The financial strength of the insurance market remains strong, but we believe that it could improve reporting by including smarter sensitivity testing, more detail on how firms are their managing emerging risks, and show how well they understand their business.
LCP’s sixth annual analysis of Solvency II reporting from the top 100 UK and Ireland non-life insurers shows that while the global pandemic continues to be a key area of focus for firms, there is naturally less emphasis in this year’s reporting as the world adapts to a “new normal”. However, the emerging risks arising from inflation concerns and the Russian invasion of Ukraine are new features this year.
- Insurers continue to be well capitalised with eligible own funds ratios averaging 206%.
- Total aggregate investments and cash has increased by £8bn to £199bn over 2021.
- 78% of firms mention the Russian invasion of Ukraine, with the main sources of risk being the immediate impact on insurers with exposures in the area, and downstream effects on the economy, heightened cyber threat, and changes to societal attitudes and behaviours.
- 77% of firms mentioned inflation within their discussions of risk, but fewer than half noted it as a key risk, and 15% of SFCRs did not mention inflation at all.
The insurance industry continues to be financially robust as it emerges from the effects of the pandemic. However, the firms do need to make sure they pay full attention to the emerging risks of volatile inflation, and the effects of the Russian invasion of Ukraine.
How we can help
We work with insurers to help them better understand and manage the risks they face and their capital requirements.
We help organisations to unlock business value from their Solvency II processes.
We provide an alternative, external view on the best estimate level of reserves for insurers and also help them understand the key drivers of variability around that best estimate.
LCP InsurSight is an analytics and automated trend identification tool for general insurance companies.
We help our insurance clients to develop strong links between their strategy, capital management and risk management processes, improving their chances of business success.
Our business-focused approach to validation can help you be confident that your insurance models are robust, and that you are meeting regulatory requirements.