Annual meeting of the Italian Association of Insurance Companies (ANIA) 2025

Distinguished Authorities, Ladies and Gentlemen,

I would like to thank ANIA for inviting me once again to speak at their general meeting. Greetings to President Liverani, whom I am meeting for the first time at a public event, and who I am sure will carry on the tradition of collaboration and discussion that marked Maria Bianca Farina's presidency. Your annual meeting will continue to be an important and fruitful part of this relationship.

I have chosen to devote today's speech to some of the effects on the insurance world of two of the main trends that are defining our times: demography and technology. I shall come to them shortly.

I shall not talk about climate, the third major trend or global cause for concern today, but not because I consider it to be any less important. I mentioned it indirectly in my Remarks of 19 June, referencing in particular the introduction of mandatory business insurance against natural catastrophe risks, in which climate change is a significant aggravating factor. I would just like to add here that we have been in close contact with companies during the delicate phase of setting risk tolerance thresholds (there are different conceptual approaches that will be quickly assessed and examined); and that, once again, it is crucial that insurance firms calibrate the protection they offer carefully, based on the coverage needs of each counterparty, whether large or small. Offering adequate, transparent and clear insurance policies will help to turn this regulatory compliance into a tangible opportunity for protection: not just an imposed burden, but a response to a real need for companies to gain security and to be able to start again even in the most difficult circumstances.

Demography

A broad, in-depth discussion of the key topics of demographic transition (facts, causes, consequences and possible policies) would be out of place here; you can find some assessments of the macroeconomic and structural implications of this phenomenon in the recent Concluding Remarks by the Governor of Banca d'Italia.¹ I have also discussed these points on other occasions.²

I shall just recall the well-known fact that Italy is now facing unprecedented demographic imbalances. The fertility rate fell to 1.18 children per woman in 2024,³ one of the lowest in the world and well below the figure needed to maintain a closed population constant. Despite a positive migration balance, the resident population has been falling for ten years now. The average age continues to rise; annual births at historical lows and increased longevity are leading to a gradual ageing of the population. The latter is also only partly offset by the composition of the flow of migrants by age.

A population in which the rising number of elderly people, both in good health and in need of care, gives insurance companies the opportunity, or rather the responsibility, to prepare themselves to fulfil their role effectively.

The most important implication of population ageing for insurance companies is the increasing demand for pension, health and welfare protection.

The reform of the public pension system resulted in moving it (as was necessary) towards achieving financial sustainability, but at the cost of substantially reducing guaranteed payments. The insurance system therefore has significant scope for action, provided that it is used in the right way. A young person thinking about the future needs to think about the smartest way of ensuring they have a serene old age, in addition to the protection provided by the public pension system. They will often focus on a mixture of financial investments and proper insurance coverage. Your companies are active in both sectors and play a special role in the second one; it is therefore up to them to advise customers properly, especially those who are at the beginning of their working life, including by promoting products (or product components) with a well-defined demographic value added in terms of protection and security. Consumers will not be attracted by products that are similar to general financial investments, but more expensive. The costs of products, especially the more complex ones, will always have to be explained clearly, including in terms of expected benefits, so as to enable customers to make an informed choice. With an appropriate offer of income protection tools for when people grow older, companies can at the same time successfully compete in the market and fully carry out their duties of loyalty towards customers. In my Remarks a few days ago, I also highlighted the fact that the right product offer with a significant demographic component, which is structured in a targeted way, contributes to the essential alignment of the maturities of insurance assets and liabilities. Ivass will remain highly focused on these aspects, in terms of both prudential and conduct supervision.

I shall cover the question of health insurance more thoroughly on another occasion. I took note of the proposals put forward by President Liverani in his report, and I shall ask the Ivass staff to consider them and begin to discuss them. Public health as a universal service has been a great achievement for society and it must be defended. However, many people also want extra forms of protection, in terms of additional comfort and services, and demand for this is likely to grow, partly because some services could be particularly important for the elderly. We would welcome ways to provide new, more effective forms of insurance and assistance that are more suited to consumer needs. One point that I believe we should always keep in mind is that every form of cooperation between public health and private insurers should be designed in such a way as to preserve proper incentives for all parties involved. We shall come back to this.

Long-term care (LTC) is set to become increasingly important given the growing elderly population and the transformation of household structures. The market is actually very small for now; premiums amount to just over €350 million, a negligible amount with respect to both total premium income in Italy (€150 billion) and the potential need for this specific coverage.⁴ To give you an idea of the scale, government estimates suggest that public expenditure on LTC⁵ was around 1.63 per cent of GDP in 2023, and it is expected to increase significantly over the next few decades.

While taking account of the fact that volumes are still low, we have begun to study the features and distribution of the LTC insurance market, to guide our thinking and stimulate discussion; we published the initial results in the Report on the Activities pursued by Ivass in 2024, which was sent to Parliament and the Government a few days ago and which you can consult.⁶ On average over the last seven years, group policies accounted for one fifth of total LTC insurance policies, but covered three quarters of policyholders; individual policies were much more numerous but covered less than 10 per cent, and social security funds covered the rest. Almost half of the premiums were combined with coverage in the event of death or dread diseases.

This type of coverage will increase, insofar as more and more people are going to start preparing at some point for no longer being self-sufficient so as not to overburden family members or other people; but I would like to point out that it will also increase as insurance companies learn to meet this need with the necessary innovations in product design, distribution and delivery. Greater use of these instruments could keep their costs down, through economies of scale and a broader and more effective roll-out of mutuality mechanisms.

For all the instruments linked to population ageing, it is important for customers to have the information they need to make an informed decision, based on what their protection requirements are and what is available. Demography-related products are among those for which it is most important to provide insurance education from school onwards, both because they are inherently complex and because they require young people to think about events that are a long way ahead of them. The introduction of insurance education in school curricula has been an appreciable step; it should be followed up with careful and well-organized implementation measures. I would like to take this opportunity to remind you that we are working on this with the relevant ministries, in agreement with Banca d'Italia and in coordination with the Committee on the Planning and Coordination of Financial Education Activities. The institutions involved are currently working on two key issues: how to develop the content of the activities and how to train teachers.

Digital technologies

On the subject of technology, I would like to focus on two challenges facing us: IT security and artificial intelligence.

The continuous evolution of insurance companies' IT systems, which are increasingly interconnected with the systems of other market operators and ICT service providers, has considerably increased their exposure to the associated risks. The accompanying regulatory changes have been significant. On 17 January, the Digital Operational Resilience Act (DORA) entered into force, introducing stringent requirements for handling IT risks, including incident management, protection against ICT third-party risk and operational resilience testing. Incidents are classified according to well-defined criteria; major ones must be notified to the authorities within strict time limits. In February, we published the procedures to be followed and have already received the first reports. We have also analysed the possible impact on Italy of certain incidents involving foreign insurance companies.

Attacks on ICT service providers have intensified in recent years. Regardless of whether the threats are malicious or not, insurance companies must bolster their monitoring of ICT third party risk both through internal organizational measures and by inserting appropriate protection clauses into contracts. Companies are required to report information on the latter in a register. In 2024, we collected the relevant information from a sample of companies on an ad hoc basis; starting this year, companies will be formally required to transmit the information, which will be used to select the critical providers to be supervised at European level. The attribution of direct supervisory powers over critical ICT service providers is one of the important innovations of the new legal framework. In March, we sent a letter to the market that explicitly sets out our expectations and we envisage strict adherence to the principles stated therein.

DORA will require large companies to perform resilience testing based on cyber-attack simulations at least once every three years. As we announced here last year, in 2024 we monitored, in collaboration with Banca d'Italia and Consob, the voluntary tests conducted by two insurance companies, in line with the TIBER-IT Guidance. While the cost and effort were not negligible, these tests proved extremely useful: they both identified and addressed specific vulnerabilities and made top management more aware of the issues. In the future, companies that will not be obliged to conduct DORA-based stress testing will be able to volunteer for TIBER-IT testing and we encourage them to do so.

We are also working hard to implement the new European artificial intelligence legislation. The transposition of the AI Act into national law is under way and will entail compliance adjustments requiring all due attention. Its draft law is currently in its third reading in the Senate.

You know that we are not doomsayers. We believe that artificial intelligence has great potential in the field of insurance and should not be demonised. At the same time, the associated risks should not be ignored; indeed, carefully managing these risks is necessary in order to exploit AI's potential and is therefore a challenge we must meet. There are many specific, sensitive aspects to its application in the sector, which have led to certain parts of the insurance value chain being included in the "high-risk" category under European legislation and that must be suitably safeguarded through appropriate governance arrangements and monitoring.

Ivass is also starting to introduce artificial intelligence tools into its own operational and supervisory processes. The first applications are focusing on consumer protection, particularly on the handling of complaints and the work of the Insurance Ombudsman. The complaints received by Ivass continue to rise: in 2024, there were more than 36,000 complaints, an increase of 20 per cent compared with 2023. This is a long-standing trend. For us, the challenge, which is not an easy one, is to maintain the quality and speed of this service, which we believe consumers appreciate, even in the face of rising claims; and this is not even counting the need for new resources to be allocated to the equally important Insurance Ombudsman project. We are creating a dedicated web portal to facilitate consumer access and optimise internal processes; we are also considering how to leverage generative artificial intelligence tools to help us handle complaints while maintaining human control. As far as the Insurance Ombudsman is concerned, it will be able to draw on the experience of the other two financial-sector ombudsmen. A joint task force between Banca d'Italia, Consob and Ivass is now studying applications to assist the consumer in cases where the partition of responsibilities among the three existing ombudsmen is unclear.

Distinguished Authorities, Ladies and Gentlemen,

In conclusion, I would like to thank you once again for having kindly hosted me, and I would also like to take this opportunity to welcome the two new Board members, Rita Laura D'Ecclesia and Maddalena Rabitti. I am sure we can count on their experience, their academic and technical preparation and the passion with which they have accepted their new positions, and I know that they will actively and expertly contribute to our work.

The new Secretary General, Ida Mercanti, recently took on her new role and brings with her very valuable experience in the field of prudential and conduct supervision to ensure that Ivass's performance remains good and its actions effective.

We remain open to dialogue and collaboration with industry, and to frank and open discussion.

To everyone, thank you for your good work.