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ERM for insurance companies – adding the investor's point of view

Published online by Cambridge University Press:  13 October 2011

A. N. Hitchcox ,
P. J. M. Klumpes ,
K. W. McGaughey ,
A. D. Smith  and
N. H. Taverner
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Abstract

A major outcome of ERM activities in insurance companies has been the bringing together of all of the key risks in the company, to be managed collectively in a holistic fashion. The authors of this paper believe that an ERM framework also needs to look beyond the company, and have regard to the risk management needs of investors, from the point of view of the contribution of the insurance company to the overall risk and reward of their total investment portfolios. To meet these needs, the ERM framework needs to provide sufficient information on topics such as systematic risk, potential correlations of earnings from future new business with macroeconomic trends, other risks to franchise value, and sources of model risk within the company. The paper does not provide solutions for the issues described above; but limits itself to describing and discussing the direction for some important new initiatives in ERM activities.

Keywords

Risk ManagementEnterprise Risk Management (ERM)Systematic RiskFranchise ValueBuffer CapitalCost of CapitalReplicating PortfolioParameter RiskModel RiskAgency RiskRisk GovernanceRisk Disclosure
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 16 , Issue 2 , 25 November 2011 , pp. 341 - 384
Copyright
Copyright © Institute and Faculty of Actuaries 2011

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