Description: The thrust of this article is that while ERM starts out as a compliance and corporate governance tool, well managed companies use ERM as a strategic tool that will help them increase shareholder value. To do so requires a synthesis of the actuarial techniques of insurance and the capital markets perspectives of corporate finance.

Description: Risk management techniques do not include system science. System science requires that the uncertainty of the world is incorporated into the results. The articles explains the difference between risk and uncertainty. Learn how risk practices create an overoptimistic view of future outcomes.

Description: COVID19 highlights the need for greater complexity expertise in risk management. Crisis like the current COVID19 pandemic and 2008 Financial meltdown and others help us to turn into focus inwards for introspection on how we can better manage our resources and provide a deeper understanding of what our objectives should be and how we can achieve them through applying complexity science.

Description: it discusses the framework and modeling of the market consistent valuation of fixed indexed annuity, against the backdrop of the convergence of accounting standards and internal risk management.

Description: The focus of this article is that while Economic Capital can be a valuable component of the ERM process for insurance companies, an over-emphasis on EC, to the point of neglect of other steps in the ERM process, can reduce the effectiveness of an ERM program.

Description: Duration matching is a risk management strategy, commonly used in the insurance industry, where the duration (price sensitivity to a yield curve movement) of an asset portfolio is adjusted to be made equal to the duration of the liability. However, this approach has flaws. In this essay, I note some key failures of duration matching and offer a potential alternative.

Description: This article discusses how risk management was a central element in the conduct of monetary policy in the United States as espoused by then Fed Chairman Alan Greenspan .

Description: A critical step in valuing a company for the purpose of financial reporting is the computation of the market value of economic surplus (MVES). This article provides a novel approach to the valuation of MVES that is stable and reasonably immune to “market noise.” Current approaches to the calculation of economic surplus of an insurance company generally define such surplus as the market value of the assets (MVA) supporting the liabilities less the market value of liabilities (MVL). While MVA is observable in the market, MVL is typically computed directly, without regard to the underlying supporting assets. Subtracting MVL from any value of assets that changes with market movements results in an unstable surplus. Consequently, a surplus that is not fully reflective of market sentiment has been rejected by many. This same approach is further used in the calculation of market consistent embedded value (MCEV) when a balance sheet approach is used .

Description: A critical step in valuing a company for the purpose of financial reporting is the computation of the market value of economic surplus (MVES). This article provides a novel approach to the valuation of MVES that is stable and reasonably immune to “market noise.” Current approaches to the calculation of economic surplus of an insurance company generally define such surplus as the market value of the assets (MVA) supporting the liabilities less the market value of liabilities (MVL). While MVA is observable in the market, MVL is typically computed directly, without regard to the underlying supporting assets. Subtracting MVL from any value of assets that changes with market movements results in an unstable surplus. Consequently, a surplus that is not fully reflective of market sentiment has been rejected by many. This same approach is further used in the calculation of market consistent embedded value (MCEV) when a balance sheet approach is used .

Description: This article is based on the author's discussions with many executives of insurance companies regarding the challenges and limitations in ERM at its current state of evolvement. The following areas need to be addressed and improved on, in the author's opinion, to 'take ERM to the next level': 1. Reconciling Risk Concerns of Creditors and Shareholders. 2. Managing of Operational Risk. 3. Execution Risks. 4. Producing Credible and Useful Risk Adjusted Performance Measures. 5. Aligning Performance Metrics with Management’s Performance Measurement Philosophy.