Enterprise risk management (ERM) has gained increased importance within the insurance industry over the past decade, and it continues to evolve as the industry and its definition of risk evolves. ERM calls for insurance companies to identify all potential risks that they either currently or potentially face, and how the company is managing that risk. ERM helps companies to manage risk, but it does not eliminate risk.

Prime has proven to be a valued partner to our clients in their ERM efforts. Our investment team blends capital market and actuarial experience to evaluate risk from multiple viewpoints. Some important considerations are:

  • Stress testing variables such as interest rates and loss reserves. Volatility can be evaluated based on historical uncertainty and by evaluating extreme scenarios that have not occurred but could happen

  • Reverse stress testing that starts by determining the point at which a loss of capital drops below a targeted minimum and then identifying scenarios that might cause this to occur

  • Evaluation of both short term and long term risks

  • Correlations between the asset risks and insurance risks

  • Creating an action plan if an identified risk scenario begins to transpire

To help aid our clients with the heavy task of risk management, Prime has developed models and reports that quantify various asset risks. Some of these risks are:

  • Interest rate risk

  • Reinvestment risk

  • Liquidity risk

  • Credit risk

  • Concentration risk

  • Tax risk

  • Political risk

After reviewing an ERM profile, we work with our clients to implement the necessary changes into our investment guidelines. This ensures that the ERM process is utilized in taking appropriate investment risks for our clients in achieving their return objectives.