Abstract
As catastrophe modeling systems become more sophisticated, the property insurance portfolio manager can receive better account loss information than ever before. We describe a software system called SmartWriter which effectively processes this information for the portfolio manager. Specifically. the system determines: Appropriate pricing for an account; Which accounts to remove from a portfolio to maximize risk-adjusted return; How to merge two books of business; Where to grow or shrink business geographically to achieve maximum diversification benefits. We utilize a number of optimization techniques to address these issues. We formulate the problem as a large mathematical program with numerous loss scenarios (10,000 or more). We then describe an algorithm to solve the resulting stochastic optimization problem in order to maximize risk-adjusted return. expected utility, or other user-defined performance measures. The SmartWriter system is a PC-based Windows application. USF&G, a large property and casualty insurance company, currently employs SmartWriter as an integral part of its decision making process.
Volume
Summer
Page
1-14
Year
1998
Categories
Actuarial Applications and Methodologies
Investments
Portfolio Strategy
Financial and Statistical Methods
Extreme Event Modeling
Business Areas
Fire and Allied Lines
Publications
Casualty Actuarial Society E-Forum
