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ASTIN in Berlin
Gary G. Venter, Chairperson, International Research Committee 

Focus on International Research   

Editor's note: This is the first of what will be regular articles by the new International Research Committee, highlighting international research of interest to CAS members.

Historic Berlin hosted the 2003 ASTIN Colloquium, with scientific content notable both for the number of papers presented and for the increasing focus on applied issues. With a growing number of CAS members now working in Europe and Asia and the globalization of the insurance business, the CAS presence at ASTIN is also growing. In fact several of the papers were by U.S.-based CAS members.   

Traditional actuarial themes of pricing, loss reserving, and insurer financial management dominated the meeting. On the other hand there was very little emphasis on the historical ASTIN topic of probability of ruin. A current hot topic is applying correlation using copulas, with applications to all of the traditional themes. (The papers from the conference are available on the colloquium Web site at www.astin2003.de/03_call_03.shtml.)   

Reserving actuaries will want to look at the Quarg paper, which finds that higher paid-to-incurred ratios lead to lower paid development and higher incurred development. The paper uses this occurrence to improve and reconcile paid and incurred estimates. Another emerging issue in reserving is looking at correlation in development between lines and using this as additional information to improve the estimates in both lines as well as to recognize the added runoff risk that can come from correlation. A paper introducing this topic is by Gillet and Serra. Although the writing is in French, the formulas are easy enough to follow. This is a good subject for future research.   

Pricing papers looked at credibility, profit loading, loss distributions, and reinsurance pricing. The Møller paper does risk loading in a stochastic process framework and is a bit difficult to read, but comes up with some new ideas for pricing by probability transforms. One such idea, which Møller calls the minimum martingale measure, seems potentially applicable. It can be simplified to picking a loading parameter s, which is a small positive number, maybe 1 percent or less, and increasing loss frequency by dividing by 1 - s, and multiplying the severity probability for loss size x by 1 - s + sx/EX. If C is the severity CV, the overall profit margin comes out as (1+C2)s/(1 - s), which can be allocated to layer by this method. Ruhm and Mango look at a related approach to risk pricing.   

In memory of Bill Jewell, Bühlmann, Gisler and Kollöffel review the multidimensional credibility paradigm Jewell started and apply it to finding the best estimate of the frequency of large claims based on the distribution of smaller claims. Hashorva and Jürg look at this problem from another perspective.   

Upwards of a half-dozen papers discussed copulas. An earlier version of my own Proceedings paper "Tails of Copulas" was previously an ASTIN Colloquium paper. Some papers followed up on the theme of using descriptive functions of copulas to evaluate goodness of fit of copulas to data, including Belguise and Levi, Charpentier, and my multivariate t-copula paper.   

Financial management papers included issues of capital and asset allocation, for example, Mango, Venter, Schnieper, Purcal, Hürlimann, and Corradin. Others addressed financial modeling issues such as DFA models and measuring the impact of reinsurance.   

Besides the scientific program, ASTIN always has a social program to encourage informal interaction. Berlin provided a good setting for this, featuring an evening reception on the rooftop of Dresdner Bank, which overlooks the famous horses on top of the Brandenburg Gate. A boat trip on a nearby lake was also enjoyable.   

The 2004 Colloquium, to be held June 6-9 in Bergen, Norway will look to continue the trend of new directions for actuarial applications in a scenic setting amid mountains, waterfalls, and fjords and the long hours of sunlight of the Norwegian summer. The scientific and social programs promise to be rewarding.

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