interruption and workers’ compensation or employer’s liability. And while many countries have some form of national terrorism insurance or reinsurance, these schemes often have some material limitations such as: • An official declaration of an act of terrorism may be necessary to trigger recoveries. • Only certain lines of coverage are available. • Business interruption cover, if available, can be limited. • All assets must be included. • Coverage for chemical, biological, radiological or nuclear (CBRN) risks may not be available. However, the commercial market for terrorism insurance protection, either standalone or in combination with a national terrorism insurance scheme, has matured considerably since 9/11. Businesses now have a range of options for matching their risk profiles and appetites to the coverages they buy. The risk transfer options for terrorism risk now include: Global programmes – it is now possible to incorporate terrorism cover within a global programme, although some considerations need to be addressed. Most importantly: whether there are overlaps or gaps between the terrorism policy and the all-risk property cover; and how a national terrorism insurance scheme, where it exists, differs from the global programme in terms of triggers and coverage levels. In both instances, difference in conditions (DIC) and/or difference in limits (DIL) policies can be used as necessary to help create consistency. Policy extensions – in addition to standard wordings, underwriters can provide a bespoke or follow form wording with sub-limits and extensions tailored specifically to the company’s needs, either within the framework of the property programme or as standalone coverage.

Flexible cover – many insurers now offer terrorism-related coverages tailored to a company’s specific needs such as: • Loss of attraction cover in case a company loses business because of damage to a nearby iconic building or critical infrastructure. • Contingent business interruption when access to an insured’s premises is not possible, including as a result of a civil or military directive. • For US-domiciled businesses, cover for TRIA captives. CBRN risks – these are normally excluded in insurance policies, but can be purchased either as a ‘write back of an exclusion’ or on a standalone basis. Physical damage (including clean-up costs), business interruption and third-party liability coverages are available from a limited number of specialist commercial markets. Indemnity period – while some loss adjusters advise that the indemnity period for business interruption cover tied to terrorism events should be at least 18 months, insured’s generally have the option of specifying the coverage term, from as short as six months to as long as five years. Contingent business interruption – businesses do not need to experience direct physical damage to suffer a loss. It is now possible to cover the impact of a supply chain disruption resulting from a terrorist action or other indirect causes of loss. Event cancellation – terrorist attacks or even severe threats can lead an organiser to cancel a major commercial event. This was most extensive after 9/11, but there have been many other instances of events cancelled as a result of a terrorist threat or attack. Recent events show that terrorism, unfortunately, will remain part of the risk landscape for the foreseeable future. Nonetheless, terrorism risks can be managed in order to minimize the threat and mitigate the potential impacts. In the absence of a loss, insurance provides comfort to an organisation’s board and its shareholders; it also offers a path to recovery if a terrorist event does occur. Today, there are wide choices in policies and wordings that enable businesses to create cost-effective coverages tailored to their specific situations and requirements. •

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Travel security and crisis management B Y I N T E R N AT I O N A L S O S / C O N T R O L R I S K

When large organisations send employees overseas or into regional danger zones, they must ensure the safety of their staff. With that in mind and the logistical nightmare that this entails, there has been a rise in companies working to prepare employees for travel and supporting them whilst they are in unfamiliar locations. International SOS, the world’s leading medical and travel security services company, conducted a Travel Risk Outlook 2016 survey among European organisations from December 3rd 2015 till January 26th 2016. Business travel is expected to continue or grow, with 91% of the survey respondents indicating international travel within their organisation is likely to remain at the same level or to increase in 2016. A key outcome of the survey was as well that 88% of respondents are concerned travel risks may have an impact on their business in 2016. Whilst many risks may be mitigated, one in three organisations reported they do not pro-actively educate their travellers before they go abroad. With that in mind, it is crucial for organizations to be able to educate and prepare their employees before travelling, as well as to assist them during a trip or even in the case of a crisis. International SOS and Control Risks enables managers to mitigate travel security risks and make the right decisions for their staff’s health, safety and security. International SOS and Control Risks’ local expertise derives from years of operational experience to provide companies with deeper, more insightful, specialist knowledge. The team is composed of 200 dedicated travel security experts, from 30+ nationalities and speaking 30+ languages, who have all lived and worked in the regions they manage. Their extensive experience includes: analysis, commercial security, crisis management, logistics, military, operational intelligence, and police. They have qualifications in relevant areas such as risk management, international relations or security studies.

Dealing with crisis Dealing with crisis and what you confront in that is difficult. Some of the crisis management teams and incident management teams we have had to drive for our clients are highly challenged. It is how we try to mitigate those risks by better preparing companies for situations before they travel into high-risk environments that can help prevent tragic events. You can’t predict an Icelandic volcano or a Japanese tsunami, but you can prepare for emergencies and risks and we act very quickly to try and mitigate those risks. When an event like Cyclone Pam comes along, we are very skilled at looking at many things at once. First of all we ascertain where our clients are. We do that through our travel tracker solution that tracks their movements. We also form a crisis management team and an incident management team that we can deploy. And usually we deploy within 24 hours. We sent a medical team, operations team, nurse, doctor and security personnel to the place to ascertain where the people are and account for their safety and make sure we can reach them and look after them. At the same time, we have our crisis management team in our assistance centre to co-ordinate back to the clients what we are hearing.

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“You can’t predict an Icelandic volcano or a Japanese tsunami, but you can prepare for emergencies and risks and we act very quickly to try and mitigate those risks.”

How we have managed crisis during Paris and Mali terrorist attacks On the evening of 13 November 2015, a series of coordinated terrorist attacks occurred in Paris. Three suicide bombers struck near the Stade de France in Saint-Denis, followed by suicide bombings and mass shootings at cafés, restaurants and a music venue in Paris. 130 people were killed. Our integrated travel security and medical support teams provided advice and assistance to those in Paris at the times of the attacks, including clients in the vicinity. In response to attacks, and realising their magnitude, we immediately added teams to our 24/7 assistance capabilities. Our teams supported client crisis management: providing clear, balanced and robust security advice and direct assistance. Our integrated assessments and advice helped to put media speculations and social media commentaries into context and provided reassurance to our clients and their people. Ground support was provided for secure escor ts, close protection and guarding. TravelTracker support was provided to clients to ensure it was being used most efficiently to locate and support employees. On 20 November 2015 terrorists attacked the Radisson Blu hotel in Bamako, capital of Mali. They took 170 hostages and killed 20 in a mass shooting. Throughout the day, our crisis management teams in Paris and London provided essential advice to clients. Our unique operations network means we were able to maintain contact with clients and members affected and coordinate the response accordingly. Control Risks’ embedded crisis management resource further enabled the effectiveness of support. One member was trapped in her hotel room during the attack. She called us for support. One of our security experts stayed on the phone with her for four hours to help her through the ordeal. This lifeline provided essential emotional support in addition to expert advice. “During the call, we advised on how to deal with the smoke in the room, life-safety techniques, and what to do in the event of the attackers trying to gain entry. In addition to safety support, our doctors were also able to provide medical advice. We liaised with the security forces and the local government to coordinate the safe release of the member. She survived the attack as a direct result of calling us.”

Everybody within International SOS is working towards the same goal; to deliver more protection and quality health and security services to more at-risk clients. In this world that has become flatter and more dangerous, health and safety and managing traveller risk is a crucial business requirement. •

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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Geopolitical Risk – what products & coverages? BY ROB HOUGH

ROB HOUGH → Rob Hough is Director of Financial & Political Risks at CGSC. → He has been part of the NMB Financial & Political Risks Division since October 2011 and assists clients with their trade credit and contract frustration, comprehensive contractors plant cover and their terrorism and political violence cover including control of well for energy focused clients. He has seven years’ experience in the insurance and reinsurance market and speaks Spanish to an intermediate level.

While it is critical for organizations to be aware of the Geopolitical risks they are facing, the good news is that there are insurance products that may cover them, thus allowing companies to continue developing their activities even in what may be considered risky areas. Rob Hough of the Financial & Political Risks Department of CGNMB, a CGSC Company, showed Fullcover some those tailored products: “The Lloyd’s and London markets offer various products that banks and corporates can use to protect their assets and investments against politically related events. We have summarised the main risk transfer products available and how they can respond below. Coverage can be specifically tailored to the insured’s needs and it is important to note that levels of indemnity, deductibles/excess, waiting periods and the breadth of coverage will differ on a case by case basis, reflecting a combination of factors such as the location of the risk and any capacity restraints in the market.”

Confiscation, Nationalisation, Expropriation, Deprivation (cend) CEND policies indemnify companies operating in foreign jurisdictions, (that is in countries outside their own domicile) against the loss of assets, equity or income arising from selective and discriminatory actions by the local authorities. Events that may be covered also include the cancellation or non-renewal

of an operating or import/export licence or the inability to convert or transfer funds due to restrictions imposed on the insured. Coverage is also available against loss arising from political violence or war on land (see below). Who purchases this coverage? Corporates with insurable interests in a foreign country, lenders with a contractual insurable interest through their loans and/or investments and foreign equity investors who have an equitable interest in a foreign company/ enterprise.

Contract Frustration Contract Frustration is a product that covers corporates and lenders against non-payment or non-performance of contractual obligations, by a majority owned state entity or public company. Government contracts are significant business opportunities. However, there is a risk that they may be unilaterally cancelled or amended by that government or its agencies. The perceived level of risk will depend on the country in question, its performance history and insurers’ appetite. Terms and prices will reflect this perception. The level of loss which can be compensated is usually up to ninety per cent of the total contract value. Who purchases this coverage? Corporates selling or buying from state entities or public companies and banks/lenders financing the specified trade.

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GEOPOLITICAL RISKS COVERAGES Trade Credit Insurance

CONFISCATION, NATIONALISATION, EXPROPRIATION, DEPRIVATION (CEND)

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CONTRACT FRUSTRATION

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TRADE CREDIT INSURANCE

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POLITICAL VIOLENCE

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What covers? Indemnify companies operating in foreign jurisdictions against loss of assets, equity or income; cancellation or non-renewal of an operating or import/ export licence, inability to convert or transfer funds; loss arising from political violence or war on land

Who purchases? → Corporates → Lenders → Foreign equity investors

What covers? Covers corporates and lenders against non-payment or non-performance of contractual obligations, by a majority owned state entity or public company

Who purchases? → Corporates buying from state/ public entities → Banks/lenders

What covers? Protects contracts to finance, buy or supply products or services from or to a private company

Who purchases? → Corporates buying from state/ public entities → Banks/lenders

Comprehensive Trade Credit Insurance is very similar to Contract Frustration but the key difference is that it protects contracts to finance, buy or supply products or services from or to a private company rather than a public or state entity. A claim under the policy can be triggered by default or non-payment by the private company. Who purchases this coverage? Corporates selling or buying from private companies and banks/lenders financing the specified trade.

Political Violence

What covers? Physical loss or damage due to pre-agreed event, such as: → Sabotage & Terrorism → Strikes, Riots, Civil Commotion (SRCC) → War and Civil War → Mutiny, Coup D'etat, Rebellion, Insurrection

Political Violence is defined as the physical loss or damage to an asset due to pre-agreed, defined types of event, such as: • Sabotage & Terrorism • Strikes, Riots, Civil Commotion (SRCC) • War and Civil War • Mutiny, Coup D'etat, Rebellion, Insurrection Coverage can be purchased in any territory in which the applicant has an insurable interest, including their own country, provided that insurers have appetite and capacity. As well as coverage against physical damage, extensions are available for consequential business interruption and liability to third parties Location and type of activity enables or restricts the coverage available. The insurance market continues to proactively respond to the demands and needs of customers with the development of additional coverages such as cyber, denial of access and loss of attraction which can complement an existing property or political risks placement. This is a brief overview of the solutions that the insurance market can provide to their clients to assist them to mitigate their exposure to financial and political risks. Such covers can make the difference between a company being able to go ahead with a venture or losing a potentially valuable business opportunity. •

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D AV ID A N D E R S O N → David Anderson is Director of Global Business Development at Zurich Credit & Political Risk. Based out of Washington, D.C., David Anderson manages Zurich Credit & Political Risk (ZCPR), a market-leading underwriter of credit and political risk insurance worldwide. He is also a subject matter expert and blogger for the Risk & Insurance Management Society (RIMS) on credit and political risk, and is a frequent source on these topics in the press. → He started with Zurich in 2002, launched the Sydney, Australia, ZCPR underwriting office in 2006, launched the Singapore office in 2009, and managed the Asia-Pacific regional team until 2012. Following that, he became Director of Global Business Development for the team. → Prior to joining Zurich, he led FCIA’s eastern region for multibuyer credit insurance out of New York and underwrote political risk insurance for Citicorp International Trade Indemnity. → David Anderson earned his B.A. in Political Science (magna cum laude) from Amherst College and his M.A. (Latin American Studies) / M.B.A. from University of Texas at Austin.

New ideas for tackling geopolitical risks in business B Y D AV I D A N D E R S O N

Companies will increasingly need to address geopolitical security as interstate conflict, terrorist attacks and refugee flows, demand greater strategic attention from business leaders and have a bigger impact on the global economy, according to the Global Risks Report 2016 from the World Economic Forum (WEF). The report, developed in collaboration with Zurich Insurance Group and other leading institutions, argues that states and governments are less able to tackle geopolitical issues alone as these challenges are increasingly interconnected. And the private sector has expertise and resources that can help, such as data for tracking risk factors, information that can be shared on criminal activity, and, crucially, the ability to control supply chains during emergencies. “There is a growing role for public-private collaboration to tackle global security challenges,” states the report. “We need clear thinking about new levers that will enable a wide range of stakeholders to jointly address global risks, which cannot be dealt with in a centralized way.” In the past many companies have been reluctant to become too closely involved in geopolitical issues. Half the managers surveyed in a 2011 study by Wharton Business School said their most common method of managing geopolitical risk was simply to avoid investing in volatile places. But that tactic is unlikely to hold up as companies seek new markets, with unrest and volatility able to spread quickly from one location to others.

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Industry alliances There is evidence, however, that this is changing. New global partnerships are emerging and action taken by the private sector against human trafficking is an example of the kind of influence companies can have. Initiatives from a number of different sectors including banking, technology and the trucking industry, are outlined in a 2014 WEF report Hedging Risk by Combating Human Trafficking. That report also highlights the travel sector, which started “the Code”, a voluntary set of guidelines to help prevent child sex tourism and trafficking, in 2004. Spearheaded by Marilyn Carlson Nelson, the former chairwoman and chief executive officer of Carlson Companies, the Code was signed by Hilton Worldwide in 2011 and now has over 1,200 company signatories from countries including Colombia, China, Egypt, Thailand, Brazil and Russia.

International partnerships In the past few decades, companies have also begun to play an increasing role in multistakeholder partnerships with UN organizations and non-governmental organizations. These partnerships have ranged from financial pledges such as Unilever’s £27 million of support to the World Food Programme since 2007, to Coca-Cola’s 5by20 initiative with UN Women which aims to support five million women entrepreneurs across the company’s value chain by 2020. Economist David McWilliams, a Professor at the School of Business at Trinity College, Dublin, points to the UN Global Compact – a voluntary initiative by the private sector officially launched in 2000 to support UN sustainability goals – as an illustration of how influential corporations can be when they work together with governments on global challenges. Some 8,000 companies have signed up to the UN Global Compact’s ten-point code of behavior around the areas of human rights, labor, anti-corruption and the environment. They submit an audit each year to show how they are meeting these requirements and these are published online. A 2013 statement from the Coca-Cola Bottling Company of Ghana, for example, stated that it had bought a new more energy-efficient plastic bottling line and built a waste water treatment plant for its fruit juice supplier.

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Climate action

The need for partnerships

At the Paris climate talks in December, the 443 corporate signatories of the UN Global Compact’s Caring for Climate initiative, set new targets for an estimated collective annual emissions saving of 93.6 million metric tons of carbon dioxide equivalent. In welcoming the Paris climate agreement, Lise Kingo, Executive Director, UN Global Compact, said the private sector should be applauded for bringing better business practices into the process and sending a forceful message on the importance of a solid climate agreement. “We believe the Paris Agreement sends the right market signals which will provide predictability, unlock capital, drive innovation and reward responsible business,” she said. “Never before have we seen this level of engagement from business and it is clear that the momentum is unstoppable.”

“Farmers saw the utter futility of changing their own habits without effective joint efforts of all major stakeholders in their watershed; and so they wouldn’t,” writes Brabeck-Letmathe. “Played out on an international scale, this is the crux: Without partnership between all those who share a stake in the problem we won’t make progress towards any meaningful solution.” From water issues to refugee crises, partnerships are vital to finding solutions to the world’s increasingly interconnected global problems and, as suggested in the Global Risks Report 2016, many businesses appear ready to play a more important part.

Addressing the water crisis Beyond the UN, companies contribute in other ways on global issues. International food company Nestlé, which has made the responsible treatment of water “critical” to its business, proposed its own Sustainable Development Goal to the World Bank in 2013, aiming to cut its use of water to sustainable levels. “While this measure may not be perfect when looking at the complexities of water withdrawals, usage and return flows,” says Peter BrabeckLetmathe, Nestlé chairman, “I am nevertheless convinced it can work as a good, practical approach for measurement-driven action.” Brabeck-Letmathe takes the issue of water so seriously he writes his own blog called Water Challenge [https://www.water-challenge.com]. In a post entitled “We will fail to feed the world until we fix the water crisis” he cites the experience of the Punjab, where water tables were dropping by one meter per year after pumps were subsidized for irrigation. There was no incentive to limit water use despite the inevitable consequences – drought and failing crops.

Key takeaways • The Global Risks Report 2016 believes there is a growing role for public-private collaboration to tackle global security challenges. • Multinational corporations have traditionally avoided becoming too closely involved in geopolitical issues. • Action taken by the private sector against human trafficking is an example of the kind of influence companies can have. • The UN Global Compact is an example of how influential corporations can be when they work together with governments on global challenges. •

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Geopolitical Overview B Y I U L I A S IM O N

The perspective on the year 2016 is quite a controversial one. There are those with an almost apocalyptic vision, who predict that we are headed toward “the perfect storm” created by the stock market crash, another real estate collapse, and skyrocketing unemployment rates. On the other hand, there is a more optimistic outlook from those who forecast a weak, yet steady recovery. Economists are analyzing the maze of objective economic signs and interpreting them subjectively, which leads to certain expectations and more worries. How do we proceed from that point? Who is to be believed and what can be expected? Despite pessimistic views out there, we all want to hold on to a glimmer of hope for our future, as well as our children’s future. As a result, when undesirable news reaches us, there is a tendency to block them out and apply the concept of “If I did not hear of it, it does not exist”, which for some is often a survival tactic. Understanding our world, however, is the basic prerequisite for shaping our life and happiness.

The Expert Forecast

I U L I A S IM O N → Iulia Simon has over twenty years of experience in evaluating, designing, and implementing specialized risk programs in the Institutional and Corporate market. In addition to her specialty in Special Risk insurance, she possesses a detailed and comprehensive understanding of political, economic, and social issues throughout Latin America, Europe, and Asia. → She is actively involved in the German, French, and Russian Chambers of Commerce, as well as STEP, a professional association for those advising families across generations. In her current role as Senior VP Marketing, based in Miami, she serves as the primary Client Relationship Executive for CH Toro International Ltd. clientele throughout the USA, Latin America, and Europe. → Through her extensive knowledge and experience in the international market, she has successfully been able to assist executives and family members in designing an optimal coverage tailored to specific needs, protecting the lives and wealth of clients.

The International Monetary Fund projects the world economy at 3.4 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage points from the previous estimates in last October. Moreover, it stresses the idea that policymakers should consider ways to bolster short-term demand. IMF released an updated World Economic Outlook forecasts as global markets have been roiled by worries over China’s slowdown and plummeting oil prices. It maintained its previous China growth forecast of 6.3 percent in 2016 and 6.0 percent in 2017, which represents sharp slowdowns from 2015. China reported that growth for 2015 hit 6.9 percent after a year in which the world’s second biggest economy endured huge capital outflows, a slide in the currency and a summer stock market crash. Shares in Europe and Asia rose and the dollar gained after China’s data was released, as investors anticipated greater efforts by Beijing to spur growth. Concerns about Beijing’s grip on economic policy have shot to the top of global investors’ risk list for 2016 after falls in its stock markets and the yuan stoked worries that the economy may be rapidly deteriorating. A steeper slowing of demand in China remained a risk to global growth and weaker-than-expected Chinese

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imports and exports were weighing heavily on other emerging markets and commodity exporters. Soft consumer demand in the United States and Japan and weakness in emerging markets due to worries over plunging oil and commodity prices and capital outflows from China are among the main risks. Furthermore, the Fund states that the outlook for an acceleration of U.S. output was dimming as dollar strength weighs on manufacturing and lower oil prices curtail energy investment. It now projects U.S. economic growth at 2.6 percent for both 2016 and 2017, down 0.2 percentage point in both years from the October forecast. In Europe, lower oil prices will help support private consumption; therefore, IMF has added 0.1 percentage point to its 2016 euro area growth forecast, bringing it to 1.7 percent, where it will remain for 2017. Brazil will stay mired in recession in 2016, with output contracting 3.5 percent, a 2.5 percentage-point downward shift from the previous forecast, and there will be essentially no growth in 2017 as Latin America’s largest economy struggles with lower Chinese demand. Forbes magazine contributor Bill Conerly reflected on the International Monetary Fund forecast, considering that the commoditydependent countries, Latin America, Africa and parts of Asia are facing difficult times. Commodity prices being so down, it represents cutback in mining, petroleum and agriculture. Conerly suggests that the world will probably grow a little bit slower than the IMF forecast. From the environment to international security and the coming Fourth Industrial Revolution, the World Economic Forum’s Global Risks Report 2016 finds risks on the rise in 2016. In this year’s annual survey, almost 750 experts assessed 29 separate global risks for both impact and likelihood over a 10-year time horizon. The risk with the greatest potential impact in 2016 was found to be a failure of climate change mitigation and adaptation. This year, it was considered to have greater potential damage than weapons

of mass destruction (2nd), water crises (3rd), large-scale involuntary migration (4th) and severe energy price shock (5th). The number one risk in 2016 in terms of likelihood, meanwhile, is large-scale involuntary migration, followed by extreme weather events (2nd), failure of climate change mitigation and adaptation (3rd), interstate conflict with regional consequences (4th) and major natural catastrophes (5th). At the top end of the scale, 2016’s two most interconnected risks – profound social instability and structural unemployment or under-employment – account for 5% of all interconnections. As an annex to this article our readers will find data sheets with excerpts from a 2016 Threat Forecast provided by Red24, a leading security company, focusing on various political, security and kidnapping risks by region in the year ahead. This information will provide a realistic and alarming overview of threats for the year 2016.

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Maritime Crime The threat from piracy and other forms of maritime crime, in particular robbery at sea, will remain elevated in a number of regions worldwide in 2016. Piracy will continue to pose a specific security risk in the Gulf of Guinea as well as South East Asia. While the majority of pirate attacks are expected to continue in the abovementioned regions, the possibility of incidents occurring elsewhere cannot be discounted. The gradual extension of the geographical spread will likely continue in 2016. A continuation of 2014 and 2015 trends regarding the nature of attacks in Nigerian waters and its evolution from oil siphoning and bunkering to increasingly well-coordinated and often violent attacks targeting commercial shipping vessels and their crew, including longer-term hijacking and KRE incidents, should also be anticipated. This risk is highlighted by a number of incidents of this nature in 2015.

Maritime security in the waterways surrounding Indonesia, Malaysia, the Philippines and Singapore has been a longstanding concern in the region and is expected to remain so in 2016. According to IMB reports in mid-2015, pirates attacked a tanker approximately every two weeks in South East Asian waters during the preceding six months. In a high-profile incident highlighting this trend, which took place on 8 August, a Singapore-registered small oil tanker, MT Joaquim, was seized in the Malacca Strait off the coast of Malaysia. The 2015 uptick in attacks in Vietnamese waters and in the Singapore Strait itself will also need to be monitored closely in 2016. Regional and international concerted security efforts, particularly on-board security measures and national and international counter-piracy efforts continue to contribute to the ongoing major decline in Somalia-based piracy since the end of 2011. Nonetheless, the regional piracy threat has not been eliminated and there are regional and international concerns regarding a potential uptick in pirate activity. Following no reported incidents for the first six months of 2015, an Iranian-flagged fishing vessel was hijacked and at least ten crew members kidnapped by suspected pirates off Somaliaâ&#x20AC;&#x2122;s eastern coastline on 22 November. Open source information indicates that the approximate cost to the shipping industry of additional counter-piracy security measures in East African waters totaled US $1.3 billion in 2014; war risk and KRE insurance premiums on vessels transiting this region were an additional US $103 million. In addition to the above-mentioned regions, the risks of piracy and robbery at sea extend to waters elsewhere. In the Indian subcontinent, there has been a rise in attacks off the coast of Bangladesh over the past 18 months. Piracy and armed robbery will continue to pose a potential security risk in South and Central America and the Caribbean, particularly in the vicinity of ports and anchorages in Brazil, Peru, Haiti, Ecuador and Guatemala. Sporadic incidents in this region, such as an attack on a luxury yacht, Pelikaan, in Haitian waters in April, underscore the ongoing risk. Furthermore, an uptick in incidents has been recorded in Venezuela in recent months, particularly near Lake Maracaibo.

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The accelerated increase in the use of technology is already demonstrating impact on how traditional kidnap for ransoms are perpetrated and managed.

Information Security Information security remains a pervasive threat to business, and travelers often do not have the same protection as when working in their offices. Internet security risks increase the pressure on governments for greater regulation in the years to come. It is imperative that all stakeholders, from government to businesses, academics and consumers, collaborate to ensure that regulations are comprehensive, proactive and improve the security and privacy vulnerabilities of connected devices. For enterprises seeking to take advantage of new IoT technologies, one of the keys to success will be to ensure that new technologies are impervious to cyber-attacks. The accelerated increase in the use of technology is already demonstrating impact on how traditional kidnap for ransoms are perpetrated and managed. On the one hand, this can be positive for both the potential victims and

for those seeking to release them. For example, Aegis Response has noted a shift away from negotiations taking place via telephone calls, to email negotiations with kidnappers, with Islamic State almost exclusively using this form of communication for their demands. This gives a crisis management team the luxury of time in a less pressured environment, enabling them to reach a decision on strategy and to craft an ideal response “behind closed doors”. In terms of proof of life, there are many more options for verification – video voice calls, for example – that can provide extra assurance that a victim is alive and being held by the group in question. However, the almost blanket use of forms of social media and popular messaging applications creates new problems in the kidnap for ransom arena. Victims can now be vulnerable to simple reconnaissance on their personal wealth gleaned from photos posted online and employment information, which kidnappers can investigate from the comfort of their own homes, choosing from a wide range of potential victims. There have been cases of kidnappers with sophisticated cyber capability conducting research on their victims’ bank accounts, abducting them, and then forcing them to simply use their online bank accounts to personally transfer a specific ransom amount for their release. While bitcoin, the anonymous currency, is used extensively in cyber extortions, it is spilling over into the realm of kidnap for ransom: we have begun to see cases where kidnappers have demanded to be paid ransoms in this crypto currency. For instance, in October, an executive from Hong Kong was released after being kidnapped and held in Taiwan for over a month by a gang demanding a ransom of US $9 million in bitcoin. Over the coming year, the trajectory of this technological shift will proceed rapidly and – for better or worse – further changes are likely in the field of traditional kidnap for ransom. In conclusion, based on all the evidence, we can safely deduce that the risk of Kidnap and Ransom is here to stay for the year to come. We live in a world of continuous challenges, as well as evolving dangers. Facing those means understanding our circumstances. Acquiring knowledge on our surroundings, keeping informed on where our world is headed is “sine qua non” for our survival. Let us be equipped for the battle for our future and our children’s future, armed with knowledge and an accurate vision of our world, while never losing sight of the wonderful things humanity has built; the acts of greatness and charity that make the human race something so important to fight for. •

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Threat Breakdown

Turkey, September 2015: The 13-year-old son of a prominent Syrian businessman was kidnapped in Istanbul for a ransom demand of US $1 million. He was freed by police forces in a security operation, which involved a fake ransom. Latvia, September 2015: Two foreign executives fell victim to an attempted kidnapping outside of their hotel in the capital, Riga. Seven suspects were arrested during a police sting operation while trying to transport the Irish and Swedish hostages to an undisclosed location.

Europe Towards the end of 2015, some of the key political and security risks facing the globe were starkly highlighted by developments in Europe, traditionally a secure business and travel zone. The migration of tens of thousands of people into the region from conflict-ridden and economicdepressed states in Africa, Asia and the Middle East not only impacted on intra and inter-state transport but also disrupted the movement of persons and goods across borders, as states moved to restrict the flow of asylum seekers. The Paris attacks in November compounded regional unity concerns and highlighted, again, the far reach of Islamist extremist ideology. The link between migration and militants was the focus of far right and leftist groupings, which have continued to seek to benefit from popular concerns regarding the longer-term influence the flow of migrants will have on local states. In the coming year, there will be a persistent threat of terrorism from international Islamist extremist groups and self-radicalized individuals and an increased frequency in low-level incidents of violence that will be confined to countries that have existing political and social tensions and which are some of the key target locations for migrants, including Germany, France, Italy, Greece and Hungary. The year ahead will be characterized by a more militarized Europe, the rise of nationalist parties, as well as increased protest activity and associated low-level acts of violence. Non-traditional kidnapping variants, in their physical and virtual forms, will pose the most significant risk across Europe and Russia in 2016. Countries that already have an entrenched organized crime element may be subject to an elevated risk; these may include Russia, Eastern European countries, Spain, Greece and elsewhere.

An additional threat will stem from opportunistic individuals, motivated by financial gain or personal grievances; disgruntled former employees, business associates, suppliers or malicious individuals may pose a security risk to business operations as well as unquantifiable reputational risks. Recent incidents affecting business continuity, such as the persistent extortion of Dutch supermarket chain, Jumbo, highlight this threat as well as the challenges that successful resolution may pose to victim(s). Over a period of several months, anonymous individuals threatened to place explosive devices in Jumbo stores in various locations in the Netherlands; the perpetrators demanded that a ransom be paid in the anonymous digital currency, bitcoin. The situation escalated between May and August, when explosives were in fact detonated in several Jumbo stores. As investigations continued, the company was forced to increase security at over 500 branches countrywide. Furthermore, political, hacktivist, anti-European Union, ultra-nationalist, anarchist, or extremist entities may choose to use extortion/cyber extortion to target individuals or businesses in relation to domestic, regional or international developments. High-profile cyber-attacks by unconfirmed state/non-state groups on various major European businesses and financial and political institutions during 2015 demonstrate that digital and cyber extortionists are capable of infiltrating a range of prominent targets. A cyber-attack targeting the German Bundestag (Parliament) in May 2015 may require the institution to completely overhaul its IT system at the cost of several million euros. Additional high-profile attacks included the online infiltration of French broadcaster, TV5Monde, in April, during which several of the station’s channels and social media platforms were hijacked and negative material related to French military action in Iraq broadcast.

France, May 2015: A local millionaire was kidnapped from his residence in France and then transported to Marbella, Spain, where he was held hostage by a group of experienced kidnappers for two months. Following his abduction, he was forced to call his family and tell them he was taking an unexpected holiday; the gang then proceeded to extort him of approximately US $1.37 million. When they released him, they demanded he continue to pay an amount of US $106,000 per week. Germany, August 2015: The 17-year-old daughter of a Saxony businessman was kidnapped and subsequently killed by the perpetrators shortly after they made a ransom demand of US $1.27 million; this occurred despite her family stating publicly that they would make the payment. The perpetrators were inexperienced and after some ‘easy’ money; they chose their victim after coming across her Facebook profile and reading up on her family. One perpetrator reportedly conducted surveillance while walking a dog in the same area the victim walked her dog. Russia, August 2015: Police arrested six members of an extortion gang following the abduction of a prominent local businessman; the victim was seized from his vehicle and injected with a substance, which the kidnappers stated was lethal venom. He was told that an antidote would be given if he complied with the kidnappers’ financial demands - final ransom demand was US $106,000. The victim reportedly contacted his family and arranged the payment, after which he was given an undisclosed antidote. Germany, June 2015: The 50-year-old mentally disabled son of German billionaire, owner of the Wurth Group, was kidnapped from his care home near Frankfurt, and held hostage as the perpetrators demanded a ransom payment of approximately US $2.2 million. The victim’s father is reported to have a personal net worth of US $7.2 billion. After becoming aware of the massive police operation underway to rescue the victim, the perpetrators left the hostage tied to a tree in a forest near Wurzburg.

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In one such example, a distribution center for Coca-Cola in Guerrero, Mexico, was closed in June 2015, reportedly because of ongoing extortion attempts by a criminal group. In addition to threats of violence, which will be used to coerce payments, past incidents in Mexico and Venezuela suggest that groups may physically attack critical infrastructure, including oil pipelines, manufacturing sites or transportation services, in order to solicit payments. An increase in extortion activity is highly likely in areas where foreign investment is expected to grow in 2016.

The Americas In the Americas, slowing growth has served to place stress on populist governments that rely on heavy social spending policies. A change of leadership in Argentina has already occurred and further political upheaval is expected. Pressure from disaffected middle class populations and opposition groups has already increased in various key states, including Brazil, Venezuela and Ecuador. Associated civil unrest will remain a key concern and risk, which both business and general travelers will need to implement mitigation measures for in 2016. Latin America experienced a period of unprecedented economic growth from the early 2000s to 2013, which pulled tens of thousands of people out of poverty and into the middle class. This success depended largely on export goods that were in great demand by the rising Asian states. Recent decreases in demand have resulted in an increase in poverty rates and slowing growth in the regionâ&#x20AC;&#x2122;s largest economies. This economic downturn coincided with and appears to be contributing to increasing anti-government sentiment by many in the lower classes, which are feeling the direct impact of the crisis, and among the fragile middle class, which is traditionally more likely to demand government accountability. In addition to disruptive and violent protests linked directly to the economy, long-standing grievances such as corruption, state mismanagement, environmental concerns, political reform and indigenous rights have surfaced in numerous areas.

Organized criminal activity, particularly in Mexico and other Central American states, will remain at elevated levels throughout 2016. The connection between organized crime networks and political elites will continue to be exposed and, in some areas, these connections may break down in response to political reforms or changes in leadership. In some areas, the political/organized crime relationship may grow, including in El Salvador, where local gangs, estimated to have 70,000 members, increased activity in 2015 in response to a government crackdown. Overall, the economic downturn is likely to benefit criminal groups at the expense of state attempts to curtail criminal activity, including drug producing and smuggling. Long established as the kidnapping center of the world, kidnap for ransom and extortion (KRE) will continue to pose one of the key security risks to individuals and companies operating in high-risk locations in South and Central America and the Caribbean in 2016. Traditional and short-term kidnappings for financial gain will continue to affect locals and foreign nationals in Mexico Venezuela, as well as in Colombia, Argentina, Brazil, El Salvador, Guatemala, Honduras, Haiti and elsewhere in 2016, albeit at varying rates. In addition, threats posed by express and virtual kidnapping and cyber extortion are expected to increase. Actual and attempted extortion incidents, be it of local or foreign staff, may potentially hamper business operations and impact profit margins.

Express kidnappings will occur regularly and hold the potential to evolve into a longer-term kidnap for ransom incident, depending on the circumstances, perpetrators and victims. The death of a Spanish tourist during a December 2014 urban express kidnapping in Maracaibo, Venezuela, as well as similar fatal outcomes in incidents elsewhere in the region, point to the potential for such an incident to rapidly deteriorate into violence. Furthermore, virtual kidnappings have grown in frequency and scope across Central and South America over the past year. Virtual kidnappings, which often emanate from incarcerated individuals, have increasingly included a cybercrime element; surveillance of potential victims is increasingly gathered using social networking platforms, or via stolen identity data. For example, in 2015, South America-based criminal entities orchestrated virtual kidnappings targeting victims in the US and Spain. A further uptick in incidents, both domestically and across geographical borders, is anticipated in 2016. Traditional long-term kidnapping levels are expected to remain highest in Mexico and Venezuela. Kidnappings orchestrated by organized crime groups will continue to pose a security risk in countries such as Argentina and Brazil, and persistent lawlessness together with high crime and homicide rates in El Salvador, Haiti and Honduras will contribute to the ongoing elevated kidnapping risk in these countries. Finally, politically motivated and/or communal protest activity is a common occurrence in lower kidnapping-risk operating environments such as Bolivia, Ecuador, Peru, Chile and Paraguay. The possibility of recreational travelers being affected cannot be discounted; in 2015, approximately 40 tourists were detained overnight by protesting community members in Peru.

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Middle East and North Africa The Middle East and North Africa’s security and political troubles continue apace. The conflicts in Syria, Yemen and Libya, the persistent menace of the Islamic State and its various affiliate groupings, and rising tension between the region’s two powerhouses, Saudi Arabia and Iran, threaten to draw in major global powers in even greater ways in 2016 and heighten already elevated sectarian tensions. The prospect of an end to the region’s various conflicts remains remote, while the risk of interstate conflict continues to increase. The high-profile conflict in Syria continues to impact on the security environment and political stability of states across the region. Major regional and global powers are increasingly viewing Syria as a battleground to preserve or enhance influence through support of proxies, to support or topple the Bashar al-Assad regime, or to contain what is increasingly becoming a bloody and most likely drawn-out conflict lasting for many more years. Western, Saudi Arabian, Turkish, Jordanian and Qatari support for anti-al-Assad forces, and Iranian, Russian, Chinese and Hezbollah support for the al-Assad regime is likely to escalate through 2016. The involvement of so many states and, by association, larger military alliances like NATO will serve to increase the risk of low-level interstate conflict. In Yemen, Saudi Arabian support for the regime of President Abd Rabbuh Mansur Hadi has been overt and significant. The fighting in Yemen, which is expected to persist through 2016, has left thousands dead and has further devastated the Yemeni state.

In restive Bahrain, Iran’s support for Shiite protesters against the Sunni minority and Bahrain’s Saudi-backed regime will persist. Political support may increasingly be complemented by support with resources. Since the establishment of a caliphate in June 2014, with Abu Bakr al-Baghdadi as its caliph, IS has continued to make gains, albeit at a lower rate compared to its 2014 victories over the Iraqi military. In May 2015, the group captured Ramadi and, despite losing territory in Diyala governorate in Iraq and in northern Syria to the Kurds, it has managed to hold Raqqa, Mosul, Fallujah and parts of Ramadi. In 2016, IS will seek to strengthen defenses in the Sunni heartland of the Anbar governorate and will continue to harry pro-Iraq forces elsewhere in the country. In Syria, IS will look towards the Aleppo governorate to make additional gains against the regime and rebel forces, while seeking further thrusts into central Syria. Coinciding with the rapid rise of IS in Syria and Iraq has been the emergence of various IS affiliates or provinces across the region and the globe. Provinces have emerged in North Africa (Egypt, Libya and Tunisia), the Arabian Peninsula (Yemen and Saudi Arabia), Asia (Bangladesh and Afghanistan) and Africa (Somalia and Nigeria). Many of these ‘new’ groups are simply rebranded former al-Qaeda-aligned groupings. These groups may pose a significant threat to foreign interests and local tourist industries. In 2016, mass-casualty and high-profile attacks are likely to continue in Egypt, Libya, Algeria, Yemen and the Gulf States.

IS has played a major part in driving sectarianism. Since emerging as a major regional power in mid-2014, its propaganda machinery has presented Shiites, apostate states (those in coalition against it) and infidels (foreign powers) as the clear enemies. The group’s establishment of a caliphate and its remarkable battlefield successes have drawn thousands of fresh recruits to its banner from across the globe. Mixed communities, such as Tripoli in Libya, Beirut in Lebanon and the Eastern Province of Saudi Arabia, which borders Bahrain, will increasingly become flashpoints of confrontation. Kidnapping for the purposes of financial, political and ideological gains will be a key security risk in many countries within the Middle East and North Africa (MENA) region in 2016. Pre-existing kidnapping risks from criminal, extremist and militia groups will remain elevated. Precedent has shown that, when compared to other regions, the potential for negative outcomes in kidnapping incidents in MENA is elevated. This has been clearly demonstrated by the abduction and subsequent execution of dozens of foreign nationals (including Chinese, Egyptian, Norwegian, UK and US citizens) by the Islamic State (IS) and affiliate groups. IS has made financial demands for the release of hostages in Syria in the past; in 2015, the group demanded a US $200 million ransom payment for a Chinese and Japanese hostage and a US $6.2 million ransom for a 26-year-old US national. The threat stems from individuals or groups affiliated with IS as well as unknown IS sympathizers. The kidnapping and execution of a French tourist in northeastern Algeria illustrate this threat. In addition, the possibility of opportunistic kidnapping and short-term hostage taking incidents occurring in countries with a medium or even low overall kidnapping threat may grow. The kidnapping and beheading of a Croatian national near Cairo, Egypt, by a previously unknown IS-affiliate group in 2015 illustrates this new threat posed by little-known militant groups keen to gain attention and support from IS. Ransom demands and settlements increased in countries such as Libya, Syria and Yemen, as unaffiliated groups have taken advantage of growing fears of a negative outcome fueled by IS execution of foreign hostages. This has been compounded by a number of instances where unsophisticated criminal groups are believed to have sold foreign hostages to IS after being unable to absorb delays in negotiations due to operational inexperience or inability to hold hostages for longer periods of time. This possibility adds a new dynamic to the regional kidnapping threat and is expected to continue in 2016. Africa’s complex political and security environment remains a point of concern for foreign business operators. The regionalization of the Boko Haram insurgency is a key focus area, while the mineral-rich

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Congo region continues to struggle with stabilizing increasingly restive polities. Within restive zones, kidnapping threats will remain elevated. The year 2015 was one of milestones in Boko Haram’s near-decade-long armed insurrection against the Nigerian state. The year commenced ominously, with the sect inflicting its deadliest act of mass violence since its inception, when Boko Haram militants allegedly killed as many as 2,000 people in the northeastern village of Baga between 03 and 07 of January. The Baga massacre and the global outcry it evoked served as the catalysts for a regionally coordinated counteroffensive against the Islamist extremist group, launched in mid-January. For the first time, the military forces of Nigeria, Cameroon, Niger and Chad conducted joint military operations against the sect, culminating in Boko Haram losing swathes of territory in northeastern Nigeria, which had been declared part of the group’s nascent caliphate in late 2014. However, the relative success of these joint military operations triggered another, albeit far less desirable, accomplishment in the Boko Haram insurgency. Although Boko Haram developed as a grassroots Nigerian organization with a domestic focus, the group’s rhetoric and ideology have always suggested a much wider ambition. Central to its recruitment strategy has been the sect’s manipulation of the historical narrative of the Kanem-Bornu Empire – an Islamic kingdom that once incorporated parts of modern Nigeria, Cameroon, Chad and Niger. For Boko Haram to achieve its purported goal of resurrecting this ancient Islamic empire, the sect would be required to export its armed insurrection beyond the confines of Nigeria’s borders. By submitting to IS, Boko Haram has effectively pledged to pursue the IS agenda of creating a unified Islamic caliphate spanning all Muslimdominated regions of the world. Although the terrorism threat in Lagos is assessed as most acute in its densely populated mainland region, the threat will extend to the Victoria and Lagos islands’ commercial districts, which host both foreign diplomatic and business interests. In Chad, acts of terrorism are likely to continue in the capital, N’Djamena, which may also serve as the operational base for a regional force mandated to spearhead counterterrorism operations against Boko Haram in 2016. In neighboring Niger, an expansion of Boko Haram activity to the respective south central and southwestern Zinder and Dosso regions, where a number of humanitarian organizations have based their operations, will be a credible concern in the coming year.

Sub-Saharan Africa Kidnapping for the purposes of ransom, as well as short-term variants such as extortion and express kidnapping, will remain a primary security concern in many high-kidnap risk countries in Sub-Saharan Africa and may increase in frequency in some lowto medium-risk locations in 2016. In particular, foreigners involved in the construction and/or engineering sectors have emerged as frequent targets, particularly in Nigeria; this trend is expected to continue in 2016. Furthermore, longer-term business travelers and expatriates will also face an elevated kidnapping threat. Furthermore, the kidnapping of locals employed by foreign companies will remain a major concern in high-risk countries. The presence and activities of well-organized criminal syndicates in relatively stable security environments within the SADC (Southern African Development Community) region, particularly in Kenya, Mozambique and South Africa, have the potential to continue to contribute to what may become an increasingly embedded kidnapping and extortion industry in 2016. Further sporadic kidnappings of locals and foreign nationals by extremist groups should be anticipated in 2016, as well as short-term hostage-takings such as the November assault on the Radisson Blu hotel in Mali’s capital, Bamako, which left approximately 19 people dead. The abduction of a Romanian national from a poorly secured mining site in northern Burkina Faso by AQIM (Al-Qaeda in the Islamic Maghreb) splinter group, al-Mourabitoun, in August 2015 speaks directly to the threat of operating in insecure regions without adequate risk mitigation measures in place.

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Asia The Asian region’s primary security issue in 2016 will remain the conflict in Afghanistan while the emergence of other IS-linked groupings in South Asia, South East Asia and Australia will gain popular attention and raise concerns among foreign and local security agencies. Afghanistan has served as a breeding ground for Islamist extremists and the threat of a greater spillover into neighboring states remains a persistent likelihood. The connection between political and security threats and KRE (Kidnap, Ransom and Extorsion) risk levels remains strong, and in areas where the former risks are present, kidnapping threat levels and incident rates are generally elevated. The types of KRE risks associated with travelling to or operating in each region are becoming increasingly diverse. The increased conflict in Afghanistan is likely to negatively affect the security situation of its northern neighbors, Tajikistan, Turkmenistan and Uzbekistan, albeit in an indirect manner. There are many citizens of Central Asian states fighting for militant groups abroad, including in the states listed above and Kyrgyzstan. Some estimates place the number of Central Asian fighters in Syria alone at between 1,000 and 1,500. Australian securit y operations have also escalated in response to government concerns of radicalization among the population. Following the December 2014 ‘Siege of Sydney’, a hostage crisis involving a single and apparently IS-motivated individual, and more recently, the October 2015 Parramatta isolated shooting incident, Australian intelligence services have escalated surveillance of those suspected of harboring extremist sympathies, and have carried out numerous raids and arrests. In Bangladesh, two separate killings of Italian and Japanese nationals were reported in September and October, respectively. Kidnapping in its various forms will pose a credible security risk to local and foreign personnel as well

as business interests in many parts of Asia in 2016. The threat of financially motivated kidnapping will remain significant in numerous locations in the region. Although the kidnapping risk posed by regional and international Islamist extremist groups garnered widespread media attention in 2015, in terms of incident rates and frequency, the primary kidnap threat in the majority of countries in Asia continued to stem from criminal groups; a significant change in this dynamic is not anticipated in 2016. The express-kidnapping risk will be most elevated for persons operating in larger cities in Bangladesh, China, Hong Kong, India, Indonesia, Malaysia, the Philippines and Taiwan. With over 40,000 kidnapping cases reported per annum, the kidnapping rate in India is expected to remain one of the highest in the world during 2016. Incidents of virtual kidnapping are also growing in frequency. In 2016, this risk is anticipated to be most prevalent in India, Taiwan, Hong Kong and China. In India and Bangladesh, tiger kidnapping¹ gangs are expected to continue to target cash-rich organizations, such as banks and financial institutions, as well as jewelry and other high-end stores. Cyber extortion may present a significant security risk to individuals and businesses in 2016. Extortion will remain endemic in the insecure and conflict affected areas of Afghanistan, Pakistan and the Philippines, where rebel and militant groups and their criminal counterparts operate well-established extortion rackets that target various sectors. High-risk operating environments include Bangladesh, India and Papua New Guinea. However, extortion will not remain limited to the above high-risk destinations. In 2015, incidents were frequently reported in China, Taiwan, Hong Kong, Indonesia, Malaysia, Singapore and Sri Lanka. Wrongful or illegal detention by state or non-state groups will pose a risk to individuals and companies in certain Asian countries in 2016. China has emerged as a particular hotspot, where the wrongful detention of managerial staff by employees or business partners/suppliers is

a common response to corporate disputes or misunderstandings. Furthermore, wrongful detention by official government entities will remain a concern for business and recreational travelers. Travelers from Asia face a general higher risk of being kidnapped in many countries in the region due to their perceived wealth, history/culture of paying ransoms and the fact that they are less likely to attract the type of media attention associated with the kidnapping of Western nationals. Chinese, South Korean, Taiwanese and Malaysian nationals, in particular, are subject to an elevated kidnapping risk in several Asian states. In the Philippines, specifically, the criminal kidnap threat will remain high in the restive southern areas, as well as in urban centers such as the capital, Manila. Urban centers in low- and medium-risk destinations such as Malaysia, Indonesia, China, Hong Kong, Singapore and Taiwan are not immune to the KRE threat. In particular, the abduction of company employees, termed ‘economic kidnapping’, is fast becoming a lucrative business; individuals in the retail and manufacturing industries are subject to the highest risk. In addition, the targeting of high-net worth individuals and their dependents by criminal entities was highlighted by several high-profile cases in Hong Kong, Taiwan and Singapore in 2015. In addition, while not comprising the primary threat, the risk of being kidnapped by Islamist extremist, politically motivated, rebel and separatist groups in certain locations in high- and extreme-risk destinations will remain elevated. •

1 It's a kidnapping in which one or more hostages are taken to coerce another person, usually a relation of the person or people held, to take part in a crime (In Colins English Dictionary).

Illustration by Carlos Pinheiro

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Rio 2016 Managing risk in the Olympic Games A VIEW BY JORGE LUZZI

In recent years, excitement in Brazil has been running high, partly because of it hosting the world’s biggest football tournament, but also due to the growing anticipation of new events to come. While Brazilians’ traditional good humour, cheerfulness and optimism may have been shaken by political upheavals over the last two years, the prospect of a new ‘mega’ event, universal in its scope, is getting hearts racing again. The events in question are the Olympic Games, running from 5-21 August 2016, and the Paralympic Games, taking place from 7-18 September. Jorge Luzzi, President of Herco Global and Director of Risk Management at Brokerslink, outlines how the host nation is preparing for these global sporting events from a risk management perspective.

The opening and closing ceremonies will be held in the historic and majestic Maracanã Stadium. Here, athletes will compete in 28 sports, two more than at the 2012 London Olympics (the International Olympic Committee decided to add golf and rugby sevens). There are four Olympic zones; Barra, Copacabana, Deodoro and Maracanã. When Rio de Janeiro was chosen to host the Olympic and Paralympic Games, Brazil was faced with the challenge of organising two of the biggest sporting events on the planet, with an interval of just two years between them - the Football World Cup in 2014 and the Olympic and Paralympic Games in 2016. For the Football World Cup, there were huge infrastructure, logistical and security issues to overcome. The stadiums where the matches were to be held were scattered geographically and the challenges were compounded by the sheer physical vastness of the country. A risk management strategy, taking into account transport infrastructure, physical structures, logistics and the security of visitors and teams while travelling, ensured risk mitigation measures could be implemented, reducing or almost eliminating the risks associated with the event. From an organisational viewpoint, this was a success. The venues for the Olympics’ 28 sports are spread across various facilities in Rio de Janeiro, a city that by Brazilian standards is relatively small. This means the risk issues posed by a wide geographical spread are reduced. Football matches however, will be held in the cities of Belo Horizonte, Brasilia, Salvador and São Paulo and, of course, in the legendary Maracanã Stadium. The 2016 Rio Olympic Committee therefore has high hopes for this event, partly because of the reduced geographical risk and also because of the experience already gained in handling events of this magnitude. Also featured on the 2016 Rio Olympic Committee’s ‘risk map’ are issues related to health and the host city’s hotel capacity. Where health is concerned, the Zika virus is clearly a worry. The epidemic affecting Brazil has been rapidly addressed by the healthcare authorities of the state of Rio de Janeiro and the Federal Government, as well as by the Olympic Committee. In order to reduce or even halt the virus’s development, the Brazilian army has been mobilised with large numbers of military personnel locating the mosquitoes’ breeding areas and treating them with larvicide. Luckily, when the Olympic Games take place,

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it will be winter in the southern hemisphere, so the tropical rains that normally foster the proliferation of mosquitoes are very unlikely to occur at that time. In order to address any health concerns visitors may have, new, large and well-equipped private hospitals have been built close to the Olympic Village and the stadiums. As far as crowd control is concerned, studies indicate that international supporters of the Olympic Games are likely to be less volatile than those who attended the Football World Cup. Taking into account experiences gained during the tournament, and as long as the sporting authorities work in similar fashion, there should be no major difficulties during this year’s events. Rio de Janeiro’s hotel infrastructure will not pose a problem since Rio is a city accustomed to receiving large numbers of tourists and has a huge range of hotels, both in terms of star ratings and price. Another risk that must be considered is terrorism. Although Brazil is not normally a target country for terrorist attacks, various initiatives are being undertaken to mitigate this risk. These include tighter border controls and stricter individual searches (since some of the foreign delegations may be targeted by terrorists). This risk is being assessed jointly by the Brazilian Olympic Committee and the Olympic authorities of the countries considered potential targets for attacks.

Unfortunately, Guanabara Bay will not be decontaminated in time for the Games. This is regrettable, since it would clearly be of huge benefit for the competition and the city itself, given that almost 1,400 competitors will be sailing on the waters of the Marina da Glória, in Guanabara Bay, swimming from Copacabana Beach, and canoeing and rowing on the waters of Rodrigo de Freitas Lagoon. The stadium infrastructures, while not yet finished, pose no major problems and will be of the standard required for competitions of this level, as will the Olympic Village itself. As with any large-scale human activity, there are risks – in differing places and occurring at differing times. But the Olympics are universal and of great importance to mankind, when sport brings us all together as one. As the legendary chairman of the International Olympic Committee, Baron Pierre de Coubertin said: “… may the Olympic Torch pursue its way through the ages for the good of a humanity always more enthusiastic, more courageous and more pure.” Risk has and will always exist. However big or small, it is a consequence of the times in which we live. In Brazil, many people are working to ensure that, under no circumstances, will this ‘celebration of mankind and humanity’ be jeopardised, and that the Olympic Games can continue to be celebrated as the greatest sporting spectacle in the world. These will be the first Olympic Games to be held in South America, the second in Latin America (Mexico City 1968) and the third in the southern hemisphere (Melbourne 1956 and Sydney 2000). •

JORGE LUZZI → A well known professional in risk and Insurance management, Jorge Luzzi is President of Herco Global. He is also Executive Vice President of IFRIMA (International Federation of Risk and Insurance Management) and President of Alarys (Latin America Risk Management Associations). Jorge Luzzi was Vice President and President of Ferma (European Federation of Risk and insurance Management associations) from 2009 until 2013, Risk Management Director of Pirelli Group in Italy and CEO of PIRCO and Pirelli Reinsurance Company in Dublin, Ireland and Lugano Switzerland for many years. He graduated in Business Administration at the University of Belgrano and is Academic at the Academia de Seguros e Previdência in Brazil. At Brokerslink, Jorge Luzzi is director of Risk Management.

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The client, a global energy company has grown in the LATAM region largely by acquisition. Companies acquired can have different loss control cultures and approaches to managing risk. Changing these attitudes needs a solid argument in respect of risk benefit arguments in making the business case for investment against the losses prevented. MAPFRE GLOBAL RISKS has developed a risk management and risk assessment tool, specifically for the Energy sector, that enables clients to operate internal benchmarking across sites. For this client this has led to changes in their investment policy and the management of their maintenance programmes in the region.

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ENTREPRISE RISK MANAGEMENT

ERM A NEW MODEL FOR RISK MANAGEMENT INTE RVIE W: ALE S SANDRO D I FE LICE , PRYSMIAN

ERM: GIVING YOUR FIRM A STRATEGIC EDGE COR E Y GOOCH , B ROK E RSLINK & J OHN BU G ALL A , E R MIN SI GHT S

REMEMBERING FRANÃ&#x2021;OIS SETTEMBRINO J OR GE LUZ ZI

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A new model for risk management

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Alessandro di Felice is Chief Risk Officer at Prysmian, following a long career in risk management. He has been heavily involved in ANRA, the Italian Risk Management Association and today is President. Jorge Luzzi, President of Herco Global at MDS Group and António Fernandes, Global Business Executive at Herco Portugal, met Alessandro at an event promoted by MDS in Porto, and talked to him about his career and risk management.

Curiously, Alessandro began his career not as a risk manager but as an insurance broker in London, after graduating in business administration at the university La Sapienza in Rome. He tells us “this was a very important experience, because spending two years in the most advanced market in the world for insurance brokerage ensures you learn all the technicalities, how this business works and the most important business fundamental – to trust the person you are doing business with.” After a couple of years in London he moved back to Italy, this time to Milan, still in broking. In the late 90s Alessandro was hired by Pirelli, in their risk management department. As Jorge puts it: “You began working on the other side of the fence.” Alessandro agrees: “Yes, I discovered an entirely new world and in the beginning I was worried it might be boring in risk management. I feared it might become too repetitive, more or less always the same, whereas in broking you know a lot of people, different customers and different activities. But this was not the case at all - it has always been a fantastic job, from the very beginning to this day.”

Jorge and António naturally agree – they both know how it is to work in risk management – after all they have many years’ experience in this area too. Jorge wanted to know how committed Pirelli was to risk management at that time and Alessandro went on to advise Pirelli historically had one of the most evolved risk management departments in Italy: “They started in the late 70s, establishing an insurance management department and in the 80s this evolved into advanced risk and insurance management.” He explains: “Advanced means looking at a risk profile with a different, more proactive approach, rather than just negotiation. In the 90s, when I joined, there were already a number of risk engineering, loss prevention, risk analysis and risk profiling activities. In the beginning these mainly focused on the insurable rather than non-insurable risks, but evolved quickly to embrace risk management. Later on, I became Risk Manager of Prysmian – a spin-off from the Pirelli Group. It was a specialist cable division of Pirelli that became a completely independent company and for the last five years I’ve been Chief Risk Officer. This means five years ago we adopted a complete enterprise risk management

(ERM) approach inside the Company and I became responsible for a number of risks that are not typically insurable.” Jorge, at this point, wants to know who Alessandro reports to regarding insurance and enterprise risk management. Alessandro is happy to clarify: “I report to the Board of Directors, or rather to a committee from the Board of Directors. This follows the corporate governance policy of the Company, where ERM is integrated into its corporate governance. As a traditional risk manager, I report to the Group Chief Finance Officer, so fall within the administration, finance and control functions.” Jorge agrees with the placement of both activities in one pair of hands but with different areas of focus. He now steers to another direction, asking Alessandro to describe the risk management approach of Italian companies, other than Pirelli, in the 90s and 2000s. Alessandro thinks for a moment and recalls: “I would say the evolution of our profession has been more or less similar in all other large companies. When I talk about large companies it means the 100-120 Italian companies that are the largest operating conglomerates in Italy, typically listed, they are also multinational or have a number of multinational operations. There are few large companies; 95% of the Italian economy comprises small and medium enterprises and in this area things are very different. Historically they have not been particularly interested or focused in managing risks. However, at the Italian Risk Management Association (ANRA) we’ve noticed this has been changing over the last few years, perhaps as a result of the recent economic crisis. “Many companies understood that a way to face the crisis was to manage the risk and try to control the volatility of results – stabilising them to avoid unexpected issues - and this really created and is still creating a new risk management culture in the country. I’m referring more to medium-sized than small companies, because small companies tend to be family-owned by two or three people, so very small. Another possible reason for better risk management is that banks, investors and customers started to require feedback and reports on how the risks are managed. I’m confident a risk management culture is really growing in Italy – as confirmed by what we see in our

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Alessandro di Felice.

"I think the insurance market needs to study a new business model. Something like an ‘insurance 2.0’"

Association where over the last one and a half years we have doubled our associates, which is very unusual.” Alessandro continues: “The Association is receiving more approaches from people who are not risk managers; they have other roles within their companies, but need to identify the risks and understand how to manage them, plus do some networking, benchmarking and training activities.” Jorge agrees: “The profession - the activity of risk management - is becoming more widespread in Italy than ever before.” Alessandro adds: “Perhaps maybe not as a full-time profession yet, but certainly it forms part of a role for someone with wider company responsibilities.” Moving on from this, Jorge asks about the work of the Italian Risk Management Association (ANRA), how it has contributed to risk management in Italy and whether

it has influenced the mindset of those working in this area. Alessandro has been President of ANRA for a year and actively involved in its management prior to this. He explains: “We invested a lot in enabling people to access a wide range of information and set up training courses, training meetings and workshops to educate people who are asking for training. This is receiving very positive feedback and interest is growing. ERM has become very popular in large companies and through ERM we are seeing a rediscovery of traditional insurance risk management. This is because when you conduct a risk profile analysis on ERM you include a number of risk areas such as legal and reporting, strategic, financial, compliance and operational. In an industrial company, its key findings typically place insurable risks at the top of the scale, but with this new approach the level at which these risks are reported and communicated is much higher than before. They are communicated to top level executives; the Chief Executive Officer and/or the Board and therefore the need to buy insurance has become more ‘popular’ together with other aspects of the ERM. They understand the insurance market has the financial capacity to reduce exposure to these risks. Clearly there are other areas of risk that are not insurable so still represent big issues for companies.” Jorge recently arrived from the annual Risk Management RIMS conference in San Diego California and commented that several risk managers for large USA companies mentioned insurers and reinsurers are increasing their focus on covering non-traditional risks; things they didn’t realise before were a real need of their clients, but that risk management associations were bringing to their attention, saying ‘you know, if you develop a policy to cover some balance sheet gaps of your clients, and if the insurance market acts upon this, technically you could do some very profitable new business’. As a result, the lobbying by regional risk associations is generating new kinds of covers by insurers. Jorge wanted to know if this is also happening in Italy. Alessandro replies: “Yes, and taking this further, I think the insurance market needs to study a new business model. Something like

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an ‘insurance 2.0’, which is: if a large company integrates an ERM framework into its corporate governance, conducts an in-depth analysis of potential scenarios and evaluates its potential exposure, why should the insurance market still only consider traditional lines such as property, liability, marine & cargo and personal accident, etc? Why don’t they, for example, become some kind of company ‘partner’, respond to the business risk management plan and say ‘that is the risk that has been assessed in your business management plan, I will provide a certain capacity just in case the outcome goes above your expectations, or below them”. He continues: “This would insure the risk management plan rather than the risks within it. I don’t know how to do it yet, clearly, I still don’t have the answer, but I do believe this is something to be evaluated and studied in order to generate a new business model. It is not just launching a new product like cyber cover, contingency/ business interruption or an evolution of existing lines of business – this is about completely rethinking the business model.” The discussion livens up. While Jorge comments this would mean that not only underwriters, but also clients might suggest new kinds of covers, António joins in and asks Alessandro what is the position of insurers on this, if they are open to this kind of approach. Alessandro’s opinion is that some insurers are getting the message, but cautiously adds: “I don’t know how open they are and how willing because this is a strategic issue for an insurer. I would say that currently the insurance market, together with part of the brokerage industry, is in a very dangerous situation; there is a lot of capacity and because the price is low, in certain lines of business insurance is going to become a commodity. And if it becomes a commodity, it will be easy to access and will need controlling. This may mean cutting costs, reducing head count, doing acquisitions, mergers etc. Only the strong players will win – the others will be completely erased from the match.” António intervenes: “In a way, your company, Prysmian, wants to play this game because they will make huge acquisitions”. Alessandro agrees: “Yes, a part of our business – low voltage cables - is in the commodity market, so we know how it works. It works by buying small companies,

Alessandro di Felice with Jorge Luzzi and António Fernandes.

cutting costs and getting the market share. We do this because we don’t have any more margin to cut prices. You can only have a margin if your costs are very, very low. Otherwise it’s impossible. And the insurance market is going in this direction right now it’s been some years now that, if a traditional property programme, for example, is good, and does not have particular issues in terms of claims and frequency, it is easy to get a discount in a renewal. So what is the added value if the discussion is only about price? This is dangerous for risk management and risk managers, because if at a certain point insurance buying becomes so cheap and easy to do, there is no incentive to invest money in loss prevention, risk control or risk management.” Jorge and António agree. Alessandro continues: “The capacity available on the insurance market is enormous at worldwide level. Insurers also have to take into consideration, for example in Europe, the introduction of Solvency II rules that require a lot of capital allocation for granting the business, which means an additional cost. So, I don’t know where this market is going. It could be the right moment to invent something completely new that is neither an insurance policy, nor a financial product, some sort of hybrid.” Jorge adds: “That might work by providing cover in case a strategic assumption of a company is wrong or the scenario becomes different from the assumption made when the strategic plan was written, for example. It is typical of the way weather insurance works.”

Switching to the subject of captives, Jorge asks: “Prysmian is one of the oldest captive owners in Italy and from your origins one of the first in Europe too. How is this working, how much of a risk appetite do you have with your loss prevention approach etc, when using the captive?” Alessandro replies: “I would say the captive for us represents our level of risk appetite in property, liability and credit. Over the years, thanks to the positive results, we have always kept profit in the captive, generating more capitalization so the captive self-financed itself, progressively increasing the level of retention. In traditional lines like property, liability and credit, we are buying just capacity from the market. All the frequency claims are retained by us. There is a balance, it is sustainable and our focus will continue to be on only insuring very high risk events, below that our own company will cover the risk.” All three would happily continue to discuss risk management, but Alessandro has a plane to catch. As they say their goodbyes, it is clear this has been a very interesting discussion. And what is clearest of all is that these men are passionate about risk management. •

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Linking ERM to strategy

ERM Giving your firm a strategic edge BY JOHN BUGALLA AND COREY GOOCH

In many industries, companies are being pushed by their regulators to implement Enterprise Risk Management (ERM). However, the vast majority of companies are not subject to a high degree of regulation and are still pushing for the adoption of ERM. Perhaps the reason that regulators and boards are so favorable toward ERM is because of the strategic and operational benefits that it makes possible, including: • Increasing the chance of achieving strategic and business objectives; • The ability to see adversity on the horizon and minimize its impact; • The ability to take advantage of value-creating opportunities such as a competitive advantage for the future; • Provides a process for board members to oversee risk management activities as required in some countries. With the introduction and adoption of ERM by many companies around the world, an additional step should be included in their ERM process. The new step – planning – is critical to establish the context surrounding the new ERM program. The planning and preparation stage should take place before an ERM program is initiated. It is at this point that the organizations leaders should discuss how the ERM program will be aligned with the organization’s strategic objectives, and be utilized as a compliance tool for regulators as needed.

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Too many ERM programs are initiated and championed by a single individual or department from the bottom up without giving adequate consideration to both the needs and goals of the entire enterprise, which is a core concept of ERM. The result is an ERM effort that is narrowly focused. For example, an ERM effort championed by the compliance or regulatory group often becomes a compliance-biased program. Obviously, these organizational capabilities are important, but they should be considered within the overall context of the organization’s strategic goals. An ERM initiative that takes a holistic approach in a culture that supports it will not only leverage the best risk identification and treatments already in place throughout the organization, but also help to incorporate the same risk processes into the strategic planning process. When ERM is aligned with the organization’s strategic and operational goals, ERM can also lead to strategic and operational benefits. The methodology is to embed ERM within the strategic and annual business planning process. Because the strategic plan sets out a vision for the organization’s growth over a multi-year time frame, incorporating the ERM process will support, not hinder, the strategic plan. The reason is straightforward: while the strategic plan is based on various projections over time (among them political, economic, technological, social, environmental, and legal), its starting line is existing conditions. However, there is an enormous range of changing circumstances with consequences that vary over time – the future is not what it used to be – that can quickly turn favorable operating conditions into an extremely difficult environment. Consider the wide range of outcomes, such as interest rates, the price of oil, a British exit from the EU, the refugee migration, and cyber risks, that are possible spanning the five-year time frame of 2016-2020.

Link strategic and business planning to decision-making Embedding the ERM process into strategic and business planning is not an end to itself. The ERM process supports the strategic plan, but it is executing the strategic and business plans with tactical actions that are critical. When data and information about risks or obstacles is added early in the process and decisions are based on that data and information your organization will actually start to practice strategic risk management. Embedding the ERM process into strategic planning also is important for growing the business because the opposite side of risk is opportunity. And a focus on opportunity can lead to an important competitive advantage within your industry.

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Your Operating Environment

MORE FAVOR ABLE

Outside Risk Factors

Current Strategic Pla

• Political • Economic • Social • Technological • Legal • Environmental

LESS FAVOR ABLE

2016

Operational Time Line

2018

ERM enhances strategic planning

Initiating the ERM process

The ERM charter

Adequate planning and preparation before initiating ERM are crucial. The planning step requires the active engagement and leadership of the CEO and leadership team. With the CEO leading the planning sessions, a constructive dialogue about ERM that will determine the unique shape and contour of your organization’s program can begin.

An ERM charter created during ERM planning is an internal blueprint for both executive leadership and middle management to follow. The strategic nature of the document warrants creation by senior executives who have a broad view and power within the organization. At the very least, the charter should state the vision, mission, and purpose of ERM within the organization. It will set the tone from the top for ERM in one of two very different directions: either risk management is a strategic support function, or it is about audit and control. We believe ERM should be aligned with and support the business activities of the organization. Risk management should collaborate with audit and compliance, but not be housed within compliance, if the option exists.

An initial planning session with the following agenda is a good place to start: • Create an ERM charter: vision, mission, and purpose. • Identify the ERM leader: Chief Risk Officer, CFO or CEO. • Identify how best to align the organizational team that will include the ERM process within the organization’s strategic plan. • Define “risk” within your organization. • Draft an initial “risk register” for your organization. • Initiate a discussion about risk appetite and tolerance. • Identify internal and external resources and collaborations that will bring added robustness to the effort.

Half of the foundational principals of ERM have to do with “preserve, protect, and comply,” but the other half have to do with supporting building the business. ERM should be employed to identify, assess, and address both threats and opportunities to the organization. More specifically, the goals of an ERM program should be: (1) minimize the impact of adverse events, (2) support business growth opportunities, and (3) enhance organizational governance.

Conclusion Incorporating ERM into the strategic plan will support growth objectives and minimize the impact of adverse events that could hamper an organization from achieving its goals. We view ERM as an important component of the strategic planning process. At Brokerslink, we have the capabilities to help our clients build and implement an ERM process that adds value and gives them a competitive edge. •

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COREY GOOCH

JOHN BUGALLA

→ Corey Gooch is Director of Business Development at Brokerslink. He joined from Towers Watson where he held positions as an Account Director, US Risk Consulting sales leader and Global Corporate Enterprise Risk Management consulting practice leader. Prior to Towers Watson, he worked at Aon for 11 years in their brokerage and risk consulting divisions and led their London-based EMEA team of ERM consultants. Corey Gooch has been quoted in numerous periodicals and has been a frequent speaker at a variety of international industry conferences. He holds a B.B.A. with double majors in Finance and Risk Management from Temple University, and attended the United States Naval Academy. → Based in Chicago, Corey Gooch can be reached at corey.gooch@brokerslink.com.

→ John Bugalla is an Enterprise Risk Management (ERM) thought leader. He has a 4 decades track record of creating new value for clients by designing new products, services, techniques, and management methods. → From 2002 to 2014, he was Managing Director of Marsh & McLennan, Inc. From 1990 to 2000, he held the position of Managing Director of Willis Corporation. From 2002 to 2004 he was Managing Director of Aon Corporation. → Since 2005 he is the managing principal of ermINSIGHTS, an advisory and training firm specializing in enterprise risk management (ERM) and strategic risk management (SRM). The firm advises clients how to embed ERM into strategic planning and leverage the process to create new value. → John Bugalla is a regular speaker at CEO, CFO, and RIMS conferences. He collaborates with companies to turn ERM from a compliance exercise to a value creator. → He has published articles in several magazines like CFO Magazine, Risk Management Magazine, The Risk Management Association, The Journal of Risk Education, among others. → Based in Indianapolis John Bugalla can be reached at jbugalla@indy.rr.com.

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“François’s ethos was that education and associations would be the only way to build a harmonised European risk management culture.”

François Settembrino.

Celebrating FERMA's 40th anniversary.

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REMEMBERING

François Settembrino BY JORGE LUZZI

In September last year, François Settembrino, creator of the Belgian Risk Management Association and founder of the Federation of European Risk Management Associations (FERMA), passed away, aged 86, after a short illness. François was Chairman of FERMA for 10 years (1984-1994), responsible for the formation of its biennial Federation Forum and named the Association’s Honorary President after his retirement. A former broker and Risk Manager at Tabacofina in Belgium, François was recognised as a prolific contributor to the risk management and insurance industry and described by his peers and colleagues as ‘the father of FERMA’. Here, Jorge Luzzi, President of Herco Global and Director of Risk Management at Brokerslink, remembers this remarkable man. François Settembrino was a major influence in the European risk management sector and for me, a real teacher, both in my life and my career. He was indeed a ‘founding father’ of FERMA and responsible for its predecessor – the Association of European Industrial Insureds (AEAI) – which he launched in 1974. He started his career in insurance in the sixties, with Belgian broker, Henri Jean. One of his famous quotes at the time was: “For everyone a premium is seen as a financial reward, yet in insurance it is something that has to be paid!” He specialised in car and personal lines insurance before moving onto pensions and employee benefits. This was at a time when many foreign organisations, particularly from the United States, were setting up their European headquarters in Belgium. François – frustrated at the lack of harmonisation across Europe – was keen to help them establish their businesses and overcome the apparent cultural and legal differences between the US and Europe. As a result, he rapidly became known as ‘the European expert’ on these matters.

After a productive and prolific life as a broker, François joined a Belgian company as a Risk Manager, developing, promoting and engraining risk management within its culture. He worked closely with the European Commission and in the early 70s was asked by the General Customs Directorate to set up a European association, representing the interests of the sector, working closely with insurers and brokers. This he did with the help of contacts in Germany, Netherland, UK, Italy, Spain and France. On a personal note, I first met François in the late 80s. I was quite young at that time, taking my first steps in the risk management world. It was during one of the AEAI/RIMS conferences in Monte Carlo and François was chairing the opening session. His multi–lingual capabilities – delivering his speech in six languages – and ability to engage with the audience were impressive. François became a reference point during my 35+ years in risk management and many of the initiatives I delivered during my time as President of FERMA and the International Federation of Risk and Insurance Management Associations were inspired by his life teachings and conversations. In 2014, we met in Brussels to celebrate along with all FERMA´s presidents, its 40th anniversary. He was there quite elegant and as lucid as ever. François never gave lessons or advice in the traditional way; instead he gave you ‘food for thought’ and continued to do so even in his later years. Long after retirement he remained active within FERMA, working alongside general secretary, Pierre Sonigo and executive director, Florence Bindelle; always ready to help, writing articles for the press and sharing his enthusiasm until his last days. On July 2015 he sent Florence his last article, quite funny, but slightly too provocative to share publically. His accompanying email text read: ’This article is like a Will, it reflects my thoughts and wishes! See you soon and big kiss!’ This was his last email. Thank you François for what you have given to our profession and all of us within the risk management community. •

François’s ethos was that education and associations would be the only way to build a harmonised European risk management culture and this desire to promote insurance and risk management education across Europe was the rationale behind the formation of AEAI and FERMA.

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Brokerslink BROKERSLINK: FROM IDEA TO REALITY – A TRANSFORMATION STORY BROKERSLINK IN AFRICA: GHANA AND TANZANIA INTERVIEWING JIRINA NEPALOVÁ R E NOMIA F OUNDE R AND CEO

BROKERSLINK NEWS

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Brokerslink: From idea to reality

A transformation story B Y PA U L B I T N E R , M A N A G I N G D I R E C T O R B R O K E R S L I N K A G

An idea. The setting and time was Portugal, the land of explorers sometime in 2004. Driven by the need to provide quality service to clients on an international basis, with no acceptable solution available, JosĂŠ Manuel Fonseca and MDS set out beyond their borders to find like minded, independent insurance brokers in order to forge a regional network. Brokerslink was born. Much like fine wines evolve over time, good ideas, accompanied by vision and a sense of direction, become a continuum of ideas that evolve over time. Brokerslink, a fine idea, started its evolution. The first phase of the evolution centered on geographical expansion in order to be able to service clients around the globe and formalization of the structure as an association. By 2009, a mere 5 years after starting as an idea, Brokerslink was a global insurance alliance present in over 50 countries with strong reinsurance brokerage support. 2009 also marked a significant shift in strategy. Half way across the globe from Portugal, in Hong Kong, the site of the first global conference, Brokerslink starts transforming into an offensive organization in search of new business. The second phase was under way. The transformation of the nature of the organization required further geographical expansion, creating a complete risk solution offering and market visibility. The

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explorers set their sights upon Middle East and Africa, until then, key unexplored regions. They also heightened their efforts to forge new relationships in key countries around the globe where Brokerslink lacked presence. Along the way, relationships were forged with high quality specialty brokerage and risk consulting firms. Brokerslink also focused efforts on strengthening strategic relationships with key global insurers launching a website with a collaboration platform. By 2013, Brokerslink had presence in over 85 countries, 10 world-class specialty broking or risk consulting offerings, strategic agreements with key insurers and increased visibility. During this time, another idea in the continuum started forming. What about becoming a different kind of global broking? You may ask: what was it that drove this idea? The simple answer is to provide a long-term viable differentiated option in the market. However this simple answer has subcomponents. The incorporation further differentiates Brokerslink from the existing independent insurance broker networks and provides an alternative to the publicly traded global brokers. Brokerslink becomes a global broking company owned by independent insurance brokers who retain their operating identity. The capital obtained from the incorporation will enable additional investment in human capital, software, branding and the individual operating brokers geared towards providing the market with a differentiated service experience and set of risk solutions.

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20%

BROKERSLINK MANAGEMENT AG

50 N E W I N V E S TO R S , 41 C O U N T R I E S FROM 5 CONTINENTS

REPRESENTING

BROKERSLINK AG

This time the setting was Brokerslink’s 5th Global Conference, October 2013 in Singapore. Brokerslink’s members took the first step by voting to transform the association into a corporation. The third phase of Brokerslink’s existence was under way. The complex and time-consuming incorporation process got under way. The first step in the process was completed by 2014, when Brokerslink Mananagement AG was created, registered and capitalized in Switzerland with five shareholders, all key players in Brokerslink’s evolution, are shown in the chart above.

The incorporation further differentiates Brokerslink from the existing independent insurance broker networks and provides an alternative to the publicly traded global brokers.

In 2015, Brokerslink AG, the global broking company was created, registered and capitalized by Brokerslink Management AG. At that time, the share offering process was launched to be completed in May of 2016. A new type of global broking company has come into existence. Now owned by 47 independent insurance brokers and consulting firms from all regions of the world, Brokerslink AG is capitalized and in a position to deliver a different client experience through a robust central team and a network of 90 affiliates with a global footprint and a broad range of industry expertise. A reality with more good ideas coming. •

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JosĂŠ Manuel Fonseca, Mohammed Jaffer, Youness Rhallam and Eric Addo-Mensah at EMEA Brokerslink Conference, Porto 2016.

Brokerslink in Africa: Ghana and Tanzania

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Brokerslink is going from strength to strength in Africa, a fast developing continent where many companies and clients are undertaking increasing amounts of business. Midas Insurance Brokers from Ghana and Tanzania-based Tan Management Insurance Brokers are new African members. Eric Addo-Mensah, COO of Midas and Mohammed Jaffer, CEO of Tan Management, were in Porto for the Brokerslink EMEA meeting where fullcover caught up with them. They discussed their careers, their companies, their markets and reasons for joining Brokerslink.

The companies Eric started his career as a teacher but then decided to study insurance in the UK (being a teacher he knew the importance of knowledge). Ten years - and many hours of study later – Eric returned to Ghana and joined the largest insurance broking company in the country. In 2008, the opportunity arose to set up his own company and within three years, the firm was one of the top 10 insurance brokers in Ghana. Midas employs 12 people working out of two branches in Tamale and Accra and between them they manage around Us $8-9million premium income. Eric has plans to expand into other cities. Moha mmed’s stor y is somewhat different, even if there are certain similarities. He studied at the American university in Sharjah (United Arab Emirates). A f ter graduating at 20, Mohammed returned home to Tanzania (his family owned several businesses such as real estate, medical facilities and bakeries). Although keen to complete his

masters degree, this required some professional experience so Mohammed’s family suggested he secure a role outside the family businesses. Mohammed’s first job was with Jubilee Insurance - the largest insurer in East Africa – where he worked for nine years. It was only after promotion to regional manager that Mohammed thought it was time to bring his insurance sector experience into the family businesses. In 2009, he bought an insurance agent – not even a broker – with a premium income of Us $200,000. In 2015, the business reported around Us $3million premium income. Such is its growth, KPMG ranks Tan Management as the fifth top midsize company in Tanzania and the firm is ranked ninth out of 120 brokers in Tanzania. Tan Management employs 26 people working in three branches in Dar Es Salaam, Moshi and Arusha and Mohammed, like Eric, is looking to grow the business further. Midas and Tan Management – two businesses born out of chance.

The markets Their portfolios and lines of business may vary, but both markets face the same challenges: servicing clients with multiple demands in differing business classes, reducing the need for specialisation. Although generalists, in certain market areas they have more experience, for example, in terrorism and political risks cover. As Eric says: “With the exception of South Africa and maybe Morocco, in most of the other parts of Africa, you do everything, you are forced to be a ‘Jack of All Trades’, but that’s also one of the reasons why joining a group like Brokerslink for me is very important. When I was studying in the UK there was an advert that used to play on TV with a guy who said ´If I don’t know it, I know a man who can’. We try our best to follow this ethos so if we do not have the experience we have access to someone who does.” In Ghana or Tanzania, for the moment, specialization is out of the question. In Tanzania the corporate market accounts for 65% of total premium income. The retail market is currently at 35% but has huge growth potential. Mohammed says: “Outside of business, people do not consider insurance a necessity. Micro-insurance is definitely helping and the regulator estimates the insurance penetration rate to triple by 2019-2020.” In Ghana the retail market is even smaller, around 15%. Both markets comprise mandatory insurances, such as third-party and employer’s liabilities in Tanzania and motor insurance and commercial liabilities linked to construction in Ghana. In the Tanzanian market, soon-to-be-enforced regulations will establish mandatory fire insurance for schools and mandatory engineering policies for construction projects. A health insurance programme for employees will also be put in place, justifying estimates the market will triple in the next few years. As for Ghana, since there is no mandatory workmen’s compensation insurance, construction firms are required to have third-party liability cover that indemnifies the companies’ own employees as well as third-parties in the case of injury. When asked about the consequences of not having mandatory motor insurance, Eric tells us the police is very strict and if you do not display proof of insurance in your car, you could get arrested (he wryly smiles).

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Ghana Insurance Market Market size â&#x20AC;&#x201C; The total market size in 2012 was broken down as follows. Figures for personal accident and health premiums are not available:

Tanzania Insurance Market Market size â&#x20AC;&#x201C; In global terms the Tanzanian non-life insurance industry in 2013 ranked at 97th position and the life industry 119th. The total market size was broken down as follows:

Note: * 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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The strategies With growth potential in both markets, it’s interesting to discover what the future strategies are for Midas and Tan Management. Eric reports in addition to increasing property and casualty for corporate clients, life cover will be a future focus: “There’s a burgeoning middle class and because of the way society is structured, where everybody depends upon relations, most of the young and up-coming middle-class people need to have life insurance for their children, particularly if they want to safeguard their education.” In the last two years major life insurers, such as Credential and Old Mutual, have established themselves in Ghana. For Tan Management, the situation is slightly different; each region is unique so the branches must adopt different strategies. Mohammed comments: “It’s difficult to focus on corporate lines in a place like Moshi¹ and in Dar-es-Salam the retail market is becoming slightly difficult with the introduction of bancassurance which allows banks to sell insurance.” He continues: “In order to sell insurance, banks have to register as brokers. This means they will not have the necessary technical expertise when it comes to offering certain classes of cover, such as marine.” Having moved away from the retail market, Tan Management has identified medical insurance as a growth area (similar to life insurance in Ghana). Numbers look set to triple in this line of business and so this, alongside corporate business, is the main focus. Mohammed is also keen to expand out of the country, either through affiliates in Tanzania or via international placements for clients.

The broking and insurance sectors Conversation now switches to the broking sector in both countries. Mohammed, in addition to his Tan Management role, is President of the Tanzania Insurance Brokers’ Association (tiba). He explains: “In my capacity, I see a number of changes such as brokers becoming more educated. In a market so young, 120 brokers competing for business is a challenge. Out of these, 95 are based in Dar-es-Salam, so everybody is fighting for the same pie. Unfortunately not all are professional, making it worse for those who are.” Mohammed adds:”This concentration is apparent when you look at the regulator’s reports – brokers control 60% of a market worth approximately Us $300 million. Of this Us $200 million, the top 15 brokers control Us $180 million and the top five control almost 50%.” The lack of expertise worries the Association, so Tiba has partnered with KPMG as their training partners in East Africa, helping brokers become more professional and better serve their clients. The sector is evolving at a fast pace; the regulator has developed a national insurance policy (still in draft) and a national insurance education strategy to include insurance within the curriculum in schools and universities. The regulator has also introduced Takaful insurance² and bancassurance and unlike other African countries, accepts the industry should become more self-regulating. In addition to his role as President of Tiba, Mohammed is vice-president of the East African Brokers Association (EABA). This comprises five countries: Tanzania, Kenya, Uganda, Rwanda and Burundi. He points out: “The challenges we face in East Africa and Africa in general are quite different from those of the European market and when faced with such challenges there are only two options – either sit back and say ‘ok, this is what it is, this is Africa’, or move forward in the belief ‘it’s our industry, our market, our country’ and if we don’t utilise the experience we have, what’s the point of having it? Mohammed’s enthusiasm and passion for his work is clear; even if he confides: “These positions are very taxing - the travelling, dealing with government officials etc, but it’s definitely worth it when your work is recognised.”

And recognised he is. Last year, Mohammed was given the Tanzania annual young professionals award in the under 35 category and identified as the youngest achiever in the country on a national level at the Tanzania Excellence Awards. Achievements to be rightly proud of, but ones he says, are a result of a lot of work. Development is also prevalent in the Ghanese market. Eric explains: “Insurance in Ghana has evolved over a number of years, with the oldest companies over 80 years old. In the 1970s there was a change of government and it was decreed all insurance companies should have at least 40% Ghanese ownership. This forced a number of global firms to leave the country, so locals took them over.” But in the last few years things have changed and foreign companies have come back into the market, some of them Nigerian, but also others such as Allianz and Saham. While the 40% ownership is no longer required, local participation is still needed. He continues: “The number of insurance companies has grown and they’ve separated into life and non-life. We have close to 50 insurers; 26 non-life and around 24 life. Insurance brokers have equally increased in numbers. Twenty years ago when I joined the first broker I worked with, there were about 20 brokers, now the number has risen to 70-odd. And, as in Tanzania, the top brokers account for 89% of commissions. It’s quite a challenge as many of the large accounts come from major state-sponsored projects and of course you have to be in the front line. But we’ve been there, we keep pushing, we never give up and will endeavour to retain our top 10 position.” Like Mohammed, Eric is also involved in sector activities, serving on the Technical Committees of the Ghana Insurance Brokers Association and co-opted to serve on the Technical Committee of the Ghana Insurance Institute.

1 Moshi is a small but typically vibrant Tanzanian market town with an urban population of 150,000 and rural population of 402,400. It is the regional capital of the Kilimanjaro region. 2 According to Investopedia Takaful Insurance is defined as a type of Islamic insurance, where members contribute money into a pooling system in order to guarantee each other against loss or damage. Takaful-branded insurance is based on Sharia, Islamic religious law, and explains how it is the responsibility of individuals to cooperate and protect each other.

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Joining Brokerslink Eric and Mohammed share the same view when asked about how they see Brokerslink in the international insurance landscape and why they have become members. They joined because, as ‘generalists’ in their own markets, they need to have access to specific knowledge when their clients require it. As Mohammed puts it: “We do not have access to a reinsurance broker in Tanzania; Brokerslink gives brokers like us, in countries like ours, a backbone to rely on. Someone calls me and asks about Kidnap & Ransom and I just have to send one email and I get a reply from a Brokerslink member somewhere across the globe. We want to provide the same support mechanism for Brokerslink members which is why we’ve expanded to East Africa. We don’t want Brokerslink to feel the need to go to countries like Malawi, for instance, when we already have somebody there. For example, when Dutch member Léons³ wanted a risk placement in Malawi, we handled it; we know the region and were able to advise them. And they felt confident because they knew us. Brokerslink can have a strong position in Africa - we have the local knowledge and our colleagues know they can trust us.” Eric wholeheartedly agrees: “When we set up Midas, I recognised how this kind of synergy can help start-up companies like mine, so I was looking for an international relationship with a network I could tap into for information and knowledge. As Mohammed mentioned, there are times when we need expert knowledge or insight and this is something Brokerslink provides. When I was approached by the Nigerian member of Brokerslink, I didn’t have to think about it at all, it was what I had been looking for, for a long time. These things take time however, you have to develop a relationship and get to know people. When people ask me ‘what have you been able to get from your association with Brokerslink?’ I tell them it’s not a one-day thing, it’s relationship-building; getting to know people and knowing where to go for information. Brokerslink will always have somebody able to provide the answers where you have none. As I said before, ‘if I can’t, I know someone who can’.” 3 The Dutch member of Brokerslink.

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Mohammed Jaffer, CEO of Tan Management Insurance Broker.

A health insurance programme for employees will also be put in place, justifying estimates the market will triple in the next few years.

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The people Eric is married with two children, a son aged 26 and reading Law and a 24 year-old daughter with a degree in Food Processing Engineering. Apart from business, he enjoys playing golf, has been golf club secretary for three years, was recently re-elected for another term and loves playing every Wednesday afternoon and on weekends. Eric says: “It’s one sport for business. You can go and sit at a CEO’s office and talk for 20 minutes, but if you have a game, six hours on and you are still talking!” We cannot resist telling him we have fantastic golf courses in Portugal, having organised a golf tournament at MDS some years ago, one of which was held in a beautiful course near the sea, in a unique landscape.

Coincidentally – or maybe not – Mohammed also plays golf, having taken it up four years ago. Always a keen sportsman, he plays football, squash and badminton and enjoys scuba diving. Mohammed also likes extreme sports, and the day before Brokerslink’s EMEA meeting, he went to Évora, a Portuguese city in the Alentejo region, to practise skydiving. He is also an avid reader, always keeping a book by the Indian spiritual teacher Osho on his bedside table. Mohammed is married with a seven year-old son. His wife, as are all the women in his family, is deeply involved in the company. He explains: “Being a family business, women are involved in it and although from the Muslim culture, our women have business responsibilities; my wife is an administrator at our Dar-es-Salam office, my sister, a director handling the northern region and my mother, a director in one of the investment companies we own.” He concludes: Women bring balance to the company, every time we win an award we dedicate it to them.” With the conversation coming to an end, we learn from Eric that Ghana is a famous chocolate producer – he shares some of Ghana’s specialties – and Mohammed confirms Tanzania is a wonderful market to invest in. There are many exciting things happening in East Africa, one of them being the East African Community, where governments are working on a similar model to the EU, with plans for a single passport, for instance. As we bid farewell and thank Eric and Mohammed for sharing their stories and dreams, again we feel that unique relationship which can only be enjoyed between Brokerslink members; business partners and friends we can trust all over the world – and now in Ghana and Tanzania. •

Tan Management and Midas joined Brokerslink because as ‘generalists’ in their own markets, they need to have access to specific knowledge when their clients require it.

Eric Addo-Mensah, COO of Midas Insurance Broker.

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G HAN A

TA N Z A N I A

Population 25,9 million Population growth 2,1% GDP per capita $1,401 Life expectancy 61,1 Adult literacy 76,6% Inflation 15,3% Human development index (out of 187 countries) 138 Foreign direct investment $3,4bn Current account as % of GDP -8,3% Mobile phone penetration 108% Key export Petroleum and crude oil Last change of leader 2012

Population 49,3 million Population growth 3% GDP per capita $968 Life expectancy 61,5 Adult literacy 80,3% Inflation 5,6% Human development index (out of 187 countries) 159 Foreign direct investment $2,1bn Current account as % of GDP -8,2% Mobile phone penetration 55% Key export Tobacco Last change of leader 2015

GDP growth (%)

GDP ($bn) GDP ($bn)

2013

2014

2015

2016*

2013

2014

2015

*Estimated Oct. 2015

WEST AFRICA P O P U L AT I O N ( M I L L I O N S )

EASTERN AFRICA P O P U L AT I O N ( M I L L I O N S )

2016

2030

2050

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RENOMIA: BROKERSLINK @CZECH REPUBLIC & CENTRAL AND EASTERN EUROPE

Jirina Nepalová An example of top expertise in the insurance industry

Jiřina Nepalová, Founder and Chief Executive Officer of Renomia, is at the pinnacle of the Czech insurance industry; her expertise and professionalism is unrivalled, as evidenced by the national accolades she frequently receives. fullcover found out more about this amazing woman and her business.

Jiřina Nepalová began working in insurance in 1978 and is one of the most recognised insurance experts in the Czech Republic. This is mainly due to her extensive experience of implementing insurance programmes and managing claims for companies from a wide range of sectors. In 1993, she founded and continues to run Renomia with her two sons, building its position as the leading insurance broker in the Czech Republic and in central and eastern Europe. Renomia has been a partner of Brokerslink since 2007 and currently handles some €240 million in clients’ premiums. The firm has more than 1000 colleagues operating in the Czech Republic, Slovakia, Hungary, Bulgaria, Romania and Serbia and is constantly expanding its services. In November 2015, it launched a new Company – Britanika - focusing on financial consulting, insurance services, mortgage loans and investments for retail clients. Ms Nepalová was elected Chairwoman of the Association of Czech Insurance Brokers in 2015 and her many awards include: Manager of the Year 2014, Banking and Insurance sector; named as one of the forbes Top 10 most influential women in the Czech Republic and Ernst & Young City of Prague Entrepreneur of the Year, 2016.

Why did you decide to work in the insurance industry? It was by chance, maybe luck. Thirty-eight years ago, Česká pojišťovna, then the only insurance Company on the market and State-owned, was looking for a motor loss adjuster – I was studying electrical engineering so they approached me. This was a big life change. From the start it was highly interesting work and it essentially became a lifelong hobby. Another big change came when my son Pavel who, after the political regime changed in the Czech Republic, was studying at the Sorbonne in Paris in 1993. He discovered brokers play a very important role in the world of insurance and along with my other son Jirka (also a university student), convinced me to build upon my years of insurance experience and establish a brokerage company. This decision further strengthened my relationship with insurance. The role of an insurance broker is to be on the side of the client, to search out and negotiate the best conditions for them, to deal with claims and in general protect clients´ interests. I find great meaning in this.

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AWA RDS RE NOMI A 2011/2013 Insurance Broker of the Year Ruban d´Honneur (European Business Awards) Top 10 best employers in Europe 2015 Employer of the Region (Sodexo)

JIRIN A NEPA L O VÁ 2014 Manager of the Year in Banking and Insurance

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Top 10 Manager of the Year (run by the Czech Management Association, the Czech Confederation of Employer and Entrepreneur Associations and the Czech Confederation of Industry) LADY PRO (run by Czech 100 Best) 2014/2015 TOP 25 Women in Business (run by Hospodářské noviny, the 9th most widelycirculated paper with a circulation of 43,000 in September 2013) 50 most influential women in the Czech Republic (run by FORBES magazine, 10 page article and cover pictures in November 2015 issue) 2016 City of Prague Entrepreneur of the Year 2015 (run by Ernst & Young)

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What did you find the most difficult when building up Renomia, which today is one of the strongest insurance brokerages in central Europe? Definitely the beginning. In my case it meant starting the business from scratch in a small town with no capital. I had to apply for a loan while mortgaging our family house. I also had to convince future colleagues – professionals from within the insurance industry – to join me in a start-up business which was hard. For that reason I started working with people outside the sector, teaching them everything. This must have been a good move as some are still working with Renomia now and are recognised as top insurance experts. It helped having my two sons with me as they were committed to building the business too. What was it like to be a successful entrepreneur and mother at the same time? I was lucky that I started my business when my sons were already adults. What’s more, we could combine our talents and take advantage of the fact that I had insurance experience and they had creative ideas, courage, vision and knowledge of foreign languages. As a mother I have been tolerant and listened to them. From the start-up to today, we have been excellent and equal partners in the business. Do you think it’s easier now for women to achieve leading positions in insurance? There should be no difference between a woman or a man striving for a management position. It depends on the abilities and opportunities a person has. He or she, however, must be prepared to sacrifice something and have courage and perseverance.

What is your best memory in this journey? I have lots of beautiful memories which I’ll never forget. One that really moved the business forward was my first trip abroad by plane. I was flying to London with my sons and another colleague, who is now a Renomia shareholder, to meet a senior executive of one of largest brokerages in the world. We had to convince him to work with us to acquire a major account - a large Czech chemical holding. And we succeeded. Later on, we jointly won the tender defeating strong, international competition and have been servicing that client ever since.

What is your vision? How do you see Renomia’s future? My personal and business vision is to maintain the family character of the Company, expand in central and eastern Europe and provide the best services for clients. We continue to work in line with our values and mission which is ‘we serve people and companies and contribute to a better life’. We share our vision with colleagues in all the countries we operate in so they identify with it, naturally want to be a part of it and are keen to build a strong brand in Europe.

Why is it important for Renomia to be a member of Brokerslink? An important milestone in the successful development of Renomia was working with international broker networks and partners. We’ve been with Brokerslink since 2007 and this partnership has enriched us, enabling us to gain not only new knowledge and experience, but also friends. Thanks to Brokerslink we have the opportunity to provide services to our clients in countries where we are not active and at the same time this cooperation brings us new clients. We greatly appreciate the joint meetings and the open and friendly communication. •

There should be no difference between a woman or a man striving for a management position. It depends on the abilities and opportunities a person has. He or she, however, must be prepared to sacrifice something and have courage and perseverance.

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BROKERSLINK NEWS

2016 Brokerslink Conference Amsterdam October 20-22

brokerslink.com @Brokerslink

Brokerslink’s Amsterdam Annual Conference Brokerslink’s biggest annual event is being held in Amsterdam this year, at the Okura Hotel, from the 20th to the 22nd of October. Over 250 participants from all over the world are expected, including members, risk managers and insurers at what is the 8th edition of the conference. The new challenges and opportunities facing Brokerslink and the insurance industry will be one of the main focuses of the conference, highlighted by notable speakers such as: Inga Beale – Lloyd’s CEO; Jean-Marc Paihol – Head of Group Market Management and Distribution at Allianz SE; Steve Hearn – Group CEO Cooper Gay Swett & Crawford and Fons Trompenaars – Founder and Director of Trompenaars Hampden-Turner.

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Brokerslink @RIMS'16 Brokerslink has once again been present in another edition of RIMS’s (the Risk Management Society) annual conference, considered the world’s leading insurance industry event. This year the conference took place in San Diego, between the 10th and 13th of April, with over 440 exhibitors. MDS Group, Crystal & Company and In2Matrix had their own presence with branded counters within Brokerslink’s booth. Brokerslink’s visibility in RIMS, through strong management and partner participation with a large attractively designed booth, is a key initiative within the strategy of elevating the organization’s brand to be viewed as a major player in the global insurance broking field. This unique event also creates the opportunity to establish presence in the market by strengthening relationships with insurers and risk managers and offers opportunities to find additional partners and clients. No other event in the industry can offer such a high quality forum for branding and developing attractive business opportunities year after year. Over 60 participants, from Brokerslink firms, were present and took part in Brokerslink organized meetings and events, such as the the traditional breakfast – where connections get reestablished and everyone gets up-to-date on the latest news – and the famous cocktail, which welcomed over 200 guests this year. RIMS 2017 will be held in Philadelphia from April 23rd through the 26th. Brokerslink will be there.

Brokerslink at San Diego Convention Center.

Brokerslink Cocktail.

Brokerslink booth at San Diego Convention Center.

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Brokerslink Expansion Brokerslink is currently present in 90 countries, 400 offices and with 10.000 professionals around the world. The expansion of the geographic reach, in association with servicing the needs of the Brokerslink firms and clients is a continuing major focus for the management team. Brokerslink’s most recent new firms are based in Europe. Each one of them is a leading, quality independent insurance brokers in their market. They are: • Austria: Aktuell • Spain: Filhet Allard España • Norway: Norwegian Broker • Sweden: Söderberg & Partners

Ventiv Technology: a Risk Management Information System Partner Brokerslink announced a strategic partnership with Ventiv – the biggest independent company in the world with specific insurance and risk technology solutions – which will allow the delivery of a RMIS (Risk Management Information System) portal to its clients. This portal will provide the multinational clients of Brokerslink with the necessary tools to analyze their global insurance programs, as well as the possibility to access other risk management tools. The Brokerslink – Ventiv partnership shows the strong commitment with the strategy of boosting growth by means of innovation, making world class risk technology available to its clients.

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Group photo.

Zurich Multinational Insurance Training The global strategic partnership between Zurich and Brokerslink continues to make important strides. The strengthening of this relationship is fundamental in providing adequate solutions and better service to existing clients in the international space. In order to reinforce this relationship, the Zurich Development Center, in Switzerland, organized and hosted training about International programs for individuals from Brokerslink firms. For two days, 25 participants from 15 countries focused on Multinational Insurance Training through very dynamic sessions, analysis and case studies on how to use Zurich’s Multinational Insurance Application (MIA), a high quality and awarded tool that provides the necessary know-how to support and assure global and sustainable insurance solutions. At the conclusion of the training, the participants’ feedback was highly positive and proved that everyone understood and left better informed about the options available when structuring an international program.

Brokerslink Regional Asia Pacific Conference In what has been a busy 2016 Brokerslink schedule, another important Asian conference was held, from the 27th to the 30th of April, in Sidney, well organized and hosted by PSC Insurance Brokers, Brokerslink’s partner in Australia and New Zealand. Under the title “Working Together for Better Results”, 60 delegates from 10 countries presented and discussed subjects such as ERM (Enterprise Risk Management), Emerging risks, Brokerslink’s new technological tools – Risk Console and the Future of Brokering.

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Angola: Present and Future PA U L O VA R E L A

The sharp drop in the price of oil on the international markets since 2014 has greatly impacted the economies of countries traditionally producing and exporting this commodity. The severity of the impact is directly proportional to the degree in which individual countriesâ&#x20AC;&#x2122; public finances depend on oil. According to the International Monetary Fund (IMF), the sub-Saharan African countries most penalised by the adverse international climate in 2015 were Angola and Nigeria. In this piece, Paulo Varela, President of the Board of Directors of CCIPA (Portugal-Angola Chamber of Commerce and Industry), outlines the issues facing Angola.

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Current context The drop in revenues from exports and tax in the oil sector, which previously accounted for around 80% of total revenue, forced the Angolan Government to review its 2015 State Budget. A fall in the estimated price per barrel from Us $ 80.00 to Us $ 45.00 prompted the immediate adoption of austerity measures to contain public spending (by suspending, postponing or cancelling works and projects considered as non-priority under the 2013-2017 National Development Plan). Alternative sources of revenue also had to be identified and steps taken to make the country less dependent on foreign trade. Indeed, in an oil-dependent country, where revenue from other exports is comparatively low (while diamonds are the second-largest source of income, they accounted for a ‘mere’ €990 million in 2015, in compared to €8.2 billion in oil revenue), it was essential the Angolan authorities took swift action, implementing measures recognised by the international community as both timely and adequate. The most impactful measure proposed was the decision to diversify the economy; this encouraged investment in industry-based, non-oil-related areas (there are prolific natural resources in many different economic sectors) and developed primary sector

production, especially in agriculture, thus cutting imports. These actions contained the flow of currency out of the country and reduced its dependence (particularly in foodstuffs) on foreign trading partners. Earlier diversification of the Angolan economy took place during the 2008-2009 financial crisis when measures were imposed by the IMF as part of a structural adjustment agreement. The agreement remained in force until May 2013. However, those in charge of economic development failed to adopt a concerted strategy for the process and consequently, although several large, viable and sustainable projects were implemented, they were low in number and involved few business areas. In light of the worsening internal crisis, in mid 2015 the Government passed its first laws which it hoped would attract private investment. These included: the abolition of a minimum value for eligible projects, the introduction of benefits and incentives payable to applicants meeting certain objectives and predefined criteria, the repatriation of capital from the outset of the project and the safeguarding of 35% of the investment in areas considered a priority (including media, hospitality and tourism) for Angolan

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PA U L O VA R E L A → Paulo Varela has a Bachelor’s Degree in Law from the Faculty of Law at the University of Coimbra and completed post-graduate courses in Business Management and Administration. → He is the Administrator of Galp Marketing Internacional S.A, is a representative for Galp Energia S.A and President of the Board of Directors of the CCIPA – the Portugal-Angola Chamber of Commerce and Industry. → From 2002 to 2014, he was Vice-President of the Board of Directors of the Visabeira Group and has been President of the Board of Directors of Visabeira Global SGPS S.A. since 2006. From November 2009 to May 2014, he held the position of President of the Board of Directors of Vista Alegre Atlantis, S.A. → Paulo Varela was President of the Board of Directors of Visabeira Moçambique S.A. from 1999 to 2014 and President of the Board of Directors of Visabeira Angola S.A. from 2002 to 2014. He was also non-executive Administrator at the Banco Único (Mozambique), PCI – Parque de Ciência e Inovação Aveiro S.A.

investors. In addition, agencies such as the Angolan Agency for the Promotion of Investment and Exports and Technical Support Units for Investment were tasked with promoting and providing support for private investment and fostering Angolan exports. They operate alongside various ministries responsible for investment, including the Presidency of the Republic, which evaluates and decides upon projects with amounts exceeding Us $10 million. Angola concedes however, that even with these initiatives, it will struggle to source funds to meet the population’s basic needs and support essential projects. Alternative funding, from the public and private sector, in Angolan and foreign currencies, is therefore vital. In support, the National Bank of Angola (NBA) implemented a series of remedial measures; it issued debt in the form of securities and treasury bonds in Angolan currency (index-linked to the Us $) and secured funding from the international banking sector (Goldman Sachs, Bilbao Vizcaya Argentaria, Santander, Deutsche Bank), global development institutions (World Bank, mainly through the International Bank for Reconstruction & Development, the African Development Bank and the European Union), multinational companies (GemCorp Capital) and from other countries via bilateral agreements. In June 2015, a credit line of Us $6 billion was negotiated with China and Us $ 1.5 billion was also listed in sovereign debt (Eurobonds) on the London Stock Exchange. This was the country’s first experience of international money markets and a good opportunity to assess how receptive others were to its requests. In a bid to keep Angola’s net international reserves fairly stable (it currently covers five to six months of imports), the Government extended the time limit for overseas payments and created a payment schedule following guidelines set by the NBA. This it hoped, would contain the outflow of foreign currency. These measures however, led to suppliers suspending exports and as the flow of imports to the country dropped, it severely impacted on sectors whose production was reliant on imported raw materials. Worst hit was the automotive sector and businesses involved in brewing, milling, dairy and glass production. Suspended production inevitably led to an increase in unemployment. An updated regulatory framework to address the crisis and minimise its harmful effects on the population was needed, and so the Customs Tariff and Excise Duty Regulations were introduced. They increased taxes on luxury products, relieved the tax burden on essential products (especially those considered to be household staples) and introduced taxes on petrol and diesel fuels produced in the country. In addition, new Securities and Urban Rental Codes were approved and a new General Employment Law was passed. The shortage of currency and a reduction in imports led to a continued devaluation of the Kwanza against the Us $ (24% in 2015) and the Euro which were compounded by rising prices and increased inflation. The latter shot up to over 17% in the first months of 2016 (previously the highest rates had been 15.31% in 2010 and 14% in 2009).

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In light of this and with the aim to contain price escalation on essential products, the Government adopted new measures in February 2016. They comprised: • The creation of a National Price Council – chaired by the Minister for Finance, members include Ministers for the Economy, Territorial Planning and Development, Trade, Agriculture and Fisheries and Transport, plus the Governor of the NBA. The Council’s powers allow it to formulate a Government-approved national pricing policy, develop, manage and implement ‘market regulation policies’ and monitor and take action against activity that could impact prices.

Where minerals are concerned, Angola’s resources include diamonds (production in 2016 is expected to reach some nine million carats); ornamental stones – granite, marble and limestone; construction materials – sand, clay and gravel; and ores – gold, silica and mercury.

• The publishing of a ‘watched prices’ list – this ensures the prices of 32 essential products and services, such as rice, milk and bread, are controlled. • Agreements that the Government is to be responsible for setting the prices of gas, paraffin for lighting, plumbed water, electricity and urban public transport.

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Areas of focus The Government’s key focus was in the primary sector (as Euronews says: “Angola is exchanging black gold for green gold”). This sector is fundamentally important; it ensures the population’s basic needs are met and can replace significant volumes of imports, stemming the currency outflow. In recognition of this, rural and livestock development programmes have been implemented and water supplies to rural areas improved and extended under the ‘Water for All’ programme. Farmers are being provided with seeds and tools, a rural trade programme has been adopted with the aim of stimulating agro-industry and livestock, and the large coffee plantations are once again investing in producing and exporting coffee. Fisheries have also received special attention; incentives via the provision of licences, vessels and nets, foster eco-friendly local fishing, supporting around 500,000 families. Where minerals are concerned, Angola’s resources include: diamonds (2016 production is expected to reach some nine million carats), ornamental stones (granite, marble and limestone), construction materials (sand, clay and gravel) and ores (gold, silica and mercury). Yet to be fully-exploited, this sector has considerable growth potential. Particularly when you consider companies still import finished construction materials and export raw unprocessed stone which is subsequently re-imported in differing formats, but typically finished-off, polished and ready-to-buy. A parallel can be drawn with the timber sector where resources cannot be fully exploited due to difficulties in accessing logging sites and transporting the cut logs. Also a lack of electricity for processing means generators have to be used, making the costs prohibitive.

The most impactful measure proposed was the decision to diversify the economy; this encouraged investment in industry-based, non-oil-related areas (there are prolific natural resources in many different economic sectors) and developed primary sector production, especially in agriculture.

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When it comes to electricity and, more specifically, its generation, Angola has the second-highest hydroelectric potential in southern Africa. It has taken steps to maximise this, building essential hydroelectric plants and connecting them to the grid. New plants including the Capanda and Cambambe dams in Kwanza Norte province will provide an additional 960 megawatts of electricity from June 2016 when the first of four installed turbines comes into operation. In Laúca - 65% of construction work is complete and the first two turbines will be operational in June 2017, generating 267 megawatts of electricity. Production will increase by a further 77 megawatts when the third turbine comes into operation in December, the same year. Soyo – a combined cycle dam - will generate 750 megawatts of electricity in 2017 from natural gas. Angola’s electricity project is long-term and one that requires heavy investment in both generation and distribution by the Government and its partners. It is a project that must be concluded urgently; the viability of the country’s industry depends upon it. A further area of focus is the environment. Environmental impact studies are compulsory for certain projects, consulting firms have to be registered, support programmes to protect the local fauna and flora and combat the poaching and killing of endangered species are underway and the creation of nature reserves is encouraged. In the latter, the Kaza Transfrontier Conservation Area is especially important as it has a huge impact upon tourism. Following on from Angola’s participation in the 21st United Nations Conference on Climate Change (COP21), the country will be hosting official celebrations for World Environment Day on 5 June 2016. The theme for the event is ‘The Fight against the Illegal Trade in Wild Fauna and Flora’ – a subject particularly important and topical for the African continent. Logistics are equally a priority as it is essential products reach end consumers. The main railway lines have been rehabilitated, roads and bridges are being repaired and restored and work to build the deep-water port at Caio in Cabinda has been scheduled for Q1 2016. Various projects are also being implemented to improve conditions for road traffic in the capital and surrounding areas, including resurfacing the main roads and providing passenger ferries across the river to connect Luanda with the neighbouring areas.

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2016: preparing for the future Despite the efforts and measures adopted by the Government, and the positive results achieved from them, 2016 did not start well for Angola. The price of oil continues to fall in the international markets (with the occasional small rise followed immediately by further drops) and the geopolitical climate in the Middle East (the conflict between Iran and Saudi Arabia and Iran’s return to the oil market) have not facilitated an increase or international stability in prices. However, some of Angola’s problems earlier this year originated from factors arising late in 2015 and although unconnected to the price of oil, have negatively impacted its external economic and business relations. In November the US Federal Reserve suspended, via North-American banks, the sale of dollars to the Angolan banking system. It alleged the country’s financial system failed to comply with internationally-approved rules regarding money laundering and the financing of terrorism. This, combined with the oil price crisis, contributed to a lack of currency in the country, which in turn has led to a steep rise in prices. In response, the NBA adopted a series of initiatives recommended by the inter-governmental body, the Financial Action Task Force (FATF). Top priority was given to regulatory reform and the enforcement of 23 out of 41 new regulations. These included; the licensing of banks, risk governance and credit management, the establishment of an ‘appropriate legal framework’, the development of faster and more precise ‘automated customer monitoring procedures’, leading to better control over transactions in progress, the autonomy of the Financial Information Unit (FIU) and a recommendation to the private sector for ‘more cohesive and better quality reporting’. As a consequence of the changes introduced, and following feedback from FATF specialists who after visiting Angola in January this year reported: “No assets relating to the financing of terrorism were identified,” the NBA announced, in late February, that as Angola and its national banking institutions had been found to be “strictly abiding by the rules of compliance,” the country “was no longer under international surveillance in respect of money laundering and the financing of terrorism.” This acknowledgement and the recent regulatory reforms should soon alleviate the severe difficulties faced by the Angolan banks in accessing dollars on the international markets. This will give a much-needed boost to a well-developed financial system which is on a par with the best in Europe and Africa. Regarding financial services, Angola’s insurance sector witnessed a year of consolidation and growth in 2015. New products were developed to meet the country’s needs, and an increasing number of companies, offering more comprehensive cover, led to a surge of interest from Portuguese and South African companies operating in the sector.

In addition to ratifying its 2016 State Budget, the Angolan Government approved a strategy for economic recovery, signalling the start of a new and more stable era where tax revenue is non-dependent on oil. It involved the issuing of guidelines around; taxation, monetary policy, foreign trade and the real economy. The Government pledged to take greater control of the country’s deficit, seek increased financing and improve the efficiency and effectiveness of foreign investment. Greater priority is being given to promote exports and there are plans to adjust the public debt repayment schedule, increase non-oil-related tax revenue, optimise public expenditure on staff, pensions, operations and the acquisition of financial assets, rationalise the import of goods and services and generally increase domestic production of basic export goods. Tax reforms are also being introduced; the Council of Ministers approved a draft law governing banking operations and transactions, which in turn will increase revenue and enable taxpayers to cross-reference banking transactions. Although the Angolan Government took action at the first signs of the crisis, the measures adopted were ineffective and inadvertently contributed to the worsening economy in 2015. As mentioned earlier, a key trigger was an increase in the global supply of oil and subsequent fall in demand. Contributory factors included; the return of Iran and other oil-producing countries to the international market, the failure by OPEC to apply production restrictions, the exporting of shale oil by the US, a fall in European consumption due to its economic crises and climate change and a slowing of China’s economy to 7% in 2015 (the lowest in 25 years) which prompted a drop in imports from Angola, China’s biggest supplier of crude. Angola’s difficulties have severely affected relations with its foreign partners and there’s still some way to go before confidence in its economy returns. 2016 will be a year of constraint and austerity, reflected in the GDP deficit forecast of 5.5% in the State Budget. Economic growth however, is predicted to reach 3.3%, supported by an estimated 48% increase in revenue from the oil sector and 12% from non-related industries. Equally positive is feedback from the World Bank; in its 2016 Doing Business Report, it ranks Angola two places higher than in 2015 (181, up from 183). Perhaps measures to improve its business environment with easier company registration and lower costs for new business set-ups are working. While the (slow) process of diversifying the economy is underway, Angola’s economic and financial recovery currently depends on the increase in the international price of oil, which the IMF says could start happening towards the end of 2016.

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A country cannot go however, from being a mono-producer and mono-exporter to having an industrialised and diversified economy easily or quickly. It is a lengthy process that requires a great deal of work, mental stamina, financial capacity and heavy investment in the training of local manpower. If, however, an internal project is approached from a medium or long-term perspective (with a view to securing the presence of enterprises and entrepreneurs in the market), structural costs are likely to fall, expatriate workers can be replaced by qualified local workers and if the project has Angolan roots – ie is set up locally and particularly if it involves Angolan partners - local consumers will look upon it more favourably. Angola firms are equally favoured when it comes to applying for funding, programmes and support through official bodies (eg the Ministry for the Economy’s Angola Invest programme, the Angolan Development Bank or Angolan banking system), since there is no shortage of local currency and credit rates are low. Angola also has an abundance of natural resources that can be used as raw materials for various industries, making entrepreneurs less reliant on currency from commercial banks. The Government is confident its economic and financial crisis is temporary; the country is known for its resilience in overcoming difficulties. Angola’s history marks periods of adversity but also, ones of achievement and progress. Portugal has equal confidence in Angola succeeding in the face of adversity. At the opening session of the conference ‘40 Years of Angolan Independence – Building a Sustainable Future’, held in Lisbon on 29 February this year, the Angolan Ambassador to Portugal, Professor Dr José Marcos Barrica, affirmed: “No crisis can hold out in Angola, it’s all a matter of time!” The Portugal-Angola Chamber of Commerce and Industry also believes the Angolan Government is doing everything in its power to put this complicated episode in the country’s economic history behind it and that, once the crisis is past, nothing will be the same as before. The characteristics of the Angolan economy will change, requiring a different approach to bilateral relations. More than ever, it will be necessary to take advantage of existing synergies, the shared cultural identity and common language. It is in everyone’s best interests – Portuguese and Angolans alike – to gradually increase local production and build sustainable partnerships, supported by the authorities of both countries. Portuguese companies and entrepreneurs have already shown they are more than capable of rising to Angola’s socio-economic challenges; they are present in every province, operate in every sector and so will continue to be long-term partners for Angola. •

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The Government is confident its economic and financial crisis is temporary; the country is known for its resilience in overcoming difficulties. Angola’s history marks periods of adversity but also, ones of achievement and progress.

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A vision of (and for) Mozambique Excerpts from the speech – ‘Reflections on Mozambique’s Economy over the Last 40 Years’ – given by Prakash Ratilal on 29 June 2015

P R A K A S H R AT I L A L → Prakash Ratilal has an extensive track record at the Banco do Fomento Nacional bank in Lisbon, which he joined while still a student. At 24, he was awarded a degree in Economics from the Faculty of Economics at the Technical University of Lisbon’s Institute of Economic and Financial Sciences.1 In that same year (1975), the year in which his homeland, Mozambique, gained independence he returned home and was appointed Chairman of the Board of Directors of the Montepio Bank of Mozambique. At 27, he became Vice-Governor of the Bank of Mozambique and at 31, was appointed Governor. → After a period of collaboration with the United Nations, where he took on a variety of tasks, from Consultant to the

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Governments of Angola and East Timor and Member of the Panel of Eminent Persons on United Nations Relations with Civil Society to Special Adviser to East Timor’s President, Xanana Gusmão, in 2001, he took on the Presidency of the Moza Banco bank, alongside his Chairmanship of the Board of Directors at Moçambique Capitais, S.A. → Prakash Ratilal says the most important lessons he learned during his career are ‘the need to be bold without fearing failure, never giving up, investing in people who can turn ideas into realities, understanding success comes from involving the greatest number of stakeholders, having a vision and strategy that everyone agrees with and sharing its results’.

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Prakash Ratilal.

Prakash Ratilal was born in Mozambique in March 1950 and instrumental in the process that led to the country’s independence and building of the Mozambican state.

In his speech at the Polana Hotel in Maputo, Prakash Ratilal looked back at Mozambique’s progress after gaining independence on 25 June 1975, considering it from an economic, political and social perspective. Economically he undertook ‘a cold analysis of the incidents that took place in the immediate run-up and which impacted and moulded the future of Mozambique’, and gave the following examples ‘demonetarisation of the official price of gold, which changed relative worldwide prices forever, the change from a fixed exchange-rate system to a flexible exchange-rate system, and the first oil-related shock; the drastic rise in the price of oil from Us $2.90 to Us $11.65 per barrel in just three months!’. “These factors,” he explains, “were devastating in their effect on a poor country like Mozambique, with its fragile institutions and severe lack of qualified personnel, on the verge of independence and relying only on its exports and farm produce. In the final years prior to independence, the colonial economy was showing considerable structural imbalances in its balance of payments and balance of trade.” Mr Ratilal remembers: “Mozambique’s independence came in the context of considerable East-West confrontation, since no Western support for the independence movements had been forthcoming, with the exception of the Nordic countries.” He adds: “Members of Parliament in Mozambique’s first Government as an independent country were charged with the mission of ensuring national unity, building the State and profoundly transforming the economy and society; yet they were mostly young – under the age of 35 – with little experience of social, economic and financial management. A gargantuan task indeed, particularly when responsible for; the smoothrunning of the economy (in a country where the majority of leadership positions in trade, industry and services were occupied by colonists who had since left the country), investment in education (only 7% of the population over the age of seven could read and write and there was only one university in the whole country), the creation of a healthcare system (almost non-existent for the majority of the population whose average life-expectancy was 44 years), and the building of the State’s institutions (almost always from scratch!).” The situation following independence was difficult. He continues: “A severe shortage of qualified professionals with little economic management experience. Political instability, in the aftermath of the attacks carried out by the then regime in Southern Rhodesia, condemned by the United Nations for its unilateral racist declaration of independence, which destroyed important infrastructures in a war that led to (…) and damage to the tune of several hundred million dollars (…) according to various UN agencies.” But the Government was determined not to given in. Mr Ratilal recalls the decisive moments for the country: “The Government launched an organisational offensive to reorganise the production and circulation of goods, encourage family production and green spaces and privatise certain sectors it felt it should not be responsible for.”

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“A vision in itself is not enough – it has to be credible and based on reality. Everyone must roll their sleeves up and get on with the job.” After 1980, Mozambique forged closer ties with the West, especially the United Kingdom. He reminds: “A period of relative peace and quiet followed, during which there was an acceleration in the intensive training of personnel, the Metical was introduced as the country’s new national currency, in 1982 there was a renewed focus to encourage the country’s private sector and open it up to foreign capital and in 1984 work began on preparations for the country to join the International Monetary Fund and the World Bank Group. A Draft Indicative Plan was also drawn up to promote and develop the country’s natural resources.” “From the late 1980s,” he reports “there was a period of terrible destabilisation with a general decline in production, rapid devaluation of the currency on the parallel market, the need to introduce rationing cards in cities to ensure people had access to staple foods and the rationing of fuel, which was generously supplied with concessionary credits by Algeria, Libya, Iraq and Angola. “This ‘destabilisation war’ required tough political, economic and diplomatic action, with various missions to foreign countries such as Portugal, France and the United Kingdom, the signing of a good neighbourhood agreement with South Africa, the conclusion of the first restructuring of Mozambique’s external debt and the drawing up of an Economic Action Programme allowing greater growth in Mozambique’s private sector which mobilised new funds into the national economy.” Once the country formally joined the IMF, Mozambique’s President, Samora Machel, was received in Washington by US President Ronald Reagan. The country’s economic situation was improving and so too was other countries’ views of Mozambique. However, trying years lay ahead for Mozambique, due to its destabilisation, aggravated by the apartheid regime. This was known as the 16-Year War, as Mr Ratilal explains: “In the late 1980s, the destruction and successive droughts and flooding meant the people of Mozambique found themselves in the midst of a human tragedy on a massive scale, but the rest of the world was scarcely even aware of it. In 1989, I wrote a book, Enfrentar o Desafio (Facing the challenge) where, based upon United Nations data, I wrote that 200,000 children did not know the whereabouts of their parents and over 5.6 million were displaced and affected. Of these, around one million had taken refuge in neighbouring countries.” He underlines the importance of the collaboration between various Non-Government Orngaisations, the United Nations and Ministries, who made a decisive contribution to save lives and rehabilitate the country economically and socially.

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Prakash Ratilal’s vision for the risk and insurance market in Mozambique is closely connected to the country’s economic development. He believes the current outlook is extremely hopeful and suggests if a number of positive factors come together, Mozambique could be one of a few countries to deliver great economic growth from 2020 onwards. He foresees this growth will require an expansion in financial services, particularly insurance, reinsurance and broking (expected to grow exponentially). Cover will be needed for the various risks associated with the development of the hydrocarbon industry and its infrastructure, the development of ports, railways, the forestry industry, tourism and agribusiness etc. In light of this, he considers the management of these risks and their transfer to the insurance sector will require specialists of international quality, something currently unavailable in Mozambique.

Despite the tragic circumstances of the late 1980s and early 1990s profoundly marking the people of Mozambique and significantly impacting the country’s economy, he opines: “It was the young people of the generation of independence, alongside Mozambique’s liberators, whom I am proud to be a part of - they held the country together in those early years. This generation became known as the ‘Generation of 8 March’. Many agreed to interrupt their studies and answer the call to go to the districts and production units, various 8 and 9 grade students taught classes to their younger peers and others agreed to study abroad. Today, these are the people who occupy the top positions in the economic and social life of Mozambique.” For education, the future looks promising. Prakash Ratilal concedes, however, there is still a long way to go: “In 2012, some 5.3 million pupils were attending primary school, while there were 760,000 and 197,000 attending the first and second years of general secondary school. “And did we make mistakes? Of course we did. Was it worth the sacrifice? It was hard, but of course it was. Forty years on, the country benefits from high sustainable growth rates and has a promising future based on the exploitation of natural gas (it has the third-largest reserves in the world), hydroelectricity, mineral resources, agribusiness, tourism and nature conservation.”

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He continues: “Mozambique to some extent remains indiv isible, Moza mbica n societ y prefers to be non-confrontational and resolve disagreements by themselves. Regular elections have made democratic changes to Government and the country is making good progress. There are still challenges to be faced, including; peace and stability, job creation, the promotion of good business practices and entrepreneurism, a reduction in imbalances and asymmetries, a fairer distribution system and a more inclusive society.” Mr Ratilal concludes by sharing his vision for Mozambique: “The current situation, the natural resources Mozambicans depend upon and of course, the worldwide market, can change the fortunes of this country, to the benefit of all citizens. This requires however, agreement and understanding between the various political and social players, a desire for the definitive restoration of peace, a priority focus on agricultural development and the promotion of skills and schooling, public policies aimed at the development of a competitive economy, greater management capacity for public companies, better quality management for micro, small and medium-sized companies, the promotion of a business climate capable of attracting major investment in a credible atmosphere where business-related conflicts can be expected to be

resolved and legislation/contracts complied with, severe penalties for acts of corruption and finally, greater transparency and the introduction of a framework that enables us to become a more competent state. “To achieve this, it requires close collaboration and commitment by all Mozambicans, greater national cohesion and tolerance of everyone’s differences and beliefs, more inclusive policies and better distribution networks. We have a window of opportunity to build a more prosperous and peaceful future – a historic moment that Mozambicans cannot afford to miss.” Prakash Ratilal's final message is clear: “These are tasks involving every generation. Everyone must conquer their own space and do specific things. A vision in itself is not enough – it has to be credible and based on reality. Everyone must roll their sleeves up and get on with the job.” An undeniably inspiring testimonial from a Mozambican who knows the past, helped build the present and is now treading the path that will build his country’s future. •

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Steve Hearn Building the broker of the future Steve Hearn is a leader with an enviable skill set and extensive insurance market experience. So it was no surprise that his appointment as Group CEO of Cooper Gay Swett & Crawford (CGSC) in November last year, succeeding Toby Esser, was roundly welcomed. Taking the reins at CGSC he is setting out to build a global wholesale distribution operation that will be a centre of excellence and innovation; he relishes the challenge as he explains to fullcover.

On 2 November 2015, Steve Hearn was appointed Group Chief Executive Officer (CEO) of Cooper Gay Swett & Crawford (CGSC), succeeding Toby Esser. He discussed the move with fullcover: “The opportunity to join CGSC was impossible to pass up. The business has a compelling story and strong established teams that are among the best in the market. At its core, CGSC is a great Company with the potential to be exceptional. We have the tools at our disposal for growth and a strategy that will mark us out from our peers. Together, this will enable us to build a business, centred on innovation, expertise and service, which is fit to challenge established markets and become a leading force in our chosen sectors.” Steve brings to CGSC more than 25 years’ insurance market experience - in the global retail, reinsurance and wholesale sectors. Early in his career, Steve was President & CEO of Marsh Affinity Europe and held a number of positions in client, sales and profit and loss management at Marsh and Sedgwick Limited. From 2005-2008 he was Chairman and CEO of privately-owned wholesaler

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Gleincairn Group. In 2008 he joined Willis as a result of their acquisition of Hilb Rogal & Hobbs and held a number of senior positions including Chairman and CEO roles with Willis Global, Willis Re and Willis Limited, the Group’s principal UK regulated entity. Prior to joining CGSC he was Deputy CEO of Willis Group Holdings. Between 2014 and 2016, Steve was Chairman of both the London Market Group (LMG), which is concerned with maintaining and enhancing London’s position in the international insurance market, and the London & International Insurance Brokers’ Association (LIIBA), which represents the interests of insurance and reinsurance brokers operating in the London and international markets. He is also a Vice President of the Insurance Institute of London. Steve’s role as Chair of LMG has been recognised by the London Insurance Market; in 2015, he won the Reactions London Market award for Industr y Personality and the Innovation accolade for LMG’S ‘London Matters’ initiative. CGSC is one of the largest independent global wholesale, underwriting manage-

ment and reinsurance broker groups. MDS Group began working with Cooper Gay in 2005 and in 2007 became a shareholder, remaining a strong partner of CGSC. The Company is set to continue its growth strategy. “Steve has the leadership, vision and energy to realise the potential that exists within this business”, said Martin Sullivan, Executive Chairman of CGSC. As part of this strategy, Cooper Gay has sold its North American business unit (CGSC North America Holdings Corporation) to BB&T Corporation. Steve explained: “The sale will enable Cooper Gay to further evolve and build a business that drives change in the market. We already have the foundation to build a truly exceptional business and we now have the resources to realise this potential.” He concluded: “I look forward to meeting and working with more members of Brokerslink. Cooper Gay has been an active member of this independent insurance broker network since its creation and I believe it has an important role to play in the development of our global Company.” •

GLOBAL INSURANCE & RISK CONSULTANTS

MDS JACQUES GOLDENBERG: FROM EGYPT TO BRAZIL, A ROUTE CHARTERED BY PASSION ENRIQUE SCHOCH: A SAILOR IN THE WORLD OF INSURANCE THE POWER OF WILL: DISCOVER MDS' NEW BRAND MDS NEWS

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Jacques Goldenberg From Egypt to Brazil, a route charted by passion

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More than five decades have passed since Jacques Goldenberg, Director of International and Business Risks, MDS Brazil, moved away from Egypt. This move, which may seem long distant, still remains vivid in his mind – so much so he can describe it in minute detail. Jacques admits: “It’s interesting to tell people a bit about our lives, our experiences and the emotions we felt. It’s almost as though we were travelling again.” Perhaps it is for this very reason – and his desire to stay in touch with his origins – that his latest bedtime reading is Nasser, the Eagle of Egypt. Jacques is unrivalled in his career and seen as a role model and inspiration for many. fullcover finds out more about his history.

Early career The fall of the monarchy in 1952 and election of Gamal Abdel Nasser as President set a new direction for Egypt and for Jacques Goldenberg too. At just 12 years old, following the nationalisation of the Suez Canal Company (which at the time was British Government owned), he was forced to leave Cairo. Jacques remembers: “Some nationalities were given 24 hours to leave the country. For Jews, there was not really a deadline but my father was worried about the situation so left Egypt for his homeland of Israel.” However, their stay in Israel was short and in 1958, Jacques’ family left to join relatives in Brazil. Jacques’ father worked in the industry so insurance was in his genes. Although he aspired to become a doctor, he graduated with a degree in Business Administration from the Pontifical Catholic University. Jacques comments: “I always wanted to be a doctor, but when my son, Dov, decided to study medicine I felt my dream had come true to some extent. I have no regrets about my chosen career path, it has gone very well.”

Jacques began his career in insurance at the age of just 17 as office clerk. Two years later he was in charge of Auto, Workers’ Compensation, Life and Property insurance. His career was undoubtedly influenced by his father who, for many years, was responsible for managing the Mercedes-Benz insurance portfolio within the company. Jacques used to go to Mercedes with his father three to five times a week and considers this period of learning particularly important as it enabled him to acquire extensive knowledge of the automobile sector. He recalls how insurance operated during the State monopoly: “When I started, insurance in Brazil was very conservative. There was a risk rating guide and it was considered our ‘bible’. Although the characteristics of the risk would differ, once you understood the risk tariff and processes involved, you could be more competitive when placing the risk. My father used to say ’here’s the tariff for fire cover and you have to read it from start to finish’. It was no fun at all, but that was how I learned, reading the tariff and all policy wordings. This learning process gave rise to my habit of constantly auditing everything, even to this day.” Jacques’ father eventually started up his own brokerage, Integridade, but never severed his connection with Mercedes-Benz, remaining with them for 23 years via a captive broker arrangement. Having started up Integridade, he soon attracted customers in Egypt and won major accounts in Brazil, including the Bozano Simonsen Banks, Embraer and Anglo American.

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A passion for insurance and life Despite a self-confessed passion for insurance, Jacques has other interests; he learnt about the work of laboratory technicians and undertook courses in electrical engineering and transactional analysis. He studied for enjoyment, cultural enrichment and to gain a different outlook from the one his degree and life experience had given and continue to give him. Jacques says: “Insurance however is my main focus - I really like the business and eat, sleep and breathe it. It’s one of the few businesses that always keeps me interested; so much so, I don’t feel life is monotonous. Things are never repetitive, there’s always something new happening and I can use my imagination and be creative.” Alongside his career, Jacques has seen his family grow. He has four children – Denys, Dov, Cyntia and Ariel – and six grandchildren. His fondness for them is clear to see, but he has no hesitation in saying one of his sources of energy and inspiration is Denys, the son who followed his father’s footsteps into insurance and who sadly passed away a few years ago. As someone who keeps his finger on the pulse of the insurance sector both in Brazil and internationally, he soon noticed the trend of consolidation among brokers. Although not in a position to acquire another broker, Jacques was aware of Integridade’s strong market position and the opportunities this could bring and following negotiations, joined forces with Lazam MDS (a broker created through a joint venture between the Sonae Group and the Suzano Group) in August 2004. The intention was to stay long enough to manage the portfolio transition (Jacques worked with his son Denys who was Commercial Director and seven other team members). Unfortunately, Denys was unable to see the project through to completion so Jacques decided to continue his son’s dream and remain proactive in broking.

A decisive encounter Following Lazam MDS’s partnership with Integridade, Jacques met MDS Chief Executive Officer, José Manuel Fonseca. In the early days, they worked together and created a strong bond, perhaps – Jacques thinks – because both had a past in insurance. Jacques recognised José’s vision for the future and his ability to plan ahead in the medium and long term, without neglecting the present. During this period Brokerslink was born and it soon became apparent the network Lazam previously belonged to – Uniba – had nothing in common with MDS (it was a small broker network). In contrast, Brokerslink was an association of larger brokers who shared similar ambitions. Jacques explains: “José was both father and mother to Brokerslink - it began as a network and turned into something larger.”

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In Jacques’ eyes, José is a well-rounded person. In addition to his business vision, insurance and reinsurance knowledge and considerable experience, he is recognised as a man of culture, well-informed about history, geography and music, and someone who commands global respect. Jacques continues: “We were on a boat trip in New York and talking about people in politics. José recommended two fantastic books to me, one about Golda Meir and the other, Nasser. Being of Jewish origin and having been born in Egypt, both were of interest to me. Incredible as it may seem, I was more touched by the story of Nasser than that of Golda Meir. I would never have bought those books if he hadn’t recommended them! Ours is a beautiful friendship.”

Relationship with MDS Jacques explains: “I have been with MDS for 11 years and hope to stay a few more yet. I enjoy working, I always have. I have never yet had to turn down covering a risk, I always try to get a maybe and whenever possible, turn it into a yes.” He speaks proudly of his achievements at MDS, and of the growing market recognition of the Company as a customer-focused, technically strong and ethical broker: “The MDS of today is the result of the work of previous and existing employees, our philosophy and the guidance we receive from our predecessors - the Sonae and Suzano groups – and their heritage and values of serenity, vigour and strength.” Jacques adds: “The Company’s image was highly respected in the market, but José wanted to be bolder. When he appointed Hélio Novaes, MDS Brazil CEO, he was confident he was the right person to realise his vision for the Company and become one of the top brokers in Brazil, building upon the respect we’d gained and yet feared by competitors.” Jacques remembers a moment that was very special for him: “It was MDS’s 30th anniversary and I was invited to attend the celebrations in Porto. Imagine my surprise when José called me to the stage to receive a prize as a thankyou for my ten year collaboration with the Group. I was very touched by the gesture, coming, as it did, not only from a professional but also from a friend.”

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Jacques Goldenberg says a few words after receiving his prize from José Manuel Fonseca at MDS's 30th anniversary.

Brokers and Brokerslink in the future

Endless energy

Jacques comments: “The perception of the broker as a salesman is slowly but surely being replaced by that of broker consultant, someone who guides customers on the best path to take, the best options and the best way to manage the risks that could jeopardise their businesses. Brokers must be consultants, offering their customers the tools to facilitate tasks and using technology to allow them to have an overall view of their business at any given time.” Referring to Brokerslink, he acknowledges how important its role has been for mds in Brazil: “It started off as an idea and has evolved into a recognised and respected worldwide organisation, with a solid growth base that is going from strength to strength.”

Jacques has endless energy both in and out of the office. His hobbies are reading, music and the sports centre (where he goes early every morning). He confirms: “It’s very important for me, it makes me feel good. It’s more than just a hobby - it’s part of my life. You could say it’s an addiction.” And he affirms with satisfaction: “I’m not getting old. It’s my children who are getting old. I’ve stood still in time. I’m at a great age now and I’m going to stay this age forever! I have experience of life and the knowledge younger people acquire over time.” Jacques warns: “People usually retire when they reach a certain age, but I have no plans to retire. I like what I do and the company where I work. As long as I’m healthy, I’m staying!” Owner of a finely-honed sense of humour, Jacques concludes: “There is a direct link between insurance and cookery. Whenever someone turns up with a business that presents a different type of risk, some people will say they have no appetite for that type of risk! "He shares his motto: “I live in the moment that is the equation between yesterday, today and tomorrow. Today is the realisation of yesterday’s dreams; yet today I also dream of tomorrow.”

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Enrique always had a liking for the sea which was why he began his career in the Merchant Navy. He says: “This could only have come from the Portuguese side of my family - my great grandfather was an admiral in the Portuguese fleet.” So it would seem almost natural that his career path would lead him to a life at sea. Enrique remained in the Merchant Navy for eight years until a twist of fate changed everything. With the fall of the Berlin Wall and the collapse of the Soviet Union, merchant shipping was suddenly flooded with a never-ending influx of sailors from Eastern European countries like Poland and Russia. Enrique realised the time had come for a career change. Luckily, his academic training left him well-prepared. Aside from subjects connected to navigation, Enrique had studied others related to law, insurance, maritime economics etc, which enabled him to steer his career course in a new direction.

First steps in the world of insurance

Enrique Schoch A sailor in the world of insurance Last year, Enrique Schoch was appointed Chief Executive Officer (CEO) of the jointventure between Filhet-Allard and MDS in Spain. fullcover asked him about his 25 year insurance-industry career, plans for the future and his ethos for success.

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It was here his path crossed into the world of insurance. Insurance companies in Spain were recruiting staff for a number of developing classes, including life and transport insurance, and in a happy coincidence, there was a requirement for a maritime insurance specialist within the transport business. On 1 October 1991, Enrique took charge of the Transport Insurance Department at Sun Alliance, despite having very little ‘real’ knowledge of the insurance business. “I knew about boats, I knew about transport and I knew about trade – because I had sailed all around the globe. But insurance was new to me,” he explains. It was at this time a decisive figure was to appear in Enrique’s life; the now-retired Director of Sun Alliance’s Transport Department. Enrique continues: “I had a great mentor, he taught me everything I know about insurance and he did it the old-fashioned way.” Enrique fondly remembers the time he spent with the man who was a true mentor for him. Over a number of years, he spent every afternoon answering the questions Enrique asked while enthusiastically studying policy clauses. He describes this as ‘a truly marvellous time’. There was a somewhat ‘romantic’ concept of underwriting that fired Enrique’s passion for his role. He discovered even a signature scribbled on a napkin was enough to close a deal, remembering the time when a client would say ‘that’s 500 million, here’s my signature and we’re done’. Enrique recognised the world of insurance and its wide range of options on offer was similar in scope to the grandeur of the sea. He continues: “In the end, we insure everything. Indeed, anything and everything can be insured, from a multinational or an oil company to a tiny corner shop. And the potential is infinite.” He remembers an episode during his time at Sun Alliance that left its mark on him professionally. Enrique explains: “It was my worst 31 December for many years, I took on a

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risk exposure (valued at approximately five million dollars at the time) unaware that there was no reinsurance cover for the following year.” His boss, the man who had trained him, kept his cool, telling him that he had made a mistake but that the risk had to be covered. “That was when I really understood what being an underwriter meant and I became one,” he continues. At Sun Alliance, Enrique’s ability to ‘talk with the top brokers in the market’ propelled him up the career ladder and he was promoted to Director of the Transport Department and, later, brokers and industrial risk. When a merger between Royal and Sun Alliance created Royal Sun Alliance he was responsible for the company’s industrial risks. In 2001, when Liberty bought Royal Sun Alliance in Spain, Enrique embraced a new challenge in his life. It was known on the market that the company intended to close down its industrial insurance branch. At the time, a large part of Enrique’s time was devoted to the brokers’ market, so when broker EOS invited him to take up the position of Managing Director, he decided to accept. Eric says: “Everyone was telling me that I was on the wrong side of the table, that I was more of a broker than an insurer, and I heard it so often that I ended up believing it.” Shortly afterwards, he would be appointed CEO and for the next 14 years, until 2015, Enrique managed EOS RISQ in Spain.

An irresistible challenge In 2015, Enrique was challenged to take on an innovative project; a joint venture in Spain spearheaded by two of Europe’s leading brokers, Filhet-Allard and MDS. Enrique comments: “The fusion of a multi-generation family Company with vast experience in the insurance sector in Europe and a Company with the power, magnitude, grandeur and turnover of MDS was an irresistible challenge.” As CEO of this joint-venture, Enrique believes the Company has everything it takes to be successful: “Our target market is one essentially made up of businesses who need more brokers to act professionally and who can provide clients with a specialised service. There is a worthwhile gap waiting to be filled in the Spanish insurance market; while the number of players may fall, those that remain will grow in size. Logically this merger movement can only be undertaken by leading companies that belong to strong groups, as we do. We have the experience, know-how, professionalism and global dimension, and we develop customised solutions adapted to our clients’ needs, locally and internationally.”

The future of the insurance industry At a time when the Spanish economy is finally seeing an upturn and Madrid is becoming an international insurance and reinsurance centre for the Latin American market, Enrique points to three major challenges facing the Spanish insurance sector. The first is the impact of the Solvency II programme on the insurance market. Without casting doubt on the security the new regime will bring, it nevertheless raises the pressing question of insurance companies’ capacity to take the new requirements on board and still stay in business. Enrique asks: “How many of today’s players will still be in the market five years from now?” The second is the question of dimension (scale) and internationalisation. In Enrique’s opinion, only two Companies on the Spanish market embody these principles. One is MAPFRE, a truly impressive firm with international scope. And the other, although operating in the specific sector of credit and surety, is Atradius. The remainder, conducting business sporadically in various operations, do not have the capacity for a global venture. The third is more from an internal perspective and concerns operational efficiency. At a time when insurance companies across the market are looking to attract clients at any cost, it is vital they consistently provide a high-quality service.

On a personal note In his free time, Enrique enjoys taking part in sport. He currently plays padel – the game is growing in popularity and is a combination of tennis, squash and badminton. Miniature trains and photography are long-standing passions that have now been put on the back burner. When asked if he lives by a particular motto, Enrique replies: “It used to be ’make others happy’, but over time I have come to realise that life is long and sometimes hard, with many obstacles to overcome. Although ‘making others happy’ is still essential, I believe we must not neglect our own happiness, so I have to be happy too.” •

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MDS NEWS

N MDS steps up focus on African continent

As part of its efforts to strengthen its worldwide growth strategy and step up operations in the African market, the MDS Group has appointed João Alvadia as CEO of MDS Africa. João Alvadia has a long track record in the insurance sector in Portugal and Africa and he will now lead and coordinate MDS Group’s entire operation in Africa, with Angola and Mozambique being his priorities. His appointment will drive growth in this area, consolidate the investment already made and explore new opportunities for development.

Strategic partnership with S21sec delivers pioneering cyber security

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S21sec and MDS have entered into a strategic partnership to help organisations deal with the problem of cyber risk. The intention is to offer a comprehensive cyber security service for the global business market. This pioneering initiative offers companies protection against cyber-attacks by combining an active prevention programme – based on S21sec’s security solutions – with specific insurance provided by MDS, minimising any possible impacts. S21sec’s services of cyber attack prevention, detection, analysis and performance in the area of cyber security are offered alongside cyber risk insurance cover. Included within the service is: an assessment of the organisation’s maturity with regard to the security of its information; technical audits, awareness-raising campaigns and training, continuous security monitoring, response teams for critical security incidents and forensic analysis. As a result of this proposition, companies will be able to take a comprehensive and assertive approach to cyber risk management.

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MDS Brazil – New head office represents innovation and sustainability MDS Brazil has opened its new head office in São Paulo. The larger, more efficient and sustainable office reflects the transformations the company has been going through, focusing on an environment which values the exchange of information and uses space to encourage greater knowledge sharing and learning. The company has implemented a ‘clear desk’ policy, meaning staff do not have designated desks, enabling greater flexibility and mobility. The new office, located in the Eldorado Business Tower on the Avenida das Nações Unidas in Pinheiros, was named by Exame magazine as one of the best places to work in Brazil. The building was also the first in Latin America to obtain LEED® C&S – Platinum, the highest level of environmental certification in the world.

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Frederico Casal-Ribeiro to work on global development strategy The MDS Group has reinforced its management team by hiring Frederico Casal-Ribeiro as Global Business Developer. Frederico is a highly-reputed executive with extensive international experience in the insurance sector. He has worked in the insurance markets in Greece, Mexico, Russia, the United States and Brazil, as well as Portugal. His mission is to enhance MDS’s competences in all the countries it operates, leveraging synergies between different local teams and supporting customer base growth in varying lines of business. Frederico’s appointment reinforces MDS’s commitment to international growth and innovation, responding to Portuguese companies’ need and harnessing the knowledge and capabilities of companies around the globe.

MDS and Brokerslink at the 24th AMRAE event Jacqueline Legrand represented MDS and Brokerslink at the 24th annual AMRAE – Association pour le Management des Risques et des Assurances de l’Entreprise - event, which took place in Lille, France, from 3rd to 5th February. Her attendance at the event reflects the MDS Group’s continuing focus to support the growing number of French investors in Portugal. Founded in 1993, AMRAE represents the French risk management and insurance community. Based in France, it is particularly active in the French-speaking countries of north and west Africa.

MDS supports reigning champion at International GT Open Miguel Ramos once again competed with the colours of the MDS brand in the International GT Open, which got underway at the Estoril Circuit in Portugal on 23 April. The Portuguese driver was at the wheel of a BMW M6 GT3, with the Teo Martín team, and accompanied by Spanish co-driver, Roldán Rodriguez. The various rounds of the International GT Open take place at the Spa-Francorchamps, Paul Ricard, Silverstone, Red Bull Ring and Monza circuits, before the final round in Barcelona on 6 October.

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Maílson da Nóbrega on MDS TALKS’ The highly reputed speaker, Maílson da Nóbrega, was in Portugal at the invitation of MDS, to speak on the subject of “Perspectives of the Brazilian Economy” at the fourth MDS Talks event. Economist and statesman, Maílson was Brazilian Minister of Finance from 1988 to 1990, one of the most difficult periods for the country’s economy. His career in public life began at the age of 20 and since then he has been involved in numerous government campaigns. His detailed knowledge of the Brazilian economy has secured crucial roles in the areas of financing, negotiations and foreign relations. Maílson has published five books, including his autobiography, Além do Feijão com Arroz, and various articles in newspapers and specialist magazines. He writes a column in the magazine VEJA and in 2013 was voted Economist of the Year by the Ordem dos Economistas do Brasil, the professional association of Brazilian economists.

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The Brazilian Healthcare Market

Illustration by Tiago Galo

B Y G U S TAV O Q U I N TÃ O

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fullcover asked Gustavo Quintão, Employee Benefits Director at MDS Brasil, about the trends and future challenges facing this sector.

The Brazilian healthcare market is currently going through a period of major change, triggered by the lifting of the ban on foreign investment in healthcare companies in Brazil and a need to reinvent the existing model in order to make it more sustainable. According to the Brazilian Association of Group Medicine (Abramge), the sector accounted for 9.3% of GDP in 2014. In 2015, it was the third-largest sector for job creation, with four million employees and a total of 72.2 million beneficiaries (50.3 million with healthcare plans and 21.9 million with dental care plans). Abramge also reports that Brazilians most desire (in order of importance): education, their own home and a healthcare plan. These figures highlight the investment opportunities for international capital and a need for greater consolidation and professionalization in Brazilian healthcare. The approval of Law 13.097/2015 – an amendment of 8.080/1990 enables ‘foreign companies or capital to hold direct or indirect shareholdings in healthcare, including controlling interests’. This can only support growth. As a result, companies such as United Health, Bain Capital and the Sanitas Internacional Group, have positioned themselves as major players. United Health, for example, recently opened the Americas Medical City, a major medical complex with two hospitals and a training centre, occupying more than 72,000m 2 (an important part of the healthcare infrastructure for the 2016 Rio Olympics). Despite its size and the opportunities it affords, Brazil’s private healthcare model shows symptoms of being in poor health itself, with worrying economic and financial repercussions.

The Variation in Hospital Medical Costs (VHMC) Index, also known as ‘medical inflation’ and determined by the Institute of Supplementary Health Studies, points to a disconnect with general inflation. The average costs of inpatient care paid for by individual healthcare plans, rose by 53.7% between 2008 and 2012. However, in the same period, the cumulative inflation rate on the Extended National Consumer Price Index (IPCA) was 24.3%. A report published in 2015 stated: "The variation in hospital medical costs for the 12 month period ending June 2015 was 17.1%, higher than the general inflation figure (IPCA) of 8.9% for the same period. The Index recorded 1.8% growth up until the end of Q2 2015 – rising from 15.3% in January to 17.1% in June’. The causes of this growth are likely to be waste and the introduction of new technologies, including drugs, more modern complementary examination equipment and highly complex and costlier procedures. Abramge ranks the sources of waste, by percentage, as: • • • • • •

Administrative bureaucracy 27.2%; Excessive treatment 21.1%; Fraud and abuse 19.4%; Overpricing 14.4%; Inefficient service 14.1%; Lack of ‘in service’ coordination 3.8%.

In order to reduce waste and excessive treatments and tackle the inefficient and poorly-coordinated service issues, a number of initiatives have been implemented by healthcare operators. Companies are encouraging family doctors to act as ‘gatekeepers’, focusing on primary care and preventive medicine alongside their usual comprehensive approach to healthcare.

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Over 70% of people accessing healthcare are covered by company plans and Brazilian law requires employees to have an occupational health check-up at least once every two years.

Greater emphasis is on the use of advanced IT-based solutions. MDS Brasil has developed a new tool – the MDS Health Report – which cuts the high costs of administrative bureaucracy, reduces fraud and will be a powerful ally in preventive medicine. By using algorithms and cross-referencing data from various healthcare databases (including epidemilogical information and implementing protocols based on the findings of major scientific studies), this Business Intelligence System can create scenarios for risk assessment. Occupational or preventive medicine has, for many years, been relegated to the sidelines, often little more than form-filling and far removed from providing any sort of management that might benefit employees’ health. It is, however, playing an increasingly important role in the promotion of health and the prevention of disease, helping to reduce the costs of company healthcare plans. Over 70% of people accessing healthcare are covered by company plans and Brazilian law requires employees to have an occupational health check-up at least once every two years. Consequently, MDS Brazil has identified an opportunity to screen the population’s clinical data, based on employees’ occupational medical records. This would enable clinical conditions and risk factors to be flagged up and acted upon, before the employee ends up in hospital. Although the Brazilian healthcare market is complex, this cycle of change not only brings opportunities for sector operators – risk consultants, insurance companies, hospitals/ service providers, the pharmaceutical industry etc - to develop new business models, but it will also be the spring-board for regulatory reform and cost-reduction strategies. •

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G U S TAV O Q U I N TÃ O → Gustavo Cruz Quintão is the Director of Employee Benefits at MDS Brazil. → He graduated as a medical doctor from the Federal University of Minas Gerais (UFMG) before working as an intern at the Cook County Hospital in Chicago, in the United States. → He specialised in corporate health as part of a Ministry of Education approved medical residency programme in Occupational Medicine at the Odilon Behrens Hospital in Belo Horizonte. → Gustavo Quintão has been involved in a number of health management consultancy projects for operators and companies in different industry sectors. → His leadership experience was gained while working in multinational companies such as Telefônica, where he was in charge of Occupational Health and Safety, and Sanitas International Group, where he was Medical Director. → He is currently attending the Executive MBA course at IESE Business School – University of Navarra.

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M D S ma g a z i n e

ACE and Chubb merger What’s in a name? Well, quite a lot when it comes to what to call the combined expertise and resources of two global insurance giants. When ACE’s acquisition of Chubb hit the headlines in 2015, the statistics were impressive – the world’s largest publicly traded property and casualty insurer; operating in 54 countries; a market capitalization of US $51.2 billion, annual gross written premiums of US $37 billion and; total assets of approximately US $150 billion. So what do you call this new member of the elite group of global property & casualty insurers? Rather than keeping to the accepted practice of using the acquiring party’s brand, the business chose to move forward with Chubb – a strong, historic brand and unique symbol of strengthen. Both ACE and Chubb saw an opportunity to adopt a brand that stands for shared values of excellence, quality and service. But far from being stuck in the past, the new Chubb presents a modern and clean brand that reflects the company’s drive for superior underwriting, service and execution. We hear two perspectives on the rationale and opportunities for the new Chubb. Andrew Kendrick, Senior Vice President, Chubb Group and Regional President for Europe, sets the scene talking about the major areas of challenge and opportunities facing the business in Europe. Then Véronique Brionne, Country President of Chubb in Iberia, talks about the new Chubb’s aspirations in the region and how the combined resources and knowledge of ACE’s and Chubb’s teams are increasing product offerings while ensuring a strong local client service but with global expertise and reach.

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Growth, discipline, innovation and service top of agenda for the new Chubb BY ADRIAN LADBURY

One of the main questions that people have asked Andrew Kendrick in recent months is whether he was surprised by the news of the acquisition of Chubb by ACE when the news broke last July. The straight-talking Lloyd’s veteran concedes that he was surprised because it was a very well-guarded secret and because of the sheer size of the deal. But, like the rest of us, once the dust had settled for Mr Kendrick the reasons behind the acquisition quickly began to make sense. “As soon as Evan set out the reasons for it, it made perfect sense. And as we have started the process of integration planning over the last few quarters and it has started to become reality, I can honestly say that here in Europe, those reasons have come to make even more sense,” said Mr Kendrick. The former Lloyd’s underwriter, who is head of Chubb in London and Europe, said that the acquisition will help the new Chubb address the three major areas of challenge and opportunity that the European insurance market is facing: growth, discipline and service. First up Mr Kendrick tackled the tricky area of growth in a persistently volatile and under-performing global economy. “Global markets have had a very volatile start to the year. They are clearly trying to tell us something and, if you can look beyond all the daily noise, it’s not too difficult to work out what that is: global economic growth is falling short of expectations,” bluntly stated Mr Kendrick. The Chubb European leader explained that, according to World Bank figures, global GDP [gross domestic product] growth fell again in 2015, slowing to 2.4% from 2.6%

Andrew Kendrick, Senior Vice President of Chubb Group.

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Today sometimes I think, as an insurance market, we don’t always pull together our skills and experience in a way that really works best for our clients. There is often too little energy going into making things easy to understand, through clear wordings and definitions.

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in 2014. Moreover, growth is now projected to recover at a slower pace than previously hoped. According to the World Bank, it will barely reach 3% in the next few years. I nde e d I nter n at ion a l Mone t a r y Fund (IMF) forecasts have been revised downward by 0.2 percentage points for both 2016 and 2017, added Mr Kendrick. “Now that might not sound much. But when you consider the low growth rates we are seeing today – and the fact that some European economies are still struggling to shake off the impact of the global economic crisis – it presents a slightly gloomy picture,” he explained. Since the onset of the financial crisis and subsequent global economic downturn , the natural reaction of European companies, including insurance companies, has clearly been to compensate for that sluggish or even negative growth in core European markets by seeking growth in faster growing markets in so-called emerging regions of the world such as Africa, Latin America and Asia. But this is not as simple as it seems. Recently, there has been a continued deceleration in emerging and developing economies, amid weak commodity prices, poor global trade growth, and lower capital flows, pointed out Mr Kendrick. To compound the problem, as companies such as Chubb and its customers seek to maintain growth in this difficult macro-economic environment, there are plenty of ‘real downside risks still lurking out there,’ pointed out Mr Kendrick. “One is the possibility of a sharper-thanexpected slowdown in emerging markets. Another is the possibility of fresh financial market turmoil. And then there is the risk of increased geopolitical instability. On the other hand there are the threats to Europe from within, relating of course to Brexit, Schengen and other issues” he explained. At the same time, the insurance and reinsurance market has seen a ‘huge swathe’ of capital coming into the insurance and reinsurance industry in recent years, said Mr Kendrick.

This new capital is not going to go away quickly and, at the very least, the mobility of capital and the ease with which it can be deployed is now very different than before, he added. Mr Kendrick explained that the three big brokers (Aon, Marsh and Willis-Towers Watson) estimate that alternative sources of capital now represent between 12 and 17 percent of global reinsurance capital. Moreover, while total reinsurance capacity overall has started to level out and even fall slightly in response to market conditions, alternative sources continue to increase their share. In these conditions, revenue growth becomes ‘very difficult’ for any insurer globally, let alone in Europe, and so action had to be taken, concluded Mr Kendrick. “As a combined organisation, we are now the world’s largest listed P&C insurer and, for example, number one financial lines insurer globally. That gives us even greater collective know-how and market firepower,” he said. Mr Kendrick said that the new Chubb will benefit from greater market presence, and not only in the US, where the Chubb brand is very powerful. “Legacy Chubb has operations in 25 countries and 11 of those are in Europe. So we will be even stronger together in Europe and this is good news for our clients and our broker partners who will benefit from an even broader offering,” he told clients at the event in Amsterdam. “We also have the benefit of complementary businesses. For example, here in Europe, legacy ACE is better known for its global accounts and multinational leadership, while legacy Chubb is better known for its middle market expertise. Yet both companies have experience in these segments, and when you put us together, that gives us a stronger platform from which to grow – and to help our clients grow,” continued Mr Kendrick. “In shor t, we are conf ident that acquisition will create higher growth potential than the sum of the two

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Illustration by Tiago Galo

companies separately. And we are very clear that becoming bigger does not stop us from growing further. If you look back at ACE’s history of acquisitions over the past twenty years or so, from Brazil and Mexico to Thailand and Indonesia, you can see a strong track record of adding diversification and building strength, whether in terms of products, distribution or geography.” he added. The second big focus for Chubb, and any other serious insurer, in these challenging economic and market times, is clearly discipline. Mr Kendrick has seen a lot of change and experienced some very challenging periods since starting as a junior underwriter at Lloyd’s in the later 1970s. But, he said, that today’s market is the most challenging he

has seen and will need some very tough decisions to navigate successfully. “I honestly can’t remember another time in my career when the rating environment has been so challenging, and over the past 12 months it has only got tougher and tougher, particularly in the large account space,” he explained. “The days of easy profit are long gone. As an industry, we now likely need to target a combined ratio of around 90 just to meet our cost of capital,” said Mr Kendrick. “And our assumption has to be that, in terms of pricing, this is as good as it gets. We simply have to build our plans for the future on the assumption that things will not get any better,” he added. The simple fact is that the record low interest rate environment in the developed

world means that it has become harder for insurers to make money from their investments. Even the most optimistic of insurers have to concede that all the latest indications suggest that this is not going to change any time soon. “I mean, we even have negative policy rates now in some markets. Several of Europe’s central banks have cut key interest rates below zero and kept them there for more than a year. Now Japan is trying it, too. So make no mistake, it is a challenging outlook for any insurer!” said Mr Kendrick. In the good old days it was possible for insurers to underwrite at a 100% plus combined ratio and still make a decent return on the back of investment returns. Not so now, stressed Mr Kendrick.

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In this environment only insurers and reinsurers with the willingness and ability to underwrite for profit will survive and prosper and, thankfully, both ACE and Chubb have a tradition of doing so, he said. “Both our legacy companies were renowned for their strong underwriting cultures. At our core, we are underwriters – we share a passion for the art and science of underwriting. And I hope you will agree we are pretty clear about our risk appetite. So we share a lot in common when it comes to our underwriting approach and our focus on discipline. I believe we are a good fit, and that we will all enormously benefit from being together. Together, we are even better positioned to face the challenging market conditions,” he said. At the same time, as the focus of insurers and reinsurers has to shift to disciplined underwriting there also has to be a sustained effort to reduce costs in this market environment. This largely explains much of the recent mergers and acquisitions (M&A) activity in the international insurance and reinsurance sector, said Mr Kendrick. “The theme of discipline applies to costs too. A high cost base and a competitive market is a problem for our industry. And it is one key reason why there is so much M&A activity going on right now. XL-Catlin, Mitsui-Amlin and nearly Zurich-RSA. I can’t remember a time quite like it,” he said. And, Mr Kendrick is convinced that this consolidation process is not over yet. He said that almost 50 deals have either closed or been announced so far this year, at the

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time of his speech, the first quarter had not even been completed. “This trend is unlikely to be over. In the non-life sector, competition remains intense. Companies are under pressure to diversify, encouraging them to look towards acquisition. As a general rule, the softer the insurance market, then the more incentive there is to acquire,” he said. While it is difficult to argue with Mr Kendrick’s conclusion that underwriting discipline and cost control are absolutely critical for success in such a tough market, that does not mean that underwriters can forget about customer demands. Those insurers that simply focus on price and cost control in an effort to maintain short-term returns to investors will inevitably lose the best accounts and embark on a downwards spiral that will be difficult to break out of. Herein lies perhaps the biggest challenge of all for the commercial underwriting community: How to rise to ever more challenging and complex customer demands of corporate and multinational customers in particular in such a tough market environment. Mr Kendrick and his fellow management team at Chubb are clearly aware of this conundrum but believe that the combination of ACE and Chubb will help deliver the answer. “We have been very clear that one of the reasons for the Chubb acquisition is to drive greater efficiency. The acquisition will allow us to realise real synergies, that will in turn allow us to invest in the areas

that matter to our clients, and in particular in enhancing our service,” he said. The critical need for this focus on improved service and innovation in the corporate insurance market has been well documented in Commercial Risk Europe’s annual survey of risk managers: Risk Frontiers. Chubb carried out its own research last year with European risk managers, that was endorsed by FERMA, and explored the changing role of the risk manager. Not surprisingly, one of the key findings of this research was that, in future, a resounding 79% of Europe’s risk managers believe they will need to think and behave as ‘innovators’ and ‘futurists’ reported Mr Kendrick. But, as he pointed out, risk managers clearly cannot be experts on everything on their own. Mr Kendrick said that some 22% of those risk managers who part in the survey reported a current lack of knowledge about emerging risks, as one example. “So, it will be increasingly important for tomorrow’s risk leaders to build the right relationships and partnerships inside and outside the business,” he said. How then should the insurance industry respond to this difficult challenge, asked Mr Kendrick. Well the good news for insurers is that Chubb’s research suggests that risk managers (78% of the survey) regard the insurance industry as a key part of the solution when it comes to the management of change and the new wave of emerging risks. The big question is whether the industry is actually going to rise to the challenge or just talk about it. Mr Kendrick, for one, believes that there is no other option.

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More generally, legacy Chubb’s strength in delivering high quality service, from claims to loss control services, is something that we are very proud of and we will continue to build on.

“I believe that the industry will simply have to innovate to provide the service that clients and brokers need in the future. If we don’t, they will find other solutions, elsewhere,” he said. The problem is that it is one thing agreeing that a response is needed and another actually working out how to do it for it is crystal clear that for the market to really deliver what the customers want will need collective and not just individual action. Mr Kendrick clearly recognises this challenge and opportunity. “Today sometimes I think, as an insurance market, we don’t always pull together our skills and experience in a way that really works best for our clients. There is often too little energy going into making things easy to understand, through clear wordings and definitions. Many emerging risks – already complex – are being further complicated by a patchwork of mismatching approaches across the market,” he said. The bottom line is that, as Commercial Risk Europe’s annual Risk Frontiers survey clearly identifies each year, innovation is not just about products but also about approaches and the delivery of more holistic and deeper reaching risk management as well as transfer solutions. “We also need to broaden out the solutions we provide if we are to remain relevant for our clients in the future. There is often too much emphasis in our industry on ‘pushing product’ – inflexible solutions that don’t meet individual needs. We also need to go beyond financial compensation, and

deeper into risk management expertise, loss control services and ‘hands-on’ incident response, throughout the whole relationship,” said Mr Kendrick. “Innovation is rarely easy. But the insurance market wasn’t invented to do the easy things, and we don’t become leaders by sticking in our comfort zones. Tackling complex risk problems is what we’re here for,” he continued. Mr Kendrick conceded that Chubb does not have all the answers. But, he argued, by bringing the two companies together it has made a big step forward in this sense. “We now have a greater pool of talent, expertise and ideas. Already this year, we have announced a new service in the area of cyber risk, where we have made available a 24/7 incident response service in partnership with Crawford & Company. And we will continue to invest in bringing these added-value services to market across a range of lines, in order to innovate beyond the wordings of the insurance policy,” explained Mr Kendrick. Multinational programmes is an obvious area where improved service is way more important than simple product or price for risk and insurance managers. Chubb recognises this, said Mr Kendrick. He told the gathered Dutch and Belgian risk managers that its research with risk managers of European multinationals showed that fewer than 30% of risk managers were very satisfied with overall service levels from their insurer in respect of their multinational programmes. Fewer still were happy with claims performance.

Mr Kendrick reported that, based on Chubb’s research, currently around 70% of European risk managers say they are dealing with more claims outside their home market and they are generally experiencing more complex multinational claims than they used to. “Good claims outcomes are surely the test of success for any global insurance programme so this is something that we all have to get right,” he said. Another area for improvement based on the research is with effective technology solutions. As a result Mr Kendrick assured risk managers that Chubb will continue to invest in enhancing its Worldview platform. “More generally, legacy Chubb’s strength in delivering high quality service, from claims to loss control services, is something that we are very proud of and we will continue to build on,” he promised customers. “So there you have it – three core themes and challenges that I believe we face here in Europe right now. A growth challenge, a need for discipline, and a demand for innovative and high quality service. As the new Chubb, I believe we are better positioned than ever to address these and we look forward to working with you under our new brand,” concluded Mr Kendrick. •

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middle market, where we have been investing a lot at legacy ACE too and really now have an opportunity to grow together and improve service for clients. These are just two examples that I believe show how the new Chubb is more than the sum of its parts.

Broadly speaking, how will these changes benefit existing clients and prospective customers?

Véronique Brionne was appointed Country President of Chubb Iberia in February 2016, after the acquisition of Chubb by ACE. Previously, she held the position of ACE's Country President for Iberia for two years. Before joining ACE, Véronique worked for 15 years in AXA where she had the opportunity to be based in different countries, including Spain.

The ACE takeover of Chubb has seen the new company branded simply as Chubb. What do the changes mean for you as a business? I believe that we make an awesome combination. The acquisition has brought together Chubb’s 130 years of underwriting insights and devotion to customer service with ACE’s three decades of technical underwriting excellence, broad risk appetite and global presence. Together, we are the number one global underwriter of professional lines and I am confident that we will become the market leader in Spain and Portugal. Indeed, across a wide range of lines from D&O liability to life sciences or business travel, our combined strength gives us an once-ina-lifetime opportunity to us to drive product and service improvements for the market, and we fully intend to take it. For me, most interesting of all in Iberia are our complementary strengths. The legacy Chubb team is really excited about getting access to our expertise and technology such as our Worldview platform in the multinational space. Likewise I’m really excited about the strength our legacy Chubb colleagues have in the

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Our current and prospective clients and partners in Iberia will benefit from doing business with an insurance company of almost unparalleled global capabilities and presence, with extensive product offering, exceptional financial strength, underwriting excellence and superior claims handling. But we are more than what our size and financial strength say about us. We may be global – but at the same time, we are really a local company everywhere we do business. We may be big, but we are not bigger than our smallest client. Here in Spain and Portugal, our regional network of local offices is especially important to our customer and service proposition. So I think it’s really important to make clear that coming together will enable us to further build on and invest in that.

What reaction have you had from those customers since the takeover went through last month? The response from customers has been overwhelmingly positive and our approach throughout this process has been to make sure it’s business as usual for them and they receive the same level of service they did before. There is still a lot of work to do to integrate our companies, but we have hit the ground running, and we are optimistic about the future.

What do you/Chubb consider to be the biggest challenges facing companies in Spain & Portugal at the moment? I believe most of the market faces the same challenges right now – highly competitive market conditions, the challenge of finding growth in our mature and lower-growth post-crisis European economies, and the need for insurance companies to become more efficient generally.

The new Chubb brand is now a huge global insurance entity. Are we going to see more consolidation in the insurance market? Clearly the Chubb acquisition is just one of many that we’ve seen recently. I don’t want to make predictions about the future, especially in such a volatile environment. But what I would say is that these pressures aren’t likely to disappear anytime soon. Consolidation continues to be an obvious response, although there are many different ways to respond to the challenges the market faces right now. •

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The Baghdad Railway BY PEDRO CASTRO CALDAS

→ Pedro Castro Caldas 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 Castro Caldas 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 he has devoted his time to Risk Management study and consultancy.

Following Kaiser Wilhelm II’s 1899 visit to Sultan Abdul Hamid II - the ‘Caliph of the Faithful’, the Deutsche Bank supported by investors from Germany, Austria, Switzerland and other nations founded the Imperial Ottoman Company of the Baghdad Railway. All supporting the venture saw the potential for a major trade route to support colonial growth 1 , crossing the Austro‑Hungarian Empire, Romania, Bulgaria, Turkey, Armenia, Syria and Iraq (then in the Ottoman Empire). In practical terms, the Germans hoped to access Iraq’s oilfields and connect to the port of Basra, ensuring better access to the eastern part of the German Colonial Empire without having to go through the Suez Canal. In addition, the Ottoman Empire wanted to maintain control over Arabia and extend its influence through the Red Sea into Egypt, which had come under British control. Promoted as a means of bringing knowledge and the latest western developments in science and technology to the region, the project also threatened the British colonial status quo in the Middle East, and became a source of international tension in the years leading up to the First World War. Indeed, some historians believe it could have been one of the main catalysts for the war (when European operations extended into the

Middle East it led to the rise and fall of new protagonists and territorial divisions which never healed in the aftermath of the conflict). The establishment of communication routes transporting people and goods, some authors claim, began with the voyages of the Portuguese discoveries to the Far East and the New World. These may well have given rise to the present-day phenomenon of ‘globalisation’ – the process of furthering economic, social, cultural and political integration internationally. Its key aspects are defined as "trade and financial transactions, capital movement and investments, migration and movement of people and the dissemination of knowledge."2 At the time, the intention of the imperial powers in establishing new communication routes would have been to organise and perpetuate their colonial rule in a context of peace, replacing the inefficient older practices of organising their trade along ‘military and war-like lines, as an additional activity to that of pirates and privateers, armed caravans, hunters and sword-wielding merchants, armed city-dwelling bourgeois, adventurers and explorers, plantation owners and conquistadors, and slave capturers and traders’. The Imperial Ottoman Company of the Baghdad Railway would be a more efficient exploitation of their domains through the pacification and submission of indigenous people and better access to their respective natural resources. While it may have been unintentional globalisation, it became an unstoppable consequence of this goal to improve efficiency. However, notwithstanding the pernicious effects justifiably attributed to ‘globalisation’ (caused by the partial loss of national sovereignty due to the emergence of supra-governmental organisations beyond state and democratic control), weaker states now have facilitated access to knowledge through new information technologies and free circulation; access that, even if they so desired, ‘stronger states’ would be powerless to prevent through recourse to increasingly inefficient and frowned-upon new ‘walls’.

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Illustration by Carlos Pinheiro

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Generally speaking, human geography across the various regions and continents, and Europe in particular, is the result of cultural and ethnic miscegenation caused by a never-ending stream of invasions and migrations over the centuries. In the case of Europe, there is no need to go back as far as the barbarian invasions that gave rise to the new nations born of the ruins of the Roman Empire or, in more recent history, the diaspora caused by religious persecution, to see that the ancient imperial states not only promoted emigration beyond their boundaries but also absorbed waves of immigrants within their domains. Whether as a result of invasion or persecution, new communities were formed creating opportunities for progress through the dissemination of shared knowledge and peacetime trading. Notwithstanding, “adjustments” that were more or less circumscribed and violent caused by ethnic or religious antagonism and disputes related to trade and territorial interests. Nowadays, as though reversing the flow of our recent colonial past, waves of migrants are arriving on Europe’s doorstep, generating tension that many see as a threat to peace and security. A hundred years on, and in an ironic twist of history, the migrants from the Middle East are now tracing the same route towards Berlin as that taken by the Baghdad Railway. At the time of its building, the unilateral aim was undoubtedly to provide the German Reich with access to its colonies and raw materials – troubling the status quo of the British Empire to the extent that it felt threatened and war ensued – but it was also seen idealistically as a means of bringing “western knowledge” to the “cradle of civilisation”. However, unlike those who feel a threat to their status quo, the more enlightened, in Berlin and elsewhere, see this traffic along the “new Baghdad Railway” not as a means

to expeditiously dispatch colonists and gain easy access to natural resources but, rather, as a process of circular migration facilitat ing new oppor t unit ies for multilateral interchange between peoples. The host nations could see opportunities from a demographic and productive contribution by this huge mass of humanity bearing hope and “western knowledge." Another opportunity, following the desirable return home of these immigrants, could be the prospective fostering of cultural relations and international trade in a possible future of peace and reconstruction of the war zones which gave rise to these migratory movements. Or, to put it another way, it is by correctly assessing strengths and weaknesses that opportunities are built and threats are reduced. •

1 In a similar aim the British planned the Cape to Cairo Railway to achieve expeditious access to their colonial domains, unifying their African possessions, facilitate governability, and allow the army to move swiftly to critical areas, assisting with colonisation and fostering trade. 2 In AL-RHODAN, Nayef R.F, STOUDMANN, Gérard – Definitions of Globalization: a comprehensive overview and a proposed definition.

Bibliography JASTROW, Morris – The War and the Bagdad Railway: the story of Asia Minor and its relation to the present conflict. [S.l.]: Lippincott, 1918. MCMURRAY, Jonathan S. – Distant ties : Germany, the Ottoman empire, and the construction of the Baghdad railway. Westport, Conn.: Praeger, 2001. ISBN 0275970639. POLANYI, Karl – A grande transformação : as origens políticas e económicas do nosso tempo. Lisboa: Edições 70, 2012. ISBN 978-972-44-1660-1.

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FUSE: FORESIGHT-DRIVEN UNDERSTANDING, STRATEGY AND EXECUTION Devadas Krishnadas has an established

KRISHNADAS, Devadas Singapore: Marshall Cavendish Business, cop 2015. ISBN 978-981-4721-12-7

reputation as a thought leader and frequently speaks at international conferences and forums. In March 2014, Devadas was invited to make a presentation on the future of China at MDS Talks’ (a discussion forum on current relevant issues organised by MDS Group).

Devadas Krishnadas is the founder and CEO of Future-Moves Group. He played an instrumental role developing Singapore’s fiscal and social policy. He is the author of Sensing Singapore: Reflections in a Time of Change, and has been cited and published in international publications on foresight and strategy. We live in an increasingly complex and uncertain world but unfortunately most businesses and organisations do not take this into consideration when planning their strategies– they still perceive the world as straightforward and static. It is essential to accept and prepare for a future that is ever-changing and unpredictable. FUSE offers a view on how to tackle problems and incorporate uncertainty into analysis. This book is invaluable reading for any business leader or manager. It provides practical advice on the strategic skills and insights necessary to help decision makers understand and prosper in today’s complex world.

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He covered three aspects of strategy for the 21st Century; first, the strategic principles which determine success in the new century, second, how can governments, corporations and institutions be better placed to deal with change and finally, the shifting political and economic repercussions on Asia and how decision makers can better judge market entry into China.

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Good For the Money is the story of Benmosche’s career, what happened behind the scenes at AIG and his fight against a hostile board, a combative Congress and an uncharitable press. It is a story of perseverance and hard knocks, of a self-made man (an “American Hero”, in Andrew Ross Sorkin’s book Too Big to Fail) who did all he could to salvage AIG, its good name, its people and their morale. The book is the vision of a leader, a man that lived by his principles and his unrivalled lessons in leadership. Be sure to read (or reread) FULLCOVER Nº5 2012 Special Feature on Robert Benmosche where we get to know the man and his vision for AIG’s recovery: “I believe we are what we

GOOD FOR THE MONEY: MY FIGHT TO PAY BACK AMERICA

choose to make ourselves.”

BENMOSCHE, Bob St. Martin’s Press, cop, 2016. ISBN 978-1250072184

This is the story of AIG’s recovery from impending bankruptcy told by the man who pulled it back from the brink of a financial meltdown. In 2009, at the peak of the financial crisis, AIG was sinking fast. The Company was hit hard by the subprime mortgage crisis of September 2008, as a result of the role of AIG Financial Products Unit, and was only saved by a bailout of US $182 billion from the Federal Government. When he was called out of retirement and invited to take the helm, replacing former CEO Ed Liddy, the plan of action was to have a quick-fire sale of assets to repay the Government as quickly as possible. But Benmosche had other ideas. His plan was for AIG to defy the odds and pay the loans in full. And that’s exactly what he did. He set out policies and in a matter of months, changed things around. Within three years, AIG had fully repaid its staggering debt to the US Government - with interest. By the time Benmosche stepped down in 2014 after five years in charge, AIG had paid back US $94bn of emergency loans to the central bank and allowed the Government to withdraw its US $68bn equity investment at a profit.

at work, sometimes in quite a different way. This book details research data from 20-30 countries in a way people can relate to and understand. In this globalized world, business has no boundaries; it is therefore becoming increasingly important to have the skills to navigate through cultural differences and understand the ‘hidden code’ of foreign cultures in order not to make an error that can sink deals or ruin a career. People may get lost in translation; as Erin says: “If you go into every interaction assuming that culture doesn’t matter, your default mechanism will be to view others through your own cultural lens and to judge or misjudge them accordingly.” The book contains several examples of these cultural clashes; Americans usually precede anything negative with three nice comments so that when they get to the point – the bad bit – someone from another culture may overlook the real message as they focus on the positive. Alternatively, the French, Dutch, Israelis, and Germans go straight to the point “your presentation was simply awful” which may cause awkwardness and distress for people from other culture not used to this mindset. The book provides an analy tical framework with practical, actionable advice for succeeding in a global world. In 2015 Erin Meyer was in Porto at the Católica Porto Business School Oficina de Líderes programme presenting her book Culture Map and talking about the impacts of cultural differences in a globalized world and

THE CULTURE MAP: BREAKING THROUGH THE INVISIBLE BOUNDARIES OF GLOBAL BUSINESS

how we must overcome stereotypes if we want to expand our business worldwide.

MEYER, Erin New York: Public Affairs, cop. 2014 ISBN 978-1-61039-250-1

Erin Meyer is an Affiliate Professor in the Organisational Behaviour Department of INSEAD business school in Fontainebleau, France. In her new book, The Culture Map, she describes how people from different cultures communicate and consider ideas

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