You have completed Phase I and II of your assessment and now your CFO wants to d

Question

You have completed Phase I and II of your assessment and now your CFO wants to discuss a few issues. He strongly advises the CEO to develop a system to evaluate enterprise and financial risk. The reason for this is that there are two models that are inconsistent and he wants to "work on the same page" as your team. This is an initiative to streamline operations and reduce confusion. You have a few ideas, however you need more time to compile an analysis for review. You are not expected to be an expert, however the goal is to submit a proposal that you and your CFO can work on together to evolve into a policy that assists each department. In addition, you want a strong and financially viable health system. This ensures that you and your team have the resources needed to continue future operations. Prior to your team meeting next week, you want to address the following topics to support Phase I and II:

g the uj analytical sk on's opera markets Mest the Cttain epuotatiors nslyses k mana Negotiato and place policy agemen s curren s finand Figure 12-6 Primary Steps in the Insurance Marketing Process d direoe in the marketplace, and other factors that affect the selection. More specifically, the h a may pro . The amount and quality of reinsur g plan review process should include the following rclal-in-items ance recoverables Underwriting earnings compared with investment income Cash flow from operatlons and liquidity 1. Financial strength of the insurer, includ- ing any recent changes * Review published . Historical loss data state licensing, coun ublic financial reports fled 4 Identification of parent company and gam. Review information available from 5. Identification of The quality of accounts, such as . Determination of balanice sheet and operating results Review p with regulatory agencies try of origin, or domicile any intercompany relationships reinsurance arrangements ment comperence . 6. Examination of the insurer's manage- insurer financial rating services If there is any question about financial strength) identify key underwriting manage ment changes 2. Financial solvency analysis (conducted . Identify changes in underwriting ny signiicant changes in gross or ner written premiums * The ratio of net premium written to philosophy policyholders' surplus

Explanation / Answer

ERM Framework:-

Control Environment

The corporate values, culture and philosophy need to be communicated and understood by all the employees.

Risk Appetite :-

Analyze the risk appetite of the organisation.This will need help from the CEO/CFO as it is a strategic call

Governance and Policies:-

This will require one to understand the current system and any internal conflicts that need to be understood and sorted .This can help in policy updating.

Measurement and Evaluation:-

These are important steps as they help us get a yardstick on the performance.

Response:-

Frequently understanding the Response such as through 'Sensitivity Analysis' helps understand the success of the implemented policies.

Business Strategy and Risk coverage:-

This involves the Vision and Mission of the company. Based on this, we can understand our risk appetite

Risk data and Infrastructure:

All the statistical and business Analytics need to be in place to convert the data to information

Stress Testing:-

Understanding where we stand. This can be achieved through stress testing and challenging ourselves to better our performance.

2)

The Insurance Marketing Process needs to be supported with everyone having understood the product and its importance to the target market.

It also helps to understand that the Insurance sector is a relatively untapped sector.

There needs to be sufficient resources at disposal to aggressively market the same.

3) These are entirely dependent upon the organization's risk appetite. This decision is important as it can lead to high expenditure and cost if something that can be borne is shared and vice-versa.

Risk could be borne if after evaluation, the cost of an unforeseen incident happening is not much.

Risk can be shared if the cost of the exposure and the eventual occurrence is very high.

4)

The Workers compensation program is devised based on the

Risk of injury to an employee/worker

and the Impact of the injury

It would be an important step in implementing to quantify the risk and impact and arrive at a threshold number as to how much could a worker be compensated.

Besides with technological process, the risk associated could be reduced and thus the impact. So this equation needs constant renewal, review and updating.

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