The global pandemic has resulted in a fundamental shift in the risks that UK and Irish Insurers believe are the biggest threat to business new research has found.
Advisors LCP have undertaken analysis of the early Solvency II disclosures of 50 insurers across the UK and Ireland and discovered a major shift in the current risks which most concern the industry.
It found 30% of insurers identified Brexit is a key risk, down by half on the figure for last year, while climate change and cyber risk are both seen as rising priority areas. In total 52% see cyber security as a key risk, up from 46% last year, while 46% of firms cited climate change, significantly up from 18% last year.
LCP said a key new risk for insurers is ‘unanticipated coverage’ where they find that they face claims for risks that they had previously believed to be not covered by their policies, particularly in light of the Covid-19 crisis. It added insurers are also concerned about ‘conduct risk’ or the risk that regulators will take further steps with major financial implications following the publication of the FCA’s interim report into general insurance pricing practices.
Despite Covid-19 related uncertainty, over half of insurers (52%) confirmed they expected to continue to meet regulatory capital requirements. It saw 48% either remain silent or say there was still too much uncertainty to confirm if they would be able to meet the requirements.
Other findings include:
- Insurers continue to be sufficiently capitalised with eligible own funds that are, on average, nearly double their Solvency Capital Requirement (SCR) at their 2019 year ends.
- 85% firms mentioned Covid-19 and its possible impact on claims experience. However, only 37% gave further details around how they are managing this such as assessing their exposures by lines of business or providing commentary on the expected impacts.
- 54% of firms mentioned the impact that market turmoil as a result of the pandemic is having on their investment holdings.
Cat Drummond, Partner in LCP’s Insurance Consulting team, said: “This analysis provides an interesting early view into how Covid-19 has shifted the insurance landscape. Concerns around the impact on claims experience and investments are rightly top of the agenda. The impact of the pandemic will have severe fallout for a number of business lines including travel, business interruption and income protection.”
“Brexit appears to be less of a key risk in the minds of insurers as it is replaced with concerns around cyber-crime and consumer protection. The issue around consumer protection is likely to rise even further up the agenda when the FCA publishes its final report into the pricing of home and motor insurance.”