In its presentation at the 17th General Insurance Seminar at the Gold Coast in Australia, Aon Benfield highlighted the critical role of actuaries in managing emerging risks for the re/insurance industry.
“The profession’s role will evolve to deliver more robust Enterprise Risk Management (ERM) frameworks and will start designing potential scenarios rather than solely performing retrospective statistical analysis,” according to Aon Benfield’s David Maneval.
Aon pointed out that over the last decade the world has seen “several large scale emerging risks,” notably “the 9/11 terrorism attack, a global financial crisis and an eruption of the Eyjafjallajökull volcano in Iceland.”
In addition Aon noted that “asbestos liability is a key example of the impact of claims on the insurance industry, which had not anticipated such costs at the point of underwriting and led to a number of insurer insolvencies. On the horizon, new risks are emerging in the shape of regulatory shifts, climate change, inflation, cyber risk, nanotechnologies and pandemics.”
Actuaries are extremely well placed to develop response strategies using their ERM skills to apply an effective framework. As a resuly Aon colncludes that the “role of actuaries is likely to evolve in the following ways:
— Designing prospective scenarios, rather than solely performing statistical analysis. In the absence of historical data, expert opinions need to be integrated in the design of specific scenarios; the actuarial role is becoming broader.
— Ability to interact at all levels and regularly engage and communicate across the organization.
— Working with the Board of Directors on the complexity and management of risks.
— Keeping up to date as emerging risks change and new paradigms emerge.
— Helping with holistic response plans and dry runs to assess the plans’ effectiveness.
The bulletin also stressed that “rating agencies and increasingly regulators are less likely to provide favorable opinions when re/insurers fail to demonstrate emerging risk management processes.”
Maneval, the head of Actuarial & ERM in Asia Pacific for Aon Benfield Analytics, prepared a study to be presented at the conference. He concluded: “Managing emerging risks is an opportunity for actuaries to add significant value to the risk management function. Actuaries are critical to embedding the ERM framework and the profession is becoming increasingly experienced in correlation with demand. With risk also comes opportunities, hence the importance of being proactive in building resilience to change and being prepared for emerging risks.”
Source: Aon Benfield
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