Features of Risk Management and Methods of Risk Assessment in Insurance

Abstract

This article takes a look at the intricacies of insurance sector risk management and assessment methods and their increasing importance in promoting financial stability. Since insurance companies work in an inherently uncertain economic environment where positive and negative deviations of the outcome from the predicted values exist, they do not decide how big is a deviation to take. Previous works have found that firms employ various risk management practices; however, there is no effort on the impacts of ISO 31000-aligned frameworks to financial stability and operational efficiency. It takes a mixed methods approach, using cultural analysis to evaluate expertise judgements, scenario evaluation and SWOTs and quantitative techniques such as Monte Carlo simulations and sensitivity analysis. Results show that companies with higher solvency ratios (180%) and balanced claims ratios (60%) can better resist economic shocks. Furthermore, profitability metrics such as Return on Equity (ROE) reflect good risk management practices to realize shareholder returns. Consequently, the study indicates that such a framework not only limits the financial losses but also boosts long term resilience and the entire regulatory compliance. The implications of these insights are that risk strategies should integrate changes to both predictive modeling and adaptive management to add stability to uncertain economic conditions.