ERM for insurance companies- adding the investor's point of view
Author: Andrew Hitchcox; Paul Klumpes; Kenneth McGaughey; Andrew Smith; Neil Taverner
Date: 25th January 2010
Published by: Presented to the Institute of Actuaries
The following is an abstract of the document, the full text can be obtained from the Institute and Faculty of Actuaries website.
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 together 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.