Keeping pace with change

Insurance Banana Skins 2017: A Singapore observation

Concerns around change dominate Singapore’s insurance risk landscape

Propelled by technological advances that challenge traditional structures, industry players are now finding themselves in a heightened state of needing to adapt to disruptions and rapid changes.

"This year, the top risks in Singapore are all interconnected. Status quo is not an option. Future survival and success are directly fuelled by effective change management coupled with high quality of management"

Woo Shea Leen, Insurance Leader, PwC Singapore

Level of preparedness in responding to risks has yet to measure up

Singapore’s Banana Skins Index score - which implies the industry’s level of anxiety in responding to risks - rose from below the global average in 2015 to above it this year.

The country also scored below the global average this year in the Preparedness Index (where it tied with in 2015) - which reflects how prepared the industry is in handling the risks identified - alongside other global financial centres such as Germany, the USA, and the UK.

Trends that stood out in this year’s ranking: The risers, fallers, and newcomers

Newcomers to the list

Technology - ranked #2
  • A common theme in virtually all the major changes facing the industry; the risk of failing to keep up with technological advancement subsequently exposes incumbents to yet another cluster of risks that are also among Singapore’s top five threats: increased competition (ranked #4), followed by cyber risk (ranked #5)
  • While incumbents have been investing in upgrading and/or adding layers of new systems, the time has now come to consider the need to refresh their overall architecture, thereby removing legacy barriers, and better future-proof their business
Competition - ranked #4
  • Given Singapore’s small market size, competition is further intensified as the MAS moves forward with regulatory developments to grow the country’s digital ecosystem, thus introducing new entrants into the local industry
  • Beyond the domestic market, foreign competition is also a source of concern as industry players race to secure growth opportunities in foreign economies, particularly the Southeast Asian markets
  • Globally, we observe a trend of excess capital flowing into the insurance industry, contributing to greater competition between incumbents

Notable risers

Change management - ranked #1 (moved up 4 spots from #5 in 2015)
  • The challenge of keeping pace and dealing with disruption has propelled change management to take over as the chief source of anxiety among insurers in Singapore, Asia Pacific and globally
  • The result also brings into light concerns about the industry’s ability to address the formidable agenda of digitisation and new competition which confronts it
Quality of management - ranked #3 (moved up 5 spots from #8 in 2015)
  • Making it into Singapore’s top 3 risks, the climb of quality management reflects the local industry’s awareness of the interconnectivity between quality of management and effective change management
  • Underlying this Banana Skin are risks concerning human talent (ranked #6 in Singapore) as industry managers are now expected to raise the bar in guiding their organisation through a climate of change and emerging threats (e.g. cyber risks), which demand fresh thinking and innovative approach
Investment performance – ranked #8 (moved up 6 spots from #14 in 2015)
  • The combination of low interest rates and volatile equity markets has made it harder for insurance companies to find suitable long-term assets to match liabilities that generate adequate returns
  • In Singapore, we also observed a shift away from guaranteed products to more protection and investment-linked products as industry players navigate the increasingly difficult investment climate

Notable faller

Regulation – ranked #13 (dropped 12 spots from #1 in 2015)
  • Regulations dropped off Singapore’s top 10 risks for the first time since 2013
  • The easing of concerns over regulatory risks suggests industry players are getting accustomed to the regulatory environment
  • At the same time, industry players continue to remain cautious of regulatory changes and developments which may bring about cost and risk implications

Contact us

Woo Shea Leen

Woo Shea Leen

Insurance Leader, PwC Singapore

Tel: +65 6236 3908

Antony Eldridge

Antony Eldridge

Financial Services Partner, PwC Singapore

Tel: +65 6236 7348

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