Casualty Actuarial Society

1998 DFA Advanced Track Handouts

Advanced Track Handouts

Advanced Track Handouts

Managing Risk in a Portfolio Context—
Assets, Derivatives, Reinsurance and Reserves

Many reinsurers and insurers have recently taken positions in credit derivatives, interest rate derivatives, and related financial instruments. Lawrence Berger will provide a general discussion on the many types and uses of derivatives. This discussion will provide a background for a case study where DFA is used to measure the risk profile of a company's asset portfolio before and after derivatives are introduced.

Gary Venter will preview his DFA call paper, "Implications of Reinsurance and Reserves on Risk of Investment Asset Allocation." This paper looks at how investment risk and reinsurance (underwriting) can affect the overall risk to the company and how the two can be managed simultaneously. His presentation will include models for asset risk and loss development risk.

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Panelists:Lawrence A. Berger, Ph.D.
Swiss Re New Markets

Gary G. Venter, FCAS, MAAA
Sedgewick Re Insurance Strategy, Inc.

Applications of Resampling Methods in DFA
and Stochastic Modeling and Error Correlation in DFA

This session will include discussions of two papers prepared for the call paper program. The first paper discusses applications of some modern non-parametric statistics to modeling loss distributions, and the possibilities of using them for modeling other input variables for the purposes of arriving at an integrated company model. The paper presents examples of inference about the severity of loss, loss distribution percentiles, and other related quantities, based on data smoothing, bootstrap of standard error and bootstrap confidence intervals. The examples are based on real-life auto injury claim data. The accuracy of the authors' methods are compared with that of standard techniques.

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Moderator:Richard Derrig
Automobile Insurers Bureau of Massachusetts
Panelists:Krzysztof Osztasweski, Ph.D., ASA, MAAA
University of Louisville

Gregory Rampalz, Ph.D.
University of Louisville

Scruggs Consulting

Why DFA Is Like Sushi

Manuel Almagro will focus on some of the interesting perceptual reasons why companies may not buy into the budgets seemingly needed to do DFA. Why might these projects get lost in the hype over tools, tool shortfalls and tool expenses? Why does DFA-like science flourish in other vertical sectors, but seems to be a little slow in getting of the blocks in the property/casualty industry? Why is project definition (or "purpose") so important in obtaining more widespread adoption of DFA?

Using an entertaining analogy, William Scheel will then compare this dilemma to sushi. DFA can be remarkable for its visual sensuality and attention to form and detail, yet broadly disturbing because buyers often do not have a clue what it's made of. Once novice DFA (and sushi) lovers really know they will gladly buy it over and over and over. Scheel will dissect what is really in DFA, aiming at the relative importance of gross loss-based modeling and the specific ramifications of seeing loss activity as a frequency/severity convolution.

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Panelists:Manuel Almagro, Jr., FCAS, MAAA
Tillinghast-Towers Perrin

William Scheel

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On-Demand Continuing Education Credit

The CAS Roundtable

Posted on 05/11/2018
By Brian Fannin

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