General insurers have questioned the Australian Prudential Regulation Authority’s (APRA) proposal for the appointment of dedicated chief risk officers.

Of 44 industry submissions on the regulator’s risk management guidance proposals, half were from general insurers, Deputy Chairman Ian Laughlin says.

“There was some concern about having a dedicated CRO and a separate board risk committee,” he told the Actuaries Institute’s regulation conference in Sydney last week.

“We will be looking at exemptions for small entities on some aspects of this role.”

Submissions have also questioned the bar on current staff members adding the role to their existing duties.

“Insurers have raised the prospect of the CRO dual-hatting,” Mr Laughlin said.

“Some submissions argued the role could be undertaken by the chief actuary, and the appointment of a separate person might detract from the role of the actuary in an organisation.

“We think the CRO will give attention to the entity as part of a wider risk review.”

Actuaries will consider insurance risk, while CROs will take in the bigger picture, he says.

“If the actuary serves as the second line of defence [in risk management], I question whether an actuary can oversee the first line of defence.

“We will consider these submission in more detail before releasing the final standard.”

General insurers also argue separate board risk committees will add little value.

“The board risk committee will look at the second line of defence in an insurer’s risk management,” Mr Laughlin said.

He says the regulator has noted improvements in general insurers’ work on risk appetite.

“We will be looking at how this will become embedded in an insurer’s culture. APRA is, however, looking for further improvements in this area.”

Mr Laughlin says risk governance and culture require increased attention.

“The board has an important role to play, because it sets the standard of the business culture and governance. But APRA isn’t planning to assess the quality of an insurer’s risk governance and culture – we want to see the board understanding these things and then satisfying us.”