In an article published on its web site Standard & Poor’s Ratings Services said it has outlined its “updated enterprise risk management (ERM) opinions for all of its rated North American and Bermudan insurance companies.
“An insurer’s ERM program is a system of processes and practices that aims to measure and manage risk, according to the article, titled ‘North American And Bermudan Insurers Continue To Step Up Their Enterprise Risk Management Efforts.’ Our ERM opinion reflects our assessment of the strength of an insurer’s ERM program.”
Credit analyst Howard Rosen explained: “As the financial crisis continued to expose some less effective risk management practices, many insurance companies began strengthening their ERM frameworks. This resulted in ERM improvements for some of our rated insurers. Six of the 15 companies that scored weak in 2009 improved to adequate. We also have observed that insurers are focusing more on ERM in the form of new or improved processes they have implemented to better control tail risks.”
Among S&P’s findings were the following:
• We assigned a strong or excellent score for ERM culture to 29 of the 34 companies that went through ERM Level II reviews, which we perform for companies whose complexity requires an in-depth analysis.
• Based on the results of our reviews, companies with more complex risk profiles have the most opportunity to strengthen their ERM programs in the areas of emerging and strategic risk management.
• Property/casualty insurers appear to be more focused on emerging risk management than life/health insurers.
• During 2010, stock prices of companies with strong or better ERM scores continued to outperform those with lower scores.
• In 2010, as in 2009, the level of average stock price volatility of companies varied inversely with their ERM scores.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site by using the Ratings search box located in the left column at www.standardandpoors.com.
Source: Standard & Poor’s
Topics Carriers Risk Management
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