When we talk about the activities of insurance brokers, can you compare these three markets in which you are present? What is the situation, where it is most developed, who uses your services the most in terms of the industry that is most represented in your portfolios?
In all three markets, I’d say that most registered insurance brokers are acting as generalists, offering services in all insurance lines, mostly collecting offers from the insurance market and focusing on product and price comparison, leaving claims handling completely to insurers. Those are competing with insurers and their agents directly, especially in the retail segment, servicing private individuals. A few brokers take it one step further and are also assisting clients with knowledge and expertise during claims handling, but still being generalists. Very few brokers are offering true risk management and specialty advisory with innovative solutions to improve a company’s corporate risk management. Being a strictly corporate & specialty broker, we belong to the latter group and we believe this is where true value is created for corporates. To do this in Slovenia, Croatia and Serbia you need patience in explaining the difference between a pure product comparison and price-driven approach on the one hand side and highly skilled, often very specialized teams on the other.

We are not insurance dealers, but risk advisors. Major industries we specialize in and we are advising are financial institutions, construction, Oil & gas, Power generation and distribution, Food & beverage, Tourism, Transportation & Logistics, Aviation, and Telecommunication. The need for professional risk advisory has developed and grown over the years and we believe it will continue to grow as economies in all three countries continue to grow over the longer term. Recently, the fragility of global supply chains became apparent due to the pandemic. We expect to see certain effects of nearshoring in the future. Countries like Slovenia, Croatia and Serbia have the chance to benefit from this development.

Insurers have recently faced major flood damage, but on the other hand, most assets are still uninsured against such risks. Only 35 per cent of economically relevant climate losses are currently insured in the EU. How to bridge that gap? Will insurance become more expensive precisely because of the growing climate risks?
Climate change represents one of the most critical challenges in the future in general and for insurance companies as Nat Cat risks are clearly on the rise. Because of a rapidly changing exposure arising from climate risks, there are limits to insurability and economic affordability of insurance covers for corporations. Current risk transfer strategies, relying on traditional insurance solutions alone, without adapting their facilities to these changes, will not bridge the gap. While insurers and risk consultants like us are constantly developing new, innovative concepts of coverage, corporations who have not yet done so will still need to think about Nat Cat Management – meaning analysing and understanding their risks properly, then managing, i.e., mitigating those risks technically. In the longer run, we believe those whole industries will have to transform their business models, factories, and supply chains to increase their resilience and adapt to climate change. Therefore, also our business models are transforming as we are increasingly becoming risk specialists helping our clients to thrive in a changing world.

Although insurance companies have shown great resilience in volatile times over the past two years, how will the current geopolitical instability still affect the work of insurers? And in what way? How much do you think all this geopolitical tension will disrupt general stability, the economy, and finances in 2022 when it comes to this region (Adriatic)?
The insurance industry is one of the most resilient industries and will continue to be one. The consequences of geopolitical instability in the insurance sector that we have seen so far relate to the revocation of coverage of international insurance programmes in Russia because of imposed sanctions, but also in Ukraine. Further, after many years of ultra-loose interest policies of the European Central Bank, inflation has now manifested itself in Europe while economies are not really growing significantly. We are looking at stagflation. Inflation will for instance lead to higher unpredictability of losses as higher replacement costs can be expected, but it is difficult to predict upfront how much higher. The ongoing instability of supply chains also affects replacement times, adding another element of uncertainty. So, predominantly the work of insurers, but especially professional risk advisors and brokers is affected in the way that an even higher level of diligence needs to be applied when consulting clients to safeguard them from such significant, unexpected losses. The ones best technically skilled and prepared to provide professional risk management and advisory will even benefit.

When it comes to the Adriatic region, I believe the same principle of increased diligence applies. It is difficult to say how current geopolitical tensions will translate to this region during the rest of the year and look further ahead, but I hope that we will see a general trend of de-escalation. Economic interdependencies between nations are significant and it is hard to imagine that further escalation would do any good, economically and also from a civil and social perspective for the people in the region.

However, challenging times have always also been phases of opportunity to than in calmer times innovate, adapt and improve. I am very happy to see that corporations, including insurers, became more agile, by showing efforts towards necessary transformation and adaption to this constant crisis. The insurance industry is, thankfully, wide awake and moving ahead.
 
Although the Croatian insurance sector has so far proved to be relatively stable during the corona crisis, could the effect of the crisis on insurance companies occur with a certain time lag?
That depends on whether we will see new, again significantly more dangerous variants of the virus or not. If yes, it is fair to assume that protective measures like further lockdowns will fuel the current stagflation and make another serious dent in the Croatian economy. This may then also influence the results of insurers. If not, I’m quite positive that such a scenario will not occur.
 
How should risk monitoring be approached in these unstable times (pandemic, war, disturbed international relations, pronounced climate change)?
As I stated already in the beginning, from my point of view it is most important to include a proper risk prognosis within a company´s risk management process. This means, that forward-looking companies adapt early to uncertainty by constantly applying methods for assessing their business model and their supply chains, checking vulnerabilities and potential impacts. The risk management department must be aware of these changes at the earliest possible stage, to anticipate the possible impact on their specific risk landscape and develop appropriate treatment strategies. Therefore, it is now more than ever of utmost importance that risk advisors and insurers are finally much more included in the clients’ strategic planning. We are increasingly rendering such services and we see more and more clients understanding and appreciating this. This is a good trend.