Interview with Volker Münch, Allianz's Global Practice Group Leader, Utilities & Services, IT Communication

 Julius von Rotenhan  Volker Münch


JvR: Volker, Business interruption is sometimes described as possibly the most varied and interesting of all types of indemnity insurance. On top of this, for the second year in a row it is considered the most threatening risk for corporations according to the "Allianz Risk Barometer". How did you get involved in this type of insurance, was it by accident or was it your own deliberate decision?

VM: My involvement in the topic of business interruption (BI) insurance and supply chain topics was a development from my career with AGCS. As you say, the topic is quite complex and in most cases rather intangible. During my career with AGCS I have worked as an Underwriter for large industrial clients in several countries as well as in various functions in our Munich headquarters. This combined experience of client interaction and strategic functions has enabled me to build up expertise in BI and allows me to provide value-added input on the topic. 

JvR: Today, more than ever, risk managers focus on balance sheet protection which adds to the demand for BI covers. This undoubtedly requires sophisticated risk analysis, adequate product design and prudent underwriting when dealing with the complex issue of business interruption. But how do you find out whether or not your risk analysis, product design and underwriting are sophisticated, adequate and prudent? What is it, that gives you the comfort of feeling to be on the safe side?

VM: CBI (Contingent Business Interruption) coverage is an integral element of each BI insurance we offer to our industrial clients as today’s production is very much dependent on a complex production string. Due to the specialization of goods on the one hand and cost challenges on the other, the production of a good or service increasingly depends on external partners. At the same time intercompany specialization has also become a bottleneck exposure (Interdependency exposure), which is part of a supply chain risk as well.  For AGCS’s insured, managing those dependencies and keeping up-to-date information on all involved suppliers is quite a challenge. For an insurance company full supply chain transparency remains an illusion as usually not all data is available. Ideally, the insurer would need to receive names and addresses of all suppliers as well as the business interruption values for each of them including make-up scenarios for each supplier. Nevertheless, and in spite of limited data availability, insurance solutions can be provided if the insurer has enough information to grasp the underlying design of a company’s Supply Chain Management. Allianz Global Corporate & Specialty has developed together with University of Applied Sciences and Arts Northwestern Switzerland an assessment method to understand the Supply Chain Management and the resulting exposure of a given company.  On top, we collect as much detailed supplier location data as possible from every client with high CBI limits in order to identify risk accumulation potentials. The combination of assessing the supply chain management and collecting suppliers’ location data gives us the comfort level to provide the requested CBI coverage. 

JvR: You are in regular exchange with colleagues from Swiss Re who also specialize in BI / Supply Chain risk. Can you describe what you expect from this exchange and whether and what advantages you see from such a partnership?

VM: AGCS is a technical Underwriting company. Risk Assessment and accumulation control are cornerstones of our Underwriting decisions. We are engaged in frequent and intensive discussions with our clients in order to receive and evaluate the risk information of their suppliers. At the same time, we have a significant number of clients globally and know their individual claims histories which enables us to benchmark the exposure of each company. Our approach is therefore very much customer based. Swiss Re has, due to the nature of the reinsurance business, taken the approach of looking at CBI exposure and losses on a portfolio basis.  Using portfolio loss experience and including global economic research provides a different perspective on the CBI topic. Our expectation is that combining AGCS’s customer focused approach with Swiss Re’s broader portfolio analysis will allow us to gain a better understanding of the global CBI exposure of companies and to ensure that we are in the position to provide our customers with a BI cover tailored to their needs.