Following the many years of collaboration Allianz Global Corporate (AGCS) sits together with Bekaert, a world market and technology leader in steel wire transformation and coatings, to talk about the cooperation and future. Geert De Saegher, Group Risk and Insurance Manager at Bekaert, and Ronald Jorssen, Risk Control Manager at AGCS Belgium, answer the questions.
How long does the relationship between Bekaert and Allianz Risk Consulting (ARC) Belgium exist in terms of Property damage and Business Interruption risk assessment?
Geert (Bekaert): The relationship between Bekaert and AGCS as a leading insurer exists for about 30 years. In the area of risk control, a close collaboration was set up right from the beginning. This partnership has led to our current Property Conservation approach. In the very beginning, Bekaert was a real Belgian company that triggered internationalization. Gradually we started to invest in all corners of the world and there was a real need to develop a well-structured property risk management policy based on international standards.
Ronald (AGCS): The Property Conservation Programs Geert refers to, is mainly being used as reference when designing and constructing new Bekaert entities. The program deals with process protection, construction & infrastructure standards and organizational aspects to keep the risk protection level of all the facilities as high as possible. Site selection and natural hazards are also looked at to prevent a company from ending up in ‘risk-prone' locations. Security issues are also assessed in detail. The assessment structure and mitigation plans are based on the insurer’s perspective, customized in such a way they form a good set of guidelines accepted by both parties. Hence the understanding between both parties is optimal.
Over the years, what were the most important improvements for Bekaert Property Risk Management?
Geert (Bekaert): Property risk management was implemented step by step. The first priority was to set up a structure and process around property risk management, starting with implementing periodical risk assessments and surveys, standards and follow up of property risk recommendations. About 20 years ago, the position of Technical Risk Manager was added to the Risk Management Team. The need and importance of a technical profile in our team was a clear choice and statement, which highlighted the importance of property risk prevention. We implemented various standards and procedures, including our Property Conservation Policy.
Over the past few years, we updated our Property Conservation Policy and merged this into our internal Property Risk “Must Do's”. This is a list of non-negotiable property protection standards. Their aim is to draw up a limited list of well-defined standards, based on our best practice and years of experience with our insurer AGCS.
Ronald (AGCS): These standardizations and “Must Do's” have been set up gradually as a result of a great deal of information and recommendations issued. A result of years of collaboration. From that customer database, a number of guidelines and focus points have been put forward. Some examples are the exclusive use of non-combustible materials, the installation of fire-resistant separations between storage and production zones, fire and smoke detection in important departments (especially electrical rooms). The focus here is not only on the material damage but also on consequential business interruption loss by making a good analysis of where the bottlenecks are found in the production process. Of course this also has an impact on the prevention of natural hazards.
Geert (Bekaert): As a next step, we also started defining and prioritizing global multi-year mitigation programs for reducing our property exposure. Examples of this are the installation of sprinklers over processes using polypropylene baths, having a clear understanding and mitigation plans for specific process risk, for example dust extraction systems, protection of oil hardening baths, etc.
How did you quantify those risk improvements?
Ronald (AGCS): ARC uses GREAT (Global Risk Evaluation Assessment Tool). This tool enables us to compare all entities within the Bekaert Group. We can quantify the strengths and weaknesses in such a way that we can optimize prevention in a structured manner. The most important action points are clearly put forward and we focus on the most important priorities.
Geert (Bekaert): This risk mapping system (GREAT) is presented at the annual stewardship meeting by ARC and they also compare us with our peers. Via this meeting we receive the necessary input enabling us to set our internal priorities. This is an additional service to AGCS’s classical risk prevention and risk survey approach. All this forms an ideal basis to align and customize our policy conditions and coverages as well.
Unfortunately, Bekaert had to deal with a major damage in Rome (Georgia, USA). After this, AGCS Claims Management has popped up together with post loss prevention. What are your thoughts?
Geert (Bekaert): This major claim dates back to end of 2014 and triggered a significant property damage and business interruption loss, affecting us and our North-American customers. Thanks to the dedication and hard work of all the teams involved, we were able to rebuild our North American plant in 11 months and start up the production process and shipment of products. Throughout this process we have been able to fulfill our baseline 'Better Together' with the entire internal team, but also with AGCS and other insurers involved. Throughout the claims settlement process, Allianz gave us the necessary confidence and freedom to bring the process of reconstruction and root cause analysis to a favorable conclusion. The claim settlement itself ran in a very structured way with regular update meetings with all parties involved. This resulted in a claims settlement where all parties were fully satisfied and was of course very much appreciated by the risk management team and executive management of Bekaert. The fast and fluent manner how everything was arranged was proof to us that we have chosen the right insurance partner over all the years.
Did this damage have any other consequences within the Bekaert Group?
Geert (Bekaert): This loss event showed the importance of non-combustible construction materials, fire separations, good maintenance practices, etc. We had several meetings with various internal functional teams and the risk experts of ARC in order to list all actions and avoid similar damages in the future. This resulted in a worldwide retrofit program. Extra budgets were released within the Bekaert Group to roll out certain preventive measures, not only with regard to this loss event, but also to reduce the probability and/or impact of other type of property losses.
How has ARC contributed to the retrofit program that you have drawn up after the loss?
Geert (Bekaert): The knowledge and experience of the ARC team were an important input in this, as well as the expertise of the international standards (NFPA), the analysis of claims and the information collected from peers and external experts. Together with the ARC team we were able to set the right priorities and define the correct action points to avoid similar losses. By doing so, we were able to allocate the budgets in a correct way and to see where the greatest needs were.
Ronald (AGCS): Post the Rome fire, my American colleagues of the ARC network supported Bekaert in the reconstruction and, above all, to provide technical support for the typical American regulations and market knowledge. We have around 150 engineers worldwide who can support our customers and, if needed, we gladly make use of them.
What is the Combined Mitigation Program that you have set up and will roll out over several years?
Geert (Bekaert): I already briefly touched on this topic in the previous questions. Within Bekaert we introduced the Combined Mitigation plan, a global project to identify, classify and prioritize our CAPEX investments needed for reducing our major risks and exposure which might impact our people and assets, with a combined focus on safety, health and environmental and property risks. We developed an assessment framework and assessment rules to map these risks covering both external requirements (e.g. legislation and/or insurer requirements) as well as internal standards (e.g. Must Do’s). The framework is structured around 4 domains: Property Risk, Safety, Health and Environment. Within each domain, we have defined assessment rules based on severity or impact on the one hand and probability or frequency on the other hand. These assessment rules help us make balanced decisions based on standardized evaluation methods and enable us to set the right priorities, to correctly allocate our budgets and improve the visibility of decisions. All projects are periodically evaluated and assessed over the domains in order to come to a fair budget allocation for the coming year.
Ronald (AGCS): Our data base was used to analyze the impact and frequency of all the property recommendations set up over the last 15 years. The results enabled Bekaert Risk Management to prioritize the property topics found in the Combined Mitigation Program.
Within this insurance and prevention approach, we have mainly focused on fire protection. Does Allianz (AGCS) also deal with other risk services?
Ronald (AGCS): Of course we also look at other risks exposing our customer. Natural catastrophes such as earthquake, windstorm and hurricane are a very important focus point for an international group such as Bekaert. We recently made an in-depth analysis for their plants located in the most exposed and “risk-prone” countries. We also calculated the accumulation exposure as a result of these locations within one region so that Bekaert risk management can align their insurance policy, if needed. Additional ARC services could be elaborated for these flood or earthquake prone sites.
Geert (Bekaert): This analysis, which focused on our earthquake and windstorm risks, has helped us to better quantify the risk and to adjust our insurance coverage accordingly. This analysis is based on an actuarial approach that can give us an estimate of the accumulation risk in a particular region and the frequency of it. This is then used internally to better tailor the insurance coverage to our needs and risk appetite.
Does Allianz (AGCS) believe that new initiatives can be taken in the area of risk consulting and that they can be offered to Bekaert?
Ronald (AGCS): I think that in the future we will stop with the traditional and classic re-surveys, with the approval of the customer of course. We currently do more than 25 surveys per year and have examined and analyzed each risk multiple times. I think it is more interesting for the customer to look at themes that cover an entire region. We can provide training to local employers with digital training materials. This kind of risk management will happen more and more in the future and will replace the classic re-survey in the end. We also spend a lot of time supporting the multiple projects that Bekaert has set up to make sure they have a good and correct technical basis. We will as focus upon BI & CBI risk analyses of the Bekaert Group since this has shifted over the last years.
What more does Bekaert's risk management team expect from ARC and AGCS in the future?
Geert (Bekaert): There are a number of projects that we are currently working on and where ARC is already closely involved. Bekaert Group still wants to grow in various countries and will continue to work closely with AGCS & ARC for risk prevention. We also understood ARC can provide expertise in the domain of supply chain risks. Another project relates to mapping of our so-called non-damage business interruption risks. We are analyzing the political risks of certain countries, strike risks, terrorism, etc. where we more and more see the need for dedicated or tailor-made insurance solutions Finally, I think that the insurers’ expertise on climate change and the impact of changing natural hazards will become more and more important for risk management. Classical storms evolve to a different level and we will have to rely on, amongst others, ARC to provide the necessary statistical models and insights as to assess our risk.
Geert and Ronald, thank you very much for your time and openness.
