As risks surrounding insurance companies have become diversified and complex, it is more important to develop Enterprise Risk Management ("ERM") as well as to maintain statutory-required own capital. Financial Services Agency (FSA) has conducted interviews with the representatives from 23 Japanese insurance companies (including foreign insurers’ subsidiary in Japan) in order to understand the current situation of risk management adopted by insurance companies in Japan and released the result with an aim to promote the development of ERM.
1) Current state and issues of risk governance scheme: (1) Design of risk management policy and internal rules, 2) Roles and responsibilities of management, directors, risk management committee and internal audit, 3) Status of risk reporting)
2) Current state and issues of risk appetite: (1) Understanding of risk profile, 2) Framework of risk appetite)
3) Status of risk and own capital management: (1)Current state and issues of risk management process, 2) Use and execution of integrated risk management tools, 3) Implementation status of stress test, 4) Implementation status of ALM reflecting characteristics of insurance liabilities, 5) Future risks and adequacy of own capital in line with the middle-term management plan)
FSA concluded that the interviews result shows some favorable progress of the Japanese insurers' ERM framework as it was observed that many insurance companies have increased management awareness of risk management, enhanced cooperation between risk management divisions and management planning divisions, and continued to make efforts to improve management processes. On the other hand, the current situation has some areas to improve in the risk management system such as 1) expertise of board members in charge of risk management, 2) role and responsibility of internal audit, 3) understanding and utilization of risk profile, 4) policy and framework of risk appetite, 5) management structure of overseas entities and 6) examination of reasonableness of internal model revisions.
Please refer to "FSA Weekly Review No.11 September 10, 2012" page (http://www.fsa.go.jp/en/newsletter/weekly2012/11.html) for further information on the result of the survey (Japanese only).