Regulators warn insurers about complicated post-pandemic conditions

My Chi To, Executive Deputy Superintendent of Insurance, Department of Financial Services, State of New York, explains why insurers should be wary about making rapid changes to their business models after the impacts of Covid-19.

Insurance Investor Editorposted on Wednesday, February 23, 2022

My Chi To, Department of Financial Services, State of New York

The changing nature of doing business during the pandemic has ladled pressure on insurers to move swiftly with their investment plans, says, My Chi To, from the State of New York.

In the current climate, she says that bodies such as regulators are now focused much more on issues such as inflation, interest rates and supply chain disruptions. New Deloitte research listed insurers’ largest burden for 2022 as regulatory pressures.

The pandemic may have created new challenges, but it also highlighted existing issues

In a recently released Clear Path Analysis report, Insurance Asset Management - North America 2022, several market experts from insurance groups including Sunlife, Mercer, Liberty Mutual, and AllianceBernstein, explore issues around good asset management in the post-pandemic world.

To says the pandemic may have created new challenges, but it also highlighted existing issues. “We have moved successfully towards a virtual business environment, but it has heightened cyber risk and data protection issues, which were all very important before the pandemic and even more so now,” she explained.

Despite all the hype around technology, including Artificial Intelligence and machine learning, the financial services industry is still in the early stages of developing and incorporating these tools

She stated these as the risks that keep business leaders and regulators alike up at night. “The pandemic has accelerated the embrace of technology. But despite all the hype around technology, including Artificial Intelligence (AI) and machine learning, the financial services industry is still in the early stages of developing and incorporating these tools,” she added.

There are questions about the long-term impacts of Covid-19, and the US government’s response, on the economy

Despite this infancy of adoption, the challenge, To stated, actually lies in not going too fast with the implementation. “From a regulator’s perspective, we implore the industry to invest in the responsible development and use of these tools and to work in partnership with regulators in this process.”

To added that there are obvious questions about the long-term impacts of Covid-19, and the US government’s response, on the economy.

“From a regulatory perspective, we are focused on issues such as inflation and interest rates, however, it is still too early to tell what the ultimate impact is going to be.”

ESG presents challenges and opportunities, especially in the areas of investments, and talent acquisition and development

Highlighting the regulator’s fears is US inflation at a multi-year high. According to the US Department of Labor’s Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6% in January 2022 on a seasonally adjusted basis. “Over the last 12 months, the All Items Index increased 7.5% before seasonal adjustment. This is the highest rate of inflation since February 1982.” The next inflation update is scheduled for release on March 10.

“In addition, the political environment has seen many changes,” adds To, “with a lot of uncertainty ahead over policy. Lastly, ESG presents challenges and opportunities, especially in the areas of investments, and talent acquisition and development.”

To learn more about this issue and others facing insurers, read our report Insurance Asset Management North America here.

 

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