Risk management in Italy

In today’s tough economic climate are clients’ expectations of insurers changing?

GK: The main change is that clients are paying more attention to the finances of the insurance company, particularly on long term business. Now the quality of the balance sheet of an insurance company is the key criteria, not just the price of the insurance. That is the main difference in the Italian market.

In the case of AXA corporate we don’t have a problem with that because our financial position is well known. Our clients know that we are a branch of AXA in Italy. We can present ourselves on the Italian market with the rating of our headquarters in Paris.

How do you see the Italian market evolving over the next 5 years?

GK: We have to expect a big movement. Today in Italy there are around thee million corporate enterprises and about 500 companies with more than 1,000 employees. Italian companies are too small today to be competitive, so they have to concentrate their activity. Italy should have no more than six leaders for each sector of activity. Today we have hundreds in each sector. These small corporates have no capacity for research and development, marketing or the study of new markets. So the first big movement we will see is a concentration of the Italian industry. The number of companies will be reduced and new ones will be created. It’s difficult to make a prediction, but I think at least 20-30% of companies will disappear. But we are going to see a new type of company on the Italian market, which is capable of developing real international activity.

How do you think the current financial market will affect the drive for consolidation?

GK: I think it will be at the origin of an acceleration of this movement. One weak point of Italian companies is that their balance sheets are not very rich. They have to strengthen their balance sheets if they want to benefit from lines of credit, which are important to develop new lines of international activity.

How do you think the commercial insurance market is going to change?

GK: Looking at Italy, we think that this concentration on the industry side is going to be at the origin of different requests from our clients. More and more they are going to ask for specialised companies as partners.

Today on the Italian market we have a lot of mixed insurance companies, which offer retail insurance as well as global programmes. In this period of confusion, the choice made by AXA ten years ago to have a specialised company for corporate risk is definitely a plus. AXA Corporate is specialised on a niche, which means big corporates everywhere in Europe with risk management and active loss prevention.

I am convinced that Italian companies are going to ask for professional, specialised partners able to deal with their technical problems and support them in new markets. The problems are going to be new for this new type of company and the solutions are not going to come from a generalist company. We have to invest in specialised employees, engineers, lawyers, in order to partner with these companies.

A number of reinsurers are talking about hardening their rates. What pressure will that put on the insurance market?

GK: We have established relationships with the big Italian corporates which are based on transparency. Our objective as a company is to smooth price on a long term basis. We never increase the price suddenly and we are not going to decrease the price suddenly. The price depends on the risk and the quality of the risk management with the company.

What are your general predictions for the global insurance market?

GK: Personally I think that the market from a technical point of view is at a minimum. In 2008 we have had an external financial crisis and this is going to accelerate the movement from a soft to hard insurance market. For AXA Corporate this is not necessarily the case because we are looking at the position of our clients case by case. We look at the quality of risk management within our clients and price accordingly.