New CAS Monograph Explores Lasso Credibility
The Casualty Actuarial Society (CAS) has published a new monograph titled “Penalized Regression and Lasso Credibility,” authored by Thomas Holmes, FCAS, chief actuary for the U.S. at Akur8, and Mattia Casotto, head of product for the U.S. and principal scientist at Akur8. CAS monographs are authoritative, peer-reviewed publications that provide in-depth analysis on important topics within property and casualty actuarial practice. This newly published monograph examines the limitations of Generalized Linear Models (GLMs) and introduces penalized regression, and a new procedure called Lasso Credibility as solutions to these shortcomings.
The monograph is divided into three parts. It begins with an essential actuarial introduction to the use of penalized regression, highlighting its advantages over traditional GLMs and exploring the statistical and intuitive connections between penalized regression and credibility. Building on this foundation, the monograph then presents a specific application of penalized regression as an actuarially sound credibility method known as Lasso Credibility. The monograph concludes with a case study that illustrates this new credibility procedure, helping readers grasp the nuances of this technique.
“The CAS Monograph Series is designed to expand the body of knowledge available to actuaries, offering in-depth explorations of key topics that have a direct impact on their work. We are grateful to Thomas Holmes and Mattia Casotto for their invaluable contributions to this important work. This latest release exemplifies our commitment to providing CAS members with the research and resources they need to advance their careers,” said Donna Royston, managing editor at CAS.
“The objective of this monograph is to help actuaries move beyond binary statistical significance and apply their expertise in credibility when evaluating model output. With practical guidance, case studies, and supporting code, it offers the actuarial community a comprehensive approach to applying lasso credibility in their ongoing projects,” said Holmes.
The new credibility monograph will be covered during the upcoming CAS Annual Meeting in Phoenix, Arizona on November 5, 2024, in the session “The Making of a Monograph” featuring Thomas Holmes, FCAS, Chief Actuary for the U.S. at Akur8, Brandon Smith, FCAS, Head of Portfolio Pricing at Markel Speciality, and Alice Xiang, AVP Actuary at Berkley Luxury Group.
The monograph can be accessed on the CAS website.
Accompanying code can be downloaded on the CAS GitHub site.
