Insurance
Overview
A series of natural disasters have hit the headlines over recent years. According to the UN, hurricanes, floods, earthquakes and tsunamis caused $109 billion of economic damage in 2010 - three times more than in 20091.
These catastrophes have also, naturally, hit the insurance industry. Few Lloyd’s of London insurers reported profits for the first half of 2011.
The industry has remained robust and proactive in the face of such adversity with an innovative approach to product development and a sustained commitment to dealing with the effects of climate change.
On the product innovation front, an example is Catastrophe Bonds (cat bonds) - a form of insurance securitisation that allows risk to be spread to investors rather than insurers. Cat bonds provide protection for the insurer’s balance sheet if a payout needs to be made and also give policyholders confidence that they are protected. If a catastrophe occurs, bondholders lose their money – because it is paid to policyholders.
Disasters such as Hurricane Irene triggered a flurry in the trading of these securities, reflecting their growing usefulness across international insurance markets2.
Insurance companies have also shown similar proactivity in addressing the risk of global climate change which may exacerbate or cause such natural catastrophes. High profile initiatives have included the formation of ClimateWise in 2007 and the role of senior insurance industry figures in liaising with Governments around the world4.
Whilst it may have been buffeted by natural disasters, the insurance industry has at least remained relatively sheltered from the other storm currently sweeping the world: the global financial crisis.
Although part of the financial services sector, insurance has remained relatively demarcated from international financial institutions and markets.
In P&C insurance whilst falling incomes amongst consumers may represent a threat to revenues, insurers in this sector had already developed a focus on data warehousing and business intelligence. Analysis and profiling is helping them to optimise risk management and automate compliance as well as offering consumers more personalised policy options in order to gain a competitive edge.
Of course, insurance companies invest in equities, bonds and capital markets and the giant American International Group (AIG) suffered its own massive losses that necessitated a Government bailout.
But across the industry as a whole, exposure to the type of asset-backed securities that turned toxic with the failure of the American sub-prime market has been limited compared to that faced, for example, by the banks.
There are nonetheless other shared financial services challenges which insurance companies have not and will not be able to avoid.
Principal among which is the burden of regulation.
The Solvency II Directive for insurance and reinsurance companies is scheduled to come into force on December 31st 2012. Complying with this and a raft of similar legislation will necessitate additional investment in areas such as technology and will certainly tie up management time that could otherwise be put to productive use. Failure to comply also represents a heavy risk in both financial terms and loss of reputation.
In addition, insurance companies may experience severe downward pressures on their future growth and profitability caused by the increased capital holdings which new legislation obliges them to put in place.
To discover more about the ways in which we can help our customers, please click the links below:
We offer insurance organisations the opportunity to remove complexity across a full range of business processes. By unburdening themselves of back office functions which support their operation but are essentially peripheral to their vision and mission, we give these customers time and efficiency to focus on what they do best. The result is more flexibility and greater efficiency in the face of formidable challenges. Customers in this sector already trust us with claims and policy administration for underwriting and broking as well as processing workers’ compensation in relevant geographies. When required, we can also process payroll, learning and development, recruitment, and HR administration as well as offshoring services which can deliver advantages including speed to market, back office transformation, on-demand business, improved customer service and cost optimisation.
Customers include: Liberty Syndicates, Sedgwick, Aon, QBE, Willis, WorkCover NSW, WorkSafe Victoria
We offer extensive technology capabilities across a variety of industry sectors. By using technology to make systems and processes work more easily in the business, we can give insurance executives the freedom to work more strategically on the business. On the wider stage, our infrastructure team supports customers’ growth with cost effective, scalable and rapidly-deployed solutions. We also design, build and run the software that supports a range of business processing solutions. We embed our intellectual property (IP) to create a solution faster and more cost-effectively than our customers can themselves. We can also provide customers with Total IT Outsourcing (ITO) solutions – a single point of supply for an end-to-end managed service.
Customers include: AXA, ACE, XL, QBE, Tokio Marine, Admiral, Brit, Liberty Mutual
We are experts in supporting procurement professionals with services including sourcing, spend management, procure to pay (P2P), system management and software solutions. We actively engage with the procurement community across industry sectors and look to provide thought leadership and develop strategies for creating added value procurement.
