The clout of risk managers within insurance organizations is growing, a new survey shows, with the majority of chief risk officers (CROs) now reporting directly to either the CEO or CFO.
Additionally, the staffing and budget size of risk offices has either remained the same or increased from 2011 to 2012.
Seventy percent of CROs now work under the CEO or CFO of their insurance organization, with a quarter reporting directly to the CEO, says an Ernst & Young survey of 19 North American and Bermudan insurance companies. Fifty percent of respondents predict more direct involvement with their respective boards in the coming three-to-five years, a practice that is more widespread within the financial and banking sectors than in the insurance industry.
“Our biggest win has been executive engagement and active CEO participation in risk committee, which resulted in positive feedback from the regulator on our ERM program,” says one respondent.
CROs promoted from audit or actuarial groups are more likely to report to the CFO and have oversight for insurance, catastrophic and operational risks but not for investment or credit risk, Ernst & Young says. However, banking CROs are usually responsible for a variety of liabilities such as credit, new-product, emerging, regulatory and operational risks as well as report to their CEO and board or be members of their executive leadership committees.
This gap is closing. In 2011, CROs were focused on risk reporting, risk measures, and clarifying roles and responsibilities across risk functions. In 2012, 30 percent of risk professionals in the insurance industry said that focusing on economic capital was their most important achievement of the year.
Regarding the tools given to insurers' risk departments, 90 percent of respondents saw stabilization or growth of their resources over the past 12 months, with half of all risk departments and offices surveyed increasing in size from 2011 to 2012.
“Our corporate-risk department has increased significantly, both in staffing and in budget,” reads one reply to the survey. “The 25 percent to 30 percent increase is expected to repeat next year.”
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