Technology, cyber and climate change are the three most urgent risks facing reinsurers worldwide, respondents to a survey conducted by professional services firm PwC have said.
Results of the Reinsurance Banana Skins 2019 survey were released yesterday to coincide with the 2019 Monte Carlo Reinsurance Rendez-Vous de Septembre.
The reinsurance industry shared a number of top risks with the broader insurance response in PwC’s Insurance Banana Skins survey, released earlier this year.
Most notably, the firm said, this was dominated by the cluster of three “banana skins” about the industry’s ability to deploy new technologies and confront structural change.
Top-ranked technology is rooted in concern that reinsurers are grappling with legacy IT systems as new data sources proliferate, PwC said.
While cyber-risk is a particular worry for reinsurers because of the largely unknown liabilities of underwriting cyber policies, as well as the threat of direct cyberattacks against insurance companies that hold valuable data.
Stephen O’Hearn, PwC global insurance leader, said: “Tech and cyber dominate reinsurers’ risk agenda. How they manage these risks is critical to the long-term credibility, profitability and capacity for innovation within the industry.”
The third top risk is climate change, which received its highest score. The reinsurance industry expressed anxiety about the costs of mounting claims from more frequent and severe natural disasters, and the prospect that some risks could become uninsurable.
Arthur Wightman, PwC Bermuda insurance leader, said: “Reinsurers have a key role to play in efforts to address the risks of climate change, and increase understanding, protection and resilience worldwide.”
Ranked fourth in the survey, change management reflects ongoing concerns about insurance markets being upended by new technologies, and radical shifts in customer expectations, PwC said.
Rounding out the top five was regulation risk, up from number eight two years ago, largely due to concerns about an influx of new rules such as GDPR and IFRS 17.
The remainder of the top ten was comprised mostly of operating risks.
Mr Wightman said: “If we look at the top five risks as a whole, what’s striking is the extent to which they feed into each other — technology is driving change management risks, for example, just as data regulation and cyberthreats are heightening technology risks. This underlines the importance of looking holistically at today’s fast-evolving risk landscape.”
Despite the changes and risks highlighted in the survey, the industry’s response to preparedness as a whole has suggested greater confidence in their ability to manage and address these risks, the firm said.
In addition, a number of broad industry themes emerged from the reinsurance market responses, including consolidation, capacity, and globalisation.
Reinsurance Banana Skins 2019 was produced by the Centre for the Study of Financial Innovation in association with PwC. It examines responses submitted to Insurance Banana Skins 2019, which was published in June and examined the global insurance industry, including the life, non-life, composite, reinsurance and broking sectors.
In the survey, PwC said it considers the reinsurance industry to be broadly represented by respondents that self-selected into the ‘reinsurance’ and ‘P&C/non-life’ sectors. It is based on surveys completed by 320 respondents from 42 territories.
• To see the full report, go to pwc.com/bm