AGCS Canada leader on lessons learned in "challenging times"

AGCS Canada leader on lessons learned in "challenging times" | Insurance Business Canada

AGCS Canada leader on lessons learned in "challenging times"

“I’ve never seen this amount of change, or so many challenges all layered on top of one another.” That’s how Bernard McNulty (pictured), chief agent and head of claims for Allianz Global Corporate & Specialty (AGCS) in Canada, described the current risk landscape and the convergence of the COVID-19 pandemic, economic inflation, supply chain disruption, geopolitical tension, climate change, and more systemic exposures.

“We’re fortunate at AGCS in that we’re strictly a commercial insurer in Canada, and for the most part our clients are large and sophisticated insurance buyers, many of whom are global companies,” said McNulty. “They’ve done exceptionally well, and I’ve found their ability to adapt, be flexible, and work their way through these challenges has been fantastic.”

While large corporations are typically very independent and capable of solving their own challenges, McNulty said AGCS is always ready to work with clients and collaborate on solutions – especially in these “very challenging times”. He emphasized the importance of partnership, not just in financial risk transfer, but in helping businesses to thrive during unprecedented times.

“We have a full team of engineers in Canada – it’s a big part of our proposition – and we’re always ready to collaborate with clients and help them if they have a supply chain challenge, a capacity shortage, or any other problem,” McNulty told Insurance Business. “For example, some of our manufacturing clients struggled due to social distancing during the pandemic, which meant they couldn’t produce as quickly as they did before. We had one client open a secondary plant to ensure its employees could maintain their distance and operate safely. That created immediate challenges around the robotics and machinery for that additional plant, but we helped them to source those materials. It also had some insurance implications, but we partnered with them, and, together, we solved their problem.”

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One of AGCS’s focus sectors in Canada is construction, specifically large projects – things like bridges, tunnels, critical infrastructure, sewage and water treatment plants – over $100 million. McNulty described that as the insurer’s “sweet spot” and said “we’re doing very, very well” – but even large construction projects have been impacted by macro social and economic challenges, like the pandemic and the supply chain crisis.

“Social distancing requirements during the pandemic slowed down large construction projects, so it was very common for clients to come back to us looking for an extension on [their coverage to meet their new] project completion dates,” McNulty told Insurance Business at the RIMS Canada conference in Halifax. “We quickly extended those, and we were happy to do so. Again, it’s all about partnership.”

Today, construction clients are heavily impacted by supply chain delays and inflation in the cost of materials. McNulty said AGCS will share any intelligence it has on how to source materials or secure better pricing. He said that is done “in parallel” and collaboratively with insurance brokers, whom he described as “our eyes and ears” in the marketplace.

“There’s so much government spending right now – and planned for the next five years – that any public infrastructure projects are relatively well insulated from inflation and interest rate rises. But the private construction sector will be more heavily impacted because the costs of financing projects is rising,” said McNulty. “Sometimes, we’ll will quote a project, but then there’s delay on the project because something happened with the financing, and it might not go ahead, so the clients will ask: ‘Can you put that quote on hold for a period of time? We need to do some work to get this project back up and running.’ We need to be patient, and work together to find a solution.”

Read more: Facing down the construction industry’s growing uncertainties

Like all insurance organizations, AGCS is not immune to the challenges its clients are facing. During the pandemic, for example, the majority of AGCS’s engineers were grounded due to travel restrictions, and so they had to turn to ‘desk review work,’ relying heavily on the eyes and ears of the clients who were on-site and feeding information back about how their manufacturing plants or construction projects were operating, utilizing safeguards, and so on. 

The desk review process was successful because AGCS could “leverage [its] relationship with brokers and clients” to access relevant information, but McNulty admitted there were situations where having an engineer physically on-site would have been more beneficial.

“We have had a couple of situations where we would have inspected a manufacturing plant, for example, and seen a risk or exposure and taken some action on it. We would have made recommendations and worked with the client to fix something,” he said. “We suffered one loss that we didn’t expect. Our team did their very best, but there’s nothing quite like being on site. We could have avoided a $50 million claim. So, we’ve done a lot of reflection after that about what we could have done differently, and whether (in any way) we could have identified that exposure pre-loss.”

Every company has learned lessons from the COVID era – and during this rather unique risk landscape we find ourselves in today. On reflection, McNulty said: “We’ve got a tremendous level of resources and tremendous global talent at AGCS, so our ability and the frequency with which we tap into those resources now is so slick – we do it automatically. Before the pandemic, we didn’t have the same frequency of contact, we didn’t have all these virtual calls, and we weren’t meeting our colleagues that way in other parts of the world. We’ve really enhanced how we leverage our global footprint for the benefit of our business and for our clients.”