• Ешқандай Нәтиже Табылған Жоқ

Dzhondelbaeva, Candidate of Economy Sciences,

JEL classifi cation: D2: Production and Organizations; D24: Production; Cost; Capital and Total Factor Productivity; Capacity

A. Dzhondelbaeva,

Оригинальность/ценность – в работе приведено описание и представлены основные положе- ния применяемых в настоящее время в Казахстане моделей риск-менеджмента. На основе изучения исследований зарубежных ученых в области риск-менеджмента автором описаны методики оценки капитала страховой организации и приведены положения их возможного применения на отечествен- ных предприятиях. Автором характеризуются первые стандарты для страхового сектора экономики

«Solvency I», которые были разработаны в 2002 г., и представляли собой пересмотр исторически сло- жившихся требований по платёжеспособности страховщиков.

Выводы – в настоящее время основным инструментом или моделью риск-менеджмента являют- ся стандарты платежеспособности «Solvency II». Однако в моделях платежеспособности временной горизонт охватывает только один год, а стратегическое управление и принятие решений в страховых компаниях требуют многолетнего прогноза, желательно 5 лет с текущей даты. Во избежание чрезмер- ных концентраций риска отечественные страховые компании включают в политику и процедуры спе- циальные принципы, которые направлены на поддержание диверсификации портфеля. Таким образом отечественные страховые компании управляют установленными концентрациями риска.

Ключевые слова – риск-менеджмент, платежеспособность, риск, эффект левериджа, ликвидность, стратегия.

The selection of risk evaluation and projection model is build by insurance companies on risk profi le, because quality of risk evaluation depends on all complete risk factors. For reduction in size of losses and loss prevention, it is necessary to use the models counting at maximum all risk factors, monitoring the solvency and the fi nancial viability of insurance company [1, p. 23].

Due to analysis of the concept of risk and its development and impact on insurance enterprise activity, you can draw a conclusion that risk is defi ned as a potential probability of occurrence of the undesired event because of either non-casual or casual processes. Casual process is our main concern, so you can use mathematical methods so as to calculate the probability of the undesired event and therefore, you can calculate the probability and of potential loss amount [2, p. 94].

You should pay closer attention to system risk, which means the risk of potential destruction of the whole system or its considerable part as affected by mutual interference of risks due to cumulative effect of losses of single market participant or group of market participants. One of the impacts of system risk is increase in investment losses that are the impact of either reduction in income from investments or impairment of assets and increase in the operations loss, since number of the insurable events is increasing.

For more accurate defi nition of risks, it is necessary to classify them in the profi le, potential implications and scope of risk [3, p. 43].

А. By the scope, risks are divided into:

– local risks – regional risks – global risks

Б. By the frequency of the undesirable events:

– exotic risks

– average probable risks – highly probable risks

В. By the causes of occurrence:

– geopolitical risks – technical risks – social risks – economic risks – fi nancial risks

Г. By the types of economic activity, risks are divided into – fi nancial risks

– commercial risks – occupational risks

Д. By target objects you can outline – property risks

– legal liability risk – risk to life and health

By the types of activity, risks of insurance company can be divided into:

– insurance risk;

– credit risk:

– liquidity risk – investment risk – market risk – operating risk

The risk is an integral part of activity of insurance company. Risk management is carried out while defi ning, evaluating and observing risk factors through defi ning risk limits and other internal control measures.

Risk management process is of crucial importance for support of steady return of insurance company and its stability and therefore, every individual employee and every branch of insurance company is held responsible for risks related to their obligations.

So building a proper risk management framework designed to protect insurance company from the events that prevent a steady achievement of results is of great importance. For domestic companies, the framework and the competence of risk management offi ce are typically determined by the Board of Directors or by relevant authority and documented then; delegated powers and responsibility have been accurately set up. In the written form, the Board of Directors approves management-related policy and requirements to such policy.

The policy defi nes risk exposure and interpretation methodology and techniques used in the present insurance company, limits structures for quality evaluation and assets diversifi cation, procedure for determination of strategy accordance on insurance and reinsurance and corporate objectives; reporting requirements are set up.

One of compulsory components of risk management framework in insurance companies is an underwriting Committee that determines and confi rms the underwriting requirements and control adequate evaluation of accepted risks. It also gives prior permission for big risk-taking, if insurance (reinsurance) amount on effected individual insurance contract, exceeds the limit from total assets of the Company, excluding assets that are reinsurers’ shares in insurance reserves, substandard risk insurance reserves and large amounts of commission expenses.

For reduction of risk in the course of its activity, domestic insurance companies conclude the reinsurance agreements with domestic and foreign reinsurers. As these agreements do not discharge the company from its obligations but only ensure the compensation from reinsurers, it is necessary to monitor fi nancial condition of its reinsurers and evaluate credit risk concentration arising on analogous geographical regions, type of activity or reinsurers’ economic features in order to minimize risks of heavy losses as a result of loss in reinsurers’

fi nancial solvency.

For the avoidance of excessive risk concentration, domestic insurance companies include into Company’s policy and procedures specifi c principles oriented on support for portfolio diversifi cation. Thus, domestic insurance companies manage fi xed risk concentrations.

Risk management is carried out by domestic insurance companies through capital structure management.

There is maintaining a capital level that is suffi cient to meet the regulations of Joint-Stock Company Act and of Committee for Financial Supervision of the Republic of Kazakhstan. For shareholders’ profi ts maximization, domestic insurance companies tend to optimize structure and capital sources. Strategy of domestic insurance for capital management is also in assets, obligations and coordination-based risks management and in evaluation of defi cit between mentioned and required capital on a regular basis and appropriate measure-taking so as to place impact on insurance company’s shareholder equity item in relation to the changes under economic conditions and risk characteristics.

Main source of domestic insurance companies’ shareholders’ equity is a capital contributed by the founders, where it is effective; domestic insurance companies additionally use such sources as reinsurance besides more traditional sources of fi nancing.

Certain requirements as to the capital are imposed; these requirements are periodically and with simultaneous risk and sensitivity analysis, predicted and compared to available capital forecast and internal profi tability regulations.

In fi nancial institutions, fi nancial risks arise due to available uncovered positions on currency and equity fi nancial instruments and the rate of interest that is subject to market fl uctuations.

So, depending on the nature of insurance company’s investments, the company must assess interest rate risk. Insurance companies manage these positions within assets and obligations management structure; this structure monitors the income generation through long-term investments of the companies, which exceed obligations on their insurance contract. Asset portfolio should be appropriate to every type of obligations.

In addition, cash fl ow adequacy is monitored within management system for insurance company’s assets, for fulfi llment of obligations arising on insurance contract.

Main risk of insurance company that is an insurance risk means that factual insurance payments can deviate from the expected ones. The chief factors, which effect amount of insurance risk, are periodicity of risks and degree of its seriousness, current factual payments and future tendencies of long-term risks. Insurance companies should provide reserves that are suffi cient for covering these obligations.

Moreover, level of risk can be reduced by diversifi cation of heavy portfolio of insurance contracts, development and implementation of standards for insurance strategies and also by using reinsurance contracts.

Reinsurance allows domestic insurance companies to reduce the risk; outward insurance can be carried out on a pro-rata basis and on a non-pro-rata basis. Pro-rata insurance, typically to quota share reinsurance or share reinsurance, is used to reduce general risk of insurance companies on specifi c types of business. Non- pro-rata insurance, typically, excess reinsurance is used to reduce the insurance companies’ risk of potential accident losses. Therefore, limits of excess insurance depend on products and territory.

Reinsurance contracts do not discharge insurance companies of their direct obligations before the insurers on insurance contracts; so, there is a credit risk or in other words, the insurer cannot fulfi ll own obligations even on the reinsurer’s contracts.

Domestic insurance companies specifi cally run the risk concentration on individual reinsurers due to the nature of reinsurance market and limited number of reinsurers that have an acceptable credit score.

Domestic insurance companies carry out general insurance of different types, which can be divided into three groups: voluntary private insurance, voluntary casualty insurance and compulsory insurance. Voluntary private insurance includes accident insurance, health insurance and other types of voluntary private insurance. Voluntary casualty insurance includes the types of insurance such as motor insurance, legal liability insurance, loans, mortgage loans, guarantee and pledges, loss insurance, legal expenses insurance and title insurance. Compulsory insurance includes all types of compulsory insurance such as legal liability of car owners, transporters before passengers, audit organizations, tour operator and travel agent, environmental insurance, crop insurance, etc.

The fi gure 1 – Insurance companies’ insurance premium

income in the Republic of Kazakhstan for branches of insurance for 01 January 2013

The note is drawn on data of the Committee for control and supervision of fi nancial market and fi nancial organizations of the National Bank of the Republic of Kazakhstan (CFS)

The most signifi cant risks for general insurance contracts arise as a result of climate change, disasters, environmental contamination and terrorist activities. There is also infl ation risk for extended risks that can be resolved in some years. These risks are essentially different, depending on the location of risk insured by the company, type of insuring against risk and branch.

For reduction of the risk, domestic insurance companies use the diversifi cation of heavy portfolio. Risk variability is decreasing through careful selection and implementation of insurance strategies and regulations shaped to ensure risk diversifi cation regarding the type of risk and level of insurance indemnity. It can be achieved to the great extent by diversifi cation on industry sectors. Moreover, implementation of tough policy in loss evaluation for all new and available losses, periodic detailed review for standard operating procedures including losses and private investigation of potential fraud-related losses is presented as the policy and the procedures implemented to reduce company’s risk. Furthermore, domestic companies carry out policy of active management and operative settlement of loss so as to minimize potential risk regarding unpredictable future events that may have a negative impact. In assessment of the obligations on insurance contract, infl ation risk is reduced by an expected infl ation accounting. Domestic insurance companies also use practice of risk- limiting audit through the defi nition of total maximum of potential loss on specifi c contracts, and also of the use of reinsurance arrangements for limitation of accident risks.

The fi gure 2 – Obligations of insurance and reinsurance companies of the Republic of Kazakhstan for 01 January 2013

The note was drawn on data of the Committee for control and supervision on fi nancial market and fi nancial organizations of the NB (National Bank) of the Republic of Kazakhstan

Key assumptions

Main assumption underlying for evaluation of obligations of domestic insurance companies is that future development of losses will occur according to the sample that is similar to previous loss experience. It includes assumptions regarding average cost of loss, loss settlement expenses, infl ation factors for loss and number of losses for each year when it occurs. Today’s supervisory body "CFN" determines a minimum amount for payment on demands in case of proven incident on employers’ liability insurance. Additional qualitative decisions are used to evaluate a degree, within which proceeding tendencies cannot be used in the future, for instance: single events, effect of current legislative changes such as changes in compulsory payment limits when insuring employers’ liability and risk settlement procedures.

There is a judgment used for evaluation of level, on which after accounting date, factual development of loss affects the rating.

Loss reserves on insurance contracts (including losses occurred but unsettled by the insurers and losses occurred but undeclared by the insurers) are formed to cover an overall size for settlement of obligations on incurred losses, which evaluation is carried out on the basis of known facts at the balance sheet date, including notifi cations on potential losses, work experience with similar losses and exemption law at the balance sheet date.

Domestic insurance companies use the whole potential and available information to evaluate the reserve for claimed losses, including expenses for reserves correction on each type of insurance contract.

For evaluation of reserves for occurred but undeclared losses, on all categories, where adequate data is available on the basis incurred and unsettled losses, the evaluation is carried out by one of the following methods: modifi ed chain ladder method, Bornhuterr-Fergusson method adjusted for loss ratio, Mack method.

Otherwise, you can determine the reserve in the amount of fi xed interest (for example, 5 per cent) of amount of granted premium for the last 12 months. Loss reserves should be analyzed individually, on each type of insurance. Furthermore, it is necessary to perform an appraisers’ individual evaluation of damage or an actuarial individual forecasting regarding more large losses. Typically, in forecasting loss, the assumptions are referred to maximally validated assessment of the most probable or expected outcome. Domestic insurance companies can regularly analyze the use of reserves.

Method based on experience of previous period losses development extrapolates the development of paid and incurred losses under observed previous period expenses and expected loss ratio. Development of previous losses is mainly analyzed by years of loss and by essential directions of activity. Typically, single losses are observed separately and according to them, reserves on estimate nominal value carried out by appraisers are generated or forecasted for dealing with their future development.

The risk following after credit risk for domestic companies is liquidity risk.

Liquidity risk is a risk, when an enterprise can face diffi culties when meeting all requirements for obligations related to fi nancial instruments. Liquidity risk arises as a result of incapability to quickly realize assets on their fair value or incapability contractor to satisfy contractual obligations or payment term for insurance obligations earlier than expected, or incapability to generate cash fl ows, since it was expected.

Basic liquidity risk faced by the Company is a daily requirement for its available fi nancial resources regarding the requirements, arising on insurance contracts.

Domestic insurance companies manage a risk liquidity by the means of policy on risk liquidity management, which defi nes what is liquidity risk for company individually and determines minimum size of funds to meet emergency payment requirements; it settles fi nancing plan of incidental expenses and determines fi nancing sources and events, which put a plan into motion and concentration of fi nancing sources and rendering of the accounts about liquidity exposure to risk and breaking before supervisory bodies and monitoring policy maintenance and review of policy on liquidity risk management for pertinence and conformity with changes in environment conditions.

It should be observed that the society as a whole and the government, in particular, represented by the Committee for fi nancial supervision tries to track fi nancial condition of insurance companies; there are prudential regulations for insurance companies set by the National Bank of the Republic of Kazakhstan and for evaluation of their solvency, there are "Solvency" international standards for specifi c ratio of insurance companies.

First standards for "Solvency I" insurance sector of economy were developed in 2002 and are considered to be a reconsideration of traditional requirements for insurers’ solvency. "Solvency I" international standard determined minimum true-to-life requirements, however not all risks were taken into account and a lack of conformity at the international level hindered its implementation.

Directive "Solvency II" was the second attempt to systemize the European insurance legislation. New standards will come into force since 01 January 2014 and will be valid in 30 (thirty) European countries.

"Solvency II" is based on three basic components: quantitative requirements (for example, requirements for

capital amount), quantitative requirements for risk management system and risk regulation by supervision bodies and requirements for accounting and disclosure of information [4, p. 32].

The National Bank of the Republic of Kazakhstan also pursue a policy of prudential regulation development of insurance companies by implementation of Risk Based Supervision (risk accounting-based regulating system) and transition to "Solvency II".

So, the insurance companies’ modern risk management system is designed for sequential estimation of all types of risk and for following prudential regulations of the National Bank of the Republic of Kazakhstan.

However, the theory of risk evaluation methods analysis provides a big number of risk management models. We have a special interest in models based on insurance capital estimation. Since the capital is of great importance for insurance company, for the majority of branches, the concept of capital is used to defi ne the assets, which are necessary for doing business. In other words, business model of companies in production branches is that to earn income from functioning of the assets, while fi nancial organizations earn incomes from functioning of the obligations. Therefore, for insurance companies, such part of their balance as insurance provisions is an integral part of their business model. These obligations are used for the acquisition of assets.

The purpose of banks and insurance companies is to earn positive P&C while making payments on obligations and income from the use of assets. One of the basic fi nancial rules is that, without risk-taking, you cannot earn the income. However fi nancial institutions should have a suffi cient buffer to acquire potential sudden losses, if they suddenly arise. Capital has this function and it should cover the losses in the vent of their occurrence. Therefore, if the risk is bigger, larger the capital of company should be. Capital has the function of risk management and is an integral part of business model for fi nancial institutions. Unlike non-fi nancial companies, capital is not just the requirements of shareholders for the assets of company and the capital of fi nancial institutions ensures the capability to continue business.

You should pay closer attention to the research of foreign scientist N.V. Strelnikov on risk management in insurance organization. As a result of analysis of the models such as Cramer-Lundberg’s model, Dane’s model, Goncharov’s model, in this research, there are conclusions that all models do not fully encompass all fi nancial factors of risk. Major part of models is based on the use of calculation of income and capital factors.

However, there is model proposed and that observes potential deviation from forecast values and uses such important factor as leverage of company [5]. Leverage is a signifi cant factor of fi nancial condition of insurance companies and is examined by other scientists, for example, Malaysian scientists Sung Yau Fung and Razak Idris [6].

"Interrelation and interdependence of insurance and investment risks effect the necessity of the use such capital calculation models that on the functional level can determine the ratio of income, losses and size of the assets, the liabilities and equity capital of company and defi ne the level of risk" [5].

N.V. Strelnikov developed the original method for evaluation of capital of insurance company with the regard to the ratio of mean-square deviation (risk measures) of income and expenses, calculation of as solvency margin ratio so as to allow to defi ne the suffi ciency of insurance capital at target level of risk;

Proposed model for capital evaluation is based on calculation of expected net cost of the assets, i.e. for the difference between the assets and liabilities excluding the capital.

The factor of mean-square deviation is used as risk level model criteria, so it allows forecasting the potential fl uctuation of income and expenses of the insurance company. Therefore, even at lesser income and higher expenses than expected, insurance companies will have a suffi cient margin of safety to continue the business.

Key position of model is that the main source of income of insurance organization – premiums received from insurers and forming insurance reserves – insurer’s obligations.

Insurance fund invested into valuable security and other profi table instruments simultaneously serves as a source of insurer’s assets.

Besides of proprietary funds, the use of temporally free insurance reserves in investment operations cause the leverage effect and allows to improve the volume of capital. At the same time, the use of borrowing funds places the obligations on the insurer to return borrowed amount of funds to the creditors (insurers) at the same volume and to cover losses by means of own funds in proportion to the size of losses.