In insurance, ERM gaining ground

Via Business Insurance:

[I]nsurers that participated in Towers Watson’s sixth biennial Insurance Industry ERM survey indicated that they viewed their ERM performance as mixed, with 58% of participants being satisfied with their ERM capabilities during the past 18 to 24 months, 31% neutral and 11% dissatisfied.

At its web site, Towers Watson emphasizes key findings from the survey:

  • Insurance company risk management performance during the recent financial crisis was mixed. … While the majority of survey participants were satisfied with the performance of their ERM programs, nearly a third remain neutral, which signals more work to be done.
  • Risk appetite is important to ERM success. … Formally documented risk appetite proves to be a key differentiator in insurers’ overall satisfaction with ERM.
  • The business impact of ERM continues to grow. … [Key business changes are]  primarily relating to formation of an asset strategy, followed by risk strategy or appetite, product pricing and reinsurance strategy for property & casualty insurers.
  • A lack of resources is inhibiting ERM development. Across the industry, a shortage of skilled people resources is viewed as the top challenge to ERM implementation while, for large insurers, data quality and integration issues are the top obstacles….
  • Convergence of economic capital methodology has slowed. While a one-year risk assessment period continues to be most popular, Solvency II requirements are driving regional differences, particularly for North American property & casualty insurers that use alternative methods.
  • Solvency II proves challenging in Europe, and its influence is spreading. The pressure is mounting — as only 10% of European respondents subject to Solvency II believe their current models meet expected future regulatory requirements — and has spread, particularly in Asia and Bermuda. The degree to which U.S. regulators will step up their ERM requirements remains to be seen.

A pdf of the entire report is here.

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