Insurers gaining enterprise-risk savvy.

Insurance companies are increasingly raising the bar for enterprise risk management, according to the latest survey of chief financial officers in life insurance by the Tillinghast business of Towers Perrin. Fueling this change, in large part, are the rating agencies--nearly 60% of respondents said that increased rating agency scrutiny is influencing how they set up and evolve their ERM framework. In addition, 27% of respondents cited compliance with rating agency requirements as a top objective of ERM.

"All major rating agencies have stepped up efforts to incorporate

ERM into their overall assessment of companies' financial strength," Prakash Shimpi, Tillinghast practice leader with global responsibility for ERM, said in a statement. "This trend is likely to increase as rating agencies refine their demands for insurance companies, and raise expectations for how companies manage risk."

The survey is the 13th in a Tillinghast series of periodic surveys among more than 70 North American life insurance CFOs. It focused on how insurers approach ERM and implement economic capital. Nearly half of the companies surveyed said that the person responsible for ERM reports to the chief executive officer. The most often cited objectives for their ERM frameworks include "improve risk-based decision making" (73%) and "make more effective use of capital" (58%).

"We're seeing a pronounced shift with risk management--from a technical task, which merely identifies and quantifies risks--to a holistic process that drives business strategy," said Shimpi. Insurers are feeling pressure internally and externally to extend ERM programs beyond regulatory compliance and control to a critical piece of the business planning process to help increase shareholder value and impact rating agency evaluations, he said.

Loss/Risk Management Notes is compiled by Senior Associate Editor Meg Green.