North American insurance executives are increasingly seeing thevalue in strong enterprise-risk-management (ERM) programs, with agrowing number of insurers crediting such programs with positivelyimpacting key areas of their business.

In its latest global ERM insurance survey, Towers Watson said North American insurers showed the “most prominent businesschanges” resulting from their ERM programs compared to the previoussurvey the firm conducted in 2010.

Asked to rank the areas of business most impacted by theirevolving ERM programs, 51 percent of North American insurersanswered product pricing, compared to 39 percent in 2010; 48percent said risk strategy, compared to 38 percent in the earliersurvey, and 44 percent said reinsurance strategy, versus 34 percentpreviously.

“Compared to 2010, insurers are increasingly looking beyond ERMas a means to mitigate downside risk and are seeing the upsidevalue of ERM as a way to enhance risk/return decisions,” says EricSimpson, Towers Watson's property and casualty ERM practice leaderfor the Americas. “Going forward, this trend will accelerate asstochastic economic capital modeling becomes more prevalent andaccessible among large and small insurers to support risk/rewarddecision-making.”

However, there is still work to be done from within: whilethree-fourths of North American organizations say their riskgovernance and organization structure have made significantprogress in the past two years, less than half feel they makeenough allowances for risk within their capital andperformance-management processes.

To that end, risk culture is seen as the most significant aspectin achieving the participant's vision of the role of ERM withintheir organization: 82 percent of North American insurers say thatit is of high importance, more so than risk monitoring andreporting. Sixty five and sixty three percent of respondents,respectively, say their risk plan will be realized through settinglimits and defining appetite.

Given their organization's current state, 45 percent of insurersthink that they could squeeze the most value from ERM by investingin risk monitoring; 44 percent say they need to invest in skilledexpertise; and 43 percent would choose a goodrisk-management-information system.

Looking forward, North American insurers emphasized dashboard(data) reporting as their top ERM priority throughout 2013,followed by risk-appetite definition. Lowest on the list wasseparating and managing individual-market, credit, andoperational-risk exposures.

More than sixty percent of respondents say their area of focuswill be to establish a common, firm-wide understanding of riskmanagement in the next two years, and about as many say they willintegrate risk and capital management into their strategy. Abouthalf report that they would like to hand employees moreresponsibility by preparing them to escalate risk-related concernsto management.

On the other hand, one unpopular strategy is aligning executiveincentives with risk returns or including RM metrics instaff-performance evaluations.

Over 539 senior insurance executives across the worldparticipated in the survey. Of that total, 200 were North Americanrespondents from Bermuda, Canada and the U.S. spanning risk,finance and actuarial disciplines across all lines of business,including property & casualty (42 percent), life insurance (26percent), reinsurance (16 percent), multiline insurers (11 percent)and other (5 percent).