Strategic Role Expansion for Chief Risk Officers in Life Insurance

As the life insurance sector transforms, CROs will become crucial in navigating multifaceted risks and opportunities. This expanded role encompasses addressing geopolitical, climate-related, and regulatory challenges while enhancing consumer outcomes and operational resilience.

CROs must now consider the wide-ranging impacts of geopolitical events and climate change. Geopolitical risks, such as the conflicts in Ukraine and the Middle East, along with the potential for economic instability due to numerous global elections, require CROs to reassess economic and operational risk profiles. Additionally, the IFoA has highlighted the underestimation of climate risk in current models, urging CROs to adopt more comprehensive scenario modeling techniques to account for the broader effects of climate change on both assets and liabilities.

In the U.K., regulatory reforms like Solvency U.K. and IFRS 17 are reshaping the responsibilities of CROs. With Solvency U.K. changes impacting capital requirements and IFRS 17 necessitating increased oversight due to its complexity, CROs must integrate these considerations into their risk management strategies. Moreover, the focus on consumer outcomes and operational resilience emphasizes the need for CROs to ensure insurers can adapt to disruptions and maintain customer trust.

Effective model governance is critical, especially with the rising use of data science techniques. The need for robust oversight to avoid material errors is paramount, as highlighted by recent regulatory statements. Additionally, CROs must prepare for unforeseen risks, such as the rapid advancement of generative AI, which presents both challenges and opportunities.