fpmi inside: a fixture for financial experts

“The business model of an insurance company in times of financial crisis” was the title of the lecture kicking off the meeting. It was held by Franz Kühnel, member of the executive board of Versicherungskammer Bayern. He started his remarks by stating “I probably have to explain the insurance business to the people attending the event-bankers.” This assumption wasn’t entirely correct, as there was also a large number of insurance industry executives in the audience. To enable the others to understand his elucidations, Kühnel presented an overview of the operations of each of the insurance industry’s three business areas – indemnity, health and life. He took a look at the opportunities and risks associated with each, and at how each has been affected by the financial crisis.
 

His conclusion: the business model governing the insurance industry has proven its stability. The upheavals emanating from the financial markets have not affected the industry, with the exception of several areas of the life insurance sector. This in turn has amassed more than 90 million contracts of coverage. These constitute a prime conduit of capital accumulation. The main threat facing the insurance industry is not, according to Kühnel, a setting forth of the great volatility displayed by the world’s financial markets in this time of crisis, but rather the coming true of a “Japan scenario”, in which low rates of interest persist over the next decade.
 

This volatility caused Kühnel to take on a charge often made about insurers: that their actions augment the turbulences roiling markets in times of crisis. As he noted, the motive governing the insurers’ actions is the need to take into account the needs imposed by their business cycles-based model. “The attaining of levels of risks in stock markets causes all insurers to sell.” The volume of investments commanded by insurers make these sales a powerful driver of stock market development.
 

The discussion taking place after Kühnel’s lecture focused on classic life insurance policies. Kühnel, who is responsible for distribution at his company, explained why this kind of policy is currently enjoying an increase in popularity: it provides a basic level of coverage. “The reason why it is experiencing a renaissance is that it meets customer needs for security and guarantee of investment,” Kühnel states. The last few years have revealed, however, that life insurers did make a number of mistakes. “We pursued, for far too long, a business model that provided us with stability, but made us inflexible,” said Kühnel. This didn’t take into account the fact that more and more people are experiencing problems in their careers. This, in turn, led to their inability to maintain payments on insurance policies. This inability has manifested itself in the increase in the number of terminations of contracts. The answer: building in a greater degree of flexibility.
 

Questions posed included the extent in which mergers of banks and insurers result in the joining of natural partners, and, conversely, the lesson to be learned from the failure of Allianz’s takeover of Dresdner Bank. By way of response, Kühnel pointed to the example of his company, which forms part of the S financial group. “The business model (of having both an insurer and a bank in a group) works. A bank provides a productive way of channeling distribution. A bank is also a success-ensuring owner.“
 

The warm temperatures caused the ensuing get-together, which featured a buffet, to be held in the courtyard of the Stock Exchange’s building. At the get-together, the attendees, all personally selected to attend by their companies’ executive board members or managing directors, set forth the discussions commenced in the aftermath of the lecture, forging new contacts and better getting to know existing ones in the process.
 

“I was gratified by the intensive exchanges of opinions and expertise between the bankers and insurers attending this event, as precisely this cross-sector networking is what fpmi strives to achieve by convening such events,” summarizes host Christine Bortenlänger, fpmi’s speaker and chairman of the executive board of Bayerische Börse (the Munich Stock Exchange’s holding company). Her summary of fpmi inside’s achievements continues with “The attendees have had many positive things to say about the event, thus confirming fpmi inside’s position of being a venue for the furthering of the networking of Munich’s financial services industry.“