Cyber risk, the prolonging of the ebola pandemic and more regulatory and legislative changes are the Top Three priority risks for UK insurers in 2015. That’s according to the findings of a new joint survey conducted by ORIC International and the Institute of Risk Management (IRM).
The survey not only identifies the top emerging risks but also examines both common and innovative emerging risk practices, asking for the considered and detailed views of ORIC International members (who make up over 70% of the UK’s insurance market) and the IRM’s insurance professional members.
The Top Ten emerging risks also include acts of terrorism, the impact of climate change, global political instability and technological advances.
Emerging risk was defined by those surveyed as newly developing risks with the potential to cause significant business impact that may not yet be sufficiently understood.
Caroline Coombe, CEO of ORIC International, believes that the identification and management of emerging risks must remain a priority for global insurers. “Only 55% of survey participants are currently reporting emerging risk at Board level despite there being considerable benefits to effective emerging risk management,” explained Coombe. “Companies must consider benefits including improved planning, awareness, competitive advantage, product innovation, better underwriting risk selection and enhanced pricing strategies.”
Coombe added: “ORIC International is currently working on developing Principles of Emerging Risk Management that will serve as a Best Practice guide for insurers and lead to greater consistency in emerging risk management. We’re also developing an Emerging Risk Database that will provide our members with access to benchmark information on emerging risks identified by peer firms.”
Board accountability on the increase
There’s good news within the survey’s findings in that both the insurance industry’s maturity of the emerging risk process and Board accountability has increased among insurers since 2013.
What hasn’t changed, though, is the perception of emerging risk as less important than other aspects of the Enterprise Risk Management framework. This rating has remained consistent over the past two years.
Alex Hindson, chief risk officer at Amlin AG and a member of the IRM’s Professional Standards and Certification Committee, said: “The survey indicates that the demand from customers for insurers to respond to this unmet need by offering cover across emerging risks has increased over the past two years. This lays down the challenge to insurers in terms of finding suitable solutions for their client’s ever-changing risk exposures. Of course, this will offer a source of differentiation and competitive advantage to those who are able to do so.”
The Top Ten emerging risks for insurers in the UK are as follows:
*Pandemic (ie Ebola)
*Further regulatory or legislative change
*Eurozone collapse/UK withdrawal from the EU
*Significant changes in broker power/distribution chains/broker communities
*Shift in affluence to emerging markets (ie South East Asia)
*Climate change (including solar weather)
*Global political instability
To receive a summary of the results from ORIC International and the Institute of Risk Management’s survey on Emerging Risk contact: firstname.lastname@example.org
About the Operational Risk Consortium International (ORIC International)
ORIC International provides operational risk data and content solutions to its global membership base of leading insurance, reinsurance and asset management firms. As members of ORIC International, firms are better able to identify, assess, manage, measure, monitor and report on operational risk.
ORIC International is a not-for-profit organisation that facilitates the anonymised and confidential exchange of operational risk intelligence between member firms, in turn providing a diverse, high quality pool of quantitative and qualitative information on relevant operational risk exposures.
Further information is available online at: www.oricinternational.com
About the Institute of Risk Management (IRM)
The IRM is a leading professional body for risk management. It’s an independent, not-for-profit organisation that champions excellence in managing risk to improve organisational performance by providing internationally recognised qualifications and training, publishing research and guidance and raising professional standards across the globe. Its members work in all industries, in all risk disciplines and across the public, private and not-for-profit sectors.
The IRM’s aims are to provide:
*Recognition: Provide internationally-recognised qualifications and courses for risk professionals throughout their careers
Knowledge: Promote the value of excellence in risk management to employers, regulators, Government and external stakeholders
Networking: Deliver virtual and face-to-face opportunities for the risk community to share information, experiences and learning
Career Support: Provide career-long support to help members develop their professional profile and improve their skills