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STAY TUNED! If you are anticipating additional search filters by attribute and level to align with the CAS Capability Model, it is coming later this Summer. As the CAS begins to code recorded sessions by specific attributes and levels (starting with the 2023 Annual Meeting), these will be tagged in the CAS database of presentations going forward and should be searchable.
But you may use the Capability Model now to help you identify topics. For example, if you want to move up one level under the content area “Functional Expertise,” you may search topics in the particular functional area to expand your knowledge.
Recorded content is searchable by Capability Model attribute and level in the CAS Online Library.
Two Views of the Financial Implications of Resource Limits
We know that resource limits are of many types, including water, oil, and arable land. The financial implications of resource limits are not well understood, however. We present two views of these financial implications. Are the financial implications close at hand, affecting the financial system in both in the 2008-2009 recession, and in likely future recessions? Or can they only be expected to affect the financial system much later? Or are both near-term limits and distant limits issues that actuaries and insurers should be concerned about? Oliver Bettis will present results from a research project on limits to growth, commissioned by the IFoA and carried out by the Global Sustainability Institute at Anglia Ruskin University, led by Dr Aled Jones. This research focuses on the long term implications of resource limits to economic growth. A simple actuarial model will be presented which explores likely issues through scenario planning methodologies. Gail Tverberg will present research results showing that the financial system is already being affected by resource limits. Countries such as Greece and Spain are already feeling the effect of resource limits (high oil prices impacting their tourist revenue), providing a model of what may be ahead.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Decomposition of life insurance liabilities into risk factors  theory and application to annuity conversion options
Life insurance liabilities are in General Session a function of various risk sources such as equity, interest rate, or mortality. It is common to measure the total risk by advanced stochastic models. However, the question of how to allocate the randomness of life insurance liabilities to different risk sources, and how to quantify and compare the individual risk contributions, is rarely discussed. Nevertheless, in order to be able to take adequate risk management strategies including product modifications, insurance companies need to assess the relative importance of each risk source.
Simple approaches such as sensitivity analyses with respect to model parameters usually lack any comparability between the different risk sources. In literature, the most common solution to this risk allocation problem is the variance decomposition approach which consecutively decomposes the risk by means of conditional expectations. Unfortunately, the results of this decomposition depend on the sequence of conditioning and are restricted to the variance as risk measure. Furthermore, most methods proposed in literature are only applicable at a certain point in time or state of the considered contract, although the risk decomposition clearly changes over time. Additionally, the natural requirement that the sum of the single risk components should be equal to the total insurance liabilities is often neglected.
In this paper, we first propose a decomposition method mainly based on the martingale representation theorem and show how this method provides a dynamic allocation of the total risk to the different risk sources over time. A comparison of the proposed method to those mentioned above demonstrates how this dynamic decomposition overcomes all discussed drawbacks. Second, we apply the mentioned decomposition approaches to several types of annuity conversion options and quantify the respective equity, interest and mortality risks. We show that different product designs imply significantly different risk decompositions and derive valuable insights for risk managers.
Keywords: Life insurance liabilities, risk management, risk decomposition, stochastic modeling of financial and mortality risk
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Data for Social Security Valuations
Actuaries working on valuations of social security arrangements often face problems with the availability and quality of suitable data. Such problems can be particularly acute for actuaries working on valuations on a consultancy basis as opposed to as permanent employees of an arrangement. This paper sets out considerations in specifying and validating the data required for the valuation of a typical social security arrangement, and presents processes for checking the quality of the data. It also gives a data template that may be a useful guide. It may be useful for actuaries to share this paper with their social security arrangement colleagues and clients to help all parties in understanding what kind of data are needed and why.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
CRO Risk Index
The CRO Risk Index seeks to aggregate the subjective opinions of global risk professionals regarding significant movements in financial markets and General Session economic conditions.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Competition between P&C Insurers
In this paper, we use a game theoretic approach to take into account competition between P&C insurers.
We investigate different cases: leader-follower models or Nash equilibrium models when insurers fix their price simultaneously.
We also consider concrete examples for several kinds of insurance sale channels (direct or agent).
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Comparison of Stochastic Loss Reserving Methods
Since knowing future losses precisely could not be possible, insurers should allocate an adequate reserve in the loss process. For this purpose, insurers need to select a suitable reserving method which estimates the expected liabilities as truely as possible. Estimation of unpaid losses and allocating the reserve to compensate these losses are the most significant responsibilities of the insurer. Profit of the companies does not only depend on the paid losses, but also the estimation of the future losses.
In this study, we aim to estimate total reserves and loss reserves for each accident year using several loss reserving methods and also to choose the suitable method by taking into account different criteria such as unbiasedness, minimum mean square error etc.
Keywords: Simulation, Loss Development Triangle, Loss Reserve, Performance Tests, Stochastic Models.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Communicating Takaful
In recent years, Takaful has flourished as an alternative to insurance in pockets of the world where Islam is the dominant religion, evident by both the phenomenal revenue growth recorded as well as significant investments into takaful operations by large multinational insurance groups. Unfortunately, Takaful is often misunderstood outside the Muslim world to be a religious instrument rather than a risk management instrument. As a consequence, the appreciation it attracts within the financially intellectual community, including actuaries, outside the Muslim world is poor in contrast to equivalently novel and innovative financial instruments.
In brief, Takaful is an alternative to insurance. The fact that takaful is developed in accordance to Islamic business principles and practices does not impede the effectiveness of takaful in meeting the risk management needs of its consumers as well as meeting the profit requirements of shareholders, but rather enhances it with values build around a socially responsible overlay.
This paper seeks to explain and communicate Takaful on a purely conceptual level, to actuaries who are not expert in the subject matter, without references to, but importantly also not in contradiction with, any underlying Islamic business principles and practices.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Communicating Longevity
Despite persistent efforts to educate and communicate about longevity risk and its potentially harmful effects, the marketplace for longevity risk mitigation solutions has been slow to develop. We propose that, in part, the problem stems from the lack of a common definition and the resulting lack of a consistent understanding of longevity risk. We examine and critique various definitions used by financial and policy communities, as well as the public at large. Finally, we suggest that a concerted effort to address this semantic murkiness is an essential ingredient for the success of marketplace solutions and broader public policy initiatives.
*Awarded Consulting Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Commercial Property Insurance Data and Analytics --- Innovation and Globalization
The presenters will lead a discussion of some of the key innovations taking place in the rating and analysis of Commercial Property insurance in the US. The presenters will extend the discussion to the international application of these techniques.
Analytic capabilities now span a wide range of abilities. As an example, recent techniques enable accumulation management --- for non-catastrophe perils and for both modeled and non-modeled catastrophe perils. At the individual risk level, engineering-based fire risk rating developed in the US is expanding to international use. Rating programs covering wind risk in the US have been enhanced to evaluate and measure wind resistive characteristics at the individual building level. The programs combine a variety of data gathering and data management techniques, with statistical analytics, and predictive models. The program develops a rich source of data for use in even more specific loss modeling.
Regions of the world and individual countries have progressed in different ways and at different rates. Yet, some trends are evident and they are propelling a globalization of the data and analytics used in the industry. Governance of insurers, including Solvency II and other external regulatory requirements, is evolving rapidly and spurring new analytics which managements seek to apply throughout their organizations --- with cohesiveness of decisions all the way from enterprise-wide decisions to individual account underwriting decisions. Likewise, the quest to achieve better data and associated analytics is rapidly progressing. Techniques developed in one geographical area are tested to check their applicability in other areas. Quantitative analysis and modeling is increasingly the norm, helping to inform decisions in the face of the intrinsic uncertainty that characterizes the industry.
A discussion of some examples of the latest innovations and techniques should offer opportunities for fruitful discussion at the Congress.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Collaboration in Actuarial Education
This session will focus upon collaboration in actuarial education and will discuss our university's efforts to establish collaboration among Northeastern Ohio universities and colleges regarding actuarial science programming. We will discuss outreach, the use of distance education, and the possibility of joint degrees. We seek input and advice regarding the structure of such programs and will use small groups to discuss ideas for outreach, collaboration, and the design of such programs.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Coherent Projections of Age, Period, and Cohort Dependent Mortality Improvements
The projection of future mortality experience constitutes a challenge for both actuaries and demographers. As we show, some of the currently used standard mortality projections have several shortcomings which may pose a serious threat to insurers, pension funds, and social security systems.
In this paper, we propose a new projection methodology which overcomes these shortcomings. We introduce a model which allows mortality improvements to depend on age, period, and cohort and we explain how the model can be estimated and applied. In particular, we show how coherent projections for several populations, i.e. males and females of the same country and populations from closely related countries, can be derived. The basis for these projections are coherent extrapolations of historical life expectancies. As aggregated mortality statistics, life expectancies typically exhibit steady patterns which often makes forecasting rather obvious. We observe that the incorporation of information on the mortality experience of other populations can have a significant impact on the projection for a given population. A comparison with other commonly used projection models shows that our model provides stable and highly plausible projections. Finally, we discuss uncertainties in our modeling approach and explain how they can be accounted for. In order to illustrate our methodology, we derive fully specified projections for German males and females as members of a large reference set of European populations.
*Awarded PBSS Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Climate and Extreme Weather
There is a large difference between the General Session public's knowledge of Climate Change, and the evidence. The Actuaries Climate Index is being developed to educate the public about Climate Change, and to enhance our profession. The Actuaries Climate Risk Index will also include exposures as a measure of Climate Change Risk. In this session, people will learn how the Indices are being developed, and what characteristics we want the Indices to have. In this interactive session, participants will see some of the indices in the development stage, and will be able to provide feedback on whether the indices communicate the right information in the right way.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Classification of Takaful Contracts
This paper is intended to assist actuaries who want to do professional service to takaful (sharia insurance) based on International Actuarial Note No. 3, Classification of Contract Under International Financial Report Standards [2005].
Some contracts are often used in Takaful are:
a) Tabarru Contract
b) Tijarah Contract
c) Wakalah Contract
d) Mudharabah Contract
e) Musyarakah Contract
f) Wadi’ah Contract
g) Amanah Contract
h) Hibrid Contract
i) Al-qardh.
This paper describes the definition of takaful contract and relevant information from each of takaful contract. Helping actuaries to determine the classification of sharia contract based IAN 3. This paper also discusses the technical aspects related to the calculation of premium reserve for insurance contracts, including conditions in the event that insufficient liability on tabarru fund.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Actuaries and Public Outreach (Poster Session)
Actuarial outreach and volunteerism. An opportunity for one-on-one discussions with the panelists from Session #73. Interested delegates also are encouraged to stop by the exhibit booth of The Actuarial Foundation
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Chief Risk Officer Panel - Property/Casualty and Health
The position of Chief Risk Officer is gaining in prominence and visibility. Most major insurers now have a CRO, who is a member of the senior management team The panelists will discuss the following topics:
· Their roles and responsibilities within their organization
· Key external risk management issues, such as ORSA, ComFrame, and Solvency II
· Key internal risk management issues, such as emerging risks, risk modeling, and leading practices
· The role of actuaries in risk management
Typical questions to be covered by the panel include
-what are the main risks you see to (life/PC) insurers in 2014? Longer term?
-how have companies responded?
-how do companies perceive the value of ERM? Value of the CRO?
-what actuarial models have proved most valuable?
-can you relate a successful risk mitigation anecdote?
Time will be reserved for Q&A.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Financing Reinsurance
Session Description:
This session will discuss
• What is meant by Financing Reinsurance;
• The differences between cash and non-cash financing;
• An analysis of the risks involved.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Facing the Interest Rate Challenge: The Impact on Insurers of Changes in Interest
Over the last 20 to 30 years, interest rates have been trending downwards in many markets. While the current low levels of interest rates help over-indebted borrowers deleverage their balance sheets, not everyone benefits from low interest rates. Insurers – and life insurers in particular – are institutional savers that suffer from low investment yields.
Not all insurers and lines of business are affected in the same way. Exposure towards interest rate fluctuations depends on the importance of investment income and the ability to hedge interest rate risks inherent in different lines of business. Naturally, long-term lines are particularly exposed. However, in the case of non-life insurance interest rate risk can either be hedged via prudent management of assets and liabilities or mitigated by re-pricing contracts when they come up for renewal. Life insurance savings products are more problematic, not only because investment income is a key source of profit but also because policyholder behaviour can foil insurers' hedging strategies that rely on reasonably accurate predictions of future cash flows. Particularly exposed are products that combine long-term guarantees, high flexibility, and high liquidity.
To cope with the current low interest rate environment, life insurers will need to envisage strategies that go beyond re-pricing policies and adjusting guarantee levels. New life insurance products should be designed in a way that they can be effectively hedged against interest rate risks. Regulators can help in facilitating this. Particularly, guarantees that are difficult to hedge, yet create little value for customers at the point of sale, should be eliminated.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Extreme Risks and How to Think About Them
‘Most risk management is really just advanced contingency planning and disciplining yourself to realise that, given enough time, very low probability events not only can happen, but they absolutely will happen. The definition of infinity is that you wait long enough, everything happens.’ Lloyd Blankfein, Goldman Sachs CEO, July 2013.
This quotation highlights one of the important reasons for considering extreme risks. Extreme risks are potential events that are very unlikely to occur (therefore infrequent) but could have a significant impact on economic growth and asset returns, should they happen. We would argue that a robust risk management approach must not stop at a particular percentile (whether VaR95 or VaR99.5), but must consider the implications of events in the tail. In this session, we discuss why we believe extreme risks are important, our ongoing research into extreme risks, our current identification and classification of extreme risks, and their implications for insurers. We will also present the results of a recent global 'wiki' survey of ERM practitioners that prioritized extreme risks for the insurance industry.
*Awarded ERM/Financial Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Extreme Risks and How to Think About Them
‘Most risk management is really just advanced contingency planning and disciplining yourself to realise that, given enough time, very low probability events not only can happen, but they absolutely will happen. The definition of infinity is that you wait long enough, everything happens.’ Lloyd Blankfein, Goldman Sachs CEO, July 2013.
This quotation highlights one of the important reasons for considering extreme risks. Extreme risks are potential events that are very unlikely to occur (therefore infrequent) but could have a significant impact on economic growth and asset returns, should they happen. We would argue that a robust risk management approach must not stop at a particular percentile (whether VaR95 or VaR99.5), but must consider the implications of events in the tail. In this session, we discuss why we believe extreme risks are important, our ongoing research into extreme risks, our current identification and classification of extreme risks, and their implications for insurers. We will also present the results of a recent global 'wiki' survey of ERM practitioners that prioritized extreme risks for the insurance industry.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Exploring Longevity Initiatives
Individuals are living longer than ever before. In this session, we look at several research longevity initiatives that are addressing the challenges and opportunities associated with increasing lifespans. Andrew Peterson will present an overview of the SOA’s Longevity Task Force’s efforts to date in exploring the opportunities for the actuarial profession around longevity. Timothy Harris, will provide highlights from the SOA’s 2014 Living to 100 Research Symposium. The SOA’s Retirement Plans Experience Committee is busy developing a new set of retirement plan mortality tables and mortality improvement rates and will present the results of their work to date. In 2013, the CIA released its Canadian Pensioners' Mortality Table. Louis Adam will discuss this study and outlines the differences between the U.S. and Canada tables.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Expanding Role of the Actuary in Catastrophe Loss Estimating and Management
Traditionally, insurance companies licensed catastrophe models from three vendors, and each vendor model came with its own front and back end to handle the model input and output. The selection process General Sessionly involved choosing between AIR, RMS and/or EQECAT. Newer technology is now offering many more options, such as open platforms, plug and play models, and even build your own model capabilities. What does all of this mean for underwriters, management, and actuaries? This session will address how actuaries can help their companies evaluate the myriad options and decide which tools can be best integrated for enhanced pricing, underwriting, risk management, and portfolio optimization processes. It will illustrate new and expanded information available to actuaries for estimating catastrophe loss potential, understanding model uncertainty, and developing their own view of risk.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Evaluating An Investment Manager In an Uncertain World
When an investor hires a manager, it has beliefs about the future performance that the manager will generate. Typically, the manager is given three years to do its job. The investor then reviews the manager in light of the performance that it generated. In this paper, we formulate a Bayesian model that enables an investor to perform such a review.
In doing so, we reveal some profound issues with many of the prevailing conventions of performance evaluation.
It becomes clear, for example, why clients often unwittingly and erroneously inflate their expectations about the impact that a manager's performance will have on their portfolio. We also learn that it is crucial for investors to understand the mean-reversion of their manager's excess returns.
Once investors have this understanding, they can use this model, alongside other approaches, as a form of expert system. That way, if the manager’s performance is unexpectedly good or bad, the investor can use the model to gauge its likely response to this performance. This is particularly helpful, and value enhancing, as the model often recommends the opposite action to what the investor would prefer from a behavioural perspective.
(The full paper is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2101771. A ten-minute version of the presentation is also available as a screencast, should you wish.)
*Awarded Consulting Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Ethics Related to the Individual Actuary
TBD
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Ethics and Professionalism from an International Perspective (Limited Attendance Session)
With the increasing globalization of business, more actuaries find themselves operating internationally, while still other may be without realizing it. This three-hour limited attendance session will consider implications of the IAA’s Principles of Professionalism for actuaries practicing in these situations. This discussion will consider the Principles of Professionalism and application of International Standards of Actuarial Practice (ISAPs); the governance of international actuarial work; various codes of conduct around the actuarial world; the profession's response to business ethics; the need for continuing professional education and development; professional discipline; and the matter of the public interest. Attendees will participate in case studies and join in the discussion.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Entity-Wide Risk Management for Pension Funds
This paper explores the application of ERM-style techniques to pension funds. It uses the term ‘entity-wide risk management’ rather than ‘enterprise risk management’, even though both have the same acronym (‘ERM’), because many pension funds do not view themselves as business ‘enterprises’ as such. Some of the techniques that business enterprises have for managing risk (e.g. raising new capital from shareholders or branching into new business areas if existing ones have unattractive risk-reward characteristics) may not be open to many pension funds. The paper argues that the holistic approach to risk management (and governance) that is a hallmark of ERM is as appropriate to pension funds as it is to any other type of entity. This is the case whether the fund is defined benefit or defined contribution in nature, or a hybrid. It is also the case whether the ‘entity’ is deemed to be the fund itself, the sponsor or the two combined. Indeed, there are aspects of pension arrangements, such as the relationship between the fund and its sponsor, that lend added impetus to the use of ERM-style techniques in practical pension fund management.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
