Dynamic Risk Modeling Award
The DRM committee has awarded a $2,500 prize award to the authors: John Burkett, FCAS, MAAA, PhD; Jennifer Cheslawski, ACAS, MAAA; Gerald Kirschner, FCAS, MAAA; Timothy Pratt, FIAA, MAAA and Diana Rangelova, Fellow, Institut des Actuaires for their paper “Holistic Approach to Setting Risk Limits”.
This paper uses a hypothetical medium sized multi-line mutual insurer and the Public Access DFA Dynamo 4 Model (“Dynamo 4”) to holistically evaluate a company’s current risk limits. Historically, the company’s risk limits were set in isolation with an eye towards capital preservation. The risk limits reviewed include those pertaining to growth rates, retentions within the company’s reinsurance program, and investment policy statement limits.
The Dynamo 4 model is used to test and suggest improvements to the current risk limits from an enterprise wide capital preservation perspective. The paper concludes that certain risk limits that were set in isolation and originally appeared to mitigate risk were actually negatively affecting the company’s long term solvency goals.
Read the original announcement to learn the details on the 2009 Dynamic Risk Modeling Call Paper Program.