International

Tough times, but not too bad for insurance industry

The global insurance industry is facing difficult times but the sector is not undergoing a systemic crisis, according to market research firm, Datamonitor. Jonathan Steiman, an analyst on Datamonitor’s Financial Services Technology team, the main reason why insurers are better placed than banks in the current crisis is due to the tighter regulatory regime to which the insurance sector is subjected as well as sound portfolio management by the majority of players. He pointed out that AIG, which has been the only major casualty in the insurance sector to date, was felled by a small group writing credit default swaps, not its insurance business. Therefore, its situation is exceptional, rather than a sign of things to come. Insurance IT budgets should be more stable than those in the banking sector, “with neither robust spending or dramatic budget cuts likely to materialize, and spending priorities shifting toward risk management and compliance”. He noted that the financial services sector still faced a number of uncertainties, with the ongoing crisis now spilling over into the wider economy.