The Deputy Head and Executive Director of Insurance Supervision at the PRA, Paul Fisher, recently spoke about his views on the challenges facing the insurance industry. In particular, he considered the impact of governance, Solvency II, environmental changes, societal changes and insurance innovation as being the next big challenges of tomorrow.

Mr. Fisher was complimentary of the insurance sector and highlighted the importance of it in “fostering a stable economy” but recognised that it will need to be “confronting the challenges of tomorrow”. Naturally, governance is the PRA’s primary focus but Mr. Fisher wanted to differentiate between governance and enforcement and stressed that the outcome of the new senior managers regime for insurers is intended to be effective governance and not enforcement.

Readers will be fully aware of the impact of Solvency II and the role the PRA plays (note the new Regulations, (SI 2015/575). For more information, please see the news section below) but the issue of environmental and societal change is something that is slowly gaining prominence. The impact of climate change on insurers and insureds alike is something the Bank of England is currently looking into as part of a report due to be published later in 2015. Similarly, as technology advances and customers and business are more reliant on advances in information technology, there is an exponential increase in the possibility and impact of cyber-crime.

Mr. Fisher reassures the insurance sector that the PRA will not hinder innovation and recognises that insurers must adapt but insurers must demonstrate that they can mitigate against associated risks. Insurers must demonstrate to the PRA that new risk exposures are well understood and that they have the relevant capital to undertake new ventures.

To view the full speech, please see 
http://www.bankofengland.co.uk/ publications/Documents/speeches/2015/speech804.pdf