Insurance Acquisition Partners

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As risk managers, insurers and investors, the insurance industry plays an important role in promoting economic, social and environmental sustainability—or sustainable development. With the adoption of the UN Sustainable Development Goals (SDGs), Paris Agreement on Climate Change, and Sendai Framework for Disaster Risk Reduction in 2015, and the upcoming Post-2020 Global Biodiversity Framework, there is growing pressure and urgency across all sectors of society to respond and find solutions to sustainability challenges the world is facing. Environmental, social and governance (ESG) issues—also known as sustainability issues pose a shared risk to insurers, communities, businesses, cities, governments and society at large, providing a strong incentive for innovation and collaboration. Some ESG issues have varying implications, with some increasingly being recognised to be potentially financially material (e.g. climate change, ecosystem degradation, pollution). ESG risks can vary by country or region, line of business, type of cover, economic sectors, client characteristics, over time, and due to other factors. Insurance companies need to pay attention to this complex range of considerations and how some industry participants are going about their integration of ESG risk factors into non-life risk assessment and underwriting.

Building a risk management plan is requires an initial risk assessment. What sets a strategic risk assessment apart from other risk assessment methods is that it is driven by the business’s core strategies. Get up to speed on strategic risk assessment with a checklist, template, and examples below. A strategic risk assessment is a systematic, continuous process for organizations to identify its strategic risks and understand how those risks are being managed across the business. “Strategic risks” are the risks that are most consequential to the organization’s ability to execute its strategy and achieve its objectives. They entail the risk exposures that can ultimately impact shareholder value or even threaten the business’s survival. The strategic risk assessment process should be led by management, but receive input from and be reviewed in conjunction with the Board. The outcome of this risk assessment is to achieve consensus, among Board members and management, around the top key risks facing the organization. For some businesses, this data may already be well-developed and formally documented. If not, the risk assessment team can leverage examples such as The Return Driven Strategy model to understand and identify the strategies most critical to achieving the organization’s overall objectives. This is a crucial step in helping management and the Board eventually prioritize the potential risks to these strategies. The risk assessment team can use the Strategic Risk Management Model as a template to help assess the risks related to each of the top strategies identified. Ultimately, this profile should contain a list of the top risks to the organization’s strategy and objectives and their potential severity or ranking. How detailed this profile is, and how it will be presented, should be carefully catered to the culture of your organization. Color-coding risks and using visual heat maps may be helpful in presenting this information to management and the Board for review and discussion. Upon presenting the preliminary strategic risk profile to leadership, the next step is for the risk assessment team to facilitate a discussion among key executives to help refine, validate, and finalize the risk profile. The ensuing cross-dialogue and conversations about risk and opportunity are among the most valuable conversations for shaping business strategy, as they unite executives across the organization to share their unique perspectives and collectively vet and prioritize the organization’s top key risks. The action plan involves developing an appropriate risk response (accept, avoid, pursue, reduce, share) to each critical risk identified in accordance with the organization’s risk appetite. The consolidated action plan should prioritize these risk responses and allocate resources across them. Best practice indicates the action plan should also include a charter that:

Step one: Connect an organisation’s strategy and business drivers to identify and analyse your risks systematically. Step two: Project the operational and financial impact of key risks to inform decisions on control measures, retention, and transfer. Align risk controls with exposure priorities, identify additional risk mitigations to manage risk within appetite and providing organisational resilience. Step three: Design an insurance program around threat exposure and appetite to ensure the most efficient use of capital. Step four: Combine strategic, operational, and assurance best practices to integrate risk practices and achieve targets. Step five: Road map from current state to future state to inform assurance and continuous improvement.

Risk profiles, appetite for risk, controls, and governance need to be re-evaluated in light of interconnected businesses and the fragility of economies to global risks. Agile and lean operational practices may have insufficient spare capacity and reserves for rapidly evolving risks and crises. Demand for greater governance and transparency has grown due to links between societal and business risk. Traditional ERM often lacks quantitative elements in risk and scenario analysis, and control planning. Risk practices can often be siloed in large companies, whereas risk is multi-dimensional in its causes, consequences, and controls. Industries are rapidly changing with greater emphasis on integration of strategy, operations, and financial practices. Significant improvements can be gained quickly through a digital data driven approach to risk and insurance. Insurance can be the most effective way to transfer financial risk and protect the balance sheet but needs to align with risk and resilience management.

Evaluating risk strategies and maturing organizational capabilities are more essential than ever. Use this model to establish a baseline of risk management maturity, obtain guidance for improvement, and track progress against aspirations. Gain a broader picture of risk competence as multiple people across your organization complete the assessment. Everyone needs the tools and procedures of improving the cyber security status of an organization’s industrial control systems security. Maturity refers to levels of protection based on various cybersecurity standards such as NIST CSF, CIS Top 20 security controls, ISA99/IEC62443, etc. Most common elements of increasing maturity include: Accurate asset inventory Updated patch management Comprehensive vulnerability assessment User & access control Log and behavioral management Secure configuration management Etc.

External audits underlined the limits of the current model used by an insurance and re-insurance provider. Part of a global insurance company, providers need to mature its cybersecurity to operate in the current regulatory environment. Insurance companies need to to balance demands from central controls like security operations center (SOC) and identity access management (IAM) systems, and local regulatory requirements across the globe. Rapid controls maturity assessment: This assessment needs to provide benchmark, quantitative and qualitative insight using NIST, ISF and ISO27001 frameworks against industry sector and region. Everyong needs to adopt an iterative approach to refine the level of confidence on the gathered data. Information security risk evaluation: Followed a well-practiced approach in which we link technology assets to business assets, assess inherent cyber risk, and then combine the controls maturity assessment to derive residual risk to the business. This allows a holistic business-wide approach, to compare the current risk profile with risk appetite.  Capability gap analysis and solution planning: Bring together control gaps and areas of low maturity alongside risk hot-spots, to provide a prioritized roadmap based on closing gaps and bringing the group within risk appetite. Insurance company need to delivered cybersecurity controls maturity scores, with industry and regional benchmarks, and set the stage for a comprehensive and targeted list of in-flight remediation activities and proposed structural changes over a 12-month period. A new internal organization to link cyber risk and enterprise risk needs to be implements. The new operating models need to support better communication between the board and the operational company around risks, impacts, and controls. Technical actions and better governance need to allow the provider to improve local security maturity and bring compliance and regulatory reporting up to speed across geographies.

Transformation has become a necessity for insurance companies, but making it stick isn’t easy. We help make holistic insurance transformations sustainable by focusing on both delivering impact and enabling organization. To achieve this level of transformation, insurance companies may need to adopt new technology, including generative AI, to harvest actionable insights from any new data at the industry’s disposal. Industry convergence for access to more information sources, products, and services, as well as talent with the skill sets and know-how of emerging capabilities are becoming table stakes. Transformative change will likely have to go beyond adding new tech bells and whistles. More proactive insurers are also beginning to embrace enterprisewide culture change to reduce silos, elevate their talent, and achieve a more ubiquitous focus on customer-centricity. For global insurers, this may include rethinking how capabilities are shared across geographies and business lines to help drive a more consistent and integrated customer experience. Leaders should make an ongoing commitment to ensure diversity, equity, and inclusion (DEI), both in their workforce and the customer demographics they serve. Demonstrating such commitment could help close the trust gap that has often undermined the industry’s credibility with key stakeholders, including regulators, legislators, and rating agencies, as well as society at large, and even their own employees. This could not only prove to be a differentiator in the market, but also help resolve societal issues such as the insurance protection gap. Earning recognition as sound ethical and financial stewards of societal welfare could ultimately empower insurance companies and their distribution force to shift away from a transactional role to adopt a broader, more holistic, relationship-based approach to consumer interactions. This transformation should not only promote insurers’ growth prospects but could also fundamentally elevate the perception of the industry’s role in protecting and enriching the ever-evolving world.

Insurers evolving to address changing operating environment and precipitate even greater societal impact Escalating frequency and severity of global risks—from climate change to cybercrime—is intensifying focus on the insurance industry’s capacity and readiness to react as society’s “financial safety nets.” Most insurers are realizing that reacting to risks may not be good enough and are undertaking transformation efforts aimed at preventing losses from happening in the first place. This shift to a more customer-centric business model will likely require advanced technology adoption and modification of company culture to help minimize siloed interactions, enhance collaboration among employees, and increase accessibility of customer data—but skill sets may need to be augmented. Merger and acquisition (M&A) activity has been on a decline since Q2 2022 due mainly to macroeconomic factors. However, as increases in interest rates and inflation ease, pent-up activity may drive an upsurge in deals later in 2023 into 2024. Insurance technology companies (InsurTechs) remain front and center of acquisition activity as carriers increasingly look to these capabilities for point solutions across the value chain to power transformation efforts. A fundamental mission underlying much of this change is that the industry’s role is pivoting to that of a sustainability ambassador, influencing and propelling purpose-driven decisions and strategies of clients across industries to create a better workplace, marketplace, and society.

Latin America and Caribbean rates increase Insurance rates in the first quarter of 2024 in the Latin America and Caribbean (LAC) region increased 5%. Property insurance rates increase for 22nd consecutive quarter Property insurance rates increased 4%. Capacity was low in Mexico, contributing to increased rates in the wake of Hurricane Otis, particularly for complex risks and those with catastrophe exposure. Colombia's property market experienced an increase in capacity and interest in underwriting high-quality risks, resulting in flat renewals and some rate decreases, albeit with continued underwriting scrutiny. Sabotage and terrorism (S&T) and strikes, riots, and civil commotion (SRCC), capacity remained limited locally. There was increased interest from international markets in these areas.