Mon 07 Mar 2022 - In allowing for diversification between risks, it is important to understand the key variables driving dependencies between risks, not least to meet Solvency II internal model rules. This paper first explores what drives dependencies between market and credit risks, and then explores dependencies with insurance and operational risks. It sets out sources that can help inform the expert judgement process for setting correlation and other dependency assumptions, and ultimately make sure these can be justified in terms of underlying drivers.
Patrick Kelliher is a Fellow of the Institute and Faculty of Actuaries with over 30 years’ experience of financial services, predominantly in UK life insurance. Since 2003 he has specialised in risk management, first with Scottish Widows and later as Head of Market Risk and ALM for Aegon UK before starting up Crystal Risk Consulting Ltd. in 2011.
Patrick is a Chartered Enterprise Risk Actuary (CERA) and a member of a number of actuarial profession risk management working parties. He has produced papers and articles on a wide range of risk topics including risk classification, operational risk, liquidity risk and the differences between bank and life insurance risks.