Board-Level Risk Committee and Executive Risk Committee Responsibilities
The board of directors of Zurich Insurance Group has ultimate oversight responsibility for Zurich's risk management program. The board approved the guidelines for the Group's risk management framework and key principles, particularly as articulated in the Zurich Risk Policy, and decides on changes to such guidelines and key principles, as well as transactions reaching specified thresholds.
The Risk Committee of the board serves as a focal point for oversight regarding Zurich's risk management. In particular its risk tolerance, including agreed limits that the board regards as acceptable for Zurich to bear, the aggregation of these limits across the entire organization, the measurement of adherence to risk limits, and its risk tolerance in relation to anticipated capital levels. The Risk Committee further oversees the organization-wide risk governance framework, including risk management and control, risk policies and their implementation, as well as risk strategy and the monitoring of operational risks.
The Risk Committee also reviews the methodologies for risk measurement and its adherence to risk limits. The Risk Committee further reviews, with business management and Zurich's Risk Management functions, its general policies and procedures and satisfies itself that effective systems of risk management are established and maintained. It receives regular reports from Zurich's Risk Management Group and assesses whether significant issues of a risk management and control nature are being appropriately addressed by management in a timely manner. The Risk Committee assesses the independence and objectivity of Zurich's Risk Management functions; approves its terms of reference; reviews the activities, plans, organization, and quality of the function; and reviews key risk management principles and procedures. To facilitate information exchange between the Audit Committee of the board and the Risk Committee of the board, at least one board member is a member of both committees. The Risk Committee generally meets seven times per year, including once jointly with the Remuneration Committee.
Zurich's Executive Risk Committee, which consists of the CEO together with the Group Executive Committee (GEC), oversees the Group's performance with regard to risk management and control, strategic, financial, and business policy issues of organization-wide relevance. This includes monitoring adherence to and further development of the Group's risk management policies and procedures. The Group Balance Sheet Committee and the Group Finance and Risk Committee regularly review and make recommendations on the Group's risk profile and significant risk-related issues.
The chief risk officer is a member of the GEC and reports directly to the CEO and the Risk Committee of the board. The CRO is a member of each of the management committees listed below, in order to provide a common and integrated approach to risk management, to allow for appropriate quantification and, where necessary, mitigation of risks identified in these committees.
Emerging Risk Group
Zurich's Emerging Risk Group (ERG) seeks to preempt potential downsides of emerging risk and help its employees and customers understand and address them. The ERG looks to serve customers and society and build business opportunities to increase, not exclude, insurability of emerging risks. The ERG's remit is to respond to emerging risk threats and opportunities with strategies that help customers understand and protect themselves from risk and that drive profitable underwriting results.
The Zurich Emerging Risk Radar shows potential risks and opportunities that the ERG has currently identified. The online, internal version of Zurich Risk Radar is interactive, and one can roll the cursor over each threat to see a description of a risk and its potential harm – and each risk is classified by its primary scope (Science and Technology, Regulatory, Environmental, Social, or Legal), as well as the time over which the risk will potentially emerge (zero to three years, three to five years, five or more years), plus its potential impact on Group earnings. (See Exhibit 14.4 for a public version.)