AIRMIC RELEASES NEW RISK APPETITE AND INSURANCE ACT EXPLAINED GUIDES
New learning and development guides released to help risk and insurance professionals to understand the importance of risk appetite, and to navigate the UK’s Insurance Act of 2015, respectively.
Airmic has released two new guides in its relaunched series of popular EXPLAINED guides: Risk Appetite: The facts, the myths, and the links with culture, maturity and sustainability; and Making the most of the Insurance Act 2015.
Airmic’s EXPLAINED series aims to provide guidance for learning and development on a range of risk and insurance subjects at an introductory level.
Risk Appetite: The facts, the myths, and the links with culture, maturity and sustainability.
Risk appetite is a key component of enterprise risk management – it refers to the amount and type of risk that an organisation is willing to pursue or retain.
Willingness to bear risk can be defined in two ways:
- An organisation’s desire or aversion to pursue opportunities in an uncertain business environment
- How much volatility around an expected outcome is tolerable in terms of capacity, regulatory compliance, ethics, reputation and alternative costs for the business.
The report aims to providing individuals who may not be risk management specialists, with a high-level overview of:
- What risk appetite is and why it is important
- How risk appetite can be used to support decision-making
- The role of culture in risk management
- Practical challenges of applying the concepts of risk appetite.
The publication is a partnership between Airmic and Arthur D Little, a management consultancy, and QBE, an international insurance company.
The approach described in the guide is aimed at ensuring that an organisation effectively implements a mechanism for understanding how much risk it should take in relation to strategic objective-setting, value creation and best value delivery, business model changes and investment decisions.
Defining and implementing risk appetite (increasingly referred to as a risk attitude) is a strategic activity that involves the Board and top management, as it must be aligned with strategic objectives, and requires consensus and engagement from the organisation’s leadership.
Risk appetite varies between industry sectors and between organisations within those sectors, and by geographies and types of risk.
The level of regulation and capital intensity of an organisation will influence its perception of acceptable risk in relation to potential opportunities.
Organisations and the context in which they operate are dynamic, and an approach of continuous improvement should be adopted to ensure that lessons learnt are taken on board and that risk appetite is regularly reviewed, updated and signed off by key stakeholders, including the Board.
Commenting on the release of the Risk Appetite publication, Claire Combes, Chair, Airmic, commented:
“Often a poorly explained concept, this guide fills the gap in many similar guides, by providing a clear explanation of the link between risk appetite and culture, with approaches to designing and embedding risk-taking within agreed limits”.
MAKING THE MOST OF THE INSURANCE ACT 2015
The Insurance Act was the most fundamental change to UK law governing commercial insurance and reinsurance since the Marine Insurance Act 1906.
It governs all polices placed, amended or renewed after the 12th August 2016 and aimed to address the imbalance between insurer and insured rights and encourage a deeper understanding of the risk by all relevant parties.
The legislation made significant changes to: the pre-contract duty of disclosure, insurer remedies in the event of a breach of the new duty of fair representation and certain terms used in policy wordings
The guide aims to assist risk managers in making the most of the benefits of the Insurance Act 2015, while ensuring their own compliance with the duties placed upon them.
The publication is a partnership between Airmic and Herbert Smith Freehills, a full service international law firm with a market leading insurance practice.
Commenting on the release of the Insurance Act publication, Julia Graham, CEO, Airmic, commented:
“Policyholders have always been obliged to be open and honest with their insurer - the Act clarifies what this actually means. This guide sets out an explanation of a quite technical subject in clear language and describes how the Act has been working, providing a one-stop shop for those who want a practical understanding”.
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NOTES TO EDITORS
ABOUT AIRMIC
The leading UK association for everyone who has a responsibility for risk management and insurance in their organisation, Airmic has over 450 corporate members and more than 1,500 individual members. Individual members are from all sectors and include company secretaries, finance directors, and internal auditors, as well as risk and
insurance professionals.
Airmic supports members through learning and research; a diverse programme of events; developing and encouraging good practice; and lobbying on subjects that directly affect our members and their professions. Above all, we provide a platform for professionals to stay in touch, to communicate with each other, and to share ideas and information.
ABOUT ARTHUR D. LITTLE
Arthur D. Little is the first management consulting firm in the world and has always remained focused on innovation. Arthur D. Little’s deep industry knowledge, linked to their strong expertise in strategy, innovation, and transformation, helps them solve clients’ most complex business issues while delivering sustainable results to their businesses. For over a century Arthur D. Little has been a pioneer in many aspects of risk management - highlighted by numerous landmark assignments leveraging proven capability and the ability to develop deep and meaningful insights.
ABOUT QBE
As a business insurance specialist, QBE European Operations offers a range of insurance products from the standard suite of property, casualty and motor to the specialist financial lines, marine and energy. All are tailored to the individual needs of our small, medium and large client base. We work hard with our broker partners to understand clients’ businesses so that we offer insurance solutions that meet their needs – from complex programmes to e-trading solutions – and support them in minimising their risk exposures.
ABOUT HERBERT SMITH FREEHILLS
Herbert Smith Freehills is a full service international law firm with a market leading insurance practice. It is an Associate Partner of Airmic and has assisted Airmic and its members on insurance law issues for many years. Herbert Smith Freehills lawyers have an outstanding reputation in complex, high profile insurance disputes and for providing strategic legal advice and representation to corporate policyholders.
The firm assists with the resolution of major claims across all classes of policy as their core expertise, including advice on coverage, claim project management and claims advocacy to secure appropriate settlement of claims using the full range of dispute resolution procedures including litigation, arbitration and all the forms of Alternative Dispute Resolution. This unrivalled hands-on experience of coverage disputes informs Herbert Smith Freehills’ approach to policy wording reviews and drafting. The team also advise on the interface between insurance and contractual risk allocation regimes
in commercial contracts. Herbert Smith Freehills’ large dedicated contentious insurance practice is ranked as top-tier in both Chambers UK and Legal 500 in representing policyholders in the largest most complex coverage disputes in the London and international market.