After AXA in 2002 and 2003, it's now the German insurer's turn to revise its position on the market.
The cases of Allianz and AXA are clear indications of the hardships witnessed by insurers in their plight to balance their portfolio and to come to grips with results volatility.
In emerging countries such portfolio balance is even harder to achieve due to the supposedly-weak household market. In their quest for more business, some firms resorted to industrial risks, which are indeed rewarding premium wise, but remain devastating with the disproportionate losses they cause to these firms and to the local markets. The Skikda fire disaster (Algeria) in January 19, 2004 would absorb the totality of the annual premium income of the whole Algerian market including all branches.
Even reinsurance, which is supposed to homogenize risks, is producing reverse effects, thus worsening portfolio gaps.
For fear of disappearing from the market, emerging countries' insurers have to necessarily expand and open up towards personal risks. Bancassurance's latest success stories are clear evidence that the market is “alive and kicking” but that insurance companies had only themselves to blame as they came short of meeting their clients' expectations.
Insurers must adapt to modern economy and business standards based on credit. Private individuals no longer want or can pay their insurance premiums in cash. They find in bankers more flexibility and understanding than they do in insurers.
Dealing with bankers, insurers are turned into a standardized financial product distributed to customers whose saving and incomes are managed by banks.
The lack of creativity on part of insurers may cost them dearly. Bankers may monopolize part of the insurers activities and push them towards industrial risks with the well-known technical hardships attendant upon that move such as portfolio gaps, costly reinsurance and results volatility.