Insurers readying for environmental risks

The Greek insurance industry is finding new room for expansion as a result of a European directive providing for mandatory coverage for all companies against environmental liabilities, according to American International Group’s (AIG) head in Greece, Christos Adamantiadis. In an interview with Kathimerini, Adamantiadis says that AIG, whose Greek arm is active in life and general insurance and fund management, plans to add the parent company’s name to all subsidiaries to bolster the group’s recognition. AIG specializes in covering large, mainly industrial, hazards. How is the specific market sector shaping up now, especially after the pressure that premiums have come under in recent years? Indeed, the traditional sectors in Greece – property assets and transport – are saturated in the domain of large enterprises. For this reason, from year to year we note large reductions in premiums, which are down between 5 and 15 percent in commercial hazards. The market for industrial hazards is small in Greece because industrial development is stagnating. As a result, industrial property insurance is shrinking, both in terms of premiums and contracts. The same is happening with transport insurance, which is worth just 40 million euros in Greece, and falling in recent years. How then would the particular Greek market justify the presence or, indeed, the attraction of new foreign insurance groups? What is not adequately insured is the new generation of hazards, in which we are developing a systematic interest. In particular, this concerns the part of financial losses that may occur from liabilities of managers or members of the board of governors. To be sure, we are talking strictly about professional liabilities where there may be financial consequences – in other words, attorneys, consultants, accountants, advertising companies and not groups such as doctors, architects or engineers. And so, even though the civil liability branch today represents a market of just 50 million euros, the interest lies in that it is a virgin market, to the degree that the concept of claim has yet to be established in people’s awareness. This is changing and it is no coincidence that civil liability coverage in sectors like hotels have doubled in recent years, as claims, mainly by foreign tourists are rising. Another sector that presents interest is the supplementary civil liability coverage for losses that companies may sustain from the withdrawal of products from the market as a result of accidents or malicious actions. Food and pharmaceutical companies are the characteristic examples, with the identification and destruction of their affected products being particularly difficult and costly. How far can the forthcoming harmonization of Greek legislation to the EU directive concerning corporate liability toward the environment constitute a field for the development of new business? Environmental liability is a new sector throughout Europe. The activation of the relevant EU directive and the mandatory coverage it requires of all companies will create demand which will be in two forms: for an accidental event and for gradual damage, such as an underground oil pipeline which leaks and pollutes the ground for a number of years. This is essentially a new market and because it does not concern a standard product and the risk differs every time, it requires the experience of a multinational group such as AIG. In Greece, an example of a firm that will need to be insured apart from industry is the large construction company. Demand for this coverage is already on the rise. How does a group specializing in industrial hazards view the area of retail insurance? Our business is characterized by verticalization. For this reason we have business solutions which concern midsized and large enterprises as well as personal solutions, which concern individuals, families and small businesses. AIG has strong interest in the retail segment because in Greece it is particularly underinsured. In the sector as a whole, 61 percent is accounted for by the vehicle branch, and 20 percent by coverage for property assets, of which the fastest-growing segment is retail, mainly as a result of the growth of mortgage credit. It is estimated that only just 18-20 percent of property assets are insured. partly because the fear of theft is not widespread. Even though the earthquake hazard should offset the underinsurance trend, this is not the case. In recent years, we have grown in the difficult car civil liability branch, where, in contrast to the prevailing market trends, we have managed to be profitable.

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