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Linkage of Risk, Capital and Financial Management

Explore the integration of risk, capital, and financial management at The Hartford, highlighting the role of Chief Risk Officers and Corporate ERM. Details on risk assessment, common return targets, and monitoring practices are discussed.

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Linkage of Risk, Capital and Financial Management

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  1. Linkage of Risk, Capital and Financial Management Mark Homan CAS Annual Meeting November 12, 2007

  2. Introduction • My Role at The Hartford • P&C Risk Modeling • Contribution to Corporate ERM Process • Discuss where The Hartford is with respect to linkage

  3. Corporate Oversight • Four Chief Risk Officers • Corporate, Property/Casualty, Life and Investment • Corporate CRO reports to Chief Financial Officer • Entire Board acts as Risk Committee

  4. Framework • Consistent Risk/Return Metric • Risk Coverage Ratio • Common Return Target across P&C, Life and Investment • Still working on common performance measures between P&C and Life

  5. Risk Assessment • Key Risks already identified in pricing models • Risk dashboards in place for our largest risks • Operational Risk • Sufficient information for allocation • Judgement call on total capital

  6. Current Linkage – P&C • Current State • Economic Allocation of carried capital • RORAC Approach; common target return • Single model used for risk and return modeling for all lines, including investment • Same model used for pricing, planning, monitoring and incentive compensation

  7. Education and Communication – P&C • Risk adjusted return is key performance metric for planning and monitoring • Regular classes on our risk and return methodology • Actuarial required to attend after one year • Finance and Underwriting specific classes • Quarterly publication of risk adjusted returns relative to plans

  8. Monitoring • Quarterly publication of returns at management line level • Quarterly review of GAAP and Statutory Capital • Monthly updates of cat exposure relative to guidelines

  9. Contact Information Mark Homan, FCAS, MAAA, CPCU The Hartford mhoman@thehartford.com 860/547-8815

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