Page 17 - Insurance Times May 2019

KPMG hit with £6m fine Willis Towers Watson launches unique $1billion politi-
over insurance audit cal risk insurance programme

Willis Towers Watson, a leading global threat to global trade. The risks that
advisory, broking and solutions com- evolve from these political dynamics
pany has launched a unique political can have a potential catastrophic im-
risk insurance programme supported pact on our clients' investments. The
with over $1bn of market capacity. combination of our cutting-edge risk
data analytics and the
The ever-shifting politi- facilities' programme's
cal environment is de- market leading coverage
KPMG has been fined £6m and issued manding a new and in- capabilities will better
with a severe reprimand by the UK novative approach to enable our clients to
accounting watchdog over its audit of how this coverage is make more informed in-
insurer Equity Syndicate Manage- currently provided. In vestment decisions and
ment over 10 years ago. Britain’s Fi- conjunction with a se- allow them to plan and
nancial Reporting Council said that it lect panel of highly grow their business with
had also issued sanctions against rated global insurers, confidence in an in-
KPMG partner Mark Taylor, as well as Willis Towers Watson has developed a creasingly unstable environment."
former partner Anthony Hulse and market-leading, comprehensive and
Douglas Morgan, a former director of clear policy wording to respond to the VAPOR is designed to anticipate where
the insurer. Mr Taylor has been fined needs of its clients. The new unexpected market exposure will
£100,000, severely reprimanded and programme is targeted at large global emerge, and where headline risk may
agreed to the imposition of a require- clients who may have existing assets or conceal opportunities for well-pre-
ment to have a second partner re- are considering future investments pared organisations. VAPOR provides
view his audits until the end of 2020. overseas. global corporations and investors with
Mr Hulse has been fined £100,000 a relative measure of political risk
and also received a severe repri- The programme is supported by an across 160+ countries, against a suite
mand, while Mr Morgan has been innovative and unique modelling and of 6 political risks and across 14 indus-
excluded from membership of the analytical tool - VAPOR (Value at Politi- try sectors.
Chartered Institute of Management cal Risk), developed in partnership
Accountants for two years. KPMG with Oxford Analytica, - which trans- Alastair Swift, Head of Corporate Risk
said: “We are disappointed that as- lates geopolitical risk assessments into and Broking, GB at Willis Towers
pects of our 2008 and 2009 audits actionable analysis, based on our pro- Watson, said "Geopolitical risk is an in-
were found not to have met the prietary VAPOR algorithm. This analyti- creasing concern to our clients who
standards set by our regulator. Since cal tool enables companies to assess are seeking new ways to assess and
this work was conducted we have and calculate the financial implications mitigate these risks. Additionally, there
changed our insurance audit ap- of political risks regionally, globally, by is increasing demand from corporate
proach considerably, including how industry sector and over time. shareholders, investors and lenders for
we work with actuaries when audit- companies to articulate transparently
ing insurance claims reserves. Andrew van den Born, Managing Di- their strategy to manage these expo-
“The Tribunal accepted that KPMG rector of Financial Solutions at Willis sures.
has taken, and continues to take, Towers Watson said "The geopolitical
steps to improve audit performance landscape remains extremely volatile To meet these requirements, a consis-
and in its last inspection report, the and inherently difficult to predict. The tent and vigorous risk quantification
FRC acknowledged our work in this rise of populism along with the spread methodology and thorough evaluation
area as an example of good practice. of protectionist agendas and the de- of available risk transfer opportunities
“We will continue to work hard to cline of multilateralism across both will be needed. This programme is
put historical matters such as this to emerging markets and in the devel- specifically directed towards meeting
rest as quickly as possible.” oped world, represent a significant these demands."

The Insurance Times, May 2019 17