The whole truth concerning ERM: a holistic approach matches underwriting risk with financial and operational stragegies.(Property/Casualty: Underwriting Insight)

Assessing, controlling and monitoring risks across the enterprise can be a daunting challenge. How will enterprise risk management teams address complex, interdependent issues associated with the evolving nature of insurer risk in the 21st century?

To master the new art and science of ERM, property/casualty insurers must adopt innovative strategies to manage risk.

Historically, there have been two sides to risk management for property/ casualty insurance companies: financial and operational.

Finance-focused risk management works to analyze and control risks in bonds, equities and other investment instruments and foreign exchange. It also seeks to align assets with liabilities and focus on the timing of payouts and maturities. The analysis in this context is derived from archetypal financial risk management standards.

Operations-focused risk management generally tackles insurance enterprise exposures. It brings risk mitigation strategies to bear in order to control enterprise risks, including those associated with product obsolescence, regulation, natural hazards, competitive dynamics, employee retention and business continuity.

However, when it comes to managing underwriting risk, the main remedies continue to be discipline, risk distribution and reinsurance. What has been lacking is a more robust coordination of underwriting risk with financial and operational strategies.

Today, it is increasingly possible to link risk management in the financial and operations area directly with underwriting to create a more expansive ERM paradigm. By integrating deep-rooted, established risk management practices with new risk assessment methods, a modern, holistic insurance ERM benchmark is emerging.