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Frees, Shi, and Valdez Awarded 2010 Hachemeister Prize

The Hachemeister Prize Committee has awarded the 2010 Charles A. Hachemeister Prize to Edward W. Frees, Peng Shi, and Emiliano A. Valdez for their paper, “Actuarial Applications of a Hierarchical Insurance Claims Model.”

Designed to promote property/casualty-oriented papers published in an international forum, the Hachemeister Prize was created to honor Charles Hachemeister’s many contributions to Actuarial Studies in Non-Life Insurance (ASTIN) and his efforts to establish a closer relationship between the CAS and ASTIN. Papers eligible for the prize are those that were published in the previous year’s ASTIN Bulletin or presented at the previous year’s ASTIN or AFIR Colloquia.

Nearly 100 papers were eligible for the 2010 Prize. The winning paper was published in Volume 39, Issue 1 of the ASTIN Bulletin. A CAS Committee chaired by David Cummings narrowed the papers down to one winner. Judging criteria includes impact to the industry, practicality of application, originality, readability, and completeness.   

The winning paper demonstrates actuarial applications of the modern statistical method that are applied to detailed, micro-level automobile insurance records. The hierarchical statistical model allows the authors to study the accident frequency, loss type, and severity jointly, and to incorporate individual characteristics such as age, gender, and driving history that explain heterogeneity among policy holders. They investigate three specific actuarial applications of their model: (1) calculating the predictive mean of losses for individual risk rating; (2) modeling the predictive distribution of a portfolio of business, including the calculation of various risk measures useful in determining economic capital; and (3) examining the predictive loss distributions for an insurer and reinsurer under various reinsurance treaties.

The 2010 Hachemeister Prize paper will be presented at the 2010 Annual Meeting in Washington, DC.

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