There have been many interesting and informative papers and reports issued over the past year or so, by a variety of professional organisations, industry forums, and regulatory bodies and associations, amongst others. Here we take a quick look at the key themes covered by a selection of these papers and include a brief overview of each one to assist interested readers in prioritising the papers which are of most relevance to them.

The topics covered are wide and varied, including emerging risks and trends, climate change and nature risk, inflation, model risk management, risk culture, scenario analysis and operational resilience. The papers below are grouped by topic.

Contributors include:

• Global Association of Risk Professionals (GARP)
• Financial Stability Board (FSB)
• Institute of Risk Management (IRM)
• European Insurance and Occupational Pensions Authority (EIOPA)
• Casualty Actuarial Society (CAS) and Society of Actuaries (SOA) Research Institute
• World Economic Forum (WEF)
• International Association of Insurance Supervisors (IAIS)
• Chief Risk Officer Forum (CRO Forum)
• Association of Insurance and Risk Managers in Industry and Commerce (Airmic)
• Professional Risk Managers’ International Association (PRMIA)
• Financial Conduct Authority (FCA)
• Bank for International Settlements (BIS)
• Institute and Faculty of Actuaries (IFoA) and the University of Exeter

Emerging risks and trends

Risk trends 2024 (IRM)

1 March 2024

Key theme – Latest emerging trends in the risk landscape.

In brief – The Risk Trends 2024 report, developed by the Institute of Risk Management’s special interest and regional groups, examines emerging global themes, including climate change, cyber risk, geopolitical uncertainty and artificial intelligence.

Insurance risk dashboard (EIOPA)

5 February 2024

Key theme – Main risks and vulnerabilities facing the insurance sector of the European Union.

In brief – The quarterly dashboard includes both trends over time and the current outlook for each risk category. These categories comprise macro risk, credit risks, market risks, liquidity and funding risks, profitability and solvency risks, interlinkages and imbalances, insurance underwriting risks, market perceptions, ESG-related risks, and digitalisation and cyber risks.

17th annual survey of emerging risks: Key findings (CAS and SOA Research Institute)

January 2024

Key theme – Latest trends in risks which extend beyond typical business planning time horizons.

In brief – Amongst other things, survey respondents¹ were asked to choose their top current risk, top five emerging risks and overall top emerging risk. This paper discusses the survey results and also includes trends going back to the initial survey in 2008. It also examines common practices related to enterprise risk management, regime change, staffing challenges and other current topics.

The global risks report 2024 - 19th edition (WEF)

10 January 2024

Key theme – Key challenges facing the world right now, including economic, environmental, societal, geopolitical and technological risks.

In brief – This is the 19th edition of the World Economic Forum (WEF) global risks report. This report identifies the more severe perceived risks to economies and to society in general over short (the next two years) and medium to longer (the next ten years) time horizons. The analysis is underpinned by the annual Global Risks Perception Survey, which brings together leading insights from over 1,500 experts across the WEF’s network.

Global insurance market report (GIMAR) - (IAIS)

December 2023

Key theme – Risks and trends across the insurance sector globally.

In brief – This is the 11th issue of the Global Insurance Market Report (GIMAR), reporting on the activities of the Global Monitoring Exercise (GME) of the International Association of Insurance Supervisors (IAIS). The GME monitors risks and trends impacting the insurance sector globally and assesses the potential build-up of systemic risk. Key macroprudential themes identified in this year’s report include interest rate, liquidity and credit risks in a challenging macroeconomic environment; and structural shifts in the life insurance sector, including allocation of capital to alternative assets and cross-border asset-intensive reinsurance.

Promoting global financial stability: 2023 FSB annual report (FSB)

11 October 2023

Key theme – Recent activities of the FSB in assessing and addressing current and emerging vulnerabilities in the global financial system.

In brief – This annual report highlights issues for financial stability which were revealed by the banking industry turmoil of March 2023. It explores current and emerging vulnerabilities in the global financial system and how the FSB is working to address them. It also reports on progress made in implementing Group of 20 (G20) reforms.

Emerging risk initiative—Major trends and emerging risk radar 2023 (CRO Forum)

31 July 2023

Key theme – Emerging risks which could have a significant impact on the insurance industry within the next 5 to 10 years.

In brief – This is the latest update to the CRO Forum emerging risk radar, which presents a summary of key emerging risks and associated major trends which could impact the insurance sector. This assessment is based on the expert opinion of the Emerging Risk Initiative working group of the CRO Forum. New risks include energy storage systems, data ethics and new insurance competition.

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Climate Risk

Climate scorpion – The sting is in the tail (IFoA and the University of Exeter)

March 2024

Key theme – Climate change modelling and the interconnectivity between risks.

In brief – This paper introduces the concept of ‘planetary solvency,’ which involves trying to understand how a worst-case scenario might look and developing policies on that basis. It includes some insightful analysis on the interconnectivity of risks globally, illustrating how climate can have an impact on other risks and can, in turn, be impacted itself.

Draft application paper on climate scenario analysis in the insurance sector (IAIS)

November 2023

Key theme – Use of scenario analysis in the assessment of climate risk.

In brief – This paper focuses on the use of climate-related scenario analysis to understand the risks to which the insurance sector is exposed at both micro- and macro-prudential levels. The paper considers why and how climate-related scenario analysis should be used and the extent to which such analyses can overcome some of the shortcomings of alternative methods for risk assessment.

FSB roadmap for addressing financial risks from climate change progress report (FSB)

13 July 2023

Key theme – Risks that climate change may pose to financial stability.

In brief – In July 2021, the FSB published a comprehensive ‘Roadmap’ to address climate-related financial risks. This latest publication, described as a ‘progress report,’ has been prepared in consultation with standard-setting bodies and other relevant international bodies. It aims to take stock of progress made in the year since the first annual Roadmap progress report was published (July 2022), identify and address areas requiring further attention, strengthen coordination across the different international initiatives, and provide updates where needed to the detailed Roadmap actions.

The emperor’s new climate scenarios (IFoA and the University of Exeter)

July 2023

Key theme – Climate change modelling and the extent to which current models may potentially be significantly underestimating the associated economic impacts.

In brief – This paper examines some of the key shortcomings of commonly used climate risk scenarios, highlighting challenges caused by the disconnect between climate scientists, economists and users of models in financial services. It delivers some stark warnings about climate change tipping points and their potential consequences, and the risk of groupthink.

Climate Financial Risk Forum (FCA)

March 2023

Key theme – Climate-related financial risks and opportunities facing the financial sector.

In brief – Guidance provided by the Climate Financial Risk Forum (CFRF) aimed at helping the financial sector develop its approach to climate-related financial risks and opportunities. The CFRF has produced a number of individual guides covering areas including climate disclosures, climate data, forward-looking portfolio climate metrics and lessons from participants in the Bank of England’s Climate Biennial Exploratory Scenario (CBES).

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Nature Risk ²

Global survey of nature risk management at financial firms (GARP)

16 April 2024

Key theme – Nature risk management.

In brief – Nature risk management, which includes biodiversity and nature-related risks, is a key component of any successful climate risk management initiative. This global survey examining the nature risk management practices of financial entities provides an informative snapshot of the current state of play, identifying areas for improvement into the future.

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Inflation Risk

Unmasking inflation: Best practices for (re)insurance risk managers (CRO Forum)

2 May 2024

Key theme – Inflation risk management (with key insights into current best practice).

In brief – Based on the results of a recent survey of its membership, this CRO Forum paper analyses the primary drivers contributing to inflation risk at present, outlining expected and potential impacts on the (re)insurance industry. It also examines tools used for measuring and forecasting inflation risk, as well as providing insights into best practice for monitoring and managing it.

The two-regime view of inflation (BIS)

20 March 2023

Key theme – A proposed new approach to modelling inflation.

In brief – The 2022 BIS Annual Economic Report presented an alternative view of the inflation process—one that seeks to overcome some of the limitations of current approaches. This study further develops the analysis that was presented in the BIS’ 2022 report, by providing more systematic evidence to support the ‘two-regime’ hypothesis of inflation put forward in that paper (i.e., the hypothesis that the inflation process comprises two separate regimes—a low- and a high-inflation regime—with potentially self-reinforcing transitions from the low to the high one).

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Model risk management (MRM)

COVID-19: A catalyst for evolving MRM (GARP)

28 March 2024

Key theme – Learnings from the COVID-19 pandemic which have prompted an evolution of model risk management practices.

In brief – The COVID-19 pandemic highlighted many shortcomings in model design and calibration, with many models failing to behave as expected during the resultant period of economic uncertainty. The pandemic highlighted the need for a robust and adaptable model risk management framework. This paper seeks to outline such a framework.

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Risk culture

Risk culture: Building resilience and seizing opportunities (Airmic, et al.)

28 April 2023

Key theme – Risk culture and what it means.

In brief – This paper explores the results of a global survey of the membership of Airmic, PRMIA and the ACCA (Association of Chartered Certified Accountants), looking into a whole range of topics impacting risk culture. It also discusses some very useful dos and don’ts when it comes to measurement of risk culture maturity and examines some interesting findings in relation to whistleblowing.

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Stress and scenario testing

Scenario analysis: A practical guide (Airmic, et al.)

19 June 2023

Key theme – The use of scenario analysis as a technique for developing insight and managing uncertainty in support of decision-making.

In brief – The objective of the guide is to provide a practical framework for risk professionals to help them take a leading role in undertaking scenario analysis within their organisations. It examines how scenario testing techniques can be used in strategic planning, operational risk management, stress testing, and crisis management and resilience.

ORSA stress and scenario testing—Best practice for assessing risks (CRO Forum)

10 February 2023

Key theme – Stress and scenario testing within the Own Risk and Solvency Assessment (ORSA) process.

In brief – An insightful paper sharing CRO Forum members’ views on the development of the ORSA and the role of stress and scenario testing within it. This paper also explores how best to consider longer-term risks, such as climate change, as part of the ORSA process, providing insight into typical management actions which are considered within the scenarios used in the ORSA process.

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Operational resilience

Guidance on arrangements to support operational continuity in resolution (FSB)

18 March 2024

Key theme – Maintaining continuity of critical functions during resolution.

In brief – A supplementary note to guidance originally published in 2016, this paper now also includes consideration of the digitalisation of critical shared services (i.e., an activity, function or service the failure of which would seriously impede the performance/delivery of critical functions of an undertaking). Amongst the topics covered are the specific issues which arise for firms in implementing arrangements to support operational continuity in the event of resolution due to the increased use of services which are digital in nature.

Issues paper on insurance sector operational resilience (IAIS)

May 2023

Key theme – Operational resilience in the insurance sector

In brief – The stated aim of this paper is to identify issues impacting operational resilience in the insurance sector and provide examples of how supervisors are approaching these developments, with consideration of lessons learnt during the COVID-19 pandemic. It specifically examines the areas of cyber resilience, IT third-party outsourcing and business continuity management, and considers a range of overarching issues for insurance supervisors.

Enhancing third-party risk management and oversight: A toolkit for financial institutions and financial authorities (FSB)

4 December 2023

Key theme - Third-party (outsourcing) risk management and oversight.

In brief – This paper describes a third-party risk management and oversight toolkit which has been developed by the FSB for financial authorities and financial institutions as well as their service providers. The aim of this toolkit is to aid and encourage supervisory convergence across difference jurisdictions and across different parts of the financial services sector. Setting out a list of common terms and definitions, the paper then summarises the approach taken by the toolkit before setting out details of the tools themselves.

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¹ Survey participants were largely located in North America, though approx. 20% were domiciled in a wide variety of other jurisdictions across the globe. The Society of Actuaries Research Institute also published a more targeted ‘Survey of emerging risk in Asia-Pacific markets’ (Survey of Emerging Risks in Asia-Pacific Markets (soa.org)) in May 2023.

² For anyone interested in understanding more about biodiversity and nature-related risks, opportunities and regulation, you may find the following paper of particular relevance: http://www.milliman.com/en/insight/biodiversity-nature-related-risks-opportunities-regulation-financial-institutions.