Page 18 - The Insurance Times October 2021

GlobalData a leading data and industry, because the increase of se- at GlobalData, comments: “Unlike Pru-
analytics company. vere weather events will lead to more dential, Aviva suffered due to its weak
claims and the premium levels required investment returns, especially from its
GlobalData’s recent report, ‘Climate
to cover this increased risk could make UK & Ireland Life business; and man-
Change and its Impact on Insurance
Market – Thematic Research’ reveals large areas of land and the properties age-for-value business in France and
that occupy it uninsurable.” Italy; where its income from invest-
that the US insurance market received
ments dropped by 51%, 70%, and 28%,
$58bn in fire and natural hazard pre-
miums in 2020, while it paid out $59bn UK-based insurance giants respectively.”
in the same year driven by the regu- reported highest top-line To mitigate the lower investment re-
larity of severe weather events across turns and focus more on the UK,
the country. This included wildfires in decline among their global Canada and Ireland markets, Aviva has
California, hurricanes in the South and peers in 2020 been selling off its non-core businesses
severe thunderstorms in the Midwest The top 20 global public insurance com- to channelize the gains for developing
in 2020. panies reported aggregate revenue of its core markets and increasing share-
holders’ return.
The US is already the biggest natural $1,923.9bn, a year-over-year (y-o-y)
Legal & General derives approximately
hazard & fire insurance market in the decline of around 5%, in their top-line
80% of its revenue from investment
world for both incoming premiums and performance in 2020. There were 11
activities. As a result, a 26.1% contrac-
outgoing claims, so the ability of cus- players that reported a drop in rev-
tion in its investment income in 2020,
tomers to keep up with ever-increas- enue and the most notable were UK-
which stood at £39.2bn, as compared
ing premiums to cover the anticipated based insurers Prudential, Aviva and
to £53bn in the previous year, greatly
escalation in claims over the next de- Legal & General, says GlobalData, a impacted its revenue stream. A roughly
cade is questionable. leading data and analytics company. 37.1% drop in gains on financial invest-
Ben Carey-Evans, Insurance Analyst at Most of the top companies were not ments designated at fair value through
GlobalData comments: “The immedi- only affected due to the decline in in- profit or loss and 24% decline in divi-
ate concern for the insurance industry vestment returns, owing to a lower dend income adversely affected the
(and people living in areas of high risk) interest rate environment and uncer- overall investment return of the com-
is whether they are becoming uninsur- tainty in financial markets in the face pany.
able. This could be disastrous for of COVID-19, but also witnessed de- Another major insurer that was im-
homeowners, who will have to take on cline in new business activities and, pacted was Zurich Insurance Group.
the risk themselves and are likely to subsequently, premium income. The insurer’s revenue stream from in-
see the value of their homes plummet. Prudential was mainly impacted due to vestment income almost halved over
This is likely to be a problem replicated a substantial rise in outward reinsur- that in the previous year, reaching
around the world, whether it is areas $12.3bn from $24.8bn, which was
ance premiums, which amounted to
at similar risk in Australia or places at $32.2bn from $1.6bn in the previous owing to roughly 56% decrease in in-
risk of flooding.” year, as it paid the majority of the vestment results on unit-linked invest-
ments related to its life insurance busi-
Climate change action is now an essen- amount to Athene Life Re for reinsur- ness.
tial part of an insurer’s overall strat- ing its in-force fixed and fixed index
The remaining nine players reported
egy. Initially it may have been viewed annuity business. This brought down its
subdued-to-moderate revenue growth
as positive corporate social responsibil- net earned premiums steeply by
with Allianz, China Life and China Pa-
ity, but the ever-increasing nature of around 75%. In addition, a 5% decline cific insurance reporting a y-o-y growth
severe weather events around the in gross written premiums on account
rate of 10%. However, Dai-ichi Life
world highlights how important making of lower new business premiums from
outperformed the top players, with its
changes is to the insurance industry. Asia, and lower sales of fixed annuities revenue growth surpassing 20%, as the
and fixed index annuities in the US,
Carey-Evans adds. “The increased need weaker Yen allowed the company’s
for climate change-related insurance is abetted the revenue decline. returns from its investments to soar
a major challenge for the insurance Parth Vala, Company Profiles Analyst significantly over the previous year. T

18 The Insurance Times, October 2021