“We predicted that 10 to 15 of those companies could receive improved ERM opinions in 2007,” S&P’s credit analyst David Ingram said in a statement regarding the findings. “As it turned out, seven of them did.”
S&P completed 274 ERM evaluations of insurers throughout the world in 2007. According to the ratings agency, 83% of insurers had adequate ERM programs in 2007. An additional 10% had strong ERM programs, 3% had excellent programs, and only 4% had what S&P regarded as weak programs.
“The experiences of 2007 and early 2008 have shown that ERM is an important discipline that will continue to be key for the financial health of insurers,” said Mr. Ingram. “It is against this backdrop that Standard & Poor’s will continue to enhance its evaluation of insurers’ ERM capabilities as a fundamental part of our credit analyses.”
“Those firms that develop strong/excellent strategic risk management processes as well as strong/excellent risk controls, and that therefore have strong and excellent overall scores, should have lower losses relative to long-term average income in adverse times and especially in extremely bad times,” S&P said in the statement.