Tag Archives: enterprise risk management

ERM best practices and considerations for Asian insurers

A strong risk management function within an insurance company allows threats to be managed and opportunities to be captured across every unit and level of the enterprise. Taking a holistic approach to risk enables organisations to optimally prioritise responses and allocate resources to manage risk exposures. It can also help identify significant risks that may have been overlooked through traditional compliance risk management practices.

Developing a risk management framework is an ongoing process that involves strategy and objective setting, risk identification, risk assessment, risk monitoring and risk incidence procedures. A well-defined framework addresses such items as the interaction of the executive risk management committee with the staff who are identifying risks, the criteria for measuring the likelihood and severity of risks and the design of questionnaires, workshops and other methods of identifying risks. With such a risk management programme in place, a company can improve the quality of internal and external customer service, protect its financial and human capital resources and safeguard the organisation’s reputation.

In this report, Milliman’s Shoaib Hussain, Pingni Eng, and Jessica Pang examine risk management best practices from their discussions with participants, global regulatory developments, and global Milliman perspectives. The authors also discuss key challenges and areas of focus for the development and evolution of risk management in Asia.

A quantum leap in benchmarking P&C unpaid claims

The ability to benchmark an entity’s results against others in the industry and the industry as a whole can provide significant insights into both actuaries’ daily work and their strategic planning. Using the most advanced benchmarks available can help to ensure a more efficient integration of reserve variability analysis into enterprise risk management processes and enhance an entity’s strategies. Milliman consultant Mark Shapland offers some perspective in this article.

The article was originally published in the March/April 2018 issue of Contingencies.

Top 15 global articles and reports for 2017

Milliman’s most viewed articles worldwide in 2017 covered topics related to healthcare in the United States, the rise of InsurTech, and the challenges of IFRS 17. (For summaries and links to all of the articles, click here.)

Here is the list of the top global articles and reports for the year:

15. MACRA: Key Considerations for health plans, By Colleen Norris and Mary van der Heijde

14. Multiemployer Pension Funding Study, By Kevin Campe

13. The American Health Care Act, By Jason Karcher

12. MACRA and Medicare Advantage plans: Synergies and potential opportunities, By Christopher Kunkel, Drew Osborne, Lynn Dong, Michael Polakowski, Noah Champagne, and Charlie Mills

11. Effective employee communication: The benefits of best practices, By Jessica Gonchar, Heidi tenBroek, and Sharon Stocker

10. Building blocks: Block grants, per capita caps, and Medicaid reform, By Justin Birrell, Jennifer Gerstorff, Nicholas Johnson, and Brad Armstrong

9. Overview and practical considerations of the new insurance contract standard: IFRS 17, By Gillian Tucker and Andrew Kay

8. InsurTech: Innovation in the P&C insurance space, By Thomas Ryan

7. The employer stop-loss insurance marketplace since the Affordable Care Act, By Mehb Khoja

6. 2017 Public Pension Funding Study, By Rebecca Sielman

5. Summary of individual market enrollment and Affordable Care Act subsidies, By Paul Houchens, Jason Clarkson, and Zachary Fohl

4. Impact of the transition from RAPS to EDS on Medicare Advantage risk scores, By Deana Bell, David Koenig, and Charlie Mills

3. Corporate Pension Funding Study, By Zorast Wadia, Alan Perry, and Charles Clark

2. Pension Funding Index, By Zorast Wadia and Charles Clark

1. Milliman Medical Index, By Christopher Girod, Susan Hart, and Scott Weltz

Emerging cyber risk regulations will move companies to fortify risk management strategies

New York has enacted regulations to protect the state’s financial services industry and consumers from cyberattacks. Future regulation may require a reliable, evidence-based approach to risk assessment as a minimum requirement for compliance.

In this article, Milliman’s Mark Stephens and Lisa Henderson discuss the evolution of cyber risk and the need for companies to understand their cyber risk exposure and the financial implications of a potential cyberattack event. They also outline several actionable steps companies can take to assess and quantify their cyber exposure.

The Times of London: Why your risk team needs to become your insight function

Business today moves at lightning pace, and this rapid pace of change is leading to an evolution in risk management. In a recent article in The Times of London, “Why your risk team needs to become your insight function,” Milliman consultant Neil Cantle writes that traditional forms of risk management are quickly becoming too slow to anticipate or enable meaningful reaction. More and more, writes Cantle, companies are embedding new technology and automation into their risk management processes, and risk teams are evolving to help businesses embed risk-thinking into their daily activities. The full article can be accessed via the link above. For more information on Milliman’s work in enterprise risk management, click here.

To optimise financial decision-making, human-and-machine iterative process proves most successful

Milliman has announced that an innovative new study examining multi-criteria decision-making using an iterative process of advanced computing and human input has shown superior results in risk management when compared with machine algorithms or humans alone.

Using an illustrative example from the life insurance industry, the study looked at how optimisation techniques can be used to develop insights into drivers of economic capital within an internal model framework, and how to then use these insights for risk management decisions. The findings illustrate that advanced computing, visualisation, and complex systems-mining techniques that include expert input can deliver superior optimisation results when faced with multiple objectives and multiple constraints, which machine algorithms alone find challenging to resolve.

While not obvious at the outset, combining human input with advanced computer modeling allows domain experts to analyse results and elicit insights into features that subsequent iterations of a model should contain, thereby refining the process.

Milliman’s study employed the DACORD platform from DRTS, Ltd. to support its system-mining efforts. ‘Future states are unknown, involve human affairs and are therefore complex,’ says Jeff Allan, CEO of DRTS, Ltd. ‘Augmenting experts with the appropriate tools and processes can aid the reasoning and evaluation of a range of solutions.’

Adds Milliman’s Corey Grigg, ‘Looking toward the future, this sort of optimisation technique can extend to big data, simulations, and enhanced visualisation, ensuring that even as the complexity of our data and problems increases, experts can continue to add value.’

The results suggest a number of practical applications for enterprise risk management (ERM) in the insurance industry, including finding patterns in key risks driving capital losses and understanding diversification in order to enable quick judgements about the similarities and differences in the risk profiles of different portfolio elements.

Milliman’s Optimisation study was conducted in conjunction with Dr. Lucy Allan of University of Sheffield. To read the entire study, click here.