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Enterprise Risks Management (ERM)

Enterprise Risks Management (ERM). John Kollar, Vice Chair, CAS ERMC CAS Representative to Risk Management Section Council May 16, 2005. ERM Vision/Dream (JK). To quantify the unquantifiable risk Risk aggregation Risk integration Correlations/diversification/hedging

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Enterprise Risks Management (ERM)

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  1. Enterprise Risks Management(ERM) John Kollar, Vice Chair, CAS ERMC CAS Representative to Risk Management Section Council May 16, 2005

  2. ERM Vision/Dream (JK) • To quantify the unquantifiable risk • Risk aggregation • Risk integration • Correlations/diversification/hedging • Insurance industry and beyond • Holistic treatment of risks • Opportunities too! • Better corporate governance • Against the Gods: The Remarkable Story of Risk

  3. Why is ERM Compelling to Me? • Corporately – risk analytics • Professionally – growth opportunity for actuaries • Personally – new, exciting, grand unified theory of risk

  4. Why Should You Get Involved? • Pricing • Reserving • Reinsurance • Catastrophe Modeling • Underwriting (Predictive Models) • Planning

  5. CAS Centennial Goal Casualty Actuaries be recognized as leading experts in the evaluation and integration of hazard risk with strategic, financial andoperation risk.

  6. CAS Members’ Unique Skill Set • Understanding of risk/uncertainty/volatility • Business knowledge of P&C lines • Model building • Mathematical • Financial • Loss distributions • Imagination?

  7. But ERM Requires Much More • Investment risk • Operational risk • Strategic risk • “Soft” quantification • Risk integration/aggregation • Correlations/diversification • Comprehensive models

  8. ERM Evolution Not Revolution

  9. Risk Management Section (RMS) • Why joint sponsorship? • Common skill set • Complementary skills • Broader solutions • Pooled resources ($, staff) • Need more risk management practitioners to serve beyond the insurance industry • Evolution of insurance and financial services

  10. Risk Management Section (RMS) • Mission • Advance actuarial profession in risk management • educational • research • networking, etc. • Focus • Develop solutions to unsolved problems • Communicate value of actuaries in providing solutions • Educate actuaries to meet market demands

  11. Risk Management Section (RMS) • Jointly sponsored by CAS and SOA • Approved by both Boards • SOA changed section by-laws • CAS members: 36 • Risk Management Section Council • Directs RMS activities • CAS representative • Elections – 4 CAS candidates • All RMS CAS members vote

  12. Risk Management Section (RMS) • Joint ongoing initiatives • Risk tolerances • Risk metrics • Operational risk • ERM Specialty Guide • ERM Symposium (3 years)

  13. Risk Management Section (RMS) • Teams • Membership Value • Communication and Publication • Newsletter • Continuing Education • Basic Education • Research • Marketplace Relevance • Professional Community

  14. Risk Management Section (RMS) • New Research • Risk adjusted performance measurement and attribution • On-line ERM guide (ERMII website) • Correlations/diversification • Operational risk survey or research • ERM monograph on measuring risks • Infrastructure to link risk, capital, and financial management • How time horizons affect risk • Credit research • Policyholder behavior research

  15. We want you!

  16. Risk Management Section (RMS) • Join and participate • Increase your knowledge • Research unsolved problems • Expand your career opportunities

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