Zurich Insurance Group AG is fixing how it detects risks after miscommunication among units aggravated losses from a port explosion in China last year, Chairman and acting Chief Executive Officer Tom de Swaan said.
“There was accumulation of risk there, which was not sufficiently detected,” de Swaan said Friday in an interview at Bloomberg headquarters in New York.
Switzerland’s biggest insurer suffered $275 million in losses due to the Tianjin explosion, which contributed to a decision to abandon a proposed takeover of RSA Insurance Group Plc. The problem was that some units took on risks at the port without realizing that other parts of Zurich had already written similar policies.
“Different information systems did not communicate well enough,” he said. “We have already strengthened our accumulation management.”
Zurich also decided to raise prices for risky customers and shake up management. De Swaan hired Assicurazioni Generali SpA’s Mario Greco to take over as Zurich’s next CEO in March. He replaces Martin Senn, who stepped down in December.
“We wanted a seasoned insurance expert,” de Swaan said. “And we wanted somebody who had CEO experience.”
Senn was previously chief investment officer. His predecessor, James Schiro, had led PriceWaterhouseCoopers, one of the world’s biggest accounting firms, before joining Zurich.
The insurer is also reshaping its business mix. Zurich started a process to sell South African and Moroccan units, according to people familiar with the matter. The company struck a $1.05 billion deal in December to buy a U.S. crop insurance business from Wells Fargo & Co.
Crop insurers protect farmers against weather-related losses and have been pressured recently as lower commodity prices squeeze revenue. De Swaan’s company previously had assumed 25 percent of Wells Fargo’s crop risks through a reinsurance agreement, and is confident that Zurich’s focus on data analytics will help the business under full ownership.
“When it came up for sale, we thought, ‘Why share that knowledge, for 75 percent, with others?”‘ de Swaan said Friday. “We can substantially improve the performance of the business and take not only 25 percent of the upside, but 100 percent.”
–With assistance from Jan-Henrik Förster.
- Update: Zurich Reports 4Q Loss of $424M, vs. Profit of $860M in Q4 2014
- Zurich Insurance Q3 Profit Falls 79% on Losses from Tianjin Port Explosions