ASTIN 2011 Delivers Powerful Content on Research and Ethics
By Louise Francis, Vice President-Research & Development
In June 2011, I attended the 2011 ASTIN (Actuarial Studies in Non-Life insurance) Colloquium in Madrid, Spain. An added bonus was that the AFIR (Actuaries in Finance) Colloquium was held jointly with the ASTIN Colloquium. I learned about a wide range of topics, including reserving, reserve variability, credibility, probability distribution applications, simulation modeling, and microinsurance. Many non-life delegates found some of the AFIR sessions to be very informative. ERM topics, such as Dave Ingram’s plenary session, “Choices and Choosing, ERM and Rational Adaptability,” were also covered in the AFIR portion of the colloquium.
All in all it was a greatly informative meeting. Following is a sampling of papers and presentations that I found quite interesting.
Pitselic and Piraeus presented a hierarchical credibility model for quantiles. Their method allows for different relationships at different percentiles of a distribution of the target variable.
Maria Martinez Miranda co-authored two papers on the double chain ladder. The double chain ladder utilizes two triangles, a paid and a count. Building on double chain ladder research, Martinez Miranda, Neilson, and Verrall presented a paper on adding underwriting year trend estimate from the incurred triangle.
Michael Fackler’s presentation, “The Financial Crisis: Risk Transfer, Insurance Layers and (no) Reinsurance Culture,” suggests that those pricing the mortgage derivitives that drove the financial crisis could have learned useful lessons from the pricing of nonproportional reinsurance. Some commonalities between the two include risk transfer pooling, layering, and data sparseness. In addition, the risks can be difficult to assess. Another commonality is risk transfer chains, along with the risk posed if someone in the chain defaults.
Savelli and Clementi presented a reserve variability model based on the collective risk model, which provides an alternative to the Mack and Bootstrap methods. The authors maintain that the technique is particularly relevant when the Fisher-Lange method, which is popular in Italy, is used for reserving.
Glen Meyers and Peng Shi’s presentation, “The Retrospective Testing of Stochastic Loss Reserve Models,” uses data from Schedule P, which was generously provided by the National Association Insurance Commissioners (NAIC). This data is available on the CAS Web Site.
David Wilke presented a plenary session on “Real World Economic Scenario Generators.” Wilke is well-known for his asset return and economic scenario models, which rely on time series models fit to empirical asset return data. This is a different approach than is used in many investment models.
In the Enterprise Risk Management plenary session, “Choices and Choosing: Plural Rationalities and ERM,” David Ingram discussed ERM within the context of differing attitudes toward risk.
Lastly, I’ll touch on ethics, a long overlooked topic. In the Professionalism Plenary session, “Finance: To be Ethical or Not To Be,” Jean Berthon asked if there is a need for ethics in finance and whether “ethics” and “finance” are contradictory terms. Berthon believes that greed has become one of the five pillars of finance today (the others are globalization, diversification, disintermediation, and deregulation). According to Berthon, these factors are responsible for the current global financial crisis. Further, he believes that now there is a mistrust of financial institutions and capitalism.
To remedy this mistrust, Berthon says we need ethics in finance. He characterizes ethics as an “imperious necessity” and crucial for a well-ordered financial system. This subject is very important to me personally and I highly recommend downloading Berthon’s overheads from the ASTIN Web Site.
All of the program’s overheads and papers, are available on the colloquim's website.
Next year ASTIN and AFIR will again have their colloquia together. The location will be Mexico City (in October), which may be a more accessible site for CAS members than the location of past colloquia. Please consider attending, as the ASTIN colloquia provides one of the few opportunities to catch up on the research being conducted outside of the CAS while meeting actuaries from all over the world.