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Inside View - If you want to get ahead, learn from your bank.
(From Reinsurance)
Byline: David Spiller is president and chief executive of Guy Carpenter.
In October 2005, Standard & Poor's (S&P) Rating Services included a formal evaluation of insurer enterprise risk management (ERM) in its rating process. This confirmed what had been anticipated for years: that the discipline of ERM would migrate from banks to other sectors of the financial services industry.
ERM is concerned with identifying and managing the critical risks facing a business. It is important to understand that ERM does not represent something new for insurers. Rather, this is an evolutionary step for our industry. ERM includes traditional practices, such as monitoring of exposure accumulation, controls on pricing, reserving and audits - the basic elements of sound risk management for an insurer.
The evolutionary step forward into ERM will involve treating all risk sources in a proactive and integrated fashion, with the goal of improving stakeholder value of the firm. To make this leap, insurers must embrace comprehensive risk management fully. Many insurers do a good job of this in certain segments of their business, for instance, catastrophe-exposed property, but the whole industry could learn from the experience of similar industries that are further along the ERM learning curve.
So, what can property/casualty (P&C) insurers learn from the banking industry? For banks, the evolution into ERM represents advancement in credit market discipline, with the results being improved transparency, efficiency and reliability. Market participants would not have willingly invested the time and money without sufficient impetus, such as: repeated market crises; investors seeking greater transparency and reduced losses; regulators wanting to know that creditors were not overextended; and creditors seeking assurance that borrowers could honour their obligations.
A closer look reveals a number of strong similarities between banks and P&C insurers. For example:
- Taking ERM to the next level.(enterprise risk management)
- Magazine article from: Risk Management Liebowitz, Michael March 1, 2007 700+ words
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- Magazine article from: Internal Auditor Schanfield, Arnold Helming, Dan December 1, 2008 700+ words
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- Magazine article from: Internal Auditor Beasley, Mark S. Clune, Richard Hermanson, Dana R. February 1, 2005 700+ words
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- Best practices in developing an ERM dashboard.(Enterprise Risk...
- Magazine article from: The RMA Journal Lam, James October 1, 2005 700+ words
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- ERM in motion.(analysis of enterprise risk management)
- Magazine article from: Risk Management Shaw, Jack Garvin, Lewis October 15, 2007 700+ words
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- Why ERM matters ... and how to accelerate progress.(analysis of enterprise risk...
- Magazine article from: Risk Management Francis, Sebastian Richards, Todd October 15, 2007 700+ words
...and implementing ERM programs. Embed Risk Management in Strategic Planning...Closely linking risk management to strategy is the hallmark of true ERM programs. Whereas...down ownership of ERM and a holistic view that risk management is intrinsic to...
- Long-t[ERM] goals: insurers with fully deployed enterprise risk management...
- Magazine article from: Best's Review Horgan, Paul March 1, 2009 700+ words
...continue to develop their ERM policies and procedures...study, Enterprisewide Risk Management for the Insurance...benchmarked the nascent ERM field in 2004. This...up report, Does ERM Matter? Enterprise Risk Management in the Insurance Industry...
- ERM in motion.(enterprise risk management)
- Magazine article from: Risk Management Shaw, Jack Garvin, Lewis July 1, 2006 700+ words
...integrate enterprise risk management (ERM) into their day...continuous, active risk management throughout the...value of their ERM investment. They...defined by the risk management committee. Janice...appreciates the way the ERM dashboard not...