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COLOGNE, Germany-The traditional arms-length relationship between insurance companies and policyholders is outdated and likely to change, a European insurer executive says.

In Europe, insurers "hardly ever hear what is said" because of the involvement of intermediaries in the business relationship, contends Willi Suter, deputy general manager of Winterthur Swiss Insurance Co. and head of the Winterthur, Switzerland-based insurer's international division. In the future, insurers must "solve the problems of customers better than before" by talking with them, he said.

Although some markets in Europe are trying to keep the traditional arrangement, they likely will be forced to change if they want to survive, predicted Mr. Suter during a keynote address at recent conference on Risk Management & Risk Financing in Europe, sponsored by London-based Risk & Insurance Research Group Ltd.

Brokers already are seeing their traditional roles eroded as customers become more sophisticated and professional, he said. Instead, brokers are placing greater emphasis on their consulting practices and will survive only if they "stand for added value."

In addition to closer relationships between buyers and underwriters, Mr. Suter identified several other trends that affect European insurers and risk managers.

Globalization is increasing, he said, pointing out that if a company is active throughout Europe, it is already international.

More and more European companies are moving their manufacturing facilities to Asia, noted Mr. Suter, and Latin America is growing in importance as well.

"Europe will continue being important, but the trend will be that Europe will lose a bit of the weight it has been holding," he predicted.

As a result, he said, the commercial insurance market must become more international-in terms of the makeup of its workforce as well as where it locates offices.

The European insurance market has already reached a saturation point in terms of demand for its products, according to Mr. Suter. At the same time, he said, it faces competition not only from other insurers but also from other types of financial services companies.

To remain competitive, the insurance industry needs to enhance its profile in the business world, Mr. Suter said. Risk managers and brokers are in a similar position, he contends.

The insurance industry currently is "not held in high esteem" and does not attract the best people, he said. Talented employees instead are snatched up by banks, which also are offering higher salaries, he said.

Looking to the future, Mr. Suter predicted that the trend toward consolidation and globalization, particularly within the commercial insurance industry, will result in just eight major global insurers and four major global reinsurers by the end of the century. Four of the 12 major players could come "from the German-speaking world," he added.

"There is a certain process of fusion taking place, particularly in the capital of reinsurers," Mr. Suter said.

A key reason the industry is going through these "concentration processes" is that insurance transaction costs are too high, he said.

Competing globally also means that insurers need to invest in international communications networks to exchange data worldwide, Mr. Suter said. However, the high investment costs required could force some players out of the market. "Not everybody is going to be able to afford to be playing the game," he said.

For those that remain, business relationships will be different. "There is going to be a certain bond between the first insurer, the reinsurer and the investment bank," predicted Mr. Suter.

One result of such integration, he said, could be that insurers may require less capital and therefore carry lower financial ratings and still be competitive.

"AA could be good enough," Mr. Suter said of an insurer's rating. An AAA rating requires more than double the amount of equity capital, which investors may not see as being a worthwhile return, he said.