DFA Committee Changes Its Name to the
Dynamic Risk Modeling Committee
by Mark R. Shapland, Chairman, Committee on Dynamic Risk Modeling
One of the impressive aspects about the CAS is that it is always changing and evolving to meet the continuing needs of its members. The emergence of DFA models in practice, and how the CAS has responded to these models by devoting research designed to stretch the boundaries in this area, are good examples of this evolution.
Before 1998, the Valuation and Financial Analysis Committee (VFAC) worked on DFA research along with its other projects. As DFA continued to evolve as an important tool for the actuary, the CAS decided in 1998 to focus even more efforts on DFA research by forming the Dynamic Financial Analysis Committee (DFAC), comprising the Dynamic Financial Analysis Task Force on Variables membership with some of the members of VFAC. This also allowed VFAC to focus more efforts on non-DFA research and they changed their name (and mission) to the Valuation, Finance, and Investments Committee (VFIC).
The DFA committee has served the CAS well since its inception, but the use of DFA models has continued to evolve. The term DFA has typically been applied to a complex model of an insurance company's operations. But the principles related to DFA modeling are being used in many other types of dynamic risk models from the relatively simple to the very complex. Practicing actuaries are now using dynamic risk models to help solve problems related to pricing, reserving, reinsurance, and capital management, to name but a few.
A little over a year ago, the Enterprise Risk Management Committee (ERMC) was established to direct and monitor research along (1) the full continuum of risk management activities, including those beyond modeling (such as risk identification, integration, treatment, exploitation, and monitoring); (2) the full range of risks, including those beyond hazard and financial risks (such as operational and strategic risks); and (3) all types of organizations, including those beyond the property/casualty insurance industry.
With these continuing changes, DFAC members decided the time was right to reassess its mission. As a result of our discussions, the committee reaffirmed the need to work closely with the ERMC (and other committees) to coordinate the DFAC's efforts and keep focused on models of property/casualty insurance risks and technical modeling issues. Since the principles, practical applications, and technical research related to risk modeling are not limited to models of insurance company operations, the committee decided that a name change was appropriate to reflect this new focus on all types of dynamic risk modeling.
On behalf of all the members of the renamed Dynamic Risk Modeling Committee, we look forward to continuing to serve the needs of the CAS and to "pushing the envelope" on dynamic risk modeling.