Published on August 6, 2014
2 General Insurance: Actuarial Market Update August 2014 Welcome to the latest insurance market report from specialist actuarial recruiter, Acumen Resources UK. This report provides a snapshot of some of the key issues at the forefront of the insurance industry in the UK this year and the impact these concerns are likely to have or have already had on resourcing. The report has been compiled from conversations with over 100 chief actuaries, CROs and senior insurance professionals who are at the forefront of the UK general insurance market. When speaking to these individuals, there were three recurring themes: • Solvency II • Risk and ERM • Pricing As a result, this is the first of a four part series, which will look at these topics in more detail, covering the challenges being faced and what effects these might have on resourcing in the second half of the year. The Global Insurance Market: Reasons for Optimism The global financial crisis has left its mark. Some of the effects continue to be felt in today’s market. Interest rates may still be at a historic low in the UK but global assets under management only returned to pre-crisis levels in 2013 and a large part of that was due to a recovery in the equity markets. The global insurance industry finally seems to be emerging from the tough period. After a sluggish 2013, there seems to be reasons for optimism: • Asia – Increase in personal wealth and an aging population means demand for insurance across the region should continue to increase in the coming years. • Latin America – Still has pockets of substantial growth and increased infrastructure development. This will provide opportunities for insurers. • US and Europe: Emerging from the financial crisis and have rebuilt capital positions. Moving forward this should leave them in a healthier state to take advantage of opportunities. European insurers still face complex challenges through increased regulation, low interest rates and technological enhancements both internally and externally from consumers. Low interest rates are squeezing investment income and the challenge for many insurers is how to adjust portfolios to increase yield without significantly increasing risk. Many insurers are looking at switching away from traditional investment in equity and sovereign bonds and looking to the alternatives. The UK has seen stronger growth in the first half of the year compared to the rest of Europe. Disposable income has been on the rise and coupled with an aging population has aided this growth. However UK direct insurers are facing increased price competition, through price comparison sites, and therefore decreased margins. The increase in the threat of cyber-attacks and the need for property and business interruption insurance means there is opportunity for firms who show an appetite to diversify their product offering. In the Lloyds Market, it remains competitive. Some worried that the stringent capital requirements would impact on price competitiveness. However, many of the chief actuaries and underwriters we spoke to mention that they see it as a something that has strengthened their position worldwide. Clients are still happy to come to Lloyds because they know that should claims arrive, they will be happy in the knowledge that there will be sufficient capital.