Well, how does the Chief Risk Officer of Aviva get to be writing a column out of John Kitson’s blog? Surfing the net one day, I stumbled accidentally upon Insurance Times and couldn’t miss reading John’s blog. What were my reactions? Shock, horror, followed by praise and admiration and then eventually … disappointment … once I discovered that the blog about “my holiday with my hubby” had been written by our own Janice Deacon. Misguidedly, I thought it merited an e-mail to John and anyway here I am.
So what exactly does the CRO of Aviva do? My job is to make sure that we have an adequate framework for identifying our risks, and taking appropriate actions to limit the impact of them on our customers and shareholders. For the last 9 months, the focus has been substantially on the immediate risks that we face on our balance sheet. We need to be sure that we invest our assets wisely, don’t invest in securities that we don’t understand and don’t invest in assets that won’t give us an appropriate return relative to the risk that we carry. We also reduce our risk by reinsuring parts of our business, but we need to assess the reinsurance companies that we do business with and check that they really are reducing our risk profile and not simply adding to it!
Despite the uncertainties of the economic outlook, and the prospect of rising unemployment until 2010, we are beginning to see some stability returning to financial markets. At Aviva, our messages about our strong capital position are now being understood. Our re-confirmed AA rating from Standard and Poors has helped to confirm our strength. I think the message is finally getting through that insurers aren’t like banks – not least because we have very strong liquidity positions based on receiving customers’ premiums before we pay out on claims.
As CRO, I also have to keep one eye on the horizon and think what are the new risks that we could face in the future. This could cover risks from climate change, regulatory change and also new risks as we increase the footprint of our business in the Asia region. One of the biggest items on my agenda at present is Solvency II. You may have seen how after years of discussion, a European Solvency II insurance directive has finally been agreed. Three years until implementation in 2012 sounds like a long period of time, but there is a vast amount of work to be done across the regulators and the industry as we move to modern risk-based supervision of insurance businesses. In terms of the Solvency II landscape, we are at a crossroads.
The original Solvency II rules were drafted during a relatively benign period for markets. But the financial crisis, particularly its effects on corporate bonds, has exposed a weak spot for annuity providers. From a UK perspective, the challenge now is to show regulators in other countries that this is a problem that is heading in their direction, especially in those countries with mature demographics.
I think there will also be a number of changes that customers and intermediaries will see. Solvency II is likely to accelerate the trend towards risk-based pricing, changing the prices for many customers and putting the spotlight on the need for improved risk prevention measures.
It also wouldn’t be surprising if we see more companies begin to move to branch based business models within the European Union, making use of existing legislative freedoms, and potentially securing some capital benefits under the Solvency II regime. Finally, it is just not all about financial and regulatory risk. With the re-branding now successfully behind us in the UK, but with work on-going in Poland and Ireland, we are very aware of the importance of reputational risk management across our business. Our brand is now one of the most valuable financial services brands in the world. With a constant focus on the quality of our customer position we believe that we can continue to grow this brand value.
Success in business and in life is often about learning from experience. That is why Aviva is one of the World’s biggest and best insurance groups, providing millions of customers with prosperity and peace of mind. My learning is that I must be more focused in future when surfing the internet for Solvency II information and spend less time reading John’s blog! Anyway thanks for the opportunity.
Jim Webber (Chief Risk Officer of Aviva)
Loading ...
