Sound Policy: Manufacturing resilience in a changing global landscape

Brian Amaral 
Welcome to Sound Policy, a podcast from FM where we share the latest insights about what it takes to protect today's businesses. We have a very special episode for you today. We are recording this at RISKWORLD, the annual gathering of global risk professionals, held in 2026 in Philadelphia. And what better place than Philly, a city once known as the workshop of the world, to discuss global manufacturing? It is an industry that is responsible for the things that we rely on every day. It is also facing a lot of change and a lot of volatility. So, on this episode of Sound Policy, we're going to get into that: the good, the bad and the rocky from here in Philadelphia.

This episode is the second of a two-part series. In the first episode, we looked from the lens of the United States. On this episode, we’ll be taking more of a global view. And we have a great guest who is going to help us do that. Achim Hillgraf is operations senior vice president of global growth strategies at FM. Achim has been with FM for more than 30 years, including a long stint running the Frankfurt, Germany Operations, which is another manufacturing powerhouse. Achim, thanks for being on the show. Welcome.

 Achim Hillgraf 
Thank you very much, Brian. Thanks for having me.  

Brian Amaral 
Let's get right into it. We're here at RISKWORLD. I'm sure you're having a lot of conversations about manufacturing. What, what's the word on the street? What are people talking about with manufacturing right now?  

Achim Hillgraf 
Well, the focus of manufacturing, I think, you know, it continues to be the centerpiece of what property insurance is all about, right? I mean, it, it introduces typically the largest and highest degree of exposure to insurance companies. So, it is, it is something that's always going to have the attention of brokers, of clients and insurance company at an event like this. 

Now, I haven't run into Adrian yet, to, to kind of relay back to your, to your Rocky comment. 

Brian Amaral 
Museum steps? You didn't see anybody on the museum steps when you were there this morning? 

Achim Hillgraf 
No, I haven't seen her yet, but, but I'm going to be here until obviously Wednesday lunchtime, so I hope I'm going to run into her.

Brian Amaral 
Absolutely.

Achim Hillgraf 
No. But yeah, manufacturing is, is continuously the centerpiece of property insurance. And yeah, the talk is the world is changing. The world is changing around us. And I would go as far as to say that the consensus opinion here at RISKWORLD is that the only constant in the world of property insurance and manufacturing within property insurance is going to be that it's going to change, and we're going to be faced with an increasing amount of uncertainty. 

Brian Amaral 
What are some of those changes that manufacturing is facing right now? 

Achim Hillgraf 
Well, one of the predominant changes: I think we can put them into three basic categories of change that we have witnessed in the past, and we will continue to witness exactly those categories of change going forward. The first one is in the area of natural catastrophe. Natural catastrophes will happen more often and more violent and more frequent all around the globe as we will go forward. There is sufficient scientific evidence to that, how it happened in the past, and we can extrapolate that forward. And in addition to the traditional perils, nat cat perils that we're seeing, the floods, the winds and the earthquakes, we're now seeing the so-called secondary perils. And they are not less violent, and they are not less disruptive. When we think about convective storms, about hail, about tornadoes, about wildfires, the exposure to those events is continued to also grow on a global scale. The second category of change we're seeing is the introduction of AI, analytics, artificial intelligence and automation in the manufacturing process. So, this is a trend that will definitely gain exponential speed and exponential dimensions over the course of the next couple of months, years and decades. And the last category is just how businesses continue to be intertwined with one another on a global scale. If you're in the manufacturing industry and you are a somewhat sizable organization, it doesn't really matter where you’re domiciled and what exactly you do. You are, in nine out of ten cases, part of the global supply chain for the products that you produce, and you are exposed to those. And you contribute to those.  

Brian Amaral 
A lot of industries face those sorts of challenges. Is it, is it, uni-? Is there any way that they affect manufacturing uniquely? 

Achim Hillgraf 
We think so. Because, you know, if you if you want to take property insurance and you divide it into just the two very, very basic sectors, you have the non-manufacturing and you have the manufacturing side. And while the non-manufacturing side in the instance, for example, for natural catastrophes and adjacent perils is probably equally exposed to manufacturing, the other two categories of the introduction of AI and automation, as well as the contribution to the global supply chain, they are subject to the manufacturing industry. Now, within manufacturing, we could obviously take a couple of subsets in manufacturing. We could take the high hazard industries, for example, and FM has the products to cater to those industries with FM Intellium for data centers, with FM Renewables, for renewable energy, with our chemical operations and forest products operations. And you have the traditional let me, let me call it basic manufacturing: the metal working, the plastic working, the assembly and that type of stuff. But the answer to your question is flat out, yes. Manufacturing is gonna be more exposed to change and more exposed to uncertainty than the non-manufacturing component in property insurance. 

 Brian Amaral 
Global supply chains. There's obviously been a lot of—there's tariffs, trade wars. There's been some global conflicts. The Strait of Hormuz closure. How are those affecting manufacturing businesses right now?

Achim Hillgraf 
Well, they are. I mean, you know let's, we don't even need to go far that long. We probably all remember how the Suez Canal was, was blocked. That caused significant disruption in so many areas. The automotive industry was disrupted because paint for certain colors of cars couldn't be shipped from one place to another. And if it could be shipped, it had to go around the, the Cape of Good Hope. And it increased the travel time by, I think, a whopping 2 or 3 weeks in total. So, it is those appearingly minor issues that in the way that supply chains are intertwined—and they're being knitted a little, a tiny little bit thinner than they maybe have been 10 or 20 years ago—the impact of a relatively minor event could have, could be a major impact to a certain industry or all of manufacturing industry within a very short period of time. 

Brian Amaral 
And we're recording this in in May of 2026. Energy prices are also really high right now as a pretty direct result of some of these global conflicts. How is that affecting manufacturers? 

Achim Hillgraf 
Oh it does. And, you know, I think it's a fair statement to make, and it's, it’s all over the press, so I'm stating the obvious. It seems to be impacting industry, manufacturing industry in Europe, a tad bit more than other places in the world. And the impacts are there. Competition is fierce. One factor that globalization has introduced into the global manufacturing industry is if the industry is global, then competition is global. You're no longer competing with manufacturers within your own country or within your own continental geography. You are competing with people that are, at the end of the day, operating global, with the advantages and the disadvantages that brings along. There's cost of labor. There's cost of goods sold. There is costs of energy. And if one of those components that contribute significantly to the cost of your product, all of a sudden due to an event like you have described, is exponentially differing from what it used to be, it puts that particular region and the industry in that region at a disadvantage. 

Brian Amaral 
Do you think all of this has really forced the conversation around resilience? Not just, not just what’s happened in the past few months, but even in the past few years?

Achim Hillgraf
Oh, definitely.

Brian Amaral 
Is there more of a focus on it? Talk about that. 

 Achim Hillgraf
Absolutely. What we're, we’re seeing, and we've, we’ve obviously been being a manufacturing insurer for almost two centuries now. That's where the impact that our products and services can have: with the engineering, with the research, with the science that is behind it, can traditionally have the biggest impact on that industry. The biggest positive impact, I might add. So what we have observed over the course of the last, say, five to 10 years, that the attitude of companies towards resilience has shifted. 10 years ago, 15 years ago, deciding as an organization that you wanted to become more resilient, that you wanted to become better prepared for events that you cannot foresee and cannot really reliably predict was more or less a choice. As we sit here today, with all the dynamics that we've already talked about, the natural catastrophe and the secondary perils, the artificial intelligence and automation, the intertwined and connectivity of global trade and of global manufacturing, at the end of the day, make resilience no longer a choice. Resilience has evolved into being essential for organizations to continuously, positively and successfully operate in their environment. 

Brian Amaral 
Let's talk about one of the other, the big three challenges that you mentioned: AI and automation. What does that look like on the factory floor right now? 

 Achim Hillgraf 
Well, you know, everything is connected these days. Machinery is no longer operating in an isolated fashion. Machinery is not just connected within one facility, within one building. But it is, in some instances, connected through various building, even various locations, even across a global scale. A machinery might well be connected while it produces something in the United States with a similar machine, or with, with another one that might use the product that is being produced down in Australia. So, those effects that are leading to huge efficiencies and effectiveness throughout the manufacturing process naturally also introduced to the fact how everything is interconnected these days, a big exposure to the organizations, should any interference ever occur in that particular and sometimes more fragile than you would like it to be environment. 

Brian Amaral 
Let's pivot. Let's talk about FM Essential. One of the big things that we're talking about here at RISKWORLD this week. What is FM Essential? You've been pretty involved in this new product. Can you, can you tell us a little bit about it? 

Achim Hillgraf 
Yeah. FM Essential, at the end of the day, sits on the foundation that we talked about a couple of minutes ago when we said the attitude of people and companies towards resilience has shifted from having been a choice to having, at the end of the day, being essential today. In order to remain competitive in your space, being resilient is indeed no longer an option. It is established as a fact that you need to have a level of resilience to successfully operate in your space. FM Essential has now been designed to give a broader group of companies, people, brokers around the globe access to FM’s capabilities when it comes to improving and building resilience through loss prevention measures over time. 

Brian Amaral 
So how, how do you approach the underwriting question to make sure that the clients are still, you know, generally aligned with the overall North star of, of what FM is all about? 

Achim Hillgraf 
And Brian, that was indeed the very first question we asked ourselves and tackled when two and a half years ago, we went into the brainstorm and into the drafting and the design of the product. How can we fit it into a what an underwriter or an insurance company would consider their risk appetite? So that was the basic questions. And what we found very quickly is FM has been doing this for 200 years. And we have been doing it for 200 years in the manufacturing industry. Over the course of those 200 years, we have accumulated a wealth of knowledge and expertise when it comes to underwriting and insuring manufacturing risk. Even more importantly, what we're doing every 10 years is we hand collect approximately 1 billion data points when it comes to insurance and when it comes to risk. Those data points are hand collected by 1,500 field engineers. There is no extrapolation or guessing or “well, this is be, going to be just about right.” This is hand collected fact. One billion data points every decade. So, we have that. And then we look at this data set and we apply our analytical capabilities and a little bit of an AI component to that, with a human in the loop to make sure that what we're doing and what we're, what conclusions were drawn are actually valid. And that tells us pretty clearly what to run from and what to run towards when it comes to insuring and partnering with manufacturing organization. And even more importantly, once it has told us what to run towards, it even more importantly tells the broker and the referring client and ourselves what good basic risk improvement opportunity present themselves as the initial foundation of the partnership. 

Brian Amaral 
Running towards. I'm picturing Rocky running through the streets of Philadelphia, running toward these good risks. 

 Achim Hillgraf 
And, you know, the data set and the AI on top. That's, that's the ten raw eggs that he drank before he ran down the streets of Philadelphia. 

Brian Amaral 
Absolutely. FM is still going to write, in the flagship mutual policy, will still write manufacturers, right?

Achim Hillgraf
Oh, of course. Oh, absolutely.

Brian Amaral 
Can you talk a little bit about that? What that, what you're looking for, compare and contrast? 

 Achim Hillgraf 
I would, I would take it back to the resilience questions. If, if, if our philosophical foundation for FM Essential or for any manufacturing industry, regardless of whether it's a specialty that might sit in our specialty products, Intellium, renewables, chemical, forest products, or whether it sits in the generic manufacturing sector, like for example, in the, in the FM mutual or in FM Essential, for all of those clients, resilience has turned into something that is essential for them.  So, if, at the end of the day, resilience is essential for all of manufacturing, but it's still continues to be a choice. And the choice is the level of resilience that you're aspiring towards. And whereas a mutual client, manufacturing specialty industry, whichever industry you're coming from, has made and continuously makes the conscious choice to aspire towards the pinnacle of loss prevention resilience that our organization defines as a highly protected risk over the best part of two centuries now. Other organizations in FM Essential are opting for a entry level conversation, bolster their resilience with—let me call them—basic measures that are prioritized, as we talked about before, and then annually make the conscious choice where the journey takes them from there. Does it take them further down the FM Essential path—which is perfectly okay, and they can stay FM Essential clients forever—or would they have a shift of their attitude towards their resilience aspirations? And would they potentially, or some of them, decide that they aspire towards the highly protected risk standard and would become eligible, potentially, in the future, to join the mutual product? 

Brian Amaral 
And I'm looking over your shoulder, and I'm seeing a big display of sprinklers. What does FM Essential think about sprinklers? What is the FM Essential approach to sprinklers? 

Achim Hillgraf 
Yeah. Let's start, let's start with the general, and I think a totally unrelated, FM unrelated, approach to sprinklers. It is undeniable that the sprinkler, assuming it is connected to a water supply, is a very effective means to fight losses, large losses, MFL type losses in manufacturing industry. So, per se, it’s not just FM. I think you can talk to any underwriter here in Philadelphia. The sprinkler is, per se, when it comes to loss prevention and resilience, a good thing. And again, there is two levels. If the sprinkler is a good thing, and somebody has it in their facility, it is, for FM Essential less of a question is how reliable and how precisely it will operate in any given scenario. We look at sprinklers like, if they exist, we accept them to be a good thing as long as they are hooked up to a water supply. In the mutual, however, our clients demand from us to really assess and say, “Well, will it work in every scenario exactly the way that we will need it to work in order to prevent those large MFL fires and associated interruptions to business?” So, the sprinkler will always be looked at favorably in FM Essential. The difference is in the mutual, we go through the analysis, whether it's as reliable as it is supposed to be. In FM Essential, we accept the fact that it exists. And if it doesn't exist, it can still be a decent enough risk to engage in a partnership with FM Essential. We would then thereafter look at construction features. We would look at degrees of combustibility. We would look at degrees of ignited, ignitable liquids, the handling thereof, the storage thereof, the ignition source control. And if we find those things either already in good order from the beginning, or a client that is interested to bring them into a good order over a foreseeable amount of time, we can be very, very, very, very comfortable with the risk quality introduced into FM Essential without sprinklers. 

 Brian Amaral
What's the response been so far? What are you hearing? 

 Achim Hillgraf 
It has been very good. In order to test it, what we conducted as a proof of concept, does the concept that we have designed actually work? We have tested it in the New York property insurance market in the United States, a market that we know very, very well and assume a leadership position in. We have tested it in France, in Europe, where we have been operating for 50 years. We're a well respected and well-established carrier; yet not in a market leading position. And we've tested it in India, an emerging market for our organization, where we see a tremendous growth of manufacturing, and we want to just be there as this growth happens and be present with a product that resonates with local market conditions. The results from all three proofs of concepts were overwhelmingly positive for the right reasons. So, at the end of 2025, we had accumulated a business volume in the range of just about $20 million. Now that doesn't sound like much, but it represented just about 25 clients that in those three geographies, have decided to pursue the path and the partnership with FM Essential. And unanimously, every single one of them gave us as the reason as to why they engaged in the partnership, our differential, when it comes to help them build their resilience through loss prevention activities. And this has led us now to bringing the product almost global, as we sit here now in Philadelphia in May 2026, as it is now available in the entire United States, most parts of Europe, and enlarged geographies in Asia Pacific, namely in India and South Korea and in Australia. We will go into all of Europe during the second half of the year. We will also add Canada as well as Latin America, very likely later in 2026, at which point in time we will have a global scale for the product. 

Brian Amaral 
We're getting a little bit short on time. I want to ask you a little bit of a future looking question. I was walking by the convention center here in Philadelphia, and I saw a statue of Benjamin Franklin, craftsman. A young Benjamin Franklin, a strapping young lad working a printing press. 

Achim Hillgraf 
Yeah.

Brian Amaral 
Printing is one of the industries that you're looking at in FM Essential. It looks a lot different now, I'm sure.

Achim Hillgraf 
Oh, yeah.

Brian Amaral 
Bring me to the future. Five, 10 years. What's, where's manufacturing going to go? And then where's FM Essential going to go with them? 

Achim Hillgraf Well, I think, you know, we can, we can sit here, and, obviously, AI is the hot topic, right. You know, artificial intelligence is going to change all our lives. But will artificial intelligence change our lives to the sense that we will no longer be needing or wanting to use products that are actually manufactured? Sit on a chair, drive in a car, put on a pair of shoes in the morning to protect ourselves from the, from the stones on the road? I doubt that. I think that artificial intelligence will impact the way that those things for daily use for humans and people will be produced and will be distributed, possibly; but they will still need to be manufactured in order to be available for mankind to use. So, if that, if I'm not entirely wrong with that assessment and with that prediction, then manufacturing will remain a centerpiece and a cornerstone of property insurance.  

Brian Amaral 
Well, thank you, Achim, for joining the show today. 

Achim Hillgraf 
Thank you very much, Brian, for having me. I enjoyed that.