Version Française ici.
SwissRe has just published its global insurance review 2017 and its 2018 forecasts. The document is available at this link (Global insurance review) .
Innovation is essential, but to identify new answers, I remain convinced that we need to understand the state of the current market. This type of report is therefore essential to refine the grid of reading of what is happening in the world around us! This is particularly right as they give valuable insights into innovative solutions!
The four main themes covered in this document are:
- Continued cyclical economic recovery at the macroeconomic level, although risks of instability persist;
- Obviously, a big subject on the natural disasters of the year! These are causing great difficulties for all the systemic insurers in the area and therefore even more so for reinsurers;
- Life insurance re-insurers adapt to the new deal;
- Stable emerging markets in non-life and strong growth in life.
Key Points from the 2017 Global Insurance Review
More globally, here are the 10 points that SwissRe puts forward:
- The rise of protectionism in large markets: in the United States, but also Brexit or the situation in Catalonia. This phenomenon is however not uniform (for example Latin America is liberalizing)
- Monetary policy : what about the gradual end of quantitative easing?
- Cyber risk : The market is growing rapidly, and the stakes are high, particularly in terms of the quantity and quality of data needed for risk monitoring and pricing. A particular focus is to read p15 of the doc on this subject. Indeed, an estimated growth of 30% per annum of this market over the next 5 years should not be underestimated.
- Increasing auto claims : More and more miles traveled, more traffic and distracted driving are the first drivers. The key is always technical results.
- Brexit and the UK insurance market: Depending on the UK exit format, premiums should be reduced by 8 to 20%. This is a considerable shock on the market.
- Innovate to increase the scope of insurability, especially in the “commercial” segments: I come back to this point just after
- Losses related to Natural disasters (hurricanes).
- Protecting Floods : Tools now exist to assess flood risk, and collaboration with states is needed to ensure the best coverage of this risk.
- IFRS17 : Investments will be needed around the data to ensure good data collection and analysis.
- Insurtechs in China : I’ll come back to this point below.
On the perimeter of the “commercial” contracts (on which I am working rather seriously lately), innovation brings new solutions.
Swiss Re cites, of course, parametric insurance solutions, coupled with a global vision of risk, that solve complexities of the process at the time of the claims. On the other hand, it does not bring any real additional value talking about premium reduction for example.
The most important point about these contracts is that it is now possible to insure elements previously impossible to cover. This offers interesting growth opportunities. For example: image loss, product recalls, weather protection, or financial risks of increasing energy prices. This is now possible thanks to better access to risk data and a better assessment of its consequences.
Insurance can therefore strengthen its position as a protector of corporate investments and offset the risks of earnings volatility.
Insurtechs in China
A small recap is proposed on the issue of insurtech in China, where the growth of Zhong An is particularly impressive (insurtech largest insurer of the world).
2 successive waves took place in China:
- A first from 2001, around the online distribution, which brought the online market share to almost 8%;
- The second in recent years, which exploits new technologies and especially big data (telematics or insurance to use / UBI)
Prospects can still open up to cover the ecosystem of e-commerce, and even consider the entry of new players outside the insurance world.
The Chinese regulator seeks to constrain certain segments (such as online lending), but it is generally rather a support for innovation.
My opinion on the global insurance review 2017
Always of very good quality, the Swiss Re reports are full of information and figures. One could blame them for their lack of pedagogy and the austere aspect of their reports, which prevent a diffusion to the greatest number. It may be the price of quality!