Challenges and Opportunities of the Global Insurance Industry

Enterprise Risk Management (ERM) is a series of processes used to identify risk, implement strategies to address risk, and monitor impact on the organization. Indeed, an effective ERM will consist of a corporate profile, which is a record of key risks that would hinder the organization in achieving their key objectives (Fraser & Simkins, 2010). Ideally, the risk profile is created as a tool to communicate with the Board of Directors, but may be used as a means of communication with all levels of management (Bethel, 2016). Typically, there are variations of the risk profile based upon the level of management, such as duration, types of risk, and purpose (Fraser & Simkins, 2010).

The insurance industry’s performance is highly correlated with the state of the economy and specifically GDP growth. From the data outlined in this report, it is evident that the insurance industry flourishes alongside the economy where factors such as output, unemployment, and other variables are growing as well. Since the 2008 crisis, the Canadian economy has recovered quite well. One of the key concerns going forward is the current exchange rate of the Canadian dollar. Going forward, as the economy goes into a boom it will be crucial for the insurance industry to reach its potential.

Insurance is an arrangement by which a company gives customers financial protection against loss or harm such as theft and illness in return for premium payments. One of the most important ways that external economic factors are affecting insurance industries is by experiencing a slow pattern in the economy. Insurance companies are affected by lower sales and lower rates of returns on their investments. Companies have to sell certain products for which they have the commitment and the

The Insurance industry is very heavily state regulated. According to the Government Accountability Office (GAO) study, the state run regulatory system is Federal verses State Regulation protecting the markets, insurance industry and policy holders and was evidenced during the financial crisis of 2008-09. The insurance business is highly profitable. “Well-run companies can make a lot of money, which breeds competition” from both “inside and outside competitors” (Property, 2013). Insurance companies were well “insulated” from the “severe” financial crisis of 2007-2008 that affected the banks and security firms, because the State regulations have the Insurance Industry “walled off” from Federal Regulations (Property, 2013). During the “Great Depression of the 1930s” “Insurance policy holders were protected by the states’ prudent supervision and regulation” (Property, 2013).

Since the onset of the financial crisis 2008, the sovereign debt crisis in western economies and the new financial regulation with Basel III coming up, the financial industry faces the challenge of reinventing itself. The ring-fence for Commercial and Investment Banking, and new economic and regulatory capital requirements will determine the kinds of products banks will be able to distribute. It will have a huge impact in the Investment Banking business, which will suffer tough regulation and supervisory procedures. At the same time, credit risk models will be reviewed because they have failed to predict the crisis of 2008. The current financial and economic crisis doesn’t have any precedent in the past.

There are a few firms that give insurers the ratings, the two more prominent ones being A.M. Best Company and Fitch Ratings. These rating systems look at how well an insurance company meets the policy holder's and contract's obligations, what risks a company may have, and how the economy will or may affect business. There are more factors, but the above are the main and are the ones that you should be most concerned with.

The 2008 Financial crisis is indisputably the worst financial crisis in the contemporary era. There is great a number of combining causes that ultimately lead to the collapse of the financial markets. Some of these causes include the slow deregulation reforms initiated in the ’60, the introduction of new, financial instruments which risks were not appropriately understood, and of course the new world wide interconnection occurred through securitisation. This essay aims at explaining the functions and the risks of the financial instruments that were included before the crisis, such as Collateralised Debt Obligations, Mortgage Backed Securities and Credit Default Swaps, understanding the impact of the instruments on the market and exploring their relations in the securitisation process to ultimately understand the extent of the impact of securitisation in the 2008 financial crisis.

In the aftermath were calls for enhanced corporate governance and risk management, with new law, regulation, and listing standards. The need for an enterprise risk management framework, providing key principles and concepts, a common language, and clear direction and guidance, became even more compelling. COSO believes this Enterprise Risk Management – Integrated Framework fills this need, and expects it will become widely accepted by companies and other organizations and indeed all stakeholders and interested parties. Among the outgrowths in the United States is the Sarbanes-Oxley Act of 2002, and similar legislation has been enacted or is being considered in other countries. This law extends the long-standing requirement for public companies to maintain systems of internal control, requiring management to certify and the independent auditor to attest to the effectiveness of those systems. Internal Control – Integrated Framework, which continues to stand the test of time, serves as the broadly accepted standard for satisfying those reporting requirements. This Enterprise Risk Management – Integrated Framework expands on internal control, providing a more robust and extensive focus on the broader subject of enterprise risk management. While it is not intended to and does not replace the internal control framework, but rather incorporates the internal control framework within it, companies may decide to look to

The last contributing factor to the success of car insurance companies is their risk management in making investments. In fact, in 2012, insurance companies had $5.4 trillion in investment assets (Rocca). As previously stated, car insurance companies have only two sources of income: premiums generated by customers and the capital gain from investing those premiums (Hussain). In fact, without gains from investments, many car insurance companies would go out of business. Therefore, it is absolutely essential that these companies are able to invest well to stay afloat. And their investment in these assets is all a big game of risk management.

insurance industry relies on the fact that the number of claims is relatively predictable in a

globalization and regulatory reform, these advances have forced the insurance industry to become more competitive. We will discuss here specifically the split or disruption in the insurance business with a focus on the auto insurance product and less complex personal insurance products. These

As we know, China economic was in high speed growth in last two decades, the result is the Chinese citizens income was in high speed growth as well. The insurance industry was new industry in China twenty years ago, and the large number of population attracted many foreign insurance companies to start business in China, at the mean time, the domestic capital also interested in the insurance market, there are average three new life insurance companies was set up in last ten years, and there are over 50 life insurance companies in China currently. The market competition becomes cruelty, the traditional agency channel to sell insurance product become more difficult. Many banks enter the insurance industry to set up their own insurance company, since the bank have already had their large number of customer, and the bank know their customer’s financial situation very well, so the bank staff is easier to contact the customer and sell the insurance product. So the traditional agent sales process is getting effectiveness.

The insurance has developed into a significant issue in financial miss-selling thus misleading the public they can easily access the credit if they adopt the offered insurance policy. Payment to shareholders and supporting the bank’s activities have always necessitated the need for making profits; this can be traced back to the privatisation of financial institutions. Banks are also seen as disregarding the outlined banking practice resulting to an unregulated banking system (Becker & Posner,2012). The financial institutions are therefore willing to put aside these practices so as to maintain the attractive profit figures as it is the same profits that motivate the financial sector and the people involved.

Japan is the second largest life insurance market in the world after the United States, with approximately 14% or 343.82 billion U.S dollars written in life insurance premiums (Freeman, 2016). The Dai-ichi Life Holdings, Inc. is one of the leading life and health insurance companies in the world with total asset value of $467 billion and insurance premiums reach $40 billion. In addition, the recent acquisition in 2014 of the U.S insurer, Protective, has helped the Dai-ichi Life Holdings, Inc grow in the U.S and expand its oversea life insurance business.

Insurance is a very important factor to attaining financial viability in an economy. It is a very difficult concept that requires a profound augmentative erudition of insurable interests, viable policy holders, risk assessment and management. This essay seeks to provide an overview of insurance; specifically on assessment, measurement and management of both man-made risks and natural disaster risks. The essay further highlights the re-known formulas adopted in measuring man-made risks. In addition to this, it would provide a concise development and challenges arising out of the use of the risk assessment formulas. Finally, the essay will highlight the difficulty, previously arising, out of assessing, measuring and managing natural disaster