A.M. Best s New Risk Management Standards
|
|
- David Lindsey
- 6 years ago
- Views:
Transcription
1 A.M. Best s New Risk Management Standards Stephanie Guethlein McElroy, A.M. Best Manager, Rating Criteria and Rating Relations Hubert Mueller, Towers Perrin, Principal March 24, 2008
2 Introduction A.M. Best (Best) issued enterprise risk management (ERM) criteria for insurers on 1/25/08 Insurance companies have a growing interest in ERM to: Respond to increased rating agency and investor scrutiny Optimize their capital allocation from a risk/reward perspective Insurers view their Best rating as critical, and their interest in ERM will grow given the rating and BCAR implications of Best s criteria 1
3 Discussion outline Highlights of A.M. Best s New ERM Methodology Comparison of A.M. Best's ERM Analysis vs. Principles-Based Solvency Regimes Impact on Company Ratings, BCAR and ERM Practices Rating Agencies Views on ERM Implementing ERM ERM in Action: Calculating Economic Capital (EC) using Stress Testing 2
4 Insurance industry continues to respond to risk dynamics Risk sources and complexity have increased over time Dynamic Financial Analysis ERM and Economic Capital Risk Cash Flow Testing Cash Flow Testing Asset-Liability Management Asset-Liability Management Traditional Risk Management Traditional Risk Management Time 3
5 What is risk management? Objectives of any prudent Risk Management system (including ERM): To manage exposure to potential earnings and capital volatility To maximize value to stakeholders Risk management is not risk avoidance Companies make money by prudently taking risks Need to get paid for the risk you are taking Goal is NOT to eliminate risk, but to understand it and manage it 4
6 Highlights of Best s ERM Methodology 5
7 Industry risk profile trends High A High Risk Profile Earnings and Capital Volatility Low Low Low Risk Profile Product Complexity A. Exposure to Earnings and Capital Volatility increasing, reflecting the impact of terrorism and CAT exposures on loss ratios and reinsurance costs; additional risk and costs related to more complex products; and general economic conditions B. Product Complexity increasing due to market demand for more sophisticated products and additional guarantees, as well as heightened competition and regulatory scrutiny B High 6
8 What s new about ERM is the E ERM is the process through which insurers identify, quantify and manage risk on an enterprise-wide, holistic basis ERM takes into consideration the individual risks at hand, as well as any correlations and interdependencies of risk across the entire organization Insurers that create a more structured, integrated risk framework and apply it prudently can Increase the value of the firm and Provide financial security to the organization 7
9 Key highlights Insurers need to adopt ERM practices appropriate for their risk profile The importance of ERM to a company s rating will vary based on an insurer s: Complexity Relative earnings and capital volatility Financial flexibility Traditional risk management strength Best expects complex companies to more fully adopt ERM and demonstrate usage of EC modeling in their decision making BCAR requirements will be closely linked to Best s opinion of a company s ERM strength and its volatility Relative volatility based on qualitative and quantitative factors An insurer s ERM strength will be based on Best s assessment of a company s ERM practices relative to its ERM evaluation 8
10 Traditional risk management defined Fundamental policies and procedures of identifying, quantifying and managing specific risks individually Little or no interaction/communication/alignment among risk managers Silo approach to risk management Five Categories of Risk Credit Market Underwriting Operational Strategic 9
11 Best s five major categories of risk Credit Market Underwriting Operational Strategic Default Downgrade Disputes Sovereign Settlement lag Concentration Equities Other assets Currency Concentration Basis Reinvestment Liquidity ALM Interest rate sensitivity Underwriting process Pricing Reserve development Product design Basis Frequency Severity Lapse Longevity Mortality and morbidity Monetary controls Financial reporting Legal controls Distribution IT systems Regulatory Training Turnover Data capture Competition Demographic/ social change Negative publicity Rating downgrade Customer demands Regulatory/ political capital Availability Technological Policyholder optionality Concentration Economic environment 10
12 Traditional risk management framework Senior Management E RM and EC Modeling Establish risk-aware culture, with proper alignment of management incentives Implement improved risk identification and management Develop sophisticated risk measurement tools Capital Management Traditional Risk Management Practices and Controls Best expects insurers to incorporate selected ERM elements in their traditional RM Framework, ultimately transitioning to fully developed Enterprise Risk Management 11
13 While one size does not fit all, Best expects all insurers to incorporate selected elements of ERM Common Elements Non-Complex Insurers Complex Insurers Foster risk-aware culture Identify, monitor and manage risk on a quantitative basis Consider the impact of risk correlations in business model Identify and manage new emerging risks Use internal economic capital (EC) models in decision making 12
14 Comparison of A.M. Best's ERM Analysis vs. Principles-Based Solvency Regimes 13
15 Best s Perspectives on Solvency II Promotes greater emphasis on risk management, sound controls and governance, and transparency at a time when the industry needs to focus on these issues Establishes an efficient, integrated platform for supervision of diverse insurance groups Embraces use of internal capital models within a two-tiered solvency approach Internal (economic) capital models if meet requirements Rules-based (static) model for all other insurers 14
16 Solvency II and Best s Process Common Themes Quantitative and qualitative solvency assessment Internal capital models will be given increasing weight in rating evaluation Independent review and/or certification of internal models and risk management process encouraged Increasing due diligence related to ERM Encouraging increased disclosure Expanding Influence Regulators are embracing principles-based solvency approach How will proposed two-tiered solvency requirements be viewed by smaller companies? Concerns include an unlevel playing field Currently Best is reviewing BCAR model, assessing future direction of model and how to incorporate internal models into overall rating evaluation 15
17 Impact on Company Ratings and BCAR Company meetings BCAR requirements Published ratings and reports 16
18 Impact #1: Company meetings Risk Management has always been a component of the qualitative review of each insurer, whether or not it was explicitly stated Evolving ERM questions have been added to data requests in recent years to reflect the importance of risk management Company preparation for A.M. Best meetings, the effectiveness of meeting presentations, additional data requests and company responses to Best s ERM questions can indicate the level of ERM within an organization Best s standards for making relative comparisons within its internal rating review process are expected to evolve Best does not provide an explicit ERM evaluation report to companies; however, elements of a company s ERM practices may be addressed in company reports or releases 17
19 Best s typical meeting agenda Executive Summary Strategic Business Review Financial Review Operational Review Catastrophe Risk Management Enterprise Risk Management (formalized in 2007) Best s Rating Feedback * Best s discussion of risk management practices and ERM may be interspersed throughout the meeting, or may be included in a separate, comprehensive ERM discussion. (Source: A.M. Best s Rating Methodology, January, 25, 2008). 18
20 Sample of A.M. Best ERM questions ERM Culture To what extent does your company engage in risk management? What is your company s risk appetite and how is it established? Describe ERM responsibilities as well as Board and senior management responsibilities ERM Identification and Management Are risks evaluated in an integrated framework? How does the company govern and control its top risk exposures? Identify your organization s largest risk scenarios How are they monitored/mitigated? How does the company handle risk in its infrastructure and systems? ERM Measurement of Risk How is risk quantified within the organization? What models/data are used? Does the company perform scenario testing? How are economic, geographic, regulatory, legislative and judicial risks handled? What capital modeling is performed? How is correlation contemplated among the top risks? 19
21 Impact #2: BCAR requirements Companies Without EC Output (Most of the U.S. Industry) Best is employing a carrot and stick approach, with its BCAR requirements more closely linked to a company s relative ERM strength and volatility An insurer with strong ERM and low volatility can operate closer to the BCAR guideline for its rating level An insurer with weak ERM and high volatility needs to maintain capital that is several notches above Best s BCAR guidelines Companies With EC Output Best is encouraging leading edge insurers to share their EC output Companies with strong ERM and EC modeling capabilities may have capital requirements that fall below Best s BCAR guidelines, provided the EC output is: Used by management in strategic decision-making Produced by an EC model that Best views as robust 20
22 Best s traditional BCAR approach Stronger RM = Lower BCAR Requirement to start Weaker RM = Higher BCAR Requirement to start PLUS a steeper slope as volatility increases Weak Risk Management BCAR Strong Risk Management BCAR Guidelines Low High Exposure to Earnings and Capital Volatility 21
23 Best s revised BCAR approach Best will consider allowing insurers to maintain lower BCAR levels relative to the guideline for its rating if they demonstrate: Superior traditional risk management fundamentals Superior capital management and financial flexibility Strong ERM characteristics Strong EC modeling capabilities Weak Risk Management BCAR Strong Risk Management BCAR Guidelines Low High Exposure to Earnings and Capital Volatility 22
24 Impact #3: Published ratings and reports Highly rated insurers without superior ERM and strong EC capabilities could face ratings pressure over time Separate ERM opinions are not expected to be published In the near term, rating rationales and press releases will likely provide insight as to Best s view of a company s relative ERM strength ERM commentary will appear in Best s Insurance Reports over time 23
25 Rating Agencies Views on ERM 24
26 Rating agencies views of capital adequacy and ERM have evolved recently Considering proprietary models when assessing capital adequacy Building economic capital (EC) models into their rating process Expecting balance between qualitative and quantitative ERM Linking capital adequacy requirements directly to ratings Excellent capital adequacy and stable outlook reported S&P Developing Quantum Risk evaluation approach Fitch Introduced proprietary EC model Prism Rating agency approaches to EC A.M. Best Considers EC part of ERM framework Moody s Conducts quantitative and qualitative analysis of EC 25
27 Key takeaways from A.M. Best s views on ERM ERM framework needs to include an enterprise-wide view and process on the identification, quantification and management of risks on a holistic basis ERM framework should include development of an EC model, at least for large insurers Risk management capabilities are a key factor in determining BCAR capital requirement A.M. Best will consider allowing companies to have lower BCAR levels for a given rating, but they must exhibit strong ERM A.M. Best will expand use of company-provided capital models in developing capital requirements with rating evaluation process 26
28 Standard & Poor s (S&P): A strategic view of insurance company ERM S&P Emphasizes Strategic Enterprise Risk Management Risk-based capital Adopted in the 1990s/updated in 2007 Enhanced capital modeling Relying more on EC for analytical purposes Capital formula S&P considers a company s total adjusted capital and compares with estimated target capital Company-specific Modeling and measurement of risk must be specific to the company to support its retained risks EC is evaluated as part of ERM assessment/rating Strong or Excellent ERM rating required for a ratings upgrade and/or partial recognition of EC model Vast majority of companies receive an Adequate ERM rating Weak ERM rating may result in Credit Watch More emphasis on EC is expected during
29 S&P: ERM quality classifications Excellent Strong Adequate Weak Advanced capabilities to identify, measure, manage all risk exposures within tolerances Advanced implementation, development and execution of ERM parameters Consistently optimizes risk-adjusted returns throughout the organization Clear vision of risk tolerance and overall risk profile Risk control exceeds adequate for most major risks Has robust processes to identify and prepare for emerging risks Incorporates risk management and decision making to optimize riskadjusted returns Has fully functioning control systems in place for all of their major risks May lack a robust process for identifying and preparing for emerging risks Performing good, classical, silo-based risk management Process to optimize risk-adjusted returns not fully developed Incomplete control process for one or more major risks Inconsistent or limited capabilities to identify, measure or manage major risk exposures Source: Standard & Poor s. 28
30 As of year-end 2007, only 13% of insurers had received strong or excellent ERM ratings from S&P Overall ERM Evaluation (207 Insurers All Sectors) Weak 3% Excellent 5% Strong 8% 84% Adequate Source: Standard & Poor s (January 2008). 29
31 Fitch Ratings: Proprietary EC model Prism is Fitch s New EC Model First released in June 2006 Global and fully stochastic captures risks, recognizing diversifications and concentrations Uses real-world runoff methodology Available for life, health and non-life, introducing Prism first in the U.S., U.K., Germany and France Works with companies models and considers overall risk management Provides partial credit for hedging In November 2007, Fitch released a report on the EC capital adequacy of 99 U.S. insurers (life/non-life) 30
32 Moody s: Holistic View of Risk Management Moody s view of risk management is based on four pillars 1. Risk governance 2. Risk mitigation 3. Risk measurement 4. Risk infrastructure and intelligence Ratings connect amount of capital on balance sheet with ERM Converging regulatory and economic views of capital adequacy Calculating EC focuses on areas to be included in modeling Emerging risks, asset liability, mismatches, operational risk EC modeling provides: Understanding of an effective risk management framework Common risk language across the firm View of relationships and tradeoffs between different risks 31
33 Implementing ERM 32
34 ERM has come a long way Risk Owner Chief Executive and Board ERM Chief Financial Officer DFA Chief Actuary CFT Product Actuary ALM Product Risks Business Line Risks Breadth of Risk Business Entity Risks All Risks 1950s 1980s 1990s 2000s 33
35 Five key principles for implementing ERM ERM serves strategic purpose not for audit ERM generates economic value ERM is focused on managing risks in an integrated manner, as a portfolio of risks ERM considers both downside risks and upside opportunities ERM is best operationalized by making it part of the normal business process 34
36 Ultimately, ERM works best when integrated into the decision-making processes and overall company strategy Impact of Risk-Management Decisions ERM Analysis Business Plan Insurable Risks Mortality Property/Casualty Human Resources Market Risks Interest rate Equity markets Foreign exchange Other Assets Current Assets Fixed Assets Expenses Costs Taxes Liabilities Current Liabilities Long-Term Liabilities Equity Revenues Operating Income Credit Risks Net Income Other Income Operational Risks Business Risks Business interruption Corporate image, brands Economic cycles Cash Flow Begin End Operation Operation Investment Investment Financing Financing 35
37 Successful companies are able to maximize value by relating a firm s decisions on the risks they take to decisions on the capital they use Towers Perrin s ERM Risk-Value Framework THEORY Portfolio of Enterprise Risks Operating the Business Financing the Business Return on Risk IN EXCESS OF Capital Costs PRACTICE PRACTICE Operating income less expenses MINUS Costs of equity, debt, insurance Economic Value THEORY Portfolio of Capital Resources ERM helps you find better ways to operate and finance your business 36
38 ERM links risk strategy to the organization and processes that drive decision making ERM Framework Governance Organization Strategy Accountability: Roles and responsibilities Risk definition Goals and objectives Risk tolerance levels and guidelines Identify Quantify Solve Execute Process Tools Monitoring and Reporting 37
39 Implementing ERM: A four-stage process at any level of the firm EC as a Key Metric for Quantifying Risk Identify Quantify Solve Execute What are my risks? Who is watching them? How much do they weigh? What is their impact? What can we do about them? How do we decide? How do I take action? What value does it create? 38
40 Best practices Successful ERM implementation requires participation by the Board and C-level executives (Culture) Includes the development of an effective ERM policy (Governance) Implementation of EC as a key metric for quantifying risk (Risk Measurement) Implementation of an effective ERM dashboard (Reporting) Integration of ERM and business strategy (Implementation) 39
41 Key findings from the Towers Perrin and Economist Intelligence Unit Risk and Opportunity Study Senior insurance industry managers were optimistic and confident at the time of our study (3Q07), just before the credit crisis and other economic issues started to emerge Top risks and opportunities share many similarities with our crossindustry results, but value of equities and credit quality are key differences Life and P/C companies have different perspectives on risks and opportunities risk appetite of P/C companies is higher than that of Life companies Insurance companies competing on product innovation are the most risk aggressive; those competing on customer service and product quality are the least aggressive ERM excellence tempers risk appetite and the potential for overconfidence in managing risks and opportunities 40
42 ERM in Action: Calculating EC Using Stress Testing 41
43 Calculating EC using stress testing requires some key decisions Decision 1: Period for Assessment Decision 2: Definition of Capital Decision 3: Measure of Risk Decision 4: Risks to Include Decision 5: Quantification Methodology Decision 6: Aggregation One year n years Run-off of portfolio Statutory GAAP Economic Risk of ruin VAR TVaR or CTE Market Credit Insurance Operational Liquidity Stochastic Modeling Stress Testing Factorbased Additive Variance/ Covariance Stochastic Implemented by a majority of multinational insurers and adopted/ proposed for: UK ICA regime, Swiss Solvency Test, EU Solvency II 42
44 Calculating EC via stress testing: Four stages to implementing the Towers Perrin FastTrack EC approach Step 1 Develop an economic view of the business Economic assessment of assets and liabilities Step 2 Identify key risks and determine levels of stress to be applied Stress events to quantify key risks Step 3 Apply stresses to the economic balance sheet EC requirement for each key risk Step 4 Aggregate individual risk capital results, allowing for correlation effects Total EC requirement for your business 43
45 By combining models, insurance companies are able to measure diversification benefits Enterprise Diversification Benefit Economic Capital Sum of P/C Segments Sum of Life/Health Segments P/C diversification effect Life/Health diversification effect Aggregated P/C Business Aggregated Life/Health Business Cross-sector diversification effect Aggregated Total 44
46 Sample EC Results: Market and credit risk typically dominate EC Concentrated EC Diversified Insurance Risk Operational Risk Market Risk Operational Risk Market Risk Credit Risk Insurance Risk Credit Risk Source: Tillinghast Client Studies. 45
47 Questions and Answers Stephanie Guethlein McElroy Manager, Rating Relations and Rating Criteria A.M. Best Company Ambest Road Oldwick, NJ Telephone: ext Fax: Web: Hubert Mueller, FSA CERA MAAA Principal Towers Perrin 175 Powder Forest Drive Weatogue, CT Telephone: Fax: Web: 46
Economic Capital: Recent Market Trends and Best Practices for Implementation
1 Economic Capital: Recent Market Trends and Best Practices for Implementation 7-11 September 2009 Hubert Mueller 2 Overview Recent Market Trends Implementation Issues Economic Capital (EC) Aggregation
More informationEnterprise Risk Management Economic Capital Modleing and the Financial Crisis
Risk Management and The Crisis Enterprise Risk Management Economic Capital Modleing and the Financial Crisis What worked and what did not Insurance Industry Continues to Respond to Risk Dynamics Risk Sources
More informationThe use of an Economic Capital Model within an Enterprise Risk Management framework
The use of an Economic Capital Model within an Enterprise Risk Management framework David Ingram, Senior Director Standard & Poor s Ratings Services December, 2007 Copyright (c) 2006 Standard & Poor s,
More informationERM and ORSA Assuring a Necessary Level of Risk Control
ERM and ORSA Assuring a Necessary Level of Risk Control Dave Ingram, MAAA, FSA, CERA, FRM, PRM Chair of IAA Enterprise & Financial Risk Committee Executive Vice President, Willis Re September, 2012 1 DISCLAIMER
More informationSolvency II Insights for North American Insurers. CAS Centennial Meeting Damon Paisley Bill VonSeggern November 10, 2014
Solvency II Insights for North American Insurers CAS Centennial Meeting Damon Paisley Bill VonSeggern November 10, 2014 Agenda 1 Introduction to Solvency II 2 Pillar I 3 Pillar II and Governance 4 North
More informationUnlocking Value with Enterprise Risk Management. presented by Jim Toole, FSA, CERA, MAAA Bob Daino, FCAS, MAAA
Unlocking Value with Enterprise Risk Management presented by Jim Toole, FSA, CERA, MAAA Bob Daino, FCAS, MAAA August, 2009 Our Talk Today Why Enterprise Risk Management? The ERM Process A Risk Vocabulary
More informationInsurance companies make money by managing various types of risk the risk of
A.M. BEST METHODOLOGY April 2, 2013 Risk and the Rating Process for Insurance Companies Insurance companies make money by managing various types of risk the risk of dying too young, experiencing a loss
More informationA.M. Best Ratings Impact from the New Rating Methodology and Stochastic-based BCAR
A.M. Best Ratings Impact from the New Rating Methodology and Stochastic-based BCAR September 2017 Prepared by Aon Benfield Executive Summary A.M. Best is expected to finalize new rating criteria by mid-october
More informationAmerican Academy of Actuaries Webinar: The Practice of ERM in the Insurance Industry. Enterprise Risk Management Committee November 19, 2013
American Academy of Actuaries Webinar: The Practice of ERM in the Insurance Industry Enterprise Risk Management Committee November 19, 2013 All Rights Reserved. 1 Presenters Bruce Jones, MAAA, FCAS, CERA
More informationEnterprise Risk Management
Enterprise Risk Management Its implications, benefits and process by Janice Englesbe, CFA, and Abbe Bensimon, FCAS, MAAA, Gen Re Capital Consultants A Berkshire Hathaway Company The 2005 hurricane season
More informationERM Capability A Rating Agency s View. David N. Ingram, CERA Director Enterprise Risk Management, Financial Services Ratings Standard & Poor s
ERM Capability A Rating Agency s View David N. Ingram, CERA Director Enterprise Risk Management, Financial Services Ratings Standard & Poor s The materials in this presentation represent the views of Standard
More informationExploring the New Era of ORSA Enterprise Risk Management (ERM)/ Own Risk and Solvency Assessment (ORSA) Committee
Exploring the New Era of ORSA Enterprise Risk Management (ERM)/ Own Risk and Solvency Assessment (ORSA) Committee Copyright 2015 by the American Academy of Actuaries. All Rights Reserved. Presenters Tricia
More informationBEST S CREDIT RATING METHODOLOGY (BCRM)
JANUARY 2018 BEST S CREDIT RATING METHODOLOGY (BCRM) AN OVERVIEW This overview document provides a quick look at the components of Best's Credit Rating Methodology (BCRM) and rating process. For more information
More informationThe Rating Agency View of Capital Modelling. Simon Harris Team Managing Director European Insurance
The Rating Agency View of Capital Modelling Simon Harris Team Managing Director European Insurance September 2007 Agenda The importance of risk and capitalisation in the rating process Moody s approach
More informationERM, the New Regulatory Requirements and Quantitative Analyses
ERM, the New Regulatory Requirements and Quantitative Analyses Presenters Lisa Cosentino, Managing Director, SMART DEVINE Kim Piersol, Consulting Actuary, Huggins Actuarial Services, Inc. 2 Objectives
More informationSubject ST9 Enterprise Risk Management Syllabus
Subject ST9 Enterprise Risk Management Syllabus for the 2018 exams 1 June 2017 Aim The aim of the Enterprise Risk Management (ERM) Specialist Technical subject is to instil in successful candidates the
More informationINTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS
Guidance Paper No. 2.2.6 INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS GUIDANCE PAPER ON ENTERPRISE RISK MANAGEMENT FOR CAPITAL ADEQUACY AND SOLVENCY PURPOSES OCTOBER 2007 This document was prepared
More informationERM Concepts and Framework. Paul Duffy
Society of Actuaries in Ireland ERM Concepts and Framework Paul Duffy 13 th May 2010 *connectedthinking Lecture Plan Introduction to ERM Describe the concept of ERM Discuss the framework for risk management
More informationNAIC OWN RISK AND SOLVENCY ASSESSMENT (ORSA) GUIDANCE MANUAL
NAIC OWN RISK AND SOLVENCY ASSESSMENT (ORSA) GUIDANCE MANUAL Created by the NAIC Group Solvency Issues Working Group Of the Solvency Modernization Initiatives (EX) Task Force 2011 National Association
More informationINTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS
Guidance Paper No. 2.2.x INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS GUIDANCE PAPER ON ENTERPRISE RISK MANAGEMENT FOR CAPITAL ADEQUACY AND SOLVENCY PURPOSES DRAFT, MARCH 2008 This document was prepared
More informationSubject SP9 Enterprise Risk Management Specialist Principles Syllabus
Subject SP9 Enterprise Risk Management Specialist Principles Syllabus for the 2019 exams 1 June 2018 Enterprise Risk Management Specialist Principles Aim The aim of the Enterprise Risk Management (ERM)
More informationSOA Risk Management Task Force
SOA Risk Management Task Force Update - Session 25 May, 2002 Dave Ingram Hubert Mueller Jim Reiskytl Darrin Zimmerman Risk Management Task Force Update Agenda Risk Management Section Formation CAS/SOA
More informationWhat Is Enterprise Risk Management?
What Is Enterprise Risk Management? April 24, 2006 Marty Przygoda AVP, Enterprise Risk Management 2002 Allstate Insurance Company Before we start talking about ERM, it might be helpful to know who we are...
More informationStatement of Guidance for Licensees seeking approval to use an Internal Capital Model ( ICM ) to calculate the Prescribed Capital Requirement ( PCR )
MAY 2016 Statement of Guidance for Licensees seeking approval to use an Internal Capital Model ( ICM ) to calculate the Prescribed Capital Requirement ( PCR ) 1 Table of Contents 1 STATEMENT OF OBJECTIVES...
More informationThe Solvency II project and the work of CEIOPS
Thomas Steffen CEIOPS Chairman Budapest, 16 May 07 The Solvency II project and the work of CEIOPS Outline Reasons for a change in the insurance EU regulatory framework The Solvency II project Drivers Process
More informationPillar 2 for Insurer s:
Pillar 2 for Insurer s: Greater requirements, enhanced value? September 2018 Order of events Presenters: 1. Pillar 2 in context 2. Redefining the standard for Enterprise Risk Management Michael van Vuuren
More informationOwn Risk and Solvency Assessment (ORSA)
Own Risk and Solvency Assessment (ORSA) Presentations to OCCA (Nov. 19, 2014) and AAIARD (Nov. 21, 2014) Jacqueline Friedland, FCIA, FCAS, FSA, MAAA Chief Actuary, RSA Canada Presentation Outline What
More informationOptimizing risk: Risk Management as a growth enabler
Optimizing risk: Risk Management as a growth enabler François Robinet, Chief Risk Officer West LB Seminar, Dusseldorf May 4, 2006 West LB Conference May 4, 2006-2 Agenda 1: Insurance industry s appetite
More informationPractical Uses of Local Reporting in Taiwan. Kitty Ching 金肖雲 VP, Actuarial Risk Management
Practical Uses of Local Reporting in Taiwan Kitty Ching 金肖雲 VP, Actuarial Risk Management Joint Regional Seminar, 15 July 2009 Agenda Local Reporting in Taiwan Financial Reports & Risk Management Impact
More informationEnterprise Risk Management (ERM)
Southeastern Actuaries Conference Enterprise Risk Management (ERM) November 16, 2007 ING. Your future. Made easier. Agenda ERM Are you doing it? Definition of ERM What is it? Industry Overview What is
More informationNavigating Financial. Maintaining the Momentum in Shifting Tides
Navigating Financial Strength Ratings Maintaining the Momentum in Shifting Tides Aon Benfield s Rating Agency Advisory group has substantial experience helping clients navigate various criteria changes
More informationQ&A on A.M. Best s Updated Credit Rating Methodology
BEST S BRIEFING Our Insight, Your Advantage. October 13, 2017 A.M. Best anticipates that fewer than 5% of its current credit ratings will change owing to the adoption of the updated BCRM Q&A on A.M. Best
More informationORSA An International Development
ORSA An International Development 25.02.14 Agenda What is an ORSA? Global reach Comparison of requirements Common challenges Potential solutions Origin of ORSA FSA ICAS Solvency II IAIS ICP16 What is an
More informationGUIDELINE ON ENTERPRISE RISK MANAGEMENT
GUIDELINE ON ENTERPRISE RISK MANAGEMENT Insurance Authority Table of Contents Page 1. Introduction 1 2. Application 2 3. Overview of Enterprise Risk Management (ERM) Framework and 4 General Requirements
More informationUpcoming Changes to AM Best s Insurance Rating Methodology
Upcoming Changes to AM Best s Insurance Rating Methodology IASA Carolinas August 17 th, 2017 Biographies Nitin Chhabra, FCAS Senior Investment Strategist Nitin joined Prime Advisors, Inc. in 2016 as a
More informationDEVELOPING A GROUP CAPITAL CALCULATION
Bill Schwegler, Senior Actuary, AEGON DEVELOPING A GROUP CAPITAL CALCULATION Presentation to NAIC s Group Solvency Issues Working Group March 25, 2011 Economic capital models: critical decisions 1. Definition
More informationCritical Reflection of Two State-of-the-Art Risk Management Frameworks (SRM004)
Critical Reflection of Two State-of-the-Art Risk Management Frameworks (SRM004) Speakers: Dr. Kathrin Anne Meier, Chief Risk Officer, Allianz Global Corporate & Specialty John Adams, VP Global ERM, PepsiCo
More informationHow to review an ORSA
How to review an ORSA Patrick Kelliher FIA CERA, Actuarial and Risk Consulting Network Ltd. Done properly, the Own Risk and Solvency Assessment (ORSA) can be a key tool for insurers to understand the evolution
More informationOverview of Results of ERM 1 Assessment based on ORSA 2 Reports and ERM Hearings
Overview of Results of ERM 1 Assessment based on ORSA 2 Reports and ERM Hearings 1. Background Based on the equation below, assuming that the amount of capital is constant, insurance companies can improve
More informationECONOMIC CAPITAL MODELING CARe Seminar JUNE 2016
ECONOMIC CAPITAL MODELING CARe Seminar JUNE 2016 Boston Catherine Eska The Hanover Insurance Group Paul Silberbush Guy Carpenter & Co. Ronald Wilkins - PartnerRe Economic Capital Modeling Safe Harbor Notice
More informationMethodology Review Seminar
etc.venues St.Paul s, London Methodology Review Seminar 16 November 2016 Methodology Review Seminar Welcome and Introduction Overview of the Structural Changes to Best's Credit Rating Methodology Greg
More informationUS Life Insurer Stress Testing
US Life Insurer Stress Testing Presentation to the Office of Financial Research June 12, 2015 Nancy Bennett, MAAA, FSA, CERA John MacBain, MAAA, FSA Tom Campbell, MAAA, FSA, CERA May not be reproduced
More informationRisk Appetite. What is risk appetite?
Risk Appetite Presented by Mike Claffey 30 March 2011 What is risk appetite? Risk appetite is the degree of risk that an organisation is willing to accept in order to achieve its objectives, both in terms
More informationAn Introduction to Solvency II
An Introduction to Solvency II Peter Withey KPMG Agenda 1. Background to Solvency II 2. Pillar 1: Quantitative Pillar Basic building blocks Assets Technical Reserves Solvency Capital Requirement Internal
More informationArticle from: Risk Management. March 2008 Issue 12
Article from: Risk Management March 2008 Issue 12 Risk Management w March 2008 Performance Measurement Performance Measurement within an Economic Capital Framework by Mark J. Scanlon Introduction W ith
More informationThe Hartford Financial Services Group
May 23, 2006 Investor Day The Hartford Financial Services Group Enterprise Risk Management David Johnson Executive Vice President Chief Financial Officer The Hartford Financial Services Group, Inc. Safe
More informationWHITE PAPER. Solvency II Compliance and beyond: Title The essential steps for insurance firms
WHITE PAPER Solvency II Compliance and beyond: Title The essential steps for insurance firms ii Contents Introduction... 1 Step 1 Data Management... 1 Step 2 Risk Calculations... 3 Solvency Capital Requirement
More informationArticle from: Risks & Rewards. August 2014 Issue 64
Article from: Risks & Rewards August 2014 Issue 64 ALM TRANSFORMATION By Eric L. Clapprood, Jeffrey R. Lortie and Kathryn M. Nelson In a world of uncertainty, there are consistently two sure things consultants
More informationEnterprise Risk Management: Ratings Agency View David Ingram
Enterprise Risk Management: Ratings Agency View David Ingram Standard & Poor s Financial Services Ratings Agenda Our ERM Criteria Who has been Evaluated Overall Findings ERM Elements What s Next S&P s
More informationLloyd s Minimum Standards MS13 Modelling, Design and Implementation
Lloyd s Minimum Standards MS13 Modelling, Design and Implementation January 2019 2 Contents MS13 Modelling, Design and Implementation 3 Minimum Standards and Requirements 3 Guidance 3 Definitions 3 Section
More informationERM Symposium Mary Neumann, CUNA Mutual Group Kailan Shang, Manulife Financial April Risk Appetite Framework and Strategic Planning
Linkage between Risk Appetite and Strategic Planning ERM Symposium 2012 By Mary Neumann, CUNA Mutual Group Kailan Shang, Manulife Financial April 2012 Agenda Research Background Risk Appetite Framework
More informationLife under Solvency II Be prepared!
Life under Solvency II Be prepared! Moderator: Hugh Rosenbaum, Towers Watson Speakers: Tomas Wittbjer, Global Head of Insurance, IKANO SA Lorraine Stack, Marsh Management Services Dublin Session Overview
More informationSession 2. Leveraging Predictive Analytics for ERM
SOA Predictive Analytics Seminar Hong Kong 29 Aug. 2018 Hong Kong Session 2 Leveraging Predictive Analytics for ERM Janice Wang, ASA, CERA David Wang, FSA, FIA, MAAA Leveraging Predictive Analytics in
More informationUBS Saudi Arabia (A SAUDI JOINT STOCK COMPANY) Pillar III Disclosure As of 31 December 2014
UBS Saudi Arabia King Fahad Road Tatweer Towers Tower 4, 9 th Floor PO Box 75724 Riyadh 11588 Kingdom of Saudi Arabia Tel. +966 (0) 11 203 8000 www.ubs.com UBS Saudi Arabia (A SAUDI JOINT STOCK COMPANY)
More informationFrançois Morin, FCAS, CFA, is a Principal with Tillinghast-Towers Perrin, 175 Powder Forest Drive, Weatogue, CT 06089,
RISK POSITION REPORTING Stephen Britt 1, Anthony Dardis 2, Mary Gilkison 3, François Morin 4, Mary M. Wilson 5 ABSTRACT Risk management is central to running a successful insurance operation. This means
More informationSupervisory Views on Bank Economic Capital Systems: What are Regulators Looking For?
Supervisory Views on Bank Economic Capital Systems: What are Regulators Looking For? Prepared By: David M Wright Group, Vice President Federal Reserve Bank of San Francisco July, 2007 Any views expressed
More informationRe: Comments on ORSA Guidance in the Financial Analysis and Financial Condition Examiners Handbooks
May 16, 2014 Mr. Jim Hattaway, Co-Chair Mr. Doug Slape, Co-Chair Risk-Focused Surveillance (E) Working Group National Association of Insurance Commissioners Via email: c/o Becky Meyer (bmeyer@naic.org)
More informationUnderstanding Best s Capital Adequacy Ratio (BCAR) for U.S. Property/Casualty Insurers
Understanding Best s Capital Adequacy Ratio (BCAR) for U.S. Property/Casualty Insurers Analytical Contact March 1, 216 Thomas Mount, Oldwick +1 (98) 439-22 Ext. 5155 Thomas.Mount@ambest.com Understanding
More informationORSA: A relevant part of the governance system within Solvency II
ORSA: A relevant part of the governance system within Solvency II Prof. Dr. Martin Balleer, Georg-August-Universität Göttingen Germany Faculty of Economics Belgrade University 18th May 2016, Belgrade Solvency
More information29th India Fellowship Seminar
29th India Fellowship Seminar Is Risk Based Capital way forward? Adaptability to Indian Context & Comparison of various market consistent measures Guide: Sunil Sharma Presented by: Rakesh Kumar Niraj Kumar
More informationUBS Saudi Arabia (A SAUDI JOINT STOCK COMPANY) Pillar III Disclosure As of 31 December 2017
UBS Saudi Arabia King Fahad Road Tatweer Towers Tower 4, 9 th Floor PO Box 75724 Riyadh 11588 Kingdom of Saudi Arabia Tel. +966 (0) 11 203 8000 www.ubs.com UBS Saudi Arabia (A SAUDI JOINT STOCK COMPANY)
More informationA.M. BEST METHODOLOGY
A.M. BEST METHODOLOGY May 1, 2017 Understanding Universal BCAR The purpose of this criteria procedure is to document the existing criteria and methodology related to A.M. Best s Universal BCAR model, which
More informationPreparing for an Own Risk & Solvency Assessment
www.pwc.com Preparing for an Own Risk & Solvency Assessment March 2013 Brian Paton Director, Insurance Risk and Capital Practice brian.paton@us.pwc.com Contents 1. ORSA challenges 2. ORSA readiness and
More informationA (personal) view. Philip Whittingham, European Chief Enterprise Risk Officer. 22 March 2010
The role of the risk profession in a Solvency II world A (personal) view Philip Whittingham, European Chief Enterprise Risk Officer XL Group plc 22 March 2010 Session Aims Successful Solvency II implementation
More informationOWN RISK AND SOLVENCY ASSESSMENT. ERM Seminar Compliance All Dealing from the same deck now
OWN RISK AND SOLVENCY ASSESSMENT ERM Seminar - 2014 Compliance All Dealing from the same deck now Own and Solvency Assessment! Originated in the UK about 10 years ago Now a global insurance regulatory
More informationAmlin Underwriting - Syndicate 2001
Primary Credit Analyst: Dina Patel, London (44) 20-7176-8409; dina.patel@standardandpoors.com Secondary Contact: Dennis P Sugrue, London (44) 20-7176-7056; dennis.sugrue@standardandpoors.com Table Of Contents
More informationInsights. NAIC s ORSA. A Broader Approach to Regulation. NAIC S ORSA Part of a Global Shift to Regulatory Modernization
Insights June 2011 NAIC s ORSA A Broader Approach to Regulation Broad regulatory changes are on the horizon for U.S. insurers. The National Association of Insurance Commissioners (NAIC s) Solvency Modernization
More informationERM Implementation and the Own Risk and Solvency Assessment (ORSA)
ERM Implementation and the Own Risk and Solvency Assessment (ORSA) Kevin Olberding June 2013 1 Agenda ERM IMPLEMENTATION AND THE OWN RISK AND SOLVENCY ASSESSMENT (ORSA) Evolution of Enterprise Risk Management
More informationENTERPRISE RISK MANAGEMENT, INTERNAL MODELS AND OPERATIONAL RISK FOR LIFE INSURERS DISCUSSION PAPER DP14-09
ENTERPRISE RISK MANAGEMENT, INTERNAL MODELS AND FOR LIFE INSURERS DISCUSSION PAPER DP14-09 This paper is issued by the Insurance and Pensions Authority ( the IPA ), the regulatory authority responsible
More informationGuidance paper on the use of internal models for risk and capital management purposes by insurers
Guidance paper on the use of internal models for risk and capital management purposes by insurers October 1, 2008 Stuart Wason Chair, IAA Solvency Sub-Committee Agenda Introduction Global need for guidance
More informationERM in the Rating Process: A Practical Perspective
ERM in the Rating Process: A Practical Perspective Jeffrey Mango, Group Vice President, A.M. Best Michelle Baurkot, Assistant Vice President, A.M. Best Tom Zitelli, Managing Senior Financial Analyst, A.M.
More informationCapital allocation at the core of our strategy David Cole Group Chief Financial Officer
Capital allocation at the core of our strategy David Cole Group Chief Financial Officer Swiss Re s capital allocation aims to deliver sustainable shareholder value P&CReinsuranceL&H Swiss Re Ltd USD 8.0bn
More information2012 Conference: Connecting Theory With Practice" 22 nd Annual CAA Conference Sheraton, Nassau, Bahamas November 14-16, 2012
2012 Conference: Connecting Theory With Practice" 22 nd Annual CAA Conference Sheraton, Nassau, Bahamas November 14-16, 2012 Stress Testing Regional & Canadian Perspectives A Presentation by Stéphane Lévesque
More informationRating Methodology Stephen Irwin, Vice President, A.M. Best Doniella Pliss, Managing Senior Financial Analyst, A.M. Best
Rating Methodology 2017 Stephen Irwin, Vice President, A.M. Best Doniella Pliss, Managing Senior Financial Analyst, A.M. Best Impetus for Change Timeline Building Block Approach Rating Implications Questions
More informationEconomic Capital in a Canadian Context
Economic Capital in a Canadian Context ERM Seminar May 2005 Topics 1. Rationale for Economic Capital 2. Canadian Regulatory Context 3. Economic Capital Principles 4. Economic Capital Issues 5. Economic
More informationThe Role of ERM in Reinsurance Decisions
The Role of ERM in Reinsurance Decisions Abbe S. Bensimon, FCAS, MAAA ERM Symposium Chicago, March 29, 2007 1 Agenda A Different Framework for Reinsurance Decision-Making An ERM Approach for Reinsurance
More informationDefining the Internal Model for Risk & Capital Management under the Solvency II Directive
14 Defining the Internal Model for Risk & Capital Management under the Solvency II Directive Mark Dougherty is an international Senior Corporate Governance and Risk Management professional and Chartered
More informationSolvency II. Yannis Pitaras IACPM Brussels, 15 May 2009
Solvency II Yannis Pitaras IACPM Brussels, 15 May 2009 CEA s Member Associations 33 national member associations: 27 EU Member States + 6 Non EU Markets Switzerland, Iceland, Norway, Turkey, Liechtenstein,
More informationSolvency Monitoring and
Solvency Monitoring and Reporting Venkatasubramanian A CILA2006/AV 1 Intro No amount of capital can substitute for the capacity to understand, measure and manage risk and no formula or model can capture
More informationInternational Insurance Regulation 101: International Association of Insurance Supervisors
The Academy Capitol Forum: Meet the Experts International Insurance Regulation 101: International Association of Insurance Supervisors George Brady, Deputy Secretary General, IAIS Moderator: Jeffrey S.
More informationSession 5: Evolution of ORSA in the US. Moderator: Michael Anthony McComis Jr. MAAA,FCAS
Session 5: Evolution of ORSA in the US Moderator: Michael Anthony McComis Jr. MAAA,FCAS Presenters: S Douglas Caldwell FSA,MAAA,CERA Chad R Runchey FSA,MAAA Elisabetta Russo MAAA SOA Antitrust Disclaimer
More informationERM and Reserve Risk
ERM and Reserve Risk Alietia Caughron, PhD CNA Insurance Casualty Actuarial Society s 2014 Centennial Celebration and Annual Meeting New York City, NY November 11, 2014 Disclaimer The purpose of this presentation
More informationGrowing the Value Capital & Risk Management
Growing the Value Capital & Risk Management Jos Streppel Member of the Executive Board and CFO AEGON N.V. Tom Grondin CRO AEGON N.V. A&I Conference November 2007 Key Messages AEGON is well prepared for
More informationEnterprise Risk Management Perspectives
Enterprise Risk Management Perspectives Enterprise Risk Management Symposium Chicago, Illinois March 30, 2007 Joan Lamm Tennant, PhD Gen Re Capital Consultants Enterprise Risk Management: Perspectives
More informationSolvency 2. Denis Duverne. FPK Conference Dec 6, CFO, Member of the Management Board
Solvency 2 FPK Conference Dec 6, 2006 Denis Duverne CFO, Member of the Management Board Cautionary statements concerning forward-looking statements The information presented here is not an offer for sale
More informationAmex Bank of Canada. Basel III Pillar III Disclosures December 31, AXP Internal Page 1 of 15
December 31, 2013 AXP Internal Page 1 of 15 Table of Contents 1 Scope of application 3 2 Capital structure and adequacy 4 3 Credit risk management 6 4 Asset liability management 11 Structural interest
More informationInsurance Summit Mr Raymond Tam Executive Director (Policy and Development) Insurance Authority 21 September 2017
Insurance Summit 2017 Mr Raymond Tam Executive Director (Policy and Development) Insurance Authority 21 September 2017 Priority of Policy Initiatives Development of risk-based capital regime Facilitation
More informationDynamic Solvency Test
Dynamic Solvency Test Joint regional seminar in Asia, 2005 Asset Liability Management Evolution of DST International financial reporting changed to a GAAP basis Actuarial reserves were no longer good and
More informationSolvency II Implementation
Solvency II Implementation Allianz Life Korea October 21, 2015 Solvency II in history 2001-02 Financial Crisis Solvency I not risk based, especially on asset side Basel II seen as a success in banking
More informationKeeping Pace with Regulatory and Rating Agency Changes. Sifang Zhang October 8, 2014
Keeping Pace with Regulatory and Rating Agency Changes Sifang Zhang October 8, 2014 Agenda Why the Changes Matter Regulatory Evolution across Asia Pacific Rating Agency Trends and Criteria / Methodology
More informationPrudential Standard GOI 3 Risk Management and Internal Controls for Insurers
Prudential Standard GOI 3 Risk Management and Internal Controls for Insurers Objectives and Key Requirements of this Prudential Standard Effective risk management is fundamental to the prudent management
More informationSolvency II: Implementation Challenges & Experiences Learned
Solvency II: Implementation Challenges & Experiences Learned Appointed Actuary Symposium Actuarial Society of Hong Kong (ASHK) Jonathan Zhao - Actuarial Services Practice Leader, Asia Pacific 3 November
More informationEnterprise Risk Management
Enterprise Risk Management Southeastern Actuaries Conference Rebecca Scotchie June 2011 ERM is 2 1 Agenda What is ERM? Why is risk management important? ERM maturity model/evolution of ERM ERM Framework
More informationORSA: Prospective Solvency Assessment and Capital Projection Modelling
FEBRUARY 2013 ENTERPRISE RISK SOLUTIONS B&H RESEARCH ESG FEBRUARY 2013 DOCUMENTATION PACK Craig Turnbull FIA Andy Frepp FFA Moody's Analytics Research Contact Us Americas +1.212.553.1658 clientservices@moodys.com
More informationPractical Actuaries and Financial reporting system: Thailand. Joint Regional Seminar Bangkok. July by Soon Chooi Ong FSA, FIAA
Practical Actuaries and Financial reporting system: Thailand by Soon Chooi Ong FSA, FIAA Joint Regional Seminar Bangkok July 2009 Contents 1 Thailand Current Financial Reporting System for Insurance 2
More informationSolvency II Detailed guidance notes for dry run process. March 2010
Solvency II Detailed guidance notes for dry run process March 2010 Introduction The successful implementation of Solvency II at Lloyd s is critical to maintain the competitive position and capital advantages
More informationSolvency II. Building an internal model in the Solvency II context. Montreal September 2010
Solvency II Building an internal model in the Solvency II context Montreal September 2010 Agenda 1 Putting figures on insurance risks (Pillar I) 2 Embedding the internal model into Solvency II framework
More informationEnterprise Risk Management Symposium. Embedding ERM in the DNA of an insurer
Enterprise Risk Management Symposium Embedding ERM in the DNA of an insurer Charlie Shamieh; Group Chief Risk Officer Munich Re Group Chicago, 29 March 2007 Integrated Risk management at Munich Re: Integral
More informationA.M. Best s Updated Credit Rating Methodology and Capital Model. Robert Raber Senior Financial Analyst A.M. Best Company
A.M. Best s Updated Credit Rating Methodology and Capital Model Robert Raber Senior Financial Analyst A.M. Best Company 1 Contents A.M. Best Company Overview Updated Best s Credit Rating Methodology (BCRM)
More informationLink between Pillar 1 and Pillar 2
Link between Pillar 1 and Pillar 2 XXIV International Seminar on Insurance and Surety, November 2014, Mexico City Olaf Ermert, BaFin Link between Pillar 1 and Pillar 2 Content Introduction Own Risk and
More information