Published on
12 June 2024
[This interview was first published on INESE.ES in Spanish on 29 May 2024.]
Liberty Specialty Markets (LSM) continues to consider Spain as a priority market in the European Union. To grow in the country, the insurer is doubling down on its strategy of granting significant autonomy to the local team to make underwriting decisions.
LSM thus seeks to differentiate itself from its rivals in the Spanish market. LSM decided some time ago to set up its Spanish unit to make customers' lives easier, says Alfonso García Larriu, the company's general manager in Spain.
In recent years, many risk managers have complained that international insurers take too long to make decisions about underwriting their risks and then issuing the appropriate insurance policies. It is also common for claims processing to take longer than needed to reach their conclusion.
The delays can be attributed to a lack of autonomy among many branches of global carriers in Spain. When important decisions have to be made, a common occurrence in the business insurance market, underwriters and claims managers have to request authorization from their parent companies in other countries, which generates paperwork and delays.
"If there is one thing that distinguishes us from, it is the autonomy we have and our capacity to underwrite at the local level," says García Larríu. "What the brokers recognize us for is the speed and agility of our responses, precisely because of that autonomy, for which the specialized training by branch and/or industry of our underwriting teams is key."
For him, the fact that his team can make decisions pertaining to almost all the contracts signed in Spain is an important competitive advantage. An advantage that is accentuated in a market where competition among underwriters is increasingly strong.
"With local decision-making power, we develop a closer relationship with our customers and can offer more efficient underwriting and claims processes," adds García Larríu.
Contacting customers
The LSM executive is thus in tune with the concerns of insurance buyers. This is no coincidence: before taking over the management of the insurer in Spain, at the end of 2022, García Larríu developed a long career in insurance brokerage, working for firms such as Marsh, Aon and March RS (today part of the Howden group).
In his 28 years as a broker, he maintained frequent contact with risk managers of the most important Spanish companies. García Larríu thus had the opportunity to listen to numerous complaints about the withdrawal of authority from local branches of international insurers. This phenomenon became especially acute during the recent hard market situation, when several insurers adopted a more restrictive underwriting process.
García Larríu points out that this was not the case for LSM, which continued to bet on the capacity of its team of more than forty underwriters in Spain in its offices in Madrid and Barcelona. The reason given for that stance was the experience that the team of its underwriters had already accumulated.
LSM has been present in Spain since 2008, when it entered the local market under the brand name Liberty International Underwriters. Since then, it has developed a leading position in segments such as financial institutions and professional liability, lines where it is common for LSM to assume leadership in the placement of high-value programs. As of 2013, the corporate insurance and facultative reinsurance unit began operating under the Liberty Specialty Markets brand.
Today, LSM provides coverage in general liability, professional liability, D&O and environmental liability, as well as cyber, transportation, construction and energy risks. The range of products offered in Spain is complemented by specialized policies for sectors such as the art market. The goal is to achieve growth rates of 8% per year, expanding market shares in areas where it already operates.
Focus Enlargement
Achieving such goals means winning over more customers. Traditionally, LSM has concentrated its efforts on the business units of large companies that demand individualized treatment and high limits in their insurance programs due to the specialization required in the coverage purchased. But LSM is investing in technology, including leveraging generative artificial intelligence, to offer access to its products to small and medium-sized businesses as well.
"We will continue with our underwriting policy, as the market knows that what we do, we do very well. But now we're going to reach a new audience," says García Larríu. "We are currently refining the formulas to access other market segments through what we call portfolio solutions and digital channels, for which we’re relying on on the collaboration of our broker partners and supporting MGAs."
The business expansion plans reinforce the importance of Spain in the strategy of LSM, the global corporate insurance and reinsurance arm of Liberty Mutual Insurance, the eighth largest non-life insurer in the world. It is a group with a long tradition in the P&C segment, where it has been operating since its foundation 112 years ago in Boston (USA).
In addition to Spain, LSM operates in five European markets selected for their dynamism and the quality of risk management: Germany, Italy, the Netherlands, Switzerland and France. The company has drawn up an investment plan on the continent until 2030. Spain is one of the most important links in this chain.
Restructuring
The new European push follows a restructuring of the international business of the Liberty Mutual group, which has just created a new division this year, Liberty International Insurance (LII), to encompass its insurance activities outside the US.
LSM was integrated into the new business unit, with a total of $6 billion in revenue at the end of 2023. The company has offices in more than 20 countries, with a significant presence in Asia, Oceania, the Middle East and Latin America, as well as Europe, the US and the London market.
As part of the restructuring, Liberty Mutual group has sold some mass insurance operations in several countries, with the aim of strengthening its financial position and concentrating its activities on markets and sectors that have greater profitability potential. In Spain, the sale of Liberty Seguros, a unit specialising in life, car and home insurance, to Generali was completed in December. It is vital to emphasise, however, that the Liberty Seguros operation has never been directly involved with the activities of LSM, which has always functioned as an independent unit focused on corporate insurance segment.
"Liberty Specialty Markets was and will continue to be here in Spain," says García Larríu.
And it will continue to keep its sights firmly on business insurance. LSM has reinforced its commitment to business customers. A commitment that, in García Larríu's view, has become even more evident during the last period of market instability.
In recent years, new insurers have entered and are planning to enter Spain. However, many had stopped underwriting certain risks in the years prior to 2019 due to the strong competitiveness of the market, which led to lower prices and greater flexibility of conditions.
García Larríu stresses that LSM did not leave or return, LSM has always been here, providing the coverage they need available to its customers.
He assures clients that LSM's presence in the local market is something that will not change, even if volatility returns to the (re)insurance industry in the future. Right now, there are already signs that the market is softening in segments such as financial lines. However, García Larríu says that this will not alter the company's strategy.
"We have our underwriting rules and we will continue to follow them," he says. "It is in the soft market that insurers reaffirm the commitment they have to their customers. LSM is here for the long haul."
Energy transition
Another commitment of LSM to its Spanish customers is to help them on their journey towards a more sustainable economy.
García Larríu says that the search for a more sustainable economy is a non-negotiable issue for the company. Since 2020, LSM has been a member of ClimateWise, an initiative that encompasses global insurers with the aim of minimizing the risks of climate change and identifying opportunities generated by the energy transition.
In this context, it is studying actions such as the integration of the so-called "green updates" into insurance policies. These are clauses through which, in the event of an accident, the replacement of damaged goods will seek to improve their ecological efficiency.
Another measure that is being implemented is the training of the company's underwriters to make decisions based on sustainability criteria.
LSM also aims to support its clients in the construction of renewable energy projects, both in the local market and in other countries.
"As insurers, we are developing products to mitigate geopolitical risk, and thus contribute to the energy transition around the world," says García Larríu. "Through risk management and underwriting, the insurance industry is a vital part of the transition to a cleaner economy, ensuring the security of investments, supply chains and the people involved in that process."
