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Member, Beacon International Group, Ltd.
A variety of factors—including the impending implementation of Solvency II and rating agency expectations—are leading insurers to bolster their enterprise risk management efforts, according to a study released Thursday by Towers Watson & Co.
But insurers 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.
More than two-thirds of respondents said their risk management programs contributed to enhanced business performance in such areas as core risk control technologies and a strengthened risk culture. Among the top ERM areas cited by insurers as contributing to enhanced performance were management of individual risk exposures, cited by 69%; risk monitoring and reporting, cited by 65%; and risk limits and controls, cited by 64%.
“The encouraging signs that ERM is being embedded in organizations are underscored by the fact that 64% of respondents said a strong risk culture served to enhance their company’s performance, while 56% said the use of economic capital in decisionmaking enhanced business performance as well,” said Towers Watson in a statement announcing the results.
But European and North American insurers diverged on some of the drivers of their ERM efforts. For example, Europeans focused on regulatory capital and other Solvency II requirements, while their North American counterparts emphasized the risk of a rating downgrade and rating agency capital.
The study was based on the responses of 465 insurance and reinsurance executives in life and property/casualty insurance industries around the world. Thirty-one percent of the respondents represented North America, 21% Europe, 19% Asia Pacific and the remainder multiple regions.
Further information about the study is available at www.towerswatson.com/research/3068.