S&P says that enterprise risk management is still in its infancy but growing among insurers. Andrew Holt reports
It probably comes as no surprise that true enterprise risk management (ERM) in leading Europe insurance companies is still in its infancy, but is developing.
As this was the outcome of Standard & Poor’s opinions on ERM of 70 European insurance companies.
“Of the insurers we rate based in Europe we have found that ERM programs at 86% are adequate, compared with 81% for all insurers globally," says Standard & Poor's credit analyst Laura Santori. “The outlook for ERM is nevertheless clearly positive.”
Standard & Poor's classifies ERM programs at insurance companies into four categories: excellent, strong, adequate, and weak.
The assessment takes into account an analysis of several components: risk management culture, risk controls, emerging-risk management, risk and economic capital modeling, and strategic risk management.
“We're seeing greater interest by insurers in establishing ERM systems not only to meet regulatory requirements but also to their competitive advantage,” adds Standard & Poor's credit analyst Keith Bevan. “A number of companies are starting to invest substantially in various aspects of ERM.”
This comes with an increased pace of change in risk management practices in the run-up to the EU's Solvency II project, which aims to bring regulatory capital requirements at insurance companies more in line with their true risks.
This month is to bring the EU's establishment of the legal framework for implementing Solvency II, although the final implementation date is to be deferred until 2012.
