Risk Management Special Interest Group
Developing the Profession’s Risk Management Vision
Tuesday, 17th April 2007
Overview
Introductions and Overview
Purpose of This Evening
Guest Speaker
RMSIG Questionnaire Feedback
The Big Question
(Hopefully) The Big Idea
Refreshments
Overview
Introductions and Overview
Purpose of This Evening
Peter Vipond, ABI
RMSIG Questionnaire Feedback
The Big Question
The Big Idea
Refreshments
18:00
18:10
18:15
18:30
19:00
19:29
19:30
Purpose of This Evening
Against the background of a changing
environment for actuaries, explore the role that
risk management1 might play in our future2 and
identify what the profession3 should do to make
this happen.
1.
2.
3.
hereafter “RM”
and vice versa
initially through the RMSIG
Guest Speaker
Peter Vipond, ABI
RMSIG Questionnaire
 Profile of Respondents
~270, thank you!





RM Events
What Actuaries Need to Learn
Risk Management Taxonomy
Research
Education
Participant Profile

By Practice Area









39% Life Insurance
14% General Insurance
12% Pensions
7% Investment
5% Banking
18% Other
4% did not specify
Majority looking to apply RM knowledge in existing practice area
Most did not specify an RM affiliation

3% PRMIA

3% GARP

6% FIRM

4% CFA

5% SoA RM Section
 12% Other(?)
RM Events - format


Most are interested in attending RM events in 2007
On average participants would like to see





3 networking evenings
1 half day seminar
1 full day seminar, but
no 2-3 day conferences in 2007
On average participants likely to attend a generic RM event, but
 unlikely to attend a life, pensions, general insurance or investment event


Several from overseas, so unlikely to be able to attend
One participant commented
“Half-day seminars are likely to require a full-day for travelling etc and
therefore fuller days are more attractive from the perspective of timeeffectiveness.”
RM Events - topics
“Assessment of the risk arising from low frequency but extremely high impact events.”
“Best practice risk management framework - organisational and committee structures.”
“Introduction to risk management benefits, terminology and tools.”
“In-house Hedge programs for options embedded in insurance liabilities”, also adding,
 “in Canada have already implemented certain hedge strategies in the asset-liability management.
These companies may be doing so relatively quietly and reaping the rewards of competitive
advantage.”
“Would like to see discussions on how we can apply risk management techniques in a
wider context and in other areas of the financial services industry such as in a start-up
situation, managing joint-venture or channel risks, and enterprise risk management.”
What Actuaries Need to Learn
 Most participants agree that actuaries need to
 learn the language of risk management
 learn new risk management concepts, and
 learn new risk management techniques
Key Areas
 Market Risk
 many responses around corporate finance, hedging,
Value at Risk, techniques used by investment banks
 ERM (Enterprise Risk Management)
 applying processes to measure and manage risk
across a whole business
 Operational Risk
 Strategic Risk
What Actuaries Need to Learn
“Just need to have a wider appreciation….the issues are wider than the
existing solution.”
“The key concept is to evaluate the risk for reward trade-off for the
business that your company underwrites……risk management is not
about eliminating risk.”
also, “[need to develop a] proper pricing regime that keys on an 'appropriate'
return on capital metric…. [a] risk management framework is of no use if it
simply logs potential problems.”
“The management of demographic risks (mortality, morbidity, longevity)
are areas within life insurers, where actuaries can taking a leading role in
developing risk management techniques and practices.”
RM Taxonomy
 Most agreed that an RM taxonomy useful for the
RMSIG
 52% said willing to contribute to development
 Of those whom commented, most noted that there
was already a well developed taxonomy which we
should build from
 References to CAS, GARP and RAMP
 Several also referred to Solvency II or Basel II papers
RM Taxonomy
 General feeling
“Don’t reinvent the wheel, but reach out to others who
are ahead”
 One participant commented
“My experience, to date, acting as an expert witness is
that many of the Risk Management concepts (and
consequently techniques)…..are flawed because they
have been based on false assumptions. I believe that if
actuaries learnt the language, concepts and techniques
they could add enormously to the risk management
industry”
Research
 Not a great many research ideas
 Some pleas to disseminate research already done by others
 and for education rather than new research
 Some support for research into
 copulas
 tail risk
 e.g. correlations in extreme conditions, identifying 99.5% level risks
 operational risk
 One participant commented
“Crucial decision is whether the profession attempts to position itself
as a force in wider risk management or in financial risk management.
Experts in financial risk management who are very comfortable with
wider risk management is a possible sale. We ought to be keepers of
market leading financial risk models.”
Education
 Useful role for the RMSIG to fulfil
 Educational requirements for fellowship should have more RM material
 Qualification should be expanded so as to encompass the bulk of the
RM concepts and techniques in use within the financial services and
corporate sector
 Some suggested inclusion of an ST subject, not a compulsory subject
 Several comments about linking to/integrating with other bodies
 PRMIA and CFA mentioned, as well as SOA
 Split of opinion
 more technical material (e.g. copulas, financial economics), against
 ensuring better general understanding of the nature of risk
 past disasters
 the techniques available for managing risk, and
 how to communicate it
Delivery Mechanisms
 To Qualified Actuaries
 CPD events (6/10)
 Informal provision (5/10)
 through distance learning and e-based learning
 Formal provision (5/10)
 in addition to qualification requirements
 through distance learning, short courses and e-based learning
 leading to recognised certificates and/or accreditation
Delivery Mechanisms
 To Future Actuaries
 CPD events (5/10)
 Informal provision (6/10)
 through distance learning and e-based learning
 Formal provision (6/10)
 in addition to qualification requirements
 through distance learning, short courses and e-based learning
 leading to recognised certificates and/or accreditation
Additional Education Material for RM
 Most willing to contribute to the identification of additional material
to better equip actuaries for work in RM
 A slight majority of participants were willing to contribute to the
development of the identified additional education material
 Several specific ideas for material
 CFA courses
 information from FIRM, GARP and PRMIA (including research)
 references to University courses.
 Some suggested producing a guide to existing resources or having
an RM section in the Actuary
Purpose of This Evening
Against the background of a changing
environment for actuaries, explore the role that
risk management1 might play in our future2 and
identify what the profession3 should do to make
this happen.
1.
2.
3.
hereafter “RM”
and vice versa
initially through the RMSIG
Conclusions





Times have changed
RM is relevant to actuaries
Actuaries are relevant to RM
RMSIG is here to improve that relevance
You have told us what RMSIG should do next
Thank You