The International ERM Glossary is intended to provide users with a set of definitions that are in common usage around the world by actuaries, regulators and members of the insurance industry. The purpose in developing the glossary is to help provide a common understanding of the terms currently in use, as definitions and meanings have varied over time, and among practitioners. It can also be used as a training and educational tool for regulators.

The glossary can be consulted per letter, organization or grouping.

**DISCLAIMER:** The content of the International ERM Glossary has been compiled by the Joint ORSA Subcommittee of the Insurance Regulation Committee and the Enterprise and Financial Risk Committee of the IAA. This information has been collated and presented for educational and informational purposes to the members of the IAA and interested parties. The IAA assumes no responsibility for the accuracy, completeness, currency, reliability of the information in the International ERM Glossary or access to any information contained on any of the sources cited in the Glossary. The IAA, its employees and officers shall not be liable for any loss or damage, direct or indirect, which may arise or occur as a result of the use of or reliance upon any of the material in the International ERM Glossary.

Term | Grouping | Organization or Jurisdiction Defining Term | Source of Definition | Definition |
---|---|---|---|---|

Conditional Tail Expectation or Tail VaR (Tail Value at Risk) | Methods | IAIS | IAIS Supervisory Material | Value at Risk (VaR) plus the average excess over the VaR if such excess occurs over a specified amount of time. |

Conditional Tail Expectation or Tail VaR (Tail Value at Risk) | Methods | International Actuarial Association | IAA - Acturial Aspects of ERM for Insurance Companies | Conditional Tail Expectation or "CTE" or Tail Value at Risk ("TVaR") is the mean of the distribution above a certain percentile or confidence level (a) or in other words, the expected value of a loss given that the loss is above a specified threshold, which is defined according to a specified percentile value a. This risk measure has many other names including Tail Value at Risk, Tail Conditional Expectation and Expected Shortfall. |

Conditional Tail Expectation or Tail VaR (Tail Value at Risk) | Methods | International Risk Management Institute | IRMI Terms | An economic cost of ruin (ECOR)-like measure in the sense that both the probability and the cost of "tail events" are considered; the calculation differs from ECOR in such a way that it has a desirable statistical property (i.e., coherence). |

Conditional Tail Expectation or Tail VaR (Tail Value at Risk) | Methods | The European Economic Area | CEA Solvency II | A coherent risk measure. For a given confidence level 1-a it measures the average losses over the defined threshold (typically set as the VaR for a given quantile), i.e. the conditioned mean value, given that the loss exceeds the 1-a percentile. |

Conditional Tail Expectation or Tail VaR (Tail Value at Risk) | Methods | United States | NAIC ORSA MANUAL | A measure of the amount of risk that exists in the tail of a distribution of outcomes, expressed as the probability weighted average of the outcomes beyond a chosen point in the distribution. |

Correlation Matrix | Methods | The European Economic Area | Solvency II | Not specifically defined. The correlation coefficients for the aggregation of the risk modules, as well as the calibration of the capital requirements for each risk module, shall result in an overall Solvency Capital Requirement.(Solvency II Directive art. 104.3) |

Correlation Matrix | Methods | United States | NAIC ORSA MANUAL | A symmetric matrix specifying pairwise interactions between a set of variables or data. A correlation matrix is commonly applied to risks or capital amounts and is an important determinant of calculated risk capital, including levels of diversification. |

Credit Risk (Counterparty Risk) | Risk Categories | Canada | OSFI Manual of Reporting | The risk that a borrower may default on his credit obligations to the lender. |

Credit Risk (Counterparty Risk) | Risk Categories | China | CIRC C-ROSS Conceptual Framework | The risk of losses arising from counterparties failing to fulfill contractual obligations, or to fulfill the contractual obligations on time, or from adverse changes in credit conditions. |

Credit Risk (Counterparty Risk) | Risk Categories | IAIS | IAIS Supervisory Material | The risk of financial loss resulting from default or movements in the credit rating assignment of issuers of securities (in the insurers investment portfolio), debtors (e.g. mortgagors), or counterparties (e.g. on reinsurance contracts, derivative contracts or deposits) and intermediaries, to whom the company has an exposure. Credit risk includes default risk, downgrade or migration risk, indirect credit or spread risk, concentration risk and correlation risk. Sources of credit risk include investment counterparties, policyholders (through outstanding premiums),reinsurers, intermediaries and derivative counterparties. |

Credit Risk (Counterparty Risk) | Risk Categories | International Actuarial Association | IAA - Acturial Aspects of ERM for Insurance Companies | The risk that a counterparty will be unable or unwilling to make payments due under a specific agreement |

Credit Risk (Counterparty Risk) | Risk Categories | International Risk Management Institute | IRMI Terms | The possibility that either one of the parties to a contract will not be able to satisfy its financial obligation under that contract. |

Credit Risk (Counterparty Risk) | Risk Categories | The European Economic Area | CEA Solvency II | The risk of a change in value due to actual credit losses deviating from expected credit losses due to the failure to meet contractual debt obligations. |

Credit Risk (Counterparty Risk) | Risk Categories | The European Economic Area | PRA Rulebook | The risk of loss, or of adverse change, in the financial situation, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any debtors to risk, or market risk concentrations |

Credit Risk (Counterparty Risk) | Risk Categories | The European Economic Area | Solvency II | The risk of loss or of adverse change in the financial situation, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any debtors to which insurance and reinsurance undertakings are exposed, in the form of counterparty default risk, or spread risk, or market risk concentrations. (Solvency II Directive art. 13(32)) |

Credit Risk (Counterparty Risk) | Risk Categories | United States | U.S. ASB Terms | Risk associated with the possibility of a loss on an investment arising from a borrower who does not make payments as promised. |

Currency Risk | Risk Categories | International Actuarial Association | IAA - Acturial Aspects of ERM for Insurance Companies | The risk of loss arising from movement in foreign exchange rates |