The bulk of insurance companies were surprised by the depth and magnitude of the economic downturn, however the sector was less directly impacted by the recession in comparison to other financial services businesses, according to a report on Monday from Ernst & Young.

The assurance, tax, transaction and advisory services group said that looking ahead, insurance companies should focus on evaluating and assessing potential exposure to extreme risks "if they are to better anticipate, manage and respond to future stress events".

Ernst & Young's global insurance leader, Peter Porrino said: "For the past year, progressive insurers have been responding to the pressures of an evolving economic landscape. Speaking to our clients we have heard how companies around the world are deploying approaches to manage credit exposures and regulatory capital, as well as focusing on redesigning and re- pricing certain products.

"Executives are not only applying strategies to manage and protect their businesses, they are also focusing on growing and reshaping their organizations and considering how best to guide them in the future," Porrino said.

The report highlighted a number of lessons learnt by insurers including:

  • Most insurers have learned to secure a capital buffer over and above what is predicted by economic capital models.
  • An enterprise-wide approach to risk management is important to future success. Insurers with the right asset protection mechanisms in place have emerged among the strongest in the downturn.
  • Sophisticated insurers are re-evaluating the size and shape of their business from the top down. The companies that responded most quickly to the crisis were among the most nimble.
  • Insurers are divesting certain businesses or product lines and reinvesting in their core businesses for future growth.
  • The insurance industry is well placed to take advantage of new market and product opportunities. The 'third age' retirement sector requires new savings and pensions products, which insurers are well placed to deliver because of their experience in underwriting older age mortality.

    In addition, geographies such as Southeast Asia, Latin America, the Middle East and Eastern Europe represent opportunities to deliver insurance products to a growing customer base.

    Lex van Overmeire, insurance leader for Europe, Middle East, India and Africa (EMEIA), said that the insurance industry had done well to emerge relatively unscathed from the downturn, but we are now entering a new and changing world.

    "Insurance leaders able to demonstrate ingenuity, the courage to make tough decisions and the foresight to apply lessons from change will guide their companies to success in the sector. At the same time they also have to restore confidence levels with customers as well as investors and other stakeholders, in order to create a sustainable future for the sector."

    Tim Rutherford, Life Insurance sector spokesperson for South Africa, said that insurers in South Africa had also experienced the impact of the global recession particularly in reduced investment income and high lapse and surrender rates causing pressure on profits.

    "The lessons learned from their global competitors are just as relevant to the local insurers and those that demonstrate flexibility and rapid responses to the market changes will reap the benefits as the South African and global economy emerge from the recession," he said.

    I-Net Bridge

    RSS
    Digg
    de.li.cious
    facebook
    How to make more cash It's not easy to make extra money, but it can be done if you're creative. Here's how...
    Can you go cashless? Follow this man as he uses plastic for every transaction he makes in the next three months...
    Seven myths of investing Medusa Learn the truth behind these seven widely held, yet patently wrong investment myths...


    Print this page
    Send this article to a friend