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FOR IMMEDIATE RELEASE
LONDON - DECEMBER 15, 2016 11:22 AM (EST)
Over the past decade, the insurance industry has been faced with numerous tests, including major catastrophe losses, the global financial crisis, regulatory changes and more recently uncertainty created by political events. While lessons have been learnt from the past, the extended pressures of diminishing investment returns, dwindling loss reserves and intense competition are beginning to erode industry fundamentals. And in an increasingly complex, interconnected world, the potential for risk accumulation and unexpected correlations has never been higher.
However, in its new special report, titled, “Insurers Hunt for Diminishing Opportunities in a Market Laden with Challenges,” A.M. Best believes that it is not all doom and gloom for the industry. Risk has always been about the upsides as well as the downsides and where there are challenges, there are also opportunities.
Catherine Thomas, senior director, analytics and one of the authors of the report, said: “Devising new solutions and products to help close the protection gap, making better use of data and exposure management tools, and pursuing growth with control and discipline are some of the areas in which insurers and reinsurers can create competitive advantage and prosper in an otherwise difficult operating environment.”
A.M. Best’s report focuses on the threats and opportunities posed by accumulation risk, pandemic, low interest rates, energy prices and adverse reserve development. Nevertheless, A.M. Best remains mindful that there are many other threats and opportunities that insurance and reinsurance market participants must consider going forward.
Mahesh Mistry, director, analytics, and co-author of the report, adds: “There is no doubt that the (re)insurance industry is entering a highly challenging period in its history. It is a time when margins are coming under increasing pressure at all levels of the industry and return on equities are now in high single digits. If tested by a major event or series of events, and with diminishing reserve releases to fall back on, industry fundamentals could begin to deteriorate.”
A.M. Best notes in its report that there is no one-size-fits-all solution, and that success will vary depending on sector, size, market and risk appetite, among other factors. However, A.M. Best observes that the strategies it has identified are some of the characteristics its most highly-rated insurers and reinsurers share in common.
To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=256891 .
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.