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RCM-4: From Enterprise Risk
Management to Ratemaking
Ratemaking Seminar
March 9-11, 2005
Kevin Dickson, FCAS, MAAA
Allstate
From ERM to Ratemaking
Objectives:
 Define terms – Clear(er) sense of what ERM
is & is not
 Describe the connection between ERM and
Ratemaking (and other traditional actuarial
roles)
 Future role of actuaries in ERM
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From ERM to Ratemaking
Definitions:



“Risk”

Bad outcome

Volatility
“Enterprise Risk Management”

Control

Finance/Portfolio
Precise, commonly-held definitions reduce confusion
and support appropriate risk management actions
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From ERM to Ratemaking
CAS ERM Definition
“The discipline by which an organization in any
industry assesses, controls, exploits, finances
and monitors risk from all sources for the
purpose of increasing the organization’s shortand long-term value to its stakeholders”
Key elements:
– Dual nature of risk
– Value creation
– CAS relevance beyond insurance industry
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From ERM to Ratemaking
Enterprise Risk Management at Allstate

Staff function reporting up through CFO

Advise CFO and Risk Council on issues such as:
•
Capital
•
Aggregate Risk
•
Risk/Return trade-offs
•
Risk Tolerances
•
Standard Terminology, Metric

Quantitative focus

Coordinate risk management activities throughout the
corporation
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From ERM to Ratemaking
Ratemaking/ERM Linkage:
 Do actuaries practice ERM?
 Functionally, will ERM change what
Ratemaking/Reserving/Other Actuaries do?
 Intersecting at the point of capital
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CAS ERM Framework Grid
Risk Management Process Step
Risk Type
Establish Identify
Context
Risks
Analyze/
Assess/
Quantify Integrate Prioritize
Risks
Risks
Risks
Treat/
Exploit
Risks
Monitor
and
Review
Strategic
Operational
Financial
Hazard
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From ERM to Ratemaking
Ratemaking/ERM Linkage – Intersecting at
the point of Capital
Capital
Risk
Loss & Expense
ERM
Ratemaking
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From ERM to Ratemaking
The future role of actuaries in ERM:
 Adoption of Actuarial practices, techniques
 Coordinators
 Quantitative modelers – aggregating all risks
 Others…
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