While the insurance industry fared well during the global economic crisis, many insurers see room for improvement in their enterprise risk management programs, according to an industry survey.

Rating agencies' expectations and implementation of Solvency II are the key drivers of ERM, according to the Towers Watson's sixth biennial Insurance Industry ERM survey.

The results of the survey suggest that insurers around the world view their ERM performance as mixed, with 58 percent of participants being satisfied with their ERM capabilities over the past 18-to-24 months. However, 31 percent were neutral and 11 percent were dissatisfied, the survey found.

More than two-thirds of respondents noted that their risk management programs contributed to enhanced business performance in such areas as core risk control technologies and a strengthened risk culture, according to the survey.

The survey found that for the most part, insurers have been able to withstand the challenges of the financial crisis better than many companies from other industries—financial services or otherwise.

ERM is influencing key business decisions at more companies than ever, the survey found. However, smaller insurers seem to be experiencing the most difficulty as companies with revenues of more than $10 billion are generally further ahead on most aspects of ERM implementation.

Solvency II, the European Union's financial standards, is a primary focus for European insurers and is expected to significantly change many aspects of Europe's insurance market. Potential changes include market consolidations, relative attractiveness of products and higher prices for consumers—highlighted by about 60 percent of participants, she said.

Participants cited management of individual risk exposures (69 percent), risk monitoring and reporting (65 percent), and risk limits and controls (64 percent) as the top ERM areas contributing to enhanced performance.

On a global basis, the survey found that nearly two-thirds of respondents said they are calculating economic capital using some type of model, up from 57 percent in 2008. In addition, most respondents (85 percent) of companies calculating economic capital are planning further development within the next year. This illustrates that companies clearly maintain the view that their work in this complex area is not finished, the survey found.

The more widespread influence of economic capital in Europe reflects Solvency II pressures. The greater prevalence in Bermuda reflects the number of global reinsurers domiciled there as well as the influence of Bermuda regulators who are seeking recognition from their European counterparts with regard to solvency, according to the survey.

Special Reports /

Risk Takers Say Stronger ERM Needed Within Their Industry

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