In October 2005, Standard & Poor's first introduced an enterprise risk management component to its ratings analysis, and the firm is currently working on revisions to its insurer capital model. Steve Dreyer, practice leader for North American insurance ratings, and Grace Osborne, a managing director at S&P, discussed aspects of both with NU in July.

S&P has stressed in the past that capital is only part of a ratings analysis–with operating performance, competitive position and other criteria also figuring into ratings. Given your groundbreaking introduction of ERM criteria, do you envision that ERM will ultimately be the most important part of the ratings process?

"There's no question that ERM is the most significant change we've made to our rating process in the 16 years I've been at S&P–not because of what we have done so far, but because of what it puts us on a path to do," Mr. Dreyer said. ERM analysis involves analyzing future risks as opposed to the traditional, ratio-based analyses that S&P focused on in the past.

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