Global insurance outlooks 2013
The Nordic region (Denmark, Finland, Norway and Sweden) is hardly booming, but certain countries still present opportunities for insurers. Norway should see the strongest growth; Denmark and Sweden are headed for more modest levels; but Finland is on the verge of recession.
Nordic GDP forecasts for 2013 – Denmark: 0.70%; Finland: 0.50%; Norway: 3.10% and Sweden: 1.20%
Several factors are limiting growth. European regulations affect almost every corner of an insurer’s business, from capital and risk management to distribution to product design.
The trend toward greater product and price transparency also pressures margins. At the macroeconomic level, prolonged low interest rates continue to affect the financial resilience of insurers, with a particular impact on capital and reserves.
Given those challenges, insurers in the region can make the most of these low-growth markets by:
- Protecting their market position
- Addressing customer needs as price transparency increases
- Managing the heightened regulatory focus
- Retooling their investment portfolios and investment/insurance risk mix
- Identifying opportunities for cost savings
Transparency around product pricing, costs and consumer benefits continues to increase. Customer expectations are driving this move in part, and meeting their needs with transparent offerings is crucial for success.
Integrating online and offline communication channels is an ideal strategic fit for the Nordic market. Consumers there are highly fluent online and actively research and compare products and prices.
In a market dominated by a handful of regional players, opportunities abound for new entrants to carve out a niche with specialty products. As always, insurers entering new markets should be aware of differences in risks, economics and business cultures.
Meanwhile, established players need to protect their markets against new entrants with strong business development strategies. Looking outward, it might also appeal to larger regional insurers to expand beyond the Nordic area.
Retooling investment portfolios
As insurers de-risk by trimming the equity component of their investment portfolios, they face difficult decisions. The search for yield this year will drive a back-to-basics approach, with insurers swapping investment risk for a redoubled focus on risk selection and pricing.
On the other side of the ledger, insurers will also have no choice but to scrutinize their expenses and identify opportunities for savings.