Insurance Companies

Services for the insurance community include:

1. Support of Corporate Strategy Planning and Analysis
2. Risk Management
3. Investment Operational Support
4. Independent Support for the Board of Directors

Support of Corporate Strategy Planning and Analysis

Investment Policy Review

Dave Tyson has worked with many Life, Property Casualty, and Health insurance companies to create and adapt investment policies to meet the variety of conflicting goals and constraints of their various constituents. Dave has extensive experience addressing the issues that arise in balancing attaining the company's reported financial goals with the optimal long term economic total return/risk balance for the investment portfolio. Combining this with CMRA's existing practice for funds and financial institutions brings a unique perspective to a review.

Risk Budgeting

Leslie Rahl is the editor of the book, "Risk Budgeting, a New Approach to Investing" published in 2000 and CMRA has advised Institutional Investors on all aspects of Risk Budgeting. Dave Tyson brings his extensive experience in planning insurance company risk based capital, asset liability, and liquidity management programs.

Risk Appetite and Attitude Statements

CMRA is a pioneer in expanding "Risk Appetite" statements to include "Risk Attitude" and is using interactive technology to assist a board in creating its' statement. Dave adds his experience helping insurance company managements adapt their risk appetite as their financial condition changes as well as to adapt to unexpected market conditions.

Asset Liability Management Advisory

Dave Tyson has designed and implemented asset liability management programs for a variety of Life, Property/Casualty, and Health liabilities in the US and internationally, and his asset liability experience is complemented by Peter Niculescu, who ran an IT Treasury.

New Product Risk Assessment

Dave Tyson has experience setting up investment strategies and risk controls for many new insurance and investment products including a variety of products using equity options, and this will expand the depth and breadth of CMRA's existing practice.

Merger and Acquisition Support

Dave Tyson has done due diligence for and implementation of mergers in Life and Property Casualty insurance companies in the US and internationally, and this will expand CMRA's mergers and acquisitions practice that has been focused on funds and brokers/ dealers.

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Risk Management

Risk Governance

CMRA helped create "Risk Practices for Mutual Fund Trustees (2010)", "Risk Principles for Asset Managers (2009)", and "Risk Statements for Institutional Investors and Investment Managers (1996)." CMRA is uniquely suited to assist our Institutional Investor clients on Risk Governance as a result of our own experience as directors and trustees, as well as our extensive risk governance benchmarking and advisory work.

Risk Advisory

Dr. Peter Niculescu heads up our Risk Advisory practice and brings extensive portfolio management and trading experience, as well as risk management experience to our activities. Dave's experience in the Insurance and Asset Management industry complements CMRA's existing team.

Risk Measurement Systems

All the principals at CMRA have extensive experience designing and implementing risk measurement systems that effectively meet an organization's needs. This includes designing reports for different levels of management that balance the need for information with the dangers of information overload.

Risk Due Diligence

CMRA conducts risk due diligence at the request of financial institutions seeking to benchmark and improve their practices, at the request of Institutional Investors seeking to invest for hedge funds seeking to understand how institutional investors world view them, as well for boards looking for an independent review.

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Investment Operational Support

Integrated Performance and Risk Measurement and Attribution

Dave Tyson has over 20 years experience designing risk analytics, performance measurement programs, and performance attribution models that integrate the feedback between risk and performance for fixed income, equity, and hedge fund portfolios. He also has extensive experience utilizing their results in the compensation process. This experience expands both the depth and breadth of that of Dr. Niculescu.

Investment Management Structure Review

Dave Tyson has studied and implemented many different investment organization designs including analyzing the interactions with insurance business and financial groups. This has included cross industry surveys, managing organizational change, and making sure that risk and compensation issues are addressed.

Asset Management Process Review for Fixed Income, Equity, and Alternative Investment Asset Classes

Dave Tyson has over 30 years experience investing and setting up processes in a variety of fixed income, equity, and alternative investments. Approaches have included those with a heavy reliance on quantitative tools to those that relied on the judgement of the individuals in the group. He also has designed programs to approach the mix between specific asset classes in the context of both general account insurance and total return portfolios.

Derivative Program Review

All of the principals at CMRA have extensive experience utilizing derivatives. Dave brings his background utilizing derivatives for a wide variety of insurance needs. The group has worked with derivatives in the fixed income, equity, currency, and commodity areas.

Alternative Investment Strategy

Dave Tyson has over 25 years investing in a variety of alternative investments. He also has designed programs to approach the broader asset classes as well as has set up and managed the investment process for specific funds.

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Independent Support for the Board of Directors

Risk Governance Advisory

Our perspective as Board members, risk experts, financial institution traders/structurers and Business managers uniquely positions us to serve Boards on issues from Risk Governance to Risk adjusted compensation

Education for Trustees

CMRA provides customized educational programs for Boards and trustees on all aspects of risk management and risk governance.

Internal and Regulatory Investigations

Experienced in conducting both internal and regulatory investigations

Crisis Management (Derivatives and Structured Finance 911)

Swat team to assist in quickly assessing problems, evaluating alternatives and solving problems. Dave Tyson has experience working through several insurance industry crisis periods.

Pre-litigation support analysis and advisory services

Advice regarding disputes, valuations, unwinds, EOD's and other issues BEFORE litigation commences.

Litigation Support/ Expert Witness

Expert analysis and testimony in matters ranging from valuation to suitability to market practices.

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Recent and Upcoming Speeches re: Insurance

June 2010

May 2010

April 2010

Selected CMRA in the Press re: Insurance

CRO Creation on the Rise, But Role Continues to Evolve
By Julie Goodman

A new risk governance survey indicates that the number of chief risk officers is going up among financial institutions and that the role of those CROs is becoming an increasingly strategic one – not simply one of control.

According to this year's Risk Governance: A Benchmarking Survey, 66% of CROs have both a strategic and a control role, up from 47% last year. The number of participants reporting that they have a CRO increased from 70% to 89%.

The Capital Market Risk Advisors [CMRA] survey was conducted over two weeks in July 2010 among 66 financial institutions, including asset managers, commercial and investment banks, insurance companies, plan sponsors, sovereign wealth funds, endowments and hedge funds. Of the respondents, 45% were asset managers, most of whom have mutual funds.

"In their narrowest sense, a CRO is a cop, and they keep track of the people [who] are staying within their risk limits," says Leslie Rahl, managing partner of CMRA.

"In its broadest definition, and I think in its most effective definition, the CRO is also an adviser, a participant in new product development, a thought leader in how should we think about our business. So that strategic part of their job is growing, and I think that's a very healthy sign. I think a good CRO should be much more than a cop."

The survey also stated that 84% of respondents with a board and a CRO have executive sessions at most meetings. That number is up from 44% last year. A risk appetite statement is one way to communicate those dynamics.

According to the results, 74% of respondents have board-approved risk policies, up from 60% last year.

The survey says that, over the last 12 months, changes to risk governance include modifying limits and increasing trend and exception reporting. Boards are increasingly reviewing counterparty, liquidity, and operational risk information.

The government changing the rules remains the top concern among risk managers, coming in at 40% among volatility, credit losses and other issues.
(August 2010)

9 in 10 institutions have chief risk officer, survey shows
By Barry B. Burr

Some 89% of pension plans, endowments, foundations, sovereign wealth funds, hedge funds and other asset managers have a chief risk officer, compared with 70% last year, according to a Capital Market Risk Advisors survey on risk governance practices at financial institutions.

While there is wide agreement among the 66 institutions surveyed of the need for a chief risk officer, "opinion varies as to whether the CRO should have both a strategic/consultative role or just a control role," said a report on the survey, Risk Governance: a Benchmarking Survey 2010.

Among respondents with CROs, 66% said their officers have both strategic and control duties, up from 47% last year, the survey found.

In addition, 84% of those have private sessions between the CRO and the board's risk committee or the full board, without management in attendance at most meetings, up from last year's 44%.

Among other results, 57% of respondents have a risk appetite statement, whose definition includes the ways an institution wants to take risk and the variability of results they want to accept. That's up from 37% last year.

Of respondents with risk appetite statements, 56% include in the statements attitudes on liquidity needs; 43% address consequences on breaching risk limits, including when the breach makes or loses money; 35% include how much to invest in hard to value assets; 33% include how much to invest in complex investments; and 33% address lack of transparency in investments.

The greatest concern cited by risk managers for the second half of this year is government changing the rules that affect investment and capital markets, cited by 40%, up from 38% last year, when it also ranked at the top.

Other top concerns for the second half of the year are volatility and credit losses, cited each by 19%; inflation, 6%; and counterparty risk, 2%. By contrast, last year, respondents ranked as their second top concern inflation, cited by 26%, followed by credit losses, 21%; counterparty risk, 7%; accountants changing the rules, 5%; and volatility, 2%.

"Overall, I think progress is being made toward more people using better risk management practices, e.g., risk appetite statements, chief risk officers, in-camera executive sessions of the risk committee or full board and the CRO without management present," Leslie Rahl, CMRA managing partner, said in an interview.

"Institutional investors (e.g., pension funds, SWF, foundations, endowments) are still lagging a bit behind other financial institutions (e.g., asset managers), such as looking at things like counterparty risk and operational risk."

Ms. Rahl said that the reason for the gap may be "overall they (institutional investors) aren't as heavily regulated (as other financial institutions). I think they've always lagged behind, but it isn't getting any worse. By the nature of the entities, they have had less pressure (on) risk management and governance.

"Institutional investors are extremely interested in risk governance in companies in which they invest as equity investors, but it is equally important for them to think about their own risk governance," Ms. Rahl said.

The survey was conducted over two weeks ended July 20. Commercial banks, investment banks and insurance companies were also among those surveyed.
(August 2010)

From Kirsten Bischoff, Opalesque New York:

While US legislators work to put together a bill that will merge the Restoring American Financial Stability Act of 2010 with the Wall Street Reform and Consumer Protection Act of 2009, corporate governance is expected to see increased oversight on compensation, voting rules, proxy access, and corporate structures. However, some of the biggest challenges facing corporate boards in 2010 are the same challenges that many failed at in the run up to the 2008 financial crisis and will not be necessarily be affected or improved by new regulation.

In one of the panel discussions to be held this Friday (June 18) during the IAFE Annual Conference, the talk will focus on "Should Boards Do More?" Led by IAFE Board of Directors member and Founder and Managing Partner of Capital Market Risk Advisors (CMRA) Leslie Rahl, the discussion will center around the perceived top challenges for corporate directors during the next year and the importance of how a firm’s view of risk management is integrated with its business.

"If you look at the crisis that we went through, the things that really damaged firms were the lack of liquidity, lack of transparency, complexity and a whole series of soft factors that generally do not get calculated into the risk metrics," she says.

Rahl says that while there were companies who understood the importance of deep risk analysis prior to the global financial crisis, those that did not have learned its importance and are beginning to widen their view of what contributes to their risk.

"I happen to believe that when people talk about risk adjusted compensation, they take too narrow a view of risk," she says.

In fact, CMRA offers on its website a list of the "galaxy of risk" that firms are exposed to.

In addition to acknowledging the wide scope of risk firms must deal with, Rahl also says that boards should define their approach through a risk appetite statement. "A risk appetite statement is one tool that has become very important. Some statements are not sufficient though, because not only should they quantify the risks but they should also help investors understand what a firm’s attitude is towards risk."

"When you are asking what the ramifications are if someone goes over their limits, you will often get a different answer depending on how the question is phrased and the question should be asked both ways: What are the ramifications if a person goes over their limit and makes money? And, what are the ramifications if a person goes over their limit and loses money?" Rahl says.

Even though it is not expressly addressed in new regulation, developing a corporate level approach to risk management is fast becoming a requirement for firms due to investor pressure. "The analyst community is asking more questions about these topics – about the role or the board and the role of oversight," she notes.

For more information on the IAFE Conference: The Truth About The Crisis or a Crisis of Truth (June 18th at Goldman Sachs at 32 Old Slip, New York, NY) visit: www.IAFE.org
(June 2010)

Navigating Post-Crisis Dynamics

Directors duty at the brink of insolvency, the importance of liquidity, the shortfalls of GAAP

The capital markets presented public company board directors with a variety of vexing issues in 2009. Leslie Rahl, founder, Capital Market Risk Advisors, suggested that the "next great front" for financial firms and banks, in particular, "is for boards to figure out what its risk appetite and risk attitude is and how to communicate that to management."

"Ask the real simple questions: what could go wrong?" suggested Rahl.
(February/March 2010)