Insurers have “long way to go” on risk and capital management

Global insurers are lagging in the implementation of programs to management risk and capital within their own organizations, according to a new study by Ernst & Young LLP.
The “risk management and capital management survey” shows that 65% of insurers are only half-way through implementing holistic risk and capital management frameworks in their companies, challenged by automation (73%), resources (63%) and cultural acceptance or “buy-in” (43%). Only 25% of insurers have a chief risk officer, with that position generally reporting to the chief financial officer, rather than the CEO-level.
This is despite a full 90% saying that the benefits of a sophisticated risk and capital management program are worth the cost. Overwhelmingly insurers cite the awareness of risk across the organization as a key benefit of a holistic program. Other pluses include discipline in product development and pricing, decision-making benefits, and understanding aggregate risk exposure across the company.
Among the goals of risk/capital management programs are communication with rating agencies and operational improvements.
“Current trends including business consolidation, globalization, scarce capital and more complex insurance products have created a new risk environment,” says Thomas Conway of Ernst & Young’s insurance & advisory services practice. “Integrating risk into operating strategies and bridging the risk silos is no longer an option, but an imperative for survival. This will require a more sophisticated measurement approach and a commitment to fully understanding the risks they are assuming.”