European Insurance Newsletter - Edition 8
In our 8th edition of the European Insurance Newsletter we feature an interview with George Quinn, CFO of Swiss Re Group, in which he discusses how the company weathered the financial markets crisis and his view on regulation and other industry changes.
In this instalment, we cover aspects of Solvency II, the future of corporate underwriting, and we look to Sub-Saharan Africa as an area of growth for insurance. We also tackle the question of how reinsurers can escape the bearish market challenges in a new, special report.
A Conversation with George Quinn, Chief Financial Officer, Swiss Re Group
George Quinn started as Group CFO for Swiss Re the day the firm announced the highest earnings it has ever had, and has since helped lead the reinsurer through the subprime and broader financial market crisis that followed. He reflects on Solvency II, IFRS Phase 4, the role of rating agencies, and prospects for the insurance sector overall.
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Reinsurance - Escaping from the Bears
Reinsurers face a persistent and dispiriting problem with the investment markets. Almost regardless of individual performance, they are rated lower than comparable companies in different industries. The markets seem to be fundamentally pessimistic about the industry's ability to deliver returns above the cost of capital - a "bear case" that no large reinsurer, and only a handful of small ones, seems able to refute. There are ways to escape the bears - but they require reinsurers to understand what drives investor pessimism, and to make major changes to their business models and communication strategies. In our report we look at four possible ways for reinsurers to innovate their business.
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Solvency II: The Long and Winding Road
The road to implementing Solvency 2 has been longer and more circuitous than expected. In our joint report with Morgan Stanley, we provide insights on implementation progress thus far. We also discuss key debates in the industry, which will have a significant impact upon the insurance landscape across Europe.
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Underwriter of the Future: Secrets to Success in the Commercial Insurance Market: 2012-2022
The commercial insurance market is about to undergo significant change, in both the SME and large commercial segments. While some changes are already visible, such as the impact of technology in SME distribution, others are less well defined or are yet to emerge. But what should insurance companies and individuals do to position themselves as leaders of the future? What will the changes mean for organizational focus, culture and the skills agenda?
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Getting Risk-Adjusted Performance Measurement Right for Solvency II
Insurers across Europe will soon begin calculating their regulatory capital requirements under the new Solvency II regime. To date, most insurers have focused on building and calibrating their Pillar I models, be it under the standard formula approach or using an internal model. Now they are shifting their efforts towards using these models to run their businesses. This is partly for compliance purposes; Solvency II requires insurers to link the calculated capital requirements to business decisions. But insurers should also see this as an ideal opportunity to overhaul their performance measures and better align incentives with risk and reward.
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Sub-Saharan Africa: Time to Consider the Last Frontier in Insurance?
With domestic markets at or close to maturity, many large insurers are looking to international markets with an eye on regions that provide attractive top-line macro growth potential. Despite formidable challenges, Sub-Saharan Africa represents the last opportunity for insurers to cheaply buy into an untapped growth region.
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ALICE: A Live Insurance Company Experience - Making Solvency II Tangible for Executives
ALICE is an interactive business simulation that allows participants to understand the implications of their business decisions in the new Solvency II environment. With ALICE, participants can discuss and make business decisions using the enhanced information, tools and business applications emerging as a result of Solvency II. This case study describes how Oliver Wyman helped one of our clients, a large global composite insurer, face several challenges with their Solvency II program.
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Lessons Learned from Internal Model Development
Oliver Wyman has worked with a number of major insurers in developing aspects of their internal models. During this time we have encountered many issues and learned valuable lessons. In this article we focus on the aspects related to designing and optimizing internal models used to address the Pillar 1 quantitative requirement of Solvency II and to determine the Solvency Capital Requirement. We give a summary of the key issues and how they can be addressed over the course of the coming 6-18 months before the models go live.
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