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Enterprise Risk Management An Insurance Company Perspective

Enterprise Risk Management An Insurance Company Perspective. CAS ERM Seminar San Francisco, April 2&3, 2001 Claus S. Metzner, FSA, FCAS, MAAA, Aktuar - SAV Chief Actuary/Risk Manager Zurich Financial Services Group - Region Switzerland. ERM - Zurich Switzerland.

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Enterprise Risk Management An Insurance Company Perspective

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  1. Enterprise Risk ManagementAn Insurance Company Perspective CAS ERM Seminar San Francisco, April 2&3, 2001 Claus S. Metzner, FSA, FCAS, MAAA, Aktuar - SAV Chief Actuary/Risk Manager Zurich Financial Services Group - Region Switzerland

  2. ERM - Zurich Switzerland • Background: ZFSG - Region Switzerland • P&C, Life Insurance, Asset Management are the primary businesses • Structure is 9+ SBU's • Prem Revenue: Life $ 2,500; P&C $ 1,350 • Total Assets: $ 24,000 • Markets: Personal and Commercial • Distribution: Agents, Brokers, Direct Sales

  3. ERM - Zurich Switzerland • Risk Management Committee Structure • Risk Management Committee • CEO, CFO, CIO, CLO, Chief Actuary Life, Non-Life, RM, Head of Regional Internal Audit • Investment Committee (incl. ALM) • CEO, CFO, Chief Actuary Life, Non-Life, RM, Controller, Group Representatives, Inv. Manager • Working Groups: Safety, Compliance, etc

  4. ERM - Zurich Switzerland • Responsibilities • Analysis of Financial Risks: DFA/ALM processes • Chief Actuaries, Risk Manager • Models, Applications • Support from Group Home Office Areas • Analysis of Operational Risks • Operational Areas with Risk Management

  5. ERM - Zurich Switzerland • Responsibilities • Identification of Risks/Opportunities • SBU's • Support Functions (IT, Finance, Corp Development, Claims) • Bottom-Up with RM review

  6. ERM - Zurich Switzerland • Responsibilities • Executive Committee • As Part of Strategic Planning Process, Region Key Issues identified • Tasks/Specific Responsibilities Assigned for each Issue • Detailed Analysis: Operational Area and RM • As required (examples: e-commerce, pricing/underwriting, new products evaluation, IT security, etc)

  7. ERM - Zurich Switzerland • Organisational Risks • Checks and Balances is First Line of Defense • Examples • Pricing/Underwriting separate from Reserving/Valuation functions • Internal/External Audit; Claim Audits • Assigned Responsibilities • Compliance Officer • Safety Officer • IT Security • Financial/Pricing - Chief Actuaries/CFO

  8. ERM - Zurich Switzerland • Organisational Risks • Detailed Analysis via Total Risk Profiling • Team Based Approach which consists of • Identification of Risks • Assigning of Values for Frequency and Severity risk • measure may be impact on earnings, capital • evaluate financial impact of "soft measures" as well • consider multi-year implications • Determining which Risks are unacceptable and therefore need risk mitigation & assign responsibility

  9. ERM - Zurich Switzerland • Organisational Risks • Review Process - Multi-Tiered • Operational Management • MBO process (individual goals and performance measurement) • Risk Management Committee • Quarterly Reports on Status of Key Issues • Goal: the key issues, etc are an operational means of dealing with issues that will have financial impacts

  10. ERM - Zurich Switzerland • Financial Risks • Note: Financial and Operational Risks are related even though I am discussing them individually • Key Risks • Pricing Assumptions/Guarantees • Asset Risk • Liability/Valuation Risk

  11. ERM - Zurich Switzerland • Financial Risks • Management of Risk & Assessment • Know where you stand (valuation/reserving) • Pricing Models • ALM/DFA models and analysis • Implement • Strategic Asset Allocation • Marketing • Capital Allocation/RBC

  12. ERM - Zurich Switzerland • Financial Risks • Review/Monitor • Actuarial Review of Financial Plans for Realism • Measurement of Deviation from Plan and Causes • Financial • Target Dates for Key Issues • On-going ("rolling") Adaptation

  13. ERM - Zurich Switzerland • Interrelationship of Operational and Financial Risk/ERM • Recognise that risk/opportunities can arise from internal or external conditions • Have processes in place that work bottom-up and top-down to assure consistency of response to emerging conditions • Rely on these processes (background) as part of the evaluation of the enterprise risk position

  14. ERM - Zurich Switzerland • Interrelationship of Operational and Financial Risk/ERM • Consider Systemic Risk within context of RBC

  15. ERM - Zurich Switzerland • Where Are We • Processes - Checks and Balances - are in place • Evaluations on a quarterly basis • Specific Risk Reviews (Total Risk Profiling) in place and used three to four times a year • DFA/ALM work on-going

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