Insurance Banana Skins 2017
(2015 ranking in brackets)
Change management (6)
Cyber risk (4)
Interest rates (3)
Investment performance (5)
Human talent (15)
Guaranteed products (7)
Political interference (16)
Business practices (11)
Cost reduction (-)
Quality of management (12)
Quality of risk management (10)
Social change (20)
Product development (17)
Corporate governance (21)
Capital availability (22)
Complex instruments (25)
The global insurance industry’s ability to confront structural and technological changes is now the greatest risk it faces, according to a new survey of insurers and close observers of the sector.
The CSFI’s latest “Insurance Banana Skins 2017” survey, conducted with support from PwC, surveyed 836 insurance practitioners and industry observers in 52 countries, to find out where they saw the greatest risks over the next 2-3 years.
Change management is at the head of a cluster of operating risks which have jumped to the top of the rankings. The report raises concerns about the industry’s ability to address the formidable agenda of digitisation, new competition, consolidation and cost reduction it faces, especially because of rapidly emerging technologies which could transform insurance markets, such as driverless cars, the ‘internet of things’ and artificial intelligence.
Although respondents acknowledged signs of growth, confidence in the recovery is not strong for reasons as widely dispersed as the slowdown in China, the risk of Trump-era protectionism, and populism in Europe. The risk of political interference was seen to have risen sharply. However, Britain’s exit from the EU was seen to be a minimal source of risk for insurers, particularly those without operations in the UK.
Regulatory risk, which has topped the last three editions of this survey, has fallen out of the top five this year. This is largely because recent regulatory changes are settling in to business as usual (e.g. Solvency 2), though the cost and complication of regulation continue to be a concern.
The report shows that the industry’s ability to attract and retain human talent is a fast-rising concern, particularly to handle the digital challenge.
Overall, the climate for insurers is becoming more challenging, according to respondents. The 2017 “Banana Skins Index”, which measures the level of anxiety in the industry, is at a record high, while the industry’s preparedness to handle these risks has fallen from 2015.
Androulla S Pittas, Partner, In charge of insurance at PwC Cyprus commented: ''For the first time in some years, the regulatory framework is not in one of the top five items on the agenda of the CEOs; this is in line with what we find in discussions with clients after the implementation of Solvency II. Issues which are relevant are operational matters, Cyber risk and IT generally and the investment returns as CEOs are looking at their bottom line. There is scope for investment in technology and security so as to maintain profitability moving towards 2020.''