Digital wealth and asset management technologies are attracting greater traction and interest from insurers in their efforts to enhance their services and customer experience. Yet, with the myriad of ways, technologies and platforms available in the market, insurance companies can be bogged down with options.
As change in technology and customer preference continue to accelerate, insurers should avoid the traditional blue sky visions and detailed technology roadmap, and instead, take a fast and iterative ‘test and learn’ approach to deliver quick value.
For the insurance industry, the need to find new opportunities for sustainable and profitable growth has become an imperative. Technology is delivering unprecedented insights at scale, new markets and segments are rapidly created, and new customer value propositions are forming.
However, Insurers know that they can't achieve these objectives through organic growth strategies alone. They are looking to mergers and acquisitions (M&A), partnerships, and corporate venture capital initiatives as a critical path towards achieving their strategic objectives of transformation and innovation. And expect to accelerate this evolution with strategy-aligned M&A and innovation initiatives over the coming years.
Based on a survey of 200 insurance executives globally, our report, Accelerated Evolution: M&A, transformation and innovation in the insurance industry (PDF, 2.7MB), illustrates that the successful insurance organizations of the future will be the ones that are already thinking beyond traditional M&A to execute transformational deals that satisfy both the evolving needs of their customer base, and demands from shareholders and investors for strategic capital deployment to enhance enterprise value.
The Central Bank has published the June 2018 edition of the Insurance Quarterly Newsletter (PDF, 1MB). In this latest edition, the Central Bank asks undertakings to consider what their contingency plans are in the event that the UK leaves the EU in March 2019 to become a Third Country, there is no implementation period and the UK has been unable to make the legislative changes to implement a temporary permissions regime. The CBI also points out that reporting issues remain for a minority of undertakings regarding look-through reporting. The latest edition of the Insurance Newsletter also includes the third article in the series on Risk Culture, this time focusing on competency. The Insurance Quarterly Newsletter can be viewed here.
Opinion on disclosure of information to customers about the impact of the withdrawal of the United Kingdom from the European Union
On 28 June EIOPA published an Opinion in which it stated that it is the duty of insurance undertakings to make insurance policyholders and beneficiaries aware of the impact of Brexit on their insurance cover and also of the contingency plans in place to ensure continuity of cover. The Opinion, as well as related Frequently Asked Questions, can be found here.
Financial Stability Report
On 25 June EIOPA published its June 2018 Financial Stability Report. The Reports refers in particular to the impact and potential consequences of digital transformation; the increasing frequency and severity of weather-related disasters; and the risk of a sudden yield spike scenario brought upon, at least in part, by the persistent low yield environment and ‘high’ uncertainties such as Brexit, the global trends towards protectionism and European elections. The Report is available here.
Letter from Anna Sweeney on “Market conditions facing specialist general insurers: Feedback from recent PRA review work”
On 31 May, Anna Sweeney, Director of Insurance Supervision at the Bank of England’s Prudential Regulation Authority (PRA), released a ‘Dear CEO’ letter entitled ‘Market conditions facing specialist general insurers: Feedback from recent PRA review work (PDF, 391KB)’. The PRA expects boards of most companies to provide a response by 27 July 2018 on a range of issues outlined within the letter, which can be viewed here.
Bank of England approach to financial services legislation under the European Union (Withdrawal) Act
On 27 June, HM Treasury confirmed its intended approach to onshoring financial services legislation under the European Union (Withdrawal) Act (EUWA) (PDF, 146KB). This includes delegating powers to financial services regulators (including the PRA and FCA) to make required changes through onshored Binding Technical Standards (BTS). The regulators will be responsible for maintaining those BTS and making changes to their own rulebooks using delegated EUWA powers. The full release is available here.
The European Union (Insurance Distribution) Regulations 2018 (S.I. 229 of 2018) were signed by the Minister for Finance and Public Expenditure & Reform, Mr Paschal Donohoe T.D., on 27 June 2018. The Insurance Distribution Regulations transpose into Irish law the Insurance Distribution Directive (Directive (EU) 2016/97), or “IDD”, which establishes requirements in respect of insurance and reinsurance distribution in the EU and applies both to (re)insurance undertakings and insurance intermediaries. The Insurance Distribution Regulations apply from 1 October 2018 and are available here.
The market for non-life run-off acquisition is booming. Driven by the prospect of robust returns, acquirers are scouring the market for opportunities whilst vendors are keen to divest, to improve capital efficiency, remove P&L volatility and a number of other reasons. Read A lasting legacy - Brexit and the non-life run-off sector (PDF, 364KB).
Every month KPMG Ireland’s IFRS team is producing an update on the progress of the industry to date on the implementation of the new insurance accounting standard. Please click here to read the June update.