There is an increasing demand for risk functions to demonstrate how they add value to the business beyond compliance, with many insurers now turning to their existing risk management teams and asking: how can we best optimize output to ensure value-enhancing performance?
Efforts by insurers across Europe and other jurisdictions to comply with Solvency ll have led to the development of enhanced risk and capital frameworks, and a greater understanding of business risks.
61% of financial service firms said risk management is essential for adding value to their business.
Source: KPMG International 2013
However, the focus in may territories has been about regulatory compliance only. The delays to Solvency II now provides insurers the opportunity to step back and think about what they are deploying and assess how they can fully embed risk management within the business while also gaining commercial value.
Describing how risk management optimizes business value and helps deliver growth is now a priority.
This fundamental shift in expectations requires risk management to be viewed through a new lens. Applying an insightful risk value equation, insurers can make a positive contribution to the risk adjusted rate of return on capital (RAROC); develop a common language for communicating the value; and develop a set of consistent measures of performance across the business.
Enhancing risk management to help deliver value, five levers:
Potential benefits for insurers
2014 saw another year of unyielding regulatory change. This report explores how these changes are impacting insurers and insurance markets.