Risk Management and Business Strategy in P/C Insurance Companies

This paper is based on the view that p/c insurance companies need to align their business strategies with the risk concerns of policyholders and creditors and the value concerns of shareholders to restore their valuation multiples. It posits that ERM is disconnected from strategy in many companies, where it has been principally based on ex-post risk measurement. The paper calls for companies to develop risk insights that guide risk assumption and accumulation activities before insurance policies are bound or investment decisions are made. Insurance companies need to move away from ex-post risk management and espouse ex-ante risk management. To effect ex-ante risk management and align its business strategy and risk management, an insurance company needs to establish a risk capacity management framework based upon a risk policy, a risk appetite and risk limits that are mutually consistent and reflect the company's strategic position and opportunities in businesses where it chooses to compete.

Insurance companies that succeed in integrating "ex-ante" risk management and strategy will use analytics as a source of competitive advantage. They will have opportunities to deploy their risk capacity more effectively, thereby enhancing the level, growth and stability of their earnings and restoring their credibility with investors.

Price: $399

About Jean-Pierre Berliet:

Before establishing his own firm, Mr. Berliet was a Senior Manager in the Risk and Capital Management Practice of the Insurance and Actuarial Advisory Services Practice at Ernst & Young. He led the development of the initial methodology needed for this purpose while he was a senior consultant at Tillinghast-Towers Perrin.

Earlier in his career, he held senior executive positions in strategic planning and corporate development at Liberty Mutual, MetLife, Citibank, Continental Bank and General Electric, as well as in strategy consulting, principally with The Boston Consulting Group.

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