ADJUSTED PERFORMANCE MEASUREMENT AT
LIFE INSURANCE COMPANY
Kim Jeun Keun
Samsung Life Insurance Company, Seoul, Korea
Abstract. This is a practice of Risk Adjusted Performance Measurement (RAPM) at
Life Insurance Company which is concentrated on Product Developing Stage. This
report represents RAPM Project Introduction, Situations to be understood to
implement RAPM, Issues to be considered to implement RAPM and Application of
RAPM & VBM.
Key-words: RAPM, Risk Capital, Accrual & Value Based RAPM, Accruals & Life
Time Average RAROC and Risk Adjusted Embedded Value etc.
1 RAPM Project Introduction
1.1 Developing Risk Capital and RAPM (Risk-Adjusted Performance
Measurement) metrics are needed to implement RAPM
1.1.1. Risk Identification and Measurement
In this stage, we identified principal market risk, credit risks. And key risk
measurement tools are implemented, although some risk measures was needed
refinement. We defined business risk, event risks and improved life risk and
redefined market & ALM risk.
Here, we represent definition and decomposition of Risks.
There are many ways to look at risk components within an organisation. By taking
a pragmatic approach to risk classification, the risks facing Life Insurance
Company can be broken down into five broad categories.
a) Market & ALM risk
b) Credit risk
c) Life liability risk
d) Business risk
e) Event Risk
Lapse Ri k
Market & ALM risk relates to the volatility in Fair Value due to changes in
interest rates, equity prices, real estate prices, inflation, foreign exchange rates,
and other market factors.