Geneva Association Survey Targets ‘Inappropriate Regulation,’ Economic Crisis

July 18, 2012

A bulletin from the insurance think tank The Geneva Association notes that “leaders of the insurance industry have significant concerns about the effects of inappropriate regulation and the effects of the current economic crisis,” according to a survey it conducted.

The survey polled more than 40 CEO Members of The Geneva Association on the performance prospects and likely growth areas for the insurance industry over the next 12 months and the challenges they face in implementing their strategies.

The survey also found that “insurers’ focus on emerging markets was evidenced by some 70 per cent of CEOs seeing Asia as a very important area for their growth and 46 per cent considering South America as highly important for their growth over the next 12-24 months.”

However, the key themes that emerged from the survey were “concerns about the macro-economic environment and the upcoming decisions on insurance regulation. When asked about the challenges to their ability to implement their strategy 75 per cent of CEOs cited the euro zone crisis as a top issue (4/4), with 73 per cent also citing over-regulation and inappropriate regulation as a top concern for their strategies.”

Although the CEO’s didn’t express much optimism that the situation would improve any time soon, they nonetheless were more optimistic when it came to their own future prospects. 59 percent indicated that they expect their profitability to increase over the next 12 months, while more than half expected their dividend to remain stable.

The report described those surveyed as “cautiously optimistic about the prospects for the insurance industry with 56 per cent expecting a hardening of insurance rates and 92 percent expecting insurance capacity to remain stable or to increase during the year ahead.

“However, the oft-cited concerns about the global economy had a majority of CEOs expecting equity markets to fall and fixed-income markets to remain stable in an environment of rising inflation.”

Dr Nikolaus von Bomhard, chairman of The Geneva Association and chairman of Munich Re’s Board of Management stated: “The insurance industry plays a vital stabilizing role in society and in the world’s economies both as a significant participant in financial markets and as a shock absorber for individuals and companies that suffer an insured loss. The results of this survey reveal that leaders of some of the world’s largest insurers are concerned that inappropriate systemic risk regulation will needlessly affect our ability to play that role.”

Geneva Association Secretary General John H. Fitzpatrick pointed out that the “insurance industry supports the ongoing regulatory initiatives undertaken by the G-20. We believe that the development and promotion of effective supervisory and regulatory policies to reduce systemic risk and address information gaps is to everyone’s benefit.”

However, he also stressed that “banking and insurance have very different business models and very separate roles in society and the world economy, thus they must be regulated differently. This survey shows that the insurance industry remains very concerned that regulators will opt for a politically motivated regulatory response, rather than focusing on a methodology appropriate for insurance.”

The Association also indicated that the results “highlight the significant role that insurers can play in tackling the challenges of global ageing, an issue covered in depth at the recent Geneva Association press conference in Washington D.C., The Challenge of Global Ageing— Funding Issues and Insurance Solutions.

Source: The Geneva Association

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