HK Actuarial Symposium Discussion Session Nov 3, 2010 Theme: Asset, Liability and Capital Management: Where are your risks? Polls on the following questions: (take 5 minutes for table discussion and 5 minutes to summarize) 1. Are you a CERA? 2. Does the regulation in HK require an Enterprise Risk Management Mechanism now? If not, will ERM be required in the next 5 years? 3. Does your company have an existing Enterprise Risk Management framework and mechanism? If yes, what are the major factors to drive the adoption of ERM system? If not, what are the major factors to hold it back? 4. If ERM has been implemented in your company, what are the risk metrics used to measure risk? (For examples, Economic Capital, VaR, EaR, ….) Our session will cover group discussion on the following subjects that actuaries have encountered with. General questions for discussion are as follows: − What are the issues identified? − What alternatives are open to you? − What actions would you take? Why? Discussion Subject 1: Post Financial Crisis 2008 The financial crisis 2008 has a deep impact to the insurance industry in Asia. The trends we have seen since last year in several countries in Asia has indicated a pull out from several foreign insurers, speculations in the market for reasons included declining parent company capital position, Solvency II implications, mis-aligned risk and return proposition, continued low interest environment, …, etc. Questions for your table to discuss: 1. HK insurance industry has been affected by the 2008 crisis, please list top 5 observations immediately after crisis to support your view. 2. Has the condition of the 5 observations above improved in the last year+? 3. Has the crisis changed your practices for your business? 4. Is the capital position of your company/industry improved from 2008 year end to 2009 year end? Discussion Subject 2: Identification of Major Risks In general, insurance industry has commonly identified four major risk categories, i.e., Credit, Market, Insurance and Operational risk. Please provide summary from your table group for the following questions. Questions for your table to discuss: 1. Please rank the four major risks above in terms of importance for your company and share with your table group the reasons supporting your view. 2. Discuss challenges you have encountered for qualitative and quantitative risk management process for the four major risks above. Share with your table group exploring potential solutions or alternatives.
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HK Actuarial Symposium Discussion Session Nov 3, 2010
Discussion Subject 3: Challenges in Implementing ALM Some insurance markets in Asia have to face the continuous low interest rate environment which increased the needs for investment department to generate higher spreads to support older and higher guarantees block of business. Questions for your table to discuss: 1. In your opinion, is HK in “low interest rate” environment? Please share your view. 2. What are the major challenges for your company to implement ALM mechanism? 2.1. senior management and board’s understanding and support 2.2. asset models 2.3. liability models 2.4. asset and liability models linkage 2.5. metrics and technical expertise 2.6. monitoring and reporting process 2.7. investment, reinvestment, disinvestment strategies 2.8. resources 2.9. others … 3. Are your actuaries ready to implement ALM? What are the major challenges to get ready?
Discussion Subject 4: Asset, Liability and Capital Management In general, financial crisis 2008 has affected the shareholders value by decreased asset value and narrowing spreads. We have discussed the financial impacts in the workshop last year. Looking back to the financial impacts, let’s think about things we would have done differently if we knew better. Questions for your table to discuss: 1. What products do you believe should not be sold? 1.1. what are the alternatives? 2. What assets do you believe should not be bought? 2.1. what are the alternatives? 3. What are the other issues besides asset and liability? 3.1. distribution channels 3.2. regulatory changes 3.3. policyholders anticipation 3.4. shareholders anticipation 3.5. market analysts 3.6. others 4. What actions would you take? Why? 5. For capital management, how does your company manage company capital related issues? 5.1. treasurers function 5.2. finance function 5.3. investors relation 5.4. economic versus regulatory capital 5.5. others
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