Risk Management highlights at the 20/20 All-Actuaries Virtual Summit

One of the key benefits of registering for a Virtual Summit is the flexibility to watch session recordings whenever it suits. Below is a summary of some of the Risk Management sessions that are well worth a view.

Using Superannuation Fund Operational Risk Scenarios To Calculate an Internal Risk Based Capital Position (6 August)

All Australian super funds must maintain an Operational Risk Reserve for the long term benefit of members. A joint effort of the Superannuation and Risk Management Practice Committees, this practical presentation explores the use of risk based scenario analysis in developing an internal risk-based capital position. 

‘Tail’ related loss data for Australian super funds is generally unavailable, making a risk based capital model based on historical loss data very difficult to construct. The alternative four-step method explored in this session is to use management sourced scenarios aggregated together using relatively simple statistical techniques. Asking the right questions to management and being aware of any biases are key to the appropriateness of the approach.

All Risks Eventually Have Financial Consequences: Improving the Focus of Non-Financial Risks (10 August)

While traditional actuarial focus has been on financial risks, non–financial risks have significant financial implications for companies, their investors and their customers. This session covers the following topics:

  • What are non-financial risks?
  • How can we identify and better manage them?
  • Industry case studies relating to non-financial risks; and
  • Practical steps actuaries can take to contribute to effective non-financial risk management within their organisation or for their clients.

 

Non-Financial Risks in General Insurance – The AA’s Role (18 August)

This session’s focus is the AA’s role in the management of non-financial risks (NFRs) for general insurers.

Insights from the session include:

  • personal Lines insurers generally have better coverage of NFRs, especially Product/Customer risks;
  • about 50% of risks on general insurers’ risk registers are NFRs, but;
  • most of the risks that appear are ‘first generation’ NFRs: Operations, Compliance, Strategy and Data/Cyber;
  • ‘second generation’ NFRs appear much less frequently: Reputation, Conduct & Culture, Governance, Product/Customer, Stakeholder Relationships; and
  • reputational and relational risks are much more prominent in risk appetite than risk reporting.

 

The session proposes some concrete ways for AAs to add value to the management of NFRs.

Actuaries and Discrimination – Report of the Anti-Discrimination Working Group (26 August)

Winner of the 2020 Melville Prize, this report and presentation raises awareness of the actuarial profession around the important contemporary issue of discrimination that may occur directly or indirectly through the design of insurance products and industry practices around underwriting, pricing and claims. The session covers:

  • summary of anti-discrimination legislation and insurance exemptions;
  • recent case studies of discrimination in insurance; and
  • practical considerations for actuaries, such as judging whether data is reliable and whether discrimination is ‘reasonable’ in the context of the insurance exemptions.

 

While as actuaries there can be a tendency to focus on incremental changes to product and practice, the presenters encourage a ground up review of existing products to ensure they meet the provisions of the legislation.

 

Risk margins – Are They Really Capturing The Risk? (27 August)

The presenters of this session take us through the results of the 2020 biennial survey of Australian Life Insurance risk margins and Target Surplus. The survey has been performed across 24 insurers and reinsurers covering more than 90% of the industry by in-force premiums.

The survey results highlight trends in risks margins since 2018 and allow entities to benchmark their specific risk margins to that of comparable entities. In addition, the survey provides an overview of the approach and methodologies used across the industry to set Target Surplus. The full set of results will be published on the Life Insurance & Wealth Management Practice Committee website.

Recordings of the above sessions are available to view on the app for registered 20/20 Virtual Summit attendees.

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