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Web Session: CERA, Module B: Taxonomy, Modelling and Mitigation of Risks – October 2021
27 September - 1 October
The seminar focuses on quantitative analyses of financial and non-financial risks of an insurance company and the effect and possible applications of risk mitigation techniques. After an introduction to the economic valuation of an insurance company, including stochastic valuation models and approximation techniques for life companies, and the building blocks of its economic balance sheet, the risk measure as well as the relevant regulatory requirements of Solvency II will be discussed. Different concepts of risk modelling covering from standard formula to fully internal models will be presented.
After a deep-dive into the risk classification, strategic, reputation and operational risks are dealt with. Afterwards methods for modelling market, credit and underwriting risks will be presented in detail. The discussion of each risk starts with its definition, how it can be identified and distinguished from other risks, and its classification according to SII. The taxonomy is followed by qualitative and quantitative valuation approaches – including scenario analyses, stress tests, deterministic and stochastic assessments, and quantifications according to the standard formula and an internal model. Furthermore, crucial aspects of any model such as assumptions, distributions, calibration and validation are discussed, as well as limitations and criteria for the adequacy of a model for solving a given problem.
Having introduced and discussed the risk modelling, tools and techniques will be discussed that are available in the insurance business to mitigate these risks. That includes the discussion around the implications of reinsurance and securitisation as well as portfolio management. We will also present what life insurance companies subject to traditional with profit business can do to hedge their main risks.
Both elements, risk modelling and measurement as well as risk mitigation, are closely related and interact with each other, what will be reflected in the topics presented and the structure of the seminar.
The consolidated view on risks in a company and an outlook on Group models close the course.