In this latest instalment of Alta Signa’s Technical Expert Spotlight Series, Sytse Huidekoper, D&O and FI Manager, shares his insights on the emerging risks for Financial Institutions and what challenges and opportunities the latest trends may bring for those who stay ahead of the curve.
The landscape for financial institutions has been an interesting and somewhat challenging one over the past few years. After overcoming the difficulties of the Covid pandemic, with increased uncertainties and fierce competition from MGAs, the industry now finds itself navigating a soft market, with a surplus in capacity, lower premiums, and a new wave of emerging risks in the form of remote technology and increasing opportunities for off-premises crime and fraud.
Part of this emerging risk landscape has been driven by society's shift to online - which has in turn inspired a new wave of fintech companies offering innovative, alternative solutions for online payment and banking services, loans, management services, and even insurance. But while such innovations are to be marvelled at, the upshot has been a rise in cybercrime, which in itself is being moulded and amplified through the use and progression of Artificial Intelligence - in particular the rise of deepfakes.
Online banking companies are, in particular, finding themselves increasingly under the spotlight in this respect; one only has to review the latest news surrounding e-money firm Revolut, whose customers have claimed to have lost thousands due to scammers. This increasing risk exposure of social engineering fraud is one financial institutions will need to do more to prevent - especially as more turn to online technology in this increasingly digital society.
But while mandatory awareness training is an obvious solution, investing in internal processes and security procedures, plus hiring experienced and knowledgeable staff, will also be key. Unfortunately, a combination of high interest rates, and even decreasing office values due to low occupancy levels, means navigating this risk landscape is proving a huge challenge for financial institutions, especially when it comes to levels of investments.
Failure to prepare is preparing to fail
From an insurer perspective, one consequence of this emerging risk landscape is to take a more conservative approach, with enhanced terms and conditions for clients. There has also been a rise in stricter regulations for financial institutions, many of which are turning a greater focus towards transparency (including climate and ESG), risk management, and consumer protection, such as GDPR. Banks are also coming under increased scrutiny from regulators to meet anti-money laundering requirements - with hefty fines for those that don’t comply.
While regulations vary from country to country, throughout Europe the emerging risks identified are applicable to all. As a result, here at Alta Signa, we do our utmost to maintain underwriting discipline and offer the right insurance products to protect our clients.
A key element of our approach is acknowledging how these emerging risks are interconnected; they are no longer separate and therefore require products that are tailored and integrated to suit a client's very specific needs. For example, as a bank begins sharing more characteristics as that of a tech company, the liability arising out of a cyber incident will have a strong link with their professional liability, which in turn will require an integrated insurance product that offers multi-line solutions. For such a situation, we envision a product where professional indemnity is combined with cyber products - similar to what is currently offered to fintech companies.
Here at Alta Signa, we are ready to anticipate these developments and are in active discussions with the market. We are committed to developing new insurance solutions that will not only meet our client's needs but will respond to the challenges of our changing world, while also meeting regulatory requirements. Thanks to our experienced teams of local underwriters, we are well-placed to deliver such tailored approaches.
Close-to-source underwriting, paired with deep local technical knowledge, is crucial for gaining and maintaining market share in today’s evolving financial landscape. At Alta Signa, we understand that every market has its nuances, and it is this detailed understanding that allows us to create tailored insurance solutions that respond effectively to local risks. By staying close to our clients and their markets, we ensure that our underwriting reflects the unique challenges they face, from emerging regulatory pressures to new forms of cybercrime. In doing so, we help our clients navigate these risks with confidence, protecting their businesses and securing long-term partnerships.