A change of scenery – from one hub to another

Generali Employee Benefits is an International network of insurance companies. In Luxembourg, we coordinate our activity on a global scale. To better clarify, we operate within – what we call – the employee benefits segment, which includes pension and protection benefits – such as death, disability, accident and healthcare. Our clients are exclusively multinational corporate clients (i.e. we don’t deal with purely domestic companies nor retail business at all). Typically, our target of clients is the Fortune 500 global clients and our main contacts within these companies are the global Human Resource managers, CFOs and risk managers at the head offices. We explain what we can provide to them on a global scale – country per country, meaning that our services can cover all their employees, whether local employees in their respective locations or mobile employees / expatriates. It is important to note that to provide these services to clients on a local basis, we need a network of local insurance companies, so we have at least one partner per country, a Generali company if we are present in this country, or an external partner if Generali is not represented in a given country, such as Le Foyer in Luxembourg. These partners cover our corporate clients’ local employees; they issue the policies, they pay the claims and they take care of all the local administration aspects while we reinsure up to 100 percent of the biometric risks, giving us the possibility to coordinate all the local schemes, to consolidate the information and the risks, while also providing added-value solutions and reporting to the headquarters of these clients.

One big advantage in Luxembourg is the dedicated regulator, very accessible and open to two-way discussions, especially for a global operations like ours (for information, we are operating through partnerships in over 100 countries). The regulator in Luxembourg has been very efficient and clear in telling us up-front their expectations and guiding us in the setting-up of this new operation. The fact that they are dealing solely with insurance and that they are not part of the banking regulators, which happens to be the case in many countries, definitely makes a big difference. You need people who understand life insurance, the global activity, as well as the corporate activity of the industry, as  regulations are often based on local retail business, rather than on cross-border corporate business. The dialogue is also open and regular to allow constant alignment and feedback.

Luxembourg also offers a highly professional ecosystem with access to skilled professionals and very importantly, synergies within the asset management and pension world, as we are looking to expand in the global pension activities to further boost our activity. Luxembourg being a place with a large number of asset managers was definitely another driving point for us to relocate from Brussels.

In our business, being a very specific segment of the wider insurance industry, the trend is global for some aspects, but at the same driven by local culture changes and specificities. The famous “glocal” trend. Corporate clients are becoming increasingly demanding. They want to protect their employees, being their man asset – especially in the current situation where the awareness of the importance of having a good package for health is rising. But they also – more and more – want to steer their global insurance benefits to make the most of them: not only the economic conditions but also the qualitative aspects (wellbeing, reporting, benchmarks…) as they want their human capital to be engaged. Happy employees lead to happy clients which leads to growth as we know and therefore EB coordination is becoming more of a powerful tool to drive profitable growth for all our customers.

The changes we face in the market are more an evolution (acceleration in many cases) rather than a drastic revolution. However, we have clearly seen a shift of enrolment in these programs from HR to risk managers and CFOs when dealing with employee benefits. We have also observed that organisations are more willing to share the risk, requesting for solutions such as captive insurance solutions. Clients are shifting away from purely traditional solutions and are looking for packages that include well-being, prevention and basically anything to help employees be more efficient in their day-to-day activities.

We are a less exposed than those operating purely in the life / investment insurance sector where clearly for them it is very challenging environment. Our geographic diversification is also of help in moment of turbulences. Some of our large Group subsidiaries are facing this low interest environment and have had to offer new products and investment supports to de-risk their portfolios. As regards to the EB segment of our group, the investment component has some impact (on some long-term disability reserving for instance) but it is not as crucial / impactful as in the life investment business.

For us, mortality, morbidity, and thus COVID, was potentially a bigger threat than the low interest rates, as at the beginning of the crisis, there was no table for a pandemic like this. Fortunately the impact has so far been limited, as we insure corporate clients, who reacted quickly and switched to teleworking almost overnight. People were less exposed to the threat and were still able to continue their activities from home. Though we have had a number of death claims, most of the health claims were covered by the state, lessening the impact on our business.

I fear instead that there will indeed be significant impacts on the economic situation of our clients. We have already caught a glimpse of the potential impact in America, with companies cutting jobs, leading to fewer employees, therefore fewer premiums. We don’t expect a great deal of new business this year and will focus more on the renewals.

If we look at the last six months, we have had clients suffer the consequences of the crisis, but we have also had clients that are booming, especially those who were more digital and more agile. Whether the clients who performed well will offset those performing badly is yet to be seen. I think the next six months to one year will be fairly negative, with more clients suffering than those doing well, however, like in any crisis, agility will pay off. After that, however, I expect to see us go back to a “new normality” in terms of growth. For sure the awareness of protection solutions will be higher after this crisis.

For many years, insurance companies have done things on their own for the more traditional piece of business, such as underwriting risk profiles and paying claims, but in terms of client relationship and additional services there is, no doubt, room for improvement. The insurance industry has been moving towards being an active partner rather than just an insurance company that pays claims. We believe that we cannot do everything on our own and therefore we need to create, maintain and manage an ecosystem of partners. In order to do so, we need to find companies, start-ups, Fintechs etc., that have a specific expertise and who can then help us provide additional services to our clients. We are currently recruiting specifically for these functions and are looking to organise additional collaboration with the start-up and incubator community in Luxembourg to address these companies. We already cooperate with several FinTech’s, however, we are in the process of analysing local collaborations and are looking to expanding these partnerships to several countries. Unfortunately, this is no easy task, as services offered in one country might not easily be replicated in other countries, be it due to regulations, culture, compliance, or other aspects that make things more complex.

I am definitely excited to see the evolution of the industry from here on and look forward to meeting the challenges ahead.