New report stresses need to bolster risk management and other efforts
(Toronto, October 30, 2009) – Canadian insurers should focus on demographic changes, emerging markets, regulatory developments and opportunities for innovation to drive sustainable growth and profitability in the post-recession world, Ernst & Young says in a new report.
“The financial crisis is a chilling reminder that insurance companies are exposed well beyond the risk from insurance policies,” explains Tom Kornya, Ernst & Young Partner and Insurance Industry Leader. “Extreme risk events can catch even well-prepared executives off balance. Managing risk more effectively will be crucial to success in the new business and regulatory environment we�re dealing with.”
Lessons from change � Regaining the balance in the insurance industry brings together insight from conversations Ernst & Young�s insurance partners initiated in more than 2,500 client meetings around the world.
The report finds that while the insurance sector was less directly affected by the recession in comparison to other financial services businesses, most companies were surprised by the depth and magnitude of the downturn. Capitalizing on what they�ve learned from these experiences could help insurers overcome future challenges and seize opportunities.
“Insurers are already managing credit exposures and regulatory capital, redesigning and
repricing certain products, and looking for opportunities to grow,” Kornya says. “These are positive steps in the right direction. But insurers can�t afford to slow their efforts down.”
Lessons from change � Regaining the balance in the insurance industry highlights a number of other lessons insurers can take away from the recession and factor into future plans, including:
- Secure a capital buffer over and above what is predicted by economic capital models. It�s equally important to develop strategies for moving capital from one legal entity to another during a crisis.
- An enterprise-wide approach to risk management is critical for future success. Insurers with the right asset protection mechanisms in place have emerged among the strongest in the downturn.
- Re-evaluate the business� size and shape from the top down. The companies that responded most quickly to the crisis were among the most nimble. Businesses should be flexible and truly aligned with strategic objectives.
- Consider divesting. Certain businesses or product lines can be divested, and reinvested in the core businesses for future growth.
- Take advantage of new market and product opportunities. This includes a range of possibilities, from the needs of certain demographic groups to geographies that offer the chance to deliver products to a growing customer base.
For a copy of the report, click here
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