Creating a risk appetite framework for insurance decision-making

Abstract

European insurance companies have made enormous strides in risk management technology in recent years, and many companies are now much better equipped to monitor, measure and manage the risks associated with the insurance coverages and guarantees they provide. However, most insurance companies are much less sophisticated in analysing the broad parameters of the enterprise risks they are confronting. Many companies are not easily able to assess the risk-return equation they face in existing businesses or in businesses they might like to enter. Companies can develop and implement a risk appetite framework that will help assess the risks as well as the potential rewards that proposed lines of business seem to offer. This tool can provide enormous value in analysing existing activities and informing the process of identifying growth opportunities.