An insurer's enterprise risk management process comes into play as rating agencies determine what rating to assign the company.

Rating agency analysts consider how insurers measure risks, how they approach emerging risks, and how they model risk as part of their ERM assessment.

But an insurer's ERM process is only one of many factors that rating agencies consider when examining property/ casualty insurers.

For example, at Standard & Poor's Corp., ERM is one of eight rating components, said Li Cheng, director-financial services ratings in New York. The other components are financial stability, capital, liquidity, investments, operating performance, competitive position, and management and corporate strategy.

According to a presentation Ms. Cheng made this year, the elements of S&P's ERM evaluation include risk controls, emerging risk management, risk models and strategic risk management.

“We have our methodology—we do discuss risk management,” said Neil Strauss, vice president/senior credit officer of the U.S. insurance group at Moody's Investors Services Inc. in New York.

“Risk management is listed as a consideration in determining the stand-alone rating for company. It's not an explicit rating factor,” said Mr. Strauss. “There are different factors relating to the business profile and the financial profile.”

“Risk management does implicitly influence some of the factors that are explicitly analyzed,” he said.

Enterprise risk management is “one of many factors, but we think it's kind of embedded in a lot of our rating analysis,” said James Auden, an analyst at Fitch Ratings Inc. in Chicago. “How companies really identify the risks they face and measure them and how they set risk appetites—it kind of all works together and is embedded in our rating process. It's a not a separate pillar of our rating but integrated in many aspects.”

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“A lot of it is tied to corporate governance,” said Mr. Auden.

“How does it impact the day-to-day underwriting and investing activity of the company? What are the real issues they're looking for? For a property/casualty insurer, catastrophe risk is a big source of volatility,” he said. “What's your appetite for cat risk and how do you manage the spread of risk and aggregation, and what models are you using to measure that risk and how do you use reinsurance?”

Mr. Auden noted that property/casualty insurers weren't as affected by the financial crisis that began in 2007 as some other financial institutions. Yet the crisis and its aftermath have driven ERM among insurers, he said.

The crisis “shed the light you could have tail events that really could affect your capital,” said Mr. Auden. “I think it's still an evolving thing” with the European Union's Solvency II directive and other regulatory issues helping to drive the ERM process.