Rethinking global strategy

International

Global insurers and reinsurers are seriously rethinking their operating models according to a survey by KPMG International. The survey report, Globalizing the Risk Business , which was produced for KPMG by the London Economist Intelligence Unit, describes the main forces shaping change in the insurance and reinsurance industry as consolidation, regulation, new delivery channels and new customer demands. Companies are clearly thinking very hard about which markets they should be in. Seventy one percent of the 148 senior executives interviewed for the survey said that they had left a market during the past three years by selling their operations, in a bid to opt out of marginal markets to concentrate on their core subsidiaries. This compared with 52% of respondents who said that they planned to enter a new market through acquisition. Drew Fellowes, head of KPMG’s Life Advisory practice in the UK, said that for companies to survive and compete in this increasingly globalised industry, insurance firms must examine their business models and decide where their strengths lie. One of the biggest challenges for insurers is how they manage their global risk to combat the phenomenon of concentrations of risk. respondents cited this as the single most important factor in effectively managing their risk. The concept of allocating capital to the risks run by an individual business unit, which makes it easier to match risk and reward, while making the business units themselves more accountable, is shared by 56% of respondents who said that within three years they would have risk adjusted performance on economic capital embedded into their management reporting procedures.