Expert Risk Articles

Inditex: tailored fashion industry insurance cover

Inditex and its flagship brand Zara are one of the most exciting names in global fashion Retail. Its business model is just as hot to watch. Global Risk Dialogue recently had the privilege to participate in a risk talk between Felix Poza, Chief Risk Manager at Inditex, and Eugenio Zorilla, Key Account Manager at AGCS, which has insured the group for many years. They discussed the need to maintain risk transparency, the complexities of international insurance programs and the importance of long-term business relationships.

Eugenio Zorilla: Everyone, even my children, knows the Zara stores. We've got lots of Zara Kids stuff.

Felix Poza: I must admit, I'm more of a Massimo Dutti customer myself, but that's a particular label for young professionals, which is part of Inditex's integrated strategy to cover various target groups across several ages. Really, I'm not a fashion expert, I'm a risk expert, but part of what makes the Inditex group special is that we are so customer-driven. We have the capacity to react and adapt fashion to customer needs. There are about 20,000 new designs a year and two to six discharges a week from our factories in A Coruña to the stores so the customers get what they want in their local market.

Zorilla: Yes, my family, especially my wife, they're always running to the sales that are going on all the time as the stores quickly move out old models to make room for the new ones.


The opening of Zara Casablanca (source: INDITEX)

Poza: We can only do this with a very controlled process, from design to discharge to the way staff work in the stores. We have commercial activity in 72 countries with almost 4000 stores worldwide in 8 branches that try to cover an age target between 2 and 40 years.

So we have a very centralized focus about everything. But still, each branch—Zara, Massimo Dutti, Pull & Bear and so on—has an independent management team. They work at an international level, but at the same time they are present in each country. My job is to provide risk management services from this department for all of them. It keeps me busy.

Zorilla: For sure. I've been working with Inditex as my client for 12 years now. Yours is a very detailed operation. It can only work with a lot of transparency, and you and I get together regularly to talk about new risks that come up. You've got a very big company that is very active all over the world, doubling in size every three years and opening 80 percent of your stores outside Spain, so there is always something new, some new risks to consider and manage. It's like your company motto: you're always a "consistent surprise".

Poza: [laughs] I hope not! If you are speaking about consistent as continuous or constant, I would say, regarding the risk management, that we don't want to have any kind of surprise. Obviously, the risk management policy defined and approved by the company is the result of many years of work and has been growing with the requirements of the group. We try to anticipate what things can go wrong, and you know very well that we dedicate a lot of time and resources to control any kind of risk that we can face.

This way we can deal with surprises consistently. One of the key factors in our policy was the international expansion. When you were involved with the Inditex Risk Management Department establishing our first international property insurance program 12 years ago, the main challenge for all of us was the capability to adapt our insurance policies to the different countries where we develop our activities.

Zorilla: That's right. This is always an issue. When I said "consistent surprise", what I meant is that your company moves very quickly, and obviously the planning is confidential until the move is publicly announced.

So as an insurer, I'm confronted with a situation where you call up and say, "Hey, we're in a new country today. Can you expand our international program, right now?"

Poza: Yes, sometimes, as you mention, the things happen very quickly and we need partners with the same capacity of reaction.

Zorilla: I understand that need, which is why we've worked together on this and were able to develop automatic inclusion clauses that let us enlarge your coverage when you need it and where you need it. You might make a surprising move, but we're ready for it.

Poza: Expansion is one thing. Another is that while we have a centralized structure, doing all our design and production in our base in Spain, at the same time we have shops and activities worldwide in all kinds of different markets. This means we have to be adapted to each characteristic, so like in the case for the shops we have several different policies under the international insurance program, and for the distribution center we have a more Spanish program.


An Inditex production facility in Spain.

Zorilla: That's what makes the program challenging and—well,from my perspective—interesting. Our work is structured a lot like that. On the one hand, at AGCS Spain we follow Inditex in Madrid where we sit and try to add to the program wherever we have the know-how.

On the other hand, if we don't have the know-how about a new market, we consult our local Allianz colleagues at the unit on the ground there and get their input on risks and solutions for the cover. And, Felix, you're travelling all the time too, visiting the local shops and meeting with our local representatives and the broker you're working with in that market. I'm curious about your impression: Have you found different regions to be more complicated to work in?

Poza: Thinking about the insurance activity in all the countries where we work, local regulations are more restricted in some aspects of coverage, and that's maybe meant some difficulty for implementing insurance policies. But in the end, we think we have been able to solve all these problems.

Zorilla: Yes, corporate clients are concerned about the compliance issue. They're worried that in some countries like the BRIC countries, which is Brazil Russia, India and China, they might have local regulators making it difficult to implement an international program or a local policy which is wide enough and has enough coverage.

Poza: In all these years of experience in international insurance program management we never have faced a compliance problem. The structure of the program with local policies and a master policy has proved its efficiency in this respect, although it is also true that in the last years we have carried out a process to increase the scope of cover as well as the limits of our local policies, of course with the support of our insurance companies.

Zorilla: Yes, yes, every year you and your team come to me, optimizing this, tweaking that, saying to me, "Eugenio, how can we improve the risk conditions here or there."

Poza: The result of this process is a homogeneous group of local policies adapted to our needs, mainly in terms of flexibility and adaptability to our international growth. But, of course, the compliance matter will remain something to speak about in the next years because my personal feeling is that in general there is a lack of knowledge about this problem in the insurance industry, and in many cases this situation creates doubts among risk managers. In my opinion, the control of any kind of compliance difficulties requires a very deep knowledge about the local insurance markets, the legal requirements and the usual habits. The insurers' support is essential for this.

Zorilla: And, for me in turn, the support of my local colleagues is essential in those countries where Allianz does business. We've got operations in 78 countries and work with fronting partners so that we can provide coverage in 150 countries. We really know the local conditions.

And this is also one reason why you and I try to meet as often as possible. I'll visit your office about 3 times a year, and we always try to get together when you're in Madrid. We'll talk about a range of things, and this way we get a better idea of what each of us needs. I can also help you manage your risks in other ways beyond property coverage and international programs, using resources the Allianz Group has to offer besides just our size and global presence. And there's a lot of trust built up that makes it easier for both of us to work together.

Poza: It's a good business relationship and not just in terms of getting coverage. Look at claims. When our stores were hit by a hurricane in Mexico in 2005, it was the largest claim in our company's history and very hard to handle. Mexico was far away, and communication was extremely difficult. It was hard to tell what the extent of the damage was going to be. But one thing we did know from the beginning was that we needed funds immediately to deal with this major business interruption, even if we didn't know its size. And that's where you helped out.

Zorilla: Not me, our claims team. I wouldn't interfere with that. But, yes, we did make an advance payment. Spanish law requires an advance payment for losses of a certain size, but that would only be if they happened in Spain. We didn't have to make an advance for the loss in Mexico, but we did anyway because that's what I think an insurance relationship is there for, supporting your client, making sure the business runs.

Poza: Along-term relationship. Sure there will always be issues. For example, let's see now how the financial markets are going to perform in general, and which effects they are going to have on the insurance market.

Zorilla: I think as far as the business relationship is concerned, we are comfortable together. If there are market fluctuations, I think at Allianz we are in a solid position to work with Inditex to maintain that trust.

Felix Poza, InditexEugenio Zorilla, AGCS

A long working relationship: Poza (l) and Zorilla (r)

Poza: In Spain, we're more focused on analyzing local risks. In terms of the international insurance industry, the bigger issue is, maybe, the global economy and, also maybe, human-related risks and natural catastrophe volatility, which is also human-related.

Zorilla: Those are the same things that motivate us, too. So I think we'll have a lot to talk about as we move forward.

Poza: Without a doubt. Just no surprises!

Download "Global Risk Dialogue" fall 2008


Zara store in Fukuoka, Japan (source: INDITEX)

Key Data on Inditex

Inditex is one of the world's largest fashion distributors, with nine sales formats— Zara, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, Uterqüe and Kiddy's Class—boasting 3914 stores in 70 countries.

The Inditex Group is comprised of over one hundred companies associated with the business of textile design, manufacturing and distribution. Thanks to its achievements and the uniqueness of its management model based on innovation and flexibility, Inditex is one of the largest fashion distribution groups.

Their fashion philosophy—creativity and quality design together with a rapid response to market demands—has resulted in fast international expansion and excellent response to its sales concepts.

The first Zara shop opened its doors in 1975 in A Coruña (Spain), the city that saw the Group's early beginnings and which is now home to its central offices. Its stores can now be found in the most important shopping districts of more than 400 cities in Europe, the Americas, Asia and Africa.

Information courtesy of Inditex


What is IIP?

Looking at International Insurance Programs 

Delivering single point access for clients to a wide range of specialized insurance services, Allianz Global Corporate & Specialty has an established reputation as a leading provider of bespoke International Insurance Programs for multi-national clients. Through its own network of local offices in 78 countries and selected fronting partners, Allianz is able to cover clients in over 150 countries around the world.

Each International Insurance Program (IIP) consists of a centrally coordinated combination of local policies and a master policy which provides cover on a Difference in Conditions and/or Difference in Limits (DIC/DIL) basis; thereby harmonizing cover for the benefit of corporate clients across all locations. IIP clients range from smaller companies with only a few locations abroad to the largest global corporations with the most complex exposures spanning dozens of countries.

To all such clients, an Allianz IIP can offer risk adequate local policies issued considering local specifics and client exposures in order to achieve compliance with local regulatory and fiscal rules. Limitations in local policies are addressed by the Allianz master cover to accommodate coverage gaps at the local level. An International Insurance Program also provides transparency and contract certainty, efficiency through central coordination and control via the parent company, a centrally coordinated claims handling process, an aligned global risk management & loss control approach and centrally recorded information on exposures, policies and claims.

Led by a key account manager, each IIP client has a dedicated team which coordinates the service delivery. This "client focus" approach delivers speed of response and flexibility through local decision making, which is supported by regular meetings between all partners involved—client, broker and insurer.

Spanning many industries and countries, there is a wide variety to the individual requirements of AGCS clients. Their varying exposures and local needs demand individually adjusted, tailor-made international insurance structures—which are always carefully designed on a case-by-case basis. An engineering program requires a different approach than a marine cargo solution. The two illustrations show how a typical IIP is structured and display examples of the common IIP product types: property and liability.

Liability IIP Structure

Property IIP Structure

See also information on International Programs on our website

  1. Why IIPs are becoming more and more important.

    Increasing globalization and consolidation of industries are fundamentally changing the risk management landscape – and with these changes come new challenges for international risk management.

    From merger activity and acquisitions to outsourcing and the growing internationalization of the value chain, new risks are emerging – all of which require a dynamic and flexible response.

    Multi-national risk exposures are naturally complex. Various locations, each with their own specific requirements, can be accommodated within a combination of local policies embedded in a global "umbrella" of coverage.

    The AGCS concept is to centrally design the scope of coverage and the tailored mix of the various international insurance solutions together with the central risk manager in order to ensure, that local changes can be addressed short-term while at the same time a standardizes global coverage is maintained.

    /assets/Thumbnails/Thumbnails%20for%20Experts%20and%20Contacts/VolkerMuench_106x70.jpg Volker Muench

    Volker has more than 20 years of insurance experience, having worked for a broker and Allianz in various offices and countries in underwriting and head office functions. Currently he is in charge of CUO Property for the Americas and for special topics such as terrorism, insurance pools and International Insurance Solutions.