Casualty Actuarial Society

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Request for Proposals Risk Premium Project Update (RPP II)

08/04/2009 —

  1. Casualty Actuarial Society (CAS)
    The CAS was organized in 1914 as a professional society with the purpose of advancing the body of knowledge of actuarial science applied to property, casualty and similar risk exposures. This is accomplished through communication with the publics affected by insurance, the presentation and discussion of papers, attendance at seminars and workshops, collection of a library, funded research activities, and other means. The membership of the CAS includes over 4,600 actuaries employed by insurance companies, industry advisory organizations, national brokers, accounting firms, educational institutions, state insurance departments, the federal government, and independent consultants. Additional information about the CAS can be found at www.casact.org.
  2. Committee on the Theory of Risk
    The Committee on the Theory of Risk (COTOR) is charged: To propose, encourage, and monitor research and other projects concerning the actuarial and financial evaluation of risk in insurance contracts and operations in support of the CAS Centennial goals.

    COTOR will sponsor the research to be conducted under this RFP on behalf of the CAS.
  3. CAS Interest in the Subject
    The CAS wishes to capitalize on the extensive review of the actuarial and financial literature review by the Risk Premium Project through 2000 by updating that review as outlined below.
  4. Research Problem Description
    Background:
    Released in June of 2000, the Risk Premium Project (RPP I), sponsored by the CAS and AERF, was an extensive up to date review and analysis of the current procedures to account for risk in the discounting of property and casualty loss and loss adjustment expenses, and a comparison of approaches presented in statistical/actuarial literature to those from financial literature. The results of RPP I were presented in three phases: Phase I – Update and expand the bibliography of literature originally composed by COTOR; Phase II – Discuss and summarize key theoretical conclusions regarding appropriate methods for quantifying insurance risk in light of the recent literature detailed in Phase I; Phase III – Propose some empirical studies to help quantify various aspects of the theory from literature contained Phase I and summarized in Phase II. Relevant documents from RPP I are on the CAS website at www.casact.org/cotor/index.cfm?fa=rpp. Actuarial and Academic Sources consulted in RPP I (37) are shown in Table 3 of the report and are meant to be representative but not required for RPP II.
  5. COTOR requests proposals from qualified researchers to produce a research document that accomplishes the following goals:
    Research Goals:
    The goals of the Risk Premium Project Update (RPP II) will be to revise the findings of RPP I. Specifically (1) update the literature bibliography from Phase I of RPP I with additional papers and research done since 2000, incorporating literature from reinsurance, risk management and catastrophe sources (in addition to statistical/actuarial and financial), (2) revise and augment the key conclusions included in Phase II of RPP I in light of additional literature and results of the two empirical studies (cost of equity capital for insurers by-line of insurance and allocation of capital for insurers), and (3) Recommend additional empirical studies to enhance the understanding of the current theories and to further quantify particular aspects, update and perhaps provide alternatives to recent models produced.
  6. Proposal Requirements
    Proposals should include a clear outline of the work that will be performed and the time frame in which it will be performed (including key dates). The more specific the proposal covers the goals the better. A cost estimate or range should accompany each proposal.

    This proposal will be reviewed in conjunction with the attached Research Agreement which defines the terms and conditions under which the work is performed.

    The proposal should be accompanied by the resumes of the researcher(s), indicating how their background, education, and experience bear on their qualifications to undertake the research.

    Respondents should demonstrate their interest in and familiarity with the literature on the evaluation of risk by including a resume (if a firm, of the principal consultant(s) performing or directing the work) showing relevant work/research experience and professional accomplishments (e.g... papers published). Receipt of proposals will be acknowledged in a timely manner.

    All decisions regarding the evaluation of responses to the RFP will be awarded entirely base on the information provided in the written proposals. The CAS will award the contract to the respondent who, in the judgment of the Oversight Subcommittee of COTOR, is best able to perform the work as specified herein. If COTOR determines that no proposal meets the requirements of the RFP, then no contract will be awarded.

    When a respondent is chosen by the Oversight Subcommittee and the contract awarded, respondents not awarded the contract will be so informed shortly thereafter.

    Interested researchers should submit their proposals and any questions in writing to:
      Richard A. Derrig, COTOR Vice-Chair
      Casualty Actuarial Society
      4350 N. Fairfax Dr. Suite 250
      Arlington, A 22203
      Phone: (703) 276-3100
      Fax: (703) 276-3108
      Email: jfulton@casact.org
    The proposals will be reviewed by members of a subcommittee COTOR. The current membership of the COTOR includes:
      Chairperson: Steve Mildenhall Vice Chairperson: Richard A. Derrig
    Committee Members
  7. Proposed Schedule
    August 1, 2009
    RFP circulates to CAS sources including ARIA list serve for academics.

    August 17, 2009
    Deadline for questions (must be written) from researchers regarding the RFP.

    August 29, 2009
    All written questions together with their answers will be distributed to all proposers.

    September 12, 2009; September 28, 2009
    Proposal deadline - end of business day; Proposal selection by COTOR

    December 7, 2009, January 8, 2010
    Draft Report due; Final Report Due
  8. Compensation
    Funding for this research is principally through the CAS but may include other research funding organizations. The amount of funds available for this project has not been determined at this time. The final scope of the project will be decided by the committee based on the research costs for various items and the expected results of the project. Payment of award(s) will be contingent upon delivery of an acceptable research product.
  9. Presentation, Ownership and Publication of Report
    If asked, the researcher(s) agree to be available to present the report at a CAS meeting or seminar. If travel is required, reasonable expenses will be paid in addition to the compensation provided in Section 8.

    As a condition of selection, the CAS requires that all right, title, and interest, including copyright and patent, in and to the report be owned by the CAS. The selected researcher must sign a formal Agreement (attached) that assigns all such rights to the CAS. Of course, in any publication of the report, the researcher will receive appropriate credit. The CAS may publish the report in any CAS publication, including electronic versions such as on its Web site or on compact discs.
  10. Research Agreement

    Submissions and Written Questions
    Richard A. Derrig, COTOR Vice-Chair
    Casualty Actuarial Society 4350 N. Fairfax Dr. Suite 250 Arlington, VA 22203
    Phone: (703) 276-3100
    Fax: (703) 276-3108
    Email: jfulton@casact.org

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