Over the next five years what type of business do you see taking a market lead?
Insurance & Reinsurance
Individuals face an increasing variety of financial risks which might not be covered by public funding. Private individual insurance products therefore play an essential role in protection against social and financial risks. According to the statistics, individual insurance market achieved a significant growth, consumer awareness of where to get health insurance has been raising in recent years. Considering the rise of consumer awareness in this area, individual insurance market will be grown in future years.
The market for cyber insurance is growing and is seen as one of the biggest growth areas in the insurance industry globally. According to industry data, the global cyber market was estimated to be worth around $2.4bn in premiums in 2014. Fitch believes cyber insurance premiums could increase to $20bn by 2020.
Cyber insurance is still a relatively new product on the Irish market however it has become more popular in recent times and a number of insurers are now offering new cyber products in Ireland as a result. It is expected that cyber will be a growth area in Ireland in the coming years.
In our view, the market leaders over the next five years will be those insurance companies that branch away from the traditional insurance business model towards a more technology-friendly operating model. In today’s digital economy, consumers want instant access to relevant and simplified information and this extends to complex insurance products. Embracing the benefits that technological advances can offer to the design and distribution of innovative insurance products will enable progressive companies to meet the needs and expectations of consumers in a more effective and efficient manner.
Because of the pressures on growth in established markets UK insurers are likely to continue to seek growth in new markets such as Africa and Asia. Because of the regulatory and market pressures in Europe consolidation is likely to continue for the next few years. Buyers are likely to include investors from outside the traditional insurance markets, including private equity. For life businesses the quest for returns is likely to result in insurers investing in different asset classes such as infrastructure projects.
Cyber threats are challenging not just global business but also individuals and governments. Insurers that can genuinely offer credible solutions to both mitigate and manage cyber threats and adapt to the changing risk environment are likely to fare much better than those insurers relying on traditional product lines.
The increased digitalisation as well as the changing environment’s impact on the number of nature-related claims and size of the said claims, two of the strongest businesses for the coming 5 years will most probably be cyber risks and environmental risks. Not only will cyber risks and environmental risks be important areas of business over the next five years, but they are also two areas with the potential to change the very nature of how insurance is sold and consumed in the future.
Because of the pressures on growth in established markets, German insurers are likely to continue to seek growth in new markets such as Africa, Asia and South America. Because of the regulatory and market pressures in Europe consolidation is likely to continue for the next few years. Buyers are likely to include investors from outside the traditional insurance markets, including private equity. For life businesses, particularly affected by the low interest rate environment, the quest for returns is likely to result in insurers investing in different asset classes such as infrastructure projects.
The technical progress is expected to have a significant impact on insurance business and will shift the risk to cyber incidents as opposed to the liability for human misconduct, e.g. autonomous vehicles, Internet of Things, telematics solutions as well as the implementation of the smart contract and blockchain technology in the insurance sector. Cyber threats are challenging not just global business but also individuals and governments. Insurers that can genuinely offer credible solutions to both mitigate and manage cyber threats and adapt to the changing risk environment are likely to fare much better than those insurers relying on traditional product lines only.
Since 2012 M&A Insurance products have become increasingly popular in the Norwegian market, both relating to real estate and industry related transactions. This insurance product is expected to continue to increase its footprint in the market over the coming years. Additionally, we foresee that different types of liability insurance products, especially directors and officers’ liability insurance, will become even more in demand, as a result of an increasing number of liability cases for directors and officers in Norwegian courts.
The opening of the Mexican energy sector will require enormous insurance capacity for the Mexican market and is a sector that will grow intensively, including in lies such as maritime, civil and environmental liability, mandatory insurance coverage required by Mexican agencies to operate, surety and transportation.
We also will see growth in cyber insurance related products, including insurance to protect new risks such as privacy and data protection.
We will continue seeing growth in financial lines, D&O insurance, in reps and warranties and tax insurance products, fraud related products and surety.
There is tremendous potential and urgency to develop an efficient health insurance sector; however, that will require better regulation and it is unlikely we will see the changes required in the regulation in the next three years.
We expect that life and health insurance will continue growing, and provided that the financial stability is maintained, that life-saving products continue growing among the ever growing middle class population.
Automobile insurance will also continue growing fueled by the mandatory automobile liability insurance schemes currently implemented and hopefully, finally, being enforced.
Because of its compulsory mandate, medical insurance will always be a hot topic. The carriers that can properly develop underwriting guidelines to properly price this cover, given the uncertainties of securing the necessary health care data to rate a constantly shifting expatriate workforce, while at the same time developing - in conjunction with the health care providers - a stable cost control protocol, have the opportunity for long term success.
Similarly, given the constant development of infrastructure throughout the UAE, the need for general liability, contractors, PI, and specialty lines cover will continue to increase.
The next five years are likely to be a period of significant change. Potential regulatory reform, increased infrastructure spending, tax reform and changes to trade policy are all likely to affect the U.S. economy in general. Technological changes, both in the way insurance products are underwritten, sold and administered and more generally in the way individuals live their lives (e.g., the advent of autonomous cars) are also likely to unfold in the next 5 years. Insurers that are nimble and able to adapt and respond to these changes are likely to take market leading positions.
Individual private pension insurance will gain attractiveness among the Austrian workforce. Demographic change will further reduce the ratio between the working population and pension receivers, thus putting additional pressure on the state pension system. As a consequence, the gap between final salaries and pension earnings is widening. Taking into account that the proportion of private pension insurance is still comparatively small in Austria, we estimate that demand for private pension schemes will increase significantly over the next five years.
As regards liability insurance we expect the D&O insurance market to grow on consolidated premiums. At the same time W&I insurances (TRI) will gain in importance as well as the selling of cyber-crime policies will gain momentum.
In addition, we expect further growth in the property insurance sector due to the rise in property prices in Austria.
Due to the characteristics and exposure of Chile to certain risks, property and life insurance will continue being core retail insurance products. Considering certain non-life insurance companies have been acquired by foreign corporations it may be that local companies reinsurance polices change and volume reduces. Additionally,, considering Chile is one of the most opened economies in the world, the access to global market implies that worldwide trends become a local reality in short terms. In this regard, data protection, cyber risks, liability due to drones, software, etc. and their related risks will probably enter into Chile rather sooner than later.
We are neither brokers nor fortune-tellers. We think, however, that in a market like the Swiss market where banks, securities dealers, asset managers and other financial institutions have a predominant position, financial lines insurance is an important business line and may gain importance within the coming years. Moreover, digitalisation may become a decisive factor for business success in insurance.
The current president, Pedro Pablo Kuczynski, has among his main proposals to streamline the processes of investment in infrastructure; therefore, we believe that in the term of its government, the construction sector and, therefore, the insurance associated with this sector, will lead the market for the next five years.
There has been a consistent increase over the last few years in the issuance of policies to cover cyber security risks, directors and officer’s liability, errors and omissions liability and employment practices liability (including liability arising from sexual harassment claims). These forms of insurance are anticipated to grow further and take market lead over the next five years.
Over the next five years, we see bancassurance and online platforms as being strong demand drivers in the Singapore market.
With a present penetration rate of approximately only 4%, uptake in life insurance policies is expected to increase with more innovative coverage, such as protection against loss of income and mortgage protection.
Demand for cyber insurance is also expected to continue to gain traction.
The main segments of the insurance industry currently in Brazil are, in order of revenue: health, property and life insurance. For the coming years, an expansion in surety insurance is likely, particularly in relation to infrastructure development projects, rural insurance, D&O, and individual life insurance.
Many insurance claims have arisen out of the poor economic conditions that have undermined the capacity of some civil construction companies to comply with their contractual obligations. In addition to economic vicissitudes, problems arising out of corruption scandals at Petrobras have also given rise to serious repercussions in the fields of surety and D&O.
Furthermore, the market is waiting to see the precise effects of the regulations issued in May 2015 by the Transport Authority (CONTRAN) under the auspices of Law 12.977. There is a considerable degree of optimism that the new legislation, in regulating the dismantling of vehicles and sale of parts will go some way to reducing the rate of car-theft in the country.
The personal insurance and pension segment expanded substantially in 2014, growing 29.7% in comparison with the previous year. In the first quarter of 2015, the so-called accumulation policies experienced exceptional growth, over 160% compared to the first quarter of 2014, an increase that is probably attributable to the uncertain economic scenario. On 2016, the sector grown another 9,2%. Moreover, the third segment, which covers insurers that specialize in health cover insurance, maintained growth levels in 2016.
As Israel is a leading force in innovations in many areas, we are beginning to see some new ideas in Insurance technology.
In 5 years technology will most likely take over mainly in the commoditized private line areas, and will be the leading insurance business.
As the market is very mature, insurance products tailor-made for the specific customer will become more important and popular.
Insurance products linked to the development of new technologies (such as cyber insurance) will also most probably take a market lead and prove to have a competitive edge.
Finally, with an ageing population and the government social security budget under pressure, it is obvious that life and health insurance will continue to be around and even become more important in the daily lives of policyholders.
Note: the authors wish to thank their colleague, Anne Catteau, senior associate at Lydian, for her help in the preparation of this article.
Given the maturity of the French insurance market, the retail market shows more consumer behavior trends (rather than a significant up-coming product trend). In the field of the traditional retail insurances (such as motor insurance, household, PPI), the market shows an increasing volatility, encouraged by the recent changes in legislation allowing a facilitated termination of an insurance contract by the consumer, and a higher pressure on costs, encouraged by insurance comparison websites.
On the corporate side, the French M&A market shows a growing interest for the “W&I” insurance products and, more generally, the French corporate actors show also growing interest for “Cyber” insurance products, as in this segment, there is still in an “under-coverage” situation.
As set out in the answer to question 20, domestic insurers are increasingly embracing digital innovation to deliver InsurTech solutions. However, Canada is a fairly conservative market and the adoption of InsurTech is by no means present across all companies. Those established insurance companies that are able to partner with FinTech companies to fully participate in the growth of InsurTech will be well positioned to take a market lead.
As in many other jurisdictions, cyber is expected to be the new source of business.