Over-regulation a ‘banana skin’ for global insurance industry

Regulatory overkill is the largest risk facing the global insurance industry, according to the Center for the Study of Financial Informations (CFSI) latest Banana Skins survey, conducted for the first time for the insurance industry, in conjunction with PricewaterhouseCoopers LLP.The Top 10 banana skins threatening to trip up the global insurance industry include: too much regulation; natural catastrophes; management quality; climate change; managing the cycle; distribution channels; long-tail liabilities; actuarial assumptions; longevity assumptions; and new types of competitors. The survey was based on information provided by more than 100 survey respondents.Excessive regulation is endangering the industry by loading companies with costs, distracting management and creating barriers to competition and innovation, a release promoting the study said. This finding is linked to concern about growing political interference, particularly in markets where governments regulate insurance products and prices. Twenty-one countries responded to the survey. Concerns about over-regulation appear to be widespread and are acute among respondents based in North America, South Africa, Asia Pacific and Europe. According to one major insurer quoted in the survey, Regulation is becoming ever more intrusive, time-consuming and box-ticking. This is despite the rhetoric about principles-based regulation.As insurers face a plethora of new demands, the focus on regulation will continue to increase, including a planned regulatory framework for European insurers aimed at the mapping the regulatory capital requirements of each company against its individual profile risk, says Mike McColgan, partner and Metro Insurance Leader at PricewaterhouseCoopers. A key challenge is to develop effective risk management systems that can provide both compliance and also improved business execution.