Bernhard Kaufmann (NN Group): ‘Good Listening Is Part of Dutch Culture’
Between the mountains and the sea - that is where Bernhard Kaufmann's life happens. The German-born still lives with his family in Munich, but nowadays he spends most of his time in his apartment near the Binnenhof, in the heart of The Hague, the city where the head office of insurer NN Group is located. However, he spent New Year's Eve - the conversation takes place just after New Year's Eve - in peace and quiet in Germany. Two of his three children did celebrate New Year's Eve in tumultuous The Hague. It has not been without consequence: 'I have to drop in at Albert Heijn soon, because they cleaned out the entire refrigerator. And drank it dry. I will have to talk to them about that,' says Kaufmann with a wink. Jurgen van Wegen, partner at Kearny, speaks to Kaufmann on behalf of Management Scope, just before NN Group announced a large settlement for customers with unit-linked policies.
I assume 'woekerpolis' was the first Dutch word you learned?
(Laughs) ‘I was indeed quickly aware of the ’woekerpolis' court cases, but in all honesty I think my first Dutch word was 'bedankt.' I am really trying my best to learn Dutch, I can now pronounce 'Scheveningen' and ' Kijkduin' quite well, but every time I try to speak Dutch, I get an answer in English. This is not working out so well. But seriously, about the ‘woekerpolis’ issue: I sincerely hope that with this settlement we now put a clear end to this troublesome case. The latest arrangement provides clarity for our customers and us, which is good, and foresees additional compensation for our customers.’
Your family lives in Germany and you commute back and forth. Is that not difficult?
‘Ach, it works. No, actually: I see it as a luxury. On the one hand the mountains of southern Germany, on the other hand the North Sea coast. Who can say that? Unfortunately, it was not possible for my wife to move to the Netherlands now; she really has to be in Munich for her work. So, I try to enjoy it: during the week in the Netherlands, during the weekends in Germany. My parents live in Bonn, which is on the route. In this way I try to unite the useful and the pleasant. I have to say that I would also live in The Hague permanently. It is a wonderful city to live in.’
What made you decide to work for NN Group in The Hague?
‘I noticed that it was time for something different. I worked for Munich Re for a long time and I needed a slightly steeper learning curve. What also played a role was that my children were a bit older and are now at university. Moreover, I already knew NN quite well. I got to know some people within the organization over the past few years. I already knew what kind of company it was, how they operated and where they stood in the world. That all appealed to me. When the CRO position became available here, I was immediately interested, especially because the CRO-function here is combined with a role in the management board. I found that interesting, it was something I had not done before. During my first conversation with CEO David Knibbe and a number of future colleagues on the board, I immediately felt a click. In the end it was quite an easy decision. It just felt good. And I must say that I have not regretted it for a moment. What I especially appreciated was that I immediately felt welcome at NN. I also like the Netherlands more and more.’
What may have made your onboarding a bit peculiar was that it took place largely during corona times...
‘I announced my departure from Munich Re in February 2020 and a few weeks later the Covid pandemic broke out. These were hectic times, where I was initially able to meet few of my new colleagues in person. Ultimately, thanks to frequent Covid testing, we spent a lot of time together. That had to be done, because NN was developing the new strategy at the time. It was presented in June 2020, the same time I joined. In the months before, I was guided through the process surrounding this new strategy completely. I really have the feeling that the strategy has become part of me. A new strategy is always a fresh start. It is very pleasant to get involved at such a time.’
You already said it: you are not only CRO, but also part of the management board. That requires a different way of thinking and acting. One of the first major decisions you were part of was the sale of NN's asset management business and entering into a strategic partnership with Goldman Sachs. How did you experience that?
‘For this specific case I have to give particular credit to our CEO. David initiated a thorough review of our investment and asset management strategy and there was full openness regarding solutions. That is an environment in which it is inspiring and fun to discuss strategic options and to have discussions within the board on all relevant dimensions. For me, that feels like a real enrichment compared to my previous positions, where my input or view was also often asked for in the field of investment or other risks. But this aspect of the CRO role, to provide a so-called second opinion, is a bit more formal. I think it is valuable to give a risk officer an active role in the management team. The vision of a CRO adds a new flavor to the palette and allows you to look at things from a different angle.’
I was surprised to see that you were trained as a physicist...
‘Actually, I was destined for a career as a scientific researcher. I once studied theoretical physics. It appealed to me because I think physics was the most important study of the 20th century. But I soon discovered during my time as a researcher that major themes had been explored and that the research now done is very specific. Towards the end I was, for example, involved in research into quasicrystals and irregular phase transitions. There were only three or four people in the world who understood what I was doing. To me that was ultimately too limiting, I wanted to make more impact and the financial industry attracted me. A position in research & development might have been the most obvious choice, but I was drawn by the financial world and, together with a number of fellow physicists and mathematicians, I became involved in drawing up credit risk models in the banking - and later in the insurance world. These were my first steps in the field of risk management. And also, Munich Re’s first steps in that field. It was a wonderful time where much was in development and in which I was able to build a lot from scratch. I think I made a good choice with my career change.’
You have more than 20 years of experience with risk management. What do you think has been the most important change in recent decades?
‘When I started, risk management was still in its infancy and most of the work was happening in the banking and insurance industry, especially to develop risk-based capital regimes. But after the 9/11 attacks and the dotcom bubble burst, risk management was suddenly top of mind. It has become more important in almost all sectors. In many companies the ‘risk focus’ moves from the second line to the first line, that is, from the risk management functions to business. Risk management is becoming an integral part of the management of the company, the control function in the second line increasingly fulfills the role of advisor and challenger.
Over the last 10 years there have been enormous changes in the areas of supervision and regulation in the insurance industry in Europe. The European Solvency 2 directive, which sets out regulatory requirements, shaped risk management in the insurance industry. Risk management for European insurance companies is therefore fairly uniform and formalized now. That is one of the reasons why we not only think very carefully about the risks before we put a product on the market, but also make sure that there is evidence and documentation that all relevant risks have been reflected on. There is now a much more stringent risk framework, but also a far greater administrative burden around it. That is exactly the dilemma I see with respect to risk management in the financial industry: With good risk management you gain valuable insights and can be ahead at every step. The formal process then adds limited additional insight, but sometimes this is where more of the focus lies and that is distracting. With good risk management, you as risk manager should be able to lean back: all risks are on the table, everything is transparent, and the board ‘only’ needs to make the decision. What is also interesting is the differences in nuance at the level of detail in the individual countries.’
Can you give an example of those differences in nuance?
‘This often concerns different interpretations of the European rules by national supervisors. They can lay the emphasis on something different. In the Netherlands, supervisory authority De Nederlandsche Bank (DNB) is - more than supervisors in other countries - very focused on financial crime. This is also because financial institutions in the Netherlands have a history of, for example, combating money laundering. You also see differences in how strict or how pragmatic supervisors are. I know the German supervisor as strictly formal, while I experienced the supervisor in the United Kingdom as to a large extent pragmatic, although this is probably due to the fact that in the context of Brexit many things had to be arranged relatively quickly to get things done.’
NN Group is an internationally operating company, with an international management team. Did you also notice something of a Dutch culture?
‘There is a clear difference in culture with the companies I have worked for. This has to do with the country, but also for example with the business model. There are differences in culture between a company running a B2B business model like reinsurance and a direct insurance company. In more hierarchical organizations, like I experienced in the Germany and the US, the culture can sometimes be like a corset. A statement you very often hear there is: ‘This subject does not fit my paycheck.’ In other words: I do not have enough stripes on my sleeve to be able to take responsibility for this. I have honestly never heard that at NN. I find it positive: there is a sense of collective responsibility here.
The culture here is also more open. Everyone can and may say anything here. Everyone here always listens to the other. We also make time for that. I am convinced that this ultimately leads to better decisions. I think that good listening is part of Dutch corporate culture, or even more broadly: Dutch culture. People always invite you to tell your story. You are listened to. And the Dutch try to make it easy for you, for example by switching to English. Or - another example - by creating an international desk here at the city hall in The Hague.’
Are Dutch people able to accept a final decision when they had different thoughts about it?
‘I think it is a strength in an organization if you can say that you disagree with a decision. That is good for transparency and that is extremely important. But indeed, once the decision to execute has been made, all must go for it. Then you cannot accept that colleagues allow things to slide. I think it comes down to leadership. Management will have to pay extra attention to this.’
Would it have helped you when you arrived in the Netherlands if there had been a network of and for foreign directors on Dutch boards?
‘That is an interesting point. I think such a network would have been a useful addition for me. Look, of course I know a lot of colleagues in the financial world - people in a similar position at other companies. But these are generally colleagues who, like me, work at international companies. Here in the Netherlands, I knew my way around less well. I experienced that as a handicap, also because everyone quickly assumes that you know everyone and that you know how things work. But that is not the case. In that respect, you miss a network that you can fall back on. I find it good to talk to each other about social developments, for example. I of course try to follow the Dutch news, but which developments in Dutch society are really relevant? That is an aspect that I miss somewhat. A network could be helpful in this regard.’
Speaking of Dutch news: the elections caused a considerable upheaval here. Are you concerned about certain political trends?
‘If I look at developments with my risk glasses on, the growth of populism is a risk for the future. Not only in the Netherlands, but throughout Europe and the US. Democracies will have to defend themselves against populist tendencies. This is also in the interest of companies: we must ensure that our individual freedoms and equal opportunities remain, that borders remain open, that we can do business worldwide. Unfortunately, that is shifting, and we will all have to be vigilant about it.’
Speaking of the future: how do you see your own future?
‘I am not done here yet. We are in the middle of implementing our strategy. That is a challenging and interesting process in this economic and political environment, and from my risk management perspective, there are still plenty of potential obstacles that we need to be mindful of to successfully achieve our objectives. For now, I am in my place here.’
This article was published in Management Scope 02 2024.
This article was last changed on 06-02-2024