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Risk officers flag conduct as leading concern 

A survey of insurance chief risk officers has revealed conduct risks are the top challenge for the Asia-Pacific region, with cybersecurity and adaptations to changing business models also raised as key threats.

The inaugural EY and Institute of International Finance report found 54% of respondents view conduct risk as the biggest threat to their business in the next year, well up on the global figure of 19%. Asia-Pacific respondents made up 18% of all participant risk officers. 

Cybersecurity, which ranked first among global responses at 53%, tied as the second-greatest concern for Asia-Pacific at 46%, along with changing business models. 

Respondents also expressed concern about capital allocation and credit risk, with both issues among the top five regionally and worldwide.  

EY Oceania Insurance Leader Walter Poetscher says while many responses from the Asia-Pacific region align with global trends, recent regulatory changes explain the heightened conduct concern.   

“With conduct-related regulations established in Australia and several other markets in the Asia-Pacific region, including Hong Kong, Malaysia and Singapore, it makes sense that [risk officers] here would have it as a bigger focus area,” he said.  

He says that in response to market instability, insurers have placed stronger emphasis on “enhancing their predictive capabilities and resilience against operational disruptions. 

“There is heightened focus on tech integration and sophisticated analytics, including artificial intelligence, to swiftly pinpoint and address nascent risks. This emphasis on technology also casts a spotlight on cybersecurity risks, which remain a top concern for [risk officers] in Asia, as it is for risk officers in Australia and in other parts of the world.”  

The survey shows 38% of Asia-Pacific insurers have begun to implement automated or advanced analytics, including artificial intelligence (AI) and generative artificial intelligence, into their operations, compared with 22% globally.   

“AI holds the potential to improve service offerings for customers and to boost organisational efficiency – risk management included,” Mr Poetscher said.  

“However, [risk officers] are aware of the importance of tempering innovation with a consideration of the associated risks, and it will be crucial to establish and implement appropriate governance frameworks and risk management strategies.” 

The report also finds geopolitical and environmental risks are the top emerging threats for Asia-Pacific in the next five years.