Cascade of regulation falls nicely for KPMG

The sheer volume of capital and risk management regulation can hold firms back if they fail to accommodate changes effectively. Many have turned for help to this year's award winning consultancy - KPMG

Awards 2014: KPMG
Best consulting firm

Navigating a path to profitable growth is becoming ever more challenging for insurers. The cascade of capital and risk management regulations mandated by national and supranational authorities can too often pose a roadblock to improving financial and operational outcomes. In this environment they need the guidance of expert consultants to plan an efficient route through this complexity.

Enter KPMG, a consultancy with a keen sensitivity to the unique problems facing the insurance industry today. The company approaches each client brief with a straightforward goal: to manage business, regulatory and compliance risk while boosting performance. To do this, KPMG takes an all-inclusive view of modern risk management, encompassing governance, risk appetite, and assessment and measurement strategies, among others. It also seeks to incorporate a broad range of stakeholders, from the board of directors to the audit function.

KPMG's holistic approach makes for an award-winning service for insurance clients. One chief risk officer says KPMG's advice and oversight helped him to build "a really enhanced, innovative and market-leading risk and compliance framework over the last 12 months". Another says he values KPMG's consistent focus on getting his firm to take ownership of the enterprise risk management process, even in the face of institutional resistance.

KPMG's global presence makes it particularly well-suited to assisting multinational insurance groups. The need to align country-specific level regulatory requirements for each operating unit into a group-wide view of risk requires careful organisation. One international insurance group turned to KPMG for help in implementing a re-engineered enterprise risk management programme and enabling compliance with Solvency II.

Here, KPMG's broad reach allowed it to carry out a multi-country assessment of the group to determine where the insurance group was falling short of its target risk management capabilities. This informed a fundamental reorganisation of the group's risk governance function and helped it establish new risk appetite, tolerance and limit protocols.

The consultancy also played a leading role in developing an insurance group's Own Risk and Solvency Assessment (Orsa) for Solvency II. For many firms the challenge is not just constructing the physical Orsa report to a suitable quality, but embedding an Orsa process throughout the organisation so that risk owners are aware of what they need to relay to the report compilers and are kept updated with the key risks and metrics being used at group level.

KPMG assisted by drafting a ‘conceptual design' for the client's Orsa process, which included sourcing the information required for the report and designing a plan to help structure the review and approval process. The consultancy then worked with the client to apply the process across the risk, actuarial and finance functions and establish the requisite governance protocols.

Another client turned to the firm to validate its internal capital model. Model validation and overarching model risk management will be a service much in demand by insurers as regulators step up their scrutiny of firms' models to ensure they are appropriate for reporting purposes. KPMG helped by lending its technical expertise to the process of calibrating the catastrophe risk, variable annuity risk, property and casualty insurance risk and market risk components of the model, among others.

Also in demand is KPMG's expertise in operational risk management, which remains an underappreciated aspect of modern risk management at many firms. This year the consultancy worked with three separate multinational insurers to develop their operational risk management systems, helping to define benchmarks based on leading practice on governance, risk assessment processes, scenario analysis and capital modelling development. KPMG then drew up roadmaps to help each group reach its target goal.

The consultancy's success rests in this two-pronged approach: developing a vision for risk management for each client and then turning that vision into reality.