(Re)insurers disclosing more about risk management methods, but quality of disclosure remains unchanged

Although more (re)insurers are disclosing their own risk management methods, levels of risk tolerance and ERM structural information, the general quality of disclosure remains unchanged, according to a Guy Carpenter report.Guy Carpenter’s Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness is a product of publicly available information — including annual reports, regulatory filings and analyst and rating agency reports — from (re)insurers around the world. The recent report updates a similar report published in April. The initial report found that the public disclosure of companies’ risk tolerances was limited. The updated survey indicates 50% of North American (re)insurers have an affirmative disclosure method for credit risk, compared to only 33% in April. Eighty-three per cent have a disclosure method for market/asset risk, marking an increase from the 67% in April. Insurance risk remained unchanged from April to October, with 17% reporting they have an affirmative disclosure method for this type of risk.“It is important to restate that the low disclosure identified in both the original and updated surveys does not suggest that the firms do not have the roles noted,” the report said. “Rather, it highlights that the firms included in the study do not disclose this structural element if it exists.”Looking deeper into the company disclosure, “while more companies are disclosing risk measurement methods, levels of risk tolerance, and ERM structural information, the general quality of disclosure remains unchanged,” the report says.“The combination of regulatory, capital market and legislative influences that we noted in our April briefing continues to exert pressure on management to better recognize, quantify and manage risk,” said Iain Boyer, chief administrative officer of Americas Broking Operations at Guy Carpenter. “As we emerge from the financial crisis, staying apprised of the latest disclosure trends, capital models and ERM methodology will be critical to success in a rapidly changing marketplace.”