Insurance managers at Knauf Group talk to Captive Review about how they have transformed the management of their international programmes by deploying a new risk platform and worked with Zurich and their API technology to simplify the reporting of vital insurance data

For Knauf Group, one of the biggest challenges when it comes to managing their international insurance programmes is communication.

The German-based company is a global leader in the field of sustainable lightweight construction and is also a major manufacturer of building materials.

However, with a presence in 90 countries, including 80 raw material processing plants and more than 300 manufacturing plants on all continents, it’s fairly easy to see how bringing together all data on the company for the purposes of insurance and risk management can prove to be quite a complex operation.

Marcus Reichel, global head of insurance management at Knauf, has a long history in running captives and insurance programmes at some of the largest companies in the world, including Adidas and Merck Group.

He explains to Captive Review that sharing data on important matters like claims and premiums across such a large number of local offices is a problem many multinationals encounter.

Likewise, the communication of conclusions drawn from such data analysis. “When you implement a policy globally, you send Excel spreadsheets around – that’s the usual way of doing it and it doesn’t matter what line of business it is,” he says. “The whole organisation has to share similar information, all the different legal entities you have.”

The data that has to be shared includes contact details, asset values, premiums and loss ratios, along with individual minimum insurance requirements there may be for a specific country.

“All this is what you have to try and pull into an Excel spreadsheet, send it to the head office of the insurance company, and then they have to try and distribute it to their countries,” he adds. “The same Excel spreadsheet gets manipulated say three times, so then, when it gets to the receiving office at the end of the day, you can see how there may be a route for mistakes or misinterpretations to arise.”

And this data has to be shared, not just internally but also externally with potentially up to six or seven different insurer partners as well as brokers.

“We rely on a fully compliant local insurance policy with a certain level of coverage in each and every country we are operating in. In our case, it’s almost 100 local insurance policies we are issuing,” Reichel explains of the challenge facing Knauf.

“This is a big challenge. The problem always shows up when you have a claim because then the quality of the local insurance policy is tested,” he adds.

While premium transfers were relatively simple, Reichel says that getting a claim fully paid in a country was proving difficult from time to time.

“The big issue there was how do you get all these different parties involved – us and the insurers globally and locally – all with the same understanding of what is going on,” he says.

The solution Knauf turned to was to invest in building their own risk management platform where they could pull all the required data. Where the firm’s partner insurers have an application programming interface (API) capability, this allows them to store all the group’s insurance data in one easy-to-read place, which can be updated as and when required.

Zurich

One such company that has been working with Knauf and developed an API able to bring together all its relevant insurance data from local offices around the world, is Zurich Insurance Company.

Zurich has stated its ambition is to fully digitalise customer communication by 2025, with all international customers and brokers exchanging data with the company digitally.

As part of this, it has developed its own centralised clearing house to serve all information through one unit to all customers, including captive owners.

“What’s important is to come to an effective data exchange. This is where it started. We always had the captive in mind when thinking about how we can improve the data exchange mechanisms we currently have,” says Armin Schäfer, head of digital and new technology, international programmes, at Zurich. “Especially for the captive having access to the data streams from the various players, having that effective orchestration around it, not spending time matching and merging spreadsheets, is a crucial element for a captive owner to support the risk financing process.”

Claims data was the first thing to be onboarded when Knauf started using Zurich’s API a year ago. Marcus Hassold, an insurance specialist at Knauf who manages global claims, explains the API technology adds daily value to the group.

“Claims management from Knauf’s perspective means we have to be aware of each and every claim logged into one of our international programmes,” Hassold says. “Zurich’s API helps us identify lost claims if, for example, someone locally reported it to a fronting insurer but just didn’t put us on the mailing list. It is very valuable to identify such gaps and also to become aware of any outstanding reserves.”

While such API technology is nothing new, Hassold says he sees this new use of it in the global insurance claims field as a “pioneering advantage”.

“At Knauf, we have been processing data since the beginning of the 1980s,” he says. “We have been handling claims data since 1982, and the first thing was to send out letters. By the end of the 1990s, when email was around, we started to exchange Excel files – although a lot of insurers nowadays are not prepared to send out monthly Excel spreadsheets. It’s a big task and an issue for many insurers.”

Captive value

Having only set up its captive, Knauf Re, just over a year ago, Knauf Group is now looking into how the captive bordereaux can be mirrored through the system.

But already, the group has seen the advantages of using the API when it comes to reinsuring the captive business.

“We have to provide the reinsurers with the information they need to quote for reinsurance for our captive, and what helped a lot when it came to negotiations was the conviction we are well aware of our risk,” says Béla Cluse, a member of the board of directors at Knauf Re. “We are one of the few major industrial companies in the world that has its own claims department that handles all claims, from the really small to the really big. This is pretty unique and it really helps us to understand our risk better.”

As a result, Cluse explains that when approaching the reinsurance market, the captive has no problem with quickly supplying all the required data, such as claims ratios, information on risk quality and even detail on implemented recommendations for risk management purposes.

“It has made it much easier to obtain reinsurance, and it makes us more confident in our own data,” he adds. “Now we go in with a good idea of how to structure our reinsurance, what our priorities are and how much risk we can take as a captive while protecting the balance sheet.”

The access to claims data and ability to identify claims trends in different parts of the world means Cluse and the Knauf Re team can estimate the claims costs that may flow into the captive in a given year.

And with this estimate, the captive can calculate risk adjusted premiums, therefore putting them in a better negotiating position with reinsurers.

Cluse especially highlights how useful it is for the captive to know about group claims that otherwise might have gone under the radar due to being picked up by the deductible.

“In the hard market, everyone tends to higher the deductible, but you are then facing the problem that you are not aware of certain claims anymore,” he notes. “The difference between a $2 million claim and a $200 million claim is in some cases decided in small details and often a matter of luck. But to calculate an accurate risk-adjusted premium, you need a full overview of 100% of the claims.”

In this way, Cluse says that having the claims department and the help of the API in collecting all claims data has already been a big support to Knauf’s captive.

The next step to take Knauf’s data reporting standards to the next level, according to Reichel, would be for other insurance carriers the group works with to develop their own APIs in order to plug into Knauf’s risk platform.

“The key thing is we have done everything from our side,” Reichel remarks. “We have the risk management software, and we are ready to implement more APIs. It’s really down to insurers and insurer networks to come to the same level of digitalisation as Zurich.”

While other international insurers are investing in their platforms, Reichel is clear this is an area where more work is required from the industry.

“You need four, five, six, seven different insurers to help you with your global insurance programmes and all of these should ideally have APIs,” he says. “That’s basically where this is all still a little behind. This is a big thing. There are a lot of platforms out there, but they’re platforms where you do a download via Excel and then upload it into your system, so it’s not automated yet.”