Presentations

C1: Ninth Annual Emerging Risk Survey

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This session will review the 9th annual survey of emerging risks, sharing new information learned and comments from risk practitioners. This survey has produced revealing comments about the current status of ERM and how it has evolved. Cognitive biases and practitioner comments of what parts of ERM work and what doesn’t work can be incorporated into future developments. We also look at advances in the development of dynamic risk monitoring and risk management design which facilitate greater resilience in the face of emerging risk.

    Moderator:
    Matthew Clark, Principal, Deloitte

C2: Adapting ERM Framework to Firm Size, Complexity, and Culture

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ERM programs vary given the size and complexity of an organization. In this session, we contrast the ERM Frameworks from a large multinational insurer and a small/mid-size domestic insurer. We highlight how ERM is embedded in decision making, the extent of the risk network within the organization and the external/internal pressures that can influence risk priorities. As well, we demonstrate the challenges of establishing a centralized ERM function within a small/mid-size insurer and provide insights on how to get buy in.

    Moderator:
    Elaine Lajeunesse, SVP & CRO, Economical Insurance

C2-R: Adapting ERM Framework to Firm Size, Complexity, and Culture

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ERM programs vary given the size and complexity of an organization. In this session, we contrast the ERM Frameworks from a large multinational insurer and a small/mid-size domestic insurer. We highlight how ERM is embedded in decision making, the extent of the risk network within the organization and the external/internal pressures that can influence risk priorities. As well, we demonstrate the challenges of establishing a centralized ERM function within a small/mid-size insurer and provide insights on how to get buy in.

    Moderator:
    Elaine Lajeunesse, SVP & CRO, Economical Insurance

C3: Addressing Cyber-Security Risks in an ERM Context: Case Study

This session will discuss cyber-security risk as just one example of a material operational risk, and how an adequate ERM framework can manage it. Discussion will include the board’s role in managing the risk, and the NACD and NAIC principles regarding this risk. We will briefly talk about the cyber environment in the health insurance sector and the potential for cyber risk to be the motivator for health insurers to see real value in ERM. We will also include a discussion of the current cyber insurance market, the use of such insurance to manage the risk, and a case study of how a company used their ERM framework to manage this risk.

    Moderator:
    Kevin Madigan, Director, Willis Towers Watson

C4: Aligning ERM, Strategic Planning, and Board Priority-Setting Process: Case Study

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True ERM is meant to be across the ‘enterprise’, holistic and proactive and used as a strategic communication tool. Healthcare tends to be focused on adverse clinical event claims mitigation. Despite the implementation of many promising (and overlapping) initiatives, healthcare remains at the top of the national concern list.

Non-clinical risks are usually distributed across various portfolios, leading to a divergence of processes and masking the overall understanding of risks to the organization. The literature suggests that ERM used broadly to coordinate an organizational risk program reduces uncertainty and, over time, improves the prospects of success in terms of addressing financial and insurable hazards, as well as guiding strategy, operations and technology, reputation, and regulatory compliance within the organization. It needs to include a combination of stakeholders throughout the strategic planning process, balanced with external review and consultation, and needs to be clearly communicated and translated into the plans of the various units and departments.

    Moderator:
    Helene Baril, Senior Manager, Ernst & Young

C5: Big Data Applications for Catastrophe Modeling and Their Impact on ERM

Big data has made the creation of liability catastrophe models not based on historical insurer’s claims data and emerging risk identification possible. What are the emerging methods of casualty catastrophe modeling? We will explore non-traditional predictive data sets. We will also discuss how insurers currently identify and evaluate emerging casualty risks and discuss scalable alternatives. How can big data analytics be applied to peer-reviewed science and other text-based data sources to offer new opportunities to identify, quantify and manage emerging risks. With a comprehensive data-driven approach, emerging risk becomes transformed from a driver of risk avoidance to a vehicle for growth in complex risk underwriting. The presentation will include examples of emerging risks with estimates of their impact on potential losses. Casualty risks are especially difficult due to the latency period and the potential for clash within portfolios, two of the most important dimensions yet are the least understood.

    Moderator:
    Robert Reville, President and Chief Executive Officer, Praedicat, Inc.

C6: Comparing ERM Practices in Banking and Insurance Sectors

How to navigate through the Looking Glass of Risk Management for Banking and Insurance.

    Moderator:
    Thomas Wilson, CRO, Allianz SE

C7: Connective Tissue: Linking Enterprise-Level Risk Appetite and Day-to-Day Risk Management

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As insurers have embarked on the implementation of ERM programs, they have recognized the need for clarity around the organization’s appetite for taking risks. This presentation will articulate the concepts of the risk appetite framework, defining risk in the context of the mission statement of the company. In addition a link between risk tolerances and risk limits will be provided through the introduction of the risk budget concept. A case study that illustrates how risk tolerances, defined at the enterprise risk level, are connected to risk limits employed for day-to-day local management decisions through a near-real-time risk monitoring framework will be also described.

    Moderator:
    Manolis Bardis, Senior Consultant, Willis Towers Watson

C8: Effective Risk Reporting for CROs

A panel of seasoned risk practitioners will present their views on what makes for effective risk reporting for Insurance CROs. What reports are most useful for running the business? What makes for risk dashboards that will be useful for a senior management and Board-level audience? What are some of the issues that insurers face in getting metrics and reports produced quickly? What is the current state of risk reporting in the industry and what are the main areas that companies are investing time and resources into for future enhancement? The panel will consider recent developments both domestically in North America, and from an international perspective.

    Moderator:
    Anthony Dardis, Consulting Actuary, Milliman

C8-R: Effective Risk Reporting for CROs

A panel of seasoned risk practitioners will present their views on what makes for effective risk reporting for Insurance CROs. What reports are most useful for running the business? What makes for risk dashboards that will be useful for a senior management and Board-level audience? What are some of the issues that insurers face in getting metrics and reports produced quickly? What is the current state of risk reporting in the industry and what are the main areas that companies are investing time and resources into for future enhancement? The panel will consider recent developments both domestically in North America, and from an international perspective.

    Moderator:
    Anthony Dardis, Consulting Actuary, Milliman

C9: Operational Risk Scenarios Analysis: A Structured Approach

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Quantifying operational risk has always been a challenge for risk management professionals. Even with the availability of good quality data, modelers and risk management professionals have struggled with this activity. Scenario Analysis has been the approach used by some to overcome the limitations posed by data driven approaches by incorporating sound business judgment in quantifying risk exposures. Structured Scenario Analysis (SSA) attempts to make the estimation process more objective and transparent and thus represents an advancement over the traditional approach to conducting scenario analysis.

This session will outline the approach used to create a Structured Scenario Analysis program at TIAA. The session will cover the following topics:

  • Operational risk overview.
  • Quantifying operational risk: approaches and supervisory guidance.
  • Scenario analysis: traditional vs. structured.
  • Structured scenario analysis: approach, illustration, lessons learned.”
    Moderator:
    David Paul, Executive Director, Financial Services, Ernst & Young LLP

C10: Fostering the Future: Sustainable ERM for Sustainable Business

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Corporate sustainability, the ability to create long-term business value, can be measured in terms of the economic, environmental, and social performance of a corporate entity. This session examines the sustainability imperative and global meta-trends from the key stakeholders’ perspectives, and summarizes the business case for sustainability as well as insurance industry best practices. We will discuss perspectives, frameworks and tools to facilitate the critical transition for insurers to integrate sustainability with their ERM program.

    Moderator:
    Stanislav Eratt, Senior Consultant, Willis Towers Watson PLC

C11: IAA Risk Book: Documentation and Development of Emerging Tools and Best Practices

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The current chair of the International Actuarial Association’s Insurance Regulation Committee will present and discuss the drafted chapters of the IAA’s Risk Book including: Actuarial Function, Model Governance, ORSA and Professional Standards. The discussion will also focus on Operational Risk, Catastrophe Risk, Distribution Risk, Reinsurance & Groups. Finally the session will close with a look at future chapters of the Risk Book which will address Framework Processes such as Resolution of Insolvencies, Capital, Stress Testing, ALM and Financial Statements. This interactive session will allow attendees to give constructive feedback on the Risk Book Project as to what else could or should be included.

    Moderator:
    Dave Sandberg, VP & Corporate Actuary, Allianzlife

C12: Interest Rate Risk: Practical Techniques for Risk Scenario Development

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Nominal interest rates are at a tipping point. What’s next? An upward spike in rates? Low (or negative) interest rates? Whichever way interest rates shift, this session can offer insights to savers of all kinds, but especially life insurers. Disadvantageous interest rate risk scenarios are possibly the financial industry’s greatest challenge. Arming your organization with a more resilient response can provide a key competitive advantage. This session builds off research that describes how practitioners can apply risk scenario planning to their current risk profile, using practical (and non-costly, non-resource-intensive) tools. The research upon which this session builds can be found on the SOA Website.

    Moderator:
    Max Rudolph, Principal Rudolph Consulting, LLC

C13: Model Risk Management in the Insurance Industry

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Model Risk Management is evolving beyond simple model governance and validation. This presentation surveys advanced practices. Topics covered include model risk scoring, uses of model risl scores, integration of data quality and model quality assessments, model system identification and analysis, and capital buffers for model risk.

    Moderator:
    Kathryn Hyland, Senior Vice President, Swiss Re

C13-R: Model Risk Management in the Insurance Industry

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Model Risk Management is evolving beyond simple model governance and validation. This presentation surveys advanced practices. Topics covered include model risk scoring, uses of model risl scores, integration of data quality and model quality assessments, model system identification and analysis, and capital buffers for model risk.

    Moderator:
    Kathryn Hyland, Senior Vice President, Swiss Re

C14: Integrating Operational Risk Management into a Broader ERM Program

A panel of CRO executives will discuss how to integrate Operational Risk into a broader ERM Program:

  • What processes need to be put into place to ensure operational risk is managed effectively, that all aspects of the business are properly covered, and that there is widespread buy-in across the organization to the operational risk management program?
  • Aspects of operational risk often enter into the domain of other areas of risk – market, demographic and credit. How does an insurer properly manage those areas of cross-over, and ensure that operational risks associated with those other risk areas are properly captured? How can a company ensure the operational risk team is an active participant in the other risk teams.
  • Operational risk data – What’s available publicly, and how to use internal and external data in tandem? The panel will discuss the value in capturing operational loss data and near misses – it is not only good to identify severe operational loss exposure, but also to be able to be more efficient by avoiding the smaller potential problems.
  • The panel will also discuss the work of Operational Risk Insurance Consortium (ORIC) International in collecting an industry database of operational risk claims as well as developing key operational risk scenarios that can help insurers better manage their operational risk exposure. How could the work of ORIC be helpful for US insurers in managing operational risk?
    Moderator:
    John Manistre, Research Actuary, GGY AXIS

C14-R: Integrating Operational Risk Management into a Broader ERM Program

A panel of CRO executives will discuss how to integrate Operational Risk into a broader ERM Program:

  • What processes need to be put into place to ensure operational risk is managed effectively, that all aspects of the business are properly covered, and that there is widespread buy-in across the organization to the operational risk management program?
  • Aspects of operational risk often enter into the domain of other areas of risk – market, demographic and credit. How does an insurer properly manage those areas of cross-over, and ensure that operational risks associated with those other risk areas are properly captured? How can a company ensure the operational risk team is an active participant in the other risk teams.
  • Operational risk data – What’s available publicly, and how to use internal and external data in tandem? The panel will discuss the value in capturing operational loss data and near misses – it is not only good to identify severe operational loss exposure, but also to be able to be more efficient by avoiding the smaller potential problems.
  • The panel will also discuss the work of Operational Risk Insurance Consortium (ORIC) International in collecting an industry database of operational risk claims as well as developing key operational risk scenarios that can help insurers better manage their operational risk exposure. How could the work of ORIC be helpful for US insurers in managing operational risk?
    Moderator:
    John Manistre, Research Actuary, GGY AXIS

C16: Research Papers

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This session presents the award-winning papers from the ERM Symposium’s annual Call for Papers.

The two papers that will be presented are:

The Optimal Timing of Risk Management, by Kailan Shang – Awarded the Joint CAS/CIA/SOA Risk Management Section Award for Practical Risk Management Applications.

This paper discusses the methods of determining the appropriate timing of implementing a risk management strategy or investing in risk management projects. It explains the human biases that may lead to inferior timing decisions. It also covers the costs and benefits of risk management projects and the impact of future information in the decision-making process.

Enterprise Risk-Reward Optimization: Two Critical Approaches, by Damon Levine – Awarded The Actuarial Foundation’s ERM Research Excellence Award in Memory of Hubert Mueller for Best Overall Paper.

This paper describes a straight-forward, non-parametric approach to aggregate “”stand-alone”” or marginal distributions with desired correlations but without imposing additional assumptions on those marginals. It then develops two optimizations for the enterprise, one based on maximizing return on economic capital and the other based on a mean-semivariance efficient frontier from the investor point of view. The definition of economic capital is applicable to any insurer or bank while the efficient frontier can be used in any for-profit company.

    Moderator:
    James Ramenda, Sr. Vice President, Enterprise Risk, SS & C Technologies, Inc.

C17: Risk Modeling for Insurers: Real-World Assets and Risk-Neutral Liabilities

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Insurance asset risk is often assessed using risk-neutral generators which start with economic scenario generators designed for pricing hedge products. This is a sound way of pricing, and gives consistent risk loading to a wide range of products. However for insurance risk management the distribution of asset value changes when holding a fixed portfolio is often the key issue. For this, real world probabilities are needed. Financial industry ESGs may not adapt well to a real world environment – lognormal distributions for example can work well for pricing but are too skewed for actual risk analysis. The best real-world models require numerical methods, but fairly good generators, beating most in the market, can be built in Excel.

This session will look at scenario generators for interest rates, credit spreads, inflation, and equities. Performance of some generators will be compared to historical data. Then probability transforms that are applied to insurance pricing and capital allocation will be reviewed.

    Moderator:
    David Payne, Insurance and Actuarial Advisory Services, Ernst & Young LLP

C18: Skills Needed to Become and Remain an Effective CRO

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The actuarial/technical career path is a great start, but if you want to be a CRO, there’s a lot more to learn. This session will help identify the gaps in traditional actuarial training for someone wanting to end up in the CRO chair.

    Moderator:
    David Schraub, Staff Fellow, Society of Actuaries

C19: Using Economic Capital Models to Manage the Business

Insurance companies manage their business to multiple metrics, of which economic capital (EC), or internal capital, may be one. However, in general terms across the industry there is a widely held view that EC when calculated may not be getting as widely used as it might be to genuinely play a major role in the management of the business. In this session, we will discuss the state of the US life and annuity industry with regard to adopting and using EC measures. We will highlight some typical barriers to successful implementation and use of an EC program, as well as some practical approaches for improvement. Reference will also be made to usage of modeling techniques (such as proxy modeling) to help speed up EC runs and enable more rapid and advanced analytics, as well as more process orientated aspects of EC such as embedding EC culture throughout the organization and getting Board and line-of-business buy-in to EC.

    Moderator:
    Anna Berezovskaya, Principal and Consulting Actuary, Milliman

C20: Using ERM to Manage Interactivity Between Operational Risk, Reserve Risk, and Underwriting Risk

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“Reserve risk” is a complicated concept, meaning different things to different stakeholders. Capital modelers focus on the tail of the liability distributions to identify capital charges and assess capital adequacy. Corporate actuarial and finance departments focus on the variability around the mean of the liabilities to determine an appropriate accounting entry – and its impact on surplus. Pricing actuaries and underwriters focus on the risk that estimates of future experience may be misestimated due to a misunderstanding of similar recent experience. Claims departments focus on legal or operational risks associated with claims handling procedures.

This session will illustrate how risk appetite and tolerances frameworks, and associated risk monitoring tools, can be used to manage the various components of “reserve risk” through highlighting the interactions of operational risk, reserve risk, and underwriting risk.

    Moderator:
    Kevin Madigan, Director, Willis Towers Watson

C21: Third Party Risk Management: War Stories and Leading Practices

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The risk presented by third party suppliers and vendors is broader and potentially more impactful than ever before. With the Internet of Things and a trend towards outsourcing, the enterprise level risk presented by third parties is a conversation being held in Boardrooms of every industry. Regulators, rating agencies, shareholders and clients are wanting more visibility and clear evidence that critical third parties have adopted the appropriate information security as well as other operational risk controls. This session will share best practices in managing third party risk as well as examples about what has and could go wrong when your third parties become a point of exposure.

    Moderator:
    Randi Woods Webber, Vice President and CRO, Principal International, Inc.

G1: ERM at Non-Corporate Entities: U.N. Case Study

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Implementing ERM at a typical corporate entity has its challenges. However, for an organization that is a non-corporate entity, large, global, or complex, ERM becomes even more difficult. In this session, we explore a case study of how the United Nations – arguably one of the most complex, large, global non-corporate entities – addressed the challenge of implementing an ERM program. Stefano Losi of the U.N. will give an overview of the U.N. culture and organizational structure, discuss the special challenges it faced in designing and launching its ERM program, and report on progress to date, including a list of key risks the U.N. faces (as shown in its latest public report).

    Moderator:

    Sim Segal, President, SimErgy Consulting

G2: SIFI or Not, Here They Come: Impacts of New Fed Regulatory Scrutiny

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In this session, attendees will hear first-hand accounts from three insurers – AIG, Prudential, and MetLife – who have recently been designated as Systemically Important Financial Institutions (SIFIs) by the new Financial Stability Oversight Council (FSOC), established by the Dodd-Frank Act in the wake of the financial crisis. Each insurer will describe their experience to date, including (a) initial gap analysis comparing current state to expected regulatory requirements; (b) steps put in place to remediate any identified gaps; (c) insurer reaction/approach to addressing the SIFI designation, which range from acceptance to litigation; (d) nature and extent of the actual regulatory requirements imposed; (d) challenges of educating regulators on the inappropriateness of applying banking rules to insurers; and (e) costs (and some benefits) to the business. Insurers will also share their thoughts on how Fed regulation is likely to filter down from SIFIs to smaller insurers, and the implications.

    Moderator:
    Paul G Cardon, KPMG LLP

G3: Applying ERM Techniques to Enhance Cyber Security: Twitter Case Study

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Enterprise Risk Management programs are commonly used to enhance the sophistication of risk-reward decision making at the highest levels of an organization, using an integrated approach to sort out key threats from all sources. However, leading organizations are also using ERM tools and techniques to enhance decision making at the traditional silo risk management level. In this session, we explore a case study of how Twitter successfully applied an advanced yet practical ERM approach to enhance its cyber security. We begin with an introduction on global cyber security, followed by a discussion of Twitter’s approach to cyber threat management and investigations. We then discuss three key advantages of the value-based ERM approach, how Twitter applied value-based ERM tools and techniques to its cyber security risk management, and the results of this case study.

    Moderator:
    Jed Isaman, Manager, PricewaterhouseCoopers

G4: Generational Diversity and the Impact on Strategic Risk

Nora Spinks will offer insight, provide information and share best practices concerning generational diversity with regards to its impact on a company’s strategy. Using the latest information from brain science and human behavior, Spinks will address the importance of having a diversity of perspectives, beliefs and behaviors, and practical strategies for effectively targeting diverse and complex consumers, influencing and designing products and the unique challenges of servicing customers with various expectations. She will also highlight how ignoring the generational diversity might derail the long-term strategy of any organization.

    Moderator:
    Elaine Lajeunesse

W1: Master Class: Managing Value and Capital in Insurance

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Creating value is challenging in any highly competitive industry: a daily battle to capture market share, defend margins and improve expenses. Managing value in insurance and banking is even more challenging due to the unique role that risk and capital play in the economics of the business. Whereas most industrial corporations actively avoid risk, there can be no return to shareholders – and no satisfied customers – if insurers avoid risk, and taking risks requires capital. In insurance and banking, risk and capital management and value management are synonymous.

The role of the Chief Financial Officer (CFO) and Chief Risk Officer (CRO) have evolved and adapted to this economic reality. Modern finance and risk functions now have substantial influence on strategy and operations and, through these, the value of their firms. This influence comes in part from being a business partner and in part through the activities directly within their responsibility.

This Masterclass is intended as a practical but theoretically grounded overview for how finance and risk professionals can better manage capital and value in insurance and banking. The course itself is structured around three broad themes in four sessions: Better Information – Measuring Value; Better Insights – Managing Value; and Better Decisions – Capital, Balance Sheet and Risk Management.

Seminar participants will received a signed copy of Tom’s book, Value and Capital Management

W3: Model Governance: What Could Possibly Go Wrong?

The session will commence with time to analyze the prepared materials and then a facilitated plenary discussion to develop greater understanding. The prepared materials are mocked-up based on real case studies of single insurers and national and international insurance groups and include (a) board agenda and papers relating to ECM (b) proposals for ECM design (c) numerical examples of parameterization (d) extracts for several distinct uses of the ECM (e) validation results (f) samples of internal and external audit review (g) historical threads of emails between individuals in the case study insurer’s management team (h) external analyst and rating agencies reports. Teams will be formed and then, in teams, participants will analyze the weaknesses or failures and make recommendations for improving model governance. Teams will present taking turns, with other teams scrutinizing and challenged those recommendations. The scrutinizers will role-play in the capacities of Group (parent) management and State regulators. The session will close again in plenary session to summarize the findings and learnings.