Insurance has always been about risk, and insurance companies, armed with actuarial tables and reinsurance, have generally handled it well. But there are risks that go beyond the ordinary-storms that wipe out a city's worth of houses and businesses and create enormous correlative exposure; lawsuits that result in liability where none existed before, or threaten to remove exclusions. These sorts of risks can drain capital reserves and put the entire company in jeopardy.To protect themselves, insurance companies increasingly step back and take a holistic, enterprisewide view of risk, and align their reserves to meet not just everyday actuarial and financial risk, but risks that cross organizational silos.

Enterprise risk management (ERM) is nothing new, says Prakash Shimpi, practice leader for ERM at Tillinghast, Towers Perrin in New York. His company has been using the term for about a decade, and Shimpi, along with colleagues at a former employer, wrote a book on the subject seven years ago. But lately, he says, interest in ERM has swelled from a trickle to a flood, especially among banks and insurance companies.

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