Risk Management
Task Force

Risk Management Metrics Subgroup

 

 

Credit Risk Management | Economic Capital Calculation and Allocation
Enterprise Risk Management | Equity Modeling | Extreme Value Models
Health Risk Management | Policyholder Behavior in the Tail
Pricing for Risk | Risk Based Capital Covariance | Risk Management Metrics


Risk Management Metrics to support Key Business Decisions
Fred Tavan, Leader

Goals

  • to research risk management metrics used in making key business decisions
  • to document risk and risk metric definitions and the application of risk metrics to business decisions

Initial Product and Process

  • Definitions of Risks
    Prepare a document that describes alternate definitions of risk, the reasons for the alternate definitions and the repercussions of utilizing the different definitions in various decision making processes.
  • Risk Metrics Definitions
    For selected risk metrics, document the definition of each metric. This definition will be both fully descriptive and fully functional. The definition document will be stand-alone complete as well as including references to literature regarding the metric. Ultimately the document could be used as an actionable reference guide for a practitioner who wanted to apply the risk metric to an insurance company situation. The definition will include mathematical formulas as well as verbal descriptions of the metric. Example(s) will be provided to show how the metric can be applied in a life insurance company situation. The definitions should be self-contained with references so that the practitioner is not being presented with a research project, but with a practical answer. References should be included for the user who wants to follow the full historical exposition of the metric.
  • Applications of Risk Metrics
    For each of a list of business problems, document the pros and cons of using each of the risk metrics as the primary measure of risk for that problem. This document will reflect different definitions of risk as well.
  • Cross References
    Develop a full cross reference capability for the material in the three above sections so that a user can start at any of the three points and see the logical progression to the other two in either order. For example, if someone comes into a situation where there are existing capabilities to calculate a particular risk metric, they can use the cross reference to see which risk definitions and business decisions are best supported by that metric.




Documents & Links
(all files are in .pdf format unless otherwise indicated)

Preliminary work products:
The subgroup has prepared the following documents in pursuit of its goal to document risk metric definitions and applications within the industry. These are intended to be working documents and comments to the subgroup are welcome. The documents and contents should not be considered to be an endorsement by, or a position of the Society of Actuaries.

Business Risk Measures Net Amount at Risk
Duration Option Adjusted Spread
Embedded Value Risk Based Capital
Exposure Limitation Risk Definitions
The Greeks  



Recent Meeting Minutes:

RMM Minutes – January 21, 2005
RMM Minutes – November 16, 2004
RMM Minutes – May 4, 2004





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