Most capital models include investment portfolio risk, yet our industry relies heavily on the scholarship of the finance and economics industry to provide insight into market/investment portfolio risk distributions. Additionally, market risks such as asset price risk, inflation risk, interest rate risk, and foreign exchange rate risk lack the inclusion of monetary system risk, thus a primary component of all market risks is missing from the risk narrative. This is creating confusion in the broader economic narrative, where basic concepts like inflation and interest rates are misunderstood. This session will discuss the global monetary system and how it works, why it is malfunctioning, how it impacts the quantification of market risk, and how it is causing the banking problems that have been a feature of the global economy since the 2008 global financial crisis, and to provide a more theoretically sound outlook of the broader global economy and a better understanding of market risk and how it impacts insurance carriers.
Learning Objectives:
Describe the global monetary system and how it impacts insurance company asset-side risk.
Demonstrate an understanding of how monetary system risk affects asset price risk, interest rate risk, inflation risk, and foreign exchange rate risk.
Describe how to protect insurance company asset portfolios from adverse economic outcomes related to banking system illiquidity.
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