1、Cover title 26/29 45 light white Cover subtitle 12/15 65 medium black Risk appetite gains momentum in a changing world 2017/2018 Global Reinsurance and Risk Appetite Survey Report How is risk appetite helping insurance companies make better decisions about reinsurance needs? How effectively are comp

2、anies using enterprise risk management (ERM) to enhance business performance? Which emerging risk is top of mind? To find out, we asked insurance executives across the globe to weigh in. 2017/2018 Global Reinsurance and Risk Appetite Survey Report 1 Risk appetite gains momentum in a changing world 2

3、017/2018 Global Reinsurance and Risk Appetite Survey Report Table of contents Executive summary .2 Survey highlights .3 Risk appetite in a changing world.4 Risk appetite and reinsurance linking micro to macro .5 Enterprise risk management .8 Emerging risks .9 Executive summary 2 Willis Towers Watson

4、s latest risk appetite survey has again confirmed that risk appetite is increasingly central to insurers business decisions. The motivation for buying reinsurance has shifted toward earnings protection and volatility reduction driven by investor relation efforts. ERM capabilities have improved, as s

5、uggested by higher satisfaction with current frameworks; however, it appears progress is still needed to achieve companies risk culture goals. Among different emerging risks, most respondents say cyber risk is clearly their main concern, due largely to the difficulties in defining and managing this

6、serious risk both from underwriting and operational perspectives. In an insurance industry of increasing complexity and risks, risk appetite and reinsurance are gaining momentum as cornerstones of a successful operation, regardless of geography or size. Risk appetite gains momentum in a changing wor

7、ld 3 ERM satisfaction widespread, but insurers final vision still far-off ERM front and center: ERM is increasingly prominent, and regulation most commonly drives implementation. ERM satisfaction overwhelming: The vast majority of insurers across all regions are satisfied with their ERM capabilities

8、. Compared with 2015 survey results, the proportion of dissatisfied survey respondents was halved indicating progress in ERM implementation over the period. Risk culture key to ERM vision: Risk culture was ranked most important to the final strategic ERM vision; however, only 20% of surveyed compani

9、es reported significant progress (more than 75%) toward achieving their visions for risk culture. Cyber risk looms as top emerging risk What concerns insurers? Unsurprisingly, technology, cyber risk and industry disruptors are prime concerns, while regulatory issues remain central. Climate change, g

10、lobalization and connectivity also featured heavily in the survey responses. Risk appetite is evolving, dynamic and almost universal Risk appetite statements are among the day-to-day must- have management tools: Nearly all survey respondents (98%) have adopted or are planning to adopt a formal risk

11、appetite statement in the next three years. Risk appetite is dynamic: One-third of insurance companies with a formal risk appetite plan intend to make a material change in the coming year, mainly due to regulatory requirements. Risk appetite guides reinsurance buys, particularly earnings Risk appeti

12、te is a strategy optimizer: Increasingly (80%), risk appetite statements optimize capital and earnings and, hence, reinsurance strategies. Drivers of reinsurance buys: Earnings protection and volatility reduction are top drivers for reinsurance purchasing. Capital is still very important; however, t

13、he advanced implementation of recent regulatory requirements has absorbed this need. Advanced metrics and less tolerance: Insurers are moving to more sophisticated metrics such as return on equity and economic capital; however, they are becoming less tolerant of missing their earnings targets due to

14、 pressure to perform from investors. Survey highlights About the survey Our web-based survey of 260 insurance executives from 51 countries was fielded June 8 through August 10, 2017. 260 respondents from 51 countries 90 EMEA* 109 Asia Pacific 43 North America 18 LAC* 74 Life 111 Non-life 75 Composit

15、e 46 Small GWP* under $100M 59 Medium GWP between $100M and $500M 96 Large GWP between $500M and $5B 59 Very large GWP over $5B 101 Privately owned 92 Publicly owned 49 Mutual 16 State owned *Europe, Middle East and Africa *Latin America and the Caribbean *Gross written premium 4 Risk appetite state

16、ments are far more than just a regulatory requirement and are almost universally used by insurance companies around the globe. In fact, what may have begun as a way to satisfy regulators and rating agencies is now being given its due as a valuable management tool that can safeguard companies from se

17、rious, debilitating emerging risks such as cyberthreats. Risk appetite statements are now on nearly every insurers agenda The concept of a risk appetite framework is not new. Rather, its emphasis and focus have increased globally over the past few years, driven by regulatory pressures and fear of sy

18、stemic risks that could threaten the financial services industry. Regulatory requirements are just one driver In some geographies an embedded risk appetite framework, including formal risk appetite statements, is a regulatory requirement. Where regulatory requirements do not exist, it is common for

19、a company to implement an equivalent framework to compare favorably with peers. Key survey results: Globally, over three-quarters of insurers surveyed have formal risk appetite statements in place, with a further 22% planning to adopt one in the coming three years. Only 2% of those questioned have n

20、o plans in place to implement a risk appetite statement. (Notably, no life insurance companies surveyed fall into this category.) When the survey was conducted in 2015, over 15% of participants had no plans to implement a risk appetite framework. Figure 1 shows a marked shift in attitude across the

21、market. Several regions, one trend Regionally, the adoption of formal risk appetite statements is consistent, with similar take-up rates. Only Latin America and the Caribbean (LAC) reported a lower-than-average adoption rate. That said, all LAC respondents plan to have one in the next three years (F

22、igure 2). Risk appetite in a changing world Figure 1. Do you have a formal risk appetite statement? Yes No, but planning to No 17% 19% 64% 22% 76% 2% 2015 2017 Already use Plan to adopt within three years North America Latin America and the Caribbean Europe, Middle East and AfricaAsia Pacifi c 77% 2

23、3% 77% 20% 77% 22% 61% 39% Figure 2. Risk appetite statement adoption by region Risk appetite gains momentum in a changing world 5 As weve just described, a risk appetite framework is integral to running an insurance company. Insurers are increasingly using their risk appetite statements to optimize

24、 their capital management and profitability targets. Reinsurance has always been a particularly efficient way to manage these macro-goals and is, therefore, unsurprisingly linked to risk appetite: 80% of insurers surveyed consider their risk appetite statements when optimizing their reinsurance stra

25、tegies (Figure 3). Next we will see how risk appetite and reinsurance targets three business areas: Operational use (within various functions of an insurance company) Earnings protection Capital strategy Operational use Group leads general risk appetite use: The degree that companies use their risk

26、appetite statements to optimize reinsurance strategies varies by region. Some of this deviation may be caused by a different mix of business types, group versus individual or the level at which risk appetite is set (Figure 4). Reinsurance is a visible and flexible part of an insurers capital managem

27、ent strategy that drives a number of key business decisions, including balance sheet strength, earnings and profitability, dividend policy, business and investment strategy, and company ratings. Risk appetite and reinsurance linking micro to macro Figure 3. Is your risk appetite statement used to op

28、timize your capital management/reinsurance strategy? 14% 80% 6% Yes Not yet No Worldwide 0% 10% 20% 30% 40% 50% 60% 70% 80% WorldwideLatin America and the Caribbean North AmericaEurope, Middle East and Africa Asia Pacifi c Figure 4. Given that reinsurance is optimized using risk appetite statements,

29、 at which level is this performed? Group levelOperational levelBusiness level 56 54 18 56 40 25 78 26 17 60 50 45 23 60 59 6 Earnings protection Survey participants indicated that earnings protection both earnings results and volatility reduction tops the list of drivers for evaluating reinsurance s

30、trategies (Figure 5). Figure 5. Which of the following measures/needs are more important to your reinsurance decision? 0%10%20%30%40%50%60% Other Expertise in product development, underwriting, expansion Solvency management Earnings protection 31 52 11 6 Figure 6. Most valued earnings metric for set

31、ting reinsurance strategy 20172015 0% 10% 20% 30% 40% Economic value added Return on equity Value of new business 0% 10% 20% 30% 40% Underwriting profi t Return on equity Combined ratio 15 13 23 18 9 15 26 LifeNon-life 20 40 Metrics are up, targets are down: Managing the volatility of results is of

32、prime importance. This is particularly relevant in public companies where perceived volatility can severely impact share price. When asked which earnings metric is the most important in setting reinsurance strategy, life insurers responses show that they dont have a clear preference (Figure 6). Some

33、 may be closed to new business, which explains the increased spread in responses. However, it is clear that insurers are increasingly considering more complex earnings metrics such as return on equity. In the 2017/2018 survey, 18% rated return on equity as the primary earnings metric, double the 9%

34、response rate in 2015/2016 results. Risk appetite gains momentum in a changing world 7 Capital strategy The global regulatory environment continues to develop. Changes and advances in recent years have increased the emphasis on capital measures and targets. Much of the new wave of global regulation

35、and oversight is now implemented (or will be shortly), with regimes such as Solvency II leading the way. A number of countries around the world are striving for frameworks with similar principles, with the introduction of risk-based capital supervisory regimes becoming the new normal in Asia Pacific

36、 and the Middle East. This focus on capital is not new; however, we are seeing changes in which capital measures are considered most important depending on the maturity of the local regulatory environments. Regulatory capital dominates nearly twice as important for life over non-life companies: Alth

37、ough regulatory capital is still the most relevant capital measure (Figure 7), economic capital and catastrophe risk capital are gaining momentum. This is because companies are more sophisticated, and indeed the use of internal capital models increased substantially from 33% to 52% between 2015 and

38、2017. However, recent catastrophic events have reinforced the focus on catastrophe risk capital. This split is slightly different when considering life and non-life separately, particularly since catastrophe risk capital is not a common concept in the life industry. Figure 7. Which of the following

39、capital measures is the most important to your reinsurance decision? Total Regulatory capital Rating agency capital Economic capital Catastrophic capital Other 17% 21% 18% 1% 43% 11% 25% 39% 21% 4% 2015 2017 Note: Solvency II and equivalent countries include: Bermuda (full equivalence), European Uni

40、on (EU) and Switzerland; Australia, Brazil, Canada, Japan, Mexico (provisional equivalence) and U.S. as of Commision Delegated Decision (EU) 2015/2290 8 Enterprise risk management Regulation is the most common driver for those developing their ERM capabilities. However, internal drivers also play an

41、 important part, as detailed in Figure 8. Figure 8 shows the overall picture; however, it is worth noting that there is a slightly different trend in North America where regulatory requirements rank only third. Only 2% of respondents answered that they had not made changes to their ERM frameworks in

42、 the previous 24 months. Interestingly, the negative interest rate environment was listed as a reason for change by a subset of respondents. This corresponds with interest rates featuring in the top 10 emerging risks. Risk culture was ranked most important to the end-state ERM vision; however, only

43、a fifth of those surveyed reported significant (greater than 75%) progress toward achieving their visions for risk culture. Figure 8. What have been the key drivers of change in your ERM framework over the last 24 months? 0%10%20%30%40%50%60% Board desire for improved ERM as good business practice S

44、upport better strategic decision making Senior management desire for improved ERM as good business practice Regulatory requirements (current/under development) 39 60 27 23 Risk appetite gains momentum in a changing world 9 Figure 9. What are the top emerging risks facing your company? cyber interest

45、 rates climate political reputation economic fi nancial regional cybersecurity increasing genetic disruptive driverless capital operational internet tax systemlegislation based price sales digitalization digital regulatory technology geopolitical disruption consumer attack technologies Brexit big wi

46、nd state performance market security terrorism developments sharing failure advances valuecomputer transformation population autonomous disaster large things driving environment cars large-scale threat innovation uncertainty data low pressure impact claims competition economy catastrophe medical pricing program catastrophic vehicles soft aging requirements earthquake growth technological natural disease core l