Asia-Pacific insurers improves ERM capability: S&P

India Infoline News Service | Mumbai |

Although ERM frameworks for Asia-Pacific insurers are gradually improving, they still fall short of those seen in more developed markets

Asia-Pacific insurers have generally enhanced their enterprise risk management (ERM) capability over the past 18 months, said Standard & Poor's Ratings Services in report published today titled "Asia-Pacific Insurers' ERM Continues To Improve, But Still Lags Behind The More Developed Markets."
 
According to the report, this development reflects the regulatory focus on insurers' risk framework regimes. Improving ERM capability also reflects the indirect influence of foreign insurance groups domiciled in Europe that are under the Solvency II regime and which have subsidiaries in Asia-Pacific.
 
"Although ERM frameworks for Asia-Pacific insurers are gradually improving, they still fall short of those seen in more developed markets," said Taiwan Ratings credit analyst Andy Chang. "Nevertheless, we believe that global regulatory trends, along with emerging risks such as floods in Thailand, will motivate insurers to enhance their risk management controls."
 
In Standard & Poor's assessment, the majority of Asia-Pacific insurers have "adequate" ERM. The percentage of local insurers with "strong" ERM scores is lower than in the more developed North American and European markets. However, an increasing percentage of insurers have "strong" or "adequate with strong risk control" ERM scores in Asia-Pacific over the past 18 months.
 
Chang said regulators in the region have been emphasizing the importance of ERM. In recent years, they have gradually increased the guidance on requirements for risk-based capital and more quantitative frameworks and models, particularly in light of several catastrophes in the region and the prevailing low interest rate environment.
 
Similar to our previous review on insurers in the region, Australia and Japan were more advanced in their ERM development, and only these two countries have insurers with "strong" ERM scores.
 
In Asia-Pacific, life insurers generally have slightly better ERM assessments than nonlife insurers.

 

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