Regulatory risks are the top concern among Canadian insurance professionals, driven largely by apprehension over policy changes and excessive government intrusion, according to a new Insurance Banana Skins survey conducted by the Center for the Study of Financial Innovation (CSFI) and PriceWaterhouse Cooper.
“With Canadian insurers, there’s still a lot of uncertainty around what regulators want to do next,” said Chris Couture, national insurance leader in Canada for PwC. “A lot of times, when insurance companies feel that they’re in a good spot with regulatory compliance, that’s when they add more on.”
In addition to these fluctuating requirements, insurers also remain cautious of regulators since they do not always consider the full particulars of the industry when approving new rules for it.
“One thing we hear from clients is that because the regulator is a common one between banks and insurance companies, the regulator adapts banking regulations to insurance without making fitting them to the industry,” she said. “They tend to be a little nervous about having to fulfill similar capital requirements that banks might have but don’t really fit an insurance environment.”
In addition, cyber risk ranked as a prominent concern, placing higher in Canada than it did for global respondents. Couture noted that while life and P&C insurance companies both listed it as a priority, the reasoning differed for each.
“Life insurers viewed it more as a risk to their own business and operations, whereas P&C insurers viewed it in terms of how to underwrite risk for the business community out there,” she said.
The results for Canada and the world are:
| 2015 Top 10 Risks (2013 results in brackets) |
| Global |
Canada |
| Regulation (1) |
Regulation (1) |
| Macro-economy (3) |
Cyber risk (-) |
| Interest rates (-) |
Interest rates (-) |
| Cyber risk (-) |
Macro-economy (2) |
| Investment performance (2) |
Change management (16) |
| Change management (15) |
Guaranteed products (4) |
| Guaranteed products (6) |
Distribution channels (11) |
| Distribution channels (11) |
Investment performance (5) |
| Natural catastrophes (5) |
Quality of risk management (14) |
| Quality of risk management (7) |
Political interference (10) |
To remain competitive, Couture recommends that brokers prepare for such emerging risks as digitization and the rise of analytics, as well as new rivals like hedge funds and possibly even Amazon.com.
“They have to be really prepared to reinvent their business model, not just adapt or change slightly, but be in a position to do long-term deep thinking and possibly get into non-traditional partnerships that they haven’t in the past, such as with tech companies that can help with data analytics and risk mitigation,” she said.
