Risk measurement and allocation in support of Enterprise Risk Management (ERM), pricing, performance, growth, etc. are challenging tasks for insurance companies. Guy Carpenter's MetaRisk® Tool Suite and new Spectral Risk Measures (SRMs) methodology help our clients address these challenges.The following training videos will help you better understand how Spectral Risk Measures work. To download the spreadsheet referenced in the videos, please enter your contact information in the form on the right.
Training Videos:
Part 1 Video: Why? "This is not about mathematics. It's about management concerns, use test, risk committee, board, people steering the company - and giving them something meaningful." (9:21)
Part 2 Video: Theory. "Risk measures determine assets, prices, and capital. The thin layer trick (tranches), with some constraints driven by rational requirements, leads to the notion of a spectral risk measure."(16:23)
Part 3 Video: Spreadsheet part 1. "It looks complicated, but once you start to apply these things in Excel, you will see it is not that intimidating. This is where you can see why it is called 'spectral.'"(19:25)
Part 4 Video: Spreadsheet part 2. "Someone hands you the plan for next year. Which lines of business and which reinsurance options are contributing to shareholder value? Conversely, what do we need to believe for the plan to be risk-neutral?"(17:51)
Part 5 Video: Parametrics. "Drawing a risk preference curve is a bit of a problem, because there are infinitely many choices to be made. Parametrics are a way of getting a handle on that."(12:46)
Part 6 Video: Financial part 1. "Taking the perspective that the investor owns all the assets, but agrees to pay claims out of them, we see that the ROE curve provides a new way of understanding spectral risk measures." (BONUS: the problem with TVaR) (15:34)
Part 7 Video: Financial part 2. "The simplest ROE curve, a straight line, leads to the Linear Yield Model. This can also be derived from the Shared-Asset theory of insurance capital."(8:36)
Part 8 Video: Spreadsheet part 3. "Say senior management hands us a view on minimum ROL and overall cost of capital. We can calibrate the parameters of the Linear Yield Model to those and then use it to allocate required premium to the portfolio components."(19:36)
Part 9 Video: Conclusion and next steps. "In your company, capital allocation is the perfect storm of Enterprise Risk Management meets Solvency II requirements meets the Use Test of all this capital modeling you've invested in. It drives planning, reinsurance purchasing, and so on. It's absolutely critical, and it’s our (actuaries) job."(5:41)
