Transcript insurers represent 40% of banks` market cap In USA: insurers

The road to recovery
The insurance point of view
General statements
The economic crisis has been a result of the financial crisis
The financial crisis has NOT been caused by the insurance
activity
Insurance has performed very differently from Banking
Some investment bank and hedge fund activities could be
considered a key factor in the crisis
Insurers are victims, not drivers, of systemic risk
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Size of the insurance activity within the financial sector
 In Europe: insurers represent 40% of banks’ market cap
 In USA: insurers represent 34% of banks’ market cap
Capital markets(1) represent 55% of the financial sector’s
assets
The hedge fund industry has an estimated USD 2 trillion in
assets under management
(1) Investment funds, pension funds and hedge funds
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Insurance represents only 8% of the assets of the socalled financial sector
114.0
77.0
16.0
Capital markets(1)
Banks
Insurers
USD trillion
(1) Investment funds, pension funds and hedge funds
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Insurance performs differently from Banking
Key differences:
 the insurance contract starts when the client pays the premium
 Insurers do not have non-performing loans
In non life, revenues are the most important factor, not assets
Life Assurance: assets and liabilities are matched, and liquidity is not an
issue
Facts do matter:
 Financial losses in the banking industry have been 10 times more
than insurers’(1) (including credit insurance losses and
impairments)
 Total capital raised by banks since 2007 has been over 20 times
the amount raised by insurers(1)
(1) Excluding AIG
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Facts do matter
Financial losses(1)
Total capital raised(1)
1,700
1,500
x10
x21
170
70
Insurers
Banks
Insurers
Banks
USD billion
(1) Excluding AIG
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Insurance performs differently from Banking
Insurance has never been affected by a systemic risk despite:
– economic crises: years 1973 - 1992 - 2007
– large catastrophic events: Katrina (close to USD 120 bn) and
Ike, Gustav, WTC and Lothar (each close to USD 50 bn)
Insurance needs recognition from:
Lawmakers
Regulators
Society
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Insurance needs recognition from lawmakers
Lawmakers
Resist the easy temptation to increase capital requirements
The largest European insurers (60% of the market) passed the
most severe stress test to date(1)
After all, it’s the policyholders who pay via higher insurance
prices
(1) Required by the Committee of European Insurance and Occupational Pensions Supervisors
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Insurance needs recognition from supervisors
Supervisors
So far supervision has been efficient enough, but the context
has changed
How could it be improved?
 Group supervisors
 with enough power to act effectively
Also important: internal oversight
 Board
 Internal Auditing
 Risk Management
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Insurance needs recognition from society
Society
Why doesn’t society have a positive view of the insurance
industry?
It depends on us, the insurers:
 Insurance is a solidarity-based activity par excellence
 No economic development without insurance
 Are we doing something wrong ?
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The insurance point of view
The economic crisis has strengthened the Insurance activity
INSURANCE: WINNER in the crisis within the financial sector
One of the best-performing sectors of the economy
Demographics mean growth for the industry:
 Health
 Pensions, annuities and other savings products
The emerging markets will drive economic growth
Savings rates grow in times of crisis, and people realize the need for
insurance
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We have to make the most of our opportunity
An excellent opportunity for the insurance industry
The insurance industry is a driver of economic development: over 7%
of the world’s GDP
Insurance can grow even in very challenging scenarios: 3.4%
premium growth in 2008
 Developed countries: +1.4%
 Emerging countries: +21.5%
Insurance remains one of the activities with very attractive growth
prospects
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Some external factors that could determine the future
Europe – new regulations
Solvency II
Capital
Management
Supervision
Basle III
Relationship between Banking and Insurance sectors
Financial-accounting coordination
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Our homework
Distribution is changing, although slowly
Companies will have to meet demand for new products and services
In Non-Life, companies with the lowest combined ratios (claims +
expenses) will be the winners:
 Growing productivity
 Sound underwriting
 Efficient structures
In Life Assurance,
investments
commercial
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drive
and
professionalism
in
Back to basics: the Essence
 Ethics: good practices
 Exemplary managerial behaviour
 Culture of success
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