The world is 'riskier by the minute', Zurich says

Increasing urbanization, natural catastrophes and global business interconnectivity are making the world riskier by the day, according to Thomas Hurlimann, chief executive officer of global corporate business at Zurich Insurance.

Hurlimann had held a number of senior management positions at the Swiss insurer, including global head of group reinsurance, chief operating officer for global corporate and CEO of global corporate in Europe.

He started his career in banking, working in treasury and corporate finance, and then moved into the insurance sector, spending seven years with Swiss Re. He joined Zurich in 2003. Hurlimann holds a degree in business administration and economics from the University of Zurich and an MBA from the International Institute for Management Development in Lausanne, Switzerland.

"We serve customers across the world," he told Shanghai Daily during an interview at the insurer's Shanghai representative office in Lujiazui, which will be transformed into a new branch office later this year. "And China is an important market for Zurich and the whole world."

Hurlimann said he visited Shanghai last month "to learn more from the team here," whom he described as doing a "very good job."

Q: What's the strategic plan for the new branch in Shanghai?

A: This has been a great milestone for us, so that we can serve our customers in China even better. With the subsidiary in Beijing and the branch in Shanghai, we will provide local customers top service, and also our international customers can have the best service everywhere in the world.

Shanghai is a very fast growing market, with a lot of local and international companies here. The closer to our customers and brokers, the better. It's the closeness that we are excited about. We can start to operate in Shanghai later this year.

Q: Do you have a plan to expand to other cities in China?

A: We want to be close to our customers, so we will continue to invest in China. We will look further on where to go.

Q: The Sino-Swiss free trade agreement just took effect last month. How will that benefit your operation?

A: Business becomes easier for the two countries from a tax and legal protection point of view. From an insurance perspective, we benefit a lot from global trade and business because we are a global company. This is very positive I think for both China and Switzerland, as well as for Zurich Insurance.

Q: What are the main hurdles of doing business in China?

A: Whenever you do business outside your home country, you need to understand cultural differences. You need to have people on the ground who actually speak the language. We have a large proportion of Chinese employees here. We have a local team who knows the local situation. We haven't sent expats from Switzerland or anywhere else. So I think we could master the hurdle very well.

Q: How would you define your customer segments here in China?

A: The first one is middle-to-large Chinese companies that want to access our global expertise, financial strength and claim capabilities.

The second group are Chinese customers who want to go abroad. The world is complex. So they need a partner who really knows what they are doing.

Q: What's your view on the Chinese insurance market?

A: Whenever an economy is growing, insurance is growing as well. The more people own things, the more they want to protect their assets, such as their cars, fridges, and houses. The more people get wealthy, the more insurance will be purchased. In markets where you see a growing middle class, you usually see fast growth in insurance. The amount of insurance people buy per capita in China is relevantly low, but we will see that grow over time.

Q: Does that mean Zurich China will expand to individual insurance from corporate business in the future?

A: Not necessarily. If people want to buy more fridges, for example, that means more business for the manufacturers. And also more business for us because they need more insurance for their operational expansion.

Q: How does Zurich plan to balance maintenance of market share with profitability in a competitive insurance market like China?

A: Zurich can be a sustainable partner only if we achieve a reasonable level of profitability. Especially in liability insurance, which is a long-tail business. Financial sustainability is very important, and this is where Zurich is very strong. We have an "AA-" rating from Standard & Poor's. We are not going to compromise this.

Liability insurance is a new and hot topic in China, and it is also what we are good at. So we think we can work closely with Chinese regulators and policymakers to develop solutions and help the regulators educate the market.

Globally we are very strong in liability insurance, such as food and drink safety.

Q: When was your research center established in Shanghai? And what is it for?

A: We've done a lot of work on understanding risks on this planet. The risks are growing faster than the world GDP. That's a bold statement. Let me give you three proof points on that.

The first is that 50 percent of the population is living in cities like Shanghai. In two to three decades, the figure will become 70 to 80 percent. It's a huge urbanization trend. Just picture the world map with few dots of megacities on it and think about what kind of accumulation is there. That's huge amount of wealth, people and assets. Then lay the first trend with the second trend, which is the increasing risk of natural catastrophes, both in terms of frequency and intensity. The cities are along shorelines, rivers, while some are unfortunately above seismic zones.

The third trend is the interconnectivity of this world. Today the world produces and trades very differently from 20 years ago. China is the best example of that. If a factory burns down in Shanghai, the spare parts it exports may affect a factory in Europe.

If you combine the three trends, the statement is probably true that risk is increasing more than GDP.

In this world, which becomes riskier by the minute, we need to partner with our customers to better understand the risks.

The shipping finance research center in Shanghai is one of the investments in these areas. The research and development center started in October 2009, in partnership with the Pudong New Area government. Over the last five years, we've invested a lot of effort and human resources into this center. Pudong is poised to become an international shipping and financial center. So we used Zurich's global expertise to initiate over 10 programs to research how to make it happen. All these programs and findings have been recognized by government officials, including former Shanghai Party Secretary Yu Zhengsheng. So we hope that we can serve as a private think tank that provides insights to government, to drive Shanghai's ambition to become a world-class shipping and financial center.

Q: How would your investment in research benefit your business?

A: This world is becoming very complex. Every country has its own insurance and tax regulations. When you do an international program, you need to understand what's allowed on the claim, risk engineering and tax sides in each country.

We have 140 law firms around the world to provide us the data. This database is available to our customers and brokers. What we can provide for our customers is that they don't have a compliance, tax or regulatory issue. We've been actively protecting their brands through that way. If anything of that happens, it would damage their reputation. So this database is very powerful, and we started with this 10 years ago.

Today it is the market standard. I think when it comes to international program business, Chinese corporations will choose Zurich.

http://www.ecns.cn/business/2014/08-04/127656.shtml