Enterprise Risk Management (ERM) & A Global ERM Qualification XXV Mexican Actuarial Congress 22 September 2011 John Kollar, FCAS, MAAA, CPCU Past President, Casualty Actuarial Society Member, CERA Treaty Board
My Perspective on ERM Disclosure Statement CAS ERM Committee report (2003) An ERM crazy First CAS VP-ERM CERA Treaty signer Leader of ISO s ERM initiatives for insurers Member of CERA Treaty Board
Evolution Not Revolution Against the Gods: The Remarkable Story of Risk Peter L. Bernstein
ERM Definition (CAS) Process Assess Control Exploit Finance Monitor risk Holistic Treatment of Risk Senior management function Opportunity as well as risk
Objective of ERM Increase the value of the entity
ERM Drivers Improved corporate governance Globalization Basel II/Solvency II (European Union) IAIS/IASB National Initiatives Rating agencies Financial Crisis Risk management evolution
ERM Drivers Professional association ERM interest RIMS, PRMIA, GARP, etc. CERA designation actuarial global rigorous education continuing professional education professional standards
Competitive Considerations Opportunity: pathway to CRO Actuaries will be better equipped to compete if they have the skills to be CRO Threat: Other professions in ERM may outgrow and/or out-compete Actuaries Defensive: Actuaries must comply with regulatory requirements, driven by IAIS/ Solvency II, to keep trusted positions
Who wants an actuarial ERM qualification? Some insurance legislation requires Actuaries to know about (E)RM (e.g Australia) IAIS draft paper (ERM) will be adopted by regulators in many jurisdictions Solvency II would benefit from a much fuller understanding of ERM in EU Employers who want quality ERM Programs Any actuary who wants to be a CRO! The global actuarial profession when it exists!
Why do we need a Global designation? Standardization of ERM toolkit Standardization of education Professional standards International mobility International recognition Globalization of the profession Compete with other professionals
Dublin Statement (Oct 2007) Single, global, uniform, high-quality, credential In-depth practitioner qualification Define syllabus from the ground up Enhance & promote the brand of the actuarial profession Position the profession to take a leading role in risk management globally Position the profession in EU for Solvency 2 Implement it all - effectively and convincingly Take early practical steps towards a truly global profession
Tallinn (May 2009) Syllabus/Learning Objectives - work complete Groupe Consultatif (EU) & IAA supportive 17 associations Interested/Active < half have English as main national language It can really happen!!! Implementation still evolving
Hyderabad Treaty (Nov 2009) 14 Actuarial associations signed a Treaty in Hyderabad, India 13 November 2009 CERA Global Association (CGA) was registered in Switzerland CGA members: Australia, Canada, France, Germany, Israel, Japan, Mexico, Netherlands, South Africa, Sweden, UK, USA(2)
Hyderabad Treaty!
Organization CERA Treaty Board Review Panel and subgroups Legal structure Intellectual Property (IP) Belgium bank Administration budget, financials, staffing, etc. Website Press releases Experienced Practitioner Pathway - Australia
Award Signatory Update After passing tough global quality assurance ( QA ) tests, 5 associations from the UK, Australia, South Africa, Netherlands, Canada, have already been granted power to award CERA (+SOA) French, German Associations, and the Casualty Actuarial Society (USA) advancing through QA process First annual review UK & SOA New Treaty signatories are invited to apply!
Next steps? Approve more Award Signatories Increase Treaty Signatories from IAA More Experienced Practitioner Pathways Adopt value proposition Develop CERA brand; marketing Establish value of CERA with regulators Develop Continuing Education Program Improve current organizational effectiveness Associations produce many CERA actuaries!
Some Issues Is the UK ST9/seminar route an easier route to Award Signatory? Should ERM subject matter be concentrated on one exam or distributed throughout the syllabus? Is ERM the core of actuarial work or another actuarial subject? How should national requirements and practices be addressed? How does the CGA fund its activities? Can smaller associations afford to be Treaty Signatories? Award Signatories?
International Actuarial Association (IAA) IAA officers have been very supportive of CERA and understand credentialing process is separate from IAA IAA strategic goal support the development of a global ERM credential for the profession Rename AFIR Section to AFIR/ERM and target ERM practitioners Enterprise & Financial Risks Committee has initiatives to support actuaries in ERM
Overall Goal - Reminder Enhance the brand of the actuarial profession globally by defining and promoting a uniform and valuable credential for members of the profession who wish to specialize in ERM based on a defined syllabus and achievement levels consistent with modern, effective methodologies supported by high-quality education and materials issued locally, in many languages recognised and portable internationally subject to educational quality control by the global actuarial profession
Questions