Technology and cyber risks the biggest banana skins for reinsurers, says PwC study

Technology is the biggest worry for reinsurers, as the industry struggles with legacy IT systems.

So says Reinsurance Banana Skins 2019, the latest edition of a report compiled by professional services firm PwC, in conjunction with the Center for Financial Services Innovation (CFSI).

Technology has moved up to take the top slot in a survey of what is worrying the industry. Tech was in second place in the previous iteration of the study, in 2017. Cyber risk, a separate category, has moved up to second, from third.

The reinsurance sector shared the broader industry’s top concern about the pressing need for business and technology modernisation, said PwC.

“There has been a huge technological shift that changes the exposures reinsurers are facing,” said Andy Moore, global insurance risk and regulatory leader, PwC UK, at an industry gathering in Monte Carlo.

Citing worries about legacy systems, the survey’s respondents said the costs and uncertainties about how to find the right technological solutions were what concerned them.

“Tech and cyber dominate reinsurers’ risk agendas. How they manage these risks is critical to their long-term credibility and profitability, and the capacity for innovation within the industry,” said Stephen O’Hearn, global insurance leader, PwC Germany.

The survey was based on responses from 320 participants, based across 42 territories.

Separately, PwC launched the 12th edition of its survey of non-life legacy insurance business. PwC said that, in 2018, its team expanded its focus outside Europe as the appetite for disposing of legacy liabilities gained momentum.

“We have seen that trend continue with nearly 100 non–life legacy deals being completed since the previous edition,” the firm said.

“A significant number of respondents consider it highly likely or likely, that they or their clients will engage in restructuring activity in the next three years, citing the release of capital and disposal of non–core business lines as key drivers for this activity.”