Sunday, 5 February 2012

Reactions Magazine - CRO Risk Forum pullout (if they fix the link)

Some really nice pieces in January's CRO Risk Forum paper from Reactions magazine (you should be able to grab the paper from the link, but it does appear to be faulty at the time of writing).

A number of major CROs have contributed (Munich Re, Nationwide (US), Zurich, Scor), and they cover some juicy material on the Solvency II front, as well as some generic ERM matters and CRO role development. Pieces that particularly piqued my interest were;

Zurich's Lehmann on the role of the CRO
  • Opines that, a decade ago, the CRO role was considered to be covered by the Chief Actuary in insurance undertakings
  • Stresses that a CRO needs to have direct access to the CEO - though that did little for Paul Moore of course, or indeed as reported only last week, Michael Roseman at MF Global.
  • Speaks supportively of the CRO Forum's Emerging Risk Initiative - strangely, as a subject so fluid and topical, the section of the website dedicated to this is sparser than my hairline!
  • States that "...advanced companies have a risk function that defines the risk strategy and clearly sets risk appetite limits" - this is a pretty breathtaking thing to say, which I can only assume has lost something in interpretation, as the question it responds to relates to underwriting. In the context of my last post on Risk Appetite, I would never see myself as a second line function setting the limits of risk appetite.
  • States that "[A company's ERM Framework] defines its risk culture" - hate to go all 'chicken and egg', but would a company's risk culture not determine their ERM Framework requirements?
  • Tries to associate the Insurance industry's relatively safe passage through 2008-2011 on ERM advances, where I would be more inclined to attribute much of it to the 'unique features' of the industry that the CEA like to bandy around when lobbying for SIFI exemptions".
Nationwide's Mahaffey on the USA's new CRO Council
  • Emphasises that the US-version of Europe's CRO Forum is not just dedicated to Solvency issues ("at the cost of engaging with other issues"), citing ratings agencies, emerging risks and federal/international developments as other agenda items. I suspect the European guys may find that snipe slightly harsh, regardless of Solvency II being the big fish right now.
RSA's MacDonald on ORSA
  • Talks throughout interchangeably about ORSA process and ORSA report. Doesn't help when he goes on to state "Identifying who owns the ORSA is of primary importance" - Articles 44 (4) and 45 (1) would tend to identify the process owner, but the unconcentrated chatter in the Level 3 doesn't uncontrovertably assign document ownership (or indeed what the significance of "owning" the ORSA Report may be). 
  • Piece on alignment with internal strategic or operational planning process very sensible - no point in shifting dates which are probably carved in stone, if you can fit the ORSA process around them
  • Identifies most of the company bar the tea lady as 'stakeholders' for engagement - I suspect there are that many customers/end users of the output, but frankly most could make themselves scarce during process construction and not be missed.
Scor's Trainar on Solvency II progress
  • Suggests that Solvency II in its entirety should "...bring enterprise risk management in the industry up to standard" - doesn't quite tally with his CRO Forum colleague above, who seemed to think the standard helped keep it afloat during the crisis!
  • Worried about the size of the Solvency II challenge should it be served up "...with a heavy and indigestible bureaucratic sauce" - truly sparkling wordsmithery!
  • States that "Solvency II is an excellent micro-economic reform but a mediocre macro-economic one" - hence the delay mon ami!
Towards the back are a couple of nice case study/example pieces which you might enjoy from a benchmarking perspective.

1 comment:

  1. Annuity prices are likely to rise as a result of Solvency II, so settlement solutions could become more expensive. Members of defined contribution (DC) schemes who are retiring and have to buy annuities will also get less retirement income for their money.