How Allianz & AXA XL Avoided Disruption during Covid-19

1. https://versicherungswirtschaft-heute.de/schlaglicht/2020-05-06/wirtschaftsneustart-
industrieversicherer-warnen-vor-gefahren-und-bereiten-goldene-zukunft-vor/
Economic restart: industrial insurers warn of dangers
and prepare for the golden future
Business or health is the question right now. The federal states are outbidding themselves with
loosening of the corona rules, especially the restrictions on the economy should drop as soon as
possible. Corona affects industrial insurers twice. There was little demand and a lot of damage
reports during the shutdown, the current restart brings even more risks.
Industrial insurers were not idle even during the crisis, as Allianz specialty insurer AGCS
explains. The employees work "with brokers and industrial customers" from their home office
and can continue to process upcoming contract extensions "without delays". Claims processing
also continues. The competitor Axa XL also relies on digitality. The risk advisory teams work
closely with the respective risk managers "to help them manage their new risks". The company
also relies on a “virtual risk assessment service”, which makes it possible to continue assessing
the risk potential in all business areas “from a distance”. The industrial insurance broker and
risk advisor Marsh warned of this missing digitalization in December. The problems of the
branch Industrial insurers are countering the corona threat with bits and bytes, which also
appears to be necessary, because industrial insurance is not an easy asset thanks to a year-long
drop in prices and must become more lucrative. Axa is not satisfied with the development of its
relatively new, and expensive, bought-in specialty insurer XL Catlin and has already taken
measures to counteract it. According to media reports, the group focuses on hedging through
additional reinsurance and price increases.
The latter point has been an issue in industrial insurance for years, because “the market has
been characterized by a fall in prices for eight years, as Hans-Jörg Mauthe, CEO in Central and
Eastern Europe at AGCS, explains in August 2019. However, he adds that prices have "been
rising" again since 2018, and even "significantly" in 2019. This is also necessary, because the
specialist insurer is currently a bit the black sheep at Allianz, in an otherwise immaculate herd.
Group CEO Oliver Bäte said: “If we only had 112 once, it would be ok for a year. But

2. https://versicherungswirtschaft-heute.de/schlaglicht/2020-05-06/wirtschaftsneustart-
industrieversicherer-warnen-vor-gefahren-und-bereiten-goldene-zukunft-vor/
unfortunately it is - and that is why it annoys us so much - that AGCS has not only had this high
combined combined ratio in one year, but for three years now. "
There is great pressure on industrial insurers, which has recently been manifested in personnel
changes at Axa and Allianz. One advantage of such large houses is that they can sit out bad
times. Many companies that entered the market years ago underestimated the complexity of
the business, which led to consolidation and, more recently, higher premium income.
Rising prices and little damage?
If the premiums rise again, combined with the current standstill of the economy, this is
certainly the ideal situation for insurers, because if there is little work, fewer accidents will
happen. But the calculation is not that simple.
The effects of the Covid 19 pandemic on claims development in the industrial sector can only
be foreseen in a few months, explains AGCS. In addition, the improper decommissioning of
buildings and production facilities harbors "considerable risks for companies". Orphaned
factories or offices are “by no means safe from fires or other dangers”. That makes sense,
nothing prevents danger like attentive employees. The insurer repeatedly sees damage on
public holidays or weekends when employees are "not or only to a limited extent".
To make matters worse for specialty insurers, the corona pandemic is affecting global supply
chains in an unprecedented manner. As a result, the dangers to freight, storage and
transportation have "increased significantly", as AGCS explains. This is also understandable, a

3. https://versicherungswirtschaft-heute.de/schlaglicht/2020-05-06/wirtschaftsneustart-
industrieversicherer-warnen-vor-gefahren-und-bereiten-goldene-zukunft-vor/
good that is permanently in a warehouse is more exposed to water, fire or long fingers than if it
were in constant motion.
Reopening as a danger
The opening of the economy, currently demanded by the Federation of German Industries
(BDI), among others, poses new dangers for insurers. If plants or businesses have been closed
for a certain period of time, it is important that companies take “targeted damage prevention
measures” before reopening. For example, companies should check whether undetected
damage and defects have occurred during the closure, the Allianz subsidiary explains.
AGCS warns that the risk of incidents such as fires, insufficient maintenance, or incorrect
storage can increase after a period of inactivity. This had to be reacted to. Companies should
carry out those inspection, test and maintenance procedures that were not carried out during
decommissioning and pay particular attention to the condition of the electrical devices and
systems, as these are "often the cause of fires". The Axa XL also speaks of the fact that if
companies "had to switch production or temporarily shut down their plants", new risks would
arise.
The potential is there
Despite all these dangers, high loss ratios and any upcoming Covid 19 claims, industrial
insurance remains as essential as it is potentially lucrative for all large insurance groups. The
rating agency Fitch has recently awarded the smaller competitor FM Global an "AA rating" again
"after passing the Covid 19 stress test" and certifying that the Americans have a "stable future".

4. https://versicherungswirtschaft-heute.de/schlaglicht/2020-05-06/wirtschaftsneustart-
industrieversicherer-warnen-vor-gefahren-und-bereiten-goldene-zukunft-vor/
This is a bit surprising because the company has provided (for the most part) Covid19 cover, but
it is reinsured and limited.
Despite the pandemic, the “stable future” label continues to apply to the entire industry,
because there will be neither a world without industry nor an industry without insurance.
Perhaps Covid-19 is the rebirth of lucrative industrial insurance in 2020.
Author: Maximilian Volz
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Matt Leiv | Sr. Director, Business Development
Expert System Enterprise NE Division - NYC
Tel: +1 202 577 6492 | mleiv@expertsystem.com