XPRIMM: Mr. Fugaciu, you have been rather recently appointed as Co-CEO for Central and Eastern Europe (CEE), alongside Artur Grzeskowiak, CEO of Marsh Poland. Please provide more details on how the Marsh network is organized in our region and how this co-management arrangement works.

Cristian FUGACIU: I am thrilled to be working as Co-CEO to lead our operations in the region. Marsh's network in the CEE region is strategically organized to ensure comprehensive services and dedicated support to our clients. We have established a strong presence across in 16 countries: Austria, Azerbaijan, Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Kazakhstan, Lithuania, Latvia, Poland, Romania, Serbia, Slovenia, Slovakia, and Ukraine.

Our co-management arrangement allows us to capitalize on the combined expertise, resources, and industry knowledge of both leaders. By working closely together, we can ensure a seamless and efficient operation that maximizes the value we provide to our clients in the region. Our collaborative approach fosters a culture of teamwork and enables us to leverage our collective strengths, ensuring consistent delivery of exceptional service across the CEE region.

XPRIMM: Marsh is one of the very few global players in the re/insurance brokerage field that is present in the entire CEE region. Are you planning to expand your footprint farther East, covering more markets?

C.F.: Marsh is committed to continuously evaluating opportunities for expansion and growth. While we are already present in the entire CEE region, we recognize the dynamic nature of the insurance industry and the evolving needs of our clients. As the CEE region continues to develop, we remain open to exploring new options for strengthening our footprint.

Our goal is to provide our clients with the benefit of our global experience and local expertise wherever they operate. By expanding our presence in the CEE region, we can extend our support to a broader range of clients and industries, contributing to the growth and development of the region as a whole. We are dedicated to leveraging our resources and networks to identify and seize opportunities that align with our mission of protecting and promoting Possibility in the CEE region.

We are now delivering services and providing access to our expertise to companies in all the countries in the region through our local offices and through partnerships in specific countries. We have recently extended the CEE region coverage to include Azerbaijan, Kazakhstan and Ukraine. This strategic decision allows us to deliver consistent, high-quality services to clients across the entire CEE region, while capitalizing on the market dynamics and opportunities specific to Azerbaijan, Kazakhstan, and the broader region.

XPRIMM: Despite belonging to the same region, the CEE markets are very diverse. How do you comment on this diversity? Which would be the common characteristics of the insurance markets in the region and also, the main differences?

C.F.: The diversity among the CEE markets is indeed a notable characteristic of the region. Each market has its own unique dynamics, shaped by historical, cultural, economic, and regulatory factors. However, amidst this diversity, there are common characteristics that bind the insurance markets in the region together.

One common characteristic is the consistent growth experienced by the CEE insurance markets over the past years. The region has witnessed an increasing awareness of risk management, regulatory developments, and expanding economies, driving the demand for insurance products and services.

Additionally, the CEE markets share a growing focus on improving risk mitigation and resilience. As businesses in the region face evolving risks and challenges, there is a growing recognition of the importance of comprehensive risk management strategies. This presents an opportunity for insurance providers to offer tailored solutions that address the specific needs of businesses and individuals.

Despite these commonalities, there are also notable differences among the CEE markets. Variations in market maturity, regulatory frameworks, cultural factors, and specific industry sectors contribute to these differences. For example, some markets may be more advanced in certain insurance segments or have specific regulations that impact product offerings and distribution channels.

At Marsh, we recognize the importance of understanding and adapting to the nuances of each market. Our approach is to combine our global expertise with a deep understanding of the local market conditions, enabling us to provide customized solutions that address the unique challenges and opportunities presented by each CEE market.

XPRIMM: Insurance brokers' contribution to the insurance distribution landscape differs from market to market. In markets like Romania, Hungary, or Bulgaria, insurance brokers have much higher presence in the retail distribution than in the other CEE markets. How do you explain this difference?

C.F.: The variation in the presence of insurance brokers in retail distribution across different CEE markets can be attributed to several factors. Market dynamics, historical development of the insurance industry, regulatory environment, customer preferences, and insurers' strategies all play a role in shaping the distribution landscape.

In markets like Romania, Hungary, and Bulgaria, insurance brokers have established a strong foothold in retail distribution. This can be attributed to several reasons. Firstly, these markets have experienced significant growth in recent years, which has led to an increased demand for insurance products and services. As the complexity of risks faced by businesses and individuals grows, there is a greater need for expert advice and tailored solutions that insurance brokers excel at providing.

Secondly, customer preferences also play a significant role. In these markets, there is a higher inclination among customers to seek personalized advice and guidance when purchasing insurance. Insurance brokers offer a one-stop solution, providing access to a wide range of insurance products from multiple insurers. This allows customers to compare options and select the coverage that best suits their needs.

Furthermore, the regulatory environment in these markets may also be conducive to the growth of insurance brokers in retail distribution. Regulations that promote transparency, fair competition, and consumer protection can create an environment where brokers thrive, providing valuable services to clients.

However, it's important to note that the presence of insurance brokers in retail distribution is not limited to these markets. In other CEE markets, alternative distribution channels, such as bancassurance or direct sales, may be more prevalent. At Marsh, we recognize the importance of understanding the unique characteristics of each market and adapting our approach accordingly. We are dedicated to supporting local and regional companies in the CEE region, leveraging our global experience and dedicated teams of professionals to provide tailored solutions that meet the specific needs of clients in each market.

XPRIMM: Besides their traditional counseling role, insurance brokers may also play a role in the insurance products' design and development. How much is this capability used in the CEE insurance markets?

C.F.: The capability of insurance brokers to contribute to insurance products' design and development is increasingly recognized and utilized in the CEE insurance markets. Beyond their traditional role as advisors, brokers possess extensive industry knowledge, insights into client needs, and access to market data. These factors position them well to collaborate with insurers and clients in designing innovative and tailored insurance solutions.

In the CEE insurance markets, we see a growing trend of brokers actively participating in the product design process. As businesses and individuals face evolving risks and challenges, the need for specialized insurance coverage grows. Insurance brokers, with their deep understanding of the local market dynamics and customer requirements, are well-equipped to provide valuable input during the product development stage.

By collaborating with insurers, insurance brokers can offer insights into emerging risks, market trends, and customer preferences. This collaborative approach ensures that insurance products are designed to address the specific needs of businesses and individuals in the CEE region.

At Marsh, we actively encourage collaboration and knowledge-sharing among our professionals. Our teams of experts work closely with insurers, leveraging our global network and industry expertise to influence the design and development of insurance products that meet the unique requirements of the CEE markets. This collaborative effort helps us deliver tailored solutions that provide comprehensive coverage and support to our clients.

XPRIMM: A trend witnessed recently is the increase in reinsurance prices. How do you comment on this trend regarding its impact on the markets in the CEE region? Is it possible that it may have a negative impact on the efforts to reduce the insurance gap?

C.F.: The recent trend of increasing reinsurance prices has implications for the CEE region and its efforts to reduce the insurance gap. Reinsurance plays a vital role in the insurance ecosystem by enabling insurers to manage their risk exposures and protect their balance sheets. As reinsurance prices rise, it can impact insurers' costs, which may ultimately be passed on to insurance buyers in the form of higher premiums.

In the CEE region, where affordability and accessibility of insurance coverage are important factors, an increase in reinsurance prices can pose challenges.

However, it's important to note that the impact of increasing reinsurance prices is not solely negative. While it may present challenges, it also highlights the importance of robust risk management and efficient underwriting practices. Insurers may reassess their risk appetite, pricing strategies, and product offerings to optimize their operations and manage costs effectively.

Also, primary insurers are retaining more risk, based on tightened terms and conditions in place during the January 1, 2023, renewal period and cedents and reinsurers worked to try to find a new market equilibrium in what was a late and disjointed process. Moreover, the CEE region has experienced constant growth in recent years, and the insurance industry has made significant strides in narrowing the insurance gap. This progress is driven by various factors, including increased awareness of the importance of insurance, regulatory developments, and economic growth. While the increase in reinsurance prices may pose challenges, it is crucial to continue focusing on innovative solutions, collaboration between insurers and reinsurers, and leveraging technology to drive efficiency and improve risk management.

At Marsh, we are committed to supporting our clients in navigating market dynamics, including reinsurance pricing trends. Our dedicated teams of professionals combine global expertise with deep local knowledge to provide strategic advice and tailor-made solutions that help our clients mitigate risks, optimize their insurance programs, and ensure long-term sustainability.

XPRIMM: How do you see the future years in the CEE insurance distribution? Should we expect to see brokers’ involvement in the retail distribution increase?

C.F.: Looking ahead, we anticipate the role of insurance brokers in the CEE insurance distribution to continue evolving, particularly in the B2B field where our activity has been primarily oriented. However, it's worth noting that we have also been instrumental in creating new markets by introducing innovative products in Romania and across the region.

An example of our involvement in retail-controlled segments is through B2B2C affinity schemes. These schemes allow us to reach retail customers indirectly by partnering with various organizations and offering insurance products tailored to their specific needs. One such example is handset insurance, where we collaborate with telecommunications companies to provide coverage for mobile devices.

Affinity insurance schemes operate on the principle of leveraging established relationships between organizations and their customer base. By understanding the unique characteristics and risks associated with a particular group of customers, we can design insurance products that align with their needs and preferences. These schemes often offer exclusive benefits, competitive pricing, and specialized coverage to enhance the value proposition for customers.

Through affinity schemes, we create a win-win situation for all stakeholders involved. The partnering organization strengthens its relationship with its customers by offering valuable insurance solutions as an added benefit. Customers benefit from convenient access to insurance products that are tailored to their specific requirements, often at favorable terms. As insurance brokers, we gain access to a wider customer base and the opportunity to provide valuable coverage solutions to retail customers.

While our activity has predominantly been focused on the B2B field, we recognize the potential of affinity schemes to expand our reach and tap into the retail market. By leveraging our expertise, industry knowledge, and global resources, we can continue to introduce new and innovative insurance products that cater to the evolving needs of retail customers.

In summary, our approach towards supporting local and regional companies in the CEE region encompasses both B2B and B2B2C models. While our primary focus has been on the B2B field, we have actively created new markets by introducing products through affinity schemes, such as mobile insurance. These schemes operate on the principle of leveraging established relationships and offer tailored coverage to retail-controlled segments. Going forward, we will continue to explore opportunities to expand our involvement in retail distribution, leveraging our expertise and commitment to delivering value-added through affinity schemes solutions to customers across the region.

Interview conducted by Daniela GHETU