Something To Spark LTC
By Jim Connolly
What do you get when you put “plain old risk management on steroids”?
Enterprise risk management, quipped James Kallman, president of Kallman Consulting Services, Lakeway, Texas, who then proceeded to explain how the new approach, which takes a more holistic approach to managing risk, is a cutting-edge way for insurers to manage risks effectively. Risk management includes operational, financial and strategic risks, he said.
Kallman and a panel of insurance experts discussed the new approach during KPMG LLPs 16th annual insurance industry conference here.
Effective risk management programs were discussed against a backdrop of concern during the conference over Section 404 requirements for the Sarbanes-Oxley Act of 2002. That section requires management to attest to the soundness of a companys internal financial reporting program. In fact, in an instant poll taken of 125 respondents at the KPMG conference, an overwhelming 83.2% said the Sarbanes-Oxley Act of 2002 would be the piece of legislation to most impact the industry, a dramatic increase over last years 58% response.
The compliance checks being put in place to comply with SOX will complement the work being done to ensure effective enterprise risk management, said Don Watson, vice president of enterprise risk management with ACE, Hamilton, Bermuda.
Two good reasons to implement ERM, according to Watson, are the identification of risk and establishment of acceptable risk appetite.
For instance, Watson cited claims management and the potential risk that an adverse legal decision for a disputed claim could have on an insurer, both monetarily and, more importantly, to the companys reputation.
“We are selling our promise to pay,” he said. “The minute that is called into question, then it raises questions about the viability of a company.”