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AXA Future Risks Report: what are tomorrow’s risks?

A pessimist guide to tomorrow’s greatest threats

 

For the last 7 years, AXA has published its AXA Future Risks Report. This year, they partnered with IPSOS and the geopolitical analysis firm Eurasia Group. The study was led in July 2020, in the middle of a worldwide pandemic, and interrogated risk experts and citizens around the globe.

Obviously, given the context, the pandemic risk is the center of attention. Although last year it was clearly overlooked and ranked at the 8th place in the future risks ranking, this year the risk experts put it as 1st risk for the next 5 to 10 years. The two following risks are climate change and cyber security.

Axa Future Risks Report 2020

 

1. The impact of pandemics and infectious diseases

Indeed, unless you have been living under a rock for the last 9 months, you are aware we are in the middle of a worldwide pandemic. Logically, this reflects in the risk experts’ concerns, as the number of them that ranks pandemics as a major emerging risk more than doubled, from 23% to 56% compared to 2019.

However, pandemics and infectious diseases are not just the top emerging risks because of the very current and tangible threat to the general population’s health. The lockdown and the Covid-19 have had important consequences and impacts. Indeed, the spiraling public debt, the escalation of geopolitical tension, growing mental health issues and surging inequalities are other risks that were accelerated by the pandemics. Furthermore, the public attention, both from governments and citizens, dedicated to the coronavirus crisis will likely steal the thunder of other major but less imminent threats, steering even more other underrated risks.

 

2. Climate change

Last year, climate change was the number one risk according to risk experts worldwide. This year, it has been overshadowed by the current sanitary crisis and is now 2nd in the risk perception ranking.  It seems that the short-term issues have overshadowed the longer-term threats as Thomas Buberl highlights. This observation is even truer for the regions thar are the most polluting and most at risk of climate change consequences: Asia and Americas. Indeed, in North America, for instance, the share of experts worried about climate sunk from 71% in 2019 to 46% this year.

 

3. Cyber risks

Cyber security is still considered as one of the major risks for the next 5 to 10 years, although it lost one place in the ranking (from 2nd to 3rd). Surprisingly, or not, the lockdown has cyber security needs.  Remote working is the new normal.  The use of online devices and systems for both private and professional communications has increased the points of cyber vulnerability. Additionally, homeworkers may also be using personal devices, which, unlike office equipment, may not be configured with the latest cyber defenses.

Working remotely also means less fluid communications between teams or departments, hackers tested the limits during the lockdown, and from February to March 2020, the number of phishing e-mails has increased by 667%, as revealed by Infosecurity Magazine.

 

4. Overlooked risks

Last year, pandemics and infectious diseases was one of the overlooked risks, but as we all know, it turned out that the risk was way higher than foreseen by the risk experts. What are the current risks that might be overlooked?

  • Mental health issues, rates of mental health issues are higher than ever, and the lockdown took a toll on mental public health.
  • De- and mis-information, specifically in the period of elections in various region of the globe
  • Advanced technologies and the use of AI, as well as deontology and ethics in the use of AI and big data. Even Elon Musk is worried about that ! Furthermore, Nancy Bewlay, Global Chief Underwriting Officer of AXA XL adds “Advanced technologies, such as AI and machine learning, are increasingly being used to predict the future. There’s a real risk that these predictions will be wrong or biased if the models are incorrect or are not based on enough data.”
  • Finally, as the focus is on Covid-19 regarding health issues, experts are less concerned about antimicrobial resistance and superbugs, this risk tumbled from 29% last year to 9% this year. There may have been a decrease in the perceived severity of antimicrobial resistance, but it still has the potential to create a future health crisis. The report states “Global spread of bugs’ resistance to common antibiotics could dramatically raise the risk level of common healthcare treatments such as chemotherapy, organ transplants, caesarean sections, and hip replacements. This would not only prolong illness but also significantly increase the cost of healthcare. The impact of these risks may be less sudden than a pandemic, but the long-term effects have the potential to be equally devastating.”

 

5. Towards more interdependent risks

Finally, the AXA Future Risk report highlights the fact that risks are more and more connected and interdependent. The current pandemic exemplifies how they are global, complex, and, therefore, difficult to address. Indeed, the pandemic impacted health (obviously), macroeconomic, debt, poverty, mental health…  This interlinking requires a global, interdisciplinary, and multi-stakeholder approach to prevention and protection. Another good example of that is the impact that the misinformation and spreading of fake news can have on other risks’ perception (climate change, pandemic…). As one of the experts who answered to the study put it “Perhaps the biggest emerging risk is our ever-reducing

 

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Le monde de l’assurance voit rouge: impacts de la pandémie sur les résultats financiers

Les groupes d’assurance commencent à publier leurs premiers résultats pour ce premier semestre plutôt troublé, c’est l’occasion de jeter un œil en arrière et de voir ce qu’il en est.

La plupart des assureurs présentent des résultats financiers semestriels en berne, ayant subis de plein fouet les effets de la pandémie. En effet, l’incertitude et instabilité financières et économiques, et la volatilité des marchés financiers et la dépréciation des actifs qui s’en est ensuivi, ajouté à l’interruption des activités commerciales due au confinement, en plus de la foultitude d’annulations d’événements et de déclarations de perte d’exploitation, ont considérablement impacté négativement les compagnies d’assurance.

Groupe AXA 

Le groupe a annoncé un recul de son chiffre d’affaire de 2% (€52,4 milliards pour la premier semestre 2020), avec un premier trimestre stable et un deuxième trimestre en chute. Sur les primes acquises, on note un plus important recul sur le portefeuille vie (-8%) que sur le portefeuille non-vie (-1%) sur cette première moitié de l’année.

La filiale française a également publié des chiffres en recul, avec une baisse du chiffre d’affaire de 6%, équivalent à un total de €12,6 millions, par rapport à la première moitié de 2019. De même qu’au niveau groupe, on note une disparité entre les branches : -3% pour le portefeuille IARD, -14% pour le portefeuille vie et enfin, seul bonne nouvelle au tableau, +10% pour la santé-prévoyance.

 

CNP Assurances 

Le groupe d’assurance français a également publié des chiffres en baisse avec un recul de leur résultats net de 8,5%, atteignant ainsi €629 millions, pour un chiffre d’affaire en baisse de 32% par rapport à la même période l’année passée. Au niveau de la filiale française, on notera un recul de 36,5% du chiffre d’affaire pour ces six premiers mois de l’année, ce qui revient à un chiffre d’affaire de €7 185 millions, avec notamment un recul important des activités de vie, épargne et retraite, cette branche ayant enregistré une baisse de 44,2%.

 

Crédit Agricole Assurances 

La branche assurance du bancassureur a, tout comme ses concurrents, enregistré une baisse de son chiffre d’affaire. Au global le chiffre d’affaires de Crédit Agricole Assurances s’élève à €14,5 milliards au 30 juin 2020, en baisse de 28,8% par rapport à la première moitié de 2019. Le groupe a estimé que l’impact du COVID sur leurs activités leur avait coûté aux alentours de €140 millions.

 

Allianz 

Le groupe allemand a annoncé un résultat net du groupe en recul de 28,8% avec un chiffre d’affaire s’élevant à €73,5 milliards. Lorsque l’on regarde de plus près, Allianz a connu un premier trimestre plutôt stable, tandis que l’impact de la pandémie et des catastrophes naturelles se sont fait sentir sur le 2ème trimestre. Allianz n’a pas encore redéfini ses objectifs et pour le reste de l’année à venir « en raison de l’incertitude persistante ».

Allianz France n’a, à l’heure actuelle, pas encore publié ses résultats financiers.

 

Generali 

Le groupe italien a publié des résultats également en baisse pour ce premier semestre 2020, avec un bénéfice net en recul de 56,7% à €774 millions.

 

Groupama 

Le groupe mutualiste a annoncé un chiffre d’affaires de €9,3 milliards d’euros pour ces 6 premiers mois de 2020, ce qui correspond à une perte de 1,2% comparé à la même période pour 2019. Ils ont également communiqué un résultat net de €139 millions.

Concernant Groupama France, le chiffre d’affaires au 30 juin 2020 s’établit à €8,1 milliards, en baisse de -1,2% par rapport au 30 juin 2019.

 

Crédit Mutuel 

Le Groupe des Assurances du Crédit Mutuel (GACM) a lui aussi tout naturellement, ressenti les effets de la pandémie, et les incertitudes financières qui en découlent. En effet, le chiffre d’affaires assurance s’établit à €5 milliards, en recul de 21,1% par rapport à l’exercice au 30 juin 2019.

 

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Troubled first semester for the insurance industry: Only three insurers have seen a raise in their revenues this year. Who are they?

Now that insurance groups have started to share their financial results for the first semester of 2020, the time has come to look back on this troubled first half of the year.

Due to the Covid-19 crisis and the lockdown, most companies have seen a down in their results compared to the same period last year. Out of all the groups that published their financial results, only three have seen a raise in their revenues.

OVERVIEW

Overall we can observe that the Non-Life premiums and operating results raised due to the drop in sinistrality during the lockdown, while the premiums written for Life insurance have dropped. The bank-insurers have also quite suffered on the bank activities, while the insurance activities did not suffer as much and compensated or alleviated the effects of the lockdown. The bank activities were impacted by several factors: the investments were impacted by the economic turmoil created by the uncertainty, and consequently there was a decrease of the investment and net fee commissions. Furthermore, between the tightening of conditions to access a mortgage credit and the covid19, which logically slowed down real estate purchases, incomes from financial transactions decreased for banks, while many of them allowed their clients to suspend or reduce monthly payments due to a partial or total loss of income, further aggravating the impact of the pandemic on their income.

THE UPS +

AGEAS GROUP

The international insurance group has communicated a raise in their net result: for the first half of 2020 they generated €791 million while for 2019 they reached €606 million. The Belgian group witnessed a down in the gross Life premiums written but it was compensated by the Non-Life thanks to the drop of sinistrality during the lockdown. The Belgian entity, AG Insurance has not yet published its half-year results, we have yet to see how impacted the leader of the insurance market in Belgium was.

BALOISE GROUP

The Swiss group has announced a raise on the EBIT of the Belgian branch of 46,6% (2020: CHF105,1 million; 2019: CHF71,7 million). The gross premiums written for Life are up by 12,4% and the Non-Life are up by 24,8%. The latest result is explained by 2 factors: the decrease of sinistrality during the lockdown, and the acquisition of Fidea and of the Non-Life portfolio of Athora Belgium.

ARGENTA

For this first semester of 2020, the bank-insurer has published a consolidated turnover of €94 million, versus €77 million for 2019. The net result is also going up compared to last year: €31 million for 2020 and €29 million for 2019. Their gross premium written for Life insurance rose by 22%, while for Non-Life, they rose by 5%.

THE DOWNS –

AXA GROUP

The French group has published its semester results and at the group level, with their turnover of €52 billion, they lost 2% on their turnover compared to the first half of last year. The impact on their net result is that it dropped by 60,8%, going from €2,3 billion to €1.4 billion. The AXA group has estimated that the Covid-19 crisis and lockdown has cost them around €1,5 billion, most of it due to events cancellations and business interruptions claims. Given that those are the results at the group level, and that AXA was involved in several lawsuits regarding the business interruption claims in France, the Belgian entity might not be as impacted as the group level shows.

KBC GROUP

The bank-insurer has seen a drop in its net results for the first semester compared to last year: €1175 million for 2019 to €205 million for 2020. However, when looking on details, we can see that the insurance activities of the KBC group are going up. Indeed, the Non-Life technical result raised by 27% while the Life technical result raised by 1%. As many bank-insurers, it is the bank results that suffered the most during this period.

BELFIUS GROUP

The bank-insurer Belfius has also been negatively impacted by the lockdown and the uncertainty on the financial markets due to the pandemic. The net result at the group level dropped from €414 million for the 1st semester of 2019 to €26 million for 2020. Meanwhile for the insurance activities specifically, the group has announced a net result of €89 million versus €126 million for the same period last year. When looking more in details we can see that the total amount of gross premiums written for Life insurance lowered by 33% while for the Non-Life the raised by 43%.

ALLIANZ BENELUX

The Benelux entity of the German group has seen a drop in their net result: from € 111,6 million to €97,7 million. Mainly due to the Luxemburgish portfolio, the gross premiums written in Life insurance are down by 27,6% while the Non-Life premium are up by 3,5%.

NN GROUP

For this first half of the year, the NN group has published a drop of 47,5% on their net result (2020: €587 million, 2019: €1118 million). However, the impact on their European insurance portfolio is lesser important, indeed, they witnessed a down of 5,1% of their results in insurance in Europe (2020: €133 million; 2019: €140 million).

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Les (ré)assureurs face aux taux bas

Photo by Giorgio Tomassetti on Unsplash

Dans ce contexte des taux bas, la stratégie Investissement des (ré)assureurs doit s’adapter à cette situation mais aussi aux exigences réglementaires, bien que ces 2 conjonctures se nourrissent l’une l’autre. En effet, les régulateurs observant la baisse des taux et l’arrivée des taux négatifs, deviennent d’autant plus vigilants sur les ratios de solvabilité des assureurs.

Ainsi, en France, 2 assureurs spécialement exposés ont été identifiés par l’enquête mondiale Assurance 2019 de Natixis IM . D’abord CNP Assurances qui est passé de 187% à 161% de ratio de solvabilité entre 2018 et ce 3ème trimestre 2019. Deuxièmement le groupe AXA qui à la fin de l’année 2018 affichait un ratio de solvabilité de 193%, tandis qu’au 30 juin 2019 il était descendu à 190%. Cependant le groupe a pensé long terme et a mis en place une véritable stratégie pour contrebalancer ces effets des taux négatifs et son exposition aux produits vie. Ainsi, avec l’intégration d’AXAL XL au modèle interne du groupe, la vente d’AXA Bank Belgium et la vente d’AXA Equitable Holdings (branche d’assurance vie aux Etats-Unis), AXA multiplie les initiatives pour maximiser son ratio de solvabilité.

A l’instar du groupe AXA, tous les acteurs mettent en place des stratégies d’investissements pour faire face à ces taux bas persistants. Ainsi, l’étude de Natixis IM révèle que les (ré)assureurs français ont de plus en plus recours à des actifs alternatifs, avec en tête l’investissement en private equity (non coté) et l’immobilier.

« La question est désormais : comment aller au-delà de 20% d’actifs alternatifs en portefeuille ? Dans le contexte actuel, les assureurs ont tendance à réduire la poche obligataire et la poche des actions cotées, qui subit le plus de volatilité comptable, au profit des actifs alternatifs. Certains acteurs ayant une problématique de solvabilité sont, eux, allés chercher de la duration sur l’obligataire car la baisse des taux impacte fortement leurs engagements au passif », observe Estelle Castres, co-responsable de la distribution France, Benelux, Genève, Monaco & Israël pour Natixis IM.

Pour la prochaine révision de Solvabilité II on annonce déjà un durcissement de la norme. Sachant qu’à l’heure actuelle, toujours d’après ce même rapport, les principales préoccupations concernant les risques de portefeuilles pour l’année à venir sont pour 87% des assureurs français les taux d’intérêts, ainsi que les réglementations (47% des acteurs français) et la volatilité (47%). Au niveau mondial, on retrouve la même préoccupation en tête (les taux d’intérêts pour 73% des (ré)assureurs interrogés), mais les ralentissements économiques et les facteurs géopolitiques prennent le pas sur les réglementations (seulement 34%) et la volatilité des marché (46%). Il est vrai que l’Europe et l’Asie ont des réglementations assez fortes par rapport au reste du marché. Avec une globalisation de plus en plus forte, le rôle de l’Association Internationale des Superviseurs d’Assurance (IAIS) prend de l’ampleur et en janvier 2020 le Standard International de Capital (ICS) devra être appliqué.  L’avenir dira si cette tendance d’une réglementation mondiale s’accentuera ou non.

 

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