Insurers can turn the tide in their favor by indulging in product innovation, re-pricing of current products, diversifying their portfolio, tapping into tax benefits and utilizing the harmonization feature of Solvency II
Dallas, Texas (PRWEB) March 22, 2013
Bancassurance – the sale of retail insurance products to a commercial bank’s client base, also known as the ‘Bank Insurance Model’ (BIM) – has evolved different models since its origins in the European Union (EU) in the mid-1980s. The classic European model is an integrated one, with common ownership or some form of exclusive commitment between the insurance provider and bank distributor. In the US, the model involves almost total separation between the two, while in many emerging markets in Asia-Pacific, where foreign insurers compete for shelf space on the limited number of domestic bank distribution platforms, a third structure is evolving.
Bancassurance growth differs significantly between geographical regions says the report @ http://www.reportsnreports.com/reports/228588-2020-foresight-bancassurance.html.
In the US, despite early indications that bancassurance might achieve market penetration levels in life insurance comparable to the one-third share it has in Europe, US banks have struggled to achieve a market share of 2% and essentially offer a range of third-party insurance products to provide choice to their clients. In contrast, in the booming markets of Asia-Pacific and Latin America, the market shares of the bancassurance channel are rapidly approaching European levels. In Latin America, the demand for pension products and simple savings oriented life insurance products are the main drivers, whereas in APAC, growth is fostered by life insurance, protection, endowment, health and pension products.
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The recent financial crisis of 2007-9 has had a traumatic impact on global bancassurance in terms of sales as well as long-term durability of bancassurance links has also been affected. While the overall durability of joint ventures and ownership links has historically been quite positive, the crisis has not only seriously damaged leading bancassurance competitors such as Fortis, KBC and ING, who have been forced to retrench by massive asset losses, but has also driven many to divest themselves of banking or insurance affiliates because of a need for capital in the downturn. The recent EU decision to order the divestiture of ING’s insurance businesses is a good example of this.
Assessing Solvency II: Challenges and Opportunities for the Insurance Industry (http://www.reportsnreports.com/reports/228585-assessing-solvency-ii-challenges-and-opportunities-for-the-insurance-industry.html)
The Solvency II Directive can be considered the ‘gold standard’ in insurance regulation and is also being looked upon as a global benchmark in insurance regulation due to its comprehensive scope and structure. The short-term impact on life and general insurance business is likely to be negative. Significant capital charges for risky and volatile assets with high yields are expected to drive changes in investment policies. Sovereign bonds will gain more exposure and replace high capital charge assets, rendering some of the products obsolete and unviable.
Solvency II requirements pose significant challenges
The complex nature of calculating solvency capital requirements, marketing consistent treatment of balance sheet items and integrating risk management in central business processes will exert immense pressure on the current structure and will increase the cost of specialists required to handle business models efficiently and in compliance with the new norms. It will also require reliable data and IT infrastructure, adding further pressure on company resources and budgets.
Despite the cost shock to insurers in the short run, if carefully designed and implemented, it will enable firms to analyze product profitability on a consistent and continuous basis. Eventually, it will also uncover many opportunities for cross-selling and expose loopholes in an insurer’s portfolio that can be replaced by new feasible products. Insurers can turn the tide in their favor by indulging in product innovation, re-pricing of current products, diversifying their portfolio, tapping into tax benefits and utilizing the harmonization feature of Solvency II, and changing their business strategies to carefully include mergers and acquisitions (M&A) and other cost optimization activities.
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Europe to Show Implementation Path as Key Regions Move Towards Equivalency but Refrain from Complete Adoption
Most European countries are not prepared to adopt the project fully and the current deadline of 1 January 2014 is expected to be breached again. Major countries in the American and Asia-Pacific regions are also going through structural changes in their regulations and are observing developments in Europe carefully. Most of the companies operating in these regions will be directly or indirectly affected by the regulation changes in Europe. Although none of the countries have indicated full adoption of the Solvency II regime, most Asia-Pacific countries are moving in the same direction with norms similar to Solvency II already in place or proposals to do so.
Explore more regional as well as global reports on the Insurance Industry @ http://www.reportsnreports.com/tags/insurance-market-research.html.
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