Consolidation going global: Hawker
The impact of the new Solvency II legislation in Europe will lead to massive global consolidations in the insurance industry, according to IAG CEO Mike Hawker.
Speaking at last week’s Steadfast Convention in Adelaide, he said Australia’s risk-based prudential regime is different from the rules in force in the US and Europe.
Solvency II is designed to facilitate the development of a single market in insurance services in Europe. Mr Hawker believes this will lead to a “common view of the valuation of companies”, which is happening at the same time as the international accounting standards are being examined to see how companies record their profits.
“A combination of these will lead to a better uniform way of valuation in insurance companies internationally, and will lead to a series of international consolidations,” he said.
“The global recognition of risk-based banking 20 years ago in the global banking industry led to massive global consolidations of the banking industry.”
Mr Hawker expects the global consolidation to begin in the next three to five years.
He also warned that premiums “must go up for property-based insurance, particularly on the retail side. Increases in the occurrence of storm activity have essentially reduced earnings dramatically.”
Associated increases in motor claims and supply chain difficulties are also having an effect on insurance companies “across the property/casualty side of the business”.
Speaking at last week’s Steadfast Convention in Adelaide, he said Australia’s risk-based prudential regime is different from the rules in force in the US and Europe.
Solvency II is designed to facilitate the development of a single market in insurance services in Europe. Mr Hawker believes this will lead to a “common view of the valuation of companies”, which is happening at the same time as the international accounting standards are being examined to see how companies record their profits.
“A combination of these will lead to a better uniform way of valuation in insurance companies internationally, and will lead to a series of international consolidations,” he said.
“The global recognition of risk-based banking 20 years ago in the global banking industry led to massive global consolidations of the banking industry.”
Mr Hawker expects the global consolidation to begin in the next three to five years.
He also warned that premiums “must go up for property-based insurance, particularly on the retail side. Increases in the occurrence of storm activity have essentially reduced earnings dramatically.”
Associated increases in motor claims and supply chain difficulties are also having an effect on insurance companies “across the property/casualty side of the business”.