The company

For many years, the strategy adopted by HanseMerkur has been aimed at achieving long-term strengthening of its financial base, something which is of key significance to customers and members involved in the insurance of people. It is this sound financial base that has allowed HanseMerkur to grow into what is now a modern insurance group extending right across Germany, employing more than 1500 people,with revenues from policy premiums in excess of € 800 million and a capital reserve in excess of €3bn.

Task

Due to regulations contained within the German Insurance Supervision Act and the Stock Companies Act, HanseMerkur is legally obliged to take appropriate measures towards identifying potentially adverse developments at an early stage. In particular, it is required to set up an appropriate monitoring system or early risk detection system. HanseMerkur has complied with these legislative obligations to set up a risk management system (RMS), and has opted for one based on the BPM/CPM toolkit from BOARD.

BOARD solution

At HanseMerkur, a risk is defined in the following way: Negative variance between the actual development and the planned / anticipated outcome. The RMS aims to identify all risks to the HanseMerkur Group in one integrated system across the whole corporation to estimate their potential implications and to arrange for appropriate measures to be taken to minimise those risks.
Departmental managers are tasked with ongoing risk identification, risk description and evaluation, determining the measures to be adopted within the scope of their defined areas of expertise and to proactively report those risks. Therefore, in BOARD the following functions have been set up:

1. Risk detection
In the first step, the user is provided with a template for entering and describing a new risk. Then the newly defined risk is assigned to a category, e.g. political risks, market or financial market risks for the affected company, and the responsible and involved employees.

2. Risk administration:
On the basis of defined indicators, factors are described which can have a major bearing on the risk, e.g. rising insurance premium revenues, decreasing combined ratio. Plan and threshold values are defined for these indicators. The risks are then evaluated based on their impact on damages/losses and probability of occurrence. By multiplying the valuations obtained for damage class and probability of occurrence, the expectancy value is calculated automatically and the risk class (high, medium or low) is determined. Suitable courses of action are then planned for all risks.

3. Risk documentation & 4. Risk reporting:
After defined periods of time, risks and their related measures are reviewed. All risks and actions, including their degree of implementation can be retrieved and viewed in summary form at any time.

Customer benefits
The introduction of the RMS has caused a large innovative leap for the department. The new system has already given a good return on investment thanks to the improved efficiency brought to the department. However, the most striking benefit is the newly acquired transparency because of the automatically calculated expectancy value for each risk. It makes it possible, at an early stage to estimate the existing risks, and in so doing helps HanseMerkur to initiate appropriate counteractive measures on time.

Furthermore, it has been possible to achieve substantial improvements in the working processes of the Corporate Planning department (CPD). With the help of BOARD, all risks can now be managed. The CPD is able to carry out targeted analyses to detect risks and identify their causes and impacts. Consequently, the analyses can be conducted faster and this opens the door for CPD employees to improve the quality of their work. Their every day tasks are in turn supported by the system because the BI solution allows them to generate a large number of significant reports: e.g.the view on individual risk classes, on the development of risks in an annual comparison or an overview of measures.