Over half of the insurance respondents in our Opportunities in adversity survey say they plan to diversify their businesses and develop new product lines in the next year.
The financial crisis and recession are chilling reminders that extreme risk events can catch even well-prepared executives off balance.
While most insurers were less affected by the financial crisis compared to other financial institutions, they still need to concentrate on three main areas:
- Reassessing modeling and hedging strategies
- Adopting sustainable cost-reduction programs
- Facing the changing landscape of demographics and regulation
For the past 18 months, we’ve been talking about financial turmoil, the lessons that insurers have learned and the challenges ahead. Our conversations reveal that insurance executives were less surprised by the speed and severity of the downturn than those in other industries, and are more optimistic about the economy.1
Chart S&P Sector Indices vs. S&P 500 Index
Property and casualty insurers generally did not suffer major losses. Life insurers, however, suffered from weakened life insurance investment portfolios and a consumer shift from variable products to more traditional products.
Overall, life insurers were more exposed to the financial crisis than property and casualty firms. Investor reaction: From June 2008 to June 2009, Standard & Poor’s Life and Health Insurance Index decreased by 52.1% while its Property 6 Casualty Insurance Index decreased by only 33.6%.
Looking forward
Regardless of their experience in the crisis, survey respondents in Opportunities in adversity expressed an overwhelming need to take quick action. Read on to learn what other leaders in the insurance industry are doing to protect and improve the performance of their businesses.
1. All survey data referenced within this report, unless otherwise noted, is from Ernst & Young’s
Opportunities in adversity survey.
