Optimizing Capital


In a recent interview, Steve Sonlin, global head of Risk and Capital Management Solutions for Conning, said risk and capital management has always been an important part of insurance companies’ operations and Conning understands the importance of that role. The following are excerpts from that interview:


Founded in 1912


HEADQUARTERS: Hartford, Conn.


Rethinking traditional approaches to risk management


Current trends impacting the global insurance industry: There is a renewed emphasis on risk and capital management within the insurance industry. This is largely driven by the extreme loss experience on both the asset and liability side of insur- ers’ balance sheets over the past few years, together with the increased scrutiny that has been generated from the rating agen- cies and regulators. If we add to this the increasingly complex and volatile marketplace that resulted from the introduction of more sophisticated financial products and the globalization of the financial industry, it is easy to understand why the industry is rethinking traditional approaches to risk management.


STEVE SONLIN Head of Risk and Capital Management Solutions, Conning


Our Investment Optimizer considers assets and liabilities as well as capital dynamics, and is an example of the latest innovation that Conning is introducing to the marketplace.


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The role of technology in addressing these changes in the marketplace: Capital management, or more specifically, regulatory capital requirements are moving away from simple rules-based formulas and into the area of principles-based analysis. This requires insurance company management to have a thorough understanding of their company’s unique risk exposures together with the impact these exposures have on the company’s financial wellbeing. So, in response, insurance companies have been putting risk management frameworks in place that make use of sophisticated internal models, which in turn have the ability to capture a multitude of highly complex risk exposures and their interactions.


The new Investment Optimizer within Conning’s risk management software platform: This new solution com- bines the power of optimization technology with our compre- hensive financial and capital risk management system. That’s unique right now to the industry. Ultimately, the goal is to identify investment strategies that can generate optimal risk adjusted returns on invested capital.


Other technological innovations that Conning is devel- oping: At Conning, we’re continuously updating our invest- ment risk management software solutions and advisory services. Some of our latest key development initiatives include a focus on enhanced credit defaults, enhanced inflation modeling, and adding new economies into our modeling framework. We have a full plate and the industry continues to enable us to look at risk in new and interesting ways.


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Best’s Review October 2012


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