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Top Global Concerns for Insurers: Capital Management and Regulatory Changes

Source: INN

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Posted on 20 Jun 2013 by Neilson

Towers WatsonAt the International Insurance Society's (IIS) annual seminar in Seoul this week, Towers Watson lead a discussion of major issues facing the insurance executives based on those identified in its recent Insurance Industry Megatrends survey.

The survey, which was conducted in cooperation with IIS with more than 500 global insurance executives prior to the seminar, was intended to identify the trends of greatest concern and understand how the executives were preparing to respond over the next two and five years.

The areas of greatest concern include capital management challenges (66 percent) and regulatory changes (61 percent); 67 percent said they were well prepared to deal with capital management, and 63 percent said they were well prepared for regulatory changes.

Over the longer term, other issues demographic aging trends, big data, social media, and attracting and retaining talent were not subject to the same level of preparation (29 percent, 32 percent and 33 percent respectively), Towers Watson said.

At the IIS conference, more than 400 IIS seminar participants participated in a separate survey, sponsored by ACORD, about issues facing the industry. The results of the two surveys tracked closely, International Insurance Society said, identifying changing regulatory requirements and capital management/asset-liability management as leading concerns.

Sixty-three percent of the survey participants were Asian, 15 percent European and 14 percent North American; people from Latin America, Africa and the Middle East made up the remaining 8 percent.

IIS asked whether current market conditions and profitability were most likely to improve (31 percent), worsen (35 percent) or stay the same (34 percent) in the future. Another question asked whether skeptics were overreacting to environmental concerns resulted in 65 percent either strongly disagreeing (36 percent) or somewhat disagreeing (29 percent).

According to the IIS survey, the top issues facing the industry were competitive price/adequate profitability (31 percent), asset/liability management (18 percent) and multiple/inconsistent regulatory standards (14 percent). The greatest threats included regulatory challenges (30 percent) and capital constraints (20 percent).

Regulatory concerns vary by region, IIS said, but the persistently low interest-rate environment and regulatory concerns about assuring adequate capital to maintain solvency have made capital management and asset-liability management the leading concern. Slow global economic recovery and uncertainty cloud judgments about how to respond to these key issues with company policies, IIS said.

Among non-life insurers, the top concerns include risk management/ERM (27 percent), regulation and reporting requirements (17 percent) and catastrophe loss trends (17 percent). Last year, the top non-life issues were inadequate premium (31 percent) and risk management/ERM (23 percent).

The Towers Watson survey identified the need to prepare for big data, social media and talent management. Among life insurers, top concerns included identifying investment opportunities to meet benefit demands (32 percent) and regulatory and rating agency requirements (13 percent). Those results were consistent with last year's survey.

Towers Watson Survey Highlights

Operational issues:

- Organizational talent/retention/training (28 percent)

- Productivity/efficiency/expense controls (28 percent)

- Regulatory requirements (18 percent)

Risk management issues:

- Applying risk management analysis to business decision-making (34 percent)

- Building a strong risk management culture (26 percent)

- Understanding and anticipating emerging risks (19 percent)

Financial issues:

- Competitive pricing and profitability (32 percent)

- Asset-liability management (28 percent)

- Capital management (20 percent)

Human capital issues:

- Retaining talent (29 percent

- Competitive compensation (24 percent)

- Succession planning (19 percent)

- Finding new talent (17 percent)

- Training (17 percent)

Growth issues:

- New market opportunities (25 percent)

- Competitive products and price (24 percent

- New product opportunities (22 percent)

Regulatory issues:

- Multiple and inconsistent standards among national regulators (27 percent)

- Understanding and anticipating regulations (18 percent)

- Public, regulatory and rating agency reactions (18 percent)


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