Description: The U.K. Pension Protection Fund (PPF) was established in April 2005 to protect the pensions of members of U.K. private sector defined benefit pension schemes that have insufficient assets and whose corporate sponsor fails. The Fund takes over the pension scheme assets and assumes responsibility for the payment of compensation to the former members of the scheme. The PPF is funded by a levy on the population of eligible schemes. To improve its ERM framework, the PPF has undertaken a reverse stress testing exercise. This analysis provided the organization with new insights into its risk profile, the scenarios leading to the PPF’s potential “failure,” and interactions between these scenarios. This paper discusses the principles and objectives of reverse stress testing in the special case of the PPF and then illustrates the application of complex system science techniques for the purpose of reverse stress testing.

Description: Abstract: The U.K. Pension Protection Fund (PPF) was established in April 2005 to protect the pensions of members of U.K. private sector defined benefit pension schemes that have insufficient assets and whose corporate sponsor fails. The Fund takes over the pension scheme assets and assumes responsibility for the payment of compensation to the former members of the scheme. The PPF is funded by a levy on the population of eligible schemes. To improve its ERM framework, the PPF has undertaken a reverse stress testing exercise. This analysis provided the organization with new insights into its risk profile, the scenarios leading to the PPF’s potential “failure,” and interactions between these scenarios. This paper discusses the principles and objectives of reverse stress testing in the special case of the PPF and then illustrates the application of complex system science techniques for the purpose of reverse stress testing.

Description: The initial risk reserves in collective risk models vary according to the underlying claim distribution, and a suitable level of ruin probability. A thorough analysis of the needed initial surplus for various ruin probability levels is provided in eight meaningful examples. The claim distributions are drawn from various fields of insurance, including property damage and liability insurance.

Description: This paper demonstrates the use of Quantile Regression in the development and understanding of conditional value at risk (VaR) models for enterprise risk management.

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 paper demonstrates that extreme value theory (EVT) can be used as a tool to model policyholder behavior in the extreme tail. This paper applies EVT to the study of variable annuity dynamic lapse behavior in the extreme tail. It illustrates a process whereby a company can fully model policyholder behavior, including the extreme tail, with existing data. No judgment about the extremal behavior is necessary.

Description: There have been continual advances in the modeling of financial series but most are aimed at the pricing of derivatives. Different criteria are needed for development of scenarios for risk management. Some recent methods will be reviewed with an eye on risk-management applications, including using the simulated method of moments to parameterize multifactor models, fractional differencing and other methods to model series with persistent autocorrelation, and models to flatten out the volatility smile, such as jump-diffusion models. These methods will be illustrated with applications to inflation, interest rates, equity prices and exchange rates.

Description: The paper o ers a simple framework for ranking the common reinsurance struc- tures in practice with the theory of stochastic orders. The basic idea is to slice the space of reinsurance structures into groups by expected loss cost to facilitate the comparisons within the group and between groups. Given the standard risk aversion assumption in economics, a spectrum of reinsurance structures with the same expected loss cost can be compared analytically with one another and sequenced based on their risk coverages under the convex order. The paper then expands the dimension of the comparison to groups of reinsurance structures with di erent expected loss costs, which can be ranked under the increasing convex order and the usual stochastic order. As such, the paper maps out the ordering for the entire space of reinsurance structures and presents it in a ma- trix format for quick reference. The implication

Description: This paper suggests that risk is too complex to quantify with a single number, and offers a two-dimensional risk measure while introducing the concept of 'iso-risk' curves. From 2006 Enterprise Risk Management Symposium, M-AS06-1.

Description: This article sees enterprise risk management as a specific application of knowledge in Order to control deviations from strategic objectives, shareholders’ values and stakeholders’ relationships. Before and after a modeling process it is necessary to find insights into how the application of knowledge management processes can improve the understanding of risk and the implementation of enterprise risk management. The article presents a proposed methodology to contribute to providing a guide for developing risk modeling knowledge and a reduction of knowledge silos, in order to improve the quality and quantity of solutions related to risk inquiries across the organization.