Actuarial Notes

Life Insurance Risk, Capital, and Asset-Liability Management in the Age of Uncertainty: Paper 1 – Risk Inventory and Taxonomy and Risk Calibration

By Anthony Dardis, Matthew Ford, Andrew Kirk, Bryan Liu and Hanbo Zhang · Milliman · 2023 · CP351-104-25

Study guide: Exam CP-351

The first of two Milliman reports, dated November 2023, on how life insurers are responding to the fast-changing economic environment, based on conversations with life insurers in the UK, European, U.S. and Bermudian markets. Paper 1 asks whether insurers' risk inventories and taxonomies captured the risks their business was exposed to, how they identify risks, and how they have recalibrated their quantification of risk exposures, including through stress and scenario testing.

On the syllabus

  • Exam CP-351 — Paper 1, on risk inventory, taxonomy and calibration; outcome 1c.

Introduction

  • Paper 1: Risk Inventory and Taxonomy, and Risk Calibration
  • Paper 2: Limitations of Risk Models and Monitoring, and Management Implications

Risk Inventory and Taxonomy

  • Risk Identification and Classification Framework
    • Methods for establishing a robust risk inventory and taxonomy
  • Risk Identification Special Focus Area: Operational and Strategic Risks
  • Evolving and Emerging Risks
    • Inflation
    • Interest rates and liquidity risk
    • Risks associated with alternative assets
    • Market volatility
    • Climate risk
    • Model risk

Risk Calibration and Dependencies

  • Risk dependencies
  • Risk calibration
  • Stress and Scenario Testing

Conclusion and Upcoming Paper

Sources