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Tuesday, 31 January 2012 00:00 - - {{hitsCtrl.values.hits}}
International insurance think tank, The Geneva Association, has identified financial stability, governmental management of natural catastrophe risk and demographics and old age society, as three key areas of interest for the global insurance industry in 2012.
The Geneva Association’s Secretary General and Managing Director Patrick M. Liedtke said: “No other topic has worried nation states around the world more persistently in 2011 than the question of global financial stability. And with as yet so many unresolved issues, ranging from a reappraisal of the risk-free nature of sovereign debt to significant new regulation and the further strengthening of the global financial system, the topic will remain at the top of the list for 2012 for insurers.”
In a statement, the Association says that insurance is a highly complex business and is not readily comparable with any other, even if they share some common elements. Unfortunately, it is also not always well understood by those outside the industry. This creates the risk of a misunderstanding of its operations and raises the likelihood of potentially unintended consequences of a particular regulatory action. It is vital, therefore, that any decisions made on insurance regulation fully respect the role of insurance and facilitate sound and sustainable risk management and risk transfer solutions upon which modern economies depend so much, says the think tank.
The statement also notes that while 2011 was by far the most expensive year on record for natural catastrophe insurance with estimated claims reaching some US$ 380 billion, the issue is not only one of claims and payouts – it is one of human tragedies and loss.
Little advancement has been made on the underlying question as to how to deal with the existing vulnerabilities and the risks they are exposed to. Few governments thoroughly revisited their national risk management – if they even have one. “In 2012, governments must make progress in understanding the risks their country and its citizens are exposed to and how to manage them properly,” urges the Association.
The Geneva Association notes at the same time that while financial uncertainty has increased, state systems for old-age provision have been incapable of following the significant shift of demographic trends. Today in most countries, these systems are not perceived as resilient enough so that individuals would look towards them for reassurance rather than with anxiety. Modern economies with (near) universal systems of old-age security require a more dynamic model.
They need to encompass increased longevity and aim not to maximise returns under optimal conditions but to assure reliable income under ideally all scenarios.
