Enterprise risk management and Solvency II: the system of governance and the Own Risk and Solvency Assessment

Abstract

PurposeThe purpose of this paper is to analyze how enterprise risk management (ERM), the system of governance and the Own Risk and Solvency Assessment (ORSA) have been boosted with the entry of Solvency II.Design/methodology/approachFor this analysis, the authors have undertaken a survey of chief risk officers (CROs) working in Spanish insurance companies.FindingsThe results show that Solvency II has definitely promoted ERM in the European insurance industry and improved the system of governance of the insurance companies, and that the perceived value of the ORSA for the companies is higher than the cost. It is clear that the quality of ERM implemented by companies is higher in those that face more complex risks and with greater interdependencies – that is, larger companies, foreign insurers and insurers with several lines of business – but is unaffected by the legal form of the entity (mutual/corporation).Originality/valueThis study conducts primary research with surveys of CROs and develops a measure of the quality of ERM implemented by insurance companies.