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7 Cards in this Set
- Front
- Back
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Briefly describe four aspects of enterprise risk management |
1. Not a one time thing 2. Should be done on a firm-wide level 3. Focuses on the risks that will have a significant impact to the value of the firm 4. Risks must be quantified as best as possible |
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Briefly describe four risks that an insurer faces |
1. Insurance Hazard - risk assumed by insurer in exchange for a premium 2. Asset - risk in the insurer's asset portfolio related to volatility in interest rates 3. Operational - risk associated with the execution of the company's businesses 4. Strategic - risk associated with making the wrong or right strategic choices |
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What comprises Insurance Hazard risk (3)? |
1. Underwriting risk 2. accumulation/CAT risk 3. Reserve Risk |
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Provide 3 characteristics of a good enterprise risk model |
1. Model shows balance between risk and reward from different strategies 2. The model reflected the relative importance of various risks to business decisions 3. The model includes mathematical techniques to reflect the relationships among risks (dependencies) |
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Describe four types of parameter risk |
1. Estimation risk - mis-estimation of model parameters due to imperfect data 2. Projection risk - refers to changes over time and the uncertainty in teh projection of these changes 3. Event risk - refers to situation in which there is a causal link between a large unpredicted event (outside of the company's control) and losses to the insurer 4. Systematic risk - refers to risks that operate simultaneously on a large number of individual policies |
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3 sources of uncertainty in catastrophe models |
1. uncertainty related to probability of events 2. uncertainty related to amount of losses the event will generate 3. uncertainty related to the quality of data |
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4 reasons for holding sufficient capital |
1. sustain current underwriting 2. provide for adverse reserve changes 3. provide for declines in assets 4. support growth 5. satisfy regulations, rating agencies, and shareholders |
