The insurance industry is facing unprecedented changes. As policymakers in many countries reshape the rules that govern the industry, supervisors are rethinking their approach. Non-executive directors are facing higher expectations to govern and lead their institutions. Competitive pressures and the financial crisis have altered the landscape globally.
The Insurance Governance Leadership Network (IGLN) provides an opportunity for non-executive directors from large global insurers to discuss with peers – through private roundtable discussions and one-on-one discussions – key issues influencing the future of the industry, including governance, regulation, and risk management. The IGLN also enables dialogue on these issues among senior executives (notably, chief risk officers), policymakers, and supervisors.
Participants in the network are committed to outstanding governance and supervision in support of the mission to build strong, enduring, and trustworthy insurance institutions in the face of global change.
The IGLN is organized and led by Tapestry Networks and actively supported by EY. In addition to providing opportunities for candid dialogue, we publish research on the issues of greatest importance to the non-executive director community in the insurance industry.
Recent network topics:
Aided by technologies like blockchain, sensors embedded in Internet of Things (IoT) devices, and low-cost genetic sequencing, insurers today have access to vastly more information, allowing them to analyze, price, and manage risk with much greater precision. Moreover, a new range of information is becoming available to insurance customers, and many will use it when deciding whether to purchase coverage. All of this is changing both insurers’ and insureds’ relationships to risk. This ViewPoints synthesizes discussions among insurance leaders of ways that richer information could significantly change the insurance landscape, including: shrinking risk pools, micro-segmentation, adverse selection, and the ability to cover risks that had previously been uninsurable. Participants also explored possibilities for insurers to prevent and mitigate risks, complementing their traditional role of covering losses and paying claims.
Competitive pressures are driving insurers to seek the greatest possible advantage from the large amounts of data at their disposal. At the same time, security and privacy concerns are limiting their ability to do so. Regulation and customer expectations are elevating standards for privacy and data governance, and insurers need to develop systems, personnel, and governance policies to meet these higher standards. Yet even while they face greater constraints in how customer information can be deployed, insurers are using big data to improve underwriting, risk management, operating efficiency, customer relations, and product innovation. This ViewPoints synthesizes views among insurance leaders about how best to manage the manage the tug-of-war between deriving strategic value from data and safeguarding consumers’ rights.
Recent trends have placed leadership and talent questions squarely on the table for insurance industry board members, executives, and regulators. Disruptions from technological developments and the emergence of new competitors have brought qualities such as flexibility, adaptability, and speed to the fore, while the traditional virtues of stability and prudence remain important. At the same time, broader trends are posing stark challenges for the leaders of large institutions, including leading insurance groups. As a result, industry non-executives and executives need new skills and new ways of leading. This ViewPoints synthesizes views among insurance leaders about how boards can effectively meet the challenge of finding and developing the leaders who will help the industry survive and thrive in the face of widespread mistrust of institutions, skepticism about traditional forms of leadership, and a rapidly transforming industry.
Data is an increasingly valuable asset. Technology is enabling the creation of more data, improving the ability of financial institutions to gather, store, and analyze it. Protecting that data from cyber-attacks or breaches of customer privacy is imperative. Getting the balance right between managing the risks and grasping the opportunities increasingly requires a strategic approach to data governance and attention from boards of directors. On October 11th and 12th participants in the Bank and Insurance Governance Leadership Networks – directors, executives, regulators, and subject matter specialists – met in New York for the Financial Services Leadership Summit to discuss related issues. ViewPoints synthesizes key themes emerging from discussions, before, during, and after the Summit.
For today’s leading insurers, board-level talent discussions extend far beyond the traditional topics of top management compensation and succession planning, as boards seek to align talent management more closely with business strategy. Insurers have always viewed human capital as an important asset, but formulating the right talent strategy has become increasingly critical as technological developments transform the way the industry works and the talent it requires. At the same time, an impending wave of retirements and the increasing prominence of millennials in the workforce have implications for recruitment, training, and workplace culture. Facing stiff competition for talent from other sectors, industry insiders worry that they may not be able to attract, retain, and develop the workforces they will need. This ViewPoints synthesizes views among insurance leaders about how boards can best meet this challenge and build the insurance industry workforce of the future.
Advancing technology, changing customer preferences, new regulations, and market conditions are propelling significant shifts across the insurance distribution landscape. The need for insurance to be sold more directly and at a lower cost is not new; however, the mandate for change is greater today than in recent memory. Put simply, distribution is taking too much money out of premiums and insurers and customers increasingly believe the current structure does not provide enough value for the money. In this ViewPoints, leading insurers exchange views on how distribution systems may evolve in the near future, as well as how best to modernize distribution systems by addressing possible impediments to change, mitigating risks through the transformation, and providing appropriate board oversight.
An array of challenging conditions, including the accelerating pace of technological change, are making many historical insurance business models unsustainable. As a result, virtually all complex insurers are undertaking massive and often near-continuous transformation efforts. Both transformation and the need to stay abreast of the changing environment demand a different approach to governance. ViewPoints synthesizes discussions among insurance leaders on enterprise transformation and the role of the board.
In the US, the Republican Party now controls the presidency and both houses of Congress for the first time in a decade. This may clear the way for a more pro-business policy agenda; however, populist and anti-business sentiment remains strong and, to date, President Trump has proven to be a highly unconventional leader. A participant summarized, “Whatever rulebook you thought this all played by is going into the shredder. Plan for unexpected events and curveballs.” In this ViewPoints, leading insurers exchange views on the changing US political landscape and the potential effects on US commercial markets and the insurance sector.
In October 2016, Tapestry Networks and EY hosted the Financial Services Leadership Summit, which brought together more than 80 financial sector leaders to discuss the extraordinary changes happening across the financial services landscape. Participants included directors and executives of the largest global banks, insurers, asset managers, regulators, fintech entrepreneurs, and other subject matter experts. ViewPoints synthesizes these and other discussions with participants in the Bank and Insurance Governance Leadership Networks over the second half of 2016. Technology is lowering the barriers to entry for emerging competitors and transforming the way incumbents do business, rapidly altering the competitive marketplace. At the same time, unprecedented macroeconomic and geopolitical conditions, driven by underlying structural changes, are creating a degree of uncertainty about the environment through which leaders must guide these institutions. Regulation will need to continue to evolve in response. A summit participant summarized, “Revolutions only get called with hindsight … We are in a period of accelerated evolution that will be called a revolution in financial services.”
Since the financial crisis, the US insurance regulatory landscape has been in a state of flux. US authorities are working toward more effective and efficient capital regulation that will bring an end to much of that uncertainty. In this ViewPoints, leading insurers and policymakers discuss recent domestic and international progress on developing group-level capital standards, as well as how best to adapt regulation to a rapidly changing industry.
Conversations with dozens of leading insurers confirm not only that board members view organizational culture as an important topic but also that they are increasingly focused on it in the boardroom. Culture is at the heart of many directors’ top risk and strategic priorities, including fostering innovation, managing risk and compliance, selecting CEOs, governing merger and acquisition considerations, and attracting talent. In this ViewPoints, leading insurers discuss the growing role for the board in overseeing and influencing culture, as well as how best to fulfill the responsibility.
Despite years of regulatory reform, insurers now face another wave of new requirements. The European Union’s Solvency II has just come into force, and the International Association of Insurance Supervisors, anticipates completion of the International Capital Standard and additional systemically important insurer requirements by 2020.In this ViewPoints, leading insurers share perspectives on how these regimes may operate or require adjustment in the future, as well as how shareholders and markets may interpret and react to new solvency metrics.
The insurance sector faces one of its most difficult periods in recent memory. Economic, regulatory, technological, structural and shareholder challenges are driving insurers to redesign many aspects of the business and key elements of strategy.In this ViewPoints,leading insurers share perspectives on the outlook for the sector, opportunities in asset management governance, and new models for growth and innovation.Insurers, together with leading banks, also explore broader challenges facing financial services, including market liquidity risks and the need for increasing board-shareholder engagement.
Reputation has long been thought of as the cornerstone of any brand. But in the current environment, reputation has increasingly become not just an asset but also a risk to be managed. For some companies, reputational risk can threaten not just their well-being and but existence. Although reputational challenges have arisen in the past, the viral nature of modern communication has radically changed the dynamic for large public firms. In this ViewPoints, leading insurers share perspectives on why reputation is so difficult to manage and how companies can more effectively govern reputation and its associated risks.
Regulatory risk requirements and the evolution of emerging risk management (ERM) have contributed to a significant maturation of risk management within leading insurers. Despite this progress, boards still wonder if they are prepared to spot the next big challenge, especially in a world where risks seem to multiply exponentially. In this ViewPoints, leading insurers share perspectives on how boards can enhance the governance of emerging risks, along with which emerging risks are most likely to materialize and cause significant harm.
As the world becomes more digital, insurers are faced with important questions about strategy, risk, market and organizational structure, workforce, and culture - issues that, in the final analysis, require the full board's careful attention. Like the technology itself, insurers' understanding of the impact of digitization is evolving rapidly. Despite progress on digital strategies, a tremendous amount of work remains to be done. In this ViewPoints, leading insurers share their perspectives on how the industry remains relevant and how companies can lead in a rapidly transforming world.
Though the post-crisis reform agenda has been underway for many years, insurance supervisors have yet to create a truly common and international language through which to understand complex insurers’ vast operations. Many see global capital standards and recovery and resolution planning as essential elements of this common language. However, making progress on these standards will require addressing significant tensions within existing regulatory frameworks, and meaningful consensus within, and across, the public and private sectors.
Supervision of insurer conduct and the emphasis on outcomes continues to grow. However, little agreement exists on appropriate conduct standards and expectations, or how to achieve the goal of good outcomes. IGLN participants noted that boards and executives are devoting significantly more time to improving conduct and mitigating associated risks. Global insurance directors, executives, and regulators gathered to discuss this new era of supervision and to consider practical approaches for addressing conduct challenges.
Insurance Governance Leadership Network
Chairman, American International Group, Inc.