While many insurers have adopted the concept of a chief risk officer, a CRO's functions and authority are largely underdeveloped, according to a new study by Deloitte.
The study, “Insurers Risk Intelligence: New Insights and Opportunities for Risk Management,” released yesterday, discusses the complexity of the industry’s risk exposures and the opportunities to enhance risk management practices.
Regarding CROs, the report found their function within companies is relatively new and their authority level largely underdeveloped, particularly in relation to other key C-Suite positions.
For example, the reporting line of the CRO in most insurance companies is to the chief financial officer, not the chief executive officer, according to Deloitte.
Additionally, for many companies that have CROs within business units and at the corporate level, reporting lines for business unit CROs appear to be predominantly within the business units, rather than to the corporate risk function, Deloitte said.
Reporting lines for the CRO to the CEO and reporting lines for business unit CROs to the corporate CRO may be appropriate to promote the proper authority level and oversight role of risk management, the report advised.
Rebecca Amoroso, head of Deloitte’s U.S. Insurance practice, said the nine principles of Deloitte’s Risk Intelligent Enterprise adopt a balanced perspective of risk management and targeted opportunities for improvement.
Carl Groth, Deloitte’s insurance risk management leader, said insurers are encouraged to take a “fresh look at their current risk programs” and evaluate opportunities for improvement in four key areas:
• Governance and oversight
• Risk identification, measurement, monitoring and control
• Decision-making
• Communication, transparency and disclosure
The report says that although most companies have formal risk identification and measurement processes in place, new insights and information about the potential benefits associated with applying those processes to unknown or emerging risks can be used for improved business decision-making.
The potential benefits associated with improving risk identification and measurement capabilities can be created by embedding companies’ risk management processes—conducted by operating units and senior management—into the business as an integral part of strategy.
Potential benefits can also be created by reorienting the emphasis of risk management processes to be more forward looking, to identify and assess previously unknown or hidden risks, Deloitte finds.
The report says that the value associated with developing risk measurement capabilities—where risk and returns can be viewed jointly to measure performance and support decision-making within the businesses—is even greater than previously thought.
Deloitte identified specific areas that companies could address to improve the identification and understanding of exposures, particularly as they relate to linkages and interconnectedness of counterparties, investment vehicles and insurance products.
While many insurers have adopted the concept of a chief risk officer, a CRO's functions and authority are largely underdeveloped, according to a new study by Deloitte.
The study, “Insurers Risk Intelligence: New Insights and Opportunities for Risk Management,” released yesterday, discusses the complexity of the industry’s risk exposures and the opportunities to enhance risk management practices.
Regarding CROs, the report found their function within companies is relatively new and their authority level largely underdeveloped, particularly in relation to other key C-Suite positions.
For example, the reporting line of the CRO in most insurance companies is to the chief financial officer, not the chief executive officer, according to Deloitte.
Additionally, for many companies that have CROs within business units and at the corporate level, reporting lines for business unit CROs appear to be predominantly within the business units, rather than to the corporate risk function, Deloitte said.
Reporting lines for the CRO to the CEO and reporting lines for business unit CROs to the corporate CRO may be appropriate to promote the proper authority level and oversight role of risk management, the report advised.
Rebecca Amoroso, head of Deloitte’s U.S. Insurance practice, said the nine principles of Deloitte’s Risk Intelligent Enterprise adopt a balanced perspective of risk management and targeted opportunities for improvement.
Carl Groth, Deloitte’s insurance risk management leader, said insurers are encouraged to take a “fresh look at their current risk programs” and evaluate opportunities for improvement in four key areas:
• Governance and oversight
• Risk identification, measurement, monitoring and control
• Decision-making
• Communication, transparency and disclosure
The report says that although most companies have formal risk identification and measurement processes in place, new insights and information about the potential benefits associated with applying those processes to unknown or emerging risks can be used for improved business decision-making.
The potential benefits associated with improving risk identification and measurement capabilities can be created by embedding companies’ risk management processes—conducted by operating units and senior management—into the business as an integral part of strategy.
Potential benefits can also be created by reorienting the emphasis of risk management processes to be more forward looking, to identify and assess previously unknown or hidden risks, Deloitte finds.
The report says that the value associated with developing risk measurement capabilities—where risk and returns can be viewed jointly to measure performance and support decision-making within the businesses—is even greater than previously thought.
Deloitte identified specific areas that companies could address to improve the identification and understanding of exposures, particularly as they relate to linkages and interconnectedness of counterparties, investment vehicles and insurance products.
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