Insurance CEOs See Economic Slowdown and Credit Crisis as Top Risks

The think tank of the CEOs of the world’s largest insurers and reinsurers, the Geneva Association, announced on Wednesday the results of a unique survey among 40 industry leaders. The survey covers the insurance-specific ramifications of the credit crisis, developments in solvency regulation and financial reporting, as well as the top corporate and industry risks in the 12 months ahead. 
 
The poll was conducted during the course of the 35th General Assembly of The Geneva Association. This most prestigious annual event of the insurance industry took place May 28-31 in Hamilton, Bermuda, and was hosted by the XL Group, ACE, Partner Re, and Axis. Among the companies represented by their CEOs were global leaders such as AIG, Aviva, AXA, Lloyd’s, Prudential, and Swiss Re as well as regional leaders from the emerging insurance world such as Sul America Seguros from Brazil, PZU from Poland, and AKSigorta from Turkey. As every year, the members of the association discussed in intensive sessions the strategic global issues facing the insurance industry. These debates lead to a series of background papers and comments that are later published by The Geneva Association in the “Geneva Papers on Risk and Insurance – Issues and Practice” of January 2009. 
 
No major impact of credit crisis expected 
 
Asked about the regulatory consequences of the credit crisis, the vast majority of 87 percent of the participating CEOs expect a minor tightening of the respective frameworks, primarily as a “spill-over” from expected major changes to banking regulation. In respect of the insurance industry’s overall reputation, 52 percent of respondents see potentially minor damage arising from the credit crisis, whereas 48 percent believe that there will be no impact whatsoever. Finally, as regards the convergence between insurance and capital markets, e.g. through the securitization of insurance risks, 52 percent of the CEOs do not anticipate any impact; 20 percent expect the pace of convergence to slow; and 28 percent believe it will accelerate in the wake of the credit crisis. 
 
Changes to solvency regulations welcomed 
 
Regarding current developments in solvency regulation, especially the forthcoming advent of the Solvency II regime, two-thirds of the respondents expressed their overall satisfaction; however, in terms of the pace of change, 57 percent would be in favor of accelerating. 
 
Development in accounting standards viewed critically 
 
In respect of developments in financial reporting, especially in the context of International Financial Reporting Standards, the CEOs gave a different assessment. Two-thirds are either unsatisfied or very unsatisfied with the overall direction of reforms. In addition, 55 percent of the respondents think the pace of introducing appropriate future accounting framework should be faster. 
 
Economic slowdown and financial market volatility top list of perceived risks 
 
The second part of the survey was devoted to the future landscape of corporate and industry risks. The participating industry leaders shared their views regarding key risks facing their respective organizations as well as the industry as a whole in the 12 months ahead. On top of the list of concerns is an economic slowdown as a result of the credit crisis, followed by continuing financial market volatility. The third most frequently mentioned risk is insurance regulators overreacting to the credit crisis. In addition, the CEOs are considering an acceleration of inflation as one of the top risks for the coming 12 months. 
 
Patrick M. Liedtke, security general and managing director of The Geneva Association, said, “Our general assembly is a globally unique gathering of industry leaders in insurance. For the first time ever we have leveraged this platform to survey the parti