Study: US insurance companies still have work to do for new regulations

According to a new study insurance companies are generally confident in their existing risk management and control processes, but some firms believe they still have work to do to prepare for the new regulatory requirements for the U.S. insurance industry.

Conducted in tandem by the global consulting firm Protiviti and St. John’s University’s School of Risk Management, Insurance and Actuarial Science, the 2015 Own Risk and Solvency Assessment (ORSA) Summary aimed to assess the current state of American insurance companies’ risk management policies and practices.

"Increased consideration for emerging risks, greater transparency and an enhanced focus on education directed towards enterprise risk management at the board level are only a few of the potential benefits of the ORSA reporting process for U.S. insurance companies," said Dr. Paul Walker, the James J. Schiro/Zurich Chair in Enterprise Risk Management and executive director, Center for Excellence in Enterprise Risk Management, at St. John's University. "Improvement of ERM processes was one of the National Association of Insurance Commissioners' key objectives in setting the ORSA requirements."

Here are some other key findings from the survey:

1. Insurance offerings could change: 51 % of respondents indicate that the heightened regulatory scrutiny associated with ORSA could affect the nature and types of insurance products sold and the types of customers obtained.
2. ORSA will change risk oversight, improve ERM (enterprise risk management), and help with the integration of risk and strategy – The results suggest that half of all insurance companies already recognize the benefits of ORSA in enhancing their ability to manage risk effectively. Among ORSA's key perceived benefits are:

            • identifying and managing emerging, financial and strategic risks
            • improving and formalizing the ERM process
            • integrating risk management with strategy 
            • measuring and quantifying operational risk
            • enhancing risk oversight from the board and senior management.

3. Many organizations need new controls and policies – Sixty percent of respondents believe ORSA creates the need for new risk management policies and internal controls.
4. More education and training is needed at the board and executive levels – New policies and controls will create opportunities for further education and training related to both ORSA and ERM. Respondents also believe that ORSA reporting will improve the risk oversight from the board of directors and senior management (69 %).

A link to the full report can be found here.