Insurance industry faces challenges and constraints as it looks to the future,
according to new study by BNY Mellon and the Economist Intelligence Unit
Report examines how insurers can drive positive economic behavior while
protecting society from risk
LONDON, Feb. 12, 2013
LONDON, Feb. 12, 2013 /PRNewswire/ -- Ongoing macroeconomic uncertainty,
proposed tough new regulatory regimes and risk of contagion are the biggest
long-term challenges facing insurers around the world, according to a new
Economist Intelligence Unit (EIU) study sponsored by BNY Mellon, the global
leader in investment management and investment services.
As a result insurers are rethinking business processes and product ranges in
order to remain competitive under new risk-based capital regimes, to meet the
evolving needs of their customer base and to continue to play a beneficial
role in the economy and broader society over the next two decades.
The key findings of the study – Insurers & society: Challenges and
opportunities in the period to 2030 – include:
Macroeconomic uncertainty, regulation and risk of contagion – Macroeconomic
uncertainty is seen by survey respondents as the main challenge facing both
life and non-life insurers (36% and 39% respectively) in the period to 2030.
Regulation is the second-biggest challenge facing life insurers (34%), while
risk of contagion from other parts of the financial system is a major concern
for non-life insurers and reinsurers (33%).
Regulators and policymakers should consider socioeconomic goals – Almost
four-fifths (79%) of respondents agree that regulators should balance concerns
for policyholder protection with other socioeconomic objectives, such as
promoting savings, while almost half (48%) believe that policymakers should
incorporate socioeconomic goals into regulators' remits. Over half (54%)
believe that regulators and legislators are focusing on near-term stability at
the expense of longer-term economic growth.
oInsurers are not doing enough to meet societal responsibilities – A strong
majority (80%) of respondents agree that insurers have a duty to
contribute positively to society, with all regions in equal agreement, yet
only 55% agree that insurers are fulfilling that role. Overall,
intermediaries are slightly less convinced that insurers are contributing
(53%, compared with 56% of insurers, with the biggest discrepancy between
the two groups seen in North America, where those figures are 64% of
insurers but just 36% of intermediaries.
oRegulation is hampering insurers' ability to meet consumers' needs – 70%
of respondents agree that individuals will have inadequate private savings
and pensions as a long-term consequence of new regulation, while just over
a half (51%) believe that current regulatory and accounting rules
encourage insurers to move away from guaranteed products, leaving
individuals with the burden of investment risk. In response to changes
affecting the industry, life insurers are offering fewer products (49%),
limiting guarantees (40%) and raising prices (35%).
oInsurers are needed more than ever but are at risk of irrelevance – Over a
half of respondents (54%) believe that regulation reduces insurers'
ability to shift risk away from households and transform financial market
risk into reliable streams of retirement income and other benefits – one
of the industry's core functions. The same proportion believe that the
burden will fall on governments to make up for individuals' private
pension shortfalls, but almost half (45%) worry that they will not be able
to afford to do so.
oInsurers need help to support developing countries and emerging economies
– Nearly a half (45%) of respondents said that supranational organisations
should prioritise working with developing countries to better inform
policymakers of the value of catastrophe and other forms of insurance.
Over half worry that, without adequate data, reinsurers may withdraw from
providing catastrophe reinsurance in emerging markets (55%); and that if
reinsurers pull back from these markets, individuals and corporates will
be forced to go underinsured (52%). Respondents (57%) also fear that the
absence of reinsurance will slow investment into emerging economies, which
in turn will slow these countries' economic growth – a major concern,
given the importance of emerging economies to pulling the global economy
out of stagnation.
Paul Traynor, Head of Insurance for Europe, Middle East & Africa at BNY
Mellon, said: "If, as the study suggests, insurers believe their core
competence of turning financial risk into reliable income streams is being
undermined by regulation, then we are at risk of a vicious circle developing
in which individuals underinvest for their future and are forced to rely on
the government. In turn, governments who cannot afford to bear the burden
attempt to meet the shortfall, pushing up their sovereign debt to
unsustainable levels. This then undermines proposed solvency regulation, which
encourages insurers to hold government bonds as these are considered 'risk
Monica Woodley, Managing Editor at the Economist Intelligence Unit, said:
"While market stability and consumer protection are important goals,
regulators and policymakers should not lose sight of the vital role the
insurance industry plays in helping households and companies to reduce risk
and save for the future. Limiting the insurance industry's ability to
transform risk will have serious ramifications for future generations, leaving
consumers under-insured and without inadequate private savings and pensions."
The Economist Intelligence Unit surveyed 332 companies around the world
including insurers, reinsurers, wealth managers and independent financial
advisers to find out what immediate and long-term challenges the insurance
industry faces and how insurers are responding, as well as to explore ways in
which the industry will develop in the future.
A copy of the full report can be found at
Notes to editors:
BNY Mellon is a global investments company dedicated to helping its clients
manage and service their financial assets throughout the investment lifecycle.
Whether providing financial services for institutions, corporations or
individual investors, BNY Mellon delivers informed investment management and
investment services in 36 countries and more than 100 markets. As of December
31, 2012, BNY Mellon had $26.7 trillion in assets under custody and
administration, and $1.4 trillion in assets under management. BNY Mellon can
act as a single point of contact for clients looking to create trade, hold,
manage, service, distribute or restructure investments. BNY Mellon is the
corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).
Additional information is available on www.bnymellon.com, or follow us on
This press release is issued by The Bank of New York Mellon to members of the
financial press and media.
All information and figures source BNY Mellon unless otherwise stated as at
December 31, 2012.
The Bank of New York Mellon, London Branch, registered in England and Wales
with FC005522 and BR000818
Branch office: One Canada Square, London E14 5AL
Authorised and regulated in the UK by the Financial Services Authority
SOURCE BNY Mellon
Contact: Tim Steele, +44 20 7163 5850, firstname.lastname@example.org
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