Insurance company boards are struggling to engage with the internal capital adequacy assessment process (ICAAP) that was introduced earlier this year, Finity Consulting Principal Scott Collings says.

Finity spoke to 30 insurers about implementing the requirements.

“A lot of actuaries said boards need to be educated, although some said their boards were very engaged,” he told an Actuaries Institute regulation conference in Sydney last week.

“Some boards were becoming engaged with modelling scenarios, because this was a new thing for them. Revenue stress testing was also new for many of the companies.”

Problems with documentation have arisen due to a lack of guidance, he says.

“The challenge has been untangling the enterprise risk management process from ICAAP reporting. There needs to be a way of avoiding the duplication of papers going to a board.”

Qualitative modelling is another area of concern for boards, Mr Collings says.

“Closer integration between risk appetite and capital management was a challenge.”

Other issues include changing capital management strategies and creating benchmarks to achieve this.

“Spelling out the capital decision process in advance was a challenge for some boards. We also found boards having trouble trying to identify alternative capital sources as part of the process.”