Canadian insurers issuing quarterly risk reports, study finds

Canadian and Bermudian insurers are more likely than their U.S. or Asian/Pacific counterparts to deliver quarterly reports on risk to their boards, according to a study by Tillinghast of Towers Perrin.The study is Tillinghast’s fourth biennial survey of risk and capital management practices among insurers worldwide.The 2006 study focuses on a number of issues including risk measurement, quantification competencies, how companies calculate and use economic capital (EC), risk reporting and areas where the global insurance community is seeking to improve their risk management capabilities.Other key findings from the study: external pressure has raised the bar for risk management globally. Most companies surveyed said they considered ‘good business practice’ to be the principal driver for their efforts, adding that rating agency considerations are a significant factor for North Americans; two-thirds of the global insurance industry uses EC as a risk quantification tool; and insurers are using a diverse set of risk metrics. The most common are statutory or regulatory capital and surplus, economic value and GAAP or IAS measures.”Companies are clearly more disciplined in their use of ERM today than ever before,” said managing director Tricia Guinn, who oversees both the Tillinghast and reinsurance businesses of Towers Perrin. “Catastrophic events, capital efficiencies and competitive pressures have driven companies to adopt less of a ‘seat-of-the-pants’ approach to risk issues.” ERM has made significant progress in recent years, the study suggests. But room for improvement remains.”Insurers now recognize the potential impact a single event like a security breach or systems failure can have on their operations, as well as on their financials,” said Prakash Shimpi, Tower Perrin practice leader with global responsibility for ERM. “Operational risks can be complicated and difficult to quantify, so many are turning to scenario analysis to achieve meaningful results.”The study found respondents are generally not satisfied with their current capabilities in many of the risk management areas they see as important. For example, they are significantly dissatisfied with their ability to quantify operational risks and to reflect risk in performance measures.Almost all respondents reported they are planning to make further improvements to their EC modeling capabilities.