According to a survey of insurance executives conducted by Lloyd’s at last week’s annual Risk and Insurance Management (RIMS) conference in Philadelphia, increased regulation is the top challenge facing the U.S. insurance industry. Despite nearly a third citing regulation as their top concern, the vast majority (76 percent) feel that few of the legislative proposals and regulatory initiatives related to insurance will receive much attention during the upcoming election cycle.
The survey of over 100 insurance professionals assessed corporate risk and how the current economic landscape and recent events around the world have shaped the industry’s outlook for 2012.
Interestingly, given that 2011 was the second worst year on record for natural catastrophes, generating industry-wide claims of over $107 billion , only 21 per cent of the respondents view natural catastrophes as the greatest challenge they will face in the year ahead.
Over half the insurance executives surveyed anticipate a decrease in capacity and increase in prices for catastrophe coverage in 2012. Only 20 percent feel that the industry is strong enough for capacity to remain robust, while 15 percent feel it’s too soon to tell.
Hank Watkins, President of Lloyd’s America, said: “With 2011 being one of the costliest years in recent history for the global insurance industry, due largely to the frequency and severity of global natural catastrophes, its notable that fewer than a quarter of respondents rated this concern highly. These findings echo our 2011 Risk Index, a survey of 500 C suite executives in a wide range of countries and industries. This bi-annual survey suggests that business leaders place a lower priority on the impact of natural disasters than on the more pressing issues of lost customers, reputational risk and the shortage of talent. Fortunately, as we heard from brokers, consultants and risk managers at RIMS last week, the recently demonstrated interconnectivity of global supply chains has become an indelible reminder of the need for ongoing business continuity planning.”
Additional key findings from the survey:
- Reputational risk was also a key concern of survey respondents, with 61 percent citing cyber liability as the leading issue. Next on the list of reputational risk exposures were management liability, political risk and financial fraud.
- Insurance executives also acknowledged that increased capital market volatility, particularly in Europe, will be reflected in the underwriting of corporate risk in the U.S., with 43 percent stating it will have a negative impact and 30 percent viewing the ultimate impact on insurance buyers in a more positive light.