Thomas Buberl

Thomas Bubel is a CEO of Accent, one of the world's largest insurance companies. I recently had a chance to sit down with him to talk about the risk facing global insurance, particularly relating to war and climate change. Explain to people who aren't familiar with life insurance or health insurance or any kind of insurance, what is the main business.

Is that right?

Yes?

And plus we have to pay claims as well, So we receive at the beginning of the year a premium, we invest the premium, and then when the claim happened, we have to then pay it out. And all of that should be managed in a way that we protect the number of people that we ensure and also make a profit.

So on the premium that you charge. The underwriting risk is very complicated. You have to assess what the risk is that somebody will live or die or get an illness, or a property will be damaged. Do you try to make money on the underwriting or you try to break even on that?

No, we have to make money on the underwriting because obviously there's capital that needs to be put behind that business, and also we have shareholders that want to return. So what we basically look at we have a lot of historic data that we can use to price a building and then make sure that over the duration of a contract we make sufficient money to remunerate our shareholders and get remuneration.

For the risk.

What type of return do you try to get on your investments? And do you have thousands of people to invest the money and who does the investing?

So what we do is we are not speculators. We very much look at what are our liabilities, and so we invest in terms of duration exactly in the same way that we would expect the liabilities to come, and we mostly hold our assets to maturity. And therefore it really depends what the liability looks like. This determines the return you need, and the longer the liability, the higher the return.

Now, Warren Buffett famously bought some life insurance. So I guess reinsurance companies years ago. You bought General Ree and he takes the premiums and he invested in and he very good investor. Is that a model you use, which is to go get really good investors that you give money to and tell them to get a higher rate of return than you would normally get if you're doing it yourself.

Yes, I mean, we obviously need to split our assets across many, many asset managers to make sure that we have a high degree of diversification. We have a fullse area of business which is the investment management. So we have ACCE Investment Managers that has around seven hundred billion of assets and we obviously invest a lot through them, but we certainly also do a lot with external asset managers to make sure that we play the market.

But also optimized it.

So in an era when we have high inflation, high interest rates, what kind of rate of return do you need to get to kind of be comfortable. You need to get a seven, eight, nine, ten percent rate of return or much higher than that to feel that you're doing a good job investing the money that you have from their premiums.

So again it depends on the liability profile. We always look what is the division of the liability relative.

To how we need to invest.

But it's obviously clear now that in an environment like this, we need to get much higher return than we used to in a zero interest rate environment. And therefore the insurer is a very slow moving investor. So we invest around ten percent of our balance sheet every year, so it is not that when market changes we immediately change everything to change the return pattern.

So if I wanted to go in the insurance business myself, would you recommend that I go into life insurance, automobile insurance, health insurance, property.

And casual Which is the best business to go on? Of those four?

I would say the property and casualty insurance for commercial business and the health insurance. Why because those are two business that are growing the most. On the property and casualty for company, you've got all the new risks supply chain risk, cyber risk, climate transition risk, and on the health side the question a more longevity but higher healthth cost and how can you help people to live a better life. Those are the two areas I would recommend to you.

The biggest risk in property and casualty is that now climate change or climate are kind of things that are changing the way that the Earth deals with weather and things like that.

Yeah, so absolutely, when you look at natural catestrophes, the number of events has significantly increased, and not only the very big events like hurricanes, but also what we call secondary parrots, so wildfires, floodings, and drought. And this leads to the fact that you have far more events and therefore a much higher cost of all of the natural catestrophes.

How do you really assess the risk of climate change, because how can you possibly know whether they're going to be a hurricane or a flood. It's just based on the past or the projection of the future. How do you do that?

So essentially we use data from the past, but as you say, since the dynamic has changed, we need to also look forward. And what we do a lot. We work a lot with scientists who understand what the warming of the earth and climate change will mean for the question of taking risk. And secondly, we take much less risk than we used to take because we have to be careful.

So let's suppose there are a lot of hurricanes. Is that good for property and casualty insurance? Or not good because people say, well, there's going to be more hurricanes, I al should buy more insurance or not good because you got to pay a lot of claims.

It depends.

I would say it's good because I mean a it creates the awareness to do more prevention.

What we see.

Today is that, as I said earlier, there is more events, it becomes more and more difficult to ensure, and therefore we work a lot with our customers around preventions. And so if you look at the large hurricanes, Hurricane Katrina and Hurricane Irma, for example, they're about fifteen years apart, costs have actually come down over time despite inflation.

So prevention does work.

Let's stop talk about another type of insurance, which is life insurance. Are you better off if people live a long time so they don't claim their life insurance, or you're better off that they die sooner.

It always depends.

So dying sooner is mostly better because if people live longer, you have the longevity risk and you never know how long people live, but that really depends country by country. We have certainly made the choice of being relatively cautious around life insurance. We used to be eighty percent in life insurance in our whole portfolio.

We are now twenty percent in life insurance.

Because life insurance is very much financial risk, which is not diversifying. And secondly, it is very much linked to a high degree of regulation which makes the business very, very difficult.

Let's talk about health insurance or third type of insurance. So there's a lot of obesity going on in the Western world, a lot of drug abuse in the Western world. Do you take that into account when you sell health insurance?

Yes, obviously, I mean you have to give you a BMI, which is then the proxy around the question how it bees are you or not? But even for example this area, we are at the beginning of quite a big revolution. If you look at all the new drugs like ozembic and others, they could change the pattern of obesity significantly going forward, which is actually an exciting journey to go on.

So the United States has a complicated healthcare program. I don't know how it works in Europe, but is our program the United States? Some call it Obamacare Affordable Care Act. Is that program better or worse for health insurance than whatever you have in Europe?

Both have the same issue, which is a demographic issue. If you look, for example, in the US, I think about ten to fifteen years ago, about twenty percent of the federal budgets and fiscal budgets were related to welfare. Today we are at thirty nine percent to the fact that people are getting older. You see exactly the same pattern in Europe, So the question around public or more public type health system will come on the table and new solutions will be needed.

Now, maybe unfairly, but insurance companies have a reputation for saying, well, we'll show you insurance, but when the claim comes they say, well, maybe it's not so as much damage as you claim and they take a long time to pay out. Is that a fair portrayal of the way some insurance companies are and how do you deal with that image?

So when I joined the insurance industry in two thousand and five, this image was already there, and I would say at the time it was also justified in a to a certain degree because we were not enough engaged to.

Work really for the border society. We were still very bureaucratic.

If you're fast forward now twenty almost twenty years forward, this is not the case anymore. We are extremely engaged in society. Take the topic of climate change, take the topic of on socially include and we have significantly changed the whole customer service. So most of it today is very digital and it's much easier both in the administration and the claims management.

So let's talk about your background for a moment. Where are you from originally? Where were you born?

I was born in Germany.

Where did you go to school?

I went to school near Disseldof in Germany and did all my childhood in Germany.

And you were a German speaker, I assume yes. Did you speak French as well? As a young I learned?

I learned French in school. It was my third language. So I did Latin English and then French. And at the time I didn't know how valuable it would be that I learned French.

Now, in the United States, you often hear people saying I want my little boy to grow up to be an investor. They wanted to be a doctor or a lawyer. You never hear people saying, I want my little boy to grow up to be an insurance person. So how did you grow up to be an insurance person? Your parents tell you to be an insurance world.

No, not at all when I studied. So after I finished my studies, I wasn't really ready to decide in which industry I went, and so I went into consulting to prolong a little bit. The journey and test certain industries. And so during that consulting time I did amazing projects.

Somewhere in insurance.

Other were in women's underwear, other were in IT distribution. So I saw very different sectors, and I really liked the insurance sector at the time because I saw exactly what you mentioned earlier, that there is an industry that is deeply rooted in society because we are basically promoting and ensuring social cohesion. Yet the industry was not recognized for it. It was that question around a very bureaucratic industry, and at the time I wanted to make a difference and wanted to go in there.

So right before you joined the Action, you were working where.

I worked for Boston Consulting.

Okay.

Then went to winter To Insurance, which was bought by Access. Second signature I had to give was the NDA of the AXA deal. Then I went and ran Zoich Insurance in Switzerland and then back to Accell to run Germany for Exile.

You've been the CEO since twenty sixteen and the stock is up about sixty percent since that time.

I think it's a little more.

I started more than sixty percent sixteen euros and today it closed at thirty.

One okay, and the market capitalization is up almost an equivalent amount.

Yeah, exactly, Yeah, we are about seventy one billion dollars.

Now, France is a wonderful country and they have a lot of great companies. Usually they're headed by people that are born in France. So how did a German get to be the head of a French major company?

You have to ask my board of directors.

Now, essentially, I mean we the board ran a process. They first looked at extra candidates. They then looked at internal candidates. We I think if a member correctly, were seven internal candidates, and then over time the process took three years, they eliminated and we were just at the end of the day two left, one French person and me. And then the board looked at essentially three criteria which

So in many cases the large French companies, the largest ones are run by French people, typically men who have gone to the so called elit power schools. But you didn't go to one of those schools. So does that mean you're an outsider a bit in the French business establishment or you've been able to work your way in.

I've been able to work my way in. But that needed two things.

One the curiosity of the French CEOs in me, but also my ability to then fully dive into it. And so what I did, for example, with my woundimentary French knowledge that I had from school and studying, I only spoke French the whole day to make sure that this would work, and I integrated myself wherever I could. This point around the university is actually a very good one, because in France you compare the very good schools with

When you're conducting business in the actually headquarters, do you speak French or do you speak English or German?

Or what I speak? No German.

And obviously whenever there is a person in the room that cannot speak French, we only speak English.

But I still do.

As many of my meetings as I can in French if it's possible.

And your business is a global business, what is the biggest place where you have the most people. Is that France or Europe or United States?

It's Europe.

So essentially we have about twenty percent of the business in France, forty percent of the business in Europe, twenty percent in the US, and then twenty percent Asia.

And any interesting growing your business by making an acquisition or doing something like that.

Yeah, I mean we have done quite a few acquisitions. As I said earlier, I started with eighty percent life insurance and we are now at twenty percent life insurance, having kept the same revenue, which meant that we had to do a.

Lot of transactions.

For example, the company you mentioned earlier, Equitable, we ipo'd in the US. We bought XXL in the US, so we did transactions probably in the area of about thirty billion Europe.

Now, as the CEO of a company does, do the insurance people come to you and say we have a big risk here, we're going to underwrite or do they leave you out of the underwriting business.

It always depends on what size of us you talk. Normally they are doing their own business. So we have a clear grid of competence for underwriting, and about ninety nine percent of all risks is done in the entities, and so it should be. But yeah, there are some risks that come to me where I have to take it.

So let's suppose I'm in business school and I say I want to go in the business world. Why would I want to go into the insurance world.

So interestingly, we actually get quite a few young people today in the business and when you ask them why are they in the business, the number one reason they always say is the purpose of insurance, because insurance companies do protect individuals, but they also help society to develop, and so that's the number one driver while people are there. Second, we have a lot of people that have analytical background, so people that love data, and obviously our industry is

In the United States, people i'd say, well, you're a really attractive business person, why don't you go in the government. You might be a cabinet officer, or something you have any interest in that or in France you can't quite do it that way.

So obviously, in our job you have a lot of links into politics because you know, when you touch sourcial security systems, when you touch the question around natural catastrophes, when you're the biggest instruer of satellites, then you always have ties into government. And obviously part of my job is also then to be in.

That spare and help where I can.

Does it entice me to switch over to a political career The answer is no.

So today, do you have any aspirations to do something beyond what you're doing. You're not going to go in the government, you said, go into philanthropy at some point. No.

I mean, look, I've been in my job for eight years. I have a lot of fun in the job, and there is also still a lot to be done, so I will continue on my journey. I will not be seduced by politics. And when you think about philanthropy, we do a lot of philanthropy also in Acceillentle for example, go running for money that we then donate to charitable institutions.

Okay, let's talk about the economy.

The United States has a situation where we have reasonably good growth in twenty twenty three over three percent.

Europe has not grown quite as well.

Why do you think the United States seems to be pulling away from the European and Chinese economies in terms of our growth? Is it something about the American business environment that the United States has recovered from COVID maybe better than Europe did or China did so.

I think it's a couple efectors. Number one is fiscal stimulus. The fiscal stimulus in the US was much higher than it was in Europe, and obviously fiscal stimulus leads to more demand. Secondly, there is a lot of unshoring happening or reshoring happening from somewhere else into the US, which is obviously something that creates growth as well. And then certainly when you look at your demography, this is much healthier than what we have in Europe.

Recently, we've had high interest rates and high inflation. I assume you've got through that reasonably well. But now we're going to go into an era where interest rates are probably going to come down and inflation seems to be coming down. How are you going to reposition your company and deal with that different economic consequence.

Obviously, these changes produce a high volatility of the economic environment, and certainly we spoke earlier about the geopolitical environment. So in a highly volatile and highly unpredictable environment, it is important to take a strategy of low risk. And so essentially what we have said, we have built now our platform that is working very well. We are the biggest insurance now of enterprises across the world.

We are one of the biggest in Europe.

We want to make sure that we scale up this business more in the next phase.

Do you worry about Russia Ukraine as a potential insurance risk?

I mean, we worry a lot about these risks because a these risks do create claims, and so the Russia Ukraine situation did create a lot of claims on the political risk side, on the marine side, on the aviation side, and so for us it's important to look out for them and certainly are to see where the next crisis come from, because even if the Ukraine Russia crisis was

Chain risk and so on.

So I project myself in a world now in which we see many many more of these crisis happening and we need to deal with it.

How has technology changed the insurance business and how do you expect AI will change the insurance business?

So I would say three phases.

Number one, technology has changed our industry so in order to handle large data sets, to do analysis, to also simplify the customer service and also the customer expertise, so that I would say is done. We now have AI coming in where I said earlier, making sure that we use the unstructured data that we have and a lot of our data is unstructured, is really beneficiary to really understand risk more. And then I think there is a third element I mentioned earlier, the topic around prevention. This

Now, you look like you're in pretty good shape. Are you an athlete? I mean you have to be if you're the head of insurance company. You can't be very overweight. Doesn't look good, I assume, so you're underweight or you're certainly trim. Do you run a lot or you exercise a lot?

What do you do?

So?

Yeah, I do run every morning. I do five kilometers every morning. And I'm a very passionate horse rider. And in order for the horse to support you, you can't have too many kilos.

But isn't that like dangerous because you're an insurance company CEO? The horse could stumble and you could fall, and the horse could fall on you. You ever had that problem?

I've fallen many times.

Were oversee a helmet and wear a vest like you know, the motorbicker vest. When you fall, it blows up, and so far apart from a broken finger, nothing.

Okay, Well that's another sport.

I probably won't be if I told your insurance people that I was going to be doing horse jumping, they wouldn't give me a life insurance.

Yes, they would if you do it. If you don't do it professionally, they would.

What's the greatest pleasure of running AX or running a large multinational, Like, what is the great fun of it?

So, first of all, it's great to work with so many motivated people. Yes, you say it's difficult to get good people, but we have good people and it's a pleasure to work with them. Secondly, an insurer looks into every industry, so from satellites to crocodile farms to travel insurance. So it's a very broad view, and certainly it is really a place where.

You can do good for society.

So what I mentioned earlier around our approach on climate change and investing in a different manner and underwriting in a different manner, you can see the change you can make on society.

So on the whole, the message you want to give people is access the best insurance company that they should use, and insurance is doing a useful thing for society.

Is that your exactly perfect summary, and.

No regrets about not going into investment banking, private equity, government, you're happy with what you're doing.

I'm very happy with that I'm doing what I'm doing, and since I don't know what the other things are about, I will stay.

Thanks for listening to hear more of my interviews. You can subscribe and download my podcast on Spotify, Apple, or wherever you listen.