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Towers: Insurers To Spend More On Risk Management

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As the financial climate improves, U.S. life insurers say they will invest to enhance their enterprise risk management methods, according to a new report.

The study was published jointly by Computer Sciences Corp., Falls Church, Va., and Towers Watson & Co., New York, in partnership with the American Council of Life Insurers, Washington.

The research shows that ERM–processes used by organizations to control risks and grab opportunities to achieve their objectives–is still under development. The reason: most life insurers operate under the constraints of limited technology and reporting capabilities that obstruct access to risk information, according to the research report.

Of the insurance executives polled for the report, 42% said ERM-related technology budgets will increase in the next 12 to 24 months. Of those companies planning to increase spending, half said they will increase their budget by 75% or more.

When asked which ERM systems or applications their organization will need to change in the next 6 to 18 months, more than 40% cited asset risk modeling/optimization and economic capital. In addition, more than 33% pointed to economic scenario generation and valuation, and more than 5% flagged cash flow/asset-liability management.

While 53% of respondents rated their ERM performance as satisfactory or better over the last 12 months, these individuals stressed the importance of improving the ERM function.

The study, “Is Your Organization at Risk? A Different Look at Enterprise Risk Management,” was based on focus group responses and surveys of 40 U.S. life insurers ranging in size from less than $100 million to more than $10 billion in revenues.