As insurers continue to evolve their enterprise risk management systems and controls, and regulators take a closer look, one aspect continues to be clear: Capital is king.

Executive Summary

A recent S&P survey reveals that insurers with the best S&P ERM scores are also the ones closest to meeting the deadline for submitting their ORSA self-assessments to regulators. The study also found that insurers overwhelmingly use capital—and to a lesser extent earnings—to benchmark risk tolerance, S&P's Sridhar Manyem reports.

A recent study by Standard & Poor’s Rating Services of insurer ERM practices across all sectors of the insurance industry reveals that insurers overwhelmingly use capital to benchmark risk tolerance, although their definitions of capital vary widely.

Regulatory Mandates

Regulators across the globe have started to require insurers to submit some form of Own Risk and Solvency Assessment, or ORSA. In principle, an insurer’s ORSA documents its risk management practices and ERM framework. According to the Insurance Core Principles established by the International Association of Insurance Supervisors, the prime purpose of the ORSA is to assess whether an insurer’s risk management and solvency position is currently adequate and is likely to remain so in the future.

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