Risk management in selected Maltese life assurance companies : a critical assessment

Abstract

Purpose: This study attempts to show the current situation and evolution of risk management and risk management practices in all Maltese life assurance companies operating within the domestic market. It involves a critical assessment of current risk management practices and highlights potential areas for improvement. Design: In view of its nature, this study makes use of qualitative research. Views and opinions were sought, not only from the players in the domestic market, but also from both local and foreign professionals as well as from the regulator, the MFSA. This was done through the use of semi-structured interviews, which were carried out in person as well as over the phone, supplemented by reference to legislation and regulations, financial statements, textbooks, journals, periodicals and Internet publications. Findings: The study has shown that most significant risks faced by the local players are market risk and insurance risk. The preparation for the Solvency II harmonisation directive has driven companies to invest in their risk management and governance structures. The risk-based approach outlined in Solvency II appears to have been much awaited. Whereas before internal factors within an organisation were the driving force for the adoption of proper risk management practices, this harmonisation directive attempts to bring all players within the EU on a level playing field. Conclusion: Organisations must stop looking at risk management as another cost but should consider it as a tool to help an organisation gain competitive advantage. Although Malta appears to be heading in the right direction, further investment is needed in education. Risk management is a culture that still needs to evolve. Value: This study is intended to raise awareness about the risks faced by local life assurance entities in view of the crucial role insurance plays in the sustainable growth of the economy.