Regulatory overkill is identified as the greatest risk facing the insurance industry according to a survey

Excessive regulation is endangering the industry by loading companies with costs, distracting management and creating barriers to competition and innovation, according to the results of a recent survey.

And the CSFI survey quoted the chief executive of a major UK life insurer as saying: “Regulation is becoming ever more intrusive, time-consuming and box-ticking. This is despite the rhetoric about principles-based regulation.”

David Lascelles, the survey’s editor said: “Over-regulation is clearly a major issue for a large part of the finance sector, not just banking. It also appears to be a global phenomenon.”

Jeremy Jensen, partner, PricewaterhouseCoopers LLP, said: "The focus on regulation will only increase over the next few years, as insurers face a number of new demands, not least the coming overhaul of financial reporting and Solvency II. A key challenge is to develop effective risk management systems which can provide both compliance and also improved business execution."

Other high level risks identified by the survey include natural catastrophes and climate change, where insurance losses for the property and casualty sector are rising fast, particularly in heavily populated areas. The main risks facing the life insurance industry include growing human longevity and the soundness of assumptions going into the pricing of life policies.

Respondents said that insurers were striving to maintain revenues by taking on extra risk, cutting prices and loosening the wording of insurance contracts. And this has raised concerns about the profitability of the industry and the risk that insurers will be exposed to risks that could take years to materialize, long-tails.

More than 80 per cent of the insurance industry respondents in the CSFI’s latest Banana Skins survey, in association with PricewaterhouseCoopers LLP were senior executives or directors and a total of 139 companies were interviewed.