The Analysis of Risk Is Universal: Part II
By Mark Shapland
Our European colleagues are already facing stochastic modeling issues with respect to their preparations for Solvency II and International Accounting Standards, so this is a hotter topic in Europe than in the United States. However, we shouldn’t allow ourselves to get complacent, as momentum related to reserve variability from rating agencies and regulators will continue to build in the United States. Indeed, the development of new models for stating the value of unpaid claims and measuring required capital are well underway and could have a direct parallel in the United States. Contributing to that development process now, rather than later, could keep the U.S. and Europe from going in divegent directions and might strengthen the end result. After all, the analysis of risk is universal; it is only the local cultures that are different.
Following up on a previous “Analysis of Risk Is Universal” article (Actuarial Review, May 2008), I am pleased to report on continued cooperation between the CAS and the U.K. actuarial profession. The second Stochastic Reserving and Modelling Seminar occurred December 2-3, 2008, at Staple Inn in London (the seminar was originally scheduled for July 3-4 but was postponed). All indications point to continued cooperation and I encourage everyone to keep an eye on, or better yet, get involved in, research, education, or regulatory efforts outside the United States.
Compared to the first U.K. seminar, the one held in December 2008 was more focused on fundamentals and the more common models, although we spent more time on modeling in R. Recent articles have appeared in the Actuarial Review regarding R (for example, the “Brainstorms” article by Glenn Meyers in August 2008), but for anyone interested in learning more, you will find an excellent Web site developed by a U.K. working party that has many useful links to papers, presentations, and open-source code.