Enterprise Risk Management

We have performed several reference calls for Pinnacle and will do so in the future.

— Insurance Company

Services

Enterprise Risk Management

Enterprise Risk Management (ERM) is a critical component of increasing your organization’s value by assessing, controlling, exploiting, financing and monitoring risk. The importance of ERM is self-evident due to the demands for information by rating agencies, regulators and financing institutions. While economic capital modeling is an essential element of ERM, it is only part of the process and not sufficient in and of itself.

At Pinnacle, we recognize the “M” in ERM stands for "Management", not models. We can assist you in the initial review, design and documentation of internal economic capital models and marginal pricing frameworks. Our holistic approach to ERM will help you to document your organization’s due diligence regarding ERM to interested parties.

Our expertise and insight comes from decades of tailoring specific solutions that meet the ERM needs of a wide range of entities and organizations:

Insurers and Reinsurers

We work with insurers and reinsurers on a variety of ERM projects, including:

  • Helping companies articulate their risk appetite
  • Building DFA models and performing DFA analyses (including company valuations) for insurers and reinsurers
  • Working on a variety of issues surrounding capital modeling
  • Assisting in the development of reinsurance treaty pricing models that incorporate rating agency capital requirements
  • Helping prepare necessary documentation for the capital models that they have developed
  • Assist designing marginal pricing models for reinsurance companies
  • Providing assistance for strategic decisions such as expanding into new lines of business or regions
  • Providing actuarial support for Merger & Acquisition (M & A) decisions

Asset managers

We work with asset managers to develop models that optimize asset allocations and that help to match the durations of assets and liabilities.

Regulators

Issues such as aggregation of risk, capital modeling and risk control procedures are all receiving considerable attention by regulators. Pinnacle works with a wide range of clients on these and other ERM issues and is well qualified to assist regulatory bodies in these matters.

Self Insured Entities

Pinnacle helps self insured entities analyze their entire cost of risk associated with the selected retention option. We can analyze various retention levels for a self insurance plan in an effort to maximize the benefit of the plan while focusing on the risk appetite of the entity.

Government Insurers

Pinnacle has vast experience assisting government insurance entities with ERM projects. Typically this would involve DFA analyses and other studies regarding capital adequacy and reinsurance structures.

Public Entities

Pinnacle’s expert staff helps public entities all over the United States in analyzing their exposures, liabilities, and risk management procedures in a cost effective way.

Publications and Media

Captive Insurance Companies Association (CICA) Conference
Captive Insurance Company Reports (CICR)
Authored by Aaron N. Hillebrandt.

Analytics Offer Unlimited Opportunities to Actuaries
Journal of Reinsurance Vol 25 No 1
Authored by Gary C. Wang.

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Case Studies

Capital Allocation
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Capital Allocation

A reinsurer wanted to compare technical treaty prices using varying capital allocation methodologies. A Pinnacle actuary assisted in the design of a model that used standard allocation methodologies, capital allocation based on marginal impacts to rating agency required capital, and recent ideas in capital consumption / utility theory. The result was a pricing model that highlighted the sensitivity of expected ROEs to the chosen capital allocation method and allowed underwriters to make more informed decisions.

Catastrophic Risks
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Catastrophic Risks

Pinnacle was retained by an insurance company specializing in catastrophic risk to identify and test alternative sources of risk financing capacity including traditional reinsurance and catastrophe bonds. In order to complete the project, Pinnacle designed a dynamic financial model to determine the cost/benefit of alternate risk financing strategies.

Company Valuation Model
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Company Valuation Model

An international financial services holding company wished to become the sole owner of a company in which they had a substantial minority interest. One of our consultants designed a stochastic valuation model projecting dividend streams several decades into the future. One of the more interesting features of this model is that it did not merely arrive at a point estimate of the value of the firm but applied various assumptions to calculate a range of values. The assumptions were discussed in advance with management and the model produced a probability distribution of the value of the firm. This allowed the client to determine the likely return for a given purchase price, improving the decision making process that led to the holding company obtaining full ownership of the subsidiary.

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