A board can only challenge effectively when it understands the information behind the decision. For insurers, many of the decisions reaching the board carry significant financial consequences; capital allocation, underwriting performance, transformation investment, expenses and technology all affect how the organisation performs and where risk sits.
As such, financial expertise is a key part of board effectiveness. The PRA expects boards to have sufficient knowledge and experience across their membership to understand the business model, its major risks and the decisions being put before them. Its supervisory expectations also place responsibility for strategy and sustainable business models with the board as a whole.
Meeting these expectations requires more than receiving a finance pack each month. Boards need enough financial understanding to interrogate assumptions, recognise where performance is headed and challenge whether investment is producing the expected outcome.
Financial expertise improves the quality of challenge
Strong financial information gives a board a view of what has happened, and financial expertise helps directors understand why it has happened and what needs further scrutiny.
A forecast may show that performance remains within plan, while the assumptions underneath it are becoming less realistic. Costs can appear controlled at group level while pressure is building within a particular function or programme. Similarly, an investment case may still show an attractive return, even though delivery dates or implementation costs have changed.
Directors need to be comfortable asking how a figure has been produced, what assumptions have changed and how sensitive the position is to different outcomes. Further, they need to understand where information is incomplete or where a management view relies heavily on judgement.
This is particularly important in insurance, where financial decisions are closely connected with underwriting, reserving, capital and risk. A board with sufficient financial depth is better placed to challenge the narrative behind the numbers rather than accepting the headline position.
Capital decisions need financial context
Capital is already moving higher up the strategic agenda across the London Market.
Lloyd’s 2026 strategy places maximising its capital advantage alongside underwriting performance and marketplace efficiency as one of its core strategic drivers. Lloyd’s has been explicit that sustainable profitability through the cycle and increasing returns for the same level of risk are central to the strategy.
Growth plans therefore need to be considered alongside the capital they consume and the returns they are expected to generate, and financial expertise helps boards to connect those decisions more effectively.
It also allows directors to have a more informed discussion about trade-offs; capital committed in one area is capital that cannot be used elsewhere, and an initiative that looks commercially attractive still needs to earn an appropriate return for the risk being taken.
The board therefore needs enough financial understanding to question whether resources are being directed towards the parts of the organisation that support its wider objectives.
Transformation investment needs the same scrutiny
Insurance firms continue to invest heavily in data, technology, AI and operating model change - programmes which often reach the board through a business case containing projected savings, implementation costs, productivity improvements and longer-term benefits. However, those assumptions can change considerably once delivery begins.
For example, a programme that was expected to remove manual work may require more integration than anticipated. A system implementation can create additional running costs alongside the technology it was expected to replace, or benefits expected within the first year may move further out as implementation dates change.
Boards need to understand these changes in financial terms; typically, this involves returning to the original investment case throughout delivery and understanding whether the economics still hold. It also means being prepared to challenge additional spend where the expected return has weakened.
Without this scrutiny, transformation programmes can continue because significant money has already been committed, while the financial case that originally justified the investment receives less attention.
Better financial insight strengthens performance discussions
Board reporting can contain a considerable amount of financial information without necessarily giving senior leaders a clear view of performance. Boards need to understand the drivers behind movements in cost, margin and profitability, alongside how current performance affects the outlook for the rest of the year; this is where the finance function contributes far more than the production of accurate accounts.
A strong finance team can explain what has moved, identify the assumptions behind the forecast and connect financial performance with what is happening elsewhere in the organisation.
The board can then spend more of its time discussing the consequences of that information rather than trying to establish what the numbers mean.
Financial expertise should extend beyond the CFO
Naturally, the CFO carries significant responsibility for financial matters at board level, but effective challenge is a collective responsibility.
The PRA has clear expectations that boards should not rely on individual specialists to challenge particular issues; non-executive directors also collectively need enough current and relevant knowledge to understand the organisation’s key activities and risks and provide effective challenges to major strategic decisions.
As financial considerations now run through technology, operational resilience, AI and regulatory change, boards now require a level of financial literacy that allows several directors to engage properly with complex assumptions and consequences of a decision.
What should boards be asking?
Financial expertise is most useful when it enables senior leaders to ask the right questions, such as:
- Does the board understand what is driving current performance?
- Are forecasts still based on realistic assumptions?
- Have the expected benefits of major investments changed?
- Where is capital being consumed and what return is the organisation receiving for it?
Boards should also consider whether the information they receive gives them enough visibility to answer those questions consistently. If directors regularly need further analysis before they can understand performance or challenge a proposal, there may be a wider issue with the way financial information is produced and presented.
Brighter Consultancy works with insurers across finance, transformation, risk and the London Market to improve financial processes, management information and the way organisations use data to support decision-making.
If you are reviewing the effectiveness of your finance function or the information reaching senior leadership, speak to us.
