Risks and changes in the digital era

Insurance Banana Skins 2019: A Singapore observation

Cyber-risk climbs four ranks to top Singapore’s insurance risk landscape

With the pace of change at an unprecedented level, insurance industry players are constantly being challenged on the status quo. The ability to manage and embed these changes throughout the organisation is crucial.

Top 3 risks

Singapore shares the same Top 3 risks as Global and Asia-Pacific: Cyber risk, Technology and Change management

Cyber risk

(ranked #1 in Singapore, #2 in Asia-Pacific and #2 in Global)

Identified as the top Singapore risk in the 2019 survey, moving up four spots from the 2017 survey results
Managing the risks of cyber attacks and data leakage by building a strong defence infrastructure is high up on the agenda as insurance industry players are often perceived as enticing targets due to the huge volume of valuable data in their possession
To cope with the rising regulatory requirements, it becomes even more crucial for the Singapore insurers to review their existing cyber security framework and measures to ensure that they are robust and effective

Technology

(ranked #2 in Singapore, #1 in Asia-Pacific and #1 in Global)

Continues to be the second ranked risk in Singapore. It is also a pervasive theme underpinning other high-ranking risks including cyber risk (#1), change management (#3), and competition (#7)
Many insurers are encumbered with legacy business models and IT infrastructure that are poorly equipped to handle the changing demands of the industry
There is often a challenge in balancing the resource needs between new technology innovation and managing existing business operations

Change management

(ranked #3 in Singapore, #3 in Asia-Pacific and #3 in Global)

The insurance industry players find themselves under pressure to respond to change in a fast manner, and this brings about another cluster of risks on the ability to manage and embed these changes throughout the organisation effectively as they pursue their transformation agenda
Dealing with change is inevitable but it is more than simply implementing the change itself. In reality, it is the effective management of the entire eco-system including its stakeholders that determines success

“Change – is the one main theme that cuts across a number of the Banana Skins topping this year’s list. As the velocity and complexity of change increase, proper execution and change management have to become core competencies. Ultimately, the success of navigating through changes hinges on people. It is the people who drive the change – therefore building a culture with people at the forefront embracing change is becoming a differentiator”

Woo Shea LeenInsurance Leader, PwC Singapore

Anxiety level continues to rise, but the industry feels more prepared to handle the risks

Singapore’s Banana Skins Index score – which implies the industry’s level of anxiety in responding to risks – is above the global average.

The country showed an improvement in the Preparedness Index – which reflects how prepared the industry is in handling the risks identified – from below the global average in the 2017 survey to above it in 2019.

When compared to other global financial centres such as Germany, Hong Kong, Japan, the USA and the UK, Singapore scored the highest Banana Skins Index, and ranked second in the Preparedness Index.

When compared to other Asia territories, Singapore ranked fourth in the Banana Skins Index, and ranked third in the Preparedness Index.

Notable risers on Singapore’s list

Investment Performance
(ranked #4, moved up 4 spots from 2017)

The risk in investment performance has leaped significantly from being ranked #14 in 2015, to #8 in 2017, and to #4 in 2019. This is a reflection of the low interest rate environment and the volatile equity markets that plague the investment scene in recent years
The challenging investment outlook has motivated Singapore insurers to review its investment strategy and to optimise the use of capital by considering alternative investment options with higher returns, which inevitably comes with higher risks

Guaranteed Products
(ranked #10, moved up 4 spots from 2017)

Declining interest rates in the market has undermined the overall profitability of insurance products with guaranteed returns
In Singapore, we continue to observe a shift away from guaranteed products to more protection products as industry players navigate the increasingly difficult investment climate