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Insurance Banana Skins 2021

What are the top risks facing the insurance industry?

We have once again sponsored the Insurance Banana Skins 2021 survey in conjunction with the Centre for the Study of Financial Innovation (CSFI), which details the risks facing the insurance sector across the globe in the next 2-3 years.

Now on its 8th edition, this survey describes the most urgent risks, or "Banana Skins", facing the global insurance industry in the latter half of 2021 as seen by a sample of over 600 practitioners and close observers, in 47 territories.

The insurance industry has had a significant involvement in responding to the impacts of the pandemic with business interruption and contingency policies paying out huge volumes of claims.  There has also been criticism at times over coverage issues and resultant legal cases around the world. These matters are all commented on by the respondents in the survey, but overall reputational risk has stayed fairly consistent in the past year.

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Insurance Banana Skins 2021 Launch Event

Top themes

Although this year’s responses expressed concern about the impact of Covid and other challenges facing insurance companies, they were balanced by a more upbeat view of the economic outlook and the industry’s ability to manage change.

The three themes below are all connected and have been amplified by the pandemic but overall the industry has been incredibly resilient – both in human and capital terms – and this is borne out in the respondents’ increasingly positive view of our industry’s preparedness to respond to the risks it faces. It is noteworthy that Pandemic did not feature at all in our last report and a testament to the industry’s resilience that it is not seen as a significant banana skin in this report either.

Crime and particularly cyber crime sits top of the risks considered by insurers for the first time in our survey.  A high ranking risk for a number of years, the increase in virtual working and the increase in the type, volume and success of cyber threats have further elevated this risk in the view of insurers.  Insurers are also uniquely impacted by the insurance policies which are sold to cover companies when they are hit with cyber attacks, and ransomware in particular.

As businesses have introduced new technology, cloud computing and third-party services in longer supply chains, the challenge for insurers has become more complex than ever.  The risk from technology, whilst high, has fallen slightly from the prior report.  Linking these 2 risks, it would seem that whilst the industry is becoming more confident in implementing new digital solutions, as companies increase the accessibility and usability of technology (particularly remotely), the more they are exposed to cyber risk.

This is the fastest rising risk in the survey and moves into the top 5 for the first time.  It is clear that the impact of climate change is a much nearer-term risk than previously perceived and in many cases, the effects are already being felt.  The worldwide focus on climate change as part of the wider ESG agenda is resulting in a step-change for most insurers.  Reporting requirements are increasing, and governments and regulators continue to press companies to better articulate and explain how they are quantifying and managing the related risks.

As the world begins its recovery from Covid, the impact on economies will be critical in understanding the speed and shape of that recovery.  There was a clear view that interest rate risk is higher for the industry than previously, but with a difference in the views between life insurers and others.  Life insurers look at the potential benefits of higher yields, with non-life insurers and reinsurers more concerned about the inflationary impacts that might lead to changes in interest rates.

Contact us

Andy Moore

Andy Moore

Partner, PwC United Kingdom

Tel: +44 (0)7702 677 654

Jim Bichard

Jim Bichard

Global Insurance Leader, Partner, PwC United Kingdom

Tel: +44 (0) 7841 562 560