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Regulation, cyber risk and interest rates top concerns for Canadian insurers, new study says


July 15, 2015   by Canadian Underwriter


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Cyber risk, interest rates and the regulatory environment rank as the top concerns for the Canadian insurance industry, according to a report from the Centre for Study of Financial Innovation and PwC Canada.

Regulation, cyber risk and interest rates were rated as the top concerns

The Canadian risk survey, released on Wednesday, found that regulatory risk emerged as the overall top risk for Canadian and global participants in the survey for the third successive year. “We were somewhat surprised to see this, given that there is relatively little new happening on the regulatory front, as compared to two years ago,” the survey said. “While regulatory change is top of mind globally, for Canadians, the regulatory environment remains consistent with concern being driven by the impact of policy decisions and intrusion on product pricing and design,” PwC Canada added in a release.

Consistent with global counterparts, cyber risk and interest rates are new to the rankings this year alongside perennial concerns surrounding regulatory developments and the broader macro-economy. Cyber risk and interest rate concerns rounded the top three risks for Canadian insurers, indexing slightly higher than their global counterparts, the release noted.

The 2015 Insurance Banana Skins survey included insights from over 800 insurers, regulators and “close observers of the industry” across 54 countries. This year’s survey included 37 Canadian responses, including 16 non-life insurers, 12 life insurers, four reinsurance firms and five observers.

Canada did not diverge widely from the global response, with nine of the top ten risks in the country also appearing on the global list. “With their large databases and complex business ecosystems, cybercrime continues to create challenges for the industry and rocketed to second place as a concern for Canadian insurers,” the release said. Added the report: “As one Canadian respondent remarked, insurers are ‘prime targets to be victimized’ given their rich data holdings, including credit card, medical and underwriting information.” [click image below to enlarge]

Canada did not diverge widely from the global response, with nine of the top ten risks in the country also appearing on the global list

Chris Couture, PwC Canada’s national insurance leader, said that the findings were no surprise. “Given the scale of their operations and rich data holdings, cyber security emerged this year as a top concern, leaving many players in the sector believing that a data breach is not a matter of if, but when. Between more regulatory scrutiny around data security and greater demand for online services in an often strained and antiquated IT environment, there is no doubt that this will remain at the forefront as a driver of change within the industry,” Couture added.

The report also found that Canadian insurers were less likely to see climate change or natural catastrophes as key risk worries this year. Climate change, for example, fell 12 places in 2015 to 19th overall, while natural catastrophes dropped from sixth to 13th.


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