Cybersecurity was ranked as the top concern for chief risk officers in the inaugural Global Insurance Risk Management Survey conducted by EY/Institute of International Finance (IIF).
CROs surveyed said the top five risk types or risk management types for next year are:
- 53% – Cybersecurity risks
- 35% – Insurance risks (such as underwriting risks including lapse, catastrophic (CAT) and longevity risks)
- 32% – Business model change/transformation
- 26% – Credit risk (including country, sovereign and concentration risks)
- 24% – There is a relationship between capital allocation, interest rate risk, and technology risk (such as the risk of inadequate management or maintenance of technology systems, networks, assets, and 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%).
The political uncertainty of this US election year has heightened the risks, with most survey respondents citing geopolitical risk as one of the most pressing risks over the next three years. CRO respondents 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 struggling to manage third-party cyber risk. 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. The AI adopters we surveyed are pragmatic 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 risks of illusions and explainability) at 61%, data privacy at 49%, and consumer fairness and algorithmic bias at 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, nearly three-quarters (72%) of CRO respondents are confident in their ability to manage change with increased risk, and 74% are confident that their budget will help them accelerate critical digital transformation strategies. I believe that this is the biggest threat.
“Insurance CROs continue to explore opportunities to drive growth and reduce associated operational risks, including third-party cyber 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.” This puts even more pressure on airlines to address protection gaps.”
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. “The insurance CRO community is also essential to her ESG integration efforts for companies that are critical to addressing climate-related risks.”
The events of 2023 have accelerated the pace at which insurers are looking 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 its assets and liabilities. Last 12 Months Management (ALM) Framework. This bullish trend continues, with over 90% of respondents planning to evaluate or implement financial (e.g. credit, market, liquidity) and non-financial (e.g. operational) risk management in the next 12 months. It is said that
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