International

Risk management is key rating factor

Rating agency Moody’s is formalizing the process for evaluating the level of risk management competency within insurance companies. The latter, the agency said in a statement, will increasingly determine what rating the agency assigns to an insurer. Moody’s says that while it has always indirectly reflected a judgment on corporate management’s risk control culture and capabilities, the new approach will be much more focused and rigorous. Moody’s views risk management as a core competency and a critical rating driver for insurers. The agency identified the level of transparency and the timing with which insurance companies convey to investors the nature of the risk characteristics faced by the company as a significant consideration in its Risk Management Assessments (RMA) process. Moody’s recently published special risk management assessment reports for life and non-life. Herve Geny, Moody’s risk specialist and the author of the two reports, described risk management as a very dynamic process and acknowledged that most insurance firms have seriously engaged in a cycle of continuous improvement in their practices, measurements and technological platforms. However, compared to banks insurance firms have generally been late in embracing a more holistic view of risk management across their businesses and types of risks.