Cyber risk tops the list of concerns for UK insurers, according to the annual ‘Banana Skins’ survey of perceived risks to the sector by the Centre for the Study of Financial Innovation (CSFI) and the audit firm PwC.
According tothe survey, the UK insurance sector shares the global concern about burgeoning regulation, particularly its cost and distraction, but also its potential to damage the international competitiveness of London as the world’s insurance capital if it is heavily “gold plated”.
By contrast, UK concern about the macroeconomic situation and the outlook for interest rates is much lower than the global average. The outlook for investment performance is also seen to be stronger by UK insurers..
Most of the most-mentioned risks centre on the rapidly changing insurance risk landscape and the new challenges facing the industry: cyber risk, the reshaping of distribution channels with the emergence of new technology and the demand for new-style products. The ability of the industry to handle these changes is, itself, seen as a high risk: “Change management” is the third biggest worry for UK insurers, and concern about the industry’s ability to attract talent is also higher than the global average.
Stephen O’Hearn, PwC global insurance leader, said: “The long-term prospects for the insurance sector are positive as people around the world live longer and have more wealth to protect. Yet insurers also face the disruptive impact of new technology, changing customer expectations, more exacting regulation and enduring economic uncertainty.”
And Mark Train, PwC global insurance risk leader, said: “The ability to identify and manage emerging, as well as familiar, risks is at the top of the boardroom agenda and will be one of the key differentiators for success in a marketplace that offers considerable long-term opportunities, but also disruptive threats.”
Meanwhile, according to a new KPMG International report, investment managers must successfully navigate an increasingly complex regulatory environment, if they are to capitalize on growth opportunities. A recent report, Navigating opposing forces, reveals that on the one hand, policymakers in many parts of the world are encouraging the investment industry to help drive economic and growth agendas. Yet on the other hand, investment managers are facing greater scrutiny by regulators, who see the increasing size of the industry and the widening range of asset classes and investment strategies as a potential systemic risk. On cyber, the audit firm says that it finds that regulators are questioning investment managers and funds about how they are addressing the growing threat of cyber-attack. Attacks can take advantage of complex trading technology and the storage of increasing volumes of data and can quickly cause disruption. Firms must get ahead of these risks.
Julie Patterson, head of regulatory change in investment management, Europe Middle East and Africa at KPMG, said: “The industry is a key player in growing economic growth and long-term savings, but needs to do more to reinforce its importance to regulators. For example, the investment industry is an integral player in the Capital Markets Union (CMU), which aims to reinvigorate Europe’s capital markets, increasing cross border flows and reducing reliance on bank financing. To be successful, however, the industry needs to address how it deals with customers, data and cyber-attacks. These tend to be uppermost in regulators’ minds.”
