‘Rise reinsurance rates puts pressure on the price we charge to customers’

The insurer Ethias has had a good year, but that is no guarantee for the future. CEO Philippe Lallemand points out the important challenges facing the Belgian insurance sector.

With a premium collection of 3.37 billion euros, Ethias achieved record turnover in 2023. The net result of 200 million euros also showed strong growth. Of the profit, 110 million euros flows as dividend payments to the shareholders, mainly the federal government and the Walloon and Flemish Regions. But it’s not all roses and moonshine. Lallemand will soon organize a major internal seminar on where Ethias will be in ten years. “It is important to look ahead and develop a strong vision for the future,” he says. “The insurance industry is facing increasing risks and an existential challenge.”

For example, electric cars and multimodal mobility require different solutions than traditional car insurance. Cyber ​​risks are increasing in both number and magnitude and threaten to become uninsurable. But perhaps the biggest challenge is the expected increase in natural disasters such as floods, storms, drought and forest fires, due to climate change.

Unaffordable fire insurance

These problems cannot be underestimated, especially in Belgium. The floods in Wallonia in 2021 cost almost 2 billion euros in damages. The insurers covered almost half of that amount, an effort that far exceeded their legal obligation. In addition, they lent the balance to the Walloon Region, because there was no money in the region’s disaster fund. As a result, their reinsurers now charge higher premiums.

The government quadrupled the ceiling for insurers’ contributions to an estimated amount of 1.6 billion euros. But no agreements have been made about who will pay for damage above that amount. The National Bank warned that the lack of a clear legal framework could mean that citizens can no longer insure themselves against such damage or that their fire insurance becomes unaffordable.

Lallemand asks that everyone takes responsibility: “First of all, the insurers themselves, who must continue to offer coverage. In France, hundreds of municipalities and collectivities can no longer insure themselves against natural disasters. We must prevent such situations. But insurers cannot bear the full burden of claims. The government must also do its part if the damage becomes too high.”

International reinsurers view the Belgian market and the uncertainty about who will pay for the damage with mixed feelings. And that is not a good thing for Belgian insurance companies, Lallemand realizes: “Ethias has seen its reinsurance rates increase by 50 percent over the past five years. This puts pressure on the price we charge to customers. Because as a Belgian insurer we are only active in our country, we cannot spread the risks across other countries or regions. That is why we have decided, as Ageas has already done, to set up our own reinsurance structure. We cannot be naive: if there is no good arrangement in Belgium, there is a risk that certain customers will no longer be able to take out fire insurance. The National Bank rightly points out the urgency of a solution.”

Lallemand advocates real private-public cooperation between insurers and the government to keep the damage from natural disasters insurable. He points out the efforts that the government can make by laying down urban development regulations and granting building permits, which, for example, prevents construction in flood areas: “The government can do a lot in the field of prevention, to limit potential damage. prevent. But more is needed than a Belgian solution, Europe also has a role to play. Natural disasters do not respect national borders. There must be a European structure that can intervene in major damage cases.”

French influence

Another important fact on the Belgian insurance market is the recent entry of the French bank BNP Paribas into the capital of the Belgian insurance group Ageas. Through BNP Paribas Fortis, the French already controlled 25 percent of AG Insurance, the largest Belgian insurer and a part of Ageas. Now they will also become the most important shareholder at group level with a 10 percent package. There are fears that Paris will exert its influence in this way and strengthen its grip on the Belgian market. So far, this has not provoked any critical comments.

“We cannot be naive,” Philippe Lallemand repeats his statement on that issue. “History shows that if a French or Dutch group gains power from a Belgian company, it is a matter of time before the decision-making center moves to Paris or Amsterdam. The matter is now being presented as if BNP Paribas is acting as the savior and anchor of Ageas, but the French bank will undoubtedly have other goals in mind with that operation.”

Even though Ethias and Ageas have a common shareholder with the Federal Participation and Investment Company (FPIM), the entry of BNP Paribas into the capital of Ageas does not change anything for Ethias, says Lallemand. Or at least a little bit: “We will play up our Belgian identity more than ever,” says the CEO of Ethias. “We have a unique model in which both the federal government and the regions are shareholders. You will not find a better example of cooperation at Belgian level.”

For Lallemand, it is crucial that an insurer like Ethias has its decision center in Belgium. “Strategic, because the decisions are then made by Belgians, who pay attention to local interests. Economically, because an insurance company is an important investor. Ethias has outstanding investments of 5 billion euros in the Belgian economy. We are an important partner for the public sector seeking financing for infrastructure, real estate and sustainable development projects. Consider our investment in Fluxys, with a view to the transport of green hydrogen. Or our collaboration with FPIM in Cityforward, to transform outdated buildings of the European Commission in Brussels into a sustainable urban district.”

Finally, there is also a financial interest in Ethias’ Belgian identity. Lallemand: “Since 2017, Ethias has distributed 700 million euros to its shareholders. In terms of dividend distribution, Ethias is the most important participation for both Wallonie Entreprendre (WE) and the Flemish Region, and the second most important for FPIM. Ethias’ dividend to Flanders is almost as large as the income the region receives from the National Lottery.”

Motivating young people

A third point of interest for Lallemand is the digitalization of the insurance sector and the implementation of artificial intelligence. “We should have no illusions: that will cost jobs,” he says. “AI allows important time savings to be achieved in all administrative processes. That will unleash a real revolution. That is why I want to think now about the function and implementation of AI in this company.”

“We have to make sure that this doesn’t become a purely negative thing,” Lallemand continues. “Yes, we will probably need fewer people. But we will need more people who think, who have IT skills, who work with data. It is important that we give young people hope. The world of tomorrow needs the courage of young people. That is why Ethias has launched FailBetter , a platform that wants to encourage young people to be daring and entrepreneurship, knowing that making mistakes and failure is part of that process. It is important to convert those experiences into a future process that focuses on improvement and innovation.”

Lallemand believes that Europe also has a major responsibility here: “We are currently experiencing a global trade war. The United States has succeeded in its own with its Inflation Reduction Act to stimulate economic growth, at the expense of Europe. European companies are facing a labor shortage and are investing in new regions such as India. We run the risk of giving our young people an image of this no future talk. Europe must urgently wake up and work towards greater integration, so that its youth are motivated to take initiatives that shape the future.”