2022 Webinar - Foreign
Currency Risk Rating Methodology - October 20
Nearly
every company doing business beyond its own borders faces the challenge of cost
effectively managing currency translation risk. Each year, corporations incur significant currency-related losses due to global
currency volatility. Companies that do not manage their FX risk exposure effectively incur earnings impairment which is capital dilutive. Application of the fundamental Enterprise Risk Management ("ERM")
principals of risk pooling; proportionate risk sharing; and rank correlation, yields a structured insurance solution which results in equitable
pricing and yields lower overall capital requirements, which is accretive to book value.
This webinar will walk through the development of risk rating methods to
measure and manage the accretive ERM value of retaining FX risk exposure through a structured insurance program. The methodology has evolved
over the ten-year history of an actual captive insurance program which provides equitable premium rates to policyholders and yields risk
reduction on an aggregate basis through the application of credible predictive actuarial techniques. Specifically, we apply stochastic differential equations in comparison of
financial models with Levy processes using Markov Chain Monte Carlo (MCMC) simulation.
Learning Objectives
- Understand the risk theory underlying the actuarial methods applied to measure and manage foreign currency translation risk (FX) exposures.
- Learn the step by step risk analytic technique of MCMC simulation modeling to create the requisite aggregate loss distributions, which in turn yield the risk rating results.
- Review the past performance of this structured reinsurance solution with the ten year history from an actual captive insurance ERM program.
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