The CRO Emerging Risk Initiative
In 2006, Swiss Re chaired the first year of the Emerging Risk Initiative launched by the Chief Risk Officer Forum. The initiative brings together various insurance organisations to examine emerging risks relevant for society and the insurance industry.
Responding to the need for action
The insurance industry plays a vital role in today’s economic system by absorbing financial and insurance risk. To fulfil this role in the future, the industry must minimise surprises by identifying and communicating emerging risks to a broader community. This will facilitate a stakeholder dialogue with representatives of a community bound by a shared risk.
Members and objectives of the ERI
The CRO Emerging Risk Initiative (CRO ERI) was founded by the CRO Forum of the Geneva Association and launched in December 2005 to raise awareness of major emerging risks relevant to society and the insurance industry. During Swiss Re’s tenure in 2006, eight chief risk officers of leading insurance and reinsurance companies joined the CRO initiative with the following objectives:
- leverage the combined power of the (re-)insurance industry to design methodologies and models to identify emerging risks relevant for the insurance industry
- analyse and prioritise emerging risks, and publish position papers on the common findings of the insurance industry
The CRO ERI is open for all insurance organisations and can be joined by supporting members on request. Current partner organisations are Allianz, AXA, Chubb, IAG, Munich Re, RSA, Swiss Re and Zurich. The chair of the initiative is passed on each year in December, and Swiss Re has handed over this mandate to Munich Re for 2007. The results of the ERI studies are made available to a wider audience through CRO meetings and the CRO Assemblies of the Geneva Association.
Achievements during Swiss Re’s tenure
In its first year of operation, the CRO Emerging Risk Initiative has achieved its goal of establishing the concept and methodologies to identify, assess and prioritise emerging risks. The following documents have been compiled.
- A scoping document provides insurance experts managing emerging risks guidance and information on the work of the CRO Forum Emerging Risks Initiative (CRO ERI). The introductory section deals with a definition of emerging risks and describes the objectives of the Emerging Risk Initiative. The first part of the document gives an overview of the basics of risk perception and outlines the challenges in developing systematic emerging risk identification processes in today’s fast-changing risk landscape. The second part highlights the work streams of the CRO ERI and puts forward proposals for methodologies for collecting, prioritising and displaying emerging risks that are relevant to the CRO community.
- The Emerging risks watch list includes prioritised emerging risks that are updated on a bi-annual basis. It includes risk data providing the rationale for risk prioritisation
- The risk radar is designed to highlight risks which the initiative has identified, analysed and determined to present the probability of a loss likely to be significant for the industry within the next fifteen years.
- A risk rating model combines qualitative and quantitative methods to rank emerging risks according to their severity originating from their impact on P&C, L&H or financial markets.
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The first CRO ERI position paper on ”Climate Change & Tropical Cyclones in the North Atlantic, Caribbean and Gulf of Mexico”.
