Sixty percent of insurers make risk management part of theirdecision-making process, according to a worldwide survey.

The findings were contained in a study by the Stamford,Conn.-based Tillinghast business of Towers Perrin, making theirfourth biennial survey of risk and capital management practicesamong insurers.

The 2006 report, released yesterday, focuses on a number ofissues including risk measurement, quantification competencies, howcompanies calculate and use economic capital risk reporting, andareas where the global insurance community is seeking to improvetheir risk management capabilities.

In addition, a special section has been included that focuses onthe impact of Solvency II on the European community, according toTillinghast.

Other key findings from the study:

External pressures are raising the bar for risk managementglobally. While 78 percent of companies cite "good businesspractice" as the principal driver for their current risk managementefforts, rating agency considerations are a significant factor for72 percent of North Americans respondents.

Changes in insurance solvency regulations were found to be amajor driver for European Union insurers' interest in riskmanagement.

Two-thirds of the insurance industry globally uses economiccapital as a risk quantification tool. This is a significantincrease over 2004 where only half of the respondents indicatedthey were using EC.

A further 19 percent of the participants indicated they areconsidering the use of EC.

The study found that insurers are using a diverse set of riskmetrics--assessing the impact of risk on their capital, value andearnings in a variety of ways, with 63 percent using at least threediffering measures. The most common are statutory or regulatorycapital and surplus (56 percent), economic value (42 percent) andGenerally Accepted Accounting Principles or InternationalAccounting Standards (IAS) at (38 percent).

Managing Director Tricia Guinn, who oversees both theTillinghast and reinsurance businesses of Towers Perrin, said in astatement that companies are "more disciplined in their use ofenterprise risk management today than ever before, as catastrophicevents, capital efficiencies and competitive pressures have drivencompanies to adopt less of a 'seat-of-the-pants' approach to riskissues."

"As risk issues have gained importance, so has the role of thechief risk officer," said Prakash Shimpi, Tower practice leaderwith global responsibility for enterprise risk management."Insurers are not only examining risk more closely, but they arealso holding executives more accountable for the results."

Almost half of the respondents (43 percent) report having achief risk officer with primary responsibility for risk management,up from 39 percent in 2004 and only 19 percent in 2002.

The study also indicated that risk management is gainingimportance in board rooms, with nearly all respondents (92 percent)reporting on risk to their board of directors at least annually, upfrom 84 percent in the 2004 survey.

Fifty-three percent of all respondents reported at leastquarterly to their board. Risk reports to senior management havebecome a common practice, with 39 percent reporting monthly andanother 35 percent reporting quarterly.

Bermudian (89%) and Canadian (82%) insurers are more likely thanU.S. carriers or Asia/Pacific companies (53% respectively) toreport quarterly on risk to their boards.

European life insurers (65 percent) and property-casualtyinsurers (60 percent) are twice as likely to report to seniormanagement monthly as their North American counterparts (31 percentrespectively), the study found.

While enterprise risk management has made significant progressin recent years, there are still growing pains.

Most respondents (77 percent) are highly focused on improvingrisk measurement and quantification processes to enhance theiroverall ERM efforts, particularly in the U.K. (97 percent) andJapan (95 percent).

Respondents are generally not satisfied with their currentcapabilities in many of the risk management areas they see asimportant. They are significantly dissatisfied with their abilityto quantify operational risks and their ability to reflect risk inperformance measures, according to the study.