Cutting edge analysis for clear decisions
Tom Durkin, head of insurance consulting at LCP, explains how Covid-19 has led to challenges and successes for insurers, upcoming regulatory issues to watch and how LCP’s InsurSight data analytics platform can help providers
What have been insurers' key concerns to date during the Covid-19 pandemic?
A key concern is the dramatically increased uncertainty, making it challenging to plan and to price risk appropriately. There has also been reputational risk for the industry, for example, following the UK business interruption test case. In LCP's latest annual review of Solvency II reporting, where we look at 100 non-life insurers each year, we highlighted three key risks ("the 3 Cs"): conduct, cyber and climate change. The first two have definitely been further amplified due to Covid-19.
However, it's not all bad news as insurers have shown excellent operational resilience. We have seen seamless remote working and that has really ensured that the industry has been able to continue to service policyholders.
What expertise can LCP offer insurers?
Our team uses cutting edge analysis to help non-life insurers make clear decisions. We work across all areas, with a particular focus on reserving, capital modelling and validation, providing chief actuary services, and supporting business transfers as independent expert. In recent years, we have helped over 70 insurers with building or validating their Solvency II internal models and supported more than a dozen insurance business transfers.
LCP also has a market leading pensions de-risking team, working with insurers to help firms manage their pension risk. Just to give you a sense of that, we've been lead advisors on 40% of all large buy-ins and buyouts valued at more than £500m since 2014.
We also offer wider market insight – into issues such as environmental, social and governance (ESG) and the impact of the pandemic on reserving – through our programme of roundtables and publications.
What have been LCP's key achievements in the insurance market over the last year?
One of our big achievements has been the launch of LCP InsurSight, our data analytics platform for non-life insurers. Following the launch in April 2020, InsurSight is already being used to analyse over £70bn of reserves. It is saving insurers time and helping them to spot trends earlier, by using machine learning to prioritise areas for analysis.
Other key achievements include the strong resilience and client service we have provided in 2020, with excellent client feedback, and our continued investment in our people. I'm really proud of our inclusive culture and diverse team, and how this is driven at all levels across LCP.
What trends will have the biggest impact on the insurance industry in 2021?
For many insurers, 2021 will be a year of two halves, with the change in risk profile, pre- and post-lockdown. We're helping insurers to understand what that means for their risk profile and how they can manage those risks effectively.
Other key challenges for insurers are delivery of Brexit plans; keeping up with the pace of digital transformation; and working out how to reflect ESG considerations in culture and strategy.
Is LCP planning to launch new product or service innovations this year?
We have exciting plans for LCP InsurSight, with powerful new features delivering even greater insight for our clients. This year we will also publish the results of our research on how insurance boards and actuaries can work better together, as well as our annual review of Solvency II reporting for the top 100 UK and Irish non-life insurers.
In terms of regulatory and compliance issues, what are the most pressing for insurers?
A key unknown is Solvency II equivalence for the UK and there is a real desire in the industry for more certainty in that space.
Other areas of focus are those that were highlighted in the PRA's "Dear CRO" letter from the end of last year, including the risk of reserve weakening, exposure management and contract uncertainty. Also, the FCA's pricing review is expected to have a significant impact on the UK retail insurance market.