Canadian Underwriter

Soft market conditions remain largest concern for global reinsurers: survey

June 13, 2016   by Canadian Underwriter

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Soft market conditions continue to be the biggest concern for the global reinsurance industry, according to Xuber’s Global Reinsurance Survey 2016, released on Friday.

The second annual survey from Xuber, the commercial insurance software business of Xchanging, a CSC Company, revealed that 33% of respondents named soft market conditions as the biggest challenge, with 74% of all respondents listing it among their top five concerns – down from 81% who placed it among their five leading concerns in 2015.

The Xuber questionnaire of senior figures working in the re/insurance industry was conducted by email and telephone surveys in April and May. Thirty-two businesses in Canada, the United States, United Kingdom, Switzerland and Bermuda took part in the survey, not including some respondents who asked to remain anonymous, Xuber, headquartered in London, said in a press release.

Besides soft market conditions, regulation was the second most pressing concern, with 18% naming it their top challenge and 69% recognizing it among their top five concerns. Additional key findings of this year’s survey include:

  • Competition from third party capital and improving investment returns in a low interest rate environment were listed as the third and fourth top challenges in the industry;
  • Cyber crime and maintaining underwriting disciplines tied at 44%, rounding out the top five industry challenges;
  • Diversifying the portfolio was seen as the number one opportunity, with 73% of respondents placing it in their top five, followed by mergers and acquisitions;
  • Security and the need to upgrade technology were listed in the top five opportunities. The complexity of the risk and the lack of skills in-house to assess risk are the main reasons preventing reinsurance companies from being better prepared against cyberattacks;
  • 2015 saw a 187% increase in the volume of mergers and acquisitions (M&A) in the insurance sector, according to the Aon Benfield Reinsurance Market Outlook. Cultural integration, operational alignment, system integration and resource duplication were among the main concerns related to M&A activities;
  • The majority of reinsurance professionals see more competition regardless of the number of reinsurance providers; and
  • None of those surveyed thought Britain voting to leave the European Union on June 23 would be positive for the London insurance market.

“The 2016 Xuber Global Reinsurance Survey confirmed that the market’s appetite for change has reached tipping point,” said Chris Baker, executive director of Xuber, in the release. “The industry has spoken and there is an almost universal consensus that a fundamental technology shake-up needs to happen now. The time to innovate has arrived.”

Baker added that the “way insurance is being bought, sold and managed has changed, and the survey results suggest the industry must take an innovative ‘digital first’ approach in order to maintain relevance with clients. Reinsurers which create solutions grounded in technology that deliver across the insurance value chain will best serve their customers and will thrive in the digital revolution.”