Casualty Actuarial Society

Professional Education

2004 Enterprise Risk Management Symposium

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2004 Enterprise Risk Management (ERM) Symposium General Session

General Session I:
Chief Risk Officer Forum

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Renowned CROs deliver keynote speeches at this year's ERM Symposium. These experts were at the cornerstone of the implementation of ERM systems/processes in general and their respective firms in particular, and have written authoritative books/articles on enterprise risk management. Presenters will provide in-depth discussions on ERM frameworks, and share their expert insights on important strategic and implementation issues confronting the industry. This session will provide a brilliant start to the ERM Symposium.

Moderator:
Harry H. Panjer, Professor, University of Waterloo, Immediate Past President of the Society of Actuaries
Panelists:
James Lam, President, James Lam & Associates
Luc Henrard, General Manager and Chief Risk Officer, the Fortis Group
Dr. Robert Mark, President and CEO, Black Diamond Inc., Chair of PRMIA's Blue Ribbon Panel

DAY I, General Session Luncheon:
Enterprise Risk Management for Pensions

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Some companies that sponsor defined benefit pension plans have been coming under closer scrutiny for valuation and funding methodologies that may potentially bias asset allocation strategies and impact the risk of the overall enterprise and question the fiduciary responsibilities of those responsible for pension plan administration and the company board of directors. Can enterprise risk management balance the many competing interests and produce a holistic view to define, measure and manage them?

Presenter:
Dr. Zvi Bodie, Professor of Finance, Boston University

General Session II:
State of Risk Management Practices: Financial Sector and Beyond

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This second general session will explore the latest developments in risk management practices across a broad variety of sectors. Experts in risk management with different backgrounds share their perspectives on various issues they encounter and discuss approaches they take to address these issues as well as the lessons learned. The session will address broad ERM issues of interest to participants in all practice areas, to build a common ground for more specialized discussions in the subsequent concurrent sessions.

Moderator:
Leo M. Tilman, Chief Institutional Strategist & Managing Director, Bear Stearns
Panelists:
Leo de Bever, Senior Vice President, Ontario's Teachers' Pension Fund
Leo M. Tilman, Chief Institutional Strategist & Managing Director, Bear Stearns
Chuck Lucas, Head of Global Market Risk, AIG
Don Mango, Director of Research and Development, GE ERC

General Session III:
Strategic Perspective—Theory Behind ERM

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ERM is a new and evolving discipline, and practitioners are facing a host of strategic, conceptual, and methodological issues related to the implementation of ERM frameworks. This general session takes an out-of the-box approach and examines the foundation on which Enterprise Risk Management is based, the principles behind the ERM revolution, and provides predictions for the future evolution of ERM. The expert panel from insurance, banking, and consulting backgrounds will challenge the audience with thought-provoking ideas and considerations regarding such much-debated issues as risk integration, economic capital, risk attribution, quantification of operational risks, and others.

Moderator:
Dr. Sam Cox, FSA, Thomas P. Bowles Jr. Chair of Actuarial Science, Professor, Georgia State University
Panelists:
Dr. Darryll Hendricks, Senior Vice President, Federal Reserve Bank of New York
Dr. Shaun Wang, FCAS, ASA, MAAA, Group Research Director, SCOR Reinsurance Company
Tom Wilson, Managing Director and Global Head of the Finance and Risk Practice, Mercer Oliver Wyman


2004 Enterprise Risk Management (ERM) Symposium Concurrent Session
Track A: Hot Topics in ERM

This track concentrates on the hot-off-the-press issues facing the risk management profession. The very latest risk management developments in the broader economy, as well as regulatory and rating agencies views on ERM are explored in detail. The stream will also offer a unique opportunity to hear from the leaders of several professional associations, such as IAA, CAS, SOA, PRMIA, COSO, and others about how these organizations tackle risk management issues.

CS 1A: Industry and Interdisciplinary Views on Risk Management
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The area of risk management is still new and ever evolving. Various sectors of the industry are trying to solve numerous risk management issues, each tackling them from their own perspective, even though cooperation might be a better approach to utilize on commonality of the problems. Fragmentation, differing terminology, and varying standards exacerbate the issue. Diversity, inclusive communication, and partnership can help to better frame, understand the process, and advance the state of risk management practice. Only recently there has been more dialogue and collaboration among various groups.

Moderator:
Mark C. Abbott, Managing Director, The Guardian Life Insurance Company of America and Board of Directors, Professional Risk Managers' International Association (PRMIA)
Panelists:
Nicholas L. Hayes, Director, Global Financial Institutions & Market Risk, The Risk Management Association (RMA)
Felix Kloman, Editor, Risk Management Reports David Koenig, Chair, Professional Risk Managers' International Association (PRMIA)
Terry Vaughan, Past President, National Association of Insurance Commissioners and Insurance Commissioner for Iowa

CS 2A: Latest in ALM
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This session provides an in-depth discussion of the latest developments and trends in the Asset Liability Management field. Leading practitioners share their insights on preeminent ALM techniques and related practical issues. A discussion of the latest banking and insurance practices is presented and addressed from a variety of perspectives. During the session, expert panelists will share their practical experiences, discuss relevant issues, and address potential pitfalls in implementing a sound ALM framework. In addition, the session provides an overview of the latest work on evaluating ALM from a Corporate Finance function perspective.

Moderator:
Jonathan Nye, Senior Vice President, Alliance Capital Management Corporation
Panelists:
Prakash Shimpi, Visiting Fellow, London School of Economics & Political Science, Senior Fellow, The Wharton School; former President and CEO, Swiss Re Financial Services
Thomas S. Y. Ho, President, Thomas Ho Company

CS 3A: External Views on Risk Management
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Boards of directors want to ensure that best practices are adopted, and risks are identified, capitalized upon, and/or hedged before escalating to board level. Rating agencies are more forgiving for companies identified as having excellent risk management practices. Regulators want to make sure nothing happens during their watch. This session is a discussion by representatives of several external groups and organizations of their take on risk management developments in various industry sectors. They will compare and contrast areas of interest and concern, definition and practice of risk management, and their predictions for future trends.

Moderator:
David Koenig, Chair, Professional Risk Managers' International Association (PRMIA)
Panelists:
Allen Brender, Senior Director, Actuarial Division, Office of Superintendent of Financial Institutions Canada
Joel Levine, Vice President and Senior Analyst, Moody's Investment Services
Robert Mark, President and CEO, Black Diamond Inc., Chair of PRMIA's Blue Ribbon Panel
David Koenig, Chair, Professional Risk Managers' International Association (PRMIA)

CS 4A: Insurer Solvency Assessment - Report of IAA Working Party
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The Report of the Working Party is now complete! The session will describe the key principles being recommended for a global insurer solvency framework. The panelists will address the report details and discuss the reaction of the insurance supervisors to the report. Overviews of the life and non-life insurer case studies included in the report are presented. The attendees will learn of the numerous implications for risk modeling, risk measures and risk aggregation for life and non-life insurers.

Moderator:
Stuart Wason, Director, Mercer Oliver Wyman
Panelists:
Stuart Wason, Director, Mercer Oliver Wyman
Glenn Meyers, Chief Actuarial Research and Assistant VP, ISO Inc.

CS 5A: COSO Framework - Review and Discussion
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This session will provide an overview, discussion of, and status update on the Committee of Sponsoring Organizations' (COSO) project to develop an Enterprise Risk Management Framework. You will hear an overview of the new draft Framework, issues on adopting this framework and a definition of enterprise risk management and its components. The session speakers will outline the relationship between the new framework and COSO's previously issued Internal Control - Integrated Framework, as well as discuss its similarities and differences with other frameworks. The discussion will also address implementation issues for insurers, banks, other financial institutions as well as other industries. An Academy of Actuaries representative will discuss the feedback the North American actuarial organizations provided in response to the initial COSO draft. Audience's comments, questions, and feedback are encouraged.

Moderator:
Doug Brooks, VP & Chief Risk Officer, Sun Life Financial
Panelists:
Richard Reynolds, Partner, PricewaterhouseCoopers, LLP, Northeast and New York Metro region leader for PWC's Internal Audit Services
Joel D. Aronchick, Chief Risk Officer, The Chubb Group of Insurance Companies

CS 6A: Creating Value through ERM
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Several industry experts will discuss their experiences on how ERM is making a difference in their organizations. Find out how these companies have started out and the path they have taken in implementing ERM, as well as the benefits achieved thus far. Speakers will discuss their experiences where ERM has proven to be an effective risk management tool, how it allowed to quantify risk exposures and created added stakeholder value to the organization.

Moderator:
Hubert Mueller, Principal, Towers Perrin
Panelists:
Vinaya Sharma, Allstate Financial
Donald Watson, Vice President, Enterprise Risk Management, The ACE Group
Randy Tillis, Allstate Financial

CS 7A: Reports of Research Working Parties
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Last year, the Casualty Actuarial Society introduced the Research Working Party concept and formed three parties to better address long-standing research needs. Working parties have proven to be effective for other organizations. They are collective research paper task forces under the direction of CAS Research Committees with the charge of addressing targeted practical research topics in a short timeframe. Working parties are open to CAS members and non-members alike.

This session will feature representatives from each of the working parties who will report on progress to date on their respective topics and share experiences about the working party process.

Moderator:
Don Mango, Director of Research and Development, GE ERC
Panelists:
Glenn Meyers, Chief Actuarial Research and Assistant Vice President, ISO Inc.
Don Mango, Director of Research and Development, GE ERC
Nathan Babcock, Conning Asset Management

 
Track B: Risk Management

This track explores various ways of managing risks and establishing proper risk metrics and limits as well as issues arising in the process of implementing ERM. The sessions stress the notion of risk as an opportunity, and provide a fresh look at adding value to the enterprise through an ERM framework. In addition, top expert panelists will address such issues as securitization, managing risk capital, establishing risk tolerances and limits, and others.

CS 1B: Capital - Economics vs. Rating Agency vs. Regulatory
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This session will present an overview of the various approaches in use for determining an insurance company's capital, as well as its uses and applications. In particular, the panelists will analyze the implications of recent and proposed regulatory changes for determining capital and reserves directed at using economic capital methodology, i.e. reflecting a company's proprietary risks.

Moderator:
Hubert Mueller, Principal, Towers Perrin
Panelists:
Hubert Mueller, Tillinghast business of Towers Perrin
Jóse Siberon, Director, Standard & Poor's

CS 2B: Risk Tolerances and Risk Reactions -
A Behavioral Finance Approach

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ERM frameworks require practitioners to establish a variety of important parameters for which there is often little guidance. Among the most important of these parameters are those that establish the company's risk tolerance and serve as the critical cut-off point for many risk measures. In this session, the presenters will discuss the pitfalls that companies must avoid in establishing their risk tolerances. For example, some firms attempt to rely upon seemingly objective measures such as bond default rates to set the risk tolerances in their ERM models and there are many pitfalls that must be avoided with this approach. After risk tolerances are set, managers tend to often display the somewhat sub-optimal reactions to risk that have been documented within the new field of behavioral finance. The ways that an ERM system can help to overcome those reactions will be discussed.

Moderator:
Dave Ingram, Consulting Actuary, Milliman USA
Panelists:
Richard Goldfarb, Senior Manager, Ernst & Young LLP
Dave Ingram, Consulting Actuary, Milliman USA

CS 3B: Risk Metrics
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Risk measures and risk-return yardsticks are necessary tools for the ERM process. Different tools might be used, depending on the intended applications. The practitioner speakers will share the uses their companies have made of different risk metrics, the strengths and weaknesses they have found, and the data collection and calculation procedures needed to support the use of these metrics. The academic speaker, as one of the original authors of coherent risk measure framework, will share his latest research on multi-period risk measures. Audience questions and interactions are welcomed and encouraged.

Moderator:
Dr. Shaun Wang, Group Research Director, SCOR Reinsurance Company
Panelists:
Fred Tavan, Assistant Vice President, Canada Life Assurance Company
Philippe Artzner, Professor, University of Strassburg
David Ruhm, Assistant Vice President, The Hartford Insurance Group

CS 4B: Creating a Framework for Risk-Adjusted Performance Measurement
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This session will deal with the process and issues for creating an appropriately designed Risk-Adjusted Performance Measurement System ("RAPM"). The speakers will discuss various methodology decisions that might be encountered and how to solve them to create a system to appropriately link risk and return metrics in an insurance organization. Issues such as accounting measurement framework, risk metrics, time horizon, risk tolerance, and hurdle rate development will be discussed. In addition, the panel will address such key items as imbedding the RAPM framework into budgeting, planning, and pricing.

Moderator:
Tom Conway, Partner, Insurance and Actuarial Advisory Services, Ernst & Young LLP
Panelists:
Tom Conway, Partner, Insurance and Actuarial Advisory Services, Ernst & Young LLP
Jean Pierre Berliet, Senior Manager, Insurance and Actuarial Advisory Services, Ernst & Young LLP
Susan Patschak, Chief Actuary, ACE Limited

CS 5B: Measuring and Managing Risk Capital in Practice
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This session will provide an inside look at how companies have implemented risk capital frameworks and what benefits they have captured by doing so. Among the issues that to be addressed are (1) difficulties posed by having incomplete, imprecise, or otherwise limited data; (2) the problem of estimating dependencies among various risks; (3) the challenge of establishing a common firm-wide language for conceptualizing risk; (4) ways of gaining the support of senior management, and (5) issues in explaining ERM results to the board as well as to external audiences of investors, regulators, and rating agencies. Practical insights and lessons learned will be explored and discussed. Presentations by panelists will be followed by ample opportunities for questions and discussion by everyone attending.

Moderator:
William H. Panning, Executive Vice President and Managing Director, Willis Re
Panelists:
William H. Panning, Executive Vice President and Managing Director, Willis Re
Sara Stehlik, Director of Risk Management, Progressive Corporation
Shyam Venkat, Partner, PricewaterhouseCoopers LLP

CS 6B: Risk Management Through Securitization
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Life insurers are increasingly looking to securitization to better manage overall risks, improve their return on capital, and to develop permanent solutions to address reinsurance capacity concerns. Some deals have occurred already with a number of others expected to occur in the near future. As companies look for new ways to improve capital efficiency using securitizations, these deals will break new ground in terms of the products covered and the way the arrangements are structured. This session will describe recent developments in the use of securitization.

Moderator:
Jack Gibson, Life Practice Leader, North America, Towers Perrin
Panelists:
Jack Gibson, Life Practice Leader, North America, Towers Perrin
Morton Lane, Morton Lane Financial

CS 7B: Risk Management Through Earnings at Risk
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ERM practitioners confront a profusion of risk factors as they try to balance risk exposures with unceasing demands for earnings and share performance from their constituents. Practitioners face seemingly perpetual changes in accounting and regulatory regimes and exploding complexity in both asset classes and insurance product design. They wonder if their best efforts align with their firms' business objectives and truly produce measurable value. The Earning-at-Risk concept is a multi-period, multi-factor development of earnings emergence in the accounting domain that can point the way to improved financial performance by permitting insurers to more confidently understand and control financial risk. This session discusses the benefits of an Earnings-at-Risk approach, highlights its key attributes and considers implementation challenges. At the end of the session, attendees will have gained an understanding of Earnings-at-Risk and how it might benefit their individual firms.

Moderator:
Jay Glacy, Senior Vice President, Asset Liability Management, Allstate Financial
Panelists:
Jay Glacy, Senior Vice President, Asset Liability Management, Allstate Financial
Andres Vilms, Director of Risk Management, US Operations, SunLife Financial

 
Track C: ERM in the Broader Economy

This stream takes a broader look at the state of risk management, discussing the latest trends, best practices, and current issues in various industries. The attendees will have an opportunity to hear about the latest ERM developments in banking, energy-related services, and investment management firms and beyond from some of the most well-known professionals in the risk management field.

CS 1C: International Issues in Enterprise Risk Management
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A panel of chief risk officers discusses the risks, opportunities, and issues involved in running international operations. The session will address considerations required for understanding the organizational risk profile in an international context and explore how these unique risks are managed in practice. Expert insights, practical experiences, and lessons learned are presented to the audience for reflection, discussion, and questions.

Moderator:
Thomas J. Duffy, Consulting Actuary, Milliman USA
Panelists:
Joel D. Aronchick, Chief Risk Officer, The Chubb Group of Insurance Companies
Wayne Fisher, Chief Risk Officer, Zurich Financial Services Group

CS 2C: ERM in Banking
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Banks have made an essential contribution to the developments of best techniques and practices related to enterprise risk management within the financial services industry and beyond. A number of financial and non-financial entities is trying to use the bank's best practices and adopt them to own situations. This session will address some of these techniques and expand on a number of recent ERM developments in banking. A panel of bank risk management and ALM practitioners will discuss the evolution of the current state of the practice and where it is headed. This session will be of interest to any risk management professional who is interested to learn about some of the best practices in ERM.

Moderator:
Robert Mark, President and CEO, Black Diamond Inc., Chair of PRMIA's Blue Ribbon Panel
Panelists:
Enrico Dallavecchia, Managing Director, Market Risk Management, JP Morgan Chase
Michel Crouhy, Senior Vice President, Risk Analytics at Canadian Imperial Bank of Commerce
Robert Mark, President and CEO, Black Diamond Inc., Chair of PRMIA's Blue Ribbon Panel
Michael J. Litwin, Managing Director, Chief Credit and Risk Officer, Merrill Lynch Capital, Board of Risk Management Association

CS 3C: ERM in Energy Sector
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What risk management problems are faced by the ever-dynamic energy sector? What issues are topical? What trends are expected? What keeps Energy CROs up at night? This session provides a look at two different perspectives on energy-related models: 1) the evolution of environmental financial products and sustainable development, and new markets to help mitigate energy related exposures, and 2) an update on the issues and concerns of the Committee of Energy CROs.

Moderator:
Jim M. Clarke, President, Clarke Consulting
Panelists:
Patricia Dondanville, Partner, Schiff Hardin
Michael R. Levin, Director of Risk Management, Nicor
Judy Pokorny, Chief Risk Officer, Peoples Energy
Dr. Michael Walsh, Senior Vice President, Chicago Climate Exchange

CS 4C: ERM in Asset Management
ERM in asset management has become quite challenging in an era of high volatility, credit, liquidity operational risk challenges, and an increasing importance of compliance oversight. This session will address the latest developments on the ERM front in asset management and discuss the issues and challenges faced by the sector. In addition, the session will explore how to minimize losses from operational and fat-tail credit risk while seeking out modest out performance of a target benchmark. Importance of ALM, aligning incentives, and issues of yield/income vs. total return are also addressed and discussed.

Moderator:
Mark C. Abbott, Managing Director, The Guardian Life Insurance Company of America and Board of Directors, Professional Risk Managers' International Association (PRMIA)
Panelists:
Erwin Martens, Executive Vice President, Risk Management, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA - CREF)
David Martin, Senior Vice President and Chief Risk Office, Alliance Capital Management
Vineer Bhansali, Executive Vice President, PIMCO

CS 5C: Three Risks of Risk Measures
How to properly use Value-at-Risk in Capital Allocation for
Asset Management

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As Value-at-Risk (VaR) based systems for measuring and managing market risks become popular, there is a growing perception among practitioners that VaR limits can lead to traders or fund managers taking overly risky positions and cause excess volatility in financial markets. These conclusions might be premature. In this talk, the expert practitioner and researcher discusses three fundamental risks that must be overcome in order to effectively use VaR to guide capital allocation in asset management: preference risk, model risk, and estimation risk. Preference risk concerns the misspecification of risk constraints. While a static VaR limit might increase risks in certain ''bad'' states of the economy, a dynamic time-consistent VaR limit might reduce risks in the same states. Model risk concerns the distributional assumptions of the investment returns. Extreme market moves are typically not rare. Careful modeling of market microstructure mechanisms for generating extreme movements is essential for building a robust VaR system. Estimation risk concerns the precision and bias of volatility measurement in both short (trading desks) and long time horizons (pensions and insurers).

The session will demonstrate that any risk measure - VAR included - is only useful for capital allocation or risk management if the practitioner understands portfolio implications, mechanisms for rare events, and where to measure risk that matters most to the organization.

Moderator:
Valentina Isakina, Finance Actuary, Society of Actuaries
Panelist:
Kenneth Yip, Chief Investment Officer, Thunder Bay Capital Management

CS 6C: Evaluating and Modeling Structured Credit Products
Modeling credit events is becoming exceedingly important for insurance companies on both investment and ERM fronts. Structured credit transactions are a relatively new phenomenon, but they already represent a substantial and growing segment of the structured finance market. The most important feature of the structured credit deals is the ability to create custom exposures that investors desire and cannot achieve any other way. These custom exposures fit into investors' various risk appetites and capital constraints.

On the surface, it seems that the structured credit transactions are much different from any traditional actuarial applications. Looking closer, however, the principles of carving out these risks are very similar to many reinsurance agreements and structuring other risk management products within various insurance lines. The expert panel will explore these and other related issues and will provide insights about the value actuaries scan bring in this area.

This section will not presume any knowledge of the structured finance market.

Moderator:
Leonid Rasin, Senior Investment Strategist, Hancock Financial Services
Panelists:
Richard Hrvatin, Managing Director, Fitch Rating Services
Leonid Rasin, Senior Investment Strategist, Hancock Financial Services

CS 7C: Basel II - Practical Issues
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An incentive driving massive organizational investment in risk management for Basel II implementation has been a proposal for a more flexible capital requirement framework utilizing internal models. This framework allows minimizing capital vs. an older prescriptive approach like RBC, while achieving specific risk management targets. This session reviews what this approach will mean for both banks and regulators, contrasts expected and unexpected issues arising in practice, discusses progress of the banking institutions down this path, and addresses implications for insurers. Canadian financial institutions - both banks and insurers - are already preparing for Basel II, and many other countries are also starting to be impacted by the issues of integrated capital requirements for financial institutions.

Moderator:
David Sandberg, Second Vice President and Corporate Actuary, Allianz Life
Panelists:
Allan Brender, Senior Director, Actuarial Division, Office of Superintendent of Financial Institutions Canada
Larry Gorski, Consultant, Claire Thinking, previously a regulator with the Illinois State Insurance Department
David Sandberg, Second Vice President and Corporate Actuary, Allianz Life
Til Schuermann, Senior Economist, Banking Studies Function, Federal Reserve Bank of New York

 
Track D: Risk Identification and Measurement

To satisfy the demands of a more technically oriented audience, this track offers an opportunity to learn about the state of risk measurement across various industries. Such topics as credit and operational risk measurement and management as well as risk integration are explored in detail. Additional sessions are devoted to the specifics of risk and capital modeling, modeling of economic series, and others.

CS 1D: Risk Modeling Applications and Risk Pricing
 

Moderator:
John Burkett, Actuary, St. Paul Fire & Marine Ins. Co.
Panelists:
Richard Phillips
Joan Lamm-Tennant, Senior Vice President, General Cologne Re
TBD

CS 2D: Credit Risk
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This session provides a comprehensive discussion on the current state of the practice of credit risk management. Top industry experts on credit risk share their insight on various issues facing credit risk practitioners and discuss lessons learned from own experiences. The panel will discuss practical issues arising in developing internal credit models (ISDA), and address fundamental vs. quantitative issues. In addition, the discussion will cover implications of credit loss distribution shape on modeling and practical issues in dealing with fat tails and uncertain variance/covariance, loss given default. Audience's questions and participation are welcomed and encouraged.

Moderator:
Dr. Michael Ong, Professor and Director, Finance Program, Illinois Institute of technology, Stuart Graduate School of Business
Panelists:
Jon Frye, Senior Economist, Federal Reserve Bank of Chicago
Peter Davis, Director of Credit Risk Management Services, Ernst & Young
Michael Ong, Professor and Director, Finance Program, Illinois Institute of technology, Stuart Graduate School of Business
Mingsung Tang, Principal, Banc of America Securities

CS 3D: Risk and Capital Modeling - Getting the Details Right
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Moderator:
Gary Venter, Managing Director, Guy Carpenter & Co. Inc.
Panelists:
Gary Venter, Managing Director, Guy Carpenter & Co. Inc.
Richard Goldfarb, Senior Manager, Ernst & Young LLP

CD 4D: Modeling of Economic Series
Building a Financial Foundation for Enterprise Risk Management

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In May, 2001, the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA) jointly issued a request for proposals on the research topic "Modeling of Economic Series Coordinated with Interest Rate Scenarios." The purpose of the RFP was to provide a foundation for future work in the projection of economic and financial scenarios, particularly regarding interest rates, inflation, equity returns, dividend yields, real estate returns, and unemployment. At this session, the researchers will present the results from this project, which included a review of relevant work in the economic, financial, and actuarial literature, the identification and development of appropriate data sources and methodologies, and the creation of a model, to be made publicly, for projecting economic scenarios. This work has relevance to any risk management applications involving financial scenario modeling, including dynamic financial analysis, regulatory and management tests, and cash-flow testing.

Moderator:
Richard W. Gorvett, Professor, University of Illinois at Urbana-Champaign
Panelists:
Kevin C. Ahlgrim, Professor, Illinois State University
Stephen P. D'Arcy, Professor, University of Illinois at Urbana-Champaign
Richard W. Gorvett, Professor, University of Illinois at Urbana-Champaign

CS 5D: Operational Risk Issues
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In this session, seasoned practitioners address two issues within the operational risk framework: risk integration issues and a Six Sigma approach.

An Integrated Framework for Measuring and Managing Operational Risk
As organizations struggle to comply with the Basel II requirements for operational risk, even the largest and most sophisticated organizations are discovering that developing a truly integrated operational risk measurement and management program is a daunting task. While virtually everyone recognizes that the key elements of such a program include loss data and indicators, risk and control assessment, and VaR calculation, few understand how to integrate these disparate measures into a theoretically valid framework that supports both capital allocation and managerial decision-making. This presentation will help identify the many challenges and will suggest practical solutions to these issues.

Optimizing Institutional Performance and Minimizing Operational Risk with Six Sigma
Operational risk exposes organizations to losses resulting from inadequate or failed internal processes, people, systems, or external events (ref. Basel Committee's Revised Working Paper, September 2002). Basel II imposes a capital charge for operational risk, but allows for mitigation of this charge through enhanced risk management. Understanding and controlling operational risk will allow financial institutions to experience fewer internal errors, increased investor confidence and customer perception, and improved agency ratings. Six Sigma provides a very effective means for controlling and minimizing operational risk.

Through the application of a powerful set of analytical tools linked to a very rigorous gated process, the Six Sigma methodology, when executed properly, will ensure the optimization of an institution's performance, resulting in minimal operational risk and corresponding financial benefits. This session will provide a roadmap for applying the Six Sigma methodology to the operational risk arena and discuss the tangible benefits that will result through this approach.

Moderator:
Barry Franklin, FCAS, MAAA, Managing Director & Actuary, AON Consulting
Panelists:
Ali Samad-Khan, Head of Global Operational Risk Strategy, SAS, Inc.
Lori Marin, Managing Director, AON Risk Services

CS 6D: Nonlinear Dynamics and Complex Systems:
Understanding the Basics for Future Enterprise Risk Management Applications

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A number of advanced tools and concepts have been explored recently, with an eye toward better explanations of complex processes. Although all somewhat distinct, these concepts are frequently discussed together: chaos, complexity, nonlinear dynamics, cellular automata, genetic algorithms, percolation - the list goes on and on. Many people - some of remarkable distinction and achievement - believe that these approaches hold the key for future modeling of complex dynamical systems. Some people are not so sure.

Some of these tools may indeed have important risk management applications in various industries. This session will discuss the basic concepts and underlying theory behind nonlinear dynamics and complex systems modeling. It should appeal to anyone who is interested in new and emerging approaches that might have value to enterprise risk management and will provide a particular value to actuaries and other risk management professionals.

Moderator/Panelist:
Richard W. Gorvett, Professor, University of Illinois at Urbana-Champaign

CS 7D: Integrated Treatment of Enterprise-wide Risks
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Virtually all enterprises must deal with health, life, pension, property/casualty, investment, operational and business risks. The panelists will first highlight similarities and differences between these risks. They will then discuss both theoretical and practical challenges to integrate underlying risks, as well as how insights gained from integrated analysis of risks could serve for better decisions. They will cover a variety of issues including volatility of benefits/losses by line of insurance, adverse development in reserves, unexpected losses in investments, linking risk, capital, earnings volatility and value, correlations (dependencies) between risks for purposes of identifying capital needs, evaluating reinsurance needs, allocating the cost of capital, optimising investment decisions, and planning growth.

Moderator:
John Kollar, Vice President, ISO Inc.
Panelists:
Rajeev Dutt, Consulting Actuary, Milliman USA
Ugur Koyluoglu, Director, Mercer Oliver Wyman
John Kollar, Vice President, ISO Inc.

 
Track E: Special Interest

Back by popular demand, this stream continues the tradition established at the first Symposium of bringing together a group of risk managers interested in a particular topic. There are no prerequisites for these sessions, and you can attend any one session or a series of three. This year, the track offers an opportunity to explore ERM issues in two contexts: health industry and extreme values. The Health Forum provides an opportunity to learn about the state of risk management in the health insurance industry, related issues, and latest modeling techniques, and will address the unique aspects of health risk management as opposed to life insurance. The Extreme Values sessions will introduce the attendees to the basics of extreme value theory and will address the issues of extreme value modeling from a variety of practical perspectives.

Extreme Value Forum
CS 1E: Extreme Value Models and Methods - Theory
CS 2E: Extreme Value - Estimating Parameters
CS 3E: Extreme Value Models and Methods - Actuarial Applications

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In today's business environment, extreme events are commanding more attention. These events have very low frequencies (e.g., once-a-century) but extraordinarily high costs. Research has shown that the Normal Distribution, which is often used in risk measurement, underestimates the impact of these events, sometimes significantly. Consequently, more expertise in this aspect of risk management is needed. The three teaching sessions introduce new families of distributions for modeling the distributions of the extreme values and discuss their applications to risk management in general and actuarial science in particular.

These sessions will each stand alone while providing a solid background to build on. The sessions have been organized by the SOA Risk Management Task Force Extreme Value Modeling subgroup.

Moderator:
Steven L. Craighead, Nationwide Financial
Panelists:
H.N. Nagaraja, Ohio State University
Steven L. Craighead, Nationwide Financial

CS 4E: Pandemic History and Financial Implications -
Focus on Flu Epidemics

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How bad does an outbreak need to be before it threatens the solvency of the insurance industry? In WWI more deaths were attributed to the "Spanish flu" than to the hostilities themselves. Politicians struggled to decide between required isolation and encouraging Liberty Loan drives (war bond rallies) to raise money for the war. While there have been many improvements for treating flu since 1918, many think it is only a matter of time before the next flu pandemic. This session will share background of flu and the recent SARS outbreaks and discuss modeling efforts to determine how severe an outbreak affect might become.

Moderator:
Max Rudolph, Vice President & Actuary, Mutual of Omaha Insurance Co
Panelists:
Max Rudolph, Vice President & Actuary, Mutual of Omaha Insurance Co
Dave Ingram, Milliman USA

Health Risk Management Forum
CS 5E: ERM Overview
CS 6E: Models and Modeling
CS 7E: ERM and Workers Compensation

The Health Forum provides an opportunity to learn about the state of risk management in the health insurance industry, issues, and latest modeling techniques, and will address the unique aspects of health risk management as opposed to life insurance. The forum sessions will explore the differences in the current state of development of risk management topics for the health insurance industry and the unique solutions health insurance may require Topics for the discussion will include:

  • The state of health insurance models
  • Survey results on the state of risk management in the health insurance industry
  • Discussion of the unique aspects of health insurance vs. life and P&C
  • Case studies

Moderator:
John W C Stark, Executive Director & Actuary, Anthem Health Plans of Virginia, Inc.
Panelists:
John W C Stark, Executive Director & Actuary, Anthem Health Plans of Virginia, Inc.
Darrell Knapp, Ernst & Young, LPP
Doug Fearrington, Actuary, Anthem Health Plans of Virginia, Inc.
Claus Metzner, Milliman USA
John C. Lloyd, Reden & Anders Ltd.


CLOSING REMARKS
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Download Handout 2
Download Handout 3

Moderator:
Dr. Shaun Wang, Group Research Director, SCOR Reinsurance Company
Panelists:
Prakash Shimpi, Visiting Fellow, London School of Economics & Political Science, Senior Fellow, The Wharton School; former President and CEO, Swiss Re Financial Services
Dr. Thomas S. Y. Ho, President, Thomas Ho Company
William H. Panning, Executive Vice President and Managing Director, Willis Re

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The CAS Roundtable

Posted on 10/29/2014
By Genevieve O'Toole

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