“You Can’t Protect Nature Because You Have to Be Stronger Than Nature Itself.”

Times of climate change call for Johannes Ehrenfeldner, Director of Lake Neusiedl National Park, to address the restoration of biodiversity and ecosystems even more intensively. Erwin Pichler, Regional Manager GrECo Burgenland, spoke with him about the threats and impacts, economic risks and current measures.

How climate change is impacting a national park beyond the obvious environmental toll

Pichler: Climate change influences the entire national park – on the one hand it effects nature and the environment, and on the other hand there are the economic impacts. How do you see this from your position?

Ehrenfeldner: I don’t see my role as National Park Director as being limited to nature conservation, but much more comprehensively in a regional and sustainability context -even if the word is overused. I see my responsibility as an equilateral triangle – the ecological, the social and the economic.  Each responsibility is equal. As a national park society, we move within this triangle.  Against a climate change background, it can also be quite simply explained: The region feels climate change first hand: when there are really dry years, as there were two years ago, the immediate consequence is that birds stay away because they choose other resting places. And as a result, tourists who come here especially for this bird watching hotspot also stay away. This leads to less added value in the region. Therefore, one can also say that climate change has a direct influence on value creation.

Pichler: The absence of the birds also reduces the added value. So, it’s a 1:1 effect?

Ehrenfeldner: Exactly.  One can rarely intervene in nature, maybe a little but usually not at all. No one has ever managed to make it rain, for example. But you can at least simulate rain or tweak things so that the groundwater remains at a reasonable level. At least this buffer remains an option for us.

Pichler: In general, biodiversity is declining. Can we do something about it in the National Park?

Ehrenfeldner: We can’t save the world, but we can manage the conditions so that the birds find the habitats they need. Bird migration is a global phenomenon. Species of wading birds are declining sharply. The much-used Bird Index, which mainly catalogues the small birds that used to thrive on agricultural land, shows that the number of these birds is also severely diminishing. However, there are also climate change winners, for example the so-called mid-winter species. Historically, the wintering and over-summering was dominated by northern species, but now more species like the shelduck and the hoopoe are arriving. They feel very much at home in the dry climate when they can also find sand. You can also observe that the climate zones are shifting.

Pichler: Where do the birds that no longer come migrate to?

Ehrenfeldner: That is an interesting question. Animals have only two options, either to migrate upwards or to migrate northwards. Either they colonise higher areas or more northerly areas.  If they can’t go further north either, they die out.

Pichler: You once said that you can’t protect nature because you have to be stronger than nature itself. What do you mean by that exactly?

Erenfeldner: That is a bit of a philosophical statement, if you like. But I am firmly convinced that we as human beings are not capable of protecting nature. Nature will always be stronger than us humans. We can preserve and maintain our living space in such a way that it is worth living in. These large, protected areas such as national parks are part of this. These are places where a person would like to go. If this is no longer the case, because desires get out of hand, such as building development, the purpose of protection becomes relevant again, but not with the purpose of protecting nature itself, but basically protecting it for humans, who then retain these valuable habitats.

Protecting a wealth of biodiversity as eco-systems become unbalanced

Pichler: The national park that you manage is a huge area, which is also partly cultivated. Can you tell us a bit more about how that works?

Ehrenfeldner: The national park covers 10,000 hectares,5,000 hectares of which belong to the strictly protected nature zone. You’re not allowed to go into this zone, only for scientific reasons, but nor would you want to, because it’s uncomfortable in the reed beds, there are mosquitoes, it smells like rot. The other 5,000 hectares are a millennia-old cultural landscape where very sustainable grazing has taken place, which has also led to a wealth of biodiversity. The variety of rare plants, birds, and insect species are the product of this extensive management. The fact that the area of the national park is actually a border landscape also has a potentiating effect on biodiversity. It is the last foothills of the Alps (Rax, Hohe Wand, Schneeberg, Leithagebirge, Ruster Hügelland) and part of the Hungarian lowlands. We have plant communities and ecosystems that have the westernmost distribution boundary as well as those with the easternmost. Two climatic zones meet. One is continental and the other maritime/atlantic.

Pichler: Can one still speak of a balance in this ecosystem as a whole?

Ehrenfeldner: No, you can’t say that. The area of the national park and the adjacent areas is one of the most intensively used agricultural areas in Austria. It is the epicentre of Austrian agriculture. Also because of the climate and the soils, the fertility of the land is very high. The limiting factor is currently the water.

Pichler: So, the biggest threat to the national park is the lack of water. What do you think are the main causes of this situation: The climate or intensive agricultural use?

Ehrenfeldner: There are always three components – the shift in precipitation or too little precipitation in the winter months, higher temperatures, and consistent drainage/extraction of groundwater for agricultural drainage. The Seewinkel is a wetland. Thus, agriculture only became possible through drainage.  On the Hungarian side they acted more cleverly than on the Austrian side, ensuring their canals could be used for drainage as well as for irrigation. On the Austrian side, however the focus was on alpine water management, where the drainage of water was the main concern.

It is possible to intervene in the systems, the drainage, and the agriculture, and create a trend reversal. Drainage should be controlled in such a way that as much water as possible remains. Not a single drop should leave the region!

Striving for a circular economy is inevitable. We have submitted a proposal to the EU, which we want to implement in the next five years. The province of Burgenland uses drainage channels with controllable sluices, which thus consistently retains water. There is also the question of which crops are more suitable, i.e. which do not need so much water. For example, seed corn and outdoor vegetables with overhead irrigation such as onions consume a lot of water and produce a high loss through evaporation. Glass houses are more effective for these crops because they have a closed water cycle. And I don’t want to blame farmers and growers now, it’s just the agricultural industry’s system.

Insuring environmental risks, a lost cause, or a beacon of hope?

Pichler: These are developments that have taken place over the last 150 years, and it’s only now we are seeing the results. So now we must find a solution to them.   At GrECo, we try to manage risks in many situations, but we can’t manage everything. The best-case scenario, and we try very hard to achieve it, is to prevent risks from occurring in the first place. That is probably – to use the word sustainable once again – the most sustainable method. Do you agree?

Ehrenfeldner: Awareness of hazards has become much more prevalent today, but despite our awareness of drought damage, it can’t really be covered by insurance, even though it is almost a calculable risk. And, sadly, at some point, society will no longer be able to afford it.

Pichler: We see more and more of these direct dependencies. Parametric weather insurance pays out when a predefined value is exceeded or not reached. For example, the amount of precipitation or the temperature. Settling claims with this type of insurance is simple.  The prerequisite, however, is to ensure that the data is collected in an objectively independent manner. A promising insurance solution that is still in its infancy.

Ehrenfeldner: These are such systemic risks that endanger the functioning and stability of an entire economic area. Where there is not just one cause.

The future: what’s in store?

Pichler: Resource management will become a major issue for Burgenland agriculture, especially in the Seewinkel regions. Do you have visions of future-oriented management?

Ehrenfeldner: Future-oriented management is like high-risk investments because you have a limited view. You are dependent on certain parameters being correct in order to make a profit. If you as a farm depend on only one crop, it brings more risk. Therefore, all sectors (agriculture, forestry, or manufacturing companies) that depend on nature must take a broader view. Forestry and agricultural enterprises already do this to some extent. They do not focus on one tree species, but on a whole range. In the short term, this diversification is accompanied by lower yields during the trial period, but in the long term it brings advantages. In forestry, you have to think in terms of rotation periods, which are, for example, 100 years. A challenge but investing for the longer term is completely necessary.

Pichler: What goals do you have personally, for yourself and for the National Park?

Ehrenfeldner: In the medium term, to renew the (structural) infrastructure of the National Park. My longer-term goal is to become the European benchmark in terms of strategy development, extensive grazing, and dealing with climate change: To show people how we do it, maybe not perfectly, but at the very least how it can work.

About Nationalpark Neusiedler See
Since its foundation in 1993, it has been the goal and obligation of the Lake Neusiedl – Seewinkel National Park to actively protect and preserve habitats for plants and animals. Accompanying scientific research is fundamental to the corresponding measures for the protection and maintenance of the ecosystem. Another essential core task of the National Park is the maintenance of the infrastructure of the valuable area to enable visitors to experience nature and recreation. Covering a total area of 10,000 hectares, over two states and 1,200 landowners, the park is home to 348 species of birds, wild horses, water buffalo and baroque donkeys, as well as many other animal and plant species.

Johannes Ehrenfeldner

Director of Lake Neusiedl National Park

Erwin Pichler

Regional Manager GrECo Burgenland

T +43 664 274 48 92

Birgit Waerder 

Account Executive

T +43 664 540 78 01

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“After All, We Cannot Afford to Wait for Better Times”

Sabine Schellander, Co-Head of Sustainability at GREINER, describes why Greiner is sticking to a sustainable transformation process to create a circular company.

For plastics and foam solutions provider Greiner, sustainability is a matter for the boss. CEO and in-house “Sustainability Ambassador No. 1” Axel Kühner stands behind the topic with conviction, and also acts as chair for the company’s own sustainability council. Co-Head of Sustainability, Sabine Schellander reports on how this helps to raise awareness among the group’s almost 12,000 employees, as well as what measures Greiner has already taken, and why cooperation is necessary both top-down and bottom-up for a functioning sustainability strategy.

Why we introduced our own recycling plant: reduction of risks and dependencies through sustainability measures

In 2022, Greiner acquired a Serbian PET recycling company, now named Greiner Recycling d.o.o., to underscore our commitment to using recycled materials in our packaging in the form of PET flakes. We firmly believe that by entering the recyclables business in addition to our plastics packaging production business, we will be able to expand our own recycling know-how.  For the first time ever some of our recycled materials are coming from our own company and are no longer having to be purchased externally.  This helps us to reduce dependencies, which is beneficial for us: The demand for recycled plastics is currently very high and so recyclates are much more expensive on the market than new material. Additionally, we do have the possibility to gain knowledge and competence.

For several months now, Greiner Recycling’s PET flakes have been being used successfully at our site in Slušovice, Czech Republic and, more recently, our site in Wartberg has also benefited from our move into recycling.  But, for the plant to be able to serve Greiner Packaging’s production as well as customers throughout Europe in the future, we plan to greatly expand the capacities at the recycling plant – stay tuned!

We are all in the same boat – innovations only really work if everyone plays along

Worldwide, the recycling infrastructure is still developed in very different ways, which poses great challenges for internationally active companies like Greiner. In Austria, for example, technological change is still needed in recycling sorting plants – but this requires high investments. Without financial incentives, we will not succeed in making recycling more attractive. By way of comparison: In Austria, there are many subsidies for the changeover to renewable energies –but when it comes to recycling, subsidies for companies are still meagre. Yet, to make a fully functioning circular economy, a financial incentive is essential to encourage the sorting companies to invest in the changes required to overcome the technical challenges we face. In addition, the use of recyclates is also limited by legal regulations, particularly in the case of plastics for medical products and food packaging where there are justifiably high requirements for purity and product safety. It is therefore even more important that sorting plants are further developed.

A change in thinking is also necessary: the higher the recycled content in a product, the more likely a different shade of colour will occur. The benefit is there, but acceptance must also be created for e.g. colour deviations (no pure white).

Creating space for ideas and innovations

We always desire ideas and input from employees on topics such as the conversion of production processes or energy transformation, but Greiner Innoventures, our innovation hub, also invests in technologies outside of Greiner’s core business. When the start-up spirit and the competencies of a globally active group of companies are combined, both worlds can benefit enormously from each other. Greiner Innoventures has proven itself as a mediator between these two worlds. In the future, our innovation hub will focus even more on circular business models and the related issues of our divisional companies and customers. During this strategic realignment, the focus will therefore be on identifying and further developing innovative solutions within the core business. In this way, we want to further expand our pioneering role in the circular economy field.

One such example is, earlier this year we acquired the start-up Zeroplast, which is developing alternatives to thermoplastics from sustainable fibres. It is not yet clear to what extent this can have an impact on common product properties or whether this alternative can replace existing products 1:1 in the future, as the products are not yet ready for serial production. However, the long-term goal is to bring the bio-based (and thus particularly sustainable plastics for the serial injection moulding industry), onto the market. Nevertheless, there is already great interest on the customer side, and we are already in strong initial talks with a manufacturer of cosmetic products.

Financial and personal responsibility

Greiner has taken out a sustainable promissory note, which includes three ESG targets that, if achieved, will reduce the interest burden of the note for Greiner. These targets by 2030 include a 100 percent share of renewable electricity; EcoVadis ratings for 99 percent of our suppliers with volumes over 500,000 euros; and management positions filled by at least 40 percent women. If the targets are (not) achieved, adjustments will be made to the interest margin.

However, to achieve our planned goals and underpin our financial commitment, a special heartfelt concern of ours is to anchor a corresponding awareness amongst our company’s employees. A significant part of this is to show employees how they can make important contributions to the future.  For example, we have launched a global internal training programme called the Sustainabilty Ambassador Programme. This programme helps our employees to better understand the climate crisis and encourages them to question the way our company currently works. We also have a large internal sustainability conference once a year. Most recently, we had over 500 participants from across all divisions from all over the world.

Greiner’s sustainable transformation process

  • Internal training programme “Sustainabilty Ambassador Programme“: The aim of the Sustainabilty Ambassador Programme is to create a company-wide sustainability culture to enable the transition to a climate-neutral and circular company. To achieve this, it takes every single Greiner employee.
  • Internal training and communication measures
  • Apprentice and plastics workshops with a sustainability component
  • Sustainability podcast “Greiner Talks”: with top-class guests such as renowned behavioural scientist Dr. Jane Goodall, founder of the Jane Goodall Institute and UN Messenger of Peace.
  • Sustainability Council

About Sabine Schellander
Sabine Schellander, Co-Head of Sustainability at Greiner AG, is a leading expert in the implementation of sustainable practices in companies with nearly 14 years of experience. With a background in landscape design and planning, she holds a degree (Diplom Ingenieurin) in natural sciences from the University of Natural Resources and Applied Life Sciences in Vienna, where she focused on physics and materials science. In addition to her professional activities, she successfully completed a second degree in “Social Innovation” at Danube University Krems.

About Greiner AG
Based in Kremsmünster, Austria, Greiner is a world-leading plastics and foam solutions company. With the three operating divisions Greiner Packaging, NEVEON and Greiner Bio-One, the company is at home in all manner of industrial sectors. Established in 1868, the Group is now one of the leading foam producers and plastics processors for the packaging, furniture, sports and automotive industries as well as medical technology and the pharmaceutical sector. In fiscal 2022, Greiner generated a turnover of EUR 2.33 billion and had over 11,600 employees at 120 locations in 34 countries.

Sabine Schellander

Co-Head of Sustainability, Greiner AG

Krystle Lippert

Krystle Lippert

Strategic Sales Manager GrECo International AG

T +43 664 962 40 37

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Start of Our New HORIZON Series “Environment in Danger”

Under the title “Environment in danger”, our upcoming HORIZON series concentrates on the ecological transformation and therefore looks at all its challenges from various angles.

In our previous HORIZON series, we introduced our 4 Risk Changers model and took a close look at the systemic influences of ecological, geopolitical, technological, and social transformation on a company’s risk landscape.
Other crises, the climate crisis being a prominent example, are more likely to emerge as developments that gradually manifest themselves. The HORIZON – “Risk Thought » Fast Forward” is our community platform for risk thought leadership. It is based on our vision to detect the impact of these systemic risk changers at an early stage and introduce risk management solutions that boost our clients’ resilience. The extent of their impact will only occur in the future and are therefore not immediately apparent. Due to their abstract nature, these developments are overshadowed by immediate events, although their relevance is often more far-reaching and therefore require our utmost attention.

Under the title “Environment in danger”, our upcoming HORIZON series concentrates on the ecological transformation and therefore looks at all its challenges from various angles.

Risk-based methodology for transformation risks

We have developed our risk-based methodology to manage the risks associated with the underlying systemic change. We distinguish between primary transformation risks, which in the case of climate change are climate risks such as natural hazards, which are directly derived from global warming, and secondary transformation risks, which arise from the necessary adaptation of the corporate strategy (including their business models, products, services, applications, processes, and technologies) to the climate crisis thus lead to a change in the risk landscape.
When we look at climate change, primary transformation risks appear as physical risks. They are apparent in form of a changed or an increased exposure to natural disasters, such as floods, storms, hail as well as heat, drought, or a rising sea level. As far as companies are concerned, these risks can cause anything from material damages to disruptions of transport routes, in energy, or raw material supplies.
Besides these primary transformation risks, which affect companies as “pure risks” from the outside, systemic change leads to secondary transformation risks that are “speculative”. They derive from companies’ adapted business strategies that were developed in response to the systemic change and comprise both risks and opportunities.

Transformation of the ecological risk landscape

To master the ecological challenges that lie ahead of us, we will have to tackle a far-reaching transformation of our economic system. The decarbonization of industry, commerce, freight, and passenger transport as well as private households has top priority. This inevitably leads to the switch to renewable energy sources, the promotion of clean mobility, the introduction of new energy management systems and green building technologies, new ways of energy storage, the development of sustainable fuels and ultimately also new methods of carbon dioxide capture, utilization, and storage.
Equally important is the protection of biodiversity through a development towards a circular economy and the careful use of resources, new technologies for clean water, advanced methods in agriculture, but also nature conservation and restoration.
This HORIZON series focuses on the new risks and regulatory challenges that companies face because of this transformation, as well as the role of data analytics and AI in this area. We invited clients and business partners to join our risk thought leadership community and provide some insights on their point of view. Also, many of our employees across our group contributed to this series.
I want to thank them all for growing our community and their efforts in doing so.

Georg Winter


T +43 664 962 39 06

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“To Be or Not to Be”?

Other crises, the climate crisis being a prominent example, are more likely to emerge as developments that gradually manifest themselves. The full extent of their impact will only occur in the future and are therefore not immediately apparent.

“The time is out of joint,” lamented William Shakespeare’s Hamlet more than 400 years ago. Yet, one could be forgiven for thinking he was talking about the confusion of the present day as we battle crisis after crisis.Many of these crises are sudden, tend to be short-term in nature, and are local or industry specific. They affect us directly and persistently demand our full attention.
Other crises, the climate crisis being a prominent example, are more likely to emerge as developments that gradually manifest themselves. The full extent of their impact will only occur in the future and are therefore not immediately apparent. Due to their abstract nature, these developments are overshadowed by immediate events, although their relevance is often more far-reaching and therefore require our utmost attention.

The concrete crisis dilemma

In practice, companies are often faced with the dilemma of focusing on long-term, sometimes even abstract goals and the necessary resources required for them, when suddenly unforeseen events crop up out of the blue, disrupting the sustainable pursuit of measures that are crucial to achieving the changes that are necessary in the long run. The perception of strategic risks is therefore pushed into the background again and again. At the same time, sticking to managing these strategic risks is also an important contribution to being prepared for events that could occur at short notice.
It is human nature to pay close attention to risks that are tangible and have concrete repercussions in the here and now. Abstract dangers that are not immediately a threat to us are neglected in our subjective risk perception.  As a result, politicians are tempted to follow the public mood to maximize their chances of success in the next elections, or the media orients itself accordingly to gain maximum circulation.
In times when public discourse seems to have lost courage and far-sightedness, and society is jumping from one crisis to the next, companies are required to act with foresight and keep an eye on their long-term goals. The urgently needed paradigm shift away from focusing on short-term results towards building strategic resilience is of particular importance.

Why we should listen to the next generation

Many political and economic decision-makers belong to a generation that can look back on an eventful life characterized by confidence and growth. Their diligence and commitment have made a significant contribution to the development of a society in Europe that is based on social prosperity and peaceful coexistence.  To ensure this peaceful coexistence in the future, the tolerance that we have towards our fellow human beings and their risk perception and concerns is of the utmost importance. When dealing with long-term risks, such as the long-term effects of the climate crisis on our personal security and economic existence, it is crucial to include the next generation, which will be directly affected by these effects, and to take their concerns seriously. 

How companies will deal with their ecological risk landscape – a pragmatic scenario

If climate scientists’ models are to be believed, the likelihood and impact of physical hazards will increase dramatically as global average temperatures rise. The climate-related change, which was previously perceived as a long-term development and the consequences of which will only appear in the distant future, will transform itself into an acute danger with immediately noticeable effects due to the drastic increase in suddenly occurring, climate-related events.
A possible scenario could be that the dimension of these primary risks is heading towards a tipping point, at which not only a clear public opinion manifests itself, but also political action becomes unavoidable. By then at the latest, banks and insurance companies as well as investors will place additional, non-material criteria at the centre of their risk assessment.
For both society and the public, the cost of managing these physical risks will be enormous, at some point exceeding the cost of transformation. From this point on, companies will put their full focus on the ecological transformation of their corporate strategy.
The costs of physical risk are becoming a competitive disadvantage for companies. From the tipping point, investments in ecological transformation will therefore pay off insofar as they increase the resilience of the company, open-up new business opportunities, and will ultimately emerge as a decisive competitive advantage.
What does this mean for risk management? In view of the increasing danger from physical climate risks, it is essential to identify their influence on one’s own assets and to eliminate weak points as best as possible. In addition, secondary transformation risks must also be identified as early as possible to be able to develop cause-related and effect-related measures for these, often new, risks.

Insurers – innovation vs. aversion

Insurers also play a key role in mitigating transformation risks. However, it is in their nature to primarily look in the rear-view mirror to be able to assess a risk based on the claim’s history. However, as we do not have the necessary historical data for transformation risks, the insurance market will have to find new ways to be a systemically relevant part of this transformation.
If insurers want to continue to fulfil their role as “enablers of the economy” in the future and not continue to lose industry importance, then it is time to support the transformation with targeted incentives and innovative solutions instead of with a restrictive underwriting policy only to keep an eye on their own risk landscape.
Therefore, the insurance market must be proactively involved in the transformation at an early stage. The prerequisite for this is the combination of the company’s agile and transparent risk management strategy, coupled with proactive risk mediation by the broker.  Only through a joint effort will we be able to meet the challenges of the transformation ahead of us. What matters here is a sense of responsibility, future orientation, and mutual respect, because only a functioning risk partnership between companies, risk carriers and brokers will be able to contribute to the well-being of our society.

Georg Winter


T +43 664 962 39 06

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Be more agile! How to anticipate a transforming risk landscape

An effective risk management process is a basic requirement for tackling transformation risks. In most cases, the risk analysis that goes with identifying risks focuses on actual risks. Abstract risks, which are currently hard to assess and thus difficult to evaluate, yet which in essence derive from systemic change or resultant strategic decisions, are often overlooked. However, to master the ever-increasing speed of change we are challenged to adjust the pace with which we tackle the associated risks. Agile risk management plays a decisive role in this process.

My first article of the current HORIZON series introduced our 4 Risk Changers model and put the spotlight on the multiple challenges faced by companies. In the light of ongoing and rapid change, these challenges are to date omnipresent.
Based on our vast experience and extensive expertise in corporate risks, I consider these complex changes as systemic risks. I have categorised them as ecological, geopolitical, technological, and social transformation risks.

The 4 Risk Changers

Unlike the tangible assets in former years, it is now the intangible assets which increasingly influence the transformation of companies’ risk environment. The major challenges for a forward-looking risk management are posed less by the concrete individual risks at an operating level but more by the abstract systemic risks which are caused by global events and external developments.
Central to my view are the effects of this systemic change on the risk situation of companies. Also, I differentiate between primary and secondary transformation risks.

  • Primary transformation risks derive directly from the risks associated with systemic change. For example, the impact of the war in Ukraine on the supply of energy and the development of prices in Europe are a result of geopolitical transformation.
  • Secondary transformation risks are typically speculative. They include both risks and opportunities and derive from the metamorphosis which companies have undergone because of systemic change. The aim is to emerge from the crisis stronger than before and/or take advantage of the new opportunities presented by this change. The resultant new risks – despite being abstract – are of great significance and cannot be ignored. They must be viewed from a holistic perspective.

How systemic change affects insurance

Primary and secondary risks tend to increase during a transformation process. They evolve over time. At the beginning, these transformation risks can only be identified with great difficulty. Most of the time we tend to pay less attention to them. Only when they reach a specific threshold, when we become aware of “soft signals”, can they be identified as such and dealt with by risk management.
As is the case with conventional “emerging risks”, the required risk assessment, however, lacks experience, i.e. it lacks historical data and information, presenting an obstacle for analysing transformation risks.

When developing suitable risk management strategies, the attempt to transfer these risks to the insurance market as part of the development of suitable risk management strategies is bound to fail in most cases. The principle of insurability applies. This means, a risk must be measurable for the insurance market to secure adequate capacities. If there is no measurability – as opposed to the maximum loss calculation in the case of fire risks, where the possible maximum loss (PML) represents the maximum expected damage caused – it will be determined based on data modelling of historical risk and claims as well as on actuarial assumptions.

Transforming risk landscape affects insurability

Since new risks and transformation risks lack the required historical data, there is usually also a lack of availability of insurance capacities, especially in their uncertain early stages of development. Adequate insurance solutions (can) only come into being over time.
The current systemic transformation leads to numerous new and changing risks which cause companies’ risk landscapes to change permanently and at an increasingly rapid pace. These dynamics now result in less and less insurance for operational risks, which in the past were adequately and successfully insured.
Thus, as the gap between the lack of insurability and company risks continues to widen, there is an urgent need for the implementation of new methods in risk management.

A transforming risk landscape is often ignored

In practice, many risk management systems that have been implemented only manage concrete risks which already exist. Due to a lack of both early-warning mechanisms and the outside perspective on systemic change and its global events, the risk analysis focus is still on the known and assessable risks. The attention is on the actual situation of the risk environment.
Today’s abstract risks, i.e. risks which still evolve as a result of the changing business environment and have therefore not yet occurred or new risks arising from strategic changes in the business model that aim at seizing new opportunities, are often ignored. In practice, the resultant transformation of the risk landscape is hardly ever anticipated. It is only dealt with once risks manifest themselves because that is when they can be identified and assessed accordingly.
So, how can risk management help to tackle increasing volatility, uncertainty, complexity, and ambiguity and, in turn, boost the resilience of companies? An effective approach that facilitates an agile management of abstract transformation risks needs to be implemented. Existing risk management processes must widen their scope and perspective with some type of risk forecasts, enabling risk managers to anticipate risks at an early stage and allowing them to better prepare themselves.

Agile approach to anticipate transformation

Quite often, we encounter situations where a company’s risk management is organised in closed administrative departments which function like silos that were put in place to comply with legal requirements. Because such risk management deals with risks at an individual level only, its benefit as a company-wide tool to effectively manage risks often fails to achieve its full value.

Systemic change - Primary and secondary risks

The agile management of risks and opportunities is based on a corporate culture that is open-minded towards such risks and opportunities and is organised around transparency, dialogue, trust, and constant feedback cycles.
It comprises interdisciplinary teams whose members act with utmost flexibility as and when needed and who are an integral part of strategic and operative decision-making processes.
That way, transformation risks can be anticipated and acted upon at an early stage. This boosts the resilience of companies, enabling them to make the most out of future opportunities.
Anticipating transformation risks at an early stage means viewing the world from a future perspective and interpreting the inherent risk situation in the best possible way. Paying attention to soft signals, like new and shifting trends, as well as an open-minded attitude towards strategic considerations helps the establishment of effective early-warning indicators to manage risks.

Agility drives insurability and strengthens resilience

As a risk specialist, it is our vision to manage the risks of our clients in such way that they can rest assured and focus on their core business.
As a loyal and trustworthy partner, we work for and with our clients in flexible, interdisciplinary teams where we prove our transparent, dialogue-driven culture every day.
We anticipate systemic change and proactively direct our organisation towards the future needs of our clients. Agile risk management plays a key role for us.
In future, our progressive service approach will focus even more strongly on anticipating any change and resultant risks at an early stage.
HORIZON – “Risk Thought » Fast Forward” is our platform for risk-thought leadership. It follows our ambition to anticipate systemic change at an early stage, drive the insurability of a transforming risk landscape and create value through tailored solutions that strengthen our clients’ resilience and protect their future ventures.
GrECo, matter of trust.

Georg Winter


T +43 664 962 39 06

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”The World Is in Big Trouble.“

Our CEO Georg Winter shares his views on why geopolitical transformation is our focus this year and why it exacerbates existing risks and causes new risks to emerge.

Secretary-General António Guterres made this statement at the General Assembly of the United Nations on 20th September 2022 in New York.

We are undergoing times of permanent change, which many refer to as systemic transformation or multiple crises strung together. This change takes place in different fields and segments. They, in turn, are interlinked at various levels. HORIZON’s risk-oriented approach aims to define and outline the key areas of change affecting your company. In doing so, we take a close look at the systemic influences of ecological, geopolitical, technological and social transformation on your company’s risk landscape.

The 4 Risk Changers

The 4 Risk Changers

These transformation processes are very dynamic, they are often interdependent and thus characterised as complex processes. They also result in systemic risks. Managing them requires much more than traditional methods of risk management.

In terms of risk management, we refer to these systemic risks as “risk changers” that directly affect companies and categorise them as follows:

  • “Environment in danger” for ecological,
  • “Beyond globalisation” for geopolitical,
  • “Digital transition” for technological and
  • “Social disruption” for social transformation.

HORIZON – “Risk Thought » Fast Forward” is our platform for so-called risk thought leadership. It is based on our vision to detect the impact of these risk changers at an early stage and introduce risk management solutions that boost our clients’ resilience.

How do the 4 Risk Changers affect companies?

Companies are exposed to various kinds of risks. At the same time, systemic transformation exacerbates existing risks and causes new risks to emerge. These primary risks have a direct bearing on companies.

 How do the 4 Risk Changers affect companies?

Primary risks – Transformation leads to direct exposure

Ecological risks
When we look at climate change, we refer to climate risks. They are apparent in form of a changed or an increased exposure to natural disasters, such as floods, storms, hail as well as heat, drought or a rising sea level. As far as companies are concerned, these risks can cause anything from material damages to disruptions of transport routes, in energy, or raw material supplies.
Geopolitical risks
Geopolitical change, characterised by an economic bloc having been established between the USA and China, has put free world trade to the test. It also shows, by looking at Russia’s invasion of Ukraine, just how quickly a system conflict, which we thought had been settled between the democratic and autocratic world, can be reignited. All that, exacerbated by global events, like the Covid-19 pandemic, puts pressure on the availability of energy resources, disrupts supply chains and leads to a global wave of price hikes that challenge governments, businesses, and the civilian population alike.
Technological risks
Technological change has resulted in an over-dependence on data, software and IT infrastructure. All are targets of a rapid increase of cyber threats all over the world and are thus one of the biggest threats of the 21st century.
Social risks
The growing divide between rich and poor, the lack of equal opportunities regarding age, ethnic background and nationality, gender and gender identity, physical and mental abilities, religion and ideology, sexual orientation and identity as well as social backgrounds increases social tensions. The Club of Rome deems equality and justice as part of the ideal solution for a liveable future.

Companies cannot shirk their responsibility in this regard. For instance, social issues are becoming more and more important as we are facing an inevitable demographic change that has already resulted in a systemic shortages on the job market.
The interdependency of these systemic risks is best demonstrated by the war in Ukraine: From a geopolitical point of view, it has led to an energy crisis. In terms of technology, it has led to an increasing number of cyber threats. On top of that, well-targeted campaigns are aimed at splitting society and disturbing social peace in our Western world. From an ecological perspective, however, there is hope that our efforts to reduce carbon dioxide emissions can finally be carried through.
Systemic change – Primary and secondary risks

Systemic change - Primary and secondary risks

Secondary risks – Adaption creates new chances and challenges

Besides these primary transformation risks, which affect companies as “pure risks” from the outside, systemic change leads to secondary transformation risks that are “speculative”. They derive from companies’ adapted business models that were developed in response to the systemic change and comprise both risks and opportunities.
Ecological adaption
In the fight against climate change, many companies have decarbonised their processes or have developed sustainable products. Saving resources and taking advantage of new opportunities are key focal points. However, new products and processes lead to new risks that must be identified at an early stage.
Geopolitical adaption
As a result of the geopolitical change, companies had to explore new markets and new sources for raw materials and find new ways of attracting both customers and suppliers, while keeping a watchful eye on possible dangers. Although the currently rising energy prices still paint a different picture, supply chains can be shortened through nearshoring. This could very well result in a wave of reindustrialisation in Europe.  
Technological adaption
Technological change enables us to pursue totally new paths. While the automation and digitisation of value chains is gaining importance, the full potential of mergers, transparency, big data, and metadata remains to be exploited. Manufacturers of previously traditional products and services are becoming system providers, goods are being replaced by data, and machines by platforms.
Social adaption
In the past, humans used to be regarded as resources. Now, humans with all their resources take centre stage. The concept of Industry 5.0. does exactly that. It places the human being at the centre to promote and foster diversity, different talents, and activities. Many companies have already initiated a transformation process because employees nowadays attach more importance on meaningful work. They believe that they can make a difference when it comes to resilience and sustainability.

Beyond globalisation – Geopolitical transformation in the spotlight

The upcoming release of HORIZON will concentrate on the geopolitical transformation and therefore looks at all its challenges from various angles.
New political world order
Does the war in Ukraine show us the dramatic face of a new political world order and how does this conflict at the very centre of Eastern Europe disrupt our economic basis?
How will the global trend of bloc formation between democratic and autocratic countries influence companies’ global business activities in the future?
What is the risk of technology being abused as an instrument of power and how could this affect companies?
How will the increasing conflict between the USA and China influence global economic relations?

Energy crisis
Blackout and a cold winter – how can we prepare for a total outage?
Will the current shortage of natural resources ruin Europe’s industry or will an ambitious energy transition turn Europe into a role model for a green global economy?

Supply chain dilemma
Will the geopolitical transformation result in a new era of offshoring, or will regional supply chains and increasing investments in circular economy boost independence and resilience?
How will China´s rise continue – considering its growing regional influence along the new silk road – and what will be the effect of its strategy of isolation as a result of its zero-tolerance pandemic policy?
Is the conflict over Taiwan’s independence a ticking time bomb for the global economy?

Loss of wealth
Will double-digit price increases lead to a decreased standard of living over the long term?
Does high inflation increase the risk of social riots in Europe?
How do these circumstances influence people’s work-life balance and their work attitude?
What does a new wave of migration mean for European companies and their DE&I (Diversity, Equity, and Inclusion) agenda?
It is indeed a difficult and challenging situation that raises many most pressing questions. We need to discuss them, their impact on the transformation of the risk landscape as well as possible solution scenarios.
Stay tuned!

Georg Winter


T +43 664 962 39 06

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Rethinking the Energy of the Future

Rethinking the energy of the future

Insurers are faced with a big challenge during the energy transition: The past loss experience on which they have based their forecast models can no longer be used for predictive future scenarios. On top of that, new risks will emerge.

We are at the crossroads of the fastest and most profound disruption the energy sector has seen since the beginning of the indus- trial revolution. It is an irreversible process driven by key technologies: solar power, wind power and battery storage systems. Hydrogen and bioenergy are still underrepresented because their technological progress is only in its infancy. We yet have a long way to go because a successful energy transition, i.e. a 100% substitution of fossil fuels with renewable energy, including green hydrogen, hydropower and biomass, might only be reached by 2050.

An analysis conducted by RethinkX, an independent think tank, has shown that 100% clean energy from a combination of the above-mentioned sources is both physically possible and economically affordable. And this is just the beginning. Coal, gas, petroleum and nuclear assets will become stranded during the 2020s because investing in these technologies will no longer be rational.

The role of insurance

Insurers are faced with a big challenge during the energy transition: The past loss experience on which they have based their forecast models can no longer be used for predictive future scenarios. On top of that, new risks will emerge as technological developments associated with solar, wind and battery storage infrastructure advance even more rapidly.
It may become more difficult to put a price tag on physical risks because the transformation from hazard to exposure to damage and its manifestation in cash flows will be hard to model. According to a Harvard Business Review research, onshore and offshore large risk losses amounted to 60 billion USD in the last 30 years.
Insuring renewable energy should present an intuitive alternative to fossil fuels. Indeed, prospects for insurers look very promising. However, the renewable energy sector must still grow considerably to replace the revenue generated by the fossil fuels sector. To date, renewables still play a minor role in the worldwide energy insurance sector, which generates roughly 14 billion USD in premiums each year. Renewable energy insurance only generates an estimated 500 million USD in premiums per year.
Insurers are in the business of taking risks, yet they also need to make a profit. They allocate capital, using historical data and other factors to calculate the right mix of aggressive and conservative risks, and tend to balance both frequency and severity. This does not mean that solar power and other renewables are unattractive to the insurance industry. On the contrary, renewables are the future of insurance just like they are the future of energy. Insurers are therefore challenged to understand, model, and price policies more effectively, especially as alternative energy continues to evolve.

Rocky road

If energy transition is to succeed in the next 32 years, two goals will have to be reached:

  • The renewable share of electric power would have to increase from currently 15%-20% to 100%
  • The share of electricity in the global energy mix would have to increase from currently 18% to 100%;

This means that the current renewable production would have to increase by a factor of 60!

The American climatologist Ken Caldeira has estimated that we would need to develop the equivalent of the energy produced by a nuclear power plant every day in a fifty-year time span. At the current rate however, the energy transition will take 363 years.

Although renewable energy has clear benefits with respect to reducing greenhouse gas emissions, it has some inherent limits. Five major obstacles would have to be overcome on the road to energy transition:

  • Space: Regardless of wind, solar or battery storage, these facilities require large areas of land. Solar parks and wind farms are usually placed on agricultural land and therefore can cause land shortages, a displacement of the population, and they have a negative impact on biodiversity.
  • Resources: The dependency on huge amounts of material and natural resources such as steel, concrete or rare natural metals accelerates the rapid depletion of our planet’s resources. Economics teach us that these supplies will not be depleted because prices increase, and technological innovation will enable the use of poorer quality ore to maintain production levels. However, obtaining poorer quality ore means more invasive and energy-intensive methods. The outcome is a vicious cycle: to produce more energy, more metals are necessary, and to produce more metals from low-grade ore requires more energy. Already there are bottlenecks in the production facilities for solar modules, wind turbines, blades, transmission and distribution lines.
  • Transmission: We are used to having electricity when we need it. Since it cannot be stored, it must be consumed when it is produced. Wind and solar energy, which are available when the wind blows, and the sun shines cannot meet these two conflicting demands.
  • Non-substitutability: Renewable electricity cannot replace all the benefits of liquid fuels. For example, batteries simply cannot meet the energy needs of heavy machinery, aircraft or merchant ships. Certain industrial processes simply require liquid fuels, e.g. the manufacture of steel, plastics and fertilisers. For other industries that rely just as heavily on uninterrupted, smooth production processes, such as aluminium and cement production, intermittency is a serious stumbling block because stoppages damage the infrastructure.
  • Financing: Given the poor financial returns and major risks associated with renewables, the energy sector remains cautious. For a successful transition to occur, about 14 trillion USD in investments in solar and wind energy would be needed by 2030. But spending in the battery sector will not exceed 10 billion USD, including research and development.

We are dealing with the “known unknown” phenomena, as the new energy system that emerges will be much larger. Its architecture will be completely different and will operate in a yet unknown way. One of the most unique characteristics of the new system will be its ability to produce much larger amounts of energy – a superabundance of clean energy.

This energy will be available at near-zero marginal cost throughout the year for nearly all populated areas of the world. Computers and the internet serve as an example. The marginal cost of information has been slashed and hundreds of new business models were created only to transform the core of the global economy

There’s a need for Risk Management 4.0 

Businesses are cautioned to not only rely on industrial insurers as some, to date insurable risks, could suffer the same fate as cyber insurance. Just think about climate change or coverage against natural disasters. Besides, there are many – often new – risks which cannot be insured and which change just as rapidly.

Industrial companies must increasingly come to grips with future risks, strengthen their risk management in the process and place it at the top of their agenda. This, however, means more than just implementing the risk improvement measures which insurers impose upon them – something which almost all market players have propagated at an inflationary level, and which only addresses the past. It is rather a matter of defining future risk changes, determining their possible consequences for one’s company and preparing accordingly – a forward-looking risk management 4.0, so to speak.

A partner who not only focuses on mere risk transfers but acts as a risk adviser, who sends out the right signals and provides expertise through a know-how pool can create real added value for industrial companies. By working in tandem with clients the insurance partner can help to meaningfully shape the future in an ever more complex, interconnected, and fast-moving world.

Zviadi Vardosanidze

General Manager GrECo Specialty

T +43 664 962 39 04

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Green Responsibilities on the Rise

Green responsibilities on the rise

The upcoming renewals will continue to be driven by a highly competitive insurance market under pressure. Comprehensive risk analyses combined with a presentation of the risks will be necessary for a successful renewal.

It is common knowledge that the insurance market is navigating through a difficult period. A lot has been said about increasing premiums and decreasing limits. However, little attention has been paid to the changing risk landscape and the impact that these changes could have on insurance contracts.
Bricks are turned into batteries“, “WE CARE. For PEOPLE the PLANET and the FUTURE“, “Adding the Extra to the Ordinary” are examples of corporate vision statements and headlines of articles that are published on the internet, in print media, company reports and on websites.
Among other things, these statements mirror the ability of innovation and sustainability and offer a glimpse into the future development of companies. At first glance these statements have absolutely nothing to do with changes in the risk landscape. Bricks have been used as a building material for thousands of years, sustainability is an age-old principle in many business sectors, and machine-driven products such as elevators have been produced and serviced for decades.

ESG efforts change liabilities

Looking deeper, however, it quickly becomes clear that these statements also contain significant changes in risks and show similarities. A brick that is not only used as a building material, it also provides the storage space for electricity, representing at least another, if not higher, product liability risk.
Less obvious is the fact that companies’ sustainability statements may result in new liabilities. ESG is a voluntary contribution by businesses to sustainable development that has been increasingly codified in laws. A violation therefore no longer remains without sanctions but comes with enormous penalties and might lead to claims for damages.
For example: In Italy, ENI was sentenced to a fine of 5 million EUR for describing a diesel product as “green” and thus deceiving consumers. In the Netherlands, a ruling by a civil court required Shell to change its guidelines and requirements to ensure that the Shell Group’s CO2 emissions in 2030 would be 45% lower than in 2019.
ENI’s “green” diesel was probably more expensive than “normal” diesel. Consumers could claim for damages because they had trusted the environmental friendliness of the green diesel, refuelled their cars with it, and then sued ENI for the additional expenses they had. Looking at the judgement against Shell, a similar situation might arise. If Shell does not achieve the target set out in the court decision by 2030, and if, for example, harvests fail due to environmental influences that can be traced back to climate change, farmers affected by crop losses might sue Shell for damages as a contributor to the climate change.
Not only product changes, but also changes in the company’s offerings may lead to new risks. The statement “Adding the Extra to the Ordinary” is just one of many examples that clearly shows that more and more manufacturing companies are evolving into system providers. Over and above typical maintenance services, companies have added a wide range of services to their portfolios, including software solutions or product trainings. Manufacturers therefore not only have to consider production risks but also risks associated with the provision of services.

EU Interests: Consumer Protection

These developments are accompanied by the EU paying more and more attention to consumer protection. From today’s perspective, the exemplary claims for damages against ENI and Shell are rather unlikely in most European legal systems, since class actions, common in the USA, are not possible in most European countries. However, the recent diesel scandal has shown that such claims could in principle also be raised in Europe.
Unlike in the USA though, far more stringent legal conditions would apply. This current lack of class actions can be seen as a kind of protection of European companies against the risk of extremely high consumer compensation claims.
This protective cloak might soon be lifted. In November 2020, the European Parliament passed the “Directive on representative actions for the protection of the collective interests of consumers” to protect collective consumer interests from breaches by companies under EU law. The directive is to be implemented in national legal systems by 31 December 2022. This new guideline will not only lead to changes in the basic liability of companies but will greatly increase their risk of being faced with extremely high compensation claims.

“We are well insured in any case”

This statement is often heard in connection with claims. In view of the changing risk landscape, however, the question arises whether the existing insurance solutions also offer the expected and necessary protection. Claims for damages from services generally comprise financial losses that are not derived from personal injury or damage to property (so- called “pure financial losses”). A violation of ESG rules can also result in property damage or personal injury, but the greater number of possible damages will be associated with pure financial losses.
In contrast, covers from traditional business and product liability insurances are specifically geared towards property damage and personal injury. Including pure financial losses is only possible to a limited extent. Even if so-called “open pure financial losses” are included in a liability contract, the limits agreed for this extension will not be enough to cover the sums claimed in the event of a violation of ESG rules.

Corporate financial loss coverage

D&O insurance usually offers managers protection against ESG claims. But what about the companies, are they adequately protected? In most European legal systems, third parties cannot directly claim damages from managers, only from companies. Should they be found liable for that damage, they can take recourse to managers for compensation payments. The insured event according to D&O is only triggered when the company claims compensation from the manager. To insure this recourse, companies bear the burden of enormous advance payments when it comes to ESG claims. Whether the D&O insurer pays the damage at the end of the day or whether the D&O insurer’s services are limited to defending the manager depends on each individual case and cannot be foreseen. Adequate insurance protection for the company itself can only be built up by means of appropriate financial loss coverage. Currently available insurance products, like the employer’s practice liability, provide only partial protection against ESG risks. Notwithstanding that, the insurance market is increasingly under pressure to insure companies against ESG losses in their entirety. To better address this need, insurers will have to come up with appropriate product innovations.
Already, the market is reacting to the changing risks of manufacturing companies that are evolving
into service-led businesses. Various insurers offer products that specifically address the risk of pure financial losses for companies offering software solutions in addition to their products.
The upcoming renewals will continue to be driven by a highly competitive insurance market under pressure. Comprehensive risk analyses combined with a presentation of the risks will be necessary for a successful renewal. The related work should be used to check the extent to which individual companies’ risks have changed and whether existing insurance policies still offer sufficient protection.

Thomas Herndlhofer

Practice Leader Liability

T +43 664 822 20 59

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Decarbonisation takes its toll

Decarbonisation takes its toll

It is no surprise that the industry, prompted by progressive political and environmental activists and industry regulators has taken action and encouraged some of the major polluting industries to transform their processes so that they produce lower or no greenhouse gas emissions.

Although the topic of global warming sparks many controversies in the world’s media, political circles and everyday discussions, few people would deny that the climate patterns have recently been changing, bringing about an increasing number of natural catastrophes. Published in August 2021, the Sixth Assessment Report of the UN-backed Intergovernmental Panel of on Climate Change shows alarming trends affecting the global economy and the well-being of the world’s population.

Amongst those most affected is the financial services industry, such as equity investors, lenders and insurers. It is no surprise that the industry, prompted by progressive political and environmental activists and industry regulators has taken action and encouraged some of the major polluting industries to transform their processes so that they produce lower or no greenhouse gas emissions. This step has often taken an extreme form of providing reduced access – or no access at all – to risk capital, effectively cutting the worst offenders from access to equity and debt financing, and to insurance.

In many cases these policies prohibit the financing of the very projects that are aimed at transformation towards greener technologies, such as the development of renewable energy sources by incumbent thermal coal-fired power producers. Whether this dogmatic and inflexible approach will contribute to reaching desired goals or prove itself to be counterproductive, remains to be seen. The seemingly unlimited capital resources available worldwide may be channelled to new players and technologies on the power utility scene, effectively pushing the incumbents into extinction. It is worth noting that all  these woes do not only befall coal- fired power producers. Next in line are gas-fired power plant owners and operators as well as industries such as oil and gas, cement, steel, transport and others that contribute to greenhouse gas emissions.

Fate of the incumbent power suppliers

Although we cannot foresee which different scenarios the future may unveil, we believe that it is still possible to arrange insurance coverage for operations that produce power from fossil fuels, including thermal coal. However, increasingly this requires careful planning, a flexible and realistic approach to the scope of cover and, finally, competent execution. Companies need not (and often cannot) go this route alone. An insurance and risk consultant can help you through the transformation process despite the pressure from activists and other key stakeholders.

Tips for your risks

  • Improve the risk quality. As long as increasingly challenging economies allow it, invest in improving the risk management framework. Traditionally, insurance has been the cheapest form of risk capital. Certain operators have abused this by consciously not using good risk management practices, which may have been effective in the short term during the final stages of the soft market. Today’s hard market no longer tolerates such an approach. Underwriters who still write carbon-intensive business can choose from the entire range of clients. They will choose those who display the desired traits such as a proactive attitude to risk management.
  • Seek outside opinion. Hire a seasoned and respected engineer to survey the business and produce a risk engineering report. It will come with useful risk recommendations backed by years of experience as well as actual loss scenarios that happened around the globe. It will also provide realistic insights into the possible costs of catastrophic losses, which can be used as a basis for discussions on how to fund those costs (especially in tough times).
  • Be realistic about the coverage sought. Low deductibles and full value policies are becoming things of the past. Not only are insurances with higher deductibles and realistically set limits easier to place, they also demonstrate the client’s commitment to loss prevention and robust risk management. Capital requirements imposed on insurers and reinsurers by financial market regulators have reduced and will continue to reduce market capacity – perhaps as much as the pressure from activists and investors.
  • Companies that have an internal decarbonisation strategy are advised to communicate it effectively. The strategy must be credible, measurable, and supported by the company’s top management. Adhering to standard measurement and reporting rules will be helpful to integrate the decarbonisation strategy into the insurers’ internal reporting systems. In the future, markets may require the progress of the strategy’s implementation to be verified by an independent auditor or a similar body.
  • Companies lacking a decarbonisation strategy may still rely on using existing assets until the end of their technical lifecycle. However, they will have fewer options to choose from as time passes. There will still be certain risk financing tools available, such as industry mutuals, captives and other alternative risk transfer techniques, parametric insurance, and so forth. An experienced, creative and open-minded risk management consultant to structure and implement risk financing strategies in the ever changing financial and regulatory landscape.
  • Careful and skilled carrier management should be exercised to optimise coverage terms and pricing, find the right balance between the requirement for broad insurance panel diversification, differing risk appetites, portfolio and territorial considerations, varying credit rating, etc. We expect certain insurers to be pushed out of writing carbon-intensive risks by their stakeholders, whilst they may or may not be replaced with new entrants. That is why accessing worldwide insurance markets and understanding the individual market characteristics, business targets and constraints is an ever more important issue.
  • The market approach should be a mixture of nurturing long- term relations with key stakeholders and accessing opportunistic capacity as it becomes available. Unfortunately, today’s market environment for carbon-intensive risks is characterised by uncertainty. There is no guarantee that an insurer, declaring a long-term commitment in good faith, will not soon be forced out by investors at short notice. Therefore, while working towards the best-case scenario, one should be prepared for the worst.
  • Submission quality is just as important as risk quality. Information provided to insurance markets should be kept up-to-date, accurate, to the point and presented in a clear and attractive manner. Distressed risks with challenging loss histories will obviously be much more difficult to place in the current environment. However, the direct involvement of a senior risk manager giving account of lessons learned and improving the robustness of the asset and risk management framework may make all the difference between a challenging placement and a failed one.

The first focuses on infrastructure (office buildings, car parks) and digitisation (less office space and business travels, working from home, which may enhance social governance as well). The second will result in huge support for innovation projects and green measures taken by both public and private business as insurers have to invest their reserves to be able to pay future claims. The decision where to place this money has to be driven by security aspects (for this reason there is a relatively big share of public investment) and with a long-time perspective in mind.

Insureds facing an ever more difficult market environment that is likely to remain challenging in the years to come should accept the reality and maximise their efforts to prepare themselves and their companies for the future.

A competent, experienced and dedicated insurance broker and risk management consultant can assist in achieving the risk financing goals required by owners, lenders, government authorities, clients, and other key stakeholders whose well-being and prosperity depends on the successful operation and resilience of the business in question.

Pawel Kowalewski

Group Practice Leader Energy, Power and Mining

T +48 507 085 066

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Delivered Duty Paid for a Green Future

Delivered Duty Paid for a Green Future

Insurers have shifted their focus from topline premium and growth towards rate adequacy. New modelling and technical tools are being utilised more than ever as insurers want to understand the complex technicalities of cargo risks.

The major international cargo insurers are reconsidering the insurability of cargo of concern (for example thermal coal) in relation to zero emissions targets as companies dealing with such cargo, such as miners, traders or major users may have difficulties to secure the insurance they need in the future.

With regard to thermal coal it still seems that cargo insurers who do underwrite the commodity business tend to focus on those accounts where the volume of thermal coal provided is within a certain tolerance limit, i.e. below or about 20% of the total turnover or revenues. Discussions are rife, especially in the lead-up to the UN Climate Change Conference (COP26) being held in November 2021 in Glasgow, UK, and with the IEA Report on net-zero emissions by 2050 and the latest UN Report having recently been issued.

In December 2020, Lloyds issued their Environmental, Social and Governance Report which included various undertakings, the two most prominent being:

  • Lloyds managing agents will be asked to provide no new insurance cover in respect of thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities from 1 January 2022.
  • To support Lloyds customers through this transition, Lloyds managing agents will be asked not to renew insurance coverages for thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities after 1 January 2030. This also applies to companies with business models which derive at least 30% of their revenues from either thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities from 1 January 2030.

Furthermore, eight of the world’s leading insurers and reinsurers, working together with the UN Envi- ronment Programme Finance Initiative, are currently in the process of establishing a pioneering Net-Zero Insurance Alliance (NZIA).

Overview & Expectations

We expect the London and mainland European cargo markets to be pressing for some continued base rate increases where business warrants it and where they are able to do so. However, through the first half of 2021 we have begun to see some softening of general increases and with some insurers beginning to look quite aggressively for new business opportunities available to them. If this trend develops, we expect the renewal business with little or no adverse claims histories and the right profiles to be considered “as before” renewals as we reach the end of 2021 and the beginning of 2022.
Marine Cargo renewals have been subject to price increases of between 15% to 40%. Automotive, pharmaceutical, commodities and retail stock throughput accounts will continue to be the most affected.
Specific changes to the underwriters’ appetite include:

  • Excess stock – insurers have reduced the capacity in many market sectors, no longer willing to underwrite excess stock.
  • Many marine insurers are no longer underwrite distilleries or wineries.

Insurers have shifted their focus from topline premium and growth towards rate adequacy. New modelling and technical tools are being utilised more than ever as insurers want to understand the complex technicalities of cargo risks. As natural perils remain a key focal point globally, we expect longer turnaround times for quotes as well as significant rate changes for most exposures in the region. Good data quality, including surveys, COPE, risk management forms, and so on, will help us to provide our clients with more favourably rated insurance contracts.

Lead lines are expected to remain conservative, and the expected reduced capacities will come with the added difficulty of some insurers not wishing to reinsure their competitors.

We will continue to see a disconnection between the local Eastern European markets and international markets in terms of rates. However, this gap is slowly closing as most local insurers face an increase of reinsurance costs and are thus unable to sustain reduction demands

Kristo Ristikivi

Group Practice Leader Cargo

T+372 506 9809

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