ERM concepts and Risk categorisation [51]

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Bullet points include: Any risk classification system should start by considering the economic value of an enterprise For life insurance includes embedded value (existing assets, liabilities): Implies high level categories such as: market risk, credit risk, insurance (and demographic) risk and operational risk, as well as liquidity risk (as solvency can be impaired if assets not sufficiently liquid) Also includes intangibles / goodwill / future profits from new business, introducing strategic risk ‘Frictional’ capital (and hence frictional risk) defined as capital needed for regulatory, accounting or rating agency requirements in excess of amount determined solely by reference to economic risks

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