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: How insurers can include a liquidity score and liquidity stress scenarios as part of their asset liability management (ALM) protocol.

Description: The Federal funds rate increased by 4.25% in 2022 with further increases in 2023, which have already resulted in a liquidity crisis for a few banks. As the rapid increase of the interest rates pushed the new money rates above the yields of many life insurers’ investment portfolios, insurance companies are facing a dilemma between compressed margins from peer pressure and the concern with liquidity shortfalls and realized capital losses should mass surrenders happen. This paper discussed main emerging risks under rising interest rate environment, and several ways to mitigate these risks.

Description: The cyber insurance market looks like it’s growing—rapidly, in fact. However, there’s more to the cyber insurance market than the outward appearance of strong growth. Worldwide aggregate premium’s upward trend may even be cause for alarm. The increase in premium against a flat rate of insured exposure is a key sign that the market could turn from growth to constriction if a solution isn’t found in the near future. If the cyber insurance sector hopes to reach such lofty goals as exceeding $30 billion in global premium by 2028, it’s going to need more capital. Whether directly into the insurance sector or via support from reinsurance and retrocession, fresh capital should help insurers achieve greater market penetration, build a broader foundation for ongoing expansion, and chart a course for long-term sustainable profitable growth. The same sources capital insurers have used since the early days of the market won’t be enough, though. Thankfully, the insurance linked securities (ILS) market seems poised to help, particularly with several promising recent transactions. New sources of capital could bolster the foundation for future cyber re/insurance growth.

Description: Chairperson's summary of Joint Risk Management Section (JRMS) Council accomplishments during the 2021-2022 Section Council year, as part of the December 2022 Risk Management newsletter. Includes an introduction to new council members, appreciation to those departing the Council, and introduces the new JRMS Council Leadership. Discusses the accomplishments made, areas of focus and activities underway which benefit JRMS Section members.

Description: Chairperson's summary of Joint Risk Management Section (JRMS) Council accomplishments during the 2021-2022 Section Council year, as part of the December 2022 Risk Management newsletter. Includes an introduction to new council members, appreciation to those departing the Council, and introduces the new JRMS Council Leadership. Discusses the accomplishments made, areas of focus and activities underway which benefit JRMS Section members.

Description: This is the second of a two-part article introducing and elaborating an “Adaptor” strategy for ERM. Such a strategy is intended to fulfil two purposes: first, switching among four styles of risk-coping strategies in order to track qualitative changes in a business’s risk environment; and, second, to support the business in navigating with resilience through all the seasons of a business-economic cycle, i.e., of boom, bust, moderate, uncertain. This latter requires careful study of the nature of resilience, the familiar idea of bounce back, and the less familiar idea of bounce forward. Part I of our article is underpinned therefore by a supplementary document (available from https://riskviews.wordpress.com/adaptor-exceptionalism/), which addresses the issue of structural change in a business or economy. It draws heavily on ideas taken from the discipline of control engineering, as well as some from ecology, social anthropology, and economics. The entire two-part article is thus an exercise in cross-disciplinary Systems Thinking.

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: In this article, a numerical comparison of two commonly used FIA valuation methodologies is conducted to help insurers decide on the best methodology to use under GAAP LDTI and VM-22. We compared two modeling approaches to project the future index credits with the annual point-to-point crediting formula: Tthe stochastic equity crediting model and the deterministic option budget crediting model. The analysis is then extended to different levels of option budgets and the monthly average crediting formula. The advantages and disadvantages of the two equity return projecting approaches are also highlighted and will be discussed later in the report.

Description: In this article, we summarize inflationary factors that may result in a sharp increase in interest rates and implications for life insurer convexity risk exposure, most notably to dynamic policyholder lapsation. We further provide insights into potential ALM strategies to mitigate this convexity risk. Due to the prolonged low-interest rate environment and low minimum interest rate guarantees offered to policyholders, liability convexity is higher than prior historical periods, which results in life insurers’ ALM positions being extremely vulnerable to short-term interest rate spikes. Convexity mismatches cause issues for life insurers under both rising and declining interest rate scenarios. This means that life insurers are not compensated for taking convexity risk and, therefore, convexity matching should always be considered in the asset optimization process. There are mixed signals from policymakers and financial markets regarding potential inflationary and sharply rising interest rate scenarios. The key takeaway is that life insurers are not compensated for taking convexity risk and it is the right time for insurers to review convexity exposure. There are different approaches available to mitigate convexity exposure through rebalancing of asset positions and hedges within each life insurer’s risk limits.

Description: In this article, we summarize inflationary factors that may result in a sharp increase in interest rates and implications for life insurer convexity risk exposure, most notably to dynamic policyholder lapsation. We further provide insights into potential ALM strategies to mitigate this convexity risk. Due to the prolonged low-interest rate environment and low minimum interest rate guarantees offered to policyholders, liability convexity is higher than prior historical periods, which results in life insurers’ ALM positions being extremely vulnerable to short-term interest rate spikes. Convexity mismatches cause issues for life insurers under both rising and declining interest rate scenarios. This means that life insurers are not compensated for taking convexity risk and, therefore, convexity matching should always be considered in the asset optimization process. There are mixed signals from policymakers and financial markets regarding potential inflationary and sharply rising interest rate scenarios. The key takeaway is that life insurers are not compensated for taking convexity risk and it is the right time for insurers to review convexity exposure. There are different approaches available to mitigate convexity exposure through rebalancing of asset positions and hedges within each life insurer’s risk limits.

Description: Feature article that discusses how insurance and banking business models have continued to grow in complexity over the past 50 years—from simple and local risk exposures to the current environment of complex and global exposures

Description: This article introduces the JRMS library, how one can access it and what books are added this year.

Description: This article introduces the JRMS library, how one can access it and what books are added this year.

Description: This article introduces a non-traditional type of economic scenario generator that relies on dynamic stochastic general equilibrium (DSGE) models are complex macroeconomics models and have been increasingly popular in central banks for analyzing monetary policies.

Description: Read the April 2020 issue of Risk Management, published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: Read the Joint Risk Management Section, Issue 44, May 2019 in french.

Description: Insight on SOA research.

Description: Summary of recent surveys to life actuaries regarding assumptions surrounding policyholder behavior in the tail for universal life with secondary guarantees and minimum guarantees on variable annuities. This information is intended to examine and ultimately give guidance to actuaries on how to set policyholder assumptions in extreme scenarios.

Description: Read the Joint Risk Management Section, Issue 44, May 2019.

Description: As sponsored by the Canadian Institute of Actuaries (CIA), Casualty Actuarial Society (CAS), and Society of Actuaries (SOA), the study looks at causes of insolvency and decisions made by management, regulators, and policyholders over the life cycle of the insolvency. Further, this study considers ways the profession can be equipped to prevent or mitigate future insolvencies. In addition to directly benefitting the profession, the work is also intended to assist other insurance industry practitioners in understanding the complexities of insurance company solvency and the benefit of keeping the actuarial profession in the forefront of company management, operations, and regulatory communication

Description: Many life and health insurers are beginning to use Predictive Analytics (PA) for a variety of purposes. This article addresses the unique challenges and potential disruption PA brings to the risk manager, as well as the opportunities.

Description: Latest in our on-going series in which we have a candid discussion with one the insurance industry's most respected and high profile risk practitioners

Description: Read the December 2018 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: Read the December 2018 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: Read the August 2018 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: The article explores the possibility of using the emerging technology for life insurers to build a monitor system for better risk and profitability management.

Description: Read the French language version of the March 2018 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: Read the March 2018 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: This article explores the methods of determining the optimal timing for risk management projects.

Description: Read the December 2016 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: The IAA Risk Book provides a set of high quality reference materials for use in managing the uncertainty of insurer risks.

Description: This article presents the results of the survey interviews, examining best practices as well as those areas that still remain challenging.

Description: Read the August 2016 issue of Risk Management published by the Joint Risk Management Section. Newsletters provide practical information for the working actuary, articles on trends that impact sections and news about section activities.

Description: The article explores impact of resetting cap vs static cap choice for the GLWB rider for a Fixed Index Annuity for a Point to Point. Moreover, analysis of a Monthly Sum Cap is provided showing impacts of particular choices of market models (e.g. Black, Heston, Bates) used to price this deal.

Description: In this article, the author explains what a CAT model is.

Description: Risk Management Issue 35 April 2016

Description: In this article, the author examines how a seemingly impossible event becomes a harsh or startling reality.

Description: In this article, we provide practical guidance for understanding how to develop and apply an effective risk appetite statement.

Description: Risk Management, the newsletter of the Joint Risk Management Section.

Description: This article highlights some of OSFI’s expectations regarding the ORSA process, and provides general feedback and observations from OSFI’s reading of 2014 ORSA reports (including KMR) and discussions with insurers.

Description: Risk Management, the newsletter of the Joint Risk Management Section. August 2015, entire issue

Description: The editors provide highlights of the articles included in the August 2015 issue of Risk Management.

Description: Risk Management, the newsletter of the Joint Risk Management Section. August 2015, entire issue

Description: Institutional investors seeking to hedge have no shortage of choices, and need the right framework to manage the different risks in portfolios as they arise. This article analyzes performance of different equity hedging strategies over the last 15 years, and lays out a potential hedging framework that takes into account types of risks being hedged, fundamental views, and current market pricing of protection.

Description: This article addresses the role of pension risk management in the context of corporate risk management and how pension risk management strategies might optimally be implemented to increase the probability that pension benefits can be financed from plan assess and that, when and if required, unexpected increases in corporate contributions can be made without financial discomfort to the firm.

Description: Risk Management March 2015, Issue 32

Description: Gestion du risque March 2015, Issue 32

Description: French language version of Risk Management, August 2014 newsletter.

Description: Complete issue of the August 2014 Risk Management newsletter.

Description: In this article, the authors discuss “tail events,” market dislocations deemed a priori, to be statistically improbable.

Description: This article discusses the concept of All models are wrong but some are useful.

Description: Full issue of Risk Management, March 2014

Description: This article discusses the details of what happened in equity repo in 2013.

Description: Full issue of the Risk Management newsletter.

Description: he co-editors introduce themselves and preview the articles in this issue.

Description: Risk Management, the newsletter of the Joint Risk Management Section. December 2012

Description: This article explores reasons for plan sponsors to consider lump-sum payouts. The author suggests for plan sponsors looking to reduce risk, the factors outlined in the article suggest that sponsors may benefit from considering risk-transfer opportunities much sooner than they may have anticipated.

Description: In the current environment of global competition, the question of how much, and in what way, the enterprise risk management (ERM) function contributes to the creation of shareholder value will only increase in importance and urgency.

Description: To deal with future correlation crises, the author suggests the implementation of ‘’quanlitative analysts’’ (‘Quanls’) in the enterprise risk management (ERM) process: risk managers who are able to lead interdisciplinary ERM studies from a jointly qualitative and quantitative point of view, with an emphasis on dynamics.

Description: Complete issue of the August 2012 Risk Management newsletter.

Description: An overview of the articles in the August 2012 issue of Risk Management and a list of winners of the most recent call for papers, “Risk Metrics for Decision Making and ORSA.”

Description: A risk map is an effective and dynamic tool in helping companies develop a broader view of their risks.

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. PPF is funded by a levy on the population of eligible schemes. The elements of the enterprise risk management of the fund have been developed by reference to practice within proprietary insurance institutions and other pensions funds; their application to this unique financial vehicle is the subject of this paper. The paper draws on references to relevant risk and actuarial work. It is designed to illustrate the application of principles and techniques to a real world example.

Description: Global financial crises like the one recently experienced, affected both large and small institutions.Today, when there is heightened need for enhanced risk management tools, some entities are unable to employ sophisticated mechanisms due to limited data availability. Moreover, from the Basel Committee on Banking Supervision’s point of view via Basel II and Basel III, the internal ratings- based (IRB) approach requires that institutions have some reliable estimates of default probabilities of default for each rating grade. Taking the work of previous researches a step further, this paper intends to propose a new dynamic mechanism to for the risk management industry for to calculateing probabilities of default (PD). Through these estimates for the core model, we generate implied probability of default (PD) through actuarial estimation tools and different probability distributions. This mechanism is specialized to work best for low- defa ult portfolios (LDPs). Furthermore, scenario testing is adopted to validate the model against any model- specific bias

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: 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: Risk management and capital budgeting are two critical components of the corporate decision process. They often need to be considered jointly at the corporate level because of their natural interaction through the dependent risk exposures and other synergetic relationships within an intricate corporate structure in a dynamic business environment. . This paper develops an integrated framework that aligns these two important corporate strategies across business divisions to optimize the streamlined enterprise strategic goal in a multi-period setting. The proposed integrated framework can serve as a practical guideline for corporate executives to optimally coordinate capital budgeting and risk management at the enterprise level.

Description: The paper discusses the arguments supporting the need for risk culture to transition into ERM culture to be embedded across financial organizations. Creating and maintaining strong ERM culture is paramount to a lasting and meaningful ERM program. It is essential for organizations to understand what ERM culture is, how it gets established and in what way affects the process of ERM implementation. Often, the implications of financial enterprises not focusing on the significance of ERM culture manifested in severely compromised ability to generate sustainable value and market competitive advantage. This paper calls for rethinking the role of ERM culture in the context of managing risks.

Description: This article argues that wealth managers should advocate dynamic spending in proportion to survival probabilities, adjusted up for exogenous pension income and down for longevity risk aversion. The authors criticize the rule of thumb of spending a fixed 'x' percent of assets for retirement planning purposes.

Description: December 2011 issue of the Risk Management section newsletter.

Description: This article recommends actions to key stakeholders to address the systemic risk in the retirement systems as employer and government based pensions reduce, and more emphasis is placed on personal savings.

Description: August 2011 Issue of the Risk Management Section Newsletter.

Description: Listing and description of key articles in August 2011 issue of Risk Management. Topics include Predictive Modeling, Risk management and Solvency II.