Over the last decade, the concept of Enterprise Risk Management (ERM) has gained significant momentum in the insurance industry and beyond. This came with the recognition of risk as being something not per se to be avoided, but to be optimally exploited in the frame of a company’s risk appetite. ERM is going beyond traditional risk management in that it is holistic, and encompasses strategic risk management as well as risk culture.
Many of these developments are reflected in regulatory changes, such as Solvency II (although these focus on policyholder protection and less on opportunities). Solvency II requires an actuarial and a risk management function in all (re-)insurance undertakings. Actuaries should see this as an opportunity to broaden their role, and to show that they are ideally equipped to carry out these tasks.
Against this backdrop, in November 2009, several actuarial associations launched the CERA credential as a global risk management designation for actuaries. CERA pursues the following goals:
- Strengthen international recognition of the actuarial profession’s enterprise risk management (ERM) expertise
- Promote the development of more actuaries internationally with training in ERM
- Present new opportunities for actuaries worldwide to use their expertise in an expanding range of areas
- Send a strong message to employers and candidates that the skill set of actuaries offers significant risk management expertise
Based on the 2011-implemented education und examination system of the German Actuarial Association, the EAA offers a series of training courses and exams (through DAV) to study for the CERA designation to all actuaries who want to deepen their knowledge in Enterprise Risk Management.
The Seminar ‘Foundations and Quantitative Methods of ERM’
The 4-day seminar starts with a brief introduction to CERA. The core of the seminar consists of two parts. The first part of the seminar assists actuaries in broadening their knowledge about modern quantitative financial and actuarial modelling, which form an essential part of the CERA syllabus. This begins with an introduction to the modern theory of risk measures. Next, a number of statistical techniques are discussed, that are highly relevant for the analysis of actuarial and financial data and for the model-building process in risk management. Among others, we will consider extreme value theory, dependence modelling, copulas, and various aspects of integrated risk management. The seminar continues with an introduction to the modelling and the management of interest rate and credit risk. In particular, participants will learn how to price simple interest options or Credit Default Swaps, how to compute risk measures for a bond portfolio, and how to account for counterparty risk.
In the second part of the seminar, the topic Enterprise Risk Management is covered from a more qualitative viewpoint. This will allow participants to understand and handle the entire risk universe including non-quantifiable risks and those risks for which companies traditionally do not hold capital, but manage them in other ways. Topics discussed include the concepts of risk and ERM, an overview over the 42 central elements of ERM, and a session outlining how ERM creates value for any company. Furthermore, the risk management culture including risk consciousness, accountabilities, discipline, collaboration, incentive compensation and communication is presented together with governance issues including market conduct, audit and legal risk. This part of the seminar also explains stakeholders, standards, first steps in the choice of a suitable ERM framework.
The seminar consists of lectures and exercise sessions. In fact, exercise sessions, where various exercises and supplementary examples are discussed, form an integral part of the seminar: they help the participants to understand the qualitative and quantitative techniques introduced in the lectures, and they are a key element in the preparation for the CERA exam.
Organised by the EAA - European Actuarial Academy GmbH in cooperation with the Instituto de Actuarios Españoles.