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Is Your Counterparty Risk Management Keeping Pace with Industry Demands?

19th March 2025

Is Your Counterparty Risk Management Keeping Pace with Industry Demands?

The insurance sector is facing relentless regulatory change, meaning effective counterparty risk management has never been more critical. Recent research reveals that 74% of industry leaders have experienced a notable increase in regulatory demands over the past year. From MGAs to insurers and brokers, the pressure to demonstrate robust governance, risk, and compliance (GRC) practices is intensifying. Key areas of focus include fair value, consumer duty, anti-money laundering (AML), and the increasingly vital consideration of Environmental, Social, and Governance (ESG) factors. Yet, despite the rising stakes, many firms continue to rely on outdated or fragmented processes to manage counterparty risk. In fact, 63% of firms in the sector still rely on manual processes for compliance management, which not only creates inefficiencies but leaves them vulnerable to missed risks and regulatory gaps. So, how can you ensure your current approach isn’t leaving your business vulnerable to unnecessary risks or operational inefficiencies?

Rethinking Risk Management: Are You Truly in Control of Your Counterparty Exposure?

The foundation of any insurance firm is trust – trust in your partners, underwriting capacity, and third-party service providers. However, trust must be backed by effective due diligence and real-time monitoring. Without these, the consequences of poor counterparty risk management can be severe. 

Key Risk Considerations: 

  • Regulatory Non-Compliance – Are your counterparties consistently meeting the FCA’s stringent requirements for financial stability, consumer protection, and operational resilience? Non-compliance could expose your firm to penalties or reputational damage. 
  • Financial Stability Risks – Are you actively monitoring the solvency and financial health of your insurers, MGAs, and brokers? A failure here could lead to unpaid claims, disputes, and significant financial losses. 
  • Third-Party Failures – Are your third-party providers equipped with comprehensive security, risk, and governance frameworks? Lapses in oversight could lead to exposure to cyber threats, data breaches, or operational disruptions. 
  • Contractual and Regulatory Obligations – Are you continuously tracking key agreements, regulatory requirements, and potential liabilities throughout the entire relationship lifecycle? Inadequate monitoring can result in compliance breaches, coverage lapses, or disputes. 

Without a structured, continuous approach to monitoring counterparties, beyond initial onboarding, firms expose themselves to significant financial, operational, and regulatory risks that can undermine business performance and impact policyholders. 

Efficiency Matters: Are You Proactively Identifying Changes? 

Beyond risk, efficiency is critical. Many insurance firms waste valuable resources on manual compliance checks, document collection, and due diligence processes that could be automated or streamlined.  

Key Efficiency Challenges: 

  • Time-Intensive Due Diligence – How long does it take to verify counterparties and assess compliance? Slow, manual processes reduce your firm’s agility, delaying time-sensitive business initiatives. 
  • Fragmented Compliance Management – Are your counterparty records scattered across multiple systems, spreadsheets, or email threads? Fragmentation increases the potential for errors and inefficiencies, making it harder to maintain a clear, real-time overview. 
  • Inconsistent Monitoring – Are you relying on periodic reviews to assess counterparty risk, or do you have real-time alerts for any changes? Reactive approaches may leave your firm exposed to emerging risks between checks. 
  • Resource Drain on Compliance Teams – Are your compliance teams spending excessive time on manual assessments and document retrieval? Misallocated resources can divert attention from strategic priorities, stalling your firm’s broader business goals. 
The Need to Move to Tech-Focused Solutions: From Outdated to Future-Ready

While many firms have relied on traditional, manual methods for managing counterparty risk, the pressure to evolve is mounting. A growing 56% of companies are investing in RegTech to modernise their processes and enhance compliance monitoring. By moving to a more tech-focused strategy, insurance firms can leverage automated tools to streamline risk assessments, reduce human error, and ensure they remain ahead of regulatory demands. 

Technology not only increases efficiency but also provides real-time insights, enabling firms to be more proactive and responsive in their risk management strategies. This transition is vital in ensuring that your business doesn’t fall behind competitors who are already leveraging these cutting-edge solutions. 

Proactive Solutions: Building a Robust Framework for Risk and Efficiency 

To remain competitive, insurance firms must evolve their counterparty risk management processes. Proactively optimising both risk management and operational efficiency frameworks is key to ensuring compliance, minimising exposure, and driving long-term operational success. With the pressure of evolving regulations and emerging risks, insurance businesses need to take a more proactive and strategic approach to ensure they are not just compliant but positioned for success. 

REG’s Challenges and Risks Tracker (CHART) Assessment is designed to be the first step in your journey toward operational resilience. This tool provides an in-depth evaluation of your current counterparty risk management practices, offering you a fresh perspective on both strengths and gaps. By answering a few targeted questions, you’ll receive a customised report, informing your next strategic decision, that reveals: 

  • Where your risk management approach excels: Identifying and building upon your firm’s strengths gives you a solid foundation to reinforce your strategy moving forward. 
  • Operational inefficiencies that may be hindering progress: You’ll uncover hidden barriers in your processes—areas that may be costing you time, resources, and opportunities to innovate. 
  • A benchmark against industry best practices: You gain invaluable insight into how your practices measure up, empowering you to stay competitive. 
  • Strategic, tailored recommendations: Going beyond simple compliance—offering specific steps to modernise your approach, reduce risk exposure, and enhance overall efficiency. 

But the true value of this assessment lies in its ability to help you make data-driven decisions that shape your future. The insights provided by the CHART Assessment aren’t just about identifying what’s wrong, they’re about helping you formulate a clearer business case for the changes your firm needs to make. Whether you’re looking to justify investments in technology, secure additional resources for compliance teams, or gain executive buy-in for a more tech-focused strategy, this assessment gives you the clarity and evidence you need to drive those conversations. 

Don’t wait for emerging risks to disrupt your business. Begin by taking the CHART Assessment today, and unlock the insights you need to streamline operations, optimise processes, and strengthen your strategic framework for long-term growth. 

Take the Assessment Now

This article was published by:

Article author:

Zoë Parsons

Zoë Parsons is the Marketing Manager at REG Technologies. With a passion for creativity, she is dedicated to driving the success of REG’s digital presence through innovative strategies and a keen advocate for diversity and inclusion.

020 3946 2880

info@reg.uk.com

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