In the next five years, the reinsurance business will experience a tremendous transformation due to the more complicated risk environment. Consider, for example, how GIC Re indicates that the intersection of various global issues will determine some of the important trends in the sector.
In a world where globalization is becoming more and more interconnected but fragmented, cyber risks are expected to become exponentially larger. At the same time, any geopolitical turbulence or sanctions in the supply chain will serve as an additional change in terms of exposure models. The scale of the climate risk is now widely acknowledged and as far as there might be political inactivity, then reinsurance business will only get more involved in control of such risk.
ESG Integration in Reinsurance
It is anticipated that these converging pressures are giving results in increased demand of reinsurance and subsequently give rise to the development of specialized products and innovations, increased use of parametric solutions, increased risk modelling and analytics, more public-private collaborations and more focusing on ESG integration. The industry is likely to adjust to a more complex and unstable risk environment in the next five years.
The adjustment of changes in regulation, including those concerning digital policies, climate risk, and customer-oriented models, will also be essential. GIC Re observes that the logical reaction to the rising regulatory complexity is the fortification of the regulatory structure, and regulatory risk becomes a fresh element of the enterprise risk management.
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Automation in Risk Management
A more comprehensive method of identifying, evaluating, and eliminating regulatory risks is thus necessary. Positively, regulators around the world are embracing a more participative and cooperative manner of doing things, which is an appreciation of the dynamics of the reinsurance business.
In the case of the industry, before competitors can foresee the new trends, taking the initiative to communicate with the regulators will be important in shaping the efficient and balanced regulations. In addition to compliance, automation and data analytics should improve efficiency, demonstrate potential, and create a competitive advantage.
For instance, GIC Re also determines the largest risks and threats that the Indian reinsurance industry will encounter within the next five years. The frequency and severity of natural catastrophes are increasing and due to climate change, more claims will be increasing with potential volatile underwriting outcomes.
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Cyber Risk Management in India
The Indian cyber risks will be enhanced by the rapid technological developments. Also, the trend of foreign direct investment that the government is promoting is likely to raise the market capacity and competition in the years to come. It is essential to keep and attract talented professionals, and the vision of IRDAI of ‘Insurance to All by 2047’ is a challenge and an opportunity.
As an example, GIC Re is keen on tracking and researching these challenges and considers that its long-term experience and good relationship in the Indian market gives it a unique advantage in eliminating these risks.
About The Author:
Ramaswamy Narayanan, Chairman and Managing Director of General Insurance Corporation of India. He started his career in GIC Re in 1988, with more than three decades of experience in multiple functions. During his tenure, he led the international growth, portfolio rationalization, and international credit rating improvement. His stewardship during periods of significant adversity reasserted GIC Re's leadership role as a top-tier global reinsurer. He has earned his reputation for integrity, strategic insight, and excellence in the insurance business.
