LatAm moves to ERM not Solvency II
Latin American companies are focusing on enterprise risk management (ERM) instead of Solvency II-type regulations, industry experts have reported.
Most Latin America countries tried to adopt a Solvency II-type regulatory framework, but there has been a slow shift towards ERM because the Directive has been delayed so many times.
“Now countries are not talking about Solvency II but about adopting ERM practices. The biggest question most of the countries have is when to start and how to start,” said Marcela Abraham, a TowersWatson actuary, in an AM Best webinar.
“Countries like Mexico, Brazil and Chile, are already making some adjustments to the regulations and companies are starting to understand and adopt what ERM means. But basically the focus is on compliance at this step,” said Abraham.
Companies are utilising ERM to give them a competitive advantage, particularly in the larger markets.
“Those companies that are doing ERM for the sake of meeting regulatory requirements, that, to me, waters down greatly the value of ERM,” said Matthew Mosher, AM Best actuary and chief rating officer.
ERM should be about creating a culture of accountability within organisations, rather than about building complex models to evaluate risk, the said the webinar panellists.
Joseph Milan, JA Milan & Associates ERM specialist, said: “Done correctly, an ERM implementation really ties a lot to cultural change in an organisation. It happens over a long time.
“ERM is a change in culture. It is not a change in the way we calculate or estimate capital. It’s not about a more complex operation.”