Description: The Market Cost of Capital approach has emerged as the standard for estimating risk margins for insurers' fair value balance sheets. This paper takes some of the ideas developed for valuing life insurance liabilities and applies them to the problem of valuing credit risky bonds. The basic idea is that credit spreads should cover the cost a) best estimate defaults plus the cost of holding capital for b) contagion risk (e.g. a credit crunch) and c) parameter risk, this risk that the best estimate is wrong and must be revised. We argue that the margins required for parameter risk can capture liquidity issues. In addition, the models developed here allow the cost of capital rate itself to be a random variable which allows credit spreads to open and close stochastically. Finally, the paper argues that it is reasonable to include something like AA best estimate default rates and liquidity spreads when valuing insurance liabilities. The main rationale for doing so is the idea that there are elements of the total credit risk issue that can be hedged between the assets and liabilities.

Description: Stress tests and scenarios are often used as an informative tool to help stakeholders understand the risk profile of a firm. These analyses are often informational only and not directly linked to internal decision-making. This paper describes our approach to integrating stress tests into a regular decision-making process as part of our Own Risk and Solvency Assessment (ORSA). We have implemented a framework and analytical process that both enhances management’s understanding of our risk profile and links that to the development of our risk appetite. In this applied paper, we describe the framework and supporting analytics we established to achieve this goal and the practical implications for obtaining buy-in from senior management to establish this as an ongoing process.

Description: Interest sensitive products including SPDAs can be thought of as spread lending business. The purpose of the paper is to introduce the excess spread approach to measuring the profitability of nonparticipating insurance products. The article describes how the excess spread approach is used to price and manage the products and its risks. From Society of Actuaries Reporting Monograph, M-AS99-1.

Description: Review of stochastic, modeled geo-spatial risk metrics for insurance loss concentration and clustering and their counter point use for diversification

Description: This paper uses stochastic simulation technology to present a risk metric for defined benefit pension plans that provides improved measures of the plan's solvency and provides a tool for pension plan managers to determine the value of risk mitigation activities. From 2006 Enterprise Risk Management Symposium, M-AS06-1.

Description: This study presents a new framework which can measure integrated marked risk and credit risk for portfolios consisting of various assets through continuous time horizons. In a simulation, the study shows that asset type, initial rating, time horizon and asset return distribution assumptions are all significant factors to influence the portfolio value distributions and hence the integrated VaRs. From 2007 Enterprise Risk Management Symposium, M-AS07-1.

Description: The objective of this paper is to explore the issues necessary to develop an integrated model of operational risk (OR) and financial risk (FR) within the framework of enterprise risk management (ERM). From 2007 Enterprise Risk Management Symposium, M-AS07-1.

Description: The Strategic Risk Register System SRRS is proposed by the authors as a new approach to modeling and visualizing the interconnectivity of risks in an ERM context. SRRS has been successfully applied in practice, and a case study is deployed to demonstrate the methodology.

Description: 2011 Enterprise Risk Management Symposium, Chicago. This presentation discusses how real world Grey Swan scenarios are excellent choices for stress and resiliency testing. In addition, an example is provided of a set of Grey Swan scenarios which correspond to the RBC C-3, Phase II.

Description: 2011 SOA Enterprise Risk Management Symposium, Chicago. This paper reviews a risk management theory that deals with correlated, non-normally distributed factors, and then applies risk management techniques to the U.S. steel industry using futures contract hedging.