Johannesburg — MOST global insurers had learnt from the financial crisis to secure a capital buffer over and above that predicted by economic capital models, according to a report from accounting group Ernst & Young.

Ernst & Young SA life insurance sector spokesman Tim Rutherford said yesterday local insurers had experienced the effect of the global recession in the form of lower investment income and higher lapse and surrender rates causing pressure on profit.

"The lessons learned from the global competitors are just as relevant to the local insurers, and those that demonstrate flexibility and rapid responses to the market changes will reap the benefits as the SA and global economies emerge from the recession," he said .

The report, "Lessons from change: regaining the balance in the insurance industry ", said insurance companies needed to focus on assessing exposure to extreme risks if they were to better anticipate and respond to future stress events.

The report found it was also up to insurers to develop strategies to be able to move capital from one legal entity to another during a crisis.

An enterprise-wide approach to risk management was important, and insurers with the right asset protection mechanisms in place had emerged among the strongest in the downturn. The chief risk officer needed to work with business units in making strategic and operational decisions and passing these to the boardroom for final sign-off.

The size and shape of businesses were being re-evaluated and questions were being asked if the businesses were scalable for an upturn. Insurers were divesting certain businesses or products .

"The 'third age' retirement sector requires new savings and pensions products, which insurers are well placed to deliver because of their experience in underwriting older age mortality.

"In addition, geographies such as Southeast Asia, Latin America, the Middle East and Eastern Europe represent opportunities to deliver insurance products to a growing customer base," a statement from Ernst & Young said.

Ernst & Young Europe, Middle East, India and Africa insurance leader Lex van Overmeire said the industry had done well to emerge relatively unscathed from the downturn "but we are now entering a new and changing world".