In a recent speech on 27 March 2023, Shoib Khan discussed the unique combination of risks currently facing the UK’s insurance sector [1]. Khan emphasized that insurers share a crucial responsibility in looking beyond the mechanics of their models and adopting proactive measures to address these risks.
Khan outlined three key areas where insurers should focus their efforts:
- Recognizing when models are not accurately reflecting prevailing conditions: Insurers need to be vigilant in evaluating their models and identifying potential discrepancies between the models’ assumptions and real-world conditions. This will enable them to adjust their strategies accordingly and minimize potential losses.
- Ensuring management actions are available during times of stress: Insurers must be confident that they can take appropriate management actions when faced with adverse market conditions or other sources of stress. This may involve reassessing their risk management processes and implementing contingency plans to maintain stability and solvency during turbulent times.
- Facilitating a safe and orderly exit for firms: Khan emphasized the importance of ensuring that firms can achieve a safe and orderly exit if necessary. This involves developing robust exit strategies that protect policyholders and minimize disruption to the financial system.
The speech highlights the importance of adopting a proactive approach to risk management in the insurance industry. By focusing on these key areas, insurers can better prepare for potential challenges and contribute to a more resilient and stable financial system.