Irish Insurance Sector more resilient than global industry

PwC Survey – Insurance Banana Skins – reveals

  • Ireland scores better than world average on level of preparedness to handle insurance risks, but is also more concerned about these risks
  • Cyber risks, interest rates and regulation are top risks for Irish insurers

The Centre for the Study of Financial Innovation (CSFI) conducted in association with PwC polled over 800 insurance practitioners and industry observers in 54 countries (including in Ireland), to find out where they saw the greatest risks over the next 2-3 years.

Ireland scored 3.27, above the world average (3.20) on the level of preparedness for insurers to handle insurance risks – according to PwC Ireland's 2015 Insurance Banana Skins Survey, launched today.

Ireland also scored slightly above the world average on the Banana Skins Index which measures the level of risk anxiety in the industry, scoring 3.22 compared to the global average of 3.21. The higher the score the greater the 'risk anxiety level'.

  Ireland Global
Preparedness Index 3.27 3.20 (1=Poorly; 5=Well)
Banana Skins Index 3.22 3.21 (The greater the score, the greater the anxiety)

Speaking at the Irish survey launch, Padraic Joyce, Insurance Partner, PwC Ireland said: "The long- term prospects for Irish insurers are positive as Ireland, with its highly talented workforce, further develops as a centre for insurance excellence. The fact that people around the world are living longer and have more wealth to protect provides opportunities. Yet they also face the disruptive impact of new technology, changing customer expectations, more exacting regulation and enduring economic uncertainty. Insurers' ability to identify and manage emerging as well as familiar risks will be one of the key differentiators for success in this competitive environment."


The top 5 risks for Ireland and around the world are:

Ireland World
Cyber risk
Interest rates
Guaranteed products
Investment performance
Interest rates
Cyber risk
Investment performance

The top concern for Irish insurers – by a large margin – is cyber risk. This reflects concerns in the industry about data security and the danger of hacking. The real concern is anticipated breaches despite best efforts.

Ciaran Kelly, Advisory Leader, PwC Ireland, said: "With advancement of digital technologies and many of the large insurance multinationals based in Ireland it is not surprising that the risk of cyber threats is the top concern for Irish insurers. Insurance leaders must broaden their focus of prevention and detection to include a risk based approach that prioritises their organisation's most valuable assets and its most relevant threats. Conversely, cybersecurity also presents an opportunity for insurance companies, marketing cyber insurance solutions and given that 81% of Irish CEOs said that cybersecurity was strategically important, it will be an area of increased focus for the industry in the years ahead."

The second greatest concern in Ireland is the impact of low interest rates on the industry's performance and the challenges posed by a heavy agenda of regulatory reform. The low interest rate has begun to make itself more deeply felt as the economy improves, having a significant impact in many cases. The concern is particularly around savings products which offer guaranteed returns, and for investment returns at companies, mainly life, which have a heavy reliance on investment income.

The third greatest concern in Ireland is the burden of regulation. The report says that new rules governing solvency and market conduct could swamp the industry with costs and compliance problems. It could also distract management from the task of running healthy businesses at a time when the industry faces radical structural change. Typical responses from insurance company directors include: "A sound regulatory environment is absolutely essential. At the same time, over-regulation potentially strangles perfectly good and sound insurers from conducting good and sound business."

Padraic Joyce added: "The survey shows that Irish insurers are concerned about the volume of change and the cost of implementation of Solvency II, as well more stringent consumer protection. However, there is acknowledgement that the new regime will produce stronger and better managed companies."

Higher concerns in Ireland than globally

Concerns around human talent, capital availability, reputation, terrorism and climate change are all much higher in Ireland compared to around the world. Human talent in Ireland has also shot up from 24th place in 2013 to 10th place in 2015. Our recovering economy has brought problems of its own and the employment market for skilled resources in Ireland is become tighter and more competitive. Companies need to carefully retain and develop their people ensuring they have the skills for the digital economy.

Less concerns in Ireland than globally

Concerns around the macro-economy, change management, business practices and quality of management are much lower in Ireland compared to around the world. Macro-economic concerns was the top concern in 2013, when the survey was last conducted. As one of Europe's top performing economy's it is not surprising that concerns around our macro-economy have eased, though there remain uncertainties in the Euro zone. The digitisation of the industry threatens traditional business models and Irish insurers are less concerned than global counterparts about this risk.

Reputational concerns in Ireland has also fallen from 8th place in 2013 to 13th place in 2015. Insurers in Ireland and around the world have become more pro-active in public relations, though growth in social media is seen as a rising threat to reputation management.

Ireland Insurance Banana Skins Ranking 2015

(Global 2015 rankings in brackets)

1. Cyber risk (4)

2. Interest rates (3)

3. Regulation (1)

4. Guaranteed products (7)

5. Investment performance (5)

6. Natural catastrophes (9)

7. Market conditions (13)

8. Macro-economy (2)

9. Distribution channels (8)

10. Human Talent (15)

11. Climate Change (19)

12. Terrorism (23)

13. Reputation (18)

14. Capital availability (22)

15. Change management (6)

16. Quality of risk management (10)

17. Pollution/contamination (24)

18. Long tail liabilities (14)

19. Political interference (16)

20. Quality of management (12)

21. Business practices (11)

22. Social change (20)

23. Product development (17)

24. Complex instruments (25)

25. Corporate governance (21)

To read the Report in full, please click here.

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