Transcript Liability Regimes

Paris International Conference on
Risk and Insurance Economics
Strategic Vulnerabilities of the
Insurance Industry
Patrick M. Liedtke
Secretary General
The Geneva Association
www.genevaassociation.org
Key Areas of Strategic Vulnerabilities
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Organisation
Regulation
Finance
Communications
Communication and Image
• Insurance image dichotomy:
– Important increases in economic and financial
performances and reliability due to insurance solutions.
– However, the perception of risks and vulnerabilities – as
a consequence of a higher level of knowledge – has
increased to the point of producing feelings of insecurity.
– Inadequate understanding of the insurance function:
every system needs to be controlled, guaranteed,
and financially protected when it fails.
– Underestimation of the importance of insurance
for the development of a modern society and
economy.
Immediate Insurance
Communication Challenges
• Since 11 September 2001 and the decline of the equity
markets, the industry’s financial strength and reputation has
suffered.
• The industry failed to deliver on some of its promises, in
particular in the arena of life insurance.
• It still has to rebuild its capital base and has to restore
investor confidence.
• The relationship with rating agencies is still tense
and further debates on methodologies and
instruments will have to be solved
Immediate Insurance
Communication Challenges
• The industry’s reputation with consumers and the media has
been eroded, despite a laudable performance in the non-life
sector under difficult conditions.
• The operational environment is changing rapidly and
insurers have to adapt to new processes. Adequate
transparency is needed.
• Insurance regulators and other standard setters will/have
introduce/d tighter frameworks that are more demanding on
companies and have to be explained to stakeholders.
• The investigations of the US State Attorney General
Elliot Spitzer have also effected the industry's
image.
Insurance and
Communication Management
The insurance industry will have to consider more
intensively the follwoing questions:
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What is the role of insurance communication in the public
domain beyond its own operations?
How can and does insurance interact with the global
dialogues in our modern democratic media-driven societies?
Which mechanisms exist to push the understanding and
knowledge about insurance matters in the public space?
What transnational mechanisms exist to lead risk
management, disaster prevention and relief
discussions and are they adequate?
=> Why do we often have such difficulties in leading
public risk debates?
Often Cost Absorbtion of Large
Disasters by the Nation-States, but....
• Regularly no systematic and comprehensive breakdown of
all concerned objects and systems, and especially a neglect
of consequential losses, opportunity costs, and nonmonetised efforts.
• Absence of stock indicators of national wealth and wellbeing: e.g. an earthquake increases GDP in the following
periods due to reconstruction rather than reduce it.
• Prevention and the political economy are often at odds:
wrongly designed decision-making processes,
differences in responsibility and concern, long-term
versus short-term problems, etc.
=> Where is insurance in all this?
Insurance and the modern society
• Need to overcome entrenched misconceptions about
role and function of insurance in a modern economy:
– Functional misconception:
Ignorance about limits of insurability and insurance
methodologies and instruments
– Fiscal misconception:
Misuse of insurance mechanisms to solve financial or
redistributional problems.
– Social misconception:
Misunderstanding of insurance as a mutuality for
the benefit of the weak and socially disadvantaged
Challenge: Insurance Communication
beyond the Immediate
• Pre-Disaster sensibilisation and information is almost as
important as post-disaster communication
• Overcoming the lack of information and understanding
about insurance and risk management in the broader public
is a necessary precondition for efficient media and public
relations work as well as for functioning markets
• Necessarily stronger penetration of insurance issues and
problems in non-sectoral national and international
(financial) organizations (BIS, IMF, WB, OECD etc.)
Paris International Conference on
Risk and Insurance Economics
Strategic Vulnerabilities of the
Insurance Industry
Patrick M. Liedtke
Secretary General
The Geneva Association
www.genevaassociation.org