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.


TermGroupingOrganization or Jurisdiction Defining TermSource of DefinitionDefinition
Risk ToleranceGeneralIAISIAIS Supervisory MaterialUsed to include the active retention of risk that is appropriate for an insurer in the context of its strategy, financial strength, and the nature, scale and complexity of its business and risks. Risk tolerance is typically a percentage of the absolute risk bearing capacity for an insurer.R
Risk ToleranceGeneralInternational Actuarial AssociationIAA - Acturial Aspects of ERM for Insurance CompaniesA quantitative description of the extent of risk that the company is willing to take in respect of a specific risk.R
Risk ToleranceGeneralInternational Risk Management InstituteIRMI TermsThe willingness of an organization to incur risk to gain future reward.R
Risk ToleranceGeneralThe European Economic AreaSolvency IIThe term risk tolerance limit is used in de Directive itself and Guidelines on the ORSA, but has not been defined explicitly. (Solvency II Directive art. 45 on ORSA)R
Risk ToleranceGeneralUnited StatesNAIC ORSA MANUALThe company's qualitative and quantitative boundaries around risk-taking, consistent with its risk appetite. Qualitative risk tolerances are useful to describe the company's preference for, or aversion to, particular types of risk, particularly for those risks that are difficult to measure. Quantitative risk tolerances are useful to set numerical limits for the amount of risk that a company is willing to take.R
Risk ToleranceGeneralUnited StatesU.S. ASB TermsThe aggregate risk-taking capacity of an organization.R