Immediacy or necessity has a way of sneaking up on us and getting our attention.

Executive Summary

"Nothing stays static over a number of years. Companies change internally, and so does the external operating environment," writes Carol Williams, a risk management and strategy consultant for P/C insurers, reminding carriers not to wait to be backed into a corner before they update their ERM programs.

This principle is true across the board.

Nobody rushes to the front of the line to get a colonoscopy or root canal, but when circumstances force us, we’ll take action, albeit grudgingly.

Some examples of how this may look for an insurance carrier include:

Ratings agencies like AM Best, Demotech, or Kroll say your current program is insufficient for the size or complexity of the company. Without drastic action, the company could see its rating downgraded. State insurance agencies and other regulators are asking more questions about risks, modeling, controls and mitigation verification, expressing concerns that the company will be unable to protect itself. The company is nearing the $500 million threshold for ORSA regulations and is nowhere near ready. Significant changes to corporate governance result in a misalignment between the board and the executive discussions and expectations regarding risk-taking behavior. Haphazard meetings create internal chaos and gridlock, leaving the company with missed performance goals; extended projects cost more money than budgeted and larger than expected financial losses overall. Premium growth creates more volume to maintain, leading to expensive changes in technology and employee costs. Expansion into new geographic markets makes the company subject to additional (new) regulations. Antiquated assessment and analysis methods generate reports that regurgitate what is commonly known already.

Enterprise risk management is a prime example of this principle in action in the insurance industry, or any business, to be honest.

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