Nick: Hi, everyone. Welcome back to another episode of Reinventing Finance. As usual, I am not all by myself. So with me is my lovely co-host, Tom. Tom, how are you this fine morning? Tom: I am very fine and looking forward to our conversation Nick.

Nick: And as usual, whilst this is somewhat of an insurTech echo chamber, we're not all by ourselves in this lovely echo chamber. We have Frederik with us. Frederik, how are you?

Frederik: I'm very well. Thank you very much for the invitation. Pleasure to be here.

Nick: Likewise. Thanks for saying yes. I can only imagine that you have quite a busy schedule. Now, for those of our listeners, viewers, who your name doesn't already ring a bell, why don't you briefly introduce yourselves and what the hell do you do exactly?

Frederik: Yeah, I mean, that's probably a broad question. Very much depends on whom you ask.

Nick: We're asking you.

Frederik: So officially what I do, it's pretty simple. I'm the CEO of Markel Insurance SE, which is the European carrier within the Markel Group. And I look after the business that we do in Europe. So that's what I officially do. At the same time, I also have another hat in the group where I'm part of a group where we are looking at insurTech investments. That's why I'm actually very interested in what you do and actually a frequent listener to your podcast. So very happy to be here for that reason as well. So that's the main occupation.

And I came from actually having my own company, which I sold to Markel in 2012. And since then, I'm with Markel and very happy with Markel. Originally, I was quite scared, to be honest, because if you come from being your own company owner and operator and then you go to a stock market listed US company, that is a bit of a shift. And I was not so sure how well that shift would go with me. But very honestly, Markel is a great company that allows you to be an entrepreneur within a company. And that's what I'm doing for Markel.

Nick: What did you do? What was your company? What did you guys do before?

Frederik: Actually, a couple. I mean, in the insurTech space, I always like to mention INEX24, which was something that I founded which was probably one of the first insurTech, but wasn't called an insurTech because we didn't have the term back then. But the main company was Anglo Underwriting, which was a Lloyd's cover holder that was doing business in Germany, Austria and Switzerland, and was actually the bridge between these markets and the London market where we placed speciality risk.

Nick: Oh, you've already alluded to at least a couple, let's say, milestones in your career. If you kind of look back with the benefit of hindsight, what seemed to have been some interesting milestones or events or lack of events that happened in your past and for yourself, but also since taking over the helm at Markel Europe and are still relevant today? So any kind of two cents you can share from your wealth of experience?

Frederik: Yeah, I mean, again, quite a broad question, but obviously, I mean, starting, I mean, coming from university, then doing kind of like initial jobs, then starting your first company was definitely a big milestone. And the question on how does that work and how well do you feel with that and how is it to be self-employed and kind of like permanently responsible for what's happening? That was a big one. And I loved it, to be honest. I thought it was a great phase of my life and then actually see something grow and see some of your ideas actually take off. That was fascinating.

But then actually transitioning into the role of a corporate entrepreneur was also very interesting because suddenly you're dealing with a different situation. Whereas when you have your own company, you basically deal with, okay, there's normally a lack of funds to kind of fund all the ideas that you have. Then you get into an environment where the funding is not the problem, but there are other hurdles that you need to overcome to make sure that you can actually develop ideas further. And seeing these two different kinds of like environments, for me, it's still a learning that's day-to-day and permanent, but that was a very interesting one for me as well. The other one that I think is also quite interesting or milestones were to learn kind of like how a global corporate can still be extremely strong at ensuring the culture within a company. And that is something where I think Markel is absolutely a role model. And that is, again, something that was an absolute milestone for me because I always thought that that was going to be far more difficult. It's actually not. I mean, it's more like you need to do something on it every day. But if you do a little bit every day, then that has a big impact. So those were a couple of milestones.

Tom: Can you explain a little bit how do they do this? Because normally it doesn't work. I mean, that's what you already said. Why does it work for Markel?

Frederik: Let's start. Why does it not work in other cases? I think if you are putting your values on a great picture and then you're putting that picture into a hallway and you walk past that thing every day and nobody looks at it because it is just something that's in a hallway, that's the way to not being successful with that. I think what Markel has done very early on, so the family has at some point, Markel was founded by a family, so they have actually defined before they were in public what is the legacy that the family wants to give the company and has put that into something that's called the Markel style. And again, that's where it could have gone wrong. If you then print the Markel style on a picture and put it in the hallway and nobody cares about it, then that's where the problem starts.

But what they have then done, they said, listen, in whatever we do, it has to play a role. So in every performance review, in every promotion, in every salary increase and every bonus discussion everywhere, you have to give a view on how the performance was with relation to the Markel style. And they've also made the Markel style more operational. So it's not just a sentence, there's also concrete examples what behaviour would be considered, kind of like, okay, that's an example on how Markel style would be put into life. And making it that concrete and making it permanent has kind of like done the trick, if you ask me. And then obviously, it's also a question of who do you hire? Who do you bring on board? If you have a group of people that has a certain mindset on how they want to do business together, it's quite easy early on to then destroy that by bringing on people that have a different mindset. Not necessarily a wrong mindset, but just a different one. I think it's then quite interesting that you hire for personality and not only for skill. So I think that that's also something that we have been able to really kind of like cement at Markel as one of the ground rules.

And last but not least, wanted here are sharp minds, not sharp elbows. That's also something that a lot of people or a lot of companies might say, but I'm pretty sure we are executing well on that, not only talking about it. So that's just a couple of examples, but that was a milestone for me to actually see how great something like that can work in a company. Sorry, Nick, I don't know whether those were actually milestones that you were referring to. I mean, we can also talk about, we founded the, I mean, I took over the Markel, but in Germany in 2013, they took over my company in 2012. Then we went, we had the first Markel branch office in Germany in 2013. Finally, we founded it on the 1st of April. And then we kind of like went from there, started actually with the same product suite that we still have. So I haven't been very innovative there then I think, but maybe within the product suite still. Then went on Brexit, happened after I took actually over Europe, a couple of years after we did Germany. And then yeah, we established the German carrier in 2017, writing business on it in 2018. And since then we've been growing that to, yeah, just short of $500 million of premium income now.

Nick: No, listen, I mean, yeah, I was hoping for regurgitation of your LinkedIn profile, obviously, Frederik, right? That's what Tom and I always set out to do. Now, I think you've mentioned it yourself. It's a broad question and you took us where you thought that was relevant and thank you for that. I think that segues quite well into what makes you different, right, or what makes you successful? I'm not a huge fan of this whole; we are everything that our competitors are not. I don't think that's the reality for most businesses. I think that's a lot of business gurus and books send you on a fool's errand with that. Because life just seems to happen in the grey. But on top of, or maybe that is one of the substance, you know, the Markel way, what do you think you do differently and what's some source of your success? And wherever you can try to be as explicit or provide an example so it's somewhat more instructive.

Frederik: Yeah, and again, I mean, I think culture is a very big one. I think that is a big differentiation factor for us. But I've talked about that already, so I'm not going to repeat all of that. What that creates though is a very strong sense of ownership. So that is something that is very typical for Markel as well, that we try to give business owners or business or divisional business owners or however you want to call it, managers, a lot of sense of ownership for their own business by giving them autonomy. So Markel is not a very centralised organisation. It's more of a very decentralised organisation. And again, we can always go into the discussion, well, what's better about centralisation? What's better about decentralisation and so on. Markel has made the deliberate decision to be a more decentralised organisation. I think that leads to people coming from the markets, actually dealing in and with the markets rather than central decisions being forced on markets and I think that is a certain advantage that we have that we can actually be quite customer focused in the markets that we're active in. I think what also helps is the fact that we are a specialist. I mean, our product portfolio is very limited. We don't do any motor. We don't do any property. We have a very, very high appreciation for long tyre classes in the casualty arena, whether that's financial lines or PI or traditional casualty, whatever it is. But that is something that we really like. And that is something that we can do well. And that's what we want to do well.

And therefore, I think the specialisation also helps to a certain degree. And last but not least, I think one of the big things that we kind of like always talk about and actually talk about a lot is how can we make it as simple as possible for our partners to work with us? So it's really like the permanent challenge and everything that we do. If we launch a new product, if we do kind of like an update of a product, if we talk about any sort of digital platform that we want to build, how can we make it as simple as possible for our partners to work with us? It's always one of the main questions. And one of the, I mean, because you asked for concrete examples, I mean, one of the earliest ones that we had in Germany was basically, we thought, okay, if the broker comes to us and has to do the same process with us, like with everybody else. So send it in the questionnaire, wait for a response, then compare the different quotes that they have received from the carriers with each other and then present it to the customer. Maybe that's too long. And we thought, okay, how can we make this quicker? And we came up with this pre-quoted model in what I think is kind of like the highest form that you can possibly have. And that pre-quoted model was actually a PDF, a self-calculating PDF. So the broker was immediately in a position for kind of like small to medium-sized risks to come up with a premium by himself by just filling out the document.

And then on the basis of that pre-quoted model, we actually said, okay, what's the next step of that? So how can we use that to also make our products simpler so that the product is easier to be integrated in online tariff machines and all these kinds of things. So it starts with something and then it continues to kind of like build on that idea always with the question in mind, how can we make it as simple as possible for our partners to work with us? That's mantra that you will always hear at Markel Europe, at least.

Nick: And I think that makes a lot of sense. I think maybe if we have some time later on, I would love to circle back on the Markel way and understand whether there was a choice, a trade-off to be made where you've had to let someone go who was very good, but didn't follow the Markel way or where someone was very part of the Markel way, but not very good because unless we hit a choice, it doesn't really matter, right?

Frederik: Opportunity cost.

Nick: Exactly. But I also wanted to, let's see whether we have a little bit more time later on. You've mentioned yourself that you've been true to your focus on certain lines of product. Could you just outline the type of product lines you're doing and why those and not others? And then we can maybe kind of go into some of them where you just see the market developments and maybe also I think what's interesting having a US and potentially UK exposure, which on some of these lines of products might be more innovative if it is still the same as it used to be and where you see these things taking hold in the German market or not.

Frederik: Yeah. And I mean, let's start with the product lines. So in Germany, we have always had a very strong focus on PI and that's mainly miscellaneous PI, but also professional PI. We added to that a very strong interest in-

Nick: What's miscellaneous PI? So professional PI, I can, but miscellaneous-

Frederik: I mean, professional would be lawyers, tax advisors, accountants, architects, these kinds of things. Miscellaneous is basically every service provider that's not in the before mentioned group. So IT, media, consultants, whatever, any sort of service that you can think of. And that is something that we like and I can also tell you how we got into it. So, but I mean, those are two product lines that are very important for us and then you have financial lines. So everything around DNO, whether it's commercial DNO, personal DNO, financial institutions, whatnot. Yeah, so all of that, we basically offer everything there. And then you have cyber. Those are the three main lines that we are writing in Germany. If you look on the more European basis, you would also probably see quite a bit of casualty business or traditional third-party liability for companies. And then we also have kind of like mainly kind of like from our base in, I mean, our former base in London driven still a lot of business in marine energy and trade credit, political risks, insurance. So those are the overall lines. But in Germany, the main focus is PI, financial lines, cyber. That's kind of the core portfolio and we've always kind of like focused on that to be honest.

Tom: If I just may add, my understanding always was that let's say on the product side, you just, let's say from an economic point of view, just decided not to be active in the space where you lose money as a lot of insurers do.

Frederik: I think it's a sensible decision.

Tom: Yeah, but I mean, most don't with the argumentation that you have to offer your clients everything. Cars would be the most let's say the most prominent example in this. And on the other hand, you don't want to serve all the clients, but you have a multi-niche strategy. So let's say if you would put it on a, in a metrics from both sides, you search for profitable part of the whole business. And that, I think that combining makes it also simpler because you're not spending your energy and time on the wrong products and the wrong clients to put it the other way around.

Frederik: Tom, you're a hundred percent correct. So, I mean, at Markel, it's pretty simple. There's three things that we kind of like look at. So number one, can we make money in the niche that we plan to operate in? That was a big question.

The second big question that we always have is the question, can we make our customers happy in that niche? So the question is, can we offer something that allows the customer to be better off because they've chosen Markel than if they would have chosen somebody else? So that's the second kind of like a big question. And if you look at the business lines that we look at, I mean, they are profitable in Germany, obviously. And the second one, we, when we came to the market at the feeling that the differentiation with regards to the different industries wasn't kind of like broad and clear enough. So it was basically, you were buying a PI policy and somewhere very much at the end of that policy, you would also say, yeah, by the way, also insured is your occupancy as an IT provider or whatever. And we thought, okay, that's not specific enough. If we were an IT company, we would want a more concrete description of what are the risks that we have that are actually insured here. So actually being more or being closer to the customer was something that we thought we could bring to the market in a specific way that would allow us to kind of give something to customers that they were not yet able to buy in a broad way in Germany. And so profitability, being able to do it a little bit better and therefore offer something that's valuable to the customers while at the same time, allowing us to kind of like earn some money with it. Those were the two main drivers, absolutely 100% correct.

Nick: When you're kind of looking at your product lines and looking at, like nascent developments, et cetera, but which of these product lines do you think will change the most? And if so, why? And as we're in the prediction business, in which way?

Frederik: I mean, that's, I think that you will see evolution in PI, whether it's miscellaneous or professional, there will be evolution because if you look at artificial intelligence, what does that do to PI coverages and so on, big questions. But I don't think it will be revolutionary. But there will be change. The same applies to financial lines. Obviously there are more risks coming in. There are more compliance regulations coming in. That again, changes the risk, the nature of the risks and so on. So there will again be change. But again, I think it will be more evolutionary than revolutionary.

In cyber, I think that is a bit, or can be potentially is a bit different because cyber in the moment is a product that is seeing strong growth, but I'm kind of like not yet. I'm not seeing yet that what I think will happen in the future is already happening, that there's actually cyber being the dominant product in the insurance market. Very simply, if we see more and more of the value chain actually going into the nets, the question is, doesn't that also completely change the risk landscape? And cyber is getting a lot of attention, but let's not forget, I don't know what the overall cyber premium in Germany is. I'm not the faintest idea because the numbers are not being publicised in a proper way yet, but I mean, let's assume it's 800 million or something. And then you compare it to the overall property market. I mean, that's nowhere yet.

So if we are talking about a product going from being whatever a fraction of what the property market is today to becoming bigger than the property market, I think that is more of a revolutionary change rather than evolutionary change. So I would think out of the product lines that we are offering, cyber will undergo the biggest change over the next decade, if you want to take that as a time zone, because it will see some fascinating growth. It will see a lot of players actually needing to go into the space. It will hopefully also bring us a lot of prevention services, post-claims service, whatnot. So I think that's probably my expectations that the biggest changes will be in cyber.

Nick: And I think that kind of makes sense. I think as an IT entrepreneur, why do we buy cyber? It's a requirement for large tenders, quite frankly. Now, the interesting thing with cyber though, if perceived adequately, is that you don't just try to get the cheapest quote on whatever tick boxes the procurement department has put on cyber, insurance sum or geography or whatever. It could, but it's not quite frankly what I usually experience. I also don't think that most brokers are adequately equipped to provide these services, quite frankly. It could be a merger of preventative consulting services around cyber and by being able to put a price tag on certain preventative measures. And it's not new. Risk management has always been part of, I don't know whether the story is true, but wasn't it like an insurance company who formed the first fire brigades or something on the insurance plaques and they were only... At least I've heard that storey because it kind of made sense to say, well, we're insuring these things. So why don't we just put out the fires as well? Because we have an economic interest. That is certainly something that I think is happening more.

There seem to be some players and I'm not doing all of them justice, but Coalition, Cowbell, there's many others, right? Seem to be going more into that kind of active cyberspace. Are they going into the right direction? How much of it is marketing? How much of it is bluff? How much of it is substance?

Frederik: I think all very good questions. Probably worth another couple of hours of discussion. I think if you look at the offerings, there is still a gap between what I would consider in the most cases being very intelligent solutions. But to problems that the customer does not yet perceive as his actual problem. So I think you mentioned education of a market. I think if you talk to people about property and you talk to them about, hey, if you install a sprinkler, your property risk will go down. Your insurance premium for property will go down. And if you ever have a fire, you're probably going to have less of a problem and less of a BU plan. Perfect. Everybody understands that. It's not something that either the buyer or the broker or the insurer really needs to spend a lot of time on to kind of explain that. I think we have not yet reached that level of maturity in the cyber environment. So I think a lot of the solutions that are being offered from some of the players that you've just mentioned are very intelligent solution. I would never doubt that, but I'm not sure whether the timing is perfect. And sometimes you can be very right with a solution, but your timing is just off, which is probably more often the reason for not being successful rather than it being a completely stupid idea. So I think it's actually good ideas. But I'm not sure that the market is already ripe for it.

So I think overall, there will be some of these models that will be successful. Some of these models that will pivot again. Some of the models will probably be integrated into some carrier offering and we'll see how all that goes.

We personally, we at Markel actually do believe strongly in prevention services being integrated in the product. And we also believe in having structural solutions on the kind of like once the incident has happened side. I'm not saying we're perfect in it. I'm just saying we believe it's very important and we're trying to do it as well as possible. But I think it will be crucial. It will just be a question on in what phases will evolution or even revolution happen in these questions. So I'm not going to judge all the various players that you have mentioned. I mean, I've looked at all of them and I think they partially have some interesting solutions. Obviously all have tried to bring out very intelligent ones. But again, I think we're not yet at a moment in time where we can actually say that's going to work, that's not going to work.

Tom: I would like to ask an additional question on that. What I don't know, because I'm not a specialist in that field, but I thought about it when Nick started to talk about fire insurance or the history of fire insurance. Why isn't this seen as something which is also from a political point of view extremely necessary to make compulsory? So if you just see the history of insurance, then at a certain time in certain countries, they just said, okay, you just need one. It can be driving a car or insuring your house against fire or you have a discussion about earthquake risk at the moment in Switzerland as an example. And if it's a compulsory insurance, then you have maturity as fast as you ever would be able to get. Is this a discussion or not? Because let's say from a political point of view, it's one of the main systemic risks for a whole economy.

Frederik: I mean, I definitely agree with the last statement, full stop. I'm not sure that a mandatory insurance is the best answer to a proper need because I'm not convinced, and I can give you various examples of that, why mandatory insurances are normally not the best developed ones. So I'm not, I mean, I agree with there should be more of a push. And I think there is actually quite a lot of push. It's not only kind of governments talking more and more about it, it's also regulators doing more and more about it. So I think there is actually quite a lot of focus and attention on the question of cyber and if you're looking at the development of the cyber markets in Europe, globally, whatever, you can actually see that it has started with very large companies being interested in it and then suddenly it got to the smaller companies more and more and more.

I think we will also see more and more that there will be private cyber insurances. So I think there is a good trend in the development. Why am I not convinced that mandatory insurance will solve that? Because again, then people will just kind of like try to throw out something that's called cyber insurance and they will then believe, oh yeah, now I'm protected because I bought some sort of cyber insurance and that will actually hinder the process that I think is far more important, which is the educational process. Because if you look at it and we see it in our own claims data, but I think that's something that competitors would also kind of support as a statement, 80% of the cyber claims are still man-made. So it's people behaving stupidly in the digital world. So clicking things they shouldn't click, using USB sticks they shouldn't use, doing all sorts of things. So ultimately, it's more the educational side that I would like to foster. And I'm not sure that a mandatory insurance would do best to that. But I mean, obviously very open to discussion because I think that's more a point where somebody can have a view on rather than know the answer.

Nick: Yeah, So out of interest when you're... And I don't want to put words in your mouth, but is it fair to say that you're kind of having a bit of a wait and see approach to say, you're a specialist, you're well-known in the market. The brokers will likely tell you when something is a miss. And rather than taking bets on potential solutions that have not been actively requested, you'll kind of do, okay, if the demand is big enough, we'll adjust our products. Is that a fair assessment of your strategy within your kind of adoption curve on cyber or am I putting words in your mouth?

Frederik: Yeah, a little bit. I think we would be a bit more, we are a bit more decisive on that. We have a clear path that we follow in our products. So when we offer products, you can find in our products, a prevention service that's being offered within the services that we provide through a partner. We have very clear underwriting tools that we use that also include recommendations that we can provide to the customers, which are also provided by a strategic partner of ours. And then we go further through the chain where we actually then offer the insurance product, but then we also go into the claim services, if you want to say. And again, we have a very clear picture of what we want to offer and are offering that. So I think we have come up with a very well thought through offering for SME clients that want to buy cyber insurance. And again, all under the provision, let's make it as simple as possible for our partners to work with us.

So I think we're very good at that and we're having the success that we want to have with it. So I think we have a market share that's at least in the broker distribution market, not small. And actually I think the brokers also respect our solution. So that's, I think we're very well positioned there, but that does not mean we are shutting our eyes. And then from that moment onwards, remain completely closed to things that we see are changing in the market. And that's what I meant with that I believe cyber will see the biggest change. I don't think that the solution that I think is very good that we have today is a very good solution three years from now. So it will be important to kind of like see how will offerings from Cowell, Constellation, whoever be accepted in the market. And what does that mean for the offering that we want to provide the market with? So that's more what I tried to say, that again, watching the market carefully is something that we need to do, but more to continuously remain top as a product provider, rather than kind of like falling behind. That's what we were doing.

Nick: Understood. Understood. I think I would like to segue into a different product line that has been for those nerds around, it has been some title is the new cyber and it's about carbon offset insurance. Now, just as a kind of brief, what is carbon offset insurance, right? You, we're talking about voluntary carbon offsets, your corporation, I don't know. Recently, Bain said, we're going to be net zero, and for that, they needed to buy, I think 100,000 credits of carbon credits. Now these credits, you know, they cost around whatever, eighty to a hundred dollars right now. But what happens if they are invalidated, if there's fraud, if there is reversal risk? Well, you know, that's carbon offset insurance because you kind of need to keep them. There's a few players strongly linked to Lloyds in that space. And from my limited product knowledge, it seems to kind of emerge out of expertise around assurities, financial lines, kind of view about things because ultimately you're protecting against the financial loss of then having to buy more credits at a later point in time to still keep up your promises. Is that something that you've been, have you heard, you know, have you heard of it? What's your view about the product or the market in general? Is that something where you see an opportunity for Markel?

Frederik: I mean, you picked  a product out of a very broad topic, because I mean, very obviously, kind of like, how do we best look after our planet and how do we make sure that future generations will have the fun of enjoying this planet as well in the same way that we're enjoying it is a much broader topic. And obviously a lot of development in that area. And I think the insurance industry is not yet good enough at, and that includes ourselves, at actually seeing the opportunities in that from a perspective of where we are, first of all, also on this planet and need to do something for the planet. And a second stage providers of insurance that might today already be affected by that. And thirdly, could be the providers of insurance solutions that actually help the transitioning. Yeah.

And, and I think all three areas are not a hundred percent fully developed yet. I think the CSRD reporting requirements that will come into place latest in 26, will do their part that, that basically in every insurance company, there will be a lot of thinking going into these questions now, but if you then go specifically into the carbon offset insurance market, I have heard of the product. Yes. And I've always said, listen, isn't it, isn't that the same thing that we're discussing in other areas as well, where we're basically discussing how do I protect virtual assets? Because, I mean, let's face it, that is a virtual asset and protecting virtual assets is something that has been difficult in the insurance market for quite a while. Yeah. So, I mean, if you want to ensure your Salesforce database that you today have, yeah. Good luck with that. Or if you want to ensure your EA sports, kind of, I don't know, FIFA 2014 that you have bought together over a period of, I don't know how many months and spent X amount of Euros on, you will have problems ensuring that today. Yeah.

So the question, okay, now I'm buying Bitcoins or carbon credits or whatever. Yeah. So ultimately that's the same question. The question around this is, do you want to limit it to that? Do you really want to limit it to, okay, today I have bought and got confirmation on having 10, 100, 1000, whatever carbon offset credits. And I want to still have them tomorrow. And if they're no longer available, I want to get somebody to pay me back the money that I paid for it. That is one question. I think that is one, there are markets to discuss that. I'm not sure that I find the solutions that I've heard of so far, very sophisticated or right, but isn't it more than questions? So you use an example there. So this company is making a lot of effort to actually become carbon neutral. And that is itself, I mean, the whole kind of like investment has a value that potentially needs protection. And is that something that the insurance markets can help with as well? Again, I personally think that all of these areas are not yet explored to an extent where product offering is already broad enough to have a fair chance of seeing enough take-off.

I think there will be individual buyers of certain of these solutions, but it will not become a broader product yet because I don't think it's finalised in its setup yet. So I'm not yet a big believer. It is something we are looking at, but it's more something we are looking at because I strongly believe that the insurance of virtual assets generally will become a far bigger topic. And we will as an industry need to become better at providing solutions for that. And I mean, as a PI insurer, we are not very far away from that. So obviously we want to play a role in that.

Nick: And that was, I mean, fully bought into it. It's a very large topic, the rhetoric around it and how the insurance industry, I think there's certain elements obviously around EV, renewable energy, et cetera, which is not really new. But a lot of the other rhetoric is about stop providing insurance product for polluters. And that is just a very tough pill to swallow for management within an insurance company if the rules are not changed. And so what I thought was really interesting about carbon offset insurance, and again, we can talk about offsetting, whether that has its own problems rather than avoidance, right? That it's a concrete opportunity to develop a line of business with all of its problems. Cyber is different now than it was 10 years ago and will be different again in 10 years’ time.

That kind of puts you a little bit into the driver's seat rather than I can't do anything. I would, but, and that's why I find it interesting that that could be an interesting opportunity where kind of doing the right thing, but also merging it with current business interests, even though it is still a nascent product, might align. And so I would say if that is something within the general remit of capabilities that people should take note of, because I just think it's better than introducing Veg Day on Thursday in your container. You can do that as well. But I feel if you're looking at some of these ESG reports, super embarrassing. Then don't publish them at all. Just be honest. Agree. Right.

Now coming back a little bit on maybe some distribution structural changes. Germany is now, and it's seen for a while, but the scene is kind of share of market consolidation around brokers, primarily driven by private equity, who've taken a page out of the probably previously larger US and UK rollup playbook. What impact, what opportunities, but potentially also challenges do you think that these type of developments have for you at Markel?

Frederik: Again, very good question. I think if you look at what has happened over the last couple of years, I think what I first want to do is put it into perspective. So as Markel, we believe there’s somewhere between 12 to 15,000 brokers that also having dealings with commercial customers in Germany. So that's our kind of like, if you want to say distribution landscape, we only sell 100% of our product via brokers. So for us, the broker market is a very relevant market. But again, if you assume it's somewhere 12 to 15,000, that's a fair number. If you look at the number of transactions that have now happened, what is it? 150 a year, 200 a year, maybe for three, four, five years. So, I mean, if we're even saying there's, there has been a thousand transactions recently, and we subtract from that, what we kind of like saw as the number of transactions before private equity kind of like found the German intermediation market very attractive, we probably had three, four hundred. So there's a delta of an additional, let's say 700 transactions out of a total, and that's over a period of, let's say, five years or something like that. So over a period of five years, that means we're talking about, what, 100, 150 a year or something like that, out of a total volume of, let's take the higher number there, 15,000.

What is that? That's nothing. So ultimately, will it structurally change broker distribution for commercial products in Germany? I do not think so. What it does do, and I think that's interesting, it will lead to a level of professionalisation for these companies that have been bought. I mean, because let's face it, these private equity guys, I mean, they're all smart people, they know what they want to do, they know what they do, and they're not going to sit on the bench and not kind of like work towards having better intermediation. So I think there will be a trend there, that these companies that have been bought will become more professional, which I think is a good trend. Does it change anything in the day-to-day? Not really, because, I mean, we're not yet seeing any of the models being very strong and actually integrating the targets that they're buying.

There might be some that are a bit better and some that are not as good, but some are not even trying. But ultimately, you will still need to talk to all the companies that are being bought, and on top of that, you will also need to talk to the central unit. So it basically adds one layer of kind of like people that you need to talk to, but it doesn't really change the dynamics of actually still having to speak to the people on the ground in the companies, even though they are now being private equity-owned. So ultimately, change is not massive there. Obviously, there is a tendency of these companies to go for something that is called commission harmonisation, which normally means you're harmonising upwards, not downwards, which, again, fair enough, that's what you do in these words. But also, again, even though that's being discussed as a big issue, I don't see that as a very big issue, because, again, normally, you will have a certain range of commission that you pay as a carrier, and normally, if you have a strong partner, you will be on the higher end, and if he's like not a big producer, he will be on the lower end. So then he will not have a lot of business with you. So ultimately, if you're then harmonising to the higher level, there's still no business. So the partner has had a lower rate, still doesn't have business with you, just because you're increasing the commission ratio.

So ultimately, again, not a large impact, lots of discussion, lots of fuzz, but I don't think not a lot of material impact. So I think what will be an interesting thing to see and watch over the next five years is how well will the integration actually work? How well will these entities be able to develop a central placing unit, these kinds of things? How well will they be able to actually use MGAs in their equation to kind of like make their placing even more structured? So I think those are the questions that will be interesting to see over the next couple of years, and the outcome of that is actually something that I'm looking forward to, because again, it brings opportunities to players like Markel, because again, in the moment, we are operating in a tested renewal market, 95% of the business stays where it is. So if some of these initiatives actually increase the level of business that's flowing around, that's good for us. So I'm all for change. I'm all for things being different. And therefore, I don't see it as a threat. I only see it as an opportunity. I don't see it as a massive change. And I think it needs to be put into perspective as a bit of a summary on my view on that.

Nick: And if you were being responsible for large commercial rather than commercial overall, do you see that there's going to be a larger, somewhat of a larger nuance then? Because some of the transactions, not all of them, but I think the level of transactions, I think that the argument is that you'll have more larger brokers, we're probably more on the upper end of the commercial spectrum rather than I'm seeing that they're building an SME type broker anytime soon. I'm also not sure whether just buying stuff together is the right way to managing that because they still need to prove the harmonisation of actual internal processes and not just kind of placement and commission renegotiation.

Frederik: I think, Nick, we're totally on the same page on that one. With regards to the larger commercial, I mean, first of all, I want to make a bit of advertising here because I try to avoid that, but about 30% of our book is actually medium and large. So we do write a lot in the areas that we're active in, especially PI and financial lines, not so much cyber. We're actually writing a lot of large and very large businesses as well. So that's something that we are active in and we do see the impact, but let's be fair. I mean, we're talking about an impact, but we're talking about a market where we used to always have a Marsh-Willis. So, I mean, if you go into the London market, what is it? The concentration of these three, or if you add Houghton to it, what is it? 60%, 50%, something like that. And so, I mean, we have always had that concentration and okay, now we're adding to a  Marsh-Willis-Houghton, we're adding three or four other names that we now need to deal with. So, I mean, it doesn't create a new situation. It's the same thing.

It's just more players coming into that market. So it actually increases the amount of people that you can talk to, to ensure that you're also getting your fair share there. So, yes, they will become major trading partners, especially in Germany, if you look at some of the units there. And then, yes, they will be treated as like you would treat the other major trading partners as well. So, I mean, no change. So even for large commercial, I don't see a big impact there. I think there's already market forces in play and these are not changing. So it's just more players, which is good.

Nick: Conscious of time. Is there a specific topic or nuance that we didn't manage to get through? I will have to ask my question about the Markel a different time. But anything we've missed, any kind of last nuance you want to give our conversation?

Frederik: Yeah, we talked at least in our last topic, we talked about large brokers and large business. And we also talked about product lines and these kinds of things. But what I think is actually quite interesting to watch in the moment is also still the insurTech space. So, I mean, we are seeing rock bottom valuations. We are seeing InsurTechs that have realised that they are more contributors rather than revolutionaries. So it's a grown up sphere. The people who go in it now are no longer the pirates that came in early and kind of wanted to take some money from the table. So I think it's serious people coming with serious ideas, using technology at rock bottom valuations.

I find it interesting that there's not more focus in our industry in the moment on going in it right now, doing more in the insurTech space now. Whereas five years ago, I thought it was far less attractive than I think that it is today. So, but that was just one additional thought. I'm pretty sure that the two of you have clear views on that as well. But I think it's a very attractive market to go deeper into in the moment. Awesome.

Tom: I would like to, I would, yeah, just a very small addition. It would be interesting, especially, but perhaps for another time to really discuss the whole insurTech space because the problem I see personally is that there are a lot of people went into this market with non-insurance backgrounds. Yes.

And on the other hand, Markel is a very good example of a company which focusses as a kind of insurTech in the German space, but with a very profound understanding of how to earn money and then to scale from a profitable, let's say, strategic starting point, which to my point of view, if you would put it in a very blunt way, what happened in the last 10 years in the insurTech space was for 95 or 99% people moving into non-profitable stuff, earning an enormous amount of money. Enormous. So, it would be interesting just to, and some of those, let's say, also new companies which were founded are not as seen as insurTech.

I mean, Markel with the stuff you did in the past, I mean, the word even didn't exist at that time, but there are still, and you see this in all industries, interesting small and medium-sized enterprises who start from a profitable starting point and then scale slowly, but you don't read about it. And then the other way around, you read an enormous amount of companies in all those spaces where I always would like to see the revenue, the cost and the profits, but I only read enormous about valuations, but I never read about revenues or profits.

Frederik: Turnover and profit, yeah.

Tom: Yeah, but that's perhaps something for another time.

Frederik: Yeah, but it would be a very interesting one.

Nick: Gentlemen, thank you so much, thank you so much for sharing your views and wish everyone listening. Thank you for listening. Feel free to comment and share. This is an invitation to start a discussion. These are broad topics. We don't have the answer to all of these things, but just try to share some informed viewpoints. And everyone, thank you very much and hope to see you on the circuit. Take care.

Frederik: Thanks for having me. Bye-bye.

Nick: Bye.