INARM

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INARM ERM Webinar January 16th, 2008 Draft
Plan Post Second Conference Call, Sept 17th
2007
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Agenda

• Agreement on Broad Structure
• Draft Global Topics Basic Components
• Draft Regional Extensions
• Next Steps

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Agreement on Broad Structure

• We have identified a number of core ERM topics
  that people have agreed would be of high interest
  to the actuarial community and risk professionals
  in the financial services industry
• Some of the topics will lend themselves to a two
  level treatment
• Level 1 Basic Introduction to the topic via a
  pre-recorded session. This will typically be a
  global treatment (i.e. the same pre-recording
  available in each region)
• Level 2 More advanced treatment via a live
  session. These sessions will typically have a
  regional adaptation (i.e. with different
  emphasis for each region)
• The webcast for level 2 will be by way of slides
  together with voice recording and the possibility
  for a chat style QA, to be co-ordinated by a
  moderator
• It is possible that the pre-recorded sessions for
  Level 1 could be via voice and video. This is to
  be confirmed.
• Sequencing of the sessions will need to be
  carefully orchestrated to enable newcomers to a
  topic to take advantage of the Level 1
  pre-recorded sessions ahead of their
  participation in the more advanced Level 2
  regional treatment (sample sequencing is provided
  attached)
• It was agreed to look into allowing the
  broadcasts to be available 1 week before and 1
  week after the event of January 16th
• An overall 1 hour Introduction will be recorded,
  linking all the topics together

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Draft Global Topics (1 of 3)

• Embedding ERM in the DNA of an Enterprise
• Risk Governance, Risk Culture
• CFO, CEO, Board perspectives
• Securing buy-in from profit centres with
  adaptation to PC and LH
• Special challenges for small/medium and mutual
  insurers
• Economic Capital a passing fad or brave new
  world?
• Basics of EC and core applications to be
  covered by a separate presentation (appendix)
• Importance of market consistent foundation in the
  presence of multiple GAAP and STAT accounting
  regimes
• Limitations of EC and key areas requiring
  judgement (e.g. time horizon, risk aggregation,
  capital allocation, capital fungibility, MVM)
• IAIS Developments
• Importance of Pillar II processes
  (feedback/model adaptation, governance, stress
  testing)
• Key issues for PC , Key issues for LH

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Draft Global Topics (2 of 3)

• Stakeholder views regulators, rating agencies,
  sell-side analysts/investors
• Are external stakeholder requirements for capital
  risk management converging or diverging?
• How to satisfy the interests of shareholders vs.
  policyholders?
• Can insurers use ERM in a way that satisfies all
  stakeholders?
• Challenges for global insurers operating in
  multiple regions
• Active Risk Controls
• How does ERM deal with irrational insurance
  markets?
• How does ERM deal with turbulent financial
  markets?
• How can centralised global risk controls be made
  effective at the local/regional level?
• Application to life policies with policyholder
  guarantees (e.g. variable annuities, with
  profits, etc)
• Application to PC reinsurance pricing

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Draft Global Topics (3 of 3)

• Setting Risk Appetite and Measurement of Economic
  Value Creation
• Measurement and definition of risk appetite
• Technical issues incorporation of franchise
  value, linkage to firm value (as opposed to
  run-off value), translation from economic
  volatility to accounting volatility
• Obtaining management buy-in embedding in the
  capital and earnings planning process
• Linkage to senior management compensation
• Role of Senior Management, the Board, ERM
• Emerging Risk Management
• Establishing an effective emerging risk
  management process
• Economic scenario wild cards
• Impact of climate change (PC focus)
• Impact of life style factors (LH focus)

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Draft Regional Extensions (1 of 2)
It is suggested that Topics A, B,C and D warrant
regional extension, with Topics E and F having
more of a global character to be debated

• Embedding ERM in the DNA of an Enterprise
• Focus here could be on regional corporate
  governance challenges, regulatory impediments,
  lessons learnt from regional industry disasters
  (e.g. HIH in Australia, Capital Markets Crisis of
  2002-2002 in Europe, etc.), differences in Board
  structures, etc..
• The application to small insurers should also be
  addressed regionally.
• Economic Capital a passing fad or brave new
  world?
• Focus here could be a survey of local regulatory
  applications and developments (e.g. Solvency II
  in Europe)
• Differences in the degree of acceptance in the
  global actuarial community (e.g. the UK may want
  to do a case study on the early strong resistance
  from senior figures in the actuarial community in
  2000-2002)
• Special challenges for some lines of business
  (e.g. Casualty lines subject to socio-political
  influences) relevant to a region, adaptation to
  incomplete markets (e.g. China), etc.

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Draft Regional Extensions (2 of 2)
It is suggested that Topics A, B,C and D warrant
regional extension, with Topics E and F having
more of a global character to be debated

• Stakeholder views regulators, rating agencies,
  sell-side analysts/investors
• Focus here could be on degree of acceptance of
  economic balance sheet concepts (e.g. contrast
  the analyst community in the US with their
  counterparts in Europe)
• IAIS developments versus regional departures
• Rating agency standards degree of harmonisation
  and adaptation to local GAAP/STAT reporting, etc.
• Active Risk Controls
• Focus here could be on tangible examples of
  translation of group wide controls and limits for
  insurance and financial market risk to local
  legal entity practice
• Which risks trade in a global market and which
  trade regionally if they trade at all?
• Case studies could include the management of
  longevity risk in Europe, Cat Risk in the US and
  the low interest rate environment in Asia

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Next Steps

• Decision re Global Topics there was broad
  agreement that the 6 topics we have selected were
  the hot topics
• Regional Co-ordinators now need to Flesh Out
  Content for Level 2 of Topics A, B, C and D and
  assign to presenters
• Preference was expressed for a dominance of
  practitioners over academics and consultants,
  though no hard quota will be applied
• Speakers to be recruited for Global Topics are to
  be recruited by this Steering Committee
• Speakers to be recruited for Regional Topics by
  Regional Committee with agreement of Global
  Steering Committee to ensure overall programme
  fit task of Regional Co-ordinators to provide a
  short update at all future Global SCs going
  forward
• Next Conference Call will focus on key speakers
  and decision on the ideal format for each global
  session i.e. standard presentation,
  interview/discussion panels, voice only/ voice
  and video
• We agreed that because the regional sessions are
  not country sessions (i.e. they may cover
  participants with many different mother
  tongues), all sessions and presentations will be
  in English
• We agreed that each session should be a minimum
  of 60 mins and a maximum of 90 minutes.
  Sufficient time should be built in for QA
  suggest between 15 and 25 of the live session
  times. Pre-recorded sessions may take the form of
  a panel discussion. Where they are straight
  presentations, they should not exceed 60 minutes