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New International Financial Reporting Standards (IFRS), new regulations, new technology, the recent pandemic and growing expectations for the insurance industry to play a greater role in environmental, social and governance (ESG) issues, have presented challenges and opportunities for insurers. In this increasingly complex business and uncertain geopolitical landscape, companies which are agile, innovative and able to drive change at scale, will gain a significant competitive edge.
The effects of the recent pandemic and the geopolitical unrest have been felt in the Cyprus economy and the insurance sector. Although premiums have been stable over the last few years, insurers may have to consider premium increases, given recent inflation. In line with the global trend, sustainability issues are also increasingly becoming part of the insurance strategy and compliance agenda of each insurer.
Keeping up and Staying compliant
IFRS 17 brought about numerous changes in insurance reporting. Upgrading systems to enable calculation and reporting under IFRS 17 was only part of the ask. Insurers need to be constantly testing, reviewing and calibrating model output.
Analysts and investors will want to know how the IFRS 17 results compare to the old numbers and how to interpret and benchmark new reportable figures in 2023 and for the years ahead.
Following an evaluation of the effectiveness of the Motor Insurance Directive of 2009 (Directive 2009/103/EC), the European Commission has issued amendments that affect compensation, minimum obligatory cover, insurance checks and use of policyholder claims history. As the national regulator amends national law to bring it into compliance with the amended directive, insurance companies will need to assess its impact on their operations.
In parallel, the process of reviewing the Solvency II framework and the issuance of new guidelines, is keeping insurers’ compliance with the regime in-check.
Risk & Opportunity
The insurance industry’s core strength is assessing and determining how to manage Life, Health and Non-Life risks. Sustainability risks are no different.
In certain areas, notably climate, the insurance industry can play a leading role helping other industries understand and act.
Moreover, because of their vital economic role as underwriters and investors, insurers have the ability to significantly influence climate impacting businesses and development initiatives.
The growing threat of climate change poses systemic physical and transition risks, with direct implications for the insurance industry.
To protect against and prevent these risks, insurers will need to develop a deeper understanding of them in their portfolios, rebuild their risk models and pricing assumptions, create new climate-related products and services, work with organisations to help them mitigate climate risks and embed the IFRS 17 accounting and reporting standards to reflect the real economic value of the risk carrier.
New and Better ways of doing insurance
The rise of the sharing economy and the ability to improve operations using advanced analytics and artificial intelligence are some of the recent developments pointing to disruptive innovation. Rather than defend against, insurers will need to take advantage of such innovation.
Insurers who are currently focused on catching up with their competitors around customer centricity and other current trends are missing the opportunity to become technologically proactive.
With a growing need to find long-term solutions to address business resilience, insurers must go beyond their traditional mandate and engage in effective transformation.
How can PwC help you
By bringing together a tech-enabled community of solvers with deep insurance sector experience and expertise, PwC Cyprus can assist you face the new challenges and manage the risks of doing business in a highly volatile and uncertain economic environment. And with substantial depth and breadth of skills and competencies, our insurance sector team plays an important role in helping our clients build trust and deliver sustained outcomes.
We work with insurance businesses by providing the whole spectrum of actuarial, regulatory, audit, advisory and tax services.
When you team up with PwC you are teaming up with people who understand the big challenges facing your industry, bringing local perspectives coupled with the international expertise only an organisation of our breadth & experience can deliver.
We believe insurers have an opportunity to shape an optimistic future for the industry – one that pushes boundaries to build upon its purpose and become a force for greater good.
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Director | In charge of Actuarial Services, PwC Cyprus
Tel: +357 - 22555141