Discussion of Duration Paper by Ron Ferguson

Ron Ferguson has performed a valuable service to the CAS by encouraging actuaries to focus one eye on the investment side of insurance operations while keeping the other eye (hopefully the good one) on familiar underwriting terrain. Bond duration is an important component of investment performance and actuaries should be familiar with this concept. The explanations, examples, formulae, and references included in the paper provide the reader with a grasp of the fundamentals of duration and adequately achieve the objectives of this work. This discussion will expand on some of the weaknesses of the duration concept, propose an alternative investment strategy, and develop a procedure for calculating the duration of loss reserves.