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1995
The actuarial theory of insurance risk Loads has followed a meandering course. Actuaries have approached this subject with different perspectives, contributing important but seemingly unrelated insights. Toad Bault‘s masterful discussion of "Risk Loads for Insurers" demonstrates the connections between the different approaches, thereby laying a firm foundation for a unified theory.
1995
Why is it that some products carry a minimal manufacturer base warranty even though all consumers are risk-averse? Conventional wisdom suggests that it is profitable for the manufacturer to offer a comprehensive warranty in this setting. We provide in this paper an explanation for the provision of minimal warranty in markets where all consumers are risk-averse.
1995
A number of studies have presented evidence rejecting the validity of the Sharpe-Lintner capital asset pricing model (CAPM). Possible alternatives include risk-based models, such as multifactor asset pricing models, or nonrisk-based models which address biases in empirical methodology, the existence of market frictions, or the presence of irrational investors.
1995
This article is concerned with insurer capitalization and its implications for insurance pricing. It establishes an economy-wide one-priced model of the dependencies between the prices of insurance and other stocks, real assets, and insurance policies, as well as consumer preferences for consumption relative to saving and insurance security, and insurer capitalization. All ingredients except the last were included in the model of Turner (1981).
1995
Insurance is a practice of exchanging a contingent claim for a fixed payment called a premium. The principle of assigning premiums according to the underlying risk is an essential element of actuarial science. A new premium principle is proposed, where risk loadings are imposed by a proportional decrease in the hazards rates. This premium principle is scale invariant and additive for layers.
1994
On the 12 May the Institute of Actuaries hosted a joint seminar with the Institute of Risk Management at Staple Inn Hall. The seminar was entitled Actuarial and Risk Management Aspects of Long Tail Liability Risks. The seminar, which was attended by about 90 people, lasted for half the day, and was structured around a risk management case study.
1994
Two approaches used to model interest randomness are presented. They are the modeling of the force of interest accumulation function and the modeling of the force of interest. The expected value, standard deviation and co-efficient of skewness of the present value of annuities-immediate are presented as illustrations.
1994
The usual chain ladder method is a deterministic claims reserving method. In the last years, a stochastic loglinear approximation to the chain ladder method has been used by several authors especially in order to quantify the variability of the estimated claims reserves. Although the reserves estimated by both methods are clearly different, the loglinear approximation as been called `chain ladder', too, by these authors.
1994
The traditional actuarial methods like loss development methods, Bornhuetter-Ferguson method, or Berquist-Sherman method have been served sell as long as point estimates are concerned. Since they are not stochastic approaches, they do not provide confidence intervals which are getting more attention connected to the risk-based capital requirements, explicit discounting the future liabilities, etc.
1994
The Bailey and Simon (1960) and Bailey (1963) papers on class and merit rating discuss models and estimation criteria in a non-probabilistic framework. It has been shown, for example, Van Eeghen et al (1983), that the Bailey and Simon criterion of class balance is equivalent to maximum likelihood estimation of a claim frequency model with Poisson distributed claim numbers.
1994
Schedule F discloses an insurer’s reinsurance transactions, for both ceded business and assumed business. Schedule F is one of the most complex schedules in the Annual Statement, and it has been extensively revised each year since 1989.
1994
This paper presents a model in which insurance cover is demanded by the clients of non-life insurance companies. The clients remunerate insurers at competitive market prices if the capacity of the insurer equals the demand for cover. Clients are, however, prepared to reward individual insurers for holding capacity in excess of insurance cover demanded, because this will increase the probability that their claims will be paid in full.
1994
The paper sets out the method required to be followed when estimating reserves for a Company or a Lloyd’s Syndicate which has accepted reinsurance treaties that have given rise to catastrophe losses, sufficiently large to upset the normal development pattern and to affect the gross account quite differently from the net account.
1994
The application of utility theory to insurance is incomplete without the inclusion of the structure of risk sharing; to limit the use of utility to accept or reject decisions misses its power to explain the real world of excess insurance and reinsurance. The fine subdivision of risk which is routinely achieved by insurance institutions can be explained on this basis. Practical methods of evaluating and pricing excess layers are given.
1994
Proportional reinsurance treaties may contain a number of loss sensitive features which require pricing by the reinsurance actuary. This paper extends the ideas presented in Bear and Nemlick’s paper Pricing the Impact of Adjustable Features and Loss Sharing Provisions of Reinsurance Treaties (PCAS 1990, Volume LXXVII) to address this problem. An aggregate distribution is introduced which can be written in closed form for quick calculations.
1994
This paper derives several formulas for the probability of eventual ruin in a discrete-time model. In this model, the number of claims process is assumed to be binomial. The claim amounts, premium rate and initial surplus are assumed to be integer-valued.
KEYWORDS Compound binomial process; Probability of eventual ruin; Ultimate ruin probability; Infinite-time ruin probability; Risk theory; Random walk; Gambler's ruin; Lagrange series.
1994
In an earlier paper the author derived a recursion formula which permits the exact computation of the aggregate claims distribution in the individual life model. To save computing time he also proposed an approximative procedure based on the exact recursion.
In the present contribution the exact recursion formula and the related approximations are generalized to the individual risk theory model with arbitrary positive claims.
1994
Investment Income, Expenses, Regulation
1994
In 1992, the NAIC adopted the concept of the appointed actuary with respect to loss reserve opinions. Now this concept is evolving into that of the valuation actuary with the potential for broad responsibilities for opining on assets and surplus as well as insurer liabilities. This session explores the appointed actuary concept and the implications of the expanding role of actuaries in reporting on the general financial position of an insurer.
