With the 2014 International Congress of Actuaries (ICA) upon us, the time is ripe to highlight some trends we are seeing in the international insurance market. Regardless of where they are domiciled, companies are facing similar question marks when considering current and upcoming regulations, changing economies, and new, more effective strategies for getting products to market.
The implementation dates for new regulations covering U.S. and European insurers are rapidly approaching. During this time, it is critical to take stock of resources to ensure compliance, both with technological upgrades and staffing the appropriate analytical talent. For U.S.-based insurers, the 2015 compliance requirement of ORSA [Own Risk and Solvency Assessment] is likely to drive large- and medium-sized insurers to evaluate and update their ERM [Enterprise Risk Management] systems. Solvency II, although delayed several times, will become a reality, with the current date for compliance at January 2016. The largest insurers will be required to have the G-SII [Global Systematically Important Insurers] and SIFI [Systematically Important Financial Institution] designations, which mean new regulatory reporting and capital requirements.
On the other side of the coin, there is also a wave of deregulation throughout much of Asia. Loosening restrictions on foreign investment will continue to attract Asian insurers to investment outside of their home markets. Regulatory changes in some of the previously protected domestic rapid-growth markets are opening the market to outside players.
Global economies are continuing to evolve. Interest rates in much of the world will remain well below long-term averages, and shareholders will continue to put pressure on public insurers to maximize value.
Meanwhile, economies in some of the rapid-growth markets are strengthening, allowing the middle class to expand. With more people leaving the home and entering the workforce there is an increase in home and auto purchases, thus an increase in the number of policies sold for these items.
This also means that families may need to change the ways they address situations such as caring for elderly family members which creates a market for products such as disability, long-term care and health insurance.
Getting Products to Market
As new products are developed and economies change, insurers must continue to seek out new ways to bring products to market. In developed economies, companies will continue to sell to their established customer bases; a strong focus, however, has been put on emerging markets.
Insurance premiums have grown by an average of 11 percent per year in emerging markets, compared with 1.3 percent per year in the developed economies, according to Swiss Re.
Customers in emerging markets, though, do not act like or have the same needs as customers in developed markets, and companies will need to address this. Globally, companies are using innovative methods to reach new market segments, including retail outlets (kiosks set up in stores), bancassurance (banks selling insurance products) and affinity groups (utilities, for example, selling insurance products).
Undoubtedly, there are many more trends insurance companies are facing on a global scale, and this is just the tip of the iceberg; these will be addressed on a broader scale at ICA next week. If you have the opportunity to attend, please stop by the DW Simpson booth (#20) to discuss further as well as learn more about our new international salary survey. You can also participate here: www.dwsimpson.com/iss