The European Insurance Industry. Regulation, Risk Management, and Internal Control

The book highlights peculiarity of features and risks - not only underwriting and reserve risk, typical of the insurance sector, but also market, credit, liquidity, operational and compliance risk - insurance undertakings have to face to. Consequently, it focuses on the role and characteristics of a systemic approach to risk governance capable of tackling the growing complexity of the uncertainty in the financial markets, and within them, the activities of insurance intermediaries. In this context, the Enterprise Risk Management (ERM) process enables firms to approach risks in an enterprise-wide, consolidated, structured, dynamic and continuous manner from a long-term perspective. On the other hand, the book analyses the regulatory principles of the second pillar of Solvency II, in particular, focusing on the "key four functions" of the risk governance system: risk management, compliance, actuarial and audit function, which bolster the “three lines of defence” structure. Furthermore, the study analyses the current trends in the insurance and financial sector and highlights how internal controls and external regulation have to be adapted to better cope with the evolving scenario, where insurance activities become ever riskier and more complex. The final chapter proposes an assessment model in order to enable the internal audit function to express a synthetic opinion about the company’s internal control system on an annual basis.The model is constructed starting from the risk types defined by the company organisational model, identified within the entity level risks - which affect the overall company structure - and within the process level risks, which affect individual company processes and are influenced by the first ones.