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0.25CIP Points

Insurance Banana Skins 2019

Centre for the Study of Financial Innovation (CSFI) and PwC
04 Dec 2019

Published by the Centre for the Study of Financial Innovation (CSFI) and PwC, Insurance Banana Skins 2019 identifies the risks, or ‘Banana Skins’, facing the global insurance industry in the first half of 2019 as seen by a sample of 927 practitioners and close observers of the scene in 53 territories. 

INDUSTRY REVEALS ITS CONCERNS

The questionnaire was in three parts.

In the first, respondents were asked to describe, in their own words, their main concerns about the insurance sector over the next 2-3 years.

In the second, they were asked to rate a list of potential ‘Banana Skins’ or risks. In the third, they were asked to rate the preparedness of insurance institutions to handle the risks they saw. This report ranks and analyses each Banana Skin individually.

Replies were confidential, but respondents could choose to be identified.

Three-quarters of the respondents were from the primary insurance industry.

The remainder were from the reinsurance and broking sectors, and non-practitioners such as regulators, consultants, analysts and other professional service providers.

BRAVE NEW WORLD

The world has changed significantly since Insurance Banana Skins first began. 

In 2007, the iPhone had just launched, Twitter was in its first year, we had yet to experience the Global Financial Crisis and Solvency II was still under development. 

A lot has changed in this time, and the insurance industry has continued to work and develop to respond to the changing needs of its customers, shareholders and regulators.

We have seen real growth in new ways of conducting business and reaching customers through a myriad of new channels.

The external environment has also changed – economically, politically and socially. These changes of course bring risks and challenges – areas of focus for management and regulators alike.

TECHNOLOGY TOPS THE LIST OF RISKS

This is the seventh Insurance Banana Skins, the second in which the risks surrounding technology and cyber have come out on the top of the pile and the first in which they are unequivocally the biggest upfront risk.

That is not to say that other risks have diminished. Indeed, the overall level of perceived riskiness within the industry is now at the highest since we began the series in 2007, and two old chestnuts (inappropriate regulation and poor investment performance) are right up there.

But the risks associated with the take-up of modern technology and with cybercrime of one sort or another are way ahead of the rest – and both are rising.

This shouldn’t be a surprise.

After all, it is well known that many insurers are lumbered with legacy systems that need updating – and that integrating them is time-consuming, fiendishly complicated and, inevitably, very expensive.

Equally, we are all aware of the risks around cyber – from simple hacking, from ransomware, from Trojans, even from malevolent state actors.

We are less aware of ‘silent’ cyber exposure – but it is a real risk that is starting to take up much more C-suite time.

GOOD NEWS AND BAD NEWS

Significantly, the overall tone of the responses this year is the most negative CSFI has seen since the series began in 2007.

This is largely due to the scale of the challenges facing the industry through technological and structural change, and concern about the industry’s ability to manage them successfully.  

The results should also be seen against a background of growing economic uncertainty around the world, and heavier regulation.

Of course, it is not all bad news. This latest survey, for instance, shows the industry (at least, the broader global industry) to be surprisingly nonchalant about Brexit.

There is also, quite clearly, plenty of capital lying around, and corporate governance and management are not perceived to be big issues.

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