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Annual Report 2020(Online Ver.)
Business Environment and Medium-to-Long-Term Course

Business Environment and Medium-to-Long-Term Course

Although COVID-19 has increased uncertainties in the business environment, the Sompo Group views imaginable risks as business opportunities, and will strive to contribute to the security, health, and wellbeing of its customers and society as a whole by providing insurance and related services of the highest quality possible.

Politics

Rise of protectionism and populism
Increase in international political conflicts and trade friction
Ballooning global debt (financial collapse of some emerging countries, enlarged fiscal deficits in developed countries)
Large-scale immigration and refugees due to political instability

Economy

Creation of economic blocks, corporate supply chain reorganization, vulnerabilities
Changes in industry landscape from acceleration of digital technologies, including remote and non-contact technologies
Flattening of global economic growth due to COVID-19
Shift in focus to stakeholders with emphasis on diversity
Expansion of investments and financing with emphasis on ESG

Society

Increase in risks simultaneously happening in other regions (pandemics, cyberattacks, etc.)
Larger and more severe wind and water damage, earthquakes and other natural catastrophes, and global climate change and global warming
Increase in international conflicts, ethnic conflicts
Greater inequality, such as poverty, permanent inequality
Changes in labor markets
Risk-off demand for predictions, forecasts and prevention using real data
Population growth in emerging countries, growth of middle class
Increase in elderly people worldwide
Transition to carbon-free society
Sharing economy
Acceleration of initiatives for next-generation mobility

Technology

Cybersecurity threats (information leakage, infrastructure damage)
New automotive technology (automatic braking systems, self-driving cars, etc.)
Non-contact healthcare and nursing services, labor reduction (online, sensors, etc.)
Advances in clean energy technology
Utilization of big data and advances in AI technology
Advances in robot technology (for welfare settings, caregiving, etc.)

	Risks	Opportunities
Rapid Technological Innovation and Digitalization	Digital disruption and industry commoditization leading to tougher competition as companies from other sectors enter the insurance business Decline in accidents thanks to self-driving car technologies, less demand for insurance due to advances in CASE^* Advanced data use, higher severity of cyber risks Departure of talented personnel who have diverse backgrounds and specialist knowledge etc.	Greater potential in new businesses outside boundaries of insurance Creation of new business models for sharing economy Development of customer-oriented products that precisely match market needs Business models based on real data, cybersecurity Diverse employment formats, personnel management changes etc.
Changes in Market Conditions	Tougher competition in shrinking market Changes in needs from low birth rates and increase in elderly people Divergence between urban and rural Personnel shortages due to declining populations etc.	Expansion of market share with high-quality services and increase in productivity via growth and work efficiency gains Growth in senior citizen market and development of new products and services Industry–government–academia projects to create problem-solving communities based on concepts of sharing and helping one another Work-style reform (diverse work styles, focus on output) etc.
Climate Change and Natural Catastrophes	Increase in insurance payments due to more severe natural catastrophes Diminished business environment and foundation from the erosion and depletion of natural capital Changes in reinsurance market due to climate change and global warming etc.	Strengthening of resilience to natural catastrophes, dispersion of risks in business portfolio Growth in ESG investments, development of products and services for decarbonized society Use of advanced technology to detect risks, creation of business models resilient to change etc.

^*Connected, autonomous, shared & services, and electric

Enhance profitability of insurance business Improve balance between profitability and growth, decentralization caused by globalization Strengthen resilience through selection and concentration	Expand services and secure earnings sources by expanding into peripheral business domains Provide total solutions for security, health, and wellbeing of customers Enact qualitative evolution and change in business portfolio
Formulate data-driven growth strategies utilizing IT and digital technology Create new businesses by collaborating with advanced players Decide prices from a customer perspective	Change business models with advanced digital technology (including remote work, online processes) Increase productivity and work efficiency in business divisions
Solve social issues with Group strengths Build and commercialize a Real Data Platform Collaborate with stakeholders, proactively participate in initiatives Invest in ESG initiatives and the SDGs, step up initiatives	Diversify and professionalize human resources who can innovate Emphasize output, change work styles during and after COVID-19 Corporate culture reform (mission-driven, results-oriented)