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The Actuary The magazine of the Institute & Faculty of Actuaries

When ignorance was bliss

Insurance executives were confident about their ability to manage risks and opportunities at the onset of the credit crisis, mirroring their counterparts in other industries, according to a new global study conducted by Towers Perrin in conjunction with the Economist Intelligence Unit.

In fact, insurance executives were among the most confident, which is not surprising, given that they are in the business of risk. Interestingly, however, leaders of companies having ‘excellent’ enterprise risk management (ERM) ratings from US ratings agency Standard & Poor’s tend to be significantly less overconfident in their overall ability to manage risks and opportunities, compared with industry peers with lesser ERM ratings.

“The findings and timing of this study underscore the challenges the insurance industry faces in managing risk and opportunity,” said Steve Taylor-Gooby, managing director of Towers Perrin’s risk and financial services. “Through the 20/20 vision provided by hindsight, we can say that many organisations in all business sectors underestimated risks or completely missed emerging risks, and that the levels of optimism and confidence the study revealed in the third quarter of 2007 were not justified.”

More detail can be sought via the website www.towersperrin.com