The insurance market is facing several challenges driven by regulatory and political pressure as well as changing customer behaviour and needs.
We - at Deloitte - see the following major themes impacting the industry:
Low investment returns and interest rates have increased focus on underlying business performance. Operating costs, low growth, pressure on claim costs and increasingly competitive pricing in some market segments are all driving scrutiny on underwriting profit.
In addition to quantitative aspects of Solvency II and SST, insurers are beginning to address the qualitative and reporting requirements. The challenges are compounded by additional Swiss, EU and US legislative and tax requirements. Insurers are beginning to address the changes created by FATCA, the EU gender directive, Risk Management requirements, Executive Compensation rules, Governance circulars and others. The cumulative impact of this is a continuing drain on resources and significant challenges for management.
The impact of the years of SST reporting is still being worked through – what is clear is that both Solvency II and the SST will increase the amount of risk capital that is being held by insurers. This may act as a drag on profitability and place further emphasis on operational cost control and profitable growth. Insurers are now rethinking their asset allocation and liability portfolio in order to better manage their solvency ratio and its corresponding volatility.
The Swiss market is one of the most insured in the world, both in general and life insurance. There are modest organic growth opportunities at best for traditional products in traditional channels. Increases in profit will come from the top-line through better exploitation of the existing customer base and M&A activities, or from the bottom-line through continuing cost reduction. Increased pricing transparency in general insurance. Personal lines products in general insurance are under pressure as comparison websites and greater customer information increase commoditisation, reduce brand power and increase the importance of price as a competitive factor.
Please consult one of our Insurance leadership contacts for more information on the following topics:
|General Insurance, Reinsurance and Captives