Insurance leaders concerned about inappropriate regulation, economic crisis

Jul 18, 2012 – Leaders of the international insurance industry have significant concerns about the effects of inappropriate regulation and the effects of the current economic crisis, according to a survey conducted by insurance economics think tank The Geneva Association.

The survey polled more than 40 CEO Members of The Geneva Association on the performance prospects and likely growth areas for the insurance industry over the next 12 months and the challenges they face in implementing their strategies.

Insurers’ focus on emerging markets was evidenced by some 70 percent of CEOs seeing Asia as a very important area for their growth and 46 percent considering South America as highly important for their growth over the next 12-24 months. However, restrictions in parts of Asia may make it difficult. One survey respondent noted:

  • Yet there are still restrictions in some parts of Asia, such as India and China, mainly in the form of mandatory joint ventures. Indian authorities, for instance, impose a 26% limit on foreign ownership. China, at 20% maximum foreign ownership for individual investors, has one of the lowest foreign insurance penetration rates of all the emerging Asian markets. Generally, governments in Asia are becoming increasingly receptive to the idea of allowing foreign company entry, although there has been a shift against this trend in Thailand.

The key themes that emerged from the survey were concerns about the macro-economic environment and the upcoming decisions on insurance regulation. When asked about the challenges to their ability to implement their strategy 75 percent of CEOs cited the eurozone crisis as a top issue (4/4), with 73 percent also citing over-regulation and inappropriate regulation as a top concern for their strategies. “It is a mess in Europe and the regulatory fall out will make it worse,” noted one respondent.

Respondents were cautiously optimistic about the prospects for the insurance industry with 56 per cent expecting a hardening of insurance rates and 92 per cent expecting insurance capacity to remain stable or to increase during the year ahead. However, the oft-cited concerns about the global economy had a majority of CEOs expecting equity markets to fall and fixed-income markets to remain stable in an environment of rising inflation. Looking to insurance risks coming in the next twelve months, climate related catastrophes stood out as particularly serious risks; respondents cited solar storms and geological and climate-related natural catastrophes as high risk. Old age security and long-term care financing also raised significant concerns.

Chairman of The Geneva Association and Chairman of the Board of Management, Munich Re, Dr Nikolaus von Bomhard said, “The insurance industry plays a vital stabilizing role in society and in the world’s economies both as a significant participant in financial markets and as a shock absorber for individuals and companies that suffer an insured loss. The results of this survey reveal that leaders of some of the world’s largest insurers are concerned that inappropriate systemic risk regulation will needlessly affect our ability to play that role.”

The 2012 CEO Survey Results is available online. (PDF)