Euler Hermes: Embracing the digital revolution
Mark Schulz, director of risk, claims & collections and executive board member at Euler Hermes Switzerland, explains how Euler Hermes has embraced the digital revolution, expanded its presence in emerging markets and increased its product offerings. And there’s much more still in the pipeline.
TXF: What types of deals does Euler Hermes mostly participate in and what services do you provide?
Mark Schulz (MS): Euler Hermes in Switzerland offers a whole range of credit insurance solutions ranging from whole turnover policies to single transaction and single contract cover solutions. We also offer solutions for payment terms ranging from the very short to several years, and have our TCO business unit located in Paris which offers political risk cover solutions.
For truly global solutions for multinational companies we have our so-called world agency which offers tailor-made solutions for multinational companies. In addition, we have other lines of business like surety and guarantees, fraud and cybercrime insurance. Collection plays a very important role in our business model since we are one of the world's leading collection providers as well.
TXF: What countries are you most active in and which countries do you want to become more active in?
MS: Developed markets remain predominant in our portfolio – the large economies like the US, Germany, France, Great Britain and so on. But we see increasing demand from emerging markets, particularly Latin America where a couple of years ago we established Solunion - a joint venture together with MAPFRE. East Asia is growing steadily too, and Africa could be a market of the future, that's why Euler Hermes has strengthened its footprint there by establishing branch offices in Morocco and South Africa.
TXF: What are your most recent product suites and are there any plans for more product innovations from Euler Hermes?
MS: We have designed the simplicity product, launched last year, that targets SMEs and is a very simplified solution that creates very low work for our clients. It's a more-or-less digitalised solution. Another product type is the Euler Hermes dual policy which is a hybrid solution of standard limits in a whole turnover policy in combination with non-cancellable limits for key buyers of our clients. We are also working on a fully digitalised solution for single buyer, single cover on a pure risk-based pricing which we are launching in one or two years.
TXF: You recently upped exposures to Africa, what were the main reasons for this increase in risk appetite?
MS: We've seen an increase in demand in two particular sectors – the agri food sector and with the energy products. But Africa remains a very challenging market, not only in terms of risk assessment and getting reliable information from counterparts there but also in terms of the ability for debt enforcement and collection.
TXF: In line with market precedence, Euler Hermes has seen pricing got to the sub-100bp level. What is causing this pricing compression?
MS: There are three major reasons for this. Firstly, we have strong competition in the market, from both established global players and new entrants. Second, we still have an overflow of cheap capital which makes the risk coverage cheaper. And thirdly, we've seen several years in a row of rather low claims ratios for the industry, albeit that with high volatility claims ratios in emerging markets. So, we've seen lots of ups and downs over the past years, but that's not really reflected in the price.
TXF: How have Russian and Turkish sanctions affected your business?
MS: We strictly enforce compliance rules, including sanction rules, and we expect the same from our clients. The more important issue is the heavy impact sanctions can have on the local economies themselves. For example, Turkey is currently heading into a deep economic crisis which has been triggered by sanctions – that's not the reason for the crisis, but it has been a trigger. The second example is Russia where the sanctions have led to crumbling foreign investment inflow.
TXF: What steps has Euler Hermes taken in order to embrace the FinTech and digitisation revolution?
MS: We have introduced and implemented the so-called Euler Hermes digital agency which is headed by our chief transformation officer and has a group-wide scope. This is certainly not enough, so we have also put in place local and regional transformation teams. The key for all this is to involve all our employees in order to improve their skills in the digital world. We need their ideas and we have to make use of those ideas given they are coming from the daily business. Last, but not least, we also have to get them engaged in digital projects from very small local ones up to group wide digital projects.