The record losses from Hurricanes Katrina, Wilma and Rita have once again highlighted the scale of the risks faced by insurers in an increasingly complex and uncertain financial, geopolitical and climatic environment.
Model outputs are clearly critical in monitoring and controlling aggregations and concentrations of risk. However, the largely unexpected gravity of the losses and resulting pressure on reinsurance programmes have once again underlined the importance of quality data, effective validation and calibration of model outputs and, not least, the sense check of underwriting experience and intuition.
The development of Enterprise Risk Management (ERM) capabilities can help to protect insurers from losses, earnings surprises and reputational damage and provide a platform for strengthening governance, decision-making and regulatory compliance. However, a recent study conducted by PwC (Enterprise risk management for the insurance industry), revealed that many insurers are finding it difficult to make headway in implementing and embedding ERM in the face of continuing data, systems and governance challenges. However, the study also found many examples of how insightful and effective management are helping to overcome these technical and organisational hurdles and bring greater clarity to insurers’ ERM missions.
PwC has a global network of specialists with deep skills in all aspects of risk management including policy and strategy, risk-based regulation, benchmarking, systems selection and development, enterprise-wide risk management and governance integration, and compliance.