???Modular??? finance industry to spur reinsurance disruption

The insurance and reinsurance industry should expect further disruption as financial sectors with inefficient cost structures and high capital usage face threats from new entrants, business models, technology and alternative sources of risk capital, according to Oliver Wyman.

The financial services industry is becoming “modular” and sector participants and value chains are being “fundamentally reshaped,” thanks to disruptive forces such as digital distribution platforms, new product providers, outsourcing trends and alternative sources of capital, Oliver Wyman, the management consulting arm of finance, insurance, reinsurance and advisory group Marsh & McLennan Companies, said in a new report.

The report titled Modular Financial Services: The New Shape of the Industry looks at how the financial services sector is being generally disrupted by new business models, technology innovation (Fintech), more efficient, mobile and fungible sources of capital, as well as other factors.

“It’s interesting that alternative capital is seen as one of the key disruptive factors for financial services, as it becomes increasingly modular, not just for insurance and reinsurance although that is clearly one of the most evident places new and efficient capital providers have affected to date,” commented Oliver Wyman Partner and co-author, Matt Austen.