Cyber risk has topped a list of concerns for reinsurers in a new report from PwC. Uncharted Waters: tackling reinsurers’ riskiest exposures, is based on a reinsurance cut of the Insurance Banana Skins Survey 2017 from PwC and the Centre for Financial Services Innovation (CSFI). The analysis highlights the most serious concerns on the industry’s risk register. Cyber is closely followed by concern about the industry’s ability to weather change and pressure on investment performance. Other prominent fears include political interference and technological disruption.
The report sets out how the risk landscape is shifting and examines opportunities for reinsurers to tackle evolving challenges, which also include Brexit and the international tax agenda.
Regulation and a challenging market environment have long dominated the top of the rankings and, although these still play on reinsurers’ minds, the most pressing concerns in 2017 are rooted in the shock and uncertainty of the ‘new’.
Cyber risk’s position at the top of the agenda reflects both the anxieties of underwriting a risk that’s constantly changing alongside the rising threat to reinsurers themselves.
Far from being simply a technology risk, cyber is now a significant reputational and systemic concern for insurers, reinsurers and their clients. The report shows that many businesses across the world are aware of the risk but remain unwilling to buy cyber cover due to restrictive coverage and limits.
PwC says that reinsurers can help their clients by using their underwriting prowess and experience of managing diverse accumulations of risk. With a better understanding of a client’s vulnerabilities and stronger safeguards in place, both reinsurers and their clients will be in a better position to control their exposure to cyber threats.
At number two is a concern about the industry’s ability to address a formidable agenda of change including new technology, shifting customer expectations and pressure on costs, performance and service. In PwC’s latest CEO survey , insurance is shown to have overtaken entertainment and media as the most disrupted sector in the global economy.
Political interference makes a new appearance on the list and holds particular relevance for the global reinsurance industry operating in a world facing a possible partial retreat from globalisation. Uncertainty around the outcome of Brexit negotiations, along with conceivable but increasingly unlikely US tax changes, are just two political events which could have ramifications for reinsurers across the world. While businesses wait for clarity, PwC says it is vital for insurers and reinsurers to make their case with regulators and policy makers and draw up contingency plans for every eventuality.
Androulla S Pittas, Partner, In charge of Insurance at PwC Cyprus commented: “Our global survey fairly reflects the concerns of the industry in Cyprus, and the increasing significance of Cyber risk, technology, as well as the changing and evolving landscape in which the industry is working in. Apart from Cyber and technology, the ability to adjust to change and to increase the investment returns are the focus areas of our discussions with clients”.