The greatest risk currently facing the insurance industry comes from new regulations that are being introduced at international and local levels, according to a new survey that ranks insurance sector risk.
The Centre for the Study of Financial Innovation's latest Insurance Banana Skins survey, conducted in association with PwC, states that new rules governing issues such as solvency and market conduct could swamp the industry with costs and compliance problems.
The survey polled more than 600 insurance practitioners and industry observers in 54 countries to find out where they see the greatest risks coming from over the next two to three years.
Regulatory risk emerged a clear leader in many major markets, including North America, Europe, and the Far East/Pacific.
The EU’s Solvency II Directive—now in its seventh year of planning—was the focus of strongest concern, particularly since many non-EU countries are awaiting the outcome before they finalise plans of their own.
David Lascelles, survey editor, said: “It is ironic that the industry’s greatest risks are seen to come from regulation, which is intended to reduce risk, at a time when operating and underwriting conditions are also very hard.”
“It is no surprise that these pressures are reflected in rising concern about the ability of management to handle them.”
David Law, global insurance leader at PwC, added: “Once again regulation is the number one risk. The fragile economic environment and subdued investment performance also remain high on the list of concerns. Managing these challenges is clearly a critical boardroom priority.”
“But there’s a risk that by solely focusing on these recurring issues insurers could miss other threats and opportunities coming up over the horizon. The industry faces transformational shifts in technology and customer expectations, which are reshaping how insurance is sold, how risk is priced and even what we mean by insurance.”
