Jahna Jacobson
The inaugural EY/Institute of International Finance (IIF) Global Insurance Risk Management Survey ranks cybersecurity as the top concern for chief risk officers.
CROs surveyed said the top five risk types or risk management types for next year are:
•
53% – Cybersecurity risks
•
35% – Insurance risks (such as lapses, underwriting risks including catastrophic risks) [CAT] long life risk)
•
32% – Business model change/
conversion
•
26% – Credit risk (including country, region)
sovereign risk and concentration risk)
•
24% – Linked between capital allocations
Interest rate risk and technology risk
(e.g. poorly managed risks)
or maintenance of technical systems;
network, assets, applications)
Human capital risk (22%) also ranked high in the one-year outlook, reflecting the tight labor market. Overall, 64% of participating CROs say talent acquisition will become increasingly difficult in the long term. Third-party risks reflect talent shortages and increased industry connectivity. More insurers are looking to access certain capabilities and technologies through ecosystems and alternative procurement models.
Survey data from 68 insurers in 15 countries shows that concerns change when looking at new risks over the next three years. While cybersecurity risk remains at the top of the list (68%) for all CROs surveyed, the top five concerns include geopolitical risk (56%), environmental risk (50%), machine learning and Rounding out are more global issues, such as artificial intelligence (43%). %), and underskilling/reskilling of existing employees (41%).
Political uncertainty in this US election year increases risks. Most survey respondents cited geopolitical risk as one of the most pressing risks over the next three years. CROs view geopolitical risks primarily in terms of macroeconomic impacts (79%), increases in cyber warfare (67%), and regulatory changes (64%).
US survey respondents were twice as likely as European respondents to expect there to be a focus on GenAI over the next five years. Approximately one-quarter of enterprises have implemented the core components of the framework needed to address AI-related risks. Despite relying on growing ecosystems and alliances to improve efficiency (43%) and attract new customers (59%), nearly half (46%) are not managing third-party cyber risks. They see it as a threat to their operational resilience.
Although they are confident in managing emerging financial and regulatory risks, less than a quarter (22%) of respondents say they are implementing AI, Gen AI, and machine learning. Companies adopting AI are doing so with guardrails in place, with 50% establishing controls to ensure responsible use of AI and ML in decision-making. Respondents cited increased risks in modeling, including the risk of illusions and explainability (61%), data privacy (49%), and consumer fairness and algorithmic bias (37%).
More than two-thirds (69%) of CROs surveyed have integrated ESG into their risk management frameworks, and 87% have integrated ESG criteria into their investments. Although many CROs are confident in their organizations' ability to incorporate ESG into decision-making, only 3% of respondents fully understand their exposure to climate change risks, and just over a third ( 36%) say climate change risks are serious. Although integrated into the business strategy, positive actions are still planned. More than half (53%) cite ESG-related investments and rewarding positive ESG actions (34%) as the key product or feature with the most growth potential.
Still, 72% of CRO respondents are confident in their ability to manage change as risks increase, and 74% believe budget is the biggest threat to accelerating critical digital transformation strategies. I am.
“Insurance CROs continue to explore opportunities to drive growth and reduce operational risk,” said Isabelle Saintenac, Global Insurance Leader at EY. “With record natural disasters expected in 2023, multi-billion dollar scale will grow due to shrinking budgets and talent shortages to address the most pressing climate-related disasters facing our generation.” The pressure on airlines to address protection gaps has become even more acute.”
Despite operating in a “quicksand environment,” he said, “CROs are investing meaningfully in the ecosystem, leveraging AI to combat the rise in fraud, and tapping into an industry full of potential.” “By laying the foundations for attracting talent, we are mitigating future risks.”
Confidence remains despite facing what some have called a “polycrisis.”
“In the face of complex risks, rapid technological advances, and resource and talent constraints, our findings highlight the resilience and adaptability of insurance CROs and their strong commitment to digital transformation. ,” said Mary Frances Monroe, director of insurance regulation and policy at the Insurance Institute. international finance.
Events in 2023 will accelerate the pace at which insurers seek to strengthen the front lines of their risk management practices, with 59% of respondents improving their liquidity management policies, procedures and practices, and more than half (56%) has updated Asset Liability Management. (ALM) Framework, for the past 12 months.
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