The Board of any institution facing significant stresses and strains, such as the shock delivered by COVID-19, has immediate heightened responsibilities and expectations. Some of these flow from APRA prudential standards and other laws and regulations, and some from the general need for strong governance in such situations. In particular, risk and capital may require close attention, and this has implications for the Audit and Risk Committees.
The Board must provide direction and support for senior management, as management itself deals with the many issues that emerge.
Management may be even more profoundly affected, as it deals with the many issues that flow from a shock – both strategic and operational – as well as running the business.
There will likely be major decisions that need to be made by the Board and management. Some of these will address the short term, and others may have significant long-term consequences.
Any advice should be aimed at best supporting Board and management in making their decisions. It should not have a purely technical perspective.
For example, with falling business volumes, there might be a desire to reduce costs, and action taken by management accordingly. The actuary might then be asked to take account of that in end of year valuations and pricing matters. However, the actuary should also consider the nature of the planned cost reductions and factor that into advice. For example, claims staffing reductions might be within scope, which could damage ability to manage claims to a high standard with flow-on impact on claims experience, and it could compromise future capability to recover.
In this Pandemic Resource Centre:
Webinar 12 June 2020 recording; Insurance Company Governance: Navigating COVID-19 Stress and Uncertainty