Insurers seek for growth opportunities despite challenging environment

Insurance Companies have had to grapple with declining revenue as result of current economic difficulties across sectors of the economy. The situation which has lead to individual consumers dropping their cover at will to focus on basic necessities, while corporate have got to cut their expenditure on insurance characterized most of the year.

This is amidst a challenging financial regulatory environment, which has not only taken toll on operators in the area of compliance but has also raise caution against expectation.

In a corroboration statement by A.M. Best, over the past decade the insurance industry has been faced with numerous tests, including major catastrophe losses, the global financial crisis, regulatory changes and more recently uncertainty created by political events .Despite the challenging operating environment, with companies navigating through a liquidity and sovereign debt crisis in addition to a sustained period of low interest rates, the (re)insurance industry has emerged  relatively unscathed and in a position of greater financial strength.

Lessons have been learnt from the past, with insurers and reinsurers adopting more robust risk practices to ensure balance sheets are better equipped to absorb the challenges that potentially lie ahead. However, the extended pressures of diminishing investment returns, dwindling loss reserves and intense competition are beginning to erode industry fundamentals. And in an increasingly complex, interconnected world, the potential for risk accumulation and unexpected correlations has never been higher.

But it is not all doom and gloom for the industry. Risk has always been about the upsides as well as the downsides and where there are challenges, there are also opportunities. Devising new solutions and products to help close the protection gap, making better use of data and exposure management tools, and pursuing growth with control and discipline are some of the areas in which insurers and reinsurers can create competitive advantage and prosper in an otherwise difficult operating environment.

A.M. Best in this report focuses on the threats and opportunities posed by accumulation risk, pandemic, low interest rates, energy prices and adverse reserve development.

Nevertheless, A.M. Best remains mindful that there are many other threats and opportunities that insurance and reinsurance market participants must consider going forward.

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