Embedding ERM: Consistent Performance Measurement

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Most insurers use any number of strategies to measure and manage their diverse risk portfolios — with mixed results. That's why a consistent approach to performance management is an essential part of both embedding enterprise risk management (ERM) and demonstrating its value. By taking this route, management can gain a more accurate view of how each product in its portfolio is performing, and make informed decisions about pricing, product strategy, capital budgeting and linking pay to performance.

This article, part of our ongoing series on embedding ERM in insurance, describes an analytical framework that can be applied to an insurer’s internal measurement and management system to align value assessment, risk and capital management.

Topics covered include:

• The components of value creation
• Setting financial targets and monitoring measurement
• Aligning targets and organizational roles
• The benefits of a value component approach

Ultimately, having a consistent analytical framework provides insurers with invaluable information about untapped sources of value creation and, ultimately, key drivers of financial performance.