Artificial intelligence will fundamentally transform the insurance industry

The ability of AI to process and analyse vast, complex datasets, identify patterns, and simulate alternative scenarios with unprecedented speed and accuracy will improve risk assessment, and data processing says VIG Re CFO Wolfgang Hajek in an interview conducted in collaboration with the Global Minds project.

The role of the CFO in insurance is specific. "Besides managing finance and reporting related aspects, it is all about managing the financial implications of complex global risks and the capacity of the company. This requires a deep understanding of underwriting cycles, reserving, capital and risk management, and the impact of macro-economic factors," says Wolfgang Hajek, describing what attracted him to this job. VIG Re aims for significant growth, but it has to cope with a rapidly changing world and adapt its operations and offerings to it. Digitization and automation have revolutionized the reinsurance industry since the beginning of the millennium, and another fundamental transformation is coming with the advent of artificial intelligence. "It is about augmenting human expertise, not replacing it, to drive greater efficiency and better decision-making across our business. Besides the internal process optimization view we still are of the opinion that reinsurance business is a business of trust and partnership," explains Hajek, adding that human expertise, judgment, and creativity will remain irreplaceable.

Since the beginning of this decade, we have seen one shock after another – COVID, inflation, the energy crisis, the war in Ukraine. What has been the biggest challenge for reinsurance so far?

The early 2020s have indeed been a period of unprecedented global shocks. For the reinsurance industry, the biggest challenge has been navigating this multi-faceted volatility and uncertainty while maintaining stability and ensuring continuous support for our clients. It is not just about managing individual events, but understanding their compounding effects on economic stability, interest rates, foreign exchange rates and inflation, claims and investment development, supply chains, all of which impact us and our clients. At VIG Re, this period has reinforced our commitment to robust risk and capital management. It has also underscored the critical importance of being a reliable partner, ensuring we can adapt quickly to external developments and continue fulfilling our promises to our partners, even in turbulent times.

Climate change is a major issue, and not just for Europe. How has it affected your business so far, and what will it mean for it in the future?

Climate change is arguably one of the most significant long-term challenges and transformative forces for the reinsurance industry. We are already experiencing its effects directly through an increased frequency and severity of natural catastrophes globally, such as floods, wildfires, hailstorms etc. VIG Re faced with the floods in CEE only last year its largest event that it managed very well and evidenced its excellent servicing towards its clients. Of course, this development leads to constant refinement of our risk models, and we are closely collaborating with all relevant stakeholders in the insurance and reinsurance industry. 

In the future, climate change will increasingly demand innovative product development and closer collaboration with our clients to promote resilience and adaptation strategies. This is also posing challenges for countries that are more exposed to certain catastrophic events than others on how to protect their population. For VIG Re, as a growing international reinsurer, it means we must continuously evolve our underwriting approach, ensuring we can effectively manage these evolving risks and continue to provide essential protection in a changing world.

Europe's response is a green transition, which is increasingly reflected in the world of finance, where various products are becoming "green." How is this playing out in your industry?

The green transition is profoundly influencing the financial sector, and reinsurance is no exception. We are seeing a growing demand for sustainable underwriting practices and the integration of ESG (Environmental, Social, and Governance) factors in risk assessments and investment decisions. We are aware that ESG is constantly evolving not only on a European level but also in light with current global developments. 

For VIG Re, it's about being a responsible corporate citizen while also identifying new opportunities to support the transition to a greener economy. In our opinion, ESG is a crucial building block in any sustainable business model. As part of the VIG Group, sustainability is our legacy, our corporate DNA and responsibility for the society. 

Speaking of major trends, one of them is undoubtedly the advent of artificial intelligence. Can we assume that a much better ability to evaluate large amounts of data and calculate alternative developments will fundamentally change the insurance business?

Absolutely. Artificial intelligence is a transformative force that will fundamentally reshape many industries. The ability of AI to process and analyse vast, complex datasets, identify patterns, and simulate alternative scenarios with unprecedented speed and accuracy will improve risk assessment, processing and product development. At VIG Re, we are actively exploring new digital ways of working and leveraging AI to enhance our capabilities and deliver greater value.

To what extent is AI already being used in today's reinsurance operations?

AI is on everybody’s agenda, though it is still an evolving journey. Currently, we see its application primarily in areas like enhanced data analytics for underwriting, fraud detection, and modelling. AI-powered tools assist in identifying trends within large datasets, optimizing portfolio management, and even automating routine data extraction. 

For VIG Re, our focus is on integrating AI to achieve complexity reduction internally and for our clients, ultimately making us an even smoother and even more efficient. It is about augmenting human expertise, not replacing it, to drive greater efficiency and better decision-making across our business. Besides the internal process optimization view we still are of the opinion that reinsurance business is a business of trust and partnership. Protection and reliability is not a one-time thing but crucial to be built to last and with any partnership by design we expect and offer to take the long term and sustainable perspective in the co-creation and in business development. 

Technology is an increasingly important driver of major change. Can you describe how digitization and automation have changed your industry since the beginning of the millennium?

Since the beginning of the millennium, digitization and automation have revolutionized the reinsurance industry, moving it from largely paper-based processes to highly sophisticated digital workflows. Initially, it was about efficiency gains in basic operations like data entry and contract management. Today, it encompasses advanced analytics, real-time data exchange, and automated underwriting tools.

For VIG Re, digitization is crucial for our growth trajectory and our goal of being a recognized international player. It allows us to process vast amounts of data, accelerate our response times for clients, and streamline our internal operations. It has fundamentally transformed how we assess risk, interact with partners, and manage our entire value chain.

There is often discussion of a topic that originated in the 19th century, namely that machines are taking jobs away from people. Are people also disappearing from the reinsurance business?

That's a valid concern, but I believe the reality in reinsurance is far more nuanced. While automation handles repetitive, rules-based tasks, the complexity of risk assessment, client relationships, and strategic decision-making in reinsurance still very much requires human expertise, judgment, and creativity. Rather than jobs disappearing, we see roles evolving and skill sets being enriched. We see new joiners learning faster and colleagues working more efficiently and also working on more complex cases even when capacity and time is scarce. 

Our colleagues are shifting from manual data processing to more analytical, strategic, and client-facing functions. Technology, including AI, serves as a powerful tool to augment human capabilities, allowing our talented teams to focus on higher-value activities and develop deeper insights. At VIG Re, we are also exploring new digital ways of working that empower our people, making their jobs more impactful and efficient.

VIG Re is a reinsurance company with a strong position in Central and Eastern Europe. Where should its further development be headed?

VIG Re is a reinsurer on a strong growth path, rapidly gaining recognition as an international player. Our ambition is to accelerate this journey. We are not planning revolutionary, sudden changes, but rather a focused evolution to build on our already solid foundation. The goal is to solidify VIG Re's position as a highly successful, recognized reinsurer that stands out on the market. This involves continuing to be trustworthy and reliable, while also being courageous, bold, and proactive in challenging the current status quo, always seeking new ways of doing business and fostering win-win situations for our partners.

Is it difficult to compete with giants such as Munich Re and Hannover Re?

They and many others are important for a stable reinsurance industry providing solutions globally. The ecosystem of reinsurance is a necessary pillar for the financial industry and for a healthy and robust society. However, VIG Re, has a very pronounced strategy and we leverage our distinct strengths. Our agility, client-centric approach, deep regional knowledge where we are strong, and our disciplined, selective underwriting strategy allow us to identify and pursue profitable opportunities where we can add significant value. 

Our rapid growth trajectory and increasing global recognition demonstrate that there is ample room for a successful, growing reinsurer like VIG Re that prioritizes reliability, smart operations, and win-win partnerships over sheer size. We aim to be a preferred partner by consistently delivering excellence and simplifying complexity for our clients.

Why is it that the global giants of the reinsurance business come from Germany?

Germany, but not only, had a strong industrial base early on, creating a demand for risk transfer. Where there is business, reinsurance is a strategic partner for building up resilience and to allow for entrepreneurship and risk taking. Coupled with a robust legal and financial infrastructure, and a culture that values long-term planning and stability, these factors created a fertile ground for the growth of large, well-capitalized reinsurance companies. They developed significant expertise in complex risk management and established global networks over many decades. 

It is important to recognize that the global reinsurance landscape is dynamic. VIG Re, with teams operating from Prague, Munich, and Paris is actively building its own global presence and expertise, demonstrating that leadership can emerge and flourish everywhere, when you are close to the business and to your clients. We are proud that we can attract many international talents that want to join our growth journey and to develop new solutions and markets. 

Is the work of a reinsurance company's chief financial officer particularly specific in any way? What attracted you to it?

The role of a CFO in reinsurance is indeed highly specific and deeply engaging. Besides managing finance and reporting related aspects, it is all about managing the financial implications of complex global risks and the capacity of the company. This requires a deep understanding of underwriting cycles, reserving, capital and risk management, and the impact of macro-economic factors. 

What attracted me was precisely this unique blend of finance, risk, and strategy. Also, the individual particularities of markets and regions are of professional interest when developing new business. All in all, it is about ensuring the company's financial strength and resilience; while simultaneously steering its growth and ensuring we have the capital to expand and innovate. It is a role where you directly contribute to the company's long-term sustainability, supporting international partners and its ability to fulfil its promises to clients.

What is your next big professional goal?

My efforts are fully dedicated to support VIG Re's strategic growth ambition and to further solidify our position as a highly successful and recognized international reinsurer player. From a financial perspective, this means ensuring our capital strength and efficiency to enable our ambitious growth trajectory, particularly as we want to build on new opportunities.  Operationally, it is about securing finance transformation and embedding new ways of working across the organization, achieving even greater complexity reduction internally and for our clients, and truly distinguishing VIG Re as a smooth, reliable, and highly efficient player. It is about translating our vision into tangible financial performance and sustained value creation for all our stakeholders.

Wolfgang Hajek 

He is the Chief Financial Officer (CFO) and a member of the Board of Management of VIG Re, responsible for managing and overseeing all financial dimensions, effective 1 January 2025. He is a seasoned executive with extensive experience in the insurance, corporate finance, and asset management sectors. Within Vienna Insurance Group, he has held various positions. These include serving as Chief Financial Officer (CFO) at Asigurarea Romaneasa Asirom since 2019, being a member of the Supervisory Board at Ubezpieczenia w Wiener TU and holding roles as a Member of the Management Board at VIG Asset Management a.s. (CZ) and Deputy Head of the Affiliated Companies Department. Hajek completed his Doctoral Studies in Law at the University of Vienna, Austria, and holds an MBA from the Maastricht School of Management in the Netherlands. Additionally, he earned an M.A. in Law and Finance and an M.A. in International Management from the University of Graz, Austria.

You can read the Czech version of the article HERE