The leading overall issue facing the global insurance industry is capitalizing on new market opportunities, according to a survey of the participants at the 43rd Annual Seminar of the International Insurance Society (IIS) in Berlin, Germany.
When asked, “What is the top issue facing the insurance industry?” 24% of respondents selected “New Market Opportunities,” with “Competitive Price/Adequate Profitability”, the top vote getter in 2006, coming in second at 21%. In 2004 the top response was “taking advantage of new market opportunities,” with “role of regulation” taking the top spot in 2005.
“The insurance industry is once again focusing on growth,” noted Patrick Kenny, IIS President and CEO. “But competitive and regulatory pressures continue to be concerns.”
Among growth concerns, new market opportunities came first (35%) and then organic growth (22%) and new product opportunities (14%). Development of emerging foreign markets, particularly in Asia, Eastern Europe and Latin America, along with new product and customer market segments in developed insurance markets continue to draw attention, with the rapid growth in India and China a particular draw.
The survey was conducted by ACORD, the insurance data standards organization, using audience response keypads.
As in 2006, the leading threats to the industry were unmeasurable risks at 41% (53% in 2006), inadequate human capital (27%, 23% in 2006) and regulation challenges (20%). In 2005, the focus was on human capital issues (46%) and government interference (31%).
The issue of greatest concern to non-life companies was risk management/enterprise risk management (33%), followed by profitability (25%) and meeting customer demand/products/distribution (21%). 2006 results ranked catastrophic loss first at 32%, followed by profitability (23%) and rate adequacy and regulatory requirements (11% each). In a relatively low catastrophe year concerns remained on risk but are more broadly focused on risk management processes.
For life insurers the leading concern was distribution efficiency (31%), followed by investments to meet benefit demands (20%). In 2006, profitability came first at 26%, followed by distribution efficiency at 22%. The search for efficient distribution methods continues to focus much of the life companies’ attention.
Of financial issues, managing risk/ERM led the way with 26%, followed by competitive price/adequate profitability at 22% and capital allocation at 21%. Much of this is driven by efforts by regulators (e.g., International Association of Insurance Supervisors (IAIS), the EU through Solvency II, and national regulators), rating agencies and accounting standard setters (e.g., IASB’s IFRS, FASB) to establish consistent solvency, reserving, rating and reporting standards worldwide.
Operational issues were led by organizational talent/retention and training (39%) and productivity/efficiency/expense controls (29%). As the technical challenges mount to understand and measure risks, and apply that knowledge in underwriting, pricing, investment management, financial performance measurement, etc. the demand for higher technical skills is growing.
For risk management, the key concerns were applying risk analysis in business decisions (29%) and building a strong risk culture (29%).
The survey is scheduled to be repeated at next year’s IIS Annual Seminar to be held in Taipei, Taiwan, July 13-16, 2008.
Source: International Insurance Society, Inc.
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