Abstract
The insurance industry plays an important role for European economic stability and the threats and opportunities it faces should be carefully determined. In this paper we highlight the main challenges by using a Political, Economic, Social and Technological (PEST) analysis. This work applies conventional actuarial thought on this area by focusing strictly on the European sector.
Highlights
A sound insurance industry is important for a proper economic system, economic growth and promoting higher employment amongst other factors
On the liability side of the non-life insurance industry we find several policies offered to cover the insured when they are legally liable to pay third party damages/losses which arise out of negligence or legal wrongdoings caused by the insured—two of which include Directors and Officers (D&O) and Errors and Omissions (E&O) policies
Insurance companies are faced with the problem of “spreading of risk” when dealing with natural disasters. This problem arises as people who live in areas where there is, for example a high risk of an earthquake occurring will be more inclined to purchase insurance to protect them from such an event
Summary
A sound insurance industry is important for a proper economic system, economic growth and promoting higher employment amongst other factors. In order to forecast the cash flow of a business, certain factors have to be assessed beforehand such as investment earning rates and inflation rates (Garrett 2013) Another example is the tendency of high unemployment rates during recessions. The economic and business environment effects on the European insurance industry are discussed by focusing on financial crises, interest rates, inflation, exchange rates, demographic and economic changes and the underwriting cycle. This is followed by a discussion of how societal and cultural changes have and will continue to affect this industry. The effects of changes in the physical environment and advances in technology are evaluated
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