Generali wins InsuranceERM's prestigious re/insurer of the year in recognition of its strong operating performance, excellent approach to risk management and its commitment to sustainability and reducing the protection gap.
As one of the largest global insurance and asset management providers, present in over 50 countries and serving 68m customers, Generali marked 2023 with two significant deals to confirm its position as an insurance leader in Europe.
Generali announced the acquisition of Liberty Seguros in June 2023 and the deal was completed on 31 January 2024. InsuranceERM's award recognises the Liberty Seguros deal strengthens the group's market position in Spain and in Portugal, and complements the insurer's existing Iberian operations in terms of product offering and distribution strategy. The acquisition also gives Generali a presence in the profitable Irish property and casualty market.
The other major acquisition was of US-headquartered asset manager Conning by Generali Investment, the asset management arm of Generali Group.
Generali has said the Conning deal will accelerate the implementation of the group's vision on asset management and enables it to enter the US market. Generali expects to achieve annual synergies between €70m-80m ($76m-87m) from the transaction within five years.
Sustainability
Winning re/insurer of the year also reflects Generali's leadership on sustainability issues and addressing climate risk.
Last year was certainly one of turbulence for the previously heralded Net-Zero Insurance Alliance (NZIA), with an exodus of insurers, including six of the eight founders. While many re/insurers have left the NZIA, for reasons linked to US antitrust concerns, Generali stayed solid and remains in the alliance.
Generali says its top management have been trying to find a solution. Together with Aviva, the insurer says it has been championing a multi-stakeholder approach, and has been working with the UN to reach out to regulators, brokers, interest groups that hold the sector to account, and even former members.
The firm is committed to reach net-zero by 2040 concerning scope 1 and 2 emissions, and scope 3 for its own operations. By 2050, Generali aims to be net zero across all three scopes including its investment and insurance portfolios.
The insurer has also pledged to establish science-based interim reduction targets.
A partnership between Generali and the United Nations Development Programme (UNDP) to reduce the protection gap for vulnerable communities worldwide was also commended by the judging panel.
One upcoming project for Generali and the UNDP will include issuing the first parametric insurance framework that is aligned to the criteria of the Sustainable Development Goals.
Generali's group chief risk officer (CRO) Carlo Ferraresi tells InsuranceERM on climate risk, Generali has internally developed a model to analyse the transition risk and the physical risk of the investment portfolio at counterparty level, as well as for underwriting portfolios, for both life and property and casualty insurance.
"This allows us to invest more in companies that have set solid transition plans and to increasingly take into consideration in the underwriting process potential losses coming from physical events that are climate-related, as well as to support regulatory reporting like the EU taxonomy and CSRD. We have done the same with cyber risk, where we have developed our own model to assess where to invest to better protect our systems from cyber-attacks," says Ferraresi.
Ferraresi explains a risk awareness culture is very important at the insurer, and this makes for better decision making. He says: "We try to take a holistic view of risks, and this is not only on traditional risks, but also on emerging risks like geopolitical uncertainties."
Geopolitical risk
For geopolitical risk, Ferraresi says Generali has developed a methodology to assess the threat. "Geopolitics is not a risk per se, but is a source of risk that influences other risks. What we do for geopolitical risk is originate many scenarios and analyse the impacts of geopolitical threats on our already identified risks. For example, the Israel-Gaza conflict might cause supply chain disruption, which could cause inflation to spike."
Asked how Generali and its risk team will innovate this year, Ferraresi says Generali is using innovation to streamline processes, improve efficiencies and enhance risk management capabilities. "We are very active in leveraging advanced data analytics and modelling techniques to enhance risk assessment. We have also started using AI, in a very careful manner."
Financial performance
Generali's strong operating performance has also been driven by solid underwriting. The group's technical results are underpinned by its non-life business, which produced an average combined ratio of 91.9% over the five-year period ending in 2022, as calculated by rating agency AM Best.
The insurer's balance sheet strength is underpinned by strong risk-adjusted capitalisation. The Generali group reported a Solvency II SCR ratio of 224% as of 30 September 2023 compared with 221% at the year-end 2022. He noted how Generali had worked to reduce the volatility of the solvency ratio over the years.
Forthcoming changes to Solvency II will also improve Generali's capital position and leave unchanged the sensitivity of the solvency ratio to market moves, chief financial officer Cristiano Borean said at the group's investor presentation in January.
In 2023, the group also posted a record operating profit of €6.5bn, representing annual growth of 11.2%, with growth coming from its life as well as property and casualty lines.
Ferraresi concluded the interview by saying: "We want to be the best in class. We want to be a business partner and support businesses in capturing opportunities as well as helping them to build resilience."
The difference between wanting to be the best, and being the best, is execution – and in this way Generali certainly delivered last year.
Winning the InsuranceERM re/insurer title of the year celebrates Generali's multiple achievements in 2023, and there are surely many more to come in 2024 and beyond.
