Peter Field reflects on a decade of publishing a title that has its roots in Solvency II but has broadened its coverage to all aspects of risk management in insurance companies worldwide
InsuranceERM celebrates its 10th anniversary this week. When the site went live on 28 November 2008 with its initial title Insurance Capital & Risk, we couldn't have predicted such a tumultuous period for the insurance industry. But it gave IERM the chance to emerge as the leading media outlet covering Solvency II and the development of enterprise risk management in insurance.
At launch in November 2008, the approaches of insurance companies to risk management were still in their infancy as companies grappled with fall-out from the financial crisis and resigned themselves to tougher oversight.
In 2009 we changed the title of the site to InsuranceERM, to be snappier and to capitalise on the trend towards a more holistic approach to risk management.
In 2008, some people told me IERM was already a little late coming to the topic of Solvency II
Some people in the industry had told me before I launched the website that IERM was already a little late coming to the topic of Solvency II since it was scheduled for implementation in less than four years, on 31 October 2012.
But I reckoned that the timetable for the ambitious new regime to become reality, like Basel II in banking, would inevitably falter – and it did. In fact, one of our first stories on 28 November 2008 was "Solvency II schedule slips".
It was also likely that even when Solvency II was finally in force, there would be plenty of issues to follow up on, maybe even a Solvency III (as there has been a Basel III).
As we know, Solvency II was delayed more than once and finally ended up passing into European law in January 2016. Since then, the number of times Solvency II has appeared in the headlines of IERM has inevitably declined but the directive still colours much of the content on the site. At the same time, new, related issues have emerged, such as international adoption of risk management approaches like Solvency II and, most recently IFRS 17, sustainability issues and, of course, Brexit.
Chief risk officers barely existed outside banks but they soon came to dominate comment on IERM.
All this a world away from the launch content of 2008 when we wrote about actuaries emerging from the back rooms of insurance companies. "Where actuaries were once tucked away in a quiet corner, they are now a central part of the insurance business," we wrote.
At least actuaries were already an integral part of the management of insurance companies. Chief risk officers barely existed outside banks but they soon came to dominate comment on IERM.
Internal models (IMs) and their approval process across Europe also attracted many words. There was febrile speculation about who was or wasn't applying for a model and, later, who was successful in their application and who wasn't.
Two out of the first three features on the site in November 2008 were about internal models. Insurers bridled at the costs of developing models, especially as many firms claimed to have their own well-tried ones, and the regulator at the time, the Financial Services Authority, took a lot of flak. A prodigious amount of paper was generated by scores of lengthy consultation papers, internal model application forms and drafts and revisions of the directive.
Jokes were made at industry conferences about the paperwork engendered by Solvency II. At one conference, a speaker from the floor pointed out that the insurance regulator of one European country had issued 20 pages of advice telling its insurance companies how to keep their own risk and solvency assessment (Orsa) to no more than 10 pages.
Jokes were made at industry conferences about the paperwork engendered by Solvency II
Even the jovial Karel Van Hulle, when he was head of the insurance and pensions unit at the European Commission, disparaged the volume of paper being spewed out by Committee of European Insurance and Occupational Pensions Supervisors (Ceiops, now the European Insurance and Occupational Pensions Authority, Eiopa) and individual country regulators during the early stages of consultations with industry.
He said he wouldn't allow the Solvency II draft to be changed radically because he wasn't going to read the 4,500 pages of text again. And asked about a further delay to the implementation of Solvency II, he told the audience, "Be patient. Remember Rome wasn't built in a day. After all, the Colosseum still isn't finished." [The old jokes are always the best].
Some experienced operators like Robert Hiscox, chairman of Hiscox in the UK, were not so amused by the demands of Solvency II. "After 48 years of assessing risks, which is what underwriting is, it was surreal to have a one-size-fits-all model for assessing the risks in the business inflicted on us in minute detail by actuarially-driven regulators," he said.
The friction between practitioners and regulators gave IERM plenty to write about
Even those who broadly supported the idea of Solvency II were critical of aspects of it. In May 2013, Graham Fulcher (then a practice leader at Towers Watson and now chief actuary for Chubb's international general insurance business) told IERM that Solvency II "is still prescriptive rules for a principles-based regime. My only hope is that the supervisors interpret it in the correct spirit."
The friction between practitioners and regulators gave IERM plenty to write about and the site came into its own covering the more technical issues, like modelling and the technology behind it. The growth in demand for new systems and quest for ever-faster calculation times provided plenty of copy and inspired the launch of the annual IERM Technology Guide in 2009.
IERM was unusual in producing news and features on the more arcane aspects of risk management and Solvency II such as partial internal models, undertaking-specific parameters, matching and volatility adjustments, long-term guarantees, the ultimate forward rate, least-squares Monte Carlo and economic scenario generators.
In 2018 the buzzwords, regulators and acronyms are all different from 10 years ago. The FSA and Ceiops have been replaced by the PRA and Eiopa. Terms like QIS4 and QIS5 and Omnibus II are dim memories; the Orsa and equivalence part of business as usual.
The initial permanent staff of two has grown to 28 and our events and data products have steadily expanded.
Also probably forgotten now is Peter Skinner, the Labour MEP between 1999 and 2014 who was often quoted by IERM, reflecting his very active role as the European Parliament's rapporteur on Solvency II. In April 2016, he was sentenced to four years in prison by a UK court for fraudulently using his parliamentary expenses.
Today, a host of new issues are the on the IERM menu: cyber risk, insurtech, accounting standards and sustainability, as well as developments in the international regulation of the insurance industry and data.
The site was free to view for the first three years. Initially the staff was two writers and one freelance web designer and manager. By 2011, IERM had enough page hits to justify a pay wall, so subscriptions were introduced.
In 2012, the company behind IERM, Field Gibson Media, brought Environmental Finance into its fold. Insurance Asset Risk was launched from scratch in 2014. Environmental and sustainability issues are increasing in importance on all three of these sites.
The initial permanent staff of two has grown to 28 and our events and data products have steadily expanded. This year alone the insurance and environmental titles have held successful conference in New York, Bermuda, Los Angeles, Singapore and London, while Insurance Risk Data and the Environmental Finance Bond Database are emerging as industry benchmarks.
The bedrock of this growth has been our loyal readership. Thank you for your support over the years and we hope to continue to provide you with relevant, timely and informative news on the biggest risks (and opportunities) in the insurance sector.
Peter Field, founder of InsuranceERM, is chairman of Field Gibson Media
- InsuranceERM has commissioned some of the industry's thought leaders to reflect on the growth of ERM over the last 10 years and what the next decade will bring. These articles will be published on the site during December.