Market instability and uncertainty combined with a broad range of simultaneous regulatory pressures, including Solvency II compliance, are converging to create a “perfect storm” for insurers. Then there are the non-financial risk trends. News reports suggest a significant increase in the frequency of natural disasters. Where do these risks leave insurers?
Accenture’s 2013 Global Risk Management Study finds that insurers see legal, market and business risks as most likely to rise in the next two years, with legal risks being the top concern. There is no question: insurers find themselves in an environment of rising risk across multiple risk types. To respond, the vast majority—90 percent—of insurance respondents are developing, or plan to develop, emerging-risk management capabilities. It won’t be easy to overcome obstacles, though. Our findings suggest insurers, particularly those in the property & casualty (P&C) area, face a diverse range of impediments in developing emerging-risk capabilities.
The chart below illustrates to what extent each of the following challenges impede the effectiveness of an insurer’s ability to manage emerging risks:
As you can see, even for insurers with specialized capabilities, managing emerging risks remains a challenge. But as I’ll share next week, many have made tremendous investments in developing their capabilities in recent years.
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