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October 16, 2002 at 08:00 PM
NU Online News Service, Oct. 16, 10:00 a.m. – Life insurance companies are giving higher priority to their risk and capital management practices, according to a Tillinghast-Towers Perrin survey of chief financial officers of North American life insurers.
The survey was the second in a series of Web-based “pulse” surveys of North American life insurance CFOs conducted by Tillinghast, New York, an actuarial and management consulting firm.
This installment examined risk and capital management practices. In particular, the survey looked at how insurers are responding to volatile capital markets and proposed regulatory changes that have brought an increased focus on risk and capital management practices.
Although most survey participants are conducting one or more types of scenario testing to analyze future earnings volatility, many are focused on less sophisticated approaches, such as selective stress testing of assumptions. Only 37% of all companies analyze earnings volatility on a total company basis using extensive scenario testing, the survey found.
While life companies’ current use of scenario testing is primarily to comply with regulatory requirements (reported by 57%), two thirds of all respondents are considering increasing the degree to which they use scenario testing to address internal needs of senior management and to enhance the strategic decision-making process.
Eighty percent of respondents currently offer some form of equity-based products, with variable annuities and segregated fund products most prevalent in the U.S. and Canada, respectively, Tillinghast says.
