Insurance Banana Skins 2021
What are the top risks facing the insurance industry?
We have once again sponsored the Insurance Banana Skins 2021 survey in conjunction with the Centre for the Study of Financial Innovation (CSFI), which details the risks facing the insurance sector across the globe in the next 2-3 years. This survey describes the most urgent risks facing the global insurance industry in the latter half of 2021 as seen by a sample of 607 practitioners and close observers in 47 territories. This year’s responses were balanced by a more upbeat view of the economic outlook and the industry’s ability to manage change.
Main concerns of insurers over the next few years
Crime, particularly cybercrime, is at the top of this year’s list. This climb reflects strong concern about the vulnerability of insurers’ systems to cybercriminal attack, and the costs of underwriting attacks on policyholders. The risk from climate change is the biggest climber by score, at no. 4 in this year’s survey). This is due in particular to a rise in catastrophic events, and is now seen as an immediate threat to insurers rather than a longer-term one. The chief matter of concern on the economic front was the outlook for interest rates (up five places to no. 5), though there was no clear consensus over the direction they were likely to take, or whether change would be good or bad for the industry.
Preparedness of insurance institutions to handle risk
Respondents were asked how well prepared they thought the insurance industry was to handle the risks they identified. On a scale of 1 (poorly) to 5 (well) they gave an average response of 3.22, an uptick from the previous survey’s 3.11, suggesting greater confidence in the industry’s ability to weather a difficult business environment.
Some risks come and go, some are hardy perennials
This year, for the first time, the industry’s most pressing concern is cybercrime – both the threat of attacks against insurers, and the potential costs of underwriting cybercrime. The last three editions of this survey show clearly that the industry has a broader focus on technology – the need to modernise internal IT systems and business models, adapt to automation and modern distribution channels and compete with new, tech-savvy players. The risk posed by climate change has risen sharply over the past couple of surveys and is now seen as a serious threat in both the short and long term. The industry’s ability to attract and retain talent – particularly in technical roles – is also a rising concern.
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