UK insurers failing on risk culture survey shows

It found that only 56% of c-level executives at insurance companies questioned said their board provides ‘executive management sponsorship and ownership’ of their firm’s risk management procedures. Under half (48%) report that the board always sets risk appetites. Almost two-thirds (63%) of executives reported that chief risk officers (CROs) or heads of risk do not sit on insurance companies’ boards of directors. Protiviti said that these results ‘suggest a board-endorsed risk culture has failed to take root in UK insurance companies’.hideOnly one in five (22%) of executives surveyed say their companies are using risk-based return on capital measures in business planning. Peter Richardson, Managing Director at Protiviti UK, said: “While most boards set risk appetite, take ownership of Solvency II, sponsor risk management and measure risk—in other words, they tick all the right boxes—the survey finds that the risk function does not play a significant role in formulating strategy or business planning. It’s disappointing to see that only 15% of those surveyed saw this happening in their organisations. The question to ask is whether during this next wave of risk management, CROs will be sitting on the board as a matter of course and implementing strategic risk management or just applying risk management processes?” Protiviti also noted that while insurers are continuing to invest in risk technologies to help meet compliance demands, a general ‘tick-box’ attitude to risk means UK insurers are missing out on the enterprise-wide opportunities presented by regulation such as Solvency II. “The attitude towards the risk function seems to be that it is a regulatory requirement, rather than a source of added value to the company. It’s worrying that fewer than one in four of those we surveyed saw value-add in the risk function. The need to embed risk culture in insurance organisations may be widely recognised, but Protiviti’s research shows there is a long way to go before boards regard it as more than simply tick-box compliance, though one positive note is that the majority (67%) of respondents report that their firm’s risk culture is being addressed as part of their firm’s training programme,” said Mr Richardson. While 77% of senior insurance executives questioned in the survey report that their board now owns their firm’s Solvency II programme, 27% say their board has only ‘sometimes’ been involved in actually running their company’s ORSA process. The Solvency II’s ORSA rules demand that insurance companies must have internal risk assessment processes in place in order to manage non-quantifiable risks, which are not reflected in the capital requirements established by Pillar I of the directive. Just one in ten say their boards are using the output from their internal capital models in decision-making—another fundamental principle of the Solvency II regime.

UK insurers failing on risk culture survey shows

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