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Member, Beacon International Group, Ltd.
A Standard & Poor’s Financial Services L.L.C. has found that enterprise risk management practices are continuing to mature at property/casualty insurers.
The report released Thursday surveyed ERM initiatives at 146 property/casualty and life and health insurers. It assigned scores of “excellent,” “strong,” “adequate” or “weak.”
Only three firms — Pembroke, Bermuda-based RenaissanceRe Holdings Ltd., New York-based The Travelers Cos. Inc. and San Antonio-based USAA Insurance Group — earned an “excellent” score.
However, the study rated 21% of property/casualty insurers as “strong” while only 9% of life/health insurers earned that score.
“More P&C companies (as a percentage) have scores higher than ‘adequate’ than for life and health companies,” S&P said in the report. “We believe this results primarily from the higher level of exposure life companies have to asset and market/interest-related risks and the difficulties inherent in managing those risks.”
S&P also credited regulatory pressure for insurers attaching more rigor to their ERM efforts.
“The approaching 2015 effective date of the National Association of Insurance Commissioner's (own risk and solvency assessment) requirements has resulted in increased momentum for improvement in insurers’ risk management processes,” the report states.
“Companies with more robust ERM programs gauge their risk profiles better and are able to communicate them clearly to their investors and other stakeholders,” the report states. “Such companies are also able to manage their risks within their stated tolerance levels. We thus expect stronger ERM programs to result in more stable, predictable earnings, whereas companies with less robust programs likely will be more susceptible to earnings swings.”