Evolution of insurance ERM
The nature of risk, and regulation and management environment have changed from moment to moment. To review and improve ERM correcponding to the changes is indispensable.
History of Insurance ERM
The practice on insurers’ risk management and the regulation on supervision have been reviewed and improved accordingly by the past failure due to unexpected emergence of risk and unsuccessful risk management.
- Insurance business means to create benefits through underwriting and managing risks. The techniques of risk management under the law of large numbers have been developed as an essential part of insurance management.
- However, as the term, “Risk based management” or “Enterprise Risk Management (ERM)” is emphasized, the mindset of the management shifts from just only focusing on financial strength to taking risk as a source of return on business strategy.
- Since insurance transactions are cash flow transactions directly laid between policyholders and insurers, not through the financial systems, the business practice and regulation have been developed locally. As the result, the regulation has been established on local basis and the international standard rules such as Basel in the banking industry have not been established.
- The mission of the International Association of Insurance Supervisors (IAIS) established in 1994 is to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global harmonizisation of supervision. Since non-traditional insurance risk (substantive financial risk) underwritten by a certain insurance company had caused in a direct connection with the Financial crisis, Insurance ERM has been discussed in conjunction with the regulatory reform on financial stability.
Relationship of Banking and Insurance regulatory
Recent structural changes for regulations on supervision, and insurance ERM
Changes after Financial crisis
- Change the Cat-and-Mouse game type regulatory reform (strength of capital requirement on the newly recognized risks etc.）
- Seek solutions for potential unknown risk＝>New approach focusing on Risk Appetite and Risk culture
Risk Appetite Framework (RAF) structure
“RAF” means that a whole concept that Risk Appetite are structured, informed, and monitored. The change of regulation on supervision after the Financial Crisis are reflected in the following:
Structure of Risk Appetite Framework
RAF pushes “Forward-looking management”
Our Services in the Insurance Industry
- Agency audit and Agency management framework enhancement
- Overseas subsidiaries governance, internal audit framework enhancement
- External evaluation of internal audit and enhancement
- Outsourced management framework and enhancement
- External evaluation of customer protection , management framework and enhancement services
- Internal audit implementation support for insurance companies
- Evaluation on compliance framework and enhancement
- Actuarial services insurance actuary business and establishment support business
- ERM framework development and enhancement (insurance industry)
- Self-assessment support on ORSA/Solvency
- Risk management model framework and enhancement
- Small-claims and short- term insurer and mutual aid support