Hertz’s change of gear

Vicky Beckett

Hertz’s European captive, Probus, writes property and auto-liability insurance for the business, while tightly managing the claims management processes. Hertz and Probus have seen plenty of change in the six years since Patrick Smith became Hertz’s international director of risk and claims management, spanning EMEA and Asia Pacific.

“Since I’ve been here, there has been a change in ownership, and a development in strategies in terms of what we rent and where, and who we rent to,” says Smith.

Hertz Corporation operates in all European countries and recently entered into the car-share business, setting up offices in principal European cities, meaning that Smith needs to find solutions to meet the changing business models that influence the underlying risks.

“Car share is a different operating model; different customers, vehicle technology and operating processes. These differing risks have to be scoped, translated and communicated to the captive, which will respond sensitively. “The way in which the captive prices and charges the insurance is probably our greatest flexibility. There are two areas: what you charge and how you charge. Those are two areas you do look at to really support the business needs and design the insurance product being delivered.”

Hertz has a significant stock of property across Europe. Formerly, the risk was placed in the open market, but some of that risk has been brought into the captive, directly benefitting Hertz. “As a global corporation, Hertz has an appetite for some risk, but not necessarily all. Our auto-liability risk has the volume that allows predictability in terms of loss frequency and cost.”

Regulations and new markets

“I think the biggest challenge for any business trying to continually grow its footprint is the complicated mix of regulatory requirements and frameworks,” says Smith. “My biggest challenge is to successfully apply what I learn in one territory to others that I know less well.”

In the past three years, Hertz has formed two new businesses in China: car rental and equipment rental. “We transfer a lot of that risk into the external market since many territories have different risks, regulatory requirements and insurance needs. Our Chinese businesses have to use locally licensed insurers, so retention strategies are challenging.”

“The biggest flexibility is captive insurance prices. What and how do you charge?”

As a global business operating locally this is not a big issue for Hertz, Smith says. “In China we have transferred a lot of the insurable risk to the external insurance market rather than absorb, for a number of factors. You need local networks and great local service delivery.

“As a new business responsible for its profit and loss (P&L), while the corporation has a large risk appetite, until the local business becomes mature, it doesn’t have the data and trading experience to make informed appetite decisions. So that is an example of how you have to meet the needs of the local business in the local territory and do one’s best to blend and supplement local needs with our global capabilities,” says Smith.

Irish domicile

Hertz explored a number of captive domiciles but settled in Ireland, a location very important to Hertz Corporation. “We have our European service centre there and at the time, as indeed now, Ireland is a smart place to domicile the captive. We remain happy with that decision,” says Smith.

Probus was formed in 1997 and the general manager has a 12-strong team, with underwriting, claims, compliance and finance experts. It also uses the Hertz Claim Management operation as its independent supplier with more than 70 employees.

Smith adds: “I travel extensively throughout Europe and internationally. That’s where my clients are and that’s where my partners are. I like to ‘kick the tyres’. In fact, I collected my Chinese visa on my way here. If I didn’t have the Hertz guy picking me up from the Shanghai airport, how would I know anything about being a customer?”

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Hertz’s change of gear

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