2019 Insurance Industry Outlook.pdf

2019 Insurance Outlook Growing economy bolsters insurers, but longer-term trends may require transformation2019 Insurance Outlook: Growing economy bolsters insurers, but longer-term trends may require transformation2Brochure / report title goes here | Section title goes here 02Where do insurers stand as they enter 2019? 1Technology trends: Insurers appear poised to leverage cloud, blockchain 4The future of work: Adaptation strategies becoming more important 7Product development trends: IoT, InsurTech can enable more flexible policies 9Merger and acquisition trends: Insurers getting mixed signals 11Regulatory trends: Focus broadens from solvency to market conduct 14Cyber risk trends: Regulations expand globally 18Privacy trends: New rules put insurers in the hot seat 22Tax reform: Early results positive, but long-term impact uncertain 27Where do insurers fit in an evolving economy and society? 29Table of contents2019 Insurance Outlook: Growing economy bolsters insurers, but longer-term trends may require transformation1Where do insurers stand as they enter 2019?Sustained economic growth, rising interest rates, and higher investment income are among the positive factors that appear to be bolstering insurer results in 2018, setting the stage for enhanced top- and bottom-line growth in the year ahead.1 The US property and casualty (P&C) side of the business got off to a particularly good start in the first half, with net income more than doubling compared to 2017 (see figure 1).2Although global consolidated figures for 2018 will not be available until the middle of 2019, data for the end of 2017 suggest that the non-US insurance industry is also growing, but perhaps not as quickly as its American counterpart, likely due to faster US economic expansion and lower unemployment. In the P&C sector, US premiums written grew 4.6 percent in 2017, the highest percentage in the past decade,3 before jumping by 12.7 percent in the first half of 2018.4 Growth is not nearly as robust globally—indeed, Swiss Re’s Sigma reported that advanced markets, even including the faster-rising US region, saw premium growth of just 1.9 percent last year.5 Although premiums increased at a much healthier rate of 6.1 percent in developing markets, that figure was down from 2016’s 9.8 percent, thanks largely to China’s growth rate being cut by half to 10 percent.6 US P&C carriers have seen their insurable exposure base continue to expand for both personal and commercial lines, likely thanks in part to faster GDP gains, a shrinking unemployment rate, and higher consumer spending. But there has also been some luck behind improving results, as insurers enjoyed a welcome first-half respite from record natural disaster losses—down globally by one-third to $17 billion compared with the same period in 2017.7 This should cushion the financial hit from second-half catastrophes, such as Hurricane Florence, which caused major flood losses but perhaps $5 billion or less in insured damages, and Hurricane Michael, where insured loss estimates ranged between $4.5 billion and $8 billion as this report was compiled. Reinsurers in particular seemed to have regrouped, with the Reinsurance Association of America reporting first-half net premiums up by one-third and the combined ratio a profitable 96.1.8 a Disclaimer Notice: “Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party. 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Credit ratings are statements of opinions and are not statements of fact.” Source: Deloitte analysis of consolidated industry results from S&P Global.aCopyright © 2018, S&P Global Market Intelligence (and its affiliates, as applicable)P&C insurer benchmarks improving in first-halfFigure 1. 2018 first-half US P&C industry resultsMetricP&C sector, 1H 2018 resultsNet premiums written Increase of 12.7%Underwriting results 300% turnaround, from a $3.7B 2017 loss to $6.7B gainCombined ratio Improvement from 100.8 to 96.4Net investment income Grew 12.2%Net income More than doubled to over $34BConsolidated capital and surplus Rise of 6.5% to $772B 2019...