New report highlights emerging risks
A new report from Guy Carpenter highlights the emerging risks facing the insurance and reinsurance sectors and the wider business community. There are three categories in the firm’s report; risks that are technological, the crystallizing risks and those that are aggravating. Not surprisingly cyber threats are paramount and pose a risk to organizations of all sizes and from all sectors. There are multiple risks in this category too, with each and all part of supply chains being potentially vulnerable. Among the crystallizing risks are those areas that are changing such as bodily injury. The report notes a significant change in the UK where those with long term bodily injuries are able to opt for periodic payments rather than a single lump sum; this shifts the element of uncertainty to the business and its insurers rather than the claimant. The aggravating category of emerging risks includes those that are certainly not new, but are increasing in frequency or severity, such as terrorism. The report highlights the potential for the industry to underestimate the level of reserves that are needed in readiness of increases in these emerging risks.
Long term risk for reinsurers
Ratings agency Fitch says that low investment returns and the search for yield have increased the long-term risks for reinsurance companies and will contribute to falling prices and weaker profitability in 2015 and beyond. The firm says that low interest rates will continue to put earnings under pressure and the additional threat from alternative reinsurance could permanently affect profit margins. Much of this will depend on whether these alternative providers stay with property catastrophe or move into casualty risk. Fitch says that it is unclear whether investors will wish to take on additional and currently unmodelled risk but the possibility of a long-term affect on the reinsurance sector should be considered. Read the full statement.
Lloyds expands Chinese operation
Lloyds will expand its international network, with the announcement that it has been awarded a licence to open a branch office in Beijing. Lloyds has been in China since 2007 but this new office will allow them to expand their presence in the country, something that is a major aim of the company. Read the full story.
