Insurers are grappling with external challenges posed by a relatively volatile economic environment and the increased frequency of catastrophic events. These challenges have, in turn, increased the internal pressures within some organizations to better manage costs and increase operational efficiency.
On a global level, the insured catastrophe losses totaled $65 billion in 2012, well above the $29 billion inflation-adjusted average of the last 30 years, revealing unexpected losses and unforeseen risk accumulation across global supply chains.
A survey of insurance equity analysts commissioned by Accenture in 2012 indicated that, while the challenges facing many insurers worldwide are similar, their relative importance varies. In North America, the two biggest threats to insurers are investment volatility (71 percent) and new regulations and reform (52 percent). In Europe, on the other hand, regulations come first (61 percent) and investment volatility second (57 percent).
Regulatory concerns seem particularly significant for the nine global insurers identified as global systemically important insurers (G-SIIs). As a result of the implementation of Solvency II and the interdependencies with IFRS (International Financial Reporting Standards) regulation (see the 2013 Accenture Global Risk Management Study), these insurers will be required to comply with stricter policy measures. As a consequence, they are likely to be affected in a number of areas including:
- Recovery and resolution planning
- Enhanced group-wide supervision
- Higher loss absorbency requirements
These new regulatory circumstances should make G-SII insurers consider applying risk-management models as an effective means of addressing their current challenges. In the following series of blog posts, I will discuss the many advantages of risk integration into global insurance.