The number of insurers identifying Brexit as a key risk has fallen by half in the past year with climate change and cyber security now rising priority areas.
Lane Clark and Peacock (LCP)’s analysis of early Solvency II disclosures by 50 insurers across the UK and Ireland reveals 30% see Brexit as a key risk, down from 60% last year.
Meanwhile 52% view cyber security as a key risk, up from 46% last year, while 46% of firms cite climate change, significantly up from 18% in 2019.
A key new risk for insurers is “unanticipated coverage” where 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.
Insurers are also concerned about “conduct risk” whereby regulators will take further steps with major financial implications following the publication of the Financial Conduct Authority’s (FCA) interim report into general insurance pricing practices.
Amid Covid-19 uncertainty, 52% of insurers expect to continue to meet regulatory capital requirements. However 48% either remained silent or report too much uncertainty to confirm if they could to meet these requirements.
Insurers continue to be sufficiently capitalised with eligible own funds that are on average nearly double their Solvency Capital Requirement at their 2019 year ends.
Some 85% firms mentioned Covid-19’s possible impact on claims but only 37% gave further details of how they are managing this such as assessing their exposures by lines of business or providing commentary on the expected impacts.
Just over half - 54% - of firms mentioned the impact of market turmoil on their investments as a result of the pandemic.
LCP insurance consulting team partner Cat Drummond says the findings show how Covid-19 is shifting the insurance landscape.
“Concerns around the impact on claims experience and investments are rightly top of the agenda,” she adds. “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.”