The end of the year is always a good opportunity to look at where we are now compared to where we were twelve months ago. What have we achieved? What have we created? What do we know now that we didn’t know then? For the insurance industry as a whole it is probably a year that has generated more questions than answers:
For as long as there has been insurance there has always been more risk than there has been capital providers willing to insure it which has led to the pricing being largely supply driven.
Recently the supply of capital seems endless and major loss events have done little to dent the enthusiasm of capital providers which is moving the insurance industry into new and uncharted territory.
Meeting this challenge makes this an incredibly exciting time as we look at creating new products and delivering our existing ones in more effective ways. The current competitive environment is driving innovation within the industry which allows us to deliver for our customers whilst still remaining a sustainable and financially secure entity.
Watching how other companies meet this challenge is fascinating with many different strategies at play. Some companies will look to economies of scale and we will undoubtedly see a lot of M&A activity in the next 12 months.
This M&A appetite has the potential to create a ‘seller’s market’ with a subsequent upwards pressure on valuations. It will be interesting to see if any new ‘mega insurers’ emerge and if they do how much genuine value they will add to their customers.
With at least one significant M&A ongoing in the market now and talk of others around the corner in 2015, the trend appears to be set as next year progresses.
As well as intense competition amongst ‘traditional’ insurers and reinsurers we continue to see alternative forms of capital entering the market.
These are often seen as the ‘sexy’ end of the business and whilst they are ostensibly complex, multi-million dollar financial instruments, the fact remains they amount to little more than bets on whether the wind blows or the ground shakes.
Will the fund manager’s appetite for these risks increase? Do the fund backers let alone individual pensioners and other small investors realize where their money is? Are they aware of the risks to which that money is exposed? Will a major event lead to all being revealed?
So as we look back at 2014 and forward to the next we still seem to have more questions than answers. From an industry that aims to deliver certainty, this is an unusual situation to say the least.
All we know is that we will always be striving to do the things we do better than we did before.
|
