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Remaining competitive in commercial risk

Remaining competitive in commercial risk

Last year Madrid, Spain-based property/casualty and life insurance group MAPFRE restructured under a listed holding company, MAPFRE S.A., shedding its mutual status. Domingo Sugranyes Bickel, vice chairman of MAPFRE S.A., discusses the company's cautious plans to grow MAPFRE Empresas, the group's industrial risk insurer.

Q: What has been MAPFRE's experience of the large commercial insurance market in Spain?

A: There is competition, as ever, in commercial risk. But the claims experience in the first quarter [2007] is very good and the combined ratio was exceptionally good due to low claims and cost control. Rates in commercial [insurance] have been under competitive pressure. We are trying to hold rates as much as we can. We always try to charge a price that would be sufficient in the long run and in some commercial risks you need to look at the long term.

Q: Does MAPFRE intend to compete in non-Spanish European markets for industrial risks?

A: In Europe, MAPFRE operates in the commercial risk [market], but to a limited extent so far. We have representative offices in Cologne, Paris and London. The London representative office of MAPFRE Empresas opened in January to serve Spanish customers in the first place, then perhaps slowly as a direct insurer for companies in other countries. It is a cautious move and I do not expect we will grow fast [in the large commercial market outside Spain]. We follow our Spanish customers and service them here [in London] and we will start looking for local business, but not in an aggressive way.

Q: Do you plan to open in other European cities?

A: Maybe there will be other countries, but Empresas can operate anywhere in the European Union under [E.U.] legislation. If our customers demand it, we could open other representative offices.

Q: What does last year's restructuring of MAPFRE mean for clients?

A: It doesn't change substantially the service they get—it is the same service and the same prices. But it gives us more visibility and the possibility of synergies, which has good consequences for customers. MAPFRE used to work through specialized units, which we will now bring together to be more customer-orientated.

Q: So what is MAPFRE's strategy?

A: When we announced the restructuring, we made a strong announcement that we would work to grow organically and acquire business in new areas. Our ambition is to continue growing, be in more countries and be more global.

Q: Is it difficult to break into other European insurance markets?

A: In Europe, all countries, except the United Kingdom, are relatively hard to get into for insurers generally. Our experience is that there are obstacles. For example, in Italy we are joining forces with a local operation* to deal with these obstacles for foreign investors. We believe that we can develop our motor business in Italy without appearing as a foreign player.

Q: What are these barriers?

A: They are not specifically trade barriers. We may call them cultural—there is a certain solidarity, a defense against foreign firms acquiring large shares and not just in insurance. You see this in other sectors.

But in the end what will appear convincing—in corporate risk—is whether we can give good service—and that will make a difference in the end.