Insurers and reinsurers are likely to have to venture into unchartered territory in their search for growth over the next decade, according to a top industry adviser.

David Law, PwC’s global insurance leader, sees major opportunities for the industry in the emerging economies whose growth is outstripping that of the developed countries which are home to traditional reinsurance markets.

London-based Mr Law was in Bermuda last week to attend the PwC/S&P Bermuda (Re)insurance Conference and identified five ‘mega-trends’ that would shape the insurance industry’s future:

— Social: Customers looking for more digital interaction.

— Technological: Advances that transform ‘big data’ into actionable insights.

— Environmental: Increasing severity and frequency of catastrophic events.

— Economic: Rise of economic and political power in emerging markets.

— Political: Harmonisation, standardisation and globalisation of the insurance market.

“There’s a huge opportunity to supply more insurance,” Mr Law told The Royal Gazette. “In many African states, for example, there is massive population growth and those people are starting to have more money and possessions. At some point in the development of any society, they will want protection through insurance.

“In the African and Middle Eastern regions, the level of insurance penetration is relatively low.”

Risks likely to become more prevalent in the coming years also provided challenges and opportunities for the industry. These included cyber risks and pandemics, as well as floods and terrorism. In addition, an increasing frequency and severity of catastrophic events was likely, leading to a requirement for more sophisticated risk models and means of risk transfer.

“What we just saw in the Philippines was that the level of insurance there was a very, very small,” Mr Law said. “Insurers can work with states to find ways to protect against those things.”

Other developing situations for which the insurance industry could offer solutions included people living longer, while young people were not saving enough for the future and states were faced with huge pension fund shortfalls.

Technology would play an influential role in the insurance industry’s future fortunes, Mr Law said. Consumers have become accustomed to the ease and convenience of digital commerce and interaction, and insurers who could best use technology to meet such expectations would gain advantage from it.

The growing involvement of capital markets in the reinsurance industry was concentrated in areas where there was high-quality data available — such as Florida windstorm and Japanese earthquake risks. Data availability makes these risks modelable and this translates well to the capital markets.

The expertise and innovation of insurance companies would be valuable when dealing with risks for which data was lacking.

A focus on customers and their needs would be key to success for insurers, Mr Law said.

“The insurers that come out on top will focus keenly on the customer and have a superior capacity for innovation and reinvention,” he said. “They’ll be able to anticipate change and how it affects them, as well as be nimble enough to quickly capitalise on emerging opportunities.”

Consolidation would likely continue in the industry, he said, but its nature would be in the form of a “quiet revolution” reflecting strategic agendas, rather than the multi-billion dollar company combinations that grab the headlines.

“Technology, for example, may play an increasingly important role in insurance deal-making, with insurers potentially acquiring technological expertise as a defensive strategy against disruptive new entrants,” he said.