Insurers’ Operational Risk Governance and Framework

Cathy Hampson and Gustavo Ortega

INTRODUCTION

An insurer’s risk governance and framework shares many principles with banking and other financial services. Indeed, many of the objectives of an insurer’s risk governance and framework are the same as those of any corporation or other business. However, there are some additional considerations. For example, the mix of payouts that an insurer will make, from nothing at all on a policy that expires without incident, to multimillions on other claims. Every business is influenced to a greater or lesser degree by the vagaries of the external environment, but, with insurance, it is the major driver of the business.

In discussing risk governance, we will be considering the mix of committees and higher-level governance at the board level. Understanding their responsibilities is useful to understanding their needs, and how they fulfil their legal, statutory and fiduciary duties. In considering the framework, we will examine the components of a good framework and how, collectively, those components deliver upon those management, committee and board accountabilities.

Risk governance in insurance requires the setting of policies and the monitoring of policy