Actively seeking and retaining risk, insurers have always emphasized effective risk and capital management (ERM). As ERM matures, several professional bodies and industry groups are publishing their views on ERM best practices and recommending new courses of action for insurers. The US Own Risk and Solvency Assessment (ORSA) is perhaps the most publicized of these, but there are other ERM initiatives with implications for insurers from the Federal Reserve, National Association of Insurance Commissioners (NAIC) and Internal Association of Insurance Supervisors (IAIS).
While regulatory intervention often drives change, some of the most successful ERM cultures have developed in response to internal events or errors, such as volatile earnings, over-reliance on models, and poor value decisions in order to improve risk culture, governance and quantification.
Insurers are subject to ever-increasing scrutiny from clients, investors, rating agencies, auditors and business partners on their ERM practices. The level of initial comfort that insurers can provide stakeholders on their risk management capabilities has a distinct impact on the scope, depth and timing of risk-focused analysis and examination procedures.