How insurance boards can adapt in 2025
The 2025 Board Agenda highlights nine issues that boards should consider addressing in their 2025 agendas. The outlook for the year ahead for oversight and corporate governance is filled with unprecedented complexity and uncertainty. Driving factors include everything from the new administration policy positions and ongoing wars in Ukraine and the Middle East to ongoing risks associated with cybersecurity, climate change, and artificial intelligence.
For insurance boards, the issues outlined in the 2025 Board Agenda apply but with one addition worth noting. Managing capital and maintaining the strength of the balance sheet remains a top priority for all insurers. From the issues identified, Environmental and Social Issues impact insurers uniquely in a multitude of ways and Disruption, including supply chain issues, could impact insurers in ways not seen before. Issues noted within Risk Oversight and Board Composition could result in reshaping board subcommittees and identifying topics to be incorporated into board agendas.
As we approach 2025, insurance boards must pivot from traditional governance models to dynamic, resilience-focused frameworks. The ability to synthesize complex, rapidly changing data into actionable strategies will be paramount. Insurance boards that master this can not only survive but thrive in the face of emerging risks and regulatory landscapes.
Scott Shapiro
US Sector Leader, Insurance
With a 2025 agenda centered around uncertainty, insurance boards need to continue being risk-focused on capital allocation and the relative strength of the balance sheet. Insurers need to efficiently and prudently manage capital, which can be challenging when insurers may be faced with pressure to issue dividends, execute share buybacks, or pursue a capital-intensive strategy like an acquisition. The board must remain focused on the strength of the balance sheet despite these pressures and ensure that insurers maintain compliance with regulatory and capital requirements. As a result, it is critical that board members understand the models involved, which add complexity and increase expectations for board members.
Insurance boards must prioritize rigorous risk assessment in their capital allocation to safeguard the balance sheet’s integrity. It is crucial to manage capital judiciously given the challenges ahead.
Kyle Ten Pas
Audit Sector Leader, Insurance
The 2025 Board Agenda mentions that geopolitical and economic risks, combined with the potential for political and social disruption posed by disinformation and cyberattacks will continue to drive volatility and uncertainty. Additionally, the reconfiguration of supply chains and the shifts toward more centralized and local supply chains creates the potential for volatile and increased costs. Assessing the impact risk events have on operations should include understanding the underlying structural shifts occurring, including geopolitical, demographic, technological, economic, climate, global energy transition, and societal.
Supply chain disruption, while not traditionally considered to be a significant insurance company issue, could cause the cost of insurance claims to rise as the materials associated with property and casualty claims or devices used in medical procedures for health claims may become more expensive. Imagine a scenario where parts are delayed due to port congestion, or key products or raw materials are assessed tariffs. This and other supply chain disruptions, like other inflationary pressures, may impact insurer profitability through increased claim costs and require changes in underwriting and premium calculations.
The 2025 Board Agenda encompasses several environmental and social issues and reminds boards to monitor management’s preparations for new state, United States, and global climate and sustainability reporting requirements. While the pushback against Environmental Social and Governance (ESG) requirements or strategies may be causing some companies to reassess their ESG initiatives, especially in light of the change in administration and certain regulators, the need to actively engage on this topic and prepare for known or anticipated requirements remains unchanged.
Insurance boards may encounter many of the same issues as other boards in 2025 related to ESG and many insurers are already preparing to comply with sustainability reporting requirements in the European Union. Other insurers may find that understanding EU guidance provides useful insights into what reporting requirements could look like and, for some, understanding what competitors are disclosing could cause the insurer to evaluate whether similar disclosure or strategies may be prudent to maintain competitive advantages and meet investor or customer expectations. The Sustainability Accounting Standards Board identified the following sustainability disclosure topics, including certain metrics, for insurance companies.
Considering the trend toward greater complexity and uncertainty, the 2025 Board Agenda notes boards are delegating more responsibility to various committees for the oversight of mission-critical risks. These risks include climate, cyber security, data governance, artificial intelligence, supply chains, and mergers/acquisitions. Many of these risks require more detailed disclosures. The challenge for boards is to clearly define the risk oversight responsibilities of each standing committee, identify any overlap, and implement a committee structure and governance processes that facilitate information sharing and coordination among committees and with the full board’s approval. Additionally, given the changing environment and risks, boards are evaluating their composition and assessing whether the board is comprised of individuals that have appropriate skills, experience, and thinking for the evolving risks and operations of the insured.
Risk oversight and board composition were discussed among audit committee members during a panel at the KPMG 36th Annual Insurance Industry Conference in September 2024. Panelists noted that certain topics like climate, cybersecurity, and generative AI (GenAI) are causing insurance boards to reevaluate the need for new or re-designed committees to assume more oversight duties.
Insurance conference panelists were asked whether insurance committee structures are fit for purpose in a world filled with increasing complexity and uncertainty. The panelists noted that this is a topic that is generating discussion and being actively considered or addressed, which is a promising development. Panelists also remarked that board members are addressing the need for enhanced skills in the changing world through board education, either through presentations to the board or by attending external training, to ensure boards members can engage in meaningful discussions on the increasingly complex topics on the agenda.
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2024 Insurance Company Audit Committee Agenda
A rapidly changing industry demands a more active insurance company board
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