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STAY TUNED! If you are anticipating additional search filters by attribute and level to align with the CAS Capability Model, it is coming later this Summer. As the CAS begins to code recorded sessions by specific attributes and levels (starting with the 2023 Annual Meeting), these will be tagged in the CAS database of presentations going forward and should be searchable.
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STAY TUNED! If you are anticipating additional search filters by attribute and level to align with the CAS Capability Model, it is coming later this Summer. As the CAS begins to code recorded sessions by specific attributes and levels (starting with the 2023 Annual Meeting), these will be tagged in the CAS database of presentations going forward and should be searchable.
But you may use the Capability Model now to help you identify topics. For example, if you want to move up one level under the content area “Functional Expertise,” you may search topics in the particular functional area to expand your knowledge.
Recorded content is searchable by Capability Model attribute and level in the CAS Online Library.
Credit & Surety Pricing and the Effects of Financial Market Convergence
This paper describes how the convergence of the insurance and financial markets is affecting Credit & Surety insurance. The paper explains why prior experience has become an unreliable measure of exposure and how this paradigm shift affects the pricing of Credit & Surety products. The authors propose a new exposure-based method for analyzing Credit & Surety that combines the best practices of insurance and financial market pricing theory. Discussions about its implementation as well as sample calculations for both primary and reinsurance pricing are included. This paper also discusses the new breed of Commercial Surety bonds that have been recently developed to compete with traditional financial products. Finally, the paper addresses the need for better and more sophisticated risk management techniques for the industry.
Source:
2003 Ratemaking Seminar
Type:
Paper
Panelists:
Christopher Steinbach, Althula Alwis
Keywords:
Financial Market Convergence, Credit, Surety Pricing
Estimating the Cost of Commercial Airlines Catastrophes- A Stochastic Simulation Approach
Actuaries are increasingly finding more applications for stochastic simulation in pricing, reserving, DFA, and other insurance and financial engineering problems. For instance, stochastic simulation has gained acceptance as a pricing tool for property catastrophe coverage in the insurance, reinsurance, broker and investment communities. This has required primary companies to compile and provide information at a more detailed level than they did only a few years ago. Various commercial simulation products have emerged to help companies assess and price their property catastrophe exposures. Although there are many parallels between the catastrophe exposures of property and commercial aviation risks, the use of simulation is not widespread in the assessment of commercial aviation catastrophic exposures. In this paper, we present the framework for a simulation model for commercial aviation catastrophes and we discuss various aspects of designing such a model including the level and type of information needed.
Source:
2003 Ratemaking Seminar
Type:
Paper
Panelists:
Romel Salam
Keywords:
Catastrophes, Stochastic Simulation Approach, pricing, reserving, DFA, insurance and financial engineering
Statistical Learning Algorithms Applied to Automobile Insurance Ratemaking
We recently conducted a research project for a large North American automobile insurer. This study was the most exhaustive ever undertaken by this particular insurer and lasted over an entire year. We analyzed the discriminating power of each variable used for ratemaking. We analyzed the performance of several models within five broad categories: linear regressions, generalized linear models, decision trees, neural networks and support vector machines. In this paper, we present the main results of this study. We qualitatively compare models and show how neural networks can represent high-order nonlinear dependencies with a small number of parameters, each of which is estimated on a large proportion of the data, thus yielding low variance. We thoroughly explain the purpose of the nonlinear sigmoidal transforms which are at the very heart of neural networks' performances. The main numerical result is a statistically significant reduction in the out-of-sample mean-squared error using the neural network model and our ability to substantially reduce the median premium by charging more to the highest risks. This in turn can translate into substantial savings and financial benefits for an insurer. We hope this paper goes a long way towards convincing actuaries to include neural networks within their set of modeling tools for ratemaking.
Source:
2003 Ratemaking Seminar
Type:
Paper
Panelists:
Germain Denoncourt, Charles Dugas, Christian Fournier, Nicolas Chapados, Pascal Vincent, Yoshua Bengio
Keywords:
Ratemaking, auto
Capital Consumption: An Alternative Methodology for Pricing Reinsurance
This paper introduces a capital consumption methodology for the price evaluation of reinsurance in a stochastic environment. It differs from the common practice of risk-based capital allocation and release by: (i) evaluating the actual contract cash flows at the scenario level; (ii) eliminating the need for contract-level supporting capital allocation and release; (iii) evaluating each scenario's operating deficits as contingent capital calls on the company capital pool; and (iv) reflecting the expected cost of contingent capital calls as an expense load. This method eliminates the need for capital allocation and release; creates scenarios that more closely model actual contract capital usage; allows more flexibility in stochastic modeling; and makes risk-return preferences an explicit part of the pricing decision.
Source:
2003 Ratemaking Seminar
Type:
Paper
Panelists:
Donald Mango
Keywords:
Capital, Pricing, Reinsurance
New Catastrophe Exposure for Workers Compensation and Commercial Property Insurance
Loss estimation models have become an essential pricing tool in recent years for natural catastrophes such as hurricanes and earthquakes. With the tragic events of September 11, 2001, and the likelihood of other terrorist events in the future, the insurance industry is struggling to prepare for these extreme events. While no computer model can predict when or where terrorists will strike next, sophisticated models have recently been developed to help estimate loss potential deriving from terrorist acts. This session will discuss terrorism modeling for the two lines considered to be most affected by attacks, namely commercial property and workers compensation. In addition, there will be a discussion of the Federal Backstop Program.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Linda Brobeck
Panelists:
Barry Lipton
Policyholder Retention and Its Impact on Pricing
As insurance draws closer to other financial services industries, the emphasis those markets place on retention, lifetime customer value, and the economic value of the current client base is getting increased attention.
This session will present possible measures of retention, a discussion of how different market segments may respond to rate changes, an approach to modeling prospective retentions by market segment, and ways this information can be used to optimize a proposed rate change.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Roosevelt Mosley
Panelists:
Claudine Modlin, Charles Boucek
Basic Concepts in Credibility
Considering credibility in the context of ratemaking concepts, this session will review variables affecting credibility and credibility formulas, as well as practical techniques for applying and increasing credibility. Both classical and Bühlmann models will be described.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Panelists:
Paul Brehm
Professionalism in Ratemaking: More Important Than Ever
Presented by members of the Committee on Professionalism Education, this session will explore the CAS Code of Conduct in light of the current environment in the insurance and financial services industries. Fictional case studies will be presented, followed by discussion and debate regarding what may or may not be acceptable behavior in a ratemaking environment. Audience participation is encouraged.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Roosevelt Mosley
Panelists:
Thomas DeFalco, Kevin Dyke
Workers Compensation-Excess Pricing
Methods and considerations that are vital in pricing excess layers for workers compensation exposures are the topics of this session. Excess layers are difficult to price for several reasons, such as lack of credible claims experience and uncertainty with regard to future claim development. How future medical trends and life expectancy will affect claim costs can also contribute to pricing difficulties. Lack of good data can also bias the appropriate rate. This session will discuss how to reflect various factors when pricing excess layers.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Walter Wright
Panelists:
Natalie Rekittke, Karen Pachyn
Catastrophe Modeling
Prior to September 11, 2001, catastrophe reinsurance was written and priced without a true appreciation for its exposure. Insurance companies, reinsurers, and even rating agencies are now aggressively pursuing more appropriate modeling techniques to assess and manage their exposure to loss.
In this session, panelists will present an update of available modeling techniques and discuss how both reinsurer and primary company professionals are using them for pricing and exposure management.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Beth Fitzgerald
Panelists:
David Lalonde, John Tedeschi, Jodi Healy
What Makes a Good Rate Filing?
What makes a good rate filing? It depends on who you ask. Now is your opportunity to ask three individuals with very distinct opinions: a regulator, a company actuary responsible for state filings, and a consultant with a similar responsibility.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Beth Fitzgerald
Panelists:
Shawna Ackerman, Dan Davis, Bonnie Wittman
The Actuary as an Expert Witness
Insurance regulation has historically required actuaries to serve as expert witnesses in administrative hearings concerning rate filings. Recent trends have required the actuary to be called upon to provide expertise in both civil and criminal litigation on a wide variety of actuarial subjects. This session will explore the challenges for actuaries as expert witnesses from two perspectives: the actuary who serves as the witness and the attorney who prepares or cross-examines them.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Beth Fitzgerald
Panelists:
Charles McClenahan
Cost of Financing Insurance-Further Developments
The cost of financing an insurance company is defined as the combined cost of capital, reinsurance, and options on a catastrophe index. This analysis updates previous approaches for allocating the cost of financing back to the individual underwriting divisions. During this session, panelists will analyze how to use dynamic financial analysis to determine profitability targets for the various underwriting divisions of an insurance company. The latest research on this topic, "The Cost of Financing Insurance-Version 2.0," is on the CAS Web Site at https://www.casact.org/pubs/forum/01spforum/meyers/.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Panelists:
Glenn Meyers
How Much Insurance Should I Buy? Insurance Decisions Using Enterprise Risk Management
Unlike the prior RCM sessions, this session will focus on the insured, and not on the insurer. This session will describe considerations in assisting commercial insurance buyers on their risk financing decisions as a function of the cost of risk financing (e.g., rates) and the buyers' corresponding appetites for retaining risk. In particular, the panel will consider the goal of creating and enhancing shareholder value in the insurance decision process, given the hard commercial insurance market.
An insurance broker and an actuary will describe several case studies in methods that attempt to optimize a corporation's risk management strategies, given considerations, among others, of the firm's cost of capital and market premium levels.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Cecily Gallagher
Panelists:
Barry Franklin, Christopher Bohn
Ratemaking, Capital Allocation, and Risk Metrics
As the audience is expected to be familiar with the actuarial considerations discussed in sessions RCM-1, RCM-2, and RCM-3, this session will discuss an update on recent research initiatives on how to estimate and reflect the parameters relating to financial models used to measure risk and return.
One panelist will describe a formal value creation framework underlying the application of a risk/return discipline to insurance (pricing and analysis), with and without allocation of surplus and in consideration of consistent treatment of underwriting and investment returns.
Another panelist will review the recent Risk Premium Project sponsored by the CAS Committee on the Theory of Risk. Both theoretical and empirical issues dealing with cost of capital and allocation of capital by line will be covered.
The third panelist will describe the concept of "Probability Transforms".
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Cecily Gallagher
Panelists:
Oakley VanSlyke, Russell Bingham, Richard Derrig
Risk and Return: What Are We Debating About? (Panel Discussion)
This session follows up last year's debate on the essential elements of analytical models used to gauge and measure risk and return, in particular the corresponding actuarial considerations in reflecting fair rates of return in ratemaking.
Issues discussed will include risk metrics, capital allocation/nonallocation, parameter risk, correlation, and a host of other considerations. This session, like last year's, will be a fun one as it will be geared toward Socratic dialogue (debated and maybe heated arguments) among the panelists and with the audience. Don't miss this one!
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Cecily Gallagher
Panelists:
Donald Mango, Glenn Meyers, Oakley VanSlyke, Russell Bingham
Risk and Return: Considerations (Background Session)
Covering the essentials of risk and return models, this session will consider the views of both the shareholder and the policyholder, as well as regulatory restrictions. The discussion will include a proof that the internal rate of return (IRR) and net present value (NPV) models are essentially equivalent when parameters/assumptions are consistent and model structures allow for it.
The panel consists of contributors to the textbook, Actuarial Considerations Regarding Risk and Return in Property-Casualty Insurance Pricing (available online through the "Publications" section of the CAS Web Site).
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Cecily Gallagher
Panelists:
Russell Bingham, Judy Mintel
Catastrophe Load? Risk Load? Who's Carrying the Load?
Who IS carrying the load? We have actuarial and modeling practices to help determine the catastrophe load and to spread that load "appropriately." But what about risk loads and reinsurer margins? These costs have not been as widely recognized or accepted. So, who's paying these costs? Our expert panelists will share some thoughts on what should be reflected and how, including some cutting edge modeling that ties together the more traditional expected loss model output with financial modeling.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Cecily Gallagher
Panelists:
John Rollins, David Appel
Geographical Spatial Analysis in Personal Lines Territorial Ratemaking
Geographical area is one of the main drivers of personal lines claims experience, yet territorial definitions and relativities can vary significantly between insurers. The problem with territory as a rating factor is that an insurer may have few policies in any one region, making it difficult to assess reliably the risk associated with that region.
This session will discuss using spatial smoothing techniques to form new territory definitions. Spatial smoothing techniques are based on the assumption that, in the absence of credible experience in any given area, that area will exhibit riskiness similar to that of neighboring areas. The discussion will cover the mechanics of spatial smoothing (including standardization for other rating variables using GLMs, credibility, possible smoothing algorithms), the inclusion of geodemographic data, and implementation issues.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Cecily Gallagher
Panelists:
Geoffrey Werner
Quantifying Impact of Nonmodeled Catastrophes
Over the last decade, much attention has been given to the development of models that estimate hurricane and earthquake expected losses. This session will focus on nonmodeled catastrophe losses, those arising from catastrophes other than hurricane and earthquake. Panelists will review current methods, describe their benefits and drawbacks, and discuss various alternate methods that incorporate such elements as capping, regional groupings, and credibility. An open discussion of the various procedures and possible variations will conclude this session.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Anthony DiDonato
Panelists:
Israel Krakowski, Sara Drexler
Applying GLM Techniques in Nontraditional Areas
Actuaries have traditionally used a variety of techniques and methods to project future results by analyzing historical data. In recent history, many insurers have begun to apply multivariate techniques, including generalized linear modeling (GLM), to these traditional actuarial pursuits. However, there are many areas in the insurance industry outside the actuarial world that would find this type of analysis valuable. This session will discuss application of GLM techniques to other functions in the insurance industry, including claims, underwriting, agency activities, reserving, and marketing.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Charles Parsons
Panelists:
Claudine Modlin
Regulating the Use of Credit Scoring in Underwriting and Rating
Many companies now use credit scoring to improve underwriting results for both personal automobile and homeowners insurance. As credit scoring use increases among insurers, regulatory interests and oversight have also increased. State insurance departments now want to know more about the use of credit scoring to ensure compliance with both existing and new state regulations related to credit scoring. Regulators are researching and testing companies' compliance with state regulations on filing requirements, underwriting/rating decisions, and systems controls. In addition, regulators are seeking to learn more about proprietary and generic industry credit scoring models. This session will discuss some of the key regulatory interests with the use of credit scoring in underwriting and rating of personal lines insurance.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Panelists:
Roosevelt Mosley, John Wilson
American Academy of Actuaries Update on Credit Scoring
This session will discuss the American Academy of Actuaries' role in providing advice to the NAIC's working group on credit scoring. Speakers will include members of the Academy's subcommittee on risk classification and a representative of the NAIC working group. The workshop will explain:
The Academy's role in this process;
The subcommittee's recommendations regarding the NAIC's plans to conduct a study of the effect of credit scoring on protected classes;
The subcommittee's recommendations regarding best practices for regulatory review of credit scoring models; and
The public policy issues and concerns regarding credit scoring to which the NAIC must respond.
The workshop is intended for actuaries who prepare rate filings, including credit scoring, and for anyone who is interested in how the Academy provides advice to the NAIC (and others) to assist in the public policy decision-making process.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Charles Parsons
Panelists:
Alan Wickman, Lisa Smego
Whose Line Is It Anyway? Multi-Peril Crop and Boiler and Machinery
Few actuaries get the opportunity for exposure to two unique insurance products: multi-peril crop and boiler and machinery. The ratemaking method for each of these two lines addresses elements not common to other property/casualty coverages, yet all actuaries can learn from the approaches used to overcome these distinctive challenges and can apply what they learn to dilemmas they face in other lines. This panel will begin with an introductory discussion of coverages, distribution systems, reinsurance considerations, and pricing issues. It will also explore how ratemaking methods address the challenges facing the actuary who prices multi-peril crop and boiler and machinery.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Regina Berens
Panelists:
Richard Bill, Christine Steben
Directors and Officers Liability
What do the numbers 204, 213, and 488 all have in common? According to the Stanford Securities Class Action Web Site, they are the number of Security Class Actions filed in 1999, 2000, and 2001, respectively.
This presentation will discuss the challenges in pricing the D&O risk. Terms and conditions offered are as important as charging the right price. Topics covered will include proper reflection of class relativities, trends, exposure bases, and multi-year options. New and renewal business will be discussed, along with some terms and conditions changes that are starting to be seen in the marketplace.
Source:
2003 Ratemaking Seminar
Type:
concurrent
Moderators:
Regina Berens
Panelists:
Claude Yoder
