ERM Glossary Organization

International ERM Glossary

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.

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Glossary
A C D E F G I L M O P R S T U V

Term	Grouping	Organization or Jurisdiction Defining Term	Source of Definition	Definition	Hidden
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.	C
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	C
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	C
Economic Capital	Solvency terms	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The amount of capital a company requires to cover its obligations with a given degree of confidence over a specific time horizon.	E
Economic Capital	Solvency terms	International Actuarial Association	IAA Deriving Value from ORSA	The amount of capital a company requires to survive or to meet a business objective for a specified period of time and risk metric, given its risk profile.	E
Emerging Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	A risk which may develop or which may already exist that is difficult to quantify or may have a high loss potential	E
Enterprise Risk Management	General	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	ERM is a continuous process. ERM adopts a holistic view to risk and assesses risk from the perspective of the company's aggregate position as well as from a standalone perspective. ERM is concerned with all risks, including those that are unquantifiable or difficult to quantify. ERM considers uncertainty from both a positive and negative viewpoint. ERM aims to achieve greater value for all stakeholders by assisting in achieving an appropriate risk-reward balance. ERM considers both the short term and the long term aspects of risk.	E
Equity Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss associated with exposure to an adverse movement in equity prices	E
Group Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss associated with exposure to other group companies	G
Inflation Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss associated with exposure to an adverse movement in inflation	I
Interest Rate Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss associated with exposure to adverse movements in interest rates	I
Liquidity Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	Liquidity risk the risk associated with the ability to trade a particular asset quickly without incurring a loss	L
Market Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss arising from changes in market variables.	M
Model Risk	Risk Categories	International Actuarial Association	IAA ISAP	The risk that, due to deficiency in the model or in its use, an intended user of the results of the model will draw an incorrect conclusion from those results	M
Operational Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss from failed or inadequate internal processes, people and systems, or from external events.	O
Own Risk and Solvency Assessment (ORSA)	General	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	A company's assessment of its risks and of the solvency needs associated with those risks	O
Regulatory Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk arising from changes in regulation or legislation	R
Reputational Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk that events could have an adverse impact on an organisation's reputation or brand value.	R
Residual Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk remaining with an organisation following its risk management process and internal controls.	R
Reverse Stress Testing	Methods	International Actuarial Association	IAA ISAP	A process for identifying events or scenarios that would lead to a predetermined financial indicator for an organization (draft)	R
Risk	Risk Categories	International Actuarial Association	IAA Deriving Value from ORSA	The potential of future losses or shortfalls from expectations due to the deviation of actual from expected results.	R
Risk Appetite	General	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The level and type of risk that an organization is willing to accept in order to achieve its objectives.	R
Risk Appetite	General	International Actuarial Association	IAA Deriving Value from ORSA	The level of aggregate risk that a company chooses to take in pursuit of its objectives.	R
Risk Capacity	Solvency terms	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The extent of risk that an organisation is capable of undertaking	R
Risk Capital	Solvency terms	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	Risk Based Capital (RBC) Capital Requirements that reflect the risk profile of the financial institutions.	R
Risk Limit	General	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The maximum amount of risk that can be underwritten. Risk limits will often be identified for key risk-taking activities such as insurance underwriting and investment.	R
Risk Profile	General	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	A description of the risk exposures of an organization.	R
Risk Profile	General	International Actuarial Association	IAA Deriving Value from ORSA	The characteristics of the material and relevant risks to which a company is exposed over a specified period of time.	R
Risk Tolerance	General	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	A quantitative description of the extent of risk that the company is willing to take in respect of a specific risk.	R
Solvency	Solvency terms	International Actuarial Association	IAA Deriving Value from ORSA	The adequacy of available economic or regulatory capital to meet future obligations or regulatory requirements.	S
Strategic Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk in relation to the achievement of an organisation's strategic business plan and objectives.	S
Stress Test	Methods	International Actuarial Association	IAA ISAP	A process for assessing the impact of one possible event or several simultaneously or sequentially occurring possible events on an entity's financial position (draft).	S
Time Horizon	Methods	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The time period associated with a given decision or measure.	T
Underwriting Risk	Risk Categories	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The risk of loss arising from movement in insurance variables including claim incidence, claim termination and persistency.	U
Value-at-Risk (see also TailVaR)	Methods	International Actuarial Association	IAA - Acturial Aspects of ERM for Insurance Companies	The maximum loss that could occur with a specified probability over a given time horizon.	V