Impact of the crisis on the insurance
industry
Violeta Ciurel
President&CEO AXA Life Insurance
Romania
The International Insurance Mediation Conference
Istanbul, March 28, 2011
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AXA Group
Global Ambition
To become THE PREFERRED COMPANY in the industry
for our clients, employees, suppliers, shareholders
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Key figures 31 Dec 2009
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90.1 billion euros in consolidated revenues
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3.9 billion euros in operating earnings
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3.5 billion euros in adjusted earnings income
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1,014 billion euros in assets under management
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The AXA Group is present in 57 countries
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96 million individuals and businesses have placed their trust in AXA
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18,000 AXA volunteers gave time to the community
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216,000 employees and exclusive sales associates around the world,
dedicated to delivering AXA customers the solutions and services they need and
expect, including: 104,000 employees, 24,000 salaried sales force, 88,000
tied agents.
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400,000 individual shareholders
AXA Life Insurance in Romania

Entrance on the Romanian market in 2010 by acquiring a small
company
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Our ambition is to achieve to build, together, AXA’s business in
Romania and become a preferred, profitable and trustworthy
company.

In Romania, AXA currently operates in the life insurance sector
(offering financial plans for children, individual and family
protection) and on the health insurance sector (offering corporate
life and health plans)
By bringing innovative products,
well trained agents and improved
customer experience AXA wants to
redefine a market of promises into
a market of proofs.
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Financial crisis - Background
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Crisis started in US in 2008 in the banking sector due
to:
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Mortgage home loans in US
Long term mispricing the real risk, over-leverage, reducing credit quality
Credit rating agencies
Lack of appropriate regulation and supervision
Lack of liquidity in the market
Systemic risk caused by large/global banks
Consequences:
 Decrease of economic growth
 Government intervention: direct support, credit guarantees, insurance,
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nationalization
Fall of the stock markets, assets value, real estate value
Reducing the interest rates
Reducing the value of pension funds and life insurance UL investment
Indirect exposure at the financial institutions which went into bankruptcy
But for insurance….
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Insurance industry is not at the origin of the crisis, but
witnessed and was impacted!
 Insurance were in a strong position when crisis started and
were well capitalised
 Insurance industry had a stabilizing impact on the financial
industry overall due to:
 Long term investment policy
 Prudent investment policy
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Insurance cannot not generate systemic risk
Overall losses much lower than in the banking sector (21%)
Effects on insurance:
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Direct and indirect
Different for life insurance, pensions and general insurance
Short term and long term
Direct effects
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Decrease of the population income; reducing the purchasing
power
Increase of the surrenders and lapses
Reducing sales
Competition with substitute products
Reputational risk
Decrease consumer confidence
Increasing the hedging price
Lower interest for investing in financial sector, mainly for
the individual investors
Increase demand for RI
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Positive effects:
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Companies focused more on clients – communication and quality of services
Focus on increasing the efficiency of the internal processes
Focus on core-business, divesting or decreasing the non core-business
More demand for the protection products and guarantee products
New approach on supervision
Indirect effects - Short term
 Changing the solvency position of certain insurance companies
 Biggest impact on D&O liability insurance and credit and
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guarantee insurance
Decrease of the asset value – stock, real estate, “mark to
market” valuation etc
Exposure to “toxic assets”
Reducing the interest rate - pressure on the liabilities
Insurance premium volume
Profitability of the companies
Solvency margin, extra capital needed mainly for the companies
offering guaranteed products
Weaker insurance B/S from equity and corporate bonds losses
Assets-liabilities management
Increased risk management costs
Industry losses USD 261 bill vs. USD1230 bill losses in banking
sector (Bloomberg 2010); total capital raised at industry level –
about 160 billion USD
Write downs, credit losses and capital raised (including guarantees)
of the major insurance companies during 2007 - January 2010 (billion USD)
Insurance company
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Losses
Capital raised
Shortfall
1
American Insurance Group (AIG)
98,2
98,1
-0,1
2
ING Groep NV
18,6
24,1
5,5
3
Ambac Financial Group Inc
12,0
1,4
-10,6
4
Aegon NV
10,7
4,0
-6,7
5
Hartford Financial SVCS GRP
9,7
6,4
-3,3
6
Fortis
9,3
22,7
13,4
7
Swiss Re
8,5
2,9
-5,6
8
Metlife Inc
7,2
4,0
-3,2
9
Allianz SE
7,0
2,0
-5,0
10
Allstate Corp
6,6
0,0
-6,6
11
Prudential Financial Inc
6,6
5,9
-0,7
12
MBIA Inc
5,7
1,0
-4,7
13
Aflac Inc
5,2
0,0
-5,2
14
Genworth Financial Inc-CL A
4,8
0,6
-4,2
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XL Capital
4,0
2,6
-1,4
16
CNA Financial Group
3,1
1,2
-1,9
17
Zurich Financial
3,1
0,0
-3,1
18
Altele
40,7
14,8
-25,9
- Total US companies
188,9
127,4
-61,5
- Total European companies
69,0
59,9
-9,1
TOTAL
261,0
191,7
-69,9
Source: Bloomberg; OECD, The Impact of the Financial Crisis on the Insurance Sector and Policy Responses, April 2010, pg. 8.
Medium and Long term effects
Life Insurance
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Decrease of the appetite for UL
Lower interest rates and
higher hedging costs on
volatile markets
Solvency capital increase
Decrease of the profitability
Consumer capacity affected
differently (more in emerging
markets)
“De-risking” / “re-risking”
General Insurance
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Premium increase for certain
lines (D&O, credit &
guarantees, professional
liability) due to claims ratio
Change of the UW policy
Exclusions
Change of the RI prices
Key learning points for insurers
Time to go for new strategies for insurers
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Protect the company financial position
Protect the existing portfolio
Intensify the client communication
Maintaining the operational control mechanisms to prevent
financial crime and fraud that can increase during the crisis
time
 Setting up adequate reserves for the longevity risk
 Adequate measurements of integrated risk management –
Solvency II
 Corporate governance
Leading the business for the future!
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Key learning points for the
regulators
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Discouraging taking short term risks by the management of the
companies
Reviewing the role of the rating agencies – regulation?
Relate the remuneration system for the co management with the
risk, short term and mainly medium and long term objectives
Discourage risk taking with no consequences
Better regulation for the financial guarantee insurance
Accounting convergence, IFRS
Solvency II – consistent risk based capital adequacy across
Europe
Macro prudential monitoring and improved supervision
Supervision / Group supervision – based on risk exposure
Greater policyholder security
Transparency of the financial products
Free competition and market
Change of behavior in the market
THANK YOU FOR YOUR
ATTENTION!
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