The Actuarial Standards Board has adopted its newest actuarial standard, ASOP 46, Risk Evaluation in Enterprise Risk Management. As defined in ASOP 46, “enterprise risk management” is
The discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders.
The scope then of the new standard is defined as:
This standard applies to actuaries when performing risk evaluation professional services for the purposes of enterprise risk management (ERM).
Risk evaluation is often performed as one part of an ERM control cycle. Within a typical ERM control cycle, risks are identified, risks are evaluated, risk appetites are chosen, risk limits are set, risks are accepted or avoided, risk mitigation activities are performed, and actions are taken when risk limits are breached. Risks are monitored and reported as they are taken and as long as they remain an exposure to the organization.
This standard focuses on five aspects of risk evaluation: risk evaluation models, economic capital, stress testing, emerging risks, and other risk evaluations. Guidance for activities related to risk treatment is addressed in proposed ASOP, Risk Treatment in Enterprise Risk Management.
This standard does not apply to actuaries when performing risk evaluation professional services that are not for the purposes of ERM. Examples of risk evaluation services that may be performed for purposes other than ERM include pricing of insurance products, and the evaluation of liabilities of insurers and pension plans.
The effective date of the new standard is May 1, 2013.