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Risk Management in Insurance budva , 18 october 2012

Risk Management in Insurance budva , 18 october 2012. Author : Dr. Mojca Piškurić Chief Risk Officer. Risk Management Basics. Risk management is a corporate activity

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Risk Management in Insurance budva , 18 october 2012

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  1. RiskManagement in Insurancebudva, 18 october 2012 Author: Dr. Mojca Piškurić Chief Risk Officer

  2. Risk Management Basics • Riskmanagement is a corporateactivity • riskmanagement ≠ underwriting (upravljanje rizicima ≠ preuzimanje rizika) • Riskmanagement is a process • howthedecisions are taken • whatbusinessactivities are undertaken • whatbusinessactivites are rejected (limits…)

  3. Three Lines of Defence in Risk Management Risk mgmt system setup Risk mgmt system oversight Active risk mgmt Boardofdirectors, underwriters, investmentmanagers, sales, claims, etc. Riskmanagementservice, riskcommittee Internalauditdepartment

  4. Risk Management Process

  5. Risks of a Life Insurance Company • According to Solvency 2: • investmentrisks (market, credit) • actuarialrisks (mortality, longevity, disability, etc.) • lapserisk • expenserisk • CAT risk • operationalrisks (processes, people, systems, external)

  6. Typical Risk Profile • Market risksrepresent more than 40% ofoverallrisk • becauseof ALM riskoflifeinsurance • Biggestcorebusinessrisks are lapseandexpense • lapse directlylinked to deterioratingeconomicconditions • expense  competition is driving up commisions (tiedagentsandbrokers) in ourregion

  7. Typical Risk Profile (cont.) • Actuarialrisks are typicallyverysmall • thistypeofrisksmeasurespossibleerrors in actuarialmethods • Operationalrisks are linked to businessvoulme • CAT risktypicallyreflectslapseandexpensedevelopment

  8. How To Set the Risk Appetite • Use appropriatemeasurableindicators • dividend payments • targetcapitaladequacysurplus • accounting profit • zero tolerance risks • Considerwidereconomiccircumstances • Make sure theindicators are relevant to business

  9. Who Influences Risk Appetite Legislation, Supervisoryagency Owners, investors Lifeinsurer Otherstakeholders employees Policyholders

  10. Key Strategic Risks • Financialrisks (capitalandcashflowpressures) • Competition • Regulatoryactions • HR risks (staffing, knowledge, fraud) • Structuralresources (softwaresystems, proprietaryinformation) • Internal bottlenecks

  11. Conclusion An efficientriskmanagementsystemaddresseskeystrategicrisksanduses transparent methods to achieve favourablebusinessresults.

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