Ireland scored 3.27, above the world average (3.20) on the level of preparedness for insurers to handle insurance risks.
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’.
Paraic Joyce
The top concern for Irish insurers - by a large margin - is cyber risk. This is not surprising for Ireland and reflects concerns in the industry about data security and the danger of hacking. There is a real need, particularly for insurance companies, to understand their cyber risks and how they protect their data. And as they become more dependent on digital technologies, these cyber risks grow. Conversely, cyber security also presents an opportunity for insurance companies. Marketing cyber insurance solutions 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 followed by 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. The survey shows that Irish insurers are concerned about the volume of change and the cost of implementation of Solvency II, as well as more stringent consumer protection. However, there is acknowledgement that the new regime will produce stronger and better managed companies. Our advice is to embrace regulation, build it into the core DNA of the business allowing more resources to be spent on important areas such as building customer relationships, gaining market share, product development and innovation.
Higher risks in Ireland
Concerns around human talent are much higher in Ireland compared to around the world. Human talent risk 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 becoming tighter and more competitive. Companies need to carefully retain and develop their people ensuring they have the skills for the digital economy.
Lower risks in Ireland
According to the survey, concerns around macro-economy and change management risks are much lower in Ireland compared to internationally. On the macro-economic front, global respondents see the macro-economic risks as much higher. Ireland is Europe’s top performing economy but we are a small open economy, very much exposed to global tailwinds. Therefore, we may need to recalibrate this rating and ensure we have factored any potential global shocks to shares into our risk pricing.
On change management, the survey found that international insurance leaders recognise the risk of change to a much greater extent compared to Irish counterparts. This may be due to the fact that they see digital and big data being greater change levers; that changing distribution channels will bring greater risk and the potential for disrupters, such as from the technology sector, entering their market. We advise Irish insurers to look at their international counterparts, learn from them and their early recognition of the risks that these changes may bring.