Why is insurers' anxiety at an all-time high?

If regulatory and macroeconomic risk were foremost amongst insurer worries two years ago, these have now been overtaken by anxieties on coping with change and cyber risk. Change management has shot up to the top of the bi-annual 2017 Banana Skins survey, which reflects risk perception amongst insurers globally in the next two to three years, up from sixth place in the 2015 rankings. Similarly, cyber risk has risen to become the second most critical concern for insurers, up from fourth, due to the rising threat of cyberattacks and the steep costs of underwriting cybercrime.

Top concerns for insurers
“For the first time in six editions of this survey, operating risks pose the greatest threat to insurers. Structural and technological changes to the industry could upend traditional business models,” said David Lascelles, survey editor at the Centre for the Study of Financial Innovation, which conducted the survey with support from PwC. “At the same time, insurers are grappling with a very difficult economic climate, which helps explain why anxiety is at an all-time high.”

Regulatory risk has topped the last three editions of the survey, but has fallen out of the top five this year largely as insurers start to see it as a business-as-usual requirement, even as regulatory cost and complication remain sources of concern. 

Technological risk still sits in third place, as new technologies such as driverless cars and artificial intelligence continue to pour into the industry and potentially upend it. Interest rates, investment performance and macroeconomic risk round out the top five list of key insurer risks for insurers. “Both the challenges and opportunities presented by change underline the vital importance of being clear about where you’re best able to add value, and then being ruthless in targeting investment and management time at these priorities,” said Mark Train, global insurance risk leader, PwC.