European insurance: a ‘one size does not fit all’ approach

The European insurance market is a fascinating mosaic of diverse industries, markets, and maturities, all operating within the same geographic region but with distinctly different needs.

The complexities that arise from historical, economic, and cultural factors mean that the “one size fits all” approach to insurance is not feasible across the continent. Instead, a nuanced, highly adaptable strategy is necessary to meet the unique demands of each country.

That is what Daphné Naudy, director of development for Continental Europe at global loss-adjusting company Charles Taylor, explained to FERMA Forum Today. “The maturation of the local market is crucial. For example, if you go to Romania, the maturity of the local market is very low compared to France, Spain, or Italy, which have well-developed, mature markets.”

Naudy highlighted an important point: insurance solutions that work in more established markets such as France or Italy cannot be seamlessly transplanted to emerging markets like Romania or Poland.

Despite the relatively nascent insurance environment in countries like Romania and Poland’s more advanced development, there are still large, often multinational corporations with significant exposure to risk. “Sometimes you have massive claims in Romania or Poland because you have French corporations that have factories there,” Naudy pointed out.

However, the response to these claims must be carefully tailored to the local environment, requiring not only an understanding of the insured risks but also local boots on the ground to manage claims.

“The role of brokers is fundamental in the insurance ecosystem, but it’s also very different from one country to another.” Daphné Naudy

Risk landscapes across Europe are not uniform either, which further complicates the task of creating a pan-European insurance strategy. In countries like Germany and Italy, small and medium-sized enterprises (SMEs) dominate the business landscape. “In Germany and Italy, you have a lot of SMEs—sometimes family-owned businesses that export their goods,” said Naudy.

These businesses, often deeply ingrained in the local economy, present a unique set of risks that differ from those faced by large multinational corporations in countries like France, where business tends to be more centralised around larger corporate entities.

The type of businesses in each country shapes the role of insurance brokers in managing these risks. According to Naudy, “The role of brokers is fundamental in the insurance ecosystem, but it’s also very different from one country to another.”

In the Netherlands, for example, brokers wield significant decision-making power in the insurance landscape. “The broker has a lot of power in the Netherlands—way more than in other countries,” she explained. This discrepancy underscores the need for insurers to be acutely aware of the local dynamics in each market they operate in.

Even within multinational brokers like Aon or Marsh, which have a presence across Europe, the power and role of the broker can vary dramatically depending on the country. This means that insurers and loss adjusters must understand not only the needs of the insured but the local insurance ecosystem in order to provide appropriate services.

One of the unique challenges of the European insurance market therefore is dealing with trans-border claims, which involve navigating multiple legal frameworks, languages, and business cultures.

Naudy underscores the importance of flexibility when managing these claims: “When it’s trans-border claims or trans-border risks, there’s a lot to take into consideration.” She stressed that while Europe may be viewed as a single region politically or economically, when it comes to insurance, it is anything but homogeneous.

It’s a far more complicated picture in terms of individual countries and insurance cultures. A company may have operations in multiple European countries, but the risks and insurance practices in each one could vary significantly.

For instance, a German SME might have a supplier in Romania or Poland, but the insurance and risk management strategies employed in each country will differ according to their respective market maturities and regulatory frameworks. “The interests and the relationships are very different, and therefore the need for insurance is very different as well,” Naudy emphasised.

As a result, the concept of risk management, while universal, manifests differently depending on the size of the business and the specific risks it faces. “Risk management is the same everywhere. The concept is the same,” Naudy said. “Then, of course, it depends on the size of the company.” Large corporations tend to have structured risk management departments with skilled professionals who are capable of analysing and managing risks on a global scale. For SMEs, however, this is often not the case.

In many SMEs, risk management duties fall to financial directors or other executives who may not have specialised expertise in risk analysis. These businesses might not even have a dedicated risk manager, despite facing substantial risks. “Sometimes it’s a director, sometimes it’s a financial director, but it’s someone that might not be so prepared for a risk analysis,” Naudy explained. In these cases, brokers and insurers play an essential role in educating businesses about their risks and helping them secure the appropriate coverage.

FERMA Forum Today is in partnership with Captive Review, part of Newton Media.

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