AIG 2010 Annual Report Download - page 161

American International Group, Inc., and Subsidiaries
and implement risk mitigation strategies and reduce its exposures in accordance with GRC-approved tolerances.
Implementation of such strategies has resulted in:
• reduced exposure to natural catastrophes and modification of reinsurance programs at Chartis;
• reduced asset / liability mismatch at Chartis;
• tightening credit criteria and improving claims management at UGC; and
• product design innovations to meet customer needs while simultaneously reducing risk to SunAmerica.
Business Unit Risk Governance
AIG has also continued to strengthen the risk management, governance, structure and processes at the
individual business unit levels, including hiring additional risk management professionals. During 2010, AIG hired
CROs for Chartis, SunAmerica and Investments & Financial Services, all of whom report to the AIG CRO and
their respective business unit chief executive officer.
The risk management framework of AIG’s major business units is consistent with that of AIG and articulates
risk strategy and governance within the business units in support of their strategic objectives. The business units’
risk governance structure encompasses the roles and responsibilities of all functions and businesses in the major
business entities, and in the case of Chartis, the geographic regions in which it operates. The major business units’
enterprise risk management organizations are headed by their respective CROs. The business units have
significantly expanded their risk management resources, including risk subject matter experts.
The following committees are responsible for managing risks at the business unit level:
• Chartis Risk & Capital Committee — The Chartis Risk and Capital Committee (RCC) is co-chaired by the
Chartis CRO and chief financial officer. Its scope includes all sources of risk, including emerging and
catastrophic risks, and its specific responsibilities include setting risk tolerance, approving capital
management strategies, insurance portfolio optimization and strategic asset allocation and risk financing and
providing oversight on economic capital modeling and risk identification, assessment and control. Similar
committees exist within major geographic regions and report directly or indirectly to the Chartis RCC.
• Chartis Asset and Liability Committee — Chartis asset and liability management is overseen by two
committees — the Asset Liability Investment Committee (ALIC) and the Asset Liability Finance Committee
(ALFC). ALIC is chaired by the Chartis chief investment officer and ALFC by the Chartis chief financial
officer, each of whom is a member of both committees.
• SunAmerica Financial Group Risk & Capital Committee — The SunAmerica Financial Group Risk and
Capital Committee (RCC) is co-chaired by the SunAmerica CRO and the SunAmerica CEO. It is
responsible for all types of risk and its specific responsibilities include, but are not limited to, approving
significant risk assessment and risk management policies, approving aggregate and specific risks, reviewing
the current and anticipated capitalization, cash flow, liquidity, and earnings, and the related risk, and
approving strategic and financial initiatives and activities as recommended by the business units and
functional groups. The RCC has various subcommittees focusing on specific risk areas, including an Asset
and Liability Committee, Operational Risk Committee, the Product Pricing Committee, and Investment
Committee.
• UGC Risk Committee is chaired by the United Guaranty CRO and is responsible for UGC’s risk
management framework to set the policies and guiding principles for managing risk. The Risk Committee
meets monthly to evaluate the risk monitoring reports and tools employed by UGC.
Defined Risk Tolerance and Enhanced Risk Identification
During 2010, AIG enhanced its risk tolerance framework with clearly-articulated tolerances for key risks at the
group and business unit levels using its enhanced scenario-related stress testing framework.
AIG 2010 Form 10-K 145