Sessions by Track

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Latest Developments in ERM
Risk and Capital Management
ERM Thoughout the Economy and the Globe
Common Issues
Advanced Topics in ERM I
Advanced Topics in ERM II
ERM Research Track

Latest Developments in ERM

ERM: The State of the Art

As an evolving discipline, ERM’s lofty goals sometimes exceed our current theoretical or practical ability to achieve them. Panelists in this session will specifically identify and describe what we need to know to practice ERM, what we actually know (at least in principle), and what we in fact do in practice. The intended result is a high-level, sophisticated, and potentially controversial review of the current status and needed future evolution of this new and powerful discipline. Examples will typically, but not exclusively, focus on financial service firms.

Moderator/Presenter: William Panning Ph.D., Willis Re
Panelist: Raju Bohra, Willis Re

Environmental Impact

Global warming, alternative energy, carbon, and other credit trading can have an impact on reputational risk and economic ERM. An overview of the environmental ERM landscape and considerations such as incorporating climate change and policy compliance into your ERM Strategy will be shared.

Moderator/Panelist: Ron Dembo, ZeroFootprint
Panelists: Brian O’Hearne, Swiss Re Capital Management and Advisory
James Johnson, Caiteur Group and Caiteur Group Climate Change Institute
Michael J. Walsh, Chicago Climate Exchange, Inc.

Terrorism/Extreme Event/Emerging Risk: Decision Making Under Extreme or Emerging Risks

Advance planning for extreme or emerging events can help your organization survive their impacts. Presenters will discuss tail events that could influence the economy and society in general, with a focus on the financial impacts and ways to reduce the impact of unusual events. Panelists will discuss topical events including avian influenza, bioterrorism, hyperinflation, dirty bomb detonation, radioactive contamination, meteor impact, catastrophic earthquake, and a major market discontinuity.

Moderator/Panelists: James Tunkey, I-OnAsia
Panelists: Max J. Rudolph, Rudolph Financial Consulting, LLC
Celina Realuyo, CBR Global Advisors
Lloyd Dixon, RAND Corporation
Peter Ulrich, RMS

ERM in Insurance

ERM has several stages of development, ranging from largely compliance-related activities to better decision-making tactics that appropriately consider risk-reward trade-offs and value creation. Although insurance companies are beginning to recognize the potential for creating value through integrated risk and capital management, many still lack the practical methods for doing so. In this session, we will compare and contrast the state of the property/casualty insurance industry with the life insurance industry in regards to ERM. Expert panelists will lead a moderated discussion covering a variety of issues including:

How and if companies are thinking about risk limits,
Where they see themselves on the continuum between compliance and value creation,
How companies are responding to increasing rating analyst interest in ERM, and
Challenges they face in operationalizing ERM.

Moderator: Francois Morin, Towers Perrin

Interdisciplinary Panel

Risk management is new and ever-evolving. Many of the industry sectors are trying to solve a variety of risk management issues, each from their own perspectives. Differing terminology and varying standards exacerbate the issue. Only recently has there been more dialogue and collaboration among the groups. A joint effort incorporating communication and partnership can help to better frame the issues, understand the process, and advance the state of risk management practice.

Moderator/Panelist: Bob Mark, Black Diamond Risk Enterprises
Panelists: Doug Brooks, Equitable Life Insurance of Canada
Dan Kugler, Snap-on Incorporated
Charles Taylor, Risk Management Association

Risk and Capital Management

Economic Capital: Market Perspective

This update to last year’s popular session discusses current industry trends for developing company-specific EC, as well as best practices for its uses and applications. Panelists will cover recent changes in the regulatory and rating agency landscape for determining capital adequacy, including the Solvency II approach currently being implemented in Europe.

Moderator/Panelist: Hubert Mueller, Towers Perrin
Panelists: Larry Bruning, Kansas Insurance Department
David Ingram, Standard & Poor’s

Economic Capital: Company Perspective

This session will provide case studies from CROs of leading-edge insurance companies who have implemented an EC framework into their financial modeling business, decision-making, risk-adjusted pricing, and performance management framework. The companies will provide both cross-sector and multinational perspectives.

Moderator: Hubert Mueller, Towers Perrin
Panelists: Ellen Cooper, AEGON USA Inc.
Lawrence Moews, Allstate Insurance Company
Craig Raymond, Hartford Financial Services Group

Reinsurance for Risk and Capital Management

Reinsurance purchasers tie their reinsurance program design into larger strategic objectives such as increased earnings, surplus stability, and capital management. ERM analytics can be effective in determining whether contemplated reinsurance programs are aligned with these corporate objectives. The ability of DFA economic capital models to simulate thousands of possible insurance events allows for the comparison of the effects on risk metrics for reinsurance provisions and to determine the amount of risk that a cedent transfers for such exposures like accumulated casualty under-reserving risk or property catastrophes. The result of this analysis is an understanding of the cost of reinsurance relative to the level of risk being ceded (i.e., the amount of capital in essence “borrowed” by the reinsured). In this vein, the panel will also discuss the ERM implications of the recent Florida statute that increased its state-sponsored Florida Hurricane Catastrophe Fund capacity by $16 billion.

Moderator: Abbe Bensimon, Gen Re Capital Consultants
Panelists: Stephen Lowe, Towers Perrin
Spencer Gluck, Guy Carpenter Instrat

New Rating Agency Capital Models for Property Casualty Insurance Companies

Because of changes in risk and the perception of risk in recent years, rating agencies have refined their property-casualty capital models to adapt to this new reality. This session will discuss the role of capital models in the rating process, rating agencies’ goals for their capital models, and the coexistence of property-casualty companies’ own capital modeling with rating agencies’ capital models.

Moderator: Janice Englesbe, Gen Re Capital Consultants
Panelist: Jeffrey Mohrenweiser, Fitch Ratings
Matthew Mosher, A.M. Best Company

ICA Based on Stress Testing

This session will describe the stress-testing approaches used by European and North American insurers to calculate EC for individual risks and then aggregate the risks. Panelists will discuss the ICA assessment required in the U.K., as well as the process for calculating required capital under Solvency II. The panel will also lead a discussion of the steps required in creating a coherent and effective framework for using stress testing to develop EC.

Moderator: Hubert Mueller, Towers Perrin
Panelists: Diane Reynolds, Algorithmics
Ian Farr, Towers Perrin

ERM Thoughout the Economy and the Globe

ERM in Banking

Hone your knowledge of ERM in banking and learn some of the best practices in risk management with this unique session. Although ERM is still in its initial stages in banking (as it is everywhere), banks have made an essential contribution to developing best risk management techniques and practices within the financial services industry and beyond. In many countries, risk management regulations in banking influence other economic sectors’ requirements for institutionalizing their own specific techniques. As a result, various financial and nonfinancial entities are trying to adopt bank best practices to their own situations. In this session you’ll learn about some of these banking techniques and expand your knowledge on a number of recent ERM developments in banking. An experienced bank risk management and ALM practitioner will discuss the evolution of the current state of the practice and where it is headed.

Moderator: Dr. Robert Mark, Black Diamond Risk Enterprises
Panelists: Tanya Azarchs, Standard & Poor’s
Michel Crouhy, IXIS Corporate and Investment Bank
Dilip Krishna, Teradata

ERM in Energy

Energy firms are increasingly being called upon to provide substantiation for current risk practices. From ratings agencies to external regulators, a trend has emerged that measures current ERM practices in the energy sector to those practices in financial services. What risk management problems are faced by the ever-dynamic energy sector? What issues are topical? What trends are expected? This session provides a look at this challenging and rewarding economic sector from an ERM perspective. Expert panelists will share their assessment of existing and developing energy-related risk models, address the evolution of environmental financial products and sustainable development, and will discuss new tools being developed to help mitigate energy-related exposures. The audience will be challenged to learn how the traditional risk management tools and techniques are applied or modified or both in new and unexpected ways in this dynamic sector.

Moderator/Panelist: Lori Ramos-Marilla, LRM Associates
Panelists: Vince Kaminski, Rice University
Vasant Shanbhogue, RBS
Tom Nuelle, British Petroleum
Lloyd Will, NRG Energy

ERM in Asset Management

This practitioner’s workshop on ERM will address:

Defining reputational risk appetite and boundaries.
Determining how high is up on a given security position and what is the threshold of enterprise reputational risk.
Identifying CRO’s responsibilities to the board and to regulators—when is senior management involved versus committed.

A variety of approaches to ERM for asset management and the current challenges will also be discussed.

Moderators/Presenters: Mark Abbott, Guardian Life
Erwin Martens, TIAA-CREF
Basil P. Rabinowitz, Assurant Inc.

Case Studies of ERM in Financial Regulation

ERM is a disciplined management approach adopted by leading firms in industry who have integrated risk management into all aspects of their business. Federal regulators have typically adopted a more parsimonious approach to risk management that relies heavily on onsite examination of operations and offsite monitoring of financial statements, especially capital. This session will follow the general session titled “The Role of ERM in Regulation,” and will feature a speaker from the Office of Federal Housing Enterprise Oversight, and will examine case studies where ERM concepts have been applied by private firms or used to guide federal regulators.

Moderator: James Lockhart, OFHEO
Panelists: Enrico Dallavecchia, Fannie Mae
Anurug Saksena, Freddie Mac
Charles Taylor, Risk Management Association

Corporate Risk Management

Update your know-how on risk management techniques used by nonfinancial companies. Our experienced panelist will explore supply chain and logistics risk management, operations risk management, energy risk management, and information risk management. The panelist will then present a framework to categorize these risks as transferable vs. nontransferable and tactical vs. strategic.

The session will also address the challenges in implementing a risk management program for manufactured goods that lack traded markets for futures and options contracts, as well as the application of real-options methodology in such situations. This session is a great way to explore the similarities and differences in risk management techniques in use across a range of industries.

Moderator: Samir Shah, Towers Perrin
Panelist: Brett Friedman, Towers Perrin Risk Capital
Eric Giauque, Intel
Beaumont W. Vance, Sun Microsystems, Inc.

Common Issues

Defining Risk Appetite

Most insurance companies have defined their risk appetite in some form as part of their ERM program. However, many companies are using a capital-centric approach that produces three key shortcomings: it may not fully capture all enterprise risks, it does not necessarily result in an optimal level of risk, and it may not produce the desired S&P ERM rating. An emerging approach, value-based ERM, is helping companies define their risk appetite in a manner that resolves these issues.

Moderator: Rick Burt, Deloitte Consulting
Panelists: Sim Segal, Deloitte Consulting LLC
Spencer Schwartz, Mastercard

Corporate Strategy Impact on ERM

The panel will explore how ERM facilitates an understanding of the linkages between board-level strategic direction and risk appetite, capital structure and leverage, diversification, and degree of risk taking in insurance and investment activities. Examples will be discussed of ERM as a value creator in balancing risk transfer, retention, diversification, and capital structure in order to optimize strategic objectives.

Moderator: Wayne Fisher, Zurich
Panelists: Michael Mahaffey, Nationwide
Gunnar Pritsch, McKinsey
Charlie Shamieh, Munich Re

Optimizing ERM Through Integrated Governance, Risk Management, and Compliance

Regulations have produced risk and compliance silos of similar processes and procedure at many companies. This has resulted in duplicative efforts that are inefficient, unreliable, and unnecessarily burdensome on business units. Developing an integrated approach to risk and compliance activities so that data becomes more reliable and inefficiencies are eliminated is key. This should include a common language framework and approach for implementing the various processes, including self-assessments across all the risk management silos. The COSO enterprise risk management framework offers 110 general risk management principles that are grouped into 10 principle categories. By applying these principles to risk management activities companies can identify overlaps and redundancies reduce inefficiencies cut costs increase effectiveness and improve overall accountability. The session will also cover the following: Finding common ground between operational risk management efforts and compliance with Sarbanes-Oxley Act, consolidating IT operational risk management systems and tools into a single system, developing organizational structures that enhance risk management efforts, developing common ground for measuring a company’s tolerance for operational risk, and evaluation of software programs that help companies develop a common approach to managing risk and compliance activities.

Moderator: Paul L. Horgan, PricewaterhouseCoopers LLP
Presenters: Carlo di Florio, PricewaterhouseCoopers LLP
William Savage, The Hartford
Tim Journy, MetLife

Value of ERM

As companies invest in ERM, they are increasingly looking for a return on that investment. Connecting ERM to the company’s strategy, having a more formal management perspective on risk-taking, and linking ERM processes to tactical business decisions and ongoing capital management are critical to the realization of value from ERM. Impediments include inconsistent risk metrics and processes within different parts of the business, immaturity of risk measurement models, and lack of progress on achieving a risk culture. Panelists from several companies will discuss how to overcome the obstacles and realize the potential value of ERM.

Moderator: Steve Lowe, Towers Perrin
Panelist: Charlie Shamieh, Munich Re
Victor Masch, AIG

Technical Innovations: Dashboards

This session provides a comprehensive discussion on the latest developments in technology and tools for real-time risk assessment, monitoring, and decision support for senior management. Examples of dashboard technology facilitating consolidated reporting for senior management and interactive decision support for ERM, ALM, Op Risk, Basel II, market, and credit risk for corporations, banks, insurers, and reinsurers.

Top industry experts will discuss practical issues arising in developing internal ERM measurement and monitoring systems, and address fundamental quantitative and implementation issues. Audience questions and participation are welcomed and encouraged.

Moderator/Panelist: James Lam, James Lam & Associates
Panelists: Curt Burmeister, Algorithmics
Shari Daw, ABN AMRO-US
Brad Jeffers, Cognos Corporation
Christopher George, IBM

Advanced Topics in ERM I

Seeking Standardization in Fair Value, Risk Measures and Simulation

Fair values (estimated as expected values) and risks (measured at different confidence intervals and terms) are reported on the accounting balance sheets and disclosed in the notes to financial statements. Bank supervisors, market regulators, and accounting standard-setters are trying to harmonize their reporting requirements on the disclosure of risks and fair values. Market practitioners use different models, parameters, and data inputs to estimate fair value and measure risks of positions. They often use inconsistent assumptions when they define underlying processes that cause changes in fair values and risks. The choice of underlying processes and analytical distribution functions with respect to their goodness-of-fit to the empirical evidences becomes critical in aligning the fair valuation and risk measurement approaches. This session will cover existing market practices and issues of aligning fair valuation and risk measurement approaches in banks and insurance companies. It will address the issues and solutions of making consistent valuation techniques and risk measurement models. In addition, this presentation will suggest a technique of assessing a goodness-of-fit of analytical distribution functions to the tails of empirical distributions (www.normeddistributionfree.org).

Presenters: Alexander Shipilov, PriceWaterhouseCoopers LLP
Stephen Kane Ph.D., Frank Sawyer School of Management, Suffolk University

Economic Scenario Generation

Here’s your opportunity to get a foundation on the projection of economic and financial scenarios, particularly those regarding interest rates inflation, equity returns, dividend yields, real estate returns, and unemployment. At this session the presenter will review important work in the economic, financial, and actuarial literature, including the identification and development of appropriate data sources and methodologies and the creation of a model for projecting economic scenarios. This work has relevance to any risk management application involving financial scenario modeling such as dynamic financial analysis regulatory and management tests, or cash flow testing.

Presenters: Kevin Ahlgrim, Illinois State University
Matthew Peters, Allstate Insurance Company

Parameter Risk, Credit Risk Analysis

This session features presentations on two key areas—Parameter Risk and Credit Risk analysis. Parameter risk—one of the most challenging and elusive issues in enterprise risk management: Attempting to quantify parameter risk by definition means putting a number on what we’ve failed to put a number on... a daunting task! Further complicating the issue are the often long development periods between the time an initial estimate is made and when the final results are reasonably known. And even when we have an estimate of parameter uncertainty, it may not be clear how to present the implications of that uncertainty in a concise and meaningful way to facilitate effective decision making.

In this session we will examine the types and sources of parameter uncertainty, examine some case studies illustrating the potential magnitude and effect of parameter uncertainty in real business situations, discuss some approaches for quantifying parameter error, and spend some time comparing different ways parameter risk can be incorporated into an ERM analysis. We will then contrast the various methods for illustrating the effect of parameter risk on the analysis results. Credit risk analysis in an ERM world: Managing credit risk is one of the most crucial elements of managing risk at any insurance company. A panelist will discuss how credit lines of business (commercial credit, political risk, structured credit, surety, and trade credit) are analyzed by leading credit analysts. In addition, the panelist will briefly discuss how directors’ and officers’ (D&O) liability can be viewed and treated as a financial product. The discussion will then examine the reasons why incorporating correlation—as practiced in modern credit modeling—is vital to credit lines’ financial products and, ultimately, to ERM. This presentation will conclude with the proposition that credit analysis must include correlation and has to be conducted at portfolio and enterprise level in order to effectively manage enterprise risk in an insurance/reinsurance company.

Panelists: Alice Underwood, Willis Re
Athula Alwis, Willis Re

Scientific Paper 1

The symposium highlights innovative cutting edge papers that explore and advance risk management topics with a focus on the analysis and practical tools related to financial and operational risks, interaction between the risks (i.e., diversification benefits), integrated ERM, and ERM value creation.

Moderator: Emily Gilde, Nationwide Insurance
Panelists:Klaus Boecker, Multivariate Models for Operational Risk
Michael McGrath, A Group Cognitive Approach to Operational Risk Identification and Evaluation
Don Pagach, Security Market Response to Firms Hiring of Chief Risk Officers

Scientific Paper 3

Moderator: Al Weller, MBA Actuaries Inc
Panelists: Thomas Ho, Measuring the Risks of Thrifts: A Business Model Approach
Yan Olszewski, Bringing Investor Confidence Back to Alternative Investments: How ERM is the Answer
Alistair Milne and Mario Onorato, Apples and Pears? The Comparison of Bank Economic and Prudential Capital

Advanced Topics in ERM II

Risk-Adjusted Profitability by Line of Business

The presenters will describe possible EC attribution and return measurement systems that produce a consistent measurement of risk/return tradeoffs across corporate functions, enabling decisions to increase economic performance, control total risk, and measure profitability on a risk-adjusted basis. This capital-return system can function as a central component of a corporate ERM framework.

Moderator/Panelist: Don Mango, Guy Carpenter
Panelist: Russ Bingham, The Hartford

Status of ERM Initiatives

Many companies today are betting on the fact that effective risk management is more than just luck. With today’s highly competitive business environment and the challenges of compliance with increasing global regulations, companies are reexamining their risk management strategies. They are investing in people, processes, and technologies to create a more systematic, logical, and predictive frameworks to enable more effective proactive planning for responding to future risk events.

This session will explore the current ERM frameworks being adopted, the progress-to-date on bringing reality to the implementation of these frameworks, and the value being attributed to these ERM efforts by members of the board, executives, auditors and other key stakeholders. Success stories will be shared and dead-end initiatives will be discussed. The purpose of the dialogue will be to look honestly at the activities being defined under the umbrella of ERM and sort out the gems from the jumble.

Moderator: Tom Hettinger, EMB America LLC
Panelists: Andrzej Czneruszewicz, EMB Consultancy LLP
Mark Homan, The Hartford
David Ruhm, The Hartford
Art Wallace, Hartford Life

Beyond Basel II – Leveraging Economic Capital to Achieve Strategic Objectives

While banks and insurance companies must comply with the Basel II and Solvency II frameworks the application of economic capital should go beyond regulatory requirements. Learn from an actual case study of how EDC implemented a successful capital management project. Discussion topics include:

Establishing the appropriate scope for economic capital including strategic business credit market and operational risk;
Defining the business and risk management applications for economic capital;
Leveraging the economic capital framework to support board-approved capital management and dividend policies;
Developing economic capital methodologies including strategic risk capital, business risk capital, and credit and market risk integration; and
Managing a successful capital management project—best practices and lessons learned.

Moderator: James Lam, James Lam & Associates
Panelists: Charles Cossette, Export Development Canada
Ashish Dev, KeyCorp
Jackie McGinn, Export Development Canada

Scientific Paper 2

Moderator: Matthieu Royer
Panelists: Neil Bodoff, Capital Allocation by Percentile Layer via Conditional Exceedance Probability
Ma Lanfang, Integrated Risk Measurement for Portfolio of Equities and Fixed Income Products
Yingjie Zhang, Pricing Capital Costs

Challenges to ERM Operations for Insurers

ERM envisions a holistic treatment of risk and opportunity across an insurer. How do traditional functions, such as underwriting, ratemaking and reserving, relate to an insurer’s ERM process? What are key challenges that insurers must address to build an effective ERM process?

The panelists and attendees will address these and other issues regarding ERM.

Moderator/Speaker: John J. Kollar, ISO
Panelist: Russ Bingham, The Hartford

ERM Research Track

Hedge Funds Under a Regime-Switching Model

Hedge funds are becoming an increasingly important factor in financial markets. Several spectacular hedge fund failures have generated significant risk in the financial markets. These failures are commonly blamed on inaccurate models. This session will examine hedge funds under a regime-switching model which allows for stochastic changes in the underlying financial environment. The speaker, Phelim Boyle, is the winner of the 2005 SunGard and International Association of Financial Engineers (IAFE) Financial Engineer of the Year Award.

Presenter: Phelim Boyle, Wilfrid Laurier University

Enterprise Risk Management, Value Maximization, and Market Frictions

This session will examine economic capital modeling at the enterprise level in a multiline firm to assess the impact of market imperfections on optimal pricing, mixes of business, and capitalization. Capitalization and pricing decisions are critical to firm value maximization. Market imperfections, including frictional costs of capital such as taxes, agency costs, and financial distress costs, are an important motivation for enterprise risk management. Insurers operate in imperfect markets where demand elasticity of policyholders and preferences for financial quality of insurers are important determinants of capitalization and pricing strategies. In this session, the optimization of enterprise or firm value in a model with market imperfections is examined. Frictional costs, imperfectly competitive demand elasticity, and preferences for financial quality are explicitly modeled and considered. A realistic model of an insurer is developed and calibrated. The impact of market imperfections on enterprise value is quantified as well as the implications for enterprise risk management.

Presenters: Michael Sherris, University of New South Wales
Shaun Yow, The Boston Consulting Group
Discussant: James P. McNichols, Aon Risk Consultants

Measuring Operational Risk Interdependencies using Interpretive Structural Modeling

The typical insurance firm is subject to a wide variety of risks. Understanding and quantifying the interrelationships between individual risk elements is a significantly important but complex challenge. If we view all the risks in a firm as an integrated system, we can apply a computer-assisted learning process called Interpretive Structural Modeling (ISM) to construct a structural graph and illustrate those risk interrelationships. In this paper, we use ISM concepts and techniques to better understand an insurance company’s overall risk profile. Dephi techniques can be used to “parameterize” this process according to group consensus regarding risk elements and interrelationships. An Analytical Hierarchy Process (AHP) can then be used to quantify relationships and weigh the significance of different risks. Such a modeling approach can be of great value to a firm’s enterprise risk management (ERM) process.

Presenters: Rick Gorvett, University of Illinois
Ningwei Liu, University of Illinois
Discussant: Paul Brehm, Guy Carpenter & Company

Alphas, Not Just Betas, Drive Economic Capital Calculations

Economic capital calculations are important tools for financial institutions in ERM. Alpha represents the expected profitability for a business segment relative to a benchmark fair rate of return. The moderator will demonstrate how ERM analysis can help to project alpha values, and how the recognition of alphas can improve the robustness of calculated economic capitals.

Presenter: Shaun Wang, Georgia State University
Discussant: Don Mango, Guy Carpenter

Risk Terminology and Measurement Modeling—Differences and Commonalities Across Organizations and Industries

Enterprise risk management has come to denote a process for bundling an organization’s entire portfolio of risks and managing it as a whole. Despite this relatively simple description of ERM, its application is notably complex—not only because of the complexity and relative newness of ERM as a technical concept but because its language is evolving from a variety of perspectives. These various perspectives appear to be generating their own vocabularies, which could be limiting the growth and development of ERM techniques. The purpose of the research is to develop a better understanding of how various risk-related terms are defined and measured across organizations and industries. A survey of the key risk inputs to ERM has been completed by risk managers in a variety of industries: hospitals and clinics; pharmaceutical; utility; information technology; and insurance. This session will present a summary of definitions and measures as reported by the respondents, noting especially current similarities and differences across organizations and industries. Having transparent definitions may lead to a commonality in terminology for improved communication and more efficient working relationships.

Presenters: Joan Schmit PhD
Shinichi Kamiya
Peng Shi
Marjorie Rosenberg PhD, University of Wisconsin
Discussant: David Cummings, State Farm Insurance Companies