Extract from. Études et Dossiers No th Asian CEO Insurance Summit. Managing the Potential of Profits in Risks. Singapore, 6 8 March 2007

Transcription

1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th Asian CEO Insurance Summit Managing the Potential of Profits in Risks Singapore, 6 8 March 2007 This document is free to download from The Geneva Association website, August 2007 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance The Geneva Association - General Secretariat - 53, route de Malagnou - CH-1208 Geneva Tel.: Fax: secretariat@genevaassociation.org -

2 The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. This document is free to download from The Geneva Association website, please visit: Layout & Distribution: Valéria Kozakova The Geneva Association - Association Internationale pour l'etude de l'economie de l'assurance

3 Key Technology Support Issues for Regulation & Supervision David Carlon 1 Agenda Current Events in Enterprise Risk for Insurance Enterprise Risk (ERM) - a Refresher Addressing Compliance Stop Gap Measures Turning Compliance into Strategic Advantage Technology Enabled Enterprise Risk Leveraging the power of Enterprise Content What Industry Leaders are Doing Questions

4 Insurers - Risk Experts- or are they? eweekly Taiwan, Life Insurance Association has also added that fines will be imposed on top of the DOI's penalty. In fact, the DOI is reported to have issued rectification notices to China Life and Fubon Life in the past half year, either for advertisements exaggerating profit rate returns Standard & Poors Says Japan s Insurers Fall Short on Strategic Risk China: More than 100 Insurers Punished for irregularities and levied 8.91 million yuan in fines against 14 executives at 128 companies during a nationwide (CIRC) inspection campaign Under the crackdown, which lasted from April to November.. Asia Insurance Review While we are pleased to see a closer relationship between risk and capital emerging, risk management should not be viewed only in the context of efficient use of capital. FSA (UK) Insurance Sector Briefing 3 No Insurer is Immune North America Prudential AIG St. Paul Travelers Europe Zurich AXA Allianz Asia China Life Mitsui Sumitomo

5 Continued Increase in Regulations Over 10,000 regulations worldwide 4,266 new regulations in the pipeline Over $1.1 trillion spent to comply with US Federal requirements Enterprises that choose one-off solutions for each regulatory challenge that they face will spend 10 times more on compliance projects than their counterparts that take a proactive approach. Gartner 5 Unstructured Information is Becoming the Dominant Information Type in Large Companies Percent of corporate information value managed in traditional databases Data Demand Unstructured Data OLTP and BI (narrow scope) Structured Data Application Types Compliance, Competitive Intelligence (wide scope) Source: Gartner

6 Web Sites Forms Electronic Documents Paper Documents & Files Content Print Output Digital Assets Enterprise Applications Fax Other Content Repositories 7 Explosive Growth of Content That Spans the Enterprise Content 90% electronic 35 billion s a day Storage Demand Petabytes 1,800 1,600 1,400 1,200 1,000 Millions of printed documents a day 80% CAGR Content is Discoverable Source: Gartner Fixed Unstructured Data Dynamic Structured Data

7 Gaps in Managing Risk 53% of Asian companies reported gaps in coverage of key risks.. compared to only 28% in the Americas Source- E&Y Risk Survey Series, Enterprise Risk - View of the Risk Landscape Strategic Competitive Reputational Ethics Investor & Public Relations Mergers & Acquisition Resource Allocation Sovereign / Political Financial Tax Capital Structure Financial Reporting Portfolio Currency or Treasury Product Pricing Credit ERM Operational Environmental Process Information Technology Continuity Human Resources Fraud Regulatory Legal Financial Market Conduct

8 ERM Framework Example Establish a simple framework e.g. COSO model Identify and clearly view Risks Assign risk ownership as a core management responsibility Manage what matters most Align risk with Strategy Take an Enterprise view 11 The REAL Impact of Compliance Dependence on end-users is error-prone and expensive Too many expensive manual processes require controls and testing Information is in multiple locations, untraceable, unreliable and not easily found High impact on operational performance and costs Huge overhead on discovery and litigation personnel and legal expenses

9 Compliance in Insurance: Maturing from risk mitigation and penalty avoidance to managing risk as a competitive advantage MATURITY CONTINUUM COST TRANSFORM Leverage Compliance for Competitive Advantage IMPROVE Optimize and Sustain COMPLY Penalty Avoidance STAKEHOLDER VALUE VALUE 13 It is all about Technology as an Enabler Select a platform that addresses Process, Content and Compliance Think Enterprise Solutions to address overlap of risks and simplify technology architecture Conversely, point solutions create technology complexity Adaptive technology platforms permit businesses to address most important risks first Process with analytics provide control and flexibility processes are the single largest source of both operational and market conduct risk

10 Essential to Enterprise Compliance Two Key Ingredients Internal Controls Continuity Information Risk Operational Risk Regulations Policies, Controls and Process Process Records Evidence and Proof, Processing and Messaging Applications helps ensure that the right controls are in place to manage risk to tolerance levels, and behave in a legally compliant manner Records helps ensure that you collect and preserve the right evidence to prove your behavior was compliant 15 Leveraging an ECM Platform to Achieve ERM Document Enterprise Content Report Team Collaboration Imaging Web Publishing Activity Monitoring Policies, Controls and Process Electronic Forms Process File System Content Content Federation Achieve Compliance Sustain Compliance Records Content Discovery Prove Compliance Evidence and Proof

11 Component Technologies for Strategic Risk Activity Monitoring Process Analytics Electronic Forms ERM Records Portfolio Rules Search & Discovery 17 Key Risk Area = Market Conduct Process What? ECM offerings institute internal best practices, risk controls BPM orchestrates complex processes, including trigger for Market Conduct Review of individual cases BAM proactively monitors and provides transparency for risks related to service performance Use with P8 CM, RM, IICE and P8 Records Crawler Why? Process maps ensure consistency with policies, practices including audit trail Removes Manual, undocumented activities Real Time Risk Integrates capture mechanism for content, Monitoring process and legal discovery Avoidance Leverages content driven events in insurance

12 ERM Framework with ECM Benefits Unifying Framework Agreed to Methodology to be used across the enterprise Shared Enterprise Learning Center for excellence Optimizes Process Performance Process Agility Ability to respond quickly to regulatory changes Enterprise Transparency Provides auditable evidence for regulators Automated processes and controls 19 What are companies doing? Leveraging ECM in the journey to Strategic ERM Global Insurance Subsidiary Large US based Multi-Lines Insurance Carrier Top 10 Life/Pension Carrier Global Insurance Leader

13 Summary Regulations and Risk continue to increase Compliance is important and a top priority for insurers globally Leading Insurers are adopting ERM Frameworks to address ERM ECM is a strategic technology solution for enabling ERM ERM can provide competitive advantage IBM Contacts Industry Marketing Ronen Lamdan, Marketing Manager Singapore ronenl@sg.ibm.com David Carlon david.arlon@us.ibm.com Joseph Dzigiel jdzigiel@us.ibm.com Brian Banigan bbanigan@us.ibm.com