Global insurance outlooks 2013

Europe

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In 2013 European insurers should focus on providing consumers with simpler, more transparent products and the information they need to make informed purchasing decisions. Delivering a great customer experience and rewarding customer loyalty will build trust.

The macroeconomic environment remains challenging in many European countries, and a concern for the region’s financial stability.

In 2013, we expect continued pressure on margins, caused by the prolonged low-interest-rate environment and ongoing uncertainty surrounding sovereign debt.

Many insurers will alter products, services and distribution models to generate growth. Regulatory changes will sharpen this focus, steering successful insurers to re-evaluate their business models and selling propositions.

In this tumultuous environment, European insurers will need to:

  • Focus on growth opportunities in a low-growth region
  • Protect and strengthen investment portfolios
  • Ensure capital adequacy
  • Finalize testing and integration of Solvency II systems
  • Prepare for developing regulations and tax changes
  • Anticipate non-bank recovery and resolution planning issues

Uncertainty over regulation

European regulations have major strategic and operational consequences for insurers. Uncertainty over Solvency II and IFRS timelines (and patchwork adoption of proposed rules) will lead to implementation differences across the region.

Emerging consumer regulations will challenge traditional models for pricing, incentives and distribution. In response, insurers will need to better understand customer needs, simplify product offerings and offer true multi-channel access.

Insurers must also consider tax changes and adjust their business models accordingly.

Weathering the storm

Despite regional differences, the political and economic climate continues to dampen growth prospects in Europe. In some countries, GDP is returning to pre-crisis levels; in others, another recession is possible.

Also, a prolonged period of low interest rates will affect life and non-life insurers as they struggle to maintain pricing margins and limit the impact on capital and reserves. In this environment, some insurers might increase product prices, a decision which could affect consumer behavior.

Hurricane Sandy’s aftermath

Hurricane Sandy caused an estimated US$50bn in losses, of which insurers are expected to pay out about US$20bn. However, the storm’s full impact is not yet fully understood.

Although it may harden rates, it will also produce big losses for European insurers writing US business -- direct or reinsurance.

Download the 2013 Europe insurance outlook for more insights into this market.