A spot of doom and gloom to brighten up your Friday
This week Alex Wise tries to balance out some less that uplifting stories and apologises it he doesn’t quite make it!
Accessibility and affordability
The issues of accessibility and affordability are certainly not new to the insurance industry but this is back in focus with the publication of a survey by the Chartered Insurance Institute that reveals over 60% of its members had been contacted by their customers because they could no longer afford to pay their premiums. With the economic fallout of the pandemic impacting on consumer finances, the role of intermediaries in helping customers understand the implications of no cover and finding the solutions that reflect their circumstances and needs has never been more crucial. The CII rightly celebrated the actions of firms helping customers to retain the much-needed cover. Adapting and responding to the circumstances that their customers find themselves in is another important step for firms both reputationally and in demonstrating their value which will no doubt be of benefit in terms of renewals.
M&A in the air
A flurry of merger and acquisition activity this week included news of the acquisition of insurTech flagbearer Brolly by Direct Line Group along with Jensten Group and PIB adding to their stables. The UK broker M&A market is predicted to accelerate as the country moves out of lockdown. Insurance Age reported that Marsh Networks was seeing a restarting of deals that had stalled in the wake of the pandemic but also new brokers coming to the party and those looking at MBOs or disposals of books. With the pandemic fuelling a rethink in terms of business and operating models, the predictions are more than likely to come true. The only potential fly in the ointment could be the outcome of the Chancellor of the Exchequer’s call for a review of Capital Gains Tax rules with some investors fearing this will become a “tax grab” to help offset the public expenditure that has accumulated during the pandemic.
Emerging markets under pressure
The highly regarded sigma research published by Swiss Re Institute provided some thought- provoking insights into the world of risk and insurance in the Middle East & Africa region. At Full Circle we are increasingly working on communications projects with clients operating across the various African insurance markets. These are exciting and strategically important areas of growth, a fact borne out by data in the recent “World insurance: riding out the 2020 pandemic storm” sigma report, where Swiss Re Institute estimated that premiums in several markets in Africa grew at double-digit rates in 2019.
However, as the Middle East Insurance Review reported, the sigma report highlights that the non-life sector will suffer from the pandemic-induced recession with sectors like oil exporters in countries such as Nigeria and Angola being hardest hit where the pandemic is likely to compound pre-Covid-19 structural and financial resources issues. They also predict challenging times for marine and credit lines as domestic lockdowns continue, commodity prices collapse, travel and tourism are curtailed and there are outflows of capital.
Bracing for the second wave
The spectre of a second wave of the pandemic now feels like it is going to manifest into a distinct possibility. Insurance Journal reported on rating agency S&P sounding the alarm bell that the resilience of insurer ratings seen over the first half of 2020 could be under threat from a second wave that could further erode capital. But it sounded a more positive note with its expectations that firms’ top lines and earnings will recover during 2021-2022 and non-life pricing will continue to improve and a stable demand for non-discretionary lines of business.
With thanks this week to:
FT Adviser - https://www.ftadviser.com/protection/2020/07/14/clients-struggle-to-afford-insurance-premiums/
Professional Adviser - https://www.professionaladviser.com/news/4017791/chancellor-sunak-review-capital-gains-tax
Insurance Journal - https://www.insurancejournal.com/news/national/2020/07/14/575464.htm
Middle East Insurance Review https://www.meinsurancereview.com/News/View-NewsLetter-Article/id/72598/type/Africa/Africa-Insurance-markets-of-oil-exporters-expected-to-be-hardest-hit-by-COVID-19