By TEH SHI NING

THE risk landscape facing insurers has changed dramatically, says the latest Insurance Banana Skins report.

Investment performance, equity markets and capital availability have overtaken fears of over-regulation and natural catastrophes as the top risks for insurers. And insurance companies are now seen to be less prepared to handle the risks identified.

The survey - conducted by PricewaterhouseCoopers and New York think-tank the Centre for the Study of Financial Innovation - polled 403 insurance practitioners and observers from 39 countries in November and December 2008, including four from Singapore.

Changes in the ranking of risks are 'strikingly similar' across North America, Europe and Asia, the report says.

Today's top risks - all closely related to the global downturn and its impact on insurers' strength and profitability - were not among the top 10 concerns in the 2007 Banana Skins poll.

Back then, 'too much regulation' was the top risk. And it is still the fifth-ranked concern, as insurers fear a 'regulatory crackdown' will pressure them to increase capital and take on more compliance costs.

Issues such as reaping sufficient returns to stay profitable, volatility in equity markets and the effect of abnormally low interest rates on income and the appeal of savings products have become more urgent.

A squeeze on profits could affect the industry's solvency, the report says - which is why capital availability has also emerged as a top risk.

Other issues that have risen up the rankings include those surrounding risk management techniques 'in the wake of the crisis and AIG' and concern over insurance companies' exposure to 'complex instruments'.

Another rising worry is whether the reinsurance sector has the capacity to meet a surge in claims on risks laid off by primary insurers - reinsurance security is now ranked the seventh most pressing risk, up from 27th in 2007.

Respondents are also more negative now than they were a year ago in their assessment of how prepared the industry is to handle the risks it faces.

Globally, only 4 per cent of respondents now think insurance companies are well prepared, compared with 21 per cent in 2007. In Asia, 92 per cent have 'mixed feelings' about how well prepared the industry is for today's risks.

This article was first published in The Business Times.