ERM, not just a good idea, Its the Law

IAIS Adopts ICP 16 on ERM

The International Association of Insurance Supervisors (IAIS) has adopted ERM as an Insurance Core Principle (ICP).

ERM is an acknowledged practice and has become an established discipline and separately identified function assuming a much greater role in many insurers’ everyday business practices. Originally, risk management only facilitated the identification of risks, and was not fully developed to provide satisfactory methods for measuring and managing risks, or for determining related capital requirements to cover those risks.
ERM processes being developed today by insurers increasingly use internal models and sophisticated risk metrics to translate risk identification into management actions and capital needs. Internal models are recognised as powerful tools that may be used, where it is proportionate to do so, to enhance company risk management and to better embed risk culture in the company. They can be used to provide a common measurement basis across all risks (e.g. same methodology, time horizon,  risk measure, level of confidence, etc.) and enhance strategic decision-making, for example capital allocation and pricing.

By this time next year, they expect to have revised the full set of ICPs.  All insurance supervisors are expected to reflect the revised ICPs in their legal frameworks and supervisory practices.  All G20 insurance supervisors will be expected to undertake a self-assessment against the new ICPs by early 2012.

Link to ICP 16

Europeans will notice that ICP 16 is very similar to Pillar 2 of Solvency 2.  Folks in the US will notice that this is very similar to documents that the NAIC has exposed for comment in the last year.

Riskviews has visited a number of non-G20 countries in the past six months and insurers there have all said that their regulators are starting to talk about ERM requirements or have already put them in place.

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Explore posts in the same categories: Enterprise Risk Management, Regulatory Risk, Solvency II

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