Keep your eye on the prize: An ERM update on the global insurance industry. 2012 Global Insurance ERM Survey Report

Towers Watson’s latest global insurance ERM survey confirms the notion that ERM adds value and highlights critical success factors. While insurers are in fact seeing the value in ERM, a number of challenges remain in realizing ERM’s full potential. We’ve chosen the theme “Keep Your Eye on the Prize” to set the stage for our analysis as insurers set their priorities for 2013. Seven key findings underpin our 2012 ERM survey results. 

• Insurers see the value in ERM. Key sources of value included the avoidance of business-threatening losses (78% of participants) and enhanced shareholder decision making (72% of non-mutual participants). 
• ERM's business impact continues to grow, albeit slowly. Satisfaction with ERM performance increased in both Europe (up from 57% to 62%) and North America (from 62% to 66%). 
• Those who stay the course will reap the rewards. Well-advanced ERM capabilities (greater than 75% complete) contributed much more strongly to business performance. 
• Risk culture is critical to long-term ERM success. Eighty percent of respondents indicate that risk culture is a highly important part of their end-state vision of ERM. 
• Defining risk appetite and monitoring against it are top short-term priorities. While 74% of respondents have now defined a risk appetite, almost 60% of these have yet to demonstrate its consistency with their risk limit structure. 
• The potential of economic capital is yet to be realized. Methodology remains the top economic capital calculation challenge (58% of participants), while management buy-in (62%) and robustness of results (61%) are the key challenges to greater use of EC in decision making. Our seventh biennial ERM survey received responses from 539 executives, making this the oldest and largest global survey of the insurance industry on this topic. We encourage consultants to use survey findings to initiate and inform discussions with clients.