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Joint Risk Management Section Essays on Risk Metrics for Decision Making and ORSA

08/29/2012 —

Risk Metrics for Decision Making and ORSA

The Joint Risk Management Section of the Society of Actuaries (SOA), the Casualty Actuarial Society (CAS), and the Canadian Institute of Actuaries (CIA), in collaboration with the International Network of Actuaries in Risk Management (IN-ARM), has released its third essay e-book, this time addressing “Risk Metrics for Decision Making and ORSA.”

The insurance regulatory framework is evolving around the world and the intent of the 18 essays is to generate discussion and debate surrounding the principles and ideas underpinning the Own Risk Solvency Assessment (ORSA) initiative and the risk metrics used for decision making. Different points of view are presented, and the organizers hope the essays will provide thought-provoking discussion and commentary.

The Joint Risk Management Section recognized three essays for awards as the top papers.

  1. Understand ORSA Before Implementing It, by Anthony Shapella and Owen Stein
  2. Effective Resilience and Interdisciplinary Approaches to Risk, by Rick Gorvett
  3. Focusing on Own Risk of the ORSA Process, by Max Rudolph

Anthony Shapella amd Max Rudolph are presenting their essays during a session at the 2012 Casualty Loss Reserve Seminar on September 7.

CAS members should note that although the publication indicates it is copyright by SOA, the publication is jointly owned by the CAS, SOA, and CIA, as the sponsoring organizations of the Joint Risk Management Section. The CAS is working with the SOA to correct the copyright issue.


Download Complete Essays

Introduction

TRUE OBJECTIVE OF RISK MANAGEMENT

These essays address the philosophies considering the “real” objectives and considerations of risk management. As was learned from our earlier series of essays, most risks that manifest themselves are not directly caused by any exogenous event, but rather from the decisions, biases, and behaviors of people. Although often called the “softer” side of ERM, it mostly makes up the ‘harder” side of contingent consequences, as learned from the financial crises.

How to Make Sure that You Take the Right Road to ERM
By Dave Ingram

Vounó Borealis (Mountain Wind)
By Jason B. Sears

Too Good to Be True
By Victoria Grossack

Minimally Destructive Scenarios and Cognitive Bias
By Mary Pat Campbell

“Effective Resilience” and Interdisciplinary Approaches to Risk
By Rick Gorvett

STAKEHOLDER MANAGEMENT

Multiple groups have keen interest and insight in the insurance industry, usually resulting in divergent points of view. What the regulatory authorities expect out of an initiative may be quite different from the expectations and/or needs of the other stakeholders (e.g., shareholders, policyholders, employees, management). The primary focus of these two essays reflects the thoughts underlying these potentially divergent expectations.

Clarifying Uncertainty
By Stephen P. D’Arcy

Is ORSA a Good Move for All the Stakeholders?
By Yayuan Ren and Jianwei Xie

GENERAL OVERVIEW OF WHAT ORSA IS

What is ORSA? What is ERM? These essays attempt to address these questions directly, and in rela¬tion to the other, through various similar and sometimes different perspectives.

More than Regulatory Compliance
By Sam Gutterman, Brian Paton and Sunil Sen

Focusing on Own Risk of the ORSA Process
By Max Rudolph

Understand ORSA Before Implementing It
By Anthony Shapella and Owen Stein

Some Key Questions an ORSA Should Answer
By Loïc Chenu

Effective Risk-Based Decision Making: ORSA and Beyond
By Guillaume Briere-Giroux and Mark Scanlon

MODELS AND MEASURES

The following essays consider the wide range of modeling and quantification aspects underlying a company’s ORSA. Issues discussed range from assessing the risk of a particular model being wrong and its corresponding miscommunication minefield to considering what the “true-and-pute” measure of risk ought to be, and whether that can be even agreed on.

Arbitrage-Free Perspective on Economic Capital Calibration
By David Wang

How an Insurance Company Can Better Measure and Understand its “Own Risks”
By Russell Sears

The Actuary’s Use of Catastrophe Models in ORSA
By Anders Ericson and Kay Cleary

Company Management’s Reaction Capacity and Management Actions: Need and Difficulty to Take These into Account in ORSA
By Stephane Loisel

Risk Metrics for Decision Making and ORSA
By Stephen J. Strommen

Economic Capital, Countercyclicality and a “Plausible” ORSA
By Evren Cubukgil and Wilson Ling

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