Market conditions are the top concern for Bermuda-based insurers, followed closely by regulation and cyber risk.
This is according to the annual ‘Banana Skins’ survey of perceived risks to the sector by the Centre for the Study of Financial Innovation (CSFI) and PwC.
The survey polled more than 800 insurance practitioners and industry observers in 54 countries, including 18 in Bermuda, to find out where they saw the greatest risks over the next two to three years.
The report explained that a “pressing concern in Bermuda was that the current soft market and an excess of capital in the industry threatened conventional business models”.
Arthur Wightman, PwC Bermuda leader and insurance leader, said: “The long-term prospects for insurers and reinsurers are positive as people around the world live longer and have more wealth to protect.
“Yet they also face the disruptive impact of new technology, changing customer expectations, more exacting regulation and enduring economic uncertainty. Insurers’ ability to identify and manage emerging as well as familiar risks will be one of the key differentiators for success in this volatile competitive environment.
”Globally, the top risk for the industry for this year is regulation, which has taken the top spot for the third consecutive year.
“The most striking new theme to emerge from this survey is the high level of anxiety about cyber risk, specifically software failure and data security breaches,” said the report.
“The chief concern is the security of the ever-growing volumes of data that insurers hold in cloud-based storage systems. For many, major breaches are inevitable; the question is how much damage they will cause?”
Wightman added: “Cyber risk is now ranked number three in Bermuda and it is the top concern in the US and UK.
“As an industry that handles large amounts of other people's money and personal data, insurers are prime targets. As a result cyber attacks and data breaches are seen as especially urgent by the industry both from the standpoint of a threat but also as an opportunity.”
“With material losses now in the billions, the demand for insurance to cover cyber risk has risen considerably. Notwithstanding, cyber is also an underwriting risk which has yet to be fully scoped.”
Additionally, underwriting risks also featured higher in Bermuda than they did globally, with one Bermuda respondent calling the threat from climate change to all business lines “huge” and urging the industry to do much more to raise awareness.
Centre for the Study of Financial Innovation, PwC, Arthur Wightman, Bermuda