Roads to Resilience

Case study: Zurich

Introduction

Zurich Insurance Group (Zurich) is a leading multi-line insurance provider with a global network of subsidiaries and offices in Europe, North and Latin America, Asia-Pacific and the Middle East as well as other markets. It offers a wide range of general insurance and life assurance products and services for individuals, small businesses, mid-sized and large companies as well as multinational corporations. Zurich employs about 60,000 people serving customers in more than 170 countries. The Group, formerly known as Zurich Financial Services Group, is headquartered in Zurich, Switzerland, where it was founded in 1872. Turnover in 2012 was $73 billion and operating profits were approximately $4 billion; general insurance contributing almost 50% to both of these figures. The recognition of the importance of resilience and the CEO’s statement in its 2012 annual report says: “ We continue to execute our proven strategy, growing our business in emerging markets while delivering a resilient performance in mature markets ”. This case study focuses on the General Insurance business as most of the interviewees were executives in that part of the organisation. The views expressed by the interviewees concerning risk management and resilience issues and the company’s approaches to addressing them were very consistent, even though their roles and responsibilities varied – which indicates a strong shared purpose and beliefs within the senior management of the company. Zurich suffered serious financial losses in 2002/3, due to a combination of events and as a consequence of its rapid expansion into areas where it had little expertise. Consequently, the company was restructured, and a number of businesses were sold off. Since then Zurich has streamlined its business portfolio to concentrate on insurance, and in 2012 the Group name was changed from Zurich Financial Services to Zurich Insurance Group. Recognition that inadequate management of risks had been one of the causes of poor performance, resulted in a change to how risks were perceived and managed: “ the concept of Enterprise Risk Management is built into the DNA of the company, or at least it has been since 2003/4 … these for Zurich very challenging times has informed maybe more than anything else the importance of sustainability in everything we do ” (CEO Global Life). In the last ten years, Zurich has become more conscious of the need to improve the management of risks throughout the business. It also led to the new CEO’s expressed view back in 2003 that Zurich should concentrate on its core businesses and become a ‘boring insurance company’. The resulting conservative and risk averse strategy has been criticised by some market analysts, but it served Zurich well during the financial crisis in 2008. As was pointed out: “ [in insurance] the fundamental problem is that you sell propositions without knowing the actual production cost ” (CFO General Insurance). Key events

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Roads to Resilience: Building dynamic approaches to risk to achieve future success