PwC’s recent survey into enterprise risk management practices in the U.S. insurance industry showed that many companies are taking active steps to develop their ERM frameworks. However, the survey also found a definite gap between insurers’ perceptions of their risk management capabilities and their actual level of sophistication, as measured by reference to the key underlying features of a risk and capital management framework.

The survey, which PwC U.S. conducted in the second half of last year, presents a detailed picture of ERM practices in the United States, and the U.S. industry’s level of preparation to comply with the NAIC’s newly adopted Risk Management and Own Risk & Solvency Assessment (RMORSA) Model Act (the Act).

The Act signifies a fundamental shift in the regulatory scrutiny of the insurance industry’s ERM practices, and insurers are likely to feel its impact well before the effective date of Jan. 1, 2015. The Act, which each jurisdiction now needs to adopt into state law, requires insurers to maintain a comprehensive risk management framework that is embedded into company operations. In particular, this includes assessments of current and prospective solvency positions under normal and stressed scenarios.