Rating Agencies Want to Know - How is your company addressing emerging issues?
I heard from a large, national Property/Casualty carrier that A.M. Best asked, as part of their review of the insurer's enterprise risk management strategy, how the company was tracking and addressing emerging issues. Their question didn't surprise me given the source.
Shortly afterwards, I attended an enterprise risk management presentation given by someone from A.M. Best who brought up - several times during the hour-long presentation - the importance of tracking and addressing emerging issues. While I was encouraged by this emphasis, given my position as Emerging Issues Specialist at Gen Re, again I was not particularly surprised.
Subsequently, while visiting a single state Personal Lines carrier in Utah, the president of the company told me that A.M. Best was inquiring about how the company was addressing and tracking emerging issues. This did surprise me.
If A.M. Best is presenting this question to big national carriers as well as small, single state Personal Lines carriers, emerging issues is clearly something on which the rating agency is focusing. I got the impression from both the big and small carrier that the agency was looking for something more formal than an answer like: "We all try to keep abreast of those issues."
To be fair, it could be that some, but not all the analysts at A.M. Best are focusing on emerging issues as an integral piece of a comprehensive enterprise risk management strategy. But it will no longer take me by surprise if I hear more carriers are asked similar questions.
Does your company have people assigned to monitor emerging issues? Is there an underwriting process in place to address emerging issues when necessary? If not, how can you be sure that your reserves are adequate while you remain unaware of potentially significant issues that may impact the lines of business that you write?
As an industry, we tend to be far more reactive than proactive and spend far more time and effort looking at the past and comparatively little time looking forward. There are good reasons for this focus on our previous experience. Events, however, seem to be moving at an ever-faster pace so there are also good reasons insurers should pay more attention to what emerging issues may affect their book of business - if for no other reason, they can at least react faster.
Gen Re has developed a process to monitor and address emerging issues, and we consult with our clients on both their potential impact and the underwriting actions one may wish to implement to address these exposures.