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Life insurers ‘optimistic despite market turbulence’

The majority of European life insurers are positive about the outlook for their businesses despite the challenges posed by the rising cost of capital and regulatory change, Towers Watson said today.


11 MAY 2012 | THE ACTUARY NEWSDESK: NICK MANN

Almost seven out of ten (68%) of those questioned in the consultancy’s European Actuarial Directors survey gave a positive assessment of their company’s prospects, despite ongoing market turbulence.

But 58% of the 35 actuarial directors surveyed also said they expected the next two to three years to be particularly difficult. Among the key challenges identified by companies were increases in the cost of accessing capital and the imminent introduction of Solvency II regulation.

More than half (56%) of the companies surveyed said they were already planning to invest in a wider, more diverse range of assets to take full advantage of the reduced regulatory constraints on investment expected under the legislation. According to Towers Watson, Solvency II will ‘significantly change’ the attractiveness of certain asset types.

Other challenges to achieving future growth identified by respondents included the move to lower-margin higher-risk guaranteed products, increased competition from other financial services, changed in customer demand and buying behaviours and ‘shrinking’ life and pensions markets.

Michael Murphy, continental Europe director of Towers Watson’s risk consulting and software business, said: ‘We live in uncertain times and traditional risk management practices are being challenged.’

Taking a disciplined approach to financial performance management and to ensuring operational and capital efficiency were vital to building a sustainable and robust business model, he added.

‘The real winners will be those who step back to consider and exploit the wider strategic opportunities emerging from this period of unprecedented change.’

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