10 June 2016 Insurance

Soft market remains biggest concern for reinsurance industry

Soft market conditions continue to be the biggest concern for the reinsurance industry, according to the second annual global reinsurance survey from Xuber, the insurance software business of Xchanging.

The findings revealed that 33 percent named soft market conditions as the biggest challenge, with 74 percent of all respondents listing it among their top five concerns, down from 81 percent who placed it among their five leading concerns in 2015.

One executive suggested that as the market softens further, problems are being stored for the future and companies that do not act in a disciplined manner may well suffer later on.

Regulation was the second most pressing concern, with 18 percent naming it their top challenge and 69 percent recognising it among their top five concerns, according to the results.

The third and fourth top challenges in the industry were listed as competition from third party capital and improving investment returns in a low interest rate environment. This was followed by cyber crime and maintaining underwriting disciplines, tied at 44 percent.

Diversifying the portfolio was seen as the number one opportunity, with 73 percent of respondents placing it in their top five, followed by mergers and acquisitions.

Security and the need to upgrade technology were also listed in the top five opportunities. The complexity of the risk and the lack of skills in-house to assess risk are the main reasons preventing reinsurance companies from being better prepared against cyber attacks.

2015 saw a 187 percent increase in the volume of mergers and acquisitions (M&A) in the insurance sector, according to the data. Cultural integration, operational alignment, system integration and resource duplication were among the main concerns related to M&A activities.

The results suggested that the majority of reinsurance professionals see more competition, regardless of the number of reinsurance providers. None of those surveyed thought Britain voting to leave the European Union on June 23 would be positive for the London insurance market.

Chris Baker, executive director at Xuber, said: “The 2016 Xuber global reinsurance survey confirmed that the market’s appetite for change has reached tipping point.

“The industry has spoken and there is an almost universal consensus that a fundamental technology shake-up needs to happen now. The time to innovate has arrived.

He added: “The way insurance is being bought, sold and managed has changed, and the survey results suggest the industry must take an innovative ‘digital first’ approach in order to maintain relevance with clients. Reinsurers which create solutions grounded in technology that deliver across the insurance value chain will best serve their customers and will thrive in the digital revolution.”

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