The growing adoption of formal risk appetite statements within the insurance industry is driving a fundamental shift in reinsurance purchasing, according to Willis Re.

A new global survey finds insurers increasingly need to adapt to increasing regulation and wider scrutiny from investors.

According to the poll – with responses from 241 insurance companies in 48 countries – 64% of insurers have a formal risk appetite statement, with 17% planning to develop one in the near future.

Companies in the Asia-Pacific, Middle East, Turkey and Africa zone, which includes Australia, are the most likely to have a risk appetite statement (73%).

The survey confirms the increasingly strategic nature of reinsurance purchasing at a company-wide level.

Some 86% of companies say the final reinsurance purchasing decision is now made by top executives, rather than individual business lines.

“The insurance industry is well served with data regarding losses, portfolio metrics and market dynamics, but until now there has been a lack of information around risk appetite and its influence on the reinsurance decision-making process,” Willis Re Global CEO John Cavanagh said.

“With rising regulatory and shareholder demands, increased pressure on insurer margins and a growing desire for a strong performance measurement framework, the dramatic shift towards risk quantification and management is clear.

“Centralised buying is also widespread as insurers increasingly link reinsurance strategies to risk appetite… to achieve corporate objectives and the competitive advantage.”