Risk management by insurers is becoming more balanced and mature in its outlook. In the past few years, global insurers have invested heavily in meeting regulatory demands and in developing a more rounded and strategic view of risk. Now, while the emphasis on regulatory compliance remains, particularly in Europe, there is a shift toward a more growth-oriented, strategic perspective to maximize the return on that investment. CROs are encouraged to play an active role in assessing the opportunities and threats of the shift.
The view from insurers surveyed for Accenture’s 2015 Global Risk Management Study suggests that the risk function should actively prepare for this responsibility. A large minority of insurance respondents report a greater risk appetite for key strategic actions compared with two years ago. For example, 44 percent have a greater appetite for new product development and 43 percent for alliances and partnerships. The appetite for risk is particularly likely to increase among surveyed life insurers, compared with property and casualty (P&C) insurers.
At BNP Paribas Cardif, Renaud Dumora, Deputy Chief Executive Officer, says the risk function must ensure that the risk appetite is satisfied without exposing the business to problems. “The low interest rate environment compels taking on additional risks to develop additional financial performance, but that requires proper mitigation and close monitoring,” he argues.
In our view, this makes sense since new product development will likely be clustered in the digital space, which is a relatively uncharted territory for many insurers. Accenture’s analysis suggests that insurers could be spending as much as 0.2 percent of premium income a year for the next three years on digital initiatives, ranging from mobile projects to data analytics—and the inherent risks of these digital projects will need to be addressed.
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