The insurance cycle reflects the rise and fall of insurance prices and availability in response to market conditions, alternating between hard and soft markets. Currently, the market is experiencing a soft cycle driven by low catastrophe losses in 2013 and increased insurer capital. During soft markets, competition for business increases premium discounts and broader coverage availability. However, this is unsustainable and could lead to deteriorating industry performance if adequate premiums are not collected to cover future obligations, potentially triggering a hard market. Regulators and consumers prefer soft markets, but insurers must charge appropriate premiums to ensure long-term industry sustainability and stabilize prices between market cycles.
Understanding Volatility and What it means to your Portfoliosorenk
Feb 2013 - Why Volatility impacts our decision-making, What causes it, how it serves as a barometer and tool to forecast market direction, how it follows power-laws typical of cascade dynamics of fluid turbulence, earthquakes etc
After years of deriding the airline industry, investing “wizard” Warren Buffett confirmed that his holding company, Berkshire Hathaway, has invested nearly $1.3 billion in the four big-name domestic carriers. Watch this webcast replay to learn more.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Economist Intelligence Unit, on behalf of BlackRock, surveyed senior executives from insurance and reinsurance companies around the world to understand how they were responding to the pressures their fixed income portfolios are under, and how they viewed private market asset classes such as real estate and infrastructure as an investment opportunity.
Investment opportunities in the non-banking sector - 2014 Imara Investor Conf...Imara Group
Presentation on the investment opportunities in the non-banking sector, by Douglas Hoto from First Mutual Holdings at the Imara Investor Conference 2014 in Zimbabwe.
P&C Market Outlook: 2020 Insurance Planning Insights CBIZ, Inc.
After approximately 20 years of a soft, buyer-friendly insurance market, we are facing a hardening market – one that is less friendly to insurance buyers. This article discusses trends to be aware of, rate forecasts, factors you can manage that affect your rates and tips for insurance buyers.
Understanding Volatility and What it means to your Portfoliosorenk
Feb 2013 - Why Volatility impacts our decision-making, What causes it, how it serves as a barometer and tool to forecast market direction, how it follows power-laws typical of cascade dynamics of fluid turbulence, earthquakes etc
After years of deriding the airline industry, investing “wizard” Warren Buffett confirmed that his holding company, Berkshire Hathaway, has invested nearly $1.3 billion in the four big-name domestic carriers. Watch this webcast replay to learn more.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Economist Intelligence Unit, on behalf of BlackRock, surveyed senior executives from insurance and reinsurance companies around the world to understand how they were responding to the pressures their fixed income portfolios are under, and how they viewed private market asset classes such as real estate and infrastructure as an investment opportunity.
Investment opportunities in the non-banking sector - 2014 Imara Investor Conf...Imara Group
Presentation on the investment opportunities in the non-banking sector, by Douglas Hoto from First Mutual Holdings at the Imara Investor Conference 2014 in Zimbabwe.
P&C Market Outlook: 2020 Insurance Planning Insights CBIZ, Inc.
After approximately 20 years of a soft, buyer-friendly insurance market, we are facing a hardening market – one that is less friendly to insurance buyers. This article discusses trends to be aware of, rate forecasts, factors you can manage that affect your rates and tips for insurance buyers.
When market conditions are good insurance companies get low of business and their profits increase but in the adverse market conditions the companies start facing losses or their profitability reaches to rock bottom.
With support by the CII, Marketforce launched this special report providing a snapshot of the challenges and opportunities the industry is facing - and how to prepared it is to meet them.
Based on responses from over 1000 senior insurers, in this report you will find dedicated chapters on digital, analytics, operations, claims, fraud and more.
Would you like to meet like-minded insurers? On November 7th, 8th and 9th we're holding our 16th annual The Future of General Insurance conference.
Find out more about the event here: http://bit.ly/1TKDIgQ
How to Achieve Claims Excellence And Not Breach New Complaints LegislationMarian Unera
Insurance claims management has come under the spotlight and poor claims handling is cited as one of the major culprits when it comes to insurance grievances.
November 2017 Reprint - Actively Manage Your Risk with a Captive Insurance Co...CBIZ, Inc.
Captive insurance companies are increasingly being considered as part of insurance and risk management practices. They hold benefits for companies across a range of industries, and may be of particular interest to the Commercial Real Estate sector.
Waves of change: revisited – Insurance opportunities in Sub-Saharan AfricaEY
EY and Oxford Economics surveyed 125 insurance executives in seven countries in sub-Saharan Africa to identify factors powering the growth of the insurance sector and determine how companies are balancing opportunities and risks.
When market conditions are good insurance companies get low of business and their profits increase but in the adverse market conditions the companies start facing losses or their profitability reaches to rock bottom.
With support by the CII, Marketforce launched this special report providing a snapshot of the challenges and opportunities the industry is facing - and how to prepared it is to meet them.
Based on responses from over 1000 senior insurers, in this report you will find dedicated chapters on digital, analytics, operations, claims, fraud and more.
Would you like to meet like-minded insurers? On November 7th, 8th and 9th we're holding our 16th annual The Future of General Insurance conference.
Find out more about the event here: http://bit.ly/1TKDIgQ
How to Achieve Claims Excellence And Not Breach New Complaints LegislationMarian Unera
Insurance claims management has come under the spotlight and poor claims handling is cited as one of the major culprits when it comes to insurance grievances.
November 2017 Reprint - Actively Manage Your Risk with a Captive Insurance Co...CBIZ, Inc.
Captive insurance companies are increasingly being considered as part of insurance and risk management practices. They hold benefits for companies across a range of industries, and may be of particular interest to the Commercial Real Estate sector.
Waves of change: revisited – Insurance opportunities in Sub-Saharan AfricaEY
EY and Oxford Economics surveyed 125 insurance executives in seven countries in sub-Saharan Africa to identify factors powering the growth of the insurance sector and determine how companies are balancing opportunities and risks.
Fronting until when - Author- Clementina Hiteshew - April 2012
December_Simbarashe
1. THE IMPACT OF REINSURANCE
ON THE INSURANCE CYCLE
The insurance cycle reflects the
rise and fall in insurance prices
and coverage availability in
response to market conditions.
The cycle alternates between
two cycles, the hard market
(peaks) and soft market
(troughs). In simple terms,
insurance prices increase during
a hard market phase, while on
the other hand, soft market
conditions are characterised
by broader coverage and lower
premium rates.
I have decided to focus on the soft
market cycle since it resonates very
well with the current state of affairs
both globally and locally, in South
Africa. Presently, it is not uncommon
to hear the words “business is tough”,
loosely translated to mean that
companies are finding it difficult to
find new business or defend existing
accounts. Could this be a symptom of
soft market conditions?
Soft market cycles can be triggered
by a variety of factors, either working
independently or simultaneously in
combinations. Major insurance loss
events such as 9/11 are known to
independently produce a reactionary
hard market cycle. However, a longer
the time lag after the last major
catastrophic event allows the market to
recover and build-up enough reserves
that act as a shield against poor results
and hence the ability to sustain lower
prices. In other words, the tragic
memories of the catastrophe losses
vanish with time as underwriters forget
how badly they got burnt the last time.
According to the Aon Benfield
Reinsurance Market Outlook
(September 2014), a combination of
low catastrophe losses in 2013 and
increased insurer capital are the major
drivers behind the current international
low reinsurance cost. Global
SIMBARASHE MUKONZO
Head of Technical: Emeritus Re SA
catastrophe insured losses of US$45
billion in 2013 were 22% below the 10
year average while on the other hand
capital in the traditional reinsurance
market grew by US$570 billion.
The excess underwriting capacity has
also found its way into the South
African market through reinsurance and
other direct insurance programmes for
large risks underwritten by international
insurers, and evidently, insurers seem
to be enjoying the temptation to
trade-off the discounts obtained on
reinsurance cost with rate reductions
for their clients.
The persistently slow rate of the
domestic market economic growth
over the past 5 years can also be
blamed for the increasing irrational
behaviour on the part of insurers
and reinsurers because there is
less new business each renewal
period, hence the resultant price
wars as companies seek to achieve
reasonable growth. Unfortunately, the
unintended consequence of this nature
of competitiveness is the “Winners
Curse” where insurers end up charging
too little to win or retain a customer
without much regard to the risk charge
being added to the portfolio.
Soft market conditions might appear
like a great idea to consumers and
regulators because insurance becomes
cheap and readily available, even
to the average man on the street.
However, the reality is that the
industry may not be collecting enough
premiums to meet both current and
future obligations hence the industry
performance will eventually deteriorate,
producing unfavourable returns for
shareholders and investors. The
ensuing capital flight could trigger a
hard market cycle.
The best way to protect consumers is
by ensuring the long-term sustainability
of the industry by charging
commensurate premiums for all the
risks assumed. The large reserves built
up in good years can then be deployed
to smooth insurance prices during bad
times. This for me, is insurance at its
best; the ability to ensure predictability
of one’s future financial position, be
it up-front premiums or net retained
losses. Sudden and steep increases in
insurance premiums can potentially
have the same heart damaging effects
as uninsured losses.
The insurance cycle cannot be avoided,
and neither can it be eliminated.
However, insurers should have the
capacity to draw a line beyond which
a risk becomes unacceptable to avoid
disproportionate risk taking behaviour.
Advanced risk management tools and
the abundant free information on the
cyber space can provide the necessary
capacity to make prudent and informed
decisions.
The risk based Solvency Assessment
and Management regime (SAM) also
enables the underwriter to select and
write sustainable lines of business
because you can visualise the capital
charge that you are bringing to the
portfolio.
http://za.linkedin.com/pub/simbarashe-mukonzo-
fiisa-airmsa/24/40b/a72/
COVER DECEMBER 2014 17