Implementing ERM in the Arab Insurance Sector

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Implementing ERM in the Arab Insurance Sector

• INSUREX 2009 Conference
• Raffles Hotel
• May 4th, 930

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Agenda

• The Myth
• The Reality (Middle East)
• The Risk Management Landscape
• The 10 Commandments of Risk Management
• The Way Forward

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The Myth

• We are in the business of risk. Who better than
  us understands Risk Management?

• Insurance Companies have been promoting Risk
  Management to their clients from at least the UK
  Industrial Revolution (1850s)
• It is only since the Cadbury Report (UK 1992) or
  SOX (USA 2002) that we started seeing Risk
  Management playing a more important role.
• This is further heightened by the expectations /
  perceptions on the requirements of Solvency II
  regulations (once enacted!)

4
The Reality Middle East

• Of the 200 licensed insurance companies in GCC,
  how many have a risk management department?
• How many of these companies have mapped risks and
  agreed on risk tolerance / risk appetite and
  regularly monitor risk internally?
• How many regulators in the region have a)
  implemented risk management requirements in their
  subsidiary legislation and b) have the expertise
  and/or resources to monitor this after
  applications are processed and licenses granted?

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The Risk Management Landscape

• Liability Risk Insurance Risk, incorporating
  reserving, reinsurance sensitivity, concentration
  risk/s and capital management, pricing, claims,
  sources of uncertainty in future claims payments
  etc.
• Asset Risk Financial, credit, liquidity and
  market Risks incorporating concentrations,
  sensitivities, timing, geo-spread etc.
• Operational HR, IT, Systems, Networks, Premises
  etc.
• Legal Regulatory Money Laundering, Data
  Protection, Compliance / Governance etc.
• Emerging Risks Strategy, Geo-Political, Economic
  etc.

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The 10 Commandments of ERM Policy Magazine
Nov./Dec. 2008

• The Golden Rule No one in the company can act
  with apparent impunity.
• Authority Limits are absolute and not arbitrary.
• Divide Rule.
• The fact that everyone is doing it does make it
  right.
• Know your underwriting.
• Know your investments.
• Ignorance of the law is no excuse.
• Keep an eye on the money.
• Manage your resources well.
• SMART Strategy.

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The Way Forward

• ERM Practice / Mentality should change from nice
  to have because of rating to must have at
  least initially, Regulator-Driven .
• It should start at the top I.e. A Risk Committee
  or Risk Audit Committee should be in place at
  Board Level.
• Risk Appetite and Risk Tolerance is to be
  formally signed off by the Board as the legal
  representatives of shareholders.
• There should be wholesale buy-in and the
  fostering of a Risk Management culture throughout
  a company .
• The Approach would have to be a Risk Based
  Approach.
• Regulators need to incorporate RM into
  legislation and have the expertise to monitor it.

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Implementing ERM in theArab Insurance Sector

• Thank You

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Speakers Bio
A Chartered Insurance Practitioner, James
Portelli is also a Fellow of the Chartered
Insurance Institute (UK), The Institute of Risk
Management (UK) and a Senior Member of the Malta
Insurance Institute. He has been active in
insurance (in Europe and the Middle East since
1990). James was also awarded the prestigious CII
Morgan Owen Prize in 2008. Having headed the
Business Development Unit of Oman Insurance Co
PSC an interactively A rated company and the
largest insurer in the UAE from 2005 to 2008,
James is now the Executive Vice President, Risk
Audit, overseeing ERM implementation. He was
previously the CEO of the Malta International
Training Centre. James is a regular contributor
to regional and international insurance industry
publications including POLICY Magazine, Insure
Magazine, Insurance Day (UK) and CII Journal
(UK).