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: In a well-designed enterprise risk management (ERM) program, the firm integrates risk management into the strategic planning process, addressing strategic risk, financial risk, operational risk and hazard risk under a single overarching process. This is particularly important to large financial firms, such as property and casualty (P&C) insurers, which face a diverse set of risks. In contrast to previous studies that document a significant product line and geographic diversification discount relative to more focused competitors, our analysis suggests that firms with effective ERM programs exhibit a performance premium. Using the Standard and Poor’s (S&P) ERM ratings from 2006 to 2012, we find that product line diversification has a significant positive effect on value for more diversified firms with well-implemented ERM programs, as compared to those with weak ERM.

Description: The system of using securities exchanges and commodity futures contract exchanges is inadequate to the task. Neither can transfer the risks of derivative financial contracts to the capital markets. Regardless of the degree of regulation or the financial incentives, this system is insufficient. A new type of exchange is needed that copes with fast price changes – even from “long” to “short” – without inviting bankruptcy.

Description: The author discusses using a simple process for risk management.

Description: The article summarizes the SOA survey conducted of risk professionals regarding their understanding of important risk terms. The results contain perceptions by individuals and also firm-level information. Survey responses clearly demonstrated high differences in risk definitions.

Description: This webcast will explore hedge strategies that can take advantage of synergies with existing business, improve liquidity and collateral management, incorporate opportunistic design-making, and reflect a company’s appetite for certain risks where excess returns can be earned.

Description: This document is a report discussing the challenges faced by the insurance industry due to climate change, focusing on availability, affordability, and adequacy of insurance in areas impacted by climate-related risks. It covers expert panel discussions, factors influencing insurers, market gaps, solutions, and funding sources.

Description: This request for proposals for research studies on measuring and modeling climate liability risks outlines the background, objectives, proposal requirements, selection process, submission details, conditions, and other pertinent information for interested researchers.

Description: This is the full research report for the thirteenth Emerging Risk Survey which summarizes the results of the survey.

Description: 2011 SOA Enterprise Risk Management Symposium, Chicago. This is the abstract of the referenced paper.