Alessandro Rizzo and Cédric Doppagne (EuroCaution): Surety as a driver of the economy
The automation of processes allows EuroCaution to envisage strengthening its current positions, notably on the international level. An interview with Alessandro Rizzo, CEO and Cédric Doppagne, Head of Sales Benelux.
Could you introduce your company in a few words?
EuroCaution, a Luxembourg company majority-held by the Edison group, positions itself as leader in performance bonds and suretyships, both in Luxembourg and Belgium. Created in 2012 with the mission of innovating, the company has undergone substantial development via the players in the insurance and construction sectors. In 2017 alone we were able to provide 2 billion euros in sureties. Promoters and builders represent the majority of our customers today. We offer 3 main activities. First, underwriting our own products, i.e. we develop our products and can accept or not a customer who is proposed to the insurer. Number two, reinsurance: the insurance companies and captives ask us to place surety credit risks on the international market. And finally, advising via a conventional brokerage activity, but with a model that is very much our own. Our partner insurers and reinsurers are very strictly selected: we demand from them an A rating and a solvency ratio of over 250%.
« In our business, the digital transformation is anchored in reality.»
What role does surety play in the Luxembourg and international economy?
Since 1978, Luxembourg law requires that financial guarantees be taken out in order to protect yourself from the non-realisation of a contract, like the bankruptcy of a real estate promoter, for example, within the framework of an off-plan property purchase. A bank that undertakes to finance a project and to give a performance bond is doubly exposed. Surety offers the solution. By avoiding the opening of a line of credit, it doesn´t weigh down on the balance sheet. In case of bankruptcy, the partner insurers of EuroCaution guarantee the completion of the works, the replacement of the promoter or the reimbursement of the purchaser. Our local positioning on an international sector allows us to support customers who are active in the Middle East and Asia from Belgium and Luxembourg by offering them a full range of surety and financial guarantees. To manage this activity, our structure is similar to an insurtech: we automate 100% of our processes. We’re able to issue guarantees in less than 24 hours, or even in one hour if necessary. In our business, the digital transformation is anchored in reality.
What challenges and opportunities do you see in the current context?
The law imposes the presence of SME´s in invitations to tender. Currently they have to submit guarantees - which the banks charge them an hefty amount for. We want to help the self-employed craftsmen and the SME´s – SMI´s whose turnover remains below 10 million euros. For this we’re developing an automated platform that will offer guarantees within an hour. This ambitious programme will be introduced in several EU countries over the coming 2 to 3 years. A risk selection algorithm coupled with artificial intelligence will make it possible to draw lessons from every claim in order to improve the scoring model. Finally, the internationalisation of our activities, notably in Scandinavia and the Netherlands, will make it possible to support our local activity.