Eric Galbraith on events surrounding the insurance sector
As we wait to see if the future US leader will endorse more protectionism or tax changes affecting the insurance/reinsurance markets and we contemplate the EU’s desire to review the IMD plus other legal/regulatory changes in the pipeline, I have to wonder what position the UK will or can play in leading the future of our “risk” business environment.
Has the UK moved so far away from the rest with its vast amount of regulation and uncertain fiscal/tax regime that it is regarded as a good example or a bad example?
Whichever it is, stuck between two very different cultures we need to make sure that we retain and develop our ability to provide an attractive commercial environment in the UK which demonstrates leadership and one in which the world’s financial services industry wants to do business.
The general insurance sector is perceived as having only been slightly injured by the global financial meltdown and has been discharged from hospital rather than retained in intensive care like the banking sector. However, this does not mean that there is no need for change in the insurance industry and it should be our opportunity to look at where we need to be and, importantly, where we want to be in the future.
The insurance sector and government must recognise the need to support and promote a sound insurance market. This is something that is described in detail within an article by Carolyn Cobb and Marike Fleur Komen Brady in the latest edition of the Geneva Association’s newsletter, which outlines some principles for promoting a sound insurance market and critical issues for insurance supervisors.
As described by Cobb and Brady, a sound insurance market finances personal and commercial risks with private capital. It promotes economic growth, allocates capital effectively and efficiently, reduced volatility in capital flows, encourages investment and savings, and contributes to global financial stability.
“The insurance sector and government must recognise the need to support and promote a sound insurance market.
Eric Galbraith
That same newsletter also carries an article by Brian Atchinson, entitled ‘self regulation and the insurance industry – a viable proposition’, which talks about the development of the Insurance Marketplace Standards Association in the US. It is with a wry smile I reflect on how the good ship SRO has long since sailed for the UK insurance industry, thanks to EU regulation and its implementation by the UK.
For the UK four years of regulation has at best seen a requirement for minimum standards for all but it has not created an environment for the promotion of greater professional standards from within.
I began by mentioning the new leadership in the US and have just begun to read Barack Obama’s latest book entitled ‘The Audacity of Hope’. Like 2009, I do not expect the book to be a bundle of laughs, but I hope that it will prove inspirational.
There needs to be a desire to change things for the better and an engagement from everyone to try to make things better. While government can and must help by taking a fresh look at how it might support and promote the insurance sector I believe all within our sector must focus on straightforward fundamentals, such as professionalism, best practice, education, underwriting and sound risk management skills. We as an industry need to be prepared to invest time, effort and resources in this. The regulator and Government, however, must reciprocate with regulatory benefits and support.
Unfortunately, for many in 2009 survival will be the only objective but our current tough economic environment should really be the catalyst for a recognition of and a return to sound fundamentals. We need to ask ourselves what kind of insurance industry we want in the next five, ten years ahead and work to ensure that we are in the best possible shape to take advantage of the recovery when it does finally come. That way we can ensure that the insurance industry retain its position as a leader both nationally and internationally.
That is the audacity of leadership.
