Post on 22-Dec-2015
Perspective of the Insurance Commission
• What we are encouraging
• New Regulation – description and intent
Background
• Life and non-life: composite companies
• Pension: risks borne by plan members
• Risks increasing or changing
Policyholder Liabilities
• Traditional Balance Sheet: one outcome
• Risk Management: universe of outcomes
• Probability and severity of each outcome
• Assets
• Asset-Liability Management
2005 Legislation
Chief Risk Officer for each:• Insurance company
• Pension plan management company
• Pension plan
2005 Legislation
• Chief Risk Officer: – Person not “function”
– No administrative responsibility– Advisory responsibility
2006 Circular
• Responsibilities: chief risk officer
• Support: actuaries, investment and reinsurance officers
• Risks: underwriting, market price, credit
• Stepping stone: enterprise risk management
Chief Risk Officer – Responsibilities
• Identify significant risks
• Evaluate monitoring and controls
• Evaluate preparedness for extreme events
• Quantify risk exposure
• Estimate economic capital
Economic Capital
• December 31 2009
• Correlations not required but encouraged
• Better understanding of risks
• Role in determining regulatory capital
Economic Capital
• Guidance:– A Global Framework for Insurer
Solvency Assessment (IAA)
– Quantitative Impact Study 2 – Technical Specifications (CEIOPS)
Chief Risk Officer – Responsibilities
• Immediate Reports:– Inadequate monitoring and controls
– Hazardous situation requiring correction
• Annual (Quarterly) reports
• Separately: risks for policyholders
Chief Risk Officer – Support
• Right to receive any information
• Annual (quarterly) reports:– Appointed actuaries
– Chief investment officer
– Reinsurance officers
Chief Risk Officer – Support
• Internal auditor – Independence– Work plan to include risk monitoring and
controls
2006 Circular – Implementation
• Deadlines in stages over three years• Implementation plan for each company
Encouraging Effective Risk Management
• Circular: no reporting to Commissioner • Chief Risk Officer:
– under CEO or senior manager– CEO and investment officers not eligible
Encouraging Effective Risk Management
• Risk management culture• Prerequisite for capital relief• Executive compensation
Encouraging Effective Risk Management
• Capital relief– New regime linked to Solvency 2
• Executive compensation – Draft regulations: Boards of Directors
Effective Risk Management –Board of Directors
• High-level policy:– Exposure of company and policyholders
to risk– Reinsurance– Data security
Effective Risk Management –Board of Directors
• Approve risk controls• Set exposure limits:
– individual risk categories– all risk categories combined
• Examine capital adequacy