The need to adapt


Why has the insurance industry underperformed the general market for the last three quarters? Insurers need to take heed of the competition, says Mike Morrissey.

Stock price performance provides the best barometer of investor sentiment on the prospects for insurance companies. More than 70 percent of the world’s insurance premiums are now written by stockholder-owned companies, so the assessment of the equities markets and the capital providers they represent is more relevant to insurers than ever before. They provide the fuel that enables the industry to grow.

Recent trends are ominous. Insurance stocks outperformed the overall equities markets in early 2013, but they have underperformed since then. Although a global perspective has been lacking in the past, there is now a reliable way to track the relative performance of our industry to the general market. What is the best way to compare?

The best overall measure of world equities markets is the Morgan Stanley Capital International World Source exchange traded fund (ETF), which trades on the London Stock Exchange under the symbol MXWO.LN. This ETF comprises more than 2,200 stocks from 40-plus countries, accounting for more than 80 percent of the world’s roughly $3 trillion of market capitalisation.

Mike Morrissey, International Insurance Society

Intelligent Insurer