Credit where credit is due

Excellence in risk management awards

Matthias Beck, Manager of Group Risk & Insurance for Germany’s Würth Group, was the winner of the innovative insurance programme in the 2017 FERMA-CRE Excellence in risk management awards.

Matthias joined the Würth Group, which is a global wholesaler of fasteners, accessories, chemicals, components, furniture and construction fittings, tools and machines, in 2005. The group operates in more than 80 countries with 400 legal entities and employs more than 74,000 people.

Matthias talked to FERMA about his work and the programme that won him the award.

What did winning the award mean to you?

It is a recognition not only for the huge efforts we have spent the past 18 months in developing the programme, but also for the Würth Group with its widespread activities. Also, it has been a nice reward and motivation for our team.

Why did you focus on creating a global programme for credit insurance for your company?

Actually, this was not the goal from the beginning. What I was trying to achieve as a first step was to remove complexity in our credit insurance landscape with regard to the number of local policies, insurers and brokers involved. At that point, credit insurance was not really controlled by corporate insurance. The number of policies, the potential improvement opportunities in conditions and the necessity for a global credit risk strategy forced us to start developing global credit insurance programmes.

What were the obstacles?

In the process of the risk concept development, we had at least three challenges to take into consideration:

  1. The need for a global implementation process for credit insurance within the Würth Group. By pooling our purchasing power in the negotiating phase, we could achieve significant economies of scale. On one hand, premiums could be decreased. On the other hand, we could decrease our internal administration costs and improve conditions substantially at the same time.
  2. The right mix between global support and local service. Beyond the importance of global integration, we recognized the need for local responsiveness in the management of credit insurance. This special kind of insurance entails much more day-to-day contact between the insured company and the insurer regarding credit limits and potential claims settlements than other classes.

In our opinion, the exchange of knowledge on local levels is necessary to ensure that credit limits, in particular, are applied and evaluated efficiently. Insured companies receive higher credit limits only if they have direct communication lines with the local credit insurers. That is the reason why we continued issuing local policies and providing local service for each individual subsidiary under our framework contracts.

  1. Better identification of potential group buyer risks and key exposures, as well as the degree of cover protection within Würth’s entire worldwide customer portfolio.

How different is credit insurance from property-casualty insurance in terms of creating a global programme, for example is there a more fragmented market? 

Actually, in credit insurance only a handful of insurers can provide the systems, tools and networks to establish and handle global programmes with a combination of centrally controlled conditions and widespread local service. The responsiveness to local challenges in the different countries also differentiates between the insurers.

How wide is the global programme now in place and what have been the benefits?

In the first step, as already mentioned, we consolidated all individual credit insurance policies within the Würth Group under framework contracts. With this, we achieved tremendous cost savings, as well as improvements regarding the risk cover. In addition, we now have a detailed overview of a far more controlled credit insurance portfolio. In the second phase, we are now identifying further subsidiaries which could benefit through the risk transfer of their non-payment risk within their trade receivable portfolio. New local policies will be now issued under the global programme from the beginning.