Lloyd’s recently released their newest survey results that was conducted during the RIMS 2012 conference to the InsuranceJournal.com that surveyed insurance regulation as well as exposures related to reputational risk.
The Insurance Journal reports that nearly a third of executives responding to a survey conducted by Lloyd’s at the recent annual Risk and Insurance Management (RIMS) conference in Philadelphia reported that increased regulation of the industry is a top challenge. However, the vast majority of the executives (76 percent) responding to the Lloyd’s survey say that most legislative proposals and regulatory initiatives related to insurance will receive little attention during the upcoming election cycle.
More than 100 insurance professionals attending RIMS responded to the survey, which assessed corporate risk and how the current economic landscape and recent events around the world have shaped the industry’s outlook for 2012.
Despite 2011 serving as the second worst year on record for natural catastrophes, generating industry-wide claims of more than $107 billion, only 21 percent of respondents view natural catastrophes as the greatest challenge they will face in the year ahead.
Even so, more than half the insurance executives surveyed anticipate a decrease in capacity and increase in prices for catastrophe coverage in 2012. Only 20 percent say that the industry is strong enough for capacity to remain robust, while 15 percent report that it’s too soon to tell.
“With 2011 being one of the costliest years in recent history for the global insurance industry, due largely to the frequency and severity of global natural catastrophes, its notable that fewer than a quarter of respondents rated this concern highly,” said Hank Watkins, president of Lloyd’s America. Watkins says the findings echo the Lloyd’s “2011 Risk Index,” a survey of 500 C suite executives in a wide range of countries and industries.
The 2011 Risk Index found that losing customers and struggling to find talented workers are the top two risks facing business leaders across the world. These top two concerns were followed by concerns about reputational risk; currency fluctuation; changing legislation; cost and availability of credit; price of material inputs; inflation; corporate liability, and excessively strict regulation, which rounded out the top 10. Rapid technological changes and cyber attacks were 11th and 12th. At the bottom of the 2011 Risk Index list were windstorms – hurricanes, typhoons and cyclones; drought; threats to biodiversity; impact of space weather (e.g. solar flares), and volcanic eruptions (ash clouds].
Business leaders place a lower priority on the impact of natural disasters than on the more pressing issues such as the loss of customers, reputational risk and the shortage of talent, Watkins says.
Reputational risk was also found to be a big concern to a number of executives at the RIMS conference. Some 61 percent of those responding to the survey cited cyber liability as the leading issue. Next on the list of reputational risk exposures were management liability, political risk and financial fraud.
Insurance executives also acknowledged that increased capital market volatility, particularly in Europe, will be reflected in the underwriting of corporate risk in the United States, with 43 percent stating it will have a negative impact and 30 percent viewing the ultimate impact on insurance buyers in a more positive light.
“The recently demonstrated interconnectivity of global supply chains has become an indelible reminder of the need for ongoing business continuity planning,” Watkins said.