An important recognition, he said, is that there is "a significant amount required to be done in integrating ERM into the day-to-day business."

Although companies are working on economic capital (EC) for decision-making and performance management, Mr. Shimpi said, they are not yet there with respect to using ERM "for wider uses such as risk control and monitoring and reporting."

He added that ERM, and the discipline it brings, has influenced a number of key business decisions. "The fundamental one that has been on people's minds was to be more definitive in articulating the risk appetite and surrounding strategy," he said.

Mr. Shimpi noted that even when everything else for ERM is in place, insurers need to find out if incentives are in place to enable implementation companywide.

Larger companies are more successful at implementing ERM, especially European companies, "not because they are better or worse--they've just been at it a little longer," Mr. Shimpi said, adding that with any type of change management, "time helps, if you do it right."

The challenge, however, is "confidence that what the top of the house is saying in terms of risk appetite is actually being internalized and acted upon appropriately by the rank and file."

The report found that:

o Embedding ERM is still a significant challenge. Towers Perrin said less than one-fifth of firms surveyed believe they have an appropriate capability in place for risk control, monitoring and reporting. Thirty-seven percent of respondents said calculating EC is an area where significant work is needed, and just 10 percent of insurers believed they have an appropriate capability in place.

o Larger insurers are more advanced in most aspects of ERM implementation--84 percent already calculating EC, versus 69 percent of medium companies with revenues between $1 billion and $10 billion.

o European insurers are better positioned in ERM. Of North American insurers, 23 percent feel significant work is needed for managing market risk exposure, compared to 7 percent of European insurers.

Under Solvency II, these capabilities are expected to lead to lower capital requirements and create competitive advantage.

o Significant numbers of respondents indicate their ERM program has resulted in key business changes, including aspects like risk strategy or appetite, asset strategies and product pricing.

o EC standards are emerging. EC methodology is moving toward a one-year value at risk (VaR) approach; the majority of respondents use a market-consistent terminal balance sheet.

o Operational risk remains a weak spot. Only 7 percent believe they have an appropriate operational risk capability in place, and 37 percent said significant work is required in this area.

Towers Perrin said that its survey results reflect the "perceived state of ERM implementation just before the latest stage of the financial crisis erupted." However, it said, "key findings remain highly pertinent in the current environment."