Moore Stephens: Insurance Industry Falling Short on Embedding Risk Management

A survey by leading accountant and insurance consultant Moore Stephens has revealed that there is still has some way to go in terms of embedding risk management into the UK insurance industry, given the FSA's continued focus on the whole area of risk management in regulated firms.

The survey was designed to assess how insurance entities are managing risk today and how risk management attitudes and practice in the industry have moved since the first Moore Stephens survey on this subject, in March 2007.

Writing in the latest issue of the Moore Stephens newsletter Insured Interest, Simon Gallagher, head of the firm’s Insurance Industry Group, says, “Against a background of increased regulation and changes in best practice, decisions on risk management strategy and practice can have a significant impact. Given the emphasis placed by the FSA on senior management responsibilities, we expected a significant increase in risk management maturity, but this was not the case. Despite some improvement, our survey reveals that while risk management frameworks and responsibilities have been set and people and resources allocated in the majority of insurance businesses, risk management continues to be low on board and senior management agendas.

“The responses on business benefits are similar to our 2007 survey. Scores of 3.8 out of 5.0 on increased regulatory compliance and improved internal control from insurer respondents are encouraging, despite the seeming continued lack of commitment to risk management from some businesses demonstrated in the responses to other questions.

“Finally, the level of preparedness for Solvency II is relatively low, but not unexpected. Affected firms will need to take positive steps sooner rather than later to demonstrate compliance to the satisfaction of the regulators. And the biggest challenge they face is likely to revolve around the development of compliant internal capital models, or the customisation of existing models and – most importantly – the embedding of those models into day-to-day business practices, as part of sound risk management.”

The 18-page Risk Management Survey Report can be downloaded by clicking HERE.

• About Moore Stephens LLP

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as an adviser and consultant to the insurance sector. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 647 offices of independent member firms in 98 countries employing 21,224 people. Fee income increased in 2008 by US$353 million to US$2,237 million, a growth rate of 18.7%.