Developing Area Gives Actuaries Extra Influence: Pierre Laurin

Enterprise risk management (ERM) has a lot of advantages for actuaries and their companies or clients. In certain circumstances, it can also be fairly easy to introduce into a company.

That was the case for CIA member Pierre Laurin, director and head of Canadian property and casualty at Towers Watson. His experience in this area dates back to the early 1990s, when he helped develop risk management concepts while working as group chief actuary at Zurich Financial Services.

He said: "What we did then was not named ERM at the time. We only knew that the company had no measures to evaluate its own risk position, and it was necessary to see whether we were doing well.

"It was easier to introduce than I expected, as we had a fair amount of ‘buy in’ from management and other parts of the company. People were, for the most part, very interested in the concept. They saw that it made good business sense.

"The company is based in Europe, where ERM concepts were developed earlier, and the process was there to be promoted."

M. Laurin left Zurich for Towers Watson in 2005, and he says his new company is heavily involved in ERM. "I do a lot of work in this area: setting the risk appetite, reviewing the Own Risk and Solvency Assessment, stress testing, and more. ERM has lots of different aspects and affects lots of different areas. Reinsurance optimization, for example, is based on ERM concepts, and people should be asking, ‘What is the cost of the capital I am buying?’ Approaches to asset and liability management and operational risk are also related to the impact on capital.

"My gut feeling is that people see ERM as a tool that is required. The 2008 financial crisis highlighted the need to have improved models with convergences at the tail end of the risk curve. Companies said, ‘We need to get better numbers to understand what is going on.’ Now the concept has matured, and more people ask, ‘What will be the impact of this on my business? Will I improve my business by doing that?’ An ERM framework can demonstrate that things are working."

Despite its value, M. Laurin added, actuaries can encounter opposition to the idea of a framework that looks at every aspect of a company. "To implement an ERM process, sometimes you have to consider short-term goals. It’s a long-term process that can take five or six years to complete, but most managers will ask for short-term returns.

"Also, most people work in silos and think, ‘What will impact me is more important than anything else.’ You have to have a top-down element; it has to start from the board. But you also have to have a bottom-up approach to develop it properly."

Working in ERM can be fun, he said, as it changes actuaries’ sphere of influence. "Traditional actuaries are in pricing or reserving, for example, but ERM will look at the impact on capital. It gives you a broader view of the company and opens up a new field.

"Starting actuaries will have a fairly steep learning curve, but we are well trained for ERM and have the right background. We think in terms of a holistic perspective, and we are comfortable with uncertainty. For actuaries, ERM is here to stay."

Canadian Institute of Actuaries/Institut canadien des actuaires