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Risk-based Capital Management key for insurers today

Mutual & Federal, a member of the Old Mutual Group, has successfully entrenched its new risk control self assessment (RCSA) methodology throughout the organisation as part of its greater Solvency II initiative.

“Increasing global regulation makes it more imperative than ever for financial services companies to retain complete control over all types of risk in order to optimise their capital requirements,” says Paul Hancock, general manager for Risk at Mutual & Federal. 

“The Solvency Assessment and Management (SAM) regime, to be implemented in South Africa by 2014, will ensure that risk-based capital management is a major focus for all insurers. The better an organisation understands and controls risk, the more efficient its utilisation of capital.”

Mutual & Federal is preparing for SAM and one of the major benefits of this preparatory work has been the enhancement and formalisation of its RCSA framework, resulting in significantly better insight into risk.

“Robust risk management leads to more informed business decisions, which translates into improved financial performance and the containment of downside risk,” says Hancock.  “Our approach to risk is all about understanding the dynamics of risk, and its impact on the business. Solvency II and its local equivalent SAM have combined the areas of capital and risk management and forced insurers to focus on risk-based capital.”

The implementation of new risk software, OpenPages, follows a global Old Mutual Group directive to standardise on risk management software. Prior to deployment, Mutual & Federal embarked on a major project to clean its risk data and undertook a comprehensive training programme for risk champions and coordinators throughout the organisation.

The OpenPages system went live in April 2010 and has been received positively by all stakeholders.

“Mutual & Federal risk committees will soon begin to see the output of OpenPages and will use this as they make decisions about risk management for their focus areas,” says Hancock.

Fundamental to the rollout of any RCSA methodology and related software is the embedding of the correct risk behaviours throughout the organisation.

Mutual & Federal is one of South Africa’s leading short-term insurers.

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