Evolving rating criteria and global regulatory changes mean insurers will need more capital going forward, it was revealed in an Aon Benfield report, Evolving Criteria.
The trend towards Basel II solvency requirements and similar global frameworks, coupled with proposed fair value accounting provisions, has the potential to drastically change how analysts and investors view and understand the industry.
The report found companies are investing significantly in developing their overall risk management frameworks and internal capital models.
Reinsurance will continue to play an important role in managing volatility as companies seek ways to manage underwriting volatility in the face of increased risk in other areas of the balance sheet and a lower cushion from operating earnings.
Rating agencies are split, however, in terms of industry outlooks, between negative and stable, with rating upgrades and downgrades neutral.
The full report can be viewed here.
