While it’s quiet right now on legislative and regulatory fronts—especially being an election year—risk managers are staying alert. They are also urged to be prepared, as more companies are requesting enterprise risk management implementation, according to experts.
“ERM is at a tipping point—let’s call it market acceptance,” says Carol Fox, director of strategic and enterprise risk practice for the Risk and Insurance Management Society, Inc. (RIMS). “Organizations are saying they are seeing value and are seeing where other organizations are getting value.”
Fox observes that boards are also “demanding ERM more and more, from what we are seeing.” In some cases, she adds, boards are even reorganizing themselves to have a separate risk committee. “They certainly are recognizing the strategic value of risk management,” she says.
Fox notes that while some RIMS practitioners “tend to take a wait-and-see attitude to see whether this is a fad or if it’s real, based on research we did last year, ERM is at a tipping point.”
Because of all the interest, “Now is the time to act on this; it doesn’t do much good to wait,” advises Fox.
To accommodate risk managers wishing to grow their skills, RIMS has expanded its tool chest to help risk managers prepare. It now includes executive reports, white papers, and other publications. There also are classes offered in a number of physical locations as well as online. RIMS also will hold its second ERM conference this year, Oct. 29-30 in San Antonio, Texas.
An Eye on Legislation
Kathy Doddridge, director of government affairs for RIMS, says the organization is staying vigilant on important legislative issues that have the potential to impact risk management.
“There are several things we are working on, but the reauthorization and reform of the National Flood Insurance Program is at the top of the list,” says Doddridge. She explains that the bipartisan issue has a broad base of support and a bill was passed last July by the House of Representatives. “We’re hoping to get this done in the Senate before they go home for the elections in the fall,” she says.
RIMS is also supportive of a “dear colleague” letter circulated by Sens. John Tester, D-Mont., and David Vitter, R-La., to the Senate leadership, requesting they schedule floor time for the Senate bill. The bill was passed unanimously out of the Senate Banking Committee, she notes, so it’s now a question of getting the leadership’s attention. “It is a big issue for risk managers, especially those in coastal and riverine areas,” says Doddridge.
The current extension for the program ends May 31. The existing program has been operating on extensions since September 2008.
The next issue of important to risk managers, she says, is the “much-anticipated” report by the Federal Insurance Office on Insurance Modernization, which was due in January. “We’re waiting to determine if there are any recommendations that require legislative action,” she adds, explaining that RIMS submitted comments late last year to the Treasury Department, identifying the lack of uniformity in licensing requirements, new product entry requirements or terms and conditions—without any sound policy justification for differences—as creating significant barriers to entry into the market.
A bill RIMS is following to ensure that it does not gain traction is legislation sponsored by Rep. Richard Neal, (D-Mass.), which was referred to the House of Representatives Committee on Ways and Means in October 2011. That bill would limit the ability of U.S. subsidiaries of foreign insurance groups to claim deductions for reinsurance ceded to affiliates based offshore.
“It’s been going on for about 10 years now,” says Doddridge. “Congressman Neal had introduced a proposal that would have a chilling effect on the global reinsurance market.”
The proposal would impact the P&C market, particularly for terrorism risk, or states in areas susceptible to catastrophes like hurricanes and earthquakes and terrorism in urban areas, Doddridge adds.
She says that RIMS is also supportive of the SMART act, or Strengthening Medicare and Repaying Taxpayers Act, which would streamline the Medicare secondary payer rules and procedures for members. But while this is the second time the bill has been introduced to Congress, it is “not likely to move this year,” Doddridge says, due the abbreviated legislative calendar.
Also of note is the Risk Retention Act bill, which would amend the federal Liability Risk Retention Act to include property. “It opens up the P&C market, making it more competitive and therefore more affordable and accessible to our members,” she says.
Doddridge says that RIMS on the Hill, June 3-5, helps give RIMS members a voice by offering them strategy sessions and a visit to The Hill to meet with their members of Congress.
Caroline McDonald is a freelance journalist who has written about the insurance industry for more than 15 years. Her coverage has included risk management, reinsurance, and the alternative market. She may be reached at carolinem38a@gmail.com.