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2001
The valuation methodology described in this paper follows from minimum sufficiency levels for reserves. The valuation is risk adjusted both for uncertainty in claims payments and uncertainty in investments. Attribution of capital is inherent in the method of determining minimum sufficiency levels.
2001
Casualty actuaries have long recognized that changes in claims patterns can create distortions in loss projections and loss reserve estimates. Various actuarial methods are used to detect, mitigate and adjust for (or avoid) these distortions.
2001
The fluctuations of the foreign exchange (FX) rates are a source of additional risk, but also an opportunity for further profits for internationally operating reinsurers. A DFA model that includes FX rates can be a means for measuring the potential impact of FX rate fluctuations on portfolios of ceded reinsurance and internationally invested assets.
2001
This paper discusses a methodology for establishing reserves for the portion of loss adjustment expense associated with the cost of claim adjusters. The actuarial literature contains very little material on how to estimate unallocated loss adjustment expense (ULAE) reserves. The literature briefly mentions “transaction based” methods that require claim department time studies.
2001
Underwriting cycles, with their wide and puzzling swings in premiums and profitability, challenge the pricing actuary to adapt rates to market realities. Understanding the forces behind insurance price fluctuations is a prerequisite to analyzing market prices.
2001
A method of inverting the Laplace transform based on the integration between zeros technique and a simple acceleration algorithm is presented. This approach was designed to approximate ultimate ruin probabilities for G-convolutions claim sizes, but it can be also used with other distributions.
2001
Surplus allocation has been requested from actuaries many times over the years. There are those who feel surplus allocation of any sort is incomprehensible. Since actuaries are asked to allocate surplus, we need to ensure the processes being used are sound. It is such a request from upper management that sent the author looking for the methods employed by others and pondering what additional methods could be constructed.
2001
In this paper, it is shown that with a certain definition of risk-based discounted loss reserves and a certain method of surplus allocation, there is an amount of premium for a contract which has the following properties:
(1 .) It is the amount of premium required for the contract to neither help nor hurt the insurer's risk-return relation.
(2.) It produces an internal rate of return equal to the insurer's target return.
If the insurer gets mo
2001
Mixed Poisson distributions are widely used for modeling claim counts when the portfolio is thought to be heterogeneous. The risk (or mixing) distribution then represents a measure of this heterogeneity. The aim of this paper is to use a variant of the Patilea and Rolin [15] smoothed version of the Simar [20] Non-Parametric Maximum Likelihood Estimator of the risk distribution in the mixed Poisson model.
2001
Chapter headings:
Introduction
Risk
Risk Theory
Risk Management
Risk Control
Risk Financing
Risk Financing Options for an Insurer
Risk Theory – Statistical Applications: Ratemaking and Solvency
Risk Theory – Financial Applications: Utility Theory and Game Theory
Examples
Summary
References
Appendix
2001
This paper provides an overview of the types of financial guaranty products and current market characteristics. It also explores the basics and alternatives of developing reserving procedures for financial guaranty irreverence products.
2001
Construction Defects: Property and Casualty insurers and actuaries cringe at the very mention of those two words. Insurers are troubled by the high frequency of construction defect claims while actuaries have encountered countless struggles with finding an appropriate and reasonable 4 . - •method for projecting the emergence of construction defect losses.
2001
The goal of ratemaking methodologies is to estimate the future expected costs for a book of business. Using past experience, including both internal and external data, the actuary attempts to quantify the required premium level to achieve an acceptable
profit.
However, if one looks at the rate activity in a market, it is apparent that company actions do not always follow the indications.
2001
The market for Excess Workers Compensation in the United States has grown rapidly over the last two decades. These are estimates that the annual premium volume in the excess $500,000 attachment segment of this market is now in excess of $1 billion. This paper presents a method of estimating rates for this type of coverage.
2001
This paper is a DFA case study of a hypothetical insurance company, DFAIC The study was completed using American Re-lnsurance's proprietary DFA model The company data used was provided in the Call Paper request The study evaluated capital adequacy, capital allocation, and underwriting performance issues Also, strategies regarding asset allocation and reinsurance structures were tested.
2001
Funding levels for many insurance and financial risk entities are often set to achieve a certain low probability of ruin.
2001
Hurricane models have become gradually more sophisticated over the past 15 years, but they're not without controversy. How do models work, how are they used, and what are some of the issues that hurricane modelers and users of the models face?
2001
As risk-bearing organizations and the public at large have recognized the long-term frequency and potential magnitude of natural disasters, risk management solutions have emerged from both private enterprise and the public sector.
2001
The paper analyses the question: Should an insurance customer carry an occurred loss himself, or should he make a claim to the insurance company? This question is important within bonus-malus contracts with individual experience adjustments of the premium. The analysis model includes a bonus hunger strategy where the customers prefer the most profitable financial alternative, that is, the alternative which represents the lowest rate of interest.
2001
The paper analyses the questions: Should – or should not – an individual buy insurance? And if so, what insurance coverage should he or she prefer? Unlike classical studies of optimal insurance coverage, this paper analyses these questions from a bonus-malus point of view, that is, for insurance contracts with individual bonus-malus (experience rating or no-claim) adjustments.
2001
Intuitively, life expectancy and hazard rate should be inversely related to each other. Whereas life expectancy, or mean time to failure, is determinable as a simple descriptive statistic, the concept o f hazard is defined as an instantaneous failure rate and involves taking limits, This note investigates "inverting" life expectancy as a method for estimating the hazard rate.
2001
When studying Worker's Compensation (WC) claim cost experience, researchers often prefer models that relate claim characteristics and other cost drivers to the logarithm of the claim cost, rather than to the dollar cost itself. Linear models based directly on dollars, however, are better suited to decomposing the differences in costs observed over time or between claim populations. Reconciling the two methods within one analysis can be awkward.
2001
Traditional survival analysis deals with functions of one variable, "time." This paper explains the case of multiple and interacting aging metrics by introducing the notion of a hazard vector field This approach is shown to provide a more general framework than traditional survival analysis, including the ability to model multi-dimensional censored data~ A simple example illustrates how Green's Theorem in the plane applies to evaluate and even to
