Global insurance markets outlook for 2012

US property-casualty insurance outlook

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Industry winners will depend on investments in core systems, informational resources and skillful management processes.


Flexible strategies in a fluctuating economy

Ongoing uncertainty over volatile economic conditions continues to impact buyers of insurance products and services, with less than favorable implications for the US property-casualty insurance industry. Global and US economies have fluctuated between slight growth and quick recession, with economic fragility increasing in the last half of 2011.

This low premium growth environment is expected to persist through 2012, adversely affecting insurer profitability and potentially resulting in the fifth year in a row of negative performance. Overall, loss reserves and premium rate adequacies are trending downward, average investment yields are in decline and volatile capital markets challenge effective risk and capital management.

At the same time, the scale and efficiency of insurer operating structures are eroding the ability of many companies to respond to emerging opportunities. As the US property-casualty industry confronts these macroeconomic conditions, it is also challenged by regulation, and an uncertain governance and compliance agenda.

Demanding global and US risk management requirements have not yet been implemented, due to their respective review and comment periods. Nonetheless, it is anticipated that they will require US insurers to measure and articulate risk using new analytical systems that involve substantial revisions to current risk and capital management strategies.

In this environment, insurers should consider strategic approaches that are flexible — capable of responding to economic pressures as they emerge, intensify or weaken. Industry winners will depend on investments in core systems, information resources and skillful management processes.

By better understanding changing insurance buying behavior and demographics, and increasing their reliance on business analytics, insurers can achieve a sustainable competitive advantage.


We believe that five broad needs are emerging to command management's attention:
1 Execute flexible approaches to manage uncertain economic conditions
2 Anticipate, understand and address the impact of prospective regulations
3 Comprehend and act upon changing insurance buying behaviors
4 Increase investments in core systems to bolster growth and profitability
5 Apply business analytics to address difficult top-line growth conditions

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