ERM-702-12: IAA Note on ERM for Capital and Solvency Purposes in the Insurance Industry


#1

A Fellowship Forums Wiki Community Post

Online Link to this Reading: http://www.actuaries.org/CTTEES_FINRISKS/Documents/Note_on_ERM.pdf

Topics Covered in this Reading:

  • Introduction
  • Governance and an Enterprise Risk Management Framework
  • Risk management Policy
  • Risk Tolerance Statement
  • Risk Responsiveness and Feedback Loop
  • Own Risk and Solvency Assessment (ORSA)
  • Economic and Supervisory Capital
  • Continuity Analysis
  • Role of Supervision in Risk Management

This is a wiki post, editable by anyone. Feel free to edit and add key points/extra detail above!


ERM-702-12: IAA Note on ERM for Capital and Solvency Purposes in the Insurance Industry
ERM-702-12: IAA Note on ERM for Capital and Solvency Purposes in the Insurance Industry
#2

Hello,

I’m having trouble distinguishing between risk capacity and risk tolerance. Can someone please clarify?

Thanks!


#6

Hi Steve!

This is what I would say:

  • Risk Tolerance is the amount of risk that a firm is willing to take on to achieve their desired goals/obligations. This is specifically related to how much risk the firm is COMFORTABLE taking to ACHIEVE their goals.
  • Risk Capacity is the absolute max amount of risk that the firm is able to take, based on their resources and current financial obligations. If they take more risk than that, they are at risk of going insolvent.

Lastly,

  • Risk Appetite is the company’s general view towards risk. Are they a risk seeker? Are they risk averse? How do they feel about different risks in general. This will be cleared up when you get to the various readings on Risk Appetite Statements.

#7

I think another key to risk appetite is the idea that this is the amount of risk a firm is willing to take while still achieving its strategic objectives…it seems like one of the big ideas on the exam is making sure that risk assessment, measurement, etc., is related to the strategic planning of a company.


#8

This section drop me crazy!:tired_face::tired_face::tired_face:


#9

What about this section is driving you crazy? Maybe someone can help? :construction_worker_man::rescue_worker_helmet: