A new study has revealed the largest risks faced by pros, the results of which have now been published in a report.
New local and international level regulations are now being seen as the greatest risk faced by the insurance industry, according to a PricewaterhouseCoopers and Centre for the Study of Financial Innovation report.
The new rules could considerably increase problems with compliance as well as costs for insurers.
According to the 2013 Insurance Banana Skins Survey, new regulations regarding market conduct and solvency could “swamp” the insurance industry with struggles in compliance as well as higher costs. The survey involved the participation of 600 practitioners and observers from 54 different countries. The goal was to identify where they feel that the largest risks will be over the next two to three years.
PwC also stated that regulatory changes could cause insurance industry management to face distraction.
This is the second time that the Banana Skins survey has been conducted – the last one was performed in 2011- in which the insurance industry’s regulations were the leading risk concern. The primary concern that was identified in terms of the regulations leading to risks was the European Union’s Solvency II Directive. This was explained within the report and was said to be a particular issue among non European Union countries that are working to finalize their own regulatory plans but must wait until the E.U. has presented an outcome.
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According to David Lascelles, the survey editor “It is ironic that the industry’s greatest risks are seen to come from regulation, which is intended to reduce risk, at a time when operating and underwriting conditions are also very hard.” He also pointed out that “It is no surprise that these pressures are reflected in rising concern about the ability of management to handle them.”
A lack of certainty regarding the financial market stability and the global economy were the second and third concerns voiced by the insurance industry respondents to the survey. Other areas included risks associated with business practices – another regulatory scrutiny element – as well as the risk associated with natural disasters made up the rest of the top five concerns that were identified.