Along with the completion of “Reorganization by Function,” promoting “ERM” is positioned as one of the two key drivers of the MS&AD Insurance Group’s “Next Challenge 2017” medium-term management plan. ERM (Enterprise Risk Management) plays an important role in enabling us to raise “Group Core Profit,” a numerical management target of “Next Challenge 2017” and also attain an “AA-level financial base.”

Overall Picture of ERM

Roles and Functions of ERM


  • In insurance company management, ERM is an important means of managing the balance among three management indicators – profit (return), risk, and capital.
  • ERM requires the quantitative and qualitative evaluation and appropriate management of risk from a comprehensive perspective.
  • ERM requires measuring the net asset value (capital) and maintaining a balance between capital and risk. In particular, because fluctuations in financial security markets, etc., cause fluctuations in capital and risk, it is important to maintain soundness based on an understanding of those situations.

*1 The integrated risk amount represents the maximum amount of losses and total value of associated insurance payments that are likely to be encountered once in 200 years (= probability of 0.5%). It is marked to market value.
*2 Net asset value is an indicator used as a management buffer to enable thorough net asset management. In addition to net assets on the B/S, it includes such items as the catastrophe reserve, life insurance embedded value, other equity liabilities, etc.

ERM Cycle

ERM is implemented through a management PDCA (Plan, Do, Check, Act) cycle.

Plan (1) By identifying and assessing risks, the Group quantitatively and qualitatively measures the risks it bears. (See section ‘A.’Specifying Risks.)
(2) By determining risk appetite and management resource allocation, a management plan is drafted. (See section ‘B.’Establishing Management Plan Based on the Determination of Risk Appetite and Allocation of Management Resources.)
Do (3) Business is driven based on the management plan.
Check (4) The actual risk appetite is monitored. In addition, (5)business performance is evaluated in comparison with risk appetite. (See section ‘C.’ Monitoring Risk Appetite and Business Evaluation.)
Act In cases when the check process has discovered problems, response and remediation measures are drafted in the plan process and then implemented in the do process.

* Includes cases in which large-scale system development projects progress slower than expected, fall short of target, are overbudget and/or where the effects fall short of expectations.

  • Approach and measures related to cybersecurity (No. 9)

 The Group has adopted a multilayered approach to information security, including measures aimed at preventing unauthorized access to systems, measures to prevent information from leaving the system, and internal security measures to detect and prevent the spread of viruses or other malware within the Group systems. We are also implementing measures on a personal and organizational scale, including employee education and awareness activities, as well as exercises simulating such an attack.
To defend against such security threats, the Group has established a specialized body (MS&AD-CSIRT*), and we are gathering data on information system vulnerabilities and will be sharing such information among the Group companies.

* Acronym for “Computer Security Incident Response Team.” This team specializes in information security within the Group.

【Emerging Risks of the Group】

Although it is difficult to grasp the magnitude and timing of occurrence of the impact on Group's management, events that may affect the Group's management from a medium to long-term perspective, should be recognized as "Group Emerging Risk ". By detecting the rising risk in the early stage, we  can set forward mitigation efforts for the future. We recognize Group emerging risk not only as a threat but also as a new business opportunity which can  solve environmental and social issues, and it is utilized to develop products and services and also to formulate our  management strategies.


  • Declining birthrate and aging population
    While the domestic insurance market tends to shrink, new insurance needs arise due to the increase in elderly people and extension of life expectancy. The Group is developing new markets through the development and research of insurance such as the “tontine annuity”and responding to rising frequency of accidents of older drivers by providing new insurance utilizing telematics technology. In addition, we are strengthening our overseas operations and are also moving forward with reforms of our business portfolio.
  • Climate Change
    The occurrence of unexperienced huge disasters leads to a large amount of insurance payment. The Group maintains adequate financial soundness by refining the natural disaster risk analysis model, conducting stress tests, and treating reinsurance, etc. In addition, we support the promotion of renewable energy with risk solutions and insurance to mitigate climate change. As an adaptation measure for climate change, we provide risk assessment and consulting services to reduce customers' losses, and in 2018 we also started collaborative research on future disaster risk prediction based on climate change with The University of Tokyo and Shibaura  Institute Of Technology.

Control of Risk

Positioning risk management as a top-priority management task, the MS&AD Group has established the MS&AD Insurance Group Risk Management Basic Policy which underpins common risk management exercised throughout the Group. Specifically, the policy identifies the principal types of risk with impact on the Group’s business portfolio, stipulates how risk factors are to be evaluated both quantitatively and qualitatively, and promotes risk management based on those evaluations. More-detailed information on the Group’s risk management systems is posted on the Group’s official website.

Insurance Business Risk

There are a variety of risks inherent in the insurance business, but these can be divided into four basic categories: insurance underwriting risks, asset management risks, liquidity risks and operational risks. The Group remains active in evaluating risk management conditions and the risk management system. We continually measure risk levels and regularly determine if risk levels are consistent with the capital strength of the Group.


Insurance underwriting risks are risks associated with underwriting losses due to either the frequency of insured events or the amount of damage from accidents and disasters significantly surpassing the projection on which the insurance premiums are calculated.
Asset management risks are risks associated with a reduction in value of assets, including off-balance-sheet assets, or income owing to the fluctuation of interest rates, stock prices, exchange rates, real estate prices, rents and the like, or the financial condition of investee entities, and risks that we cannot hold assets in alignment with the characteristics of liabilities, such as claim payments.
Liquidity risks are risks that cash shortages caused by large cash-outs, such as claims payments due to major disasters, force us to secure financing by selling assets at significantly disadvantageous prices (cash management risk), or risks that market disturbances prevent market transactions or force disadvantageous trades (market liquidity risk).
Operational risks are risks that cause losses due to the failure of the operational process or business system, misconduct of executives or employees, or external incidents, such as accidents or disasters.


Changes in the Risk Portfolio

By carefully managing risk control based on the risk appetite policy, we aim to build the following kinds of risk portfolios. Specifically, we are accelerating sales of strategic equity holdings while moving ahead with the expansion of insurance underwriting risks.


* The weight of each business domain risk in the case that the sum of the planned risk weights is 100%.


Reduction of Equity Risk

MSI and ADI have strategic equity holdings of the stock of transactional partners based on the premise that they will be long-term holdings for the purposes of obtaining stable fund management returns from dispersed investments and of comprehensively maintaining and strengthening transactional relations.
However, for the purpose of maintaining a solid financial position, there is a need to proceed with the shrinkage of risk assets concentrated in strategic equity holdings.
For this reason, the Group is moving forward steadily with risk reduction by defining target levels for the medium- to long-term and by defining sales goals in the medium-term management plan.

* In November 2015, the plan value was raised from the original ¥300 billion.

Advancing Risk Management

Efforts to Enhance the Methods of Risk Management

Aiming to accurately assess and manage risk, the Group is moving ahead with efforts to enhance the methods of risk management. In fiscal 2014, the Group built a unified systems base for all Group units, including overseas bases and started full-scale application from fiscal 2015. Thereby, the Group enhanced the methods of risk management while also realizing the unification of data management processes for the Group as a whole.


Strengthening Natural Disaster Risk Management

As natural disaster risk is one of the most-important kinds of risk for the Group, we are undertaking the following measures aimed at controlling such risks and augmenting capital efficiency.


  • Controlling insurance underwriting risk
    Revising premium rates and products for property insurance and introducing domestic and overseas underwriting limits based on consideration of risk concentration situations
  • Arranging reinsurance to transfer risk
    Arranging reinsurance to adjust risk amounts while also confirming the soundness of reinsurance companies and avoiding excessive concentration regarding transactions with specified reinsurance companies to reduce reinsurance credit risk