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1994
Allocated loss adjustment expense reserves are a large component of an insurance company’s liabilities. For many lines of business, allocated loss adjustment expenses are growing as a percentage of losses. As a response, many companies are taking actions to control these costs implementing systems to better monitor them. Some companies are re-engineering the entire claim settlement process.
1994
Robert Bender develops an equation for the relationship between the aggregate incurred loss ratio and the aggregate retrospective return premium. This discussion will illustrate this relationship using data for groups of actual insureds.
1994
The aggregate premium returned to a group of individual risks that are subject to retrospective rating depends upon the retrospective rating formula, the aggregate loss ratio of the risks, and the distribution of the individual risks’ loss ratios around the aggregate. As the aggregate incurred loss ratio for a group of risks increases, the aggregate returned premium decreases, but not as rapidly as the loss ratio increases.
1994
In this paper some results are given on the addivity of chain-ladder projections. Given two claims development triangles, when do their chain-ladder projections add up to the projections of the combined triangle, that is the triangle being the element-wise sum of the two given triangles?
Necessary and sufficient conditions for equality are given.
1994
The purpose of this paper is to explore how such a risk margin should be incorporated in statutory accounting. Rather than researching methods of calculating risk, this paper will assume that a satisfactory method for calculating risk margins will be separately developed. There are three common situations where the term “risk margin” is used: undiscounted loss reserves, loss portfolio transfers, and self-insurance trust funds.
1994
Many reinsurance contracts have adjustable premium and loss limiting features that complicate the reserving practice. This session addresses such factors as swing rating, loss-ratio caps, profit commissions, aggregate deductibles, and pre-set commutation terms.
1994
This paper critiques the methodologies used in prior studies to estimate underwriting betas for application in the “insurance CAPM.” It argues that reliable estimates of underwriting betas do not exist. It also demonstrates the inapplicability of the CAPM to the yield to maturity of a bond or portfolio of bonds. Finally, it demonstrates that the assumption that the yield on a U.S.
1994
Winter 1994, Ratemaking Call Papers These files are in Portable Document Format (PDF), you will need to download the Acrobat Reader to view the articles. Table of Contents Download Entire Volume An Alternative to the Parallelogram Method Alfred D Commodore How to Choose a Trend Factor Israel Krakowski
1994
Summer 1994, Environmental Papers These files are in Portable Document Format (PDF), you will need to download the Acrobat Reader to view the articles. Table of Contents Download Entire Volume Duration, Hiding In a Taylor Series Keith D. Holler Using the Whole Triangle to Estimate Loss Reserves Frank Pierson
1994
Spring 1994, Variability in Reserves Prize Program Papers (Volume 1) These files are in Portable Document Format (PDF), you will need to download the Acrobat Reader to view the articles. Table of Contents Download Volume 1 Download Volume 2 Volume 1 Accounting for Risk Margins Stephen W. Philbrick with an introduction by Paul G. O'Connell
1994
This article introduces a neural network artificial intelligence model as an early warning system for predicting insurer insolvency. In order to investigate a firm's propensity toward insolvency, a feed forward, back-propagation methodology is applied to financial data two years prior to insolvency for a sample of U.S. property-liability insurers that became insolvent in 1991 or 1992 and a size-matched sample of solvent insurers.
1994
Regulators have recently adopted a risk-based capital formula for property-liability insurers. This article develops practical methods for setting risk-based capital standards using the expected policyholder deficit as the solvency measure. The analysis considers the stochastic nature of insurance risk, using market valuation to remove measurement bias, and finds that a proper time horizon is the period between risk-based capital evaluations.
1994
Regulators have recently adopted a risk-based capital formula for property-liability insurers. This article develops practical methods for setting risk-based capital standards using the expected policyholder deficit as the solvency measure. The analysis considers the stochastic nature of insurance risk, using market valuation to remove measurement bias, and finds that a proper time horizon is the period between risk-based capital evaluations.
1994
Although the use of investment income in ratemaking for property-liability insurance has received much theoretical discussion since the mid-1970s, little attention has been paid to the role of federal income taxes in ratemaking. The pricing models of Fairley (1979), Hill and Modigliani (1987), and Myers and Cohn (1987) all incorporate federal income taxes as an accounting item, a necessary cost of doing business.
1994
The Esscher transform is a time-honored tool in actuarial science. This paper shows that the Esscher transform is also an efficient technique for valuing derivative securities if the logarithms of the prices of the primary securities are governed by certain stochastic processes with stationary and independent increments. This family of processes includes the Weiner process, the Poisson process, the gamma process and the inverse Gaussian process.
1994
A study compares the market value of highly leveraged transactions (HLT) to the discounted value of their corresponding cash flow forecasts. For a sample of 51 HLTs completed over the period 1983-1989, the valuation of discounted cash flow forecasts are within 10%, on average, of the market values of the completed transactions. These valuations perform at least as well as valuation methods using comparable companies and transactions.
1994
This paper critiques the methodologies used in prior studies to estimate underwriting betas for application in the "insurance CAPM." It argues that reliable estimates of underwriting betas do not exist. It also demonstrates the inapplicability of the CAPM to the yield to maturity of a bond or portfolio of bonds. Finally, it demonstrates that the assumption that the yield on a U.S.
1994
Several well known methods of calculating fair premium rates are considered. Particular reference is made to the Myers-Cohn and internal rate of return methods. In the absence of taxes, the most natural application of each method produces a return on equity, period by period, that is consistent with the capital asset pricing model. Hence, the 2 methods produce the same premium under these conditions.
1993
In this paper a continuous-time model of a reinsurance market is presented, which contains the principal components of uncertainty transparent in such a market: Uncertainty about the time instants at which accidents take place, and uncertainty about claim sizes given that accidents have occurred.
1993
This paper contains a new approach to analyzing loss statistics which uses stochastic processes. The author views loss statistics as samples from a specific type of stochastic process. The author believes that type of process is the most consistent with the realities of insurance statistics, and he explains why.
1993
Forty-one years of catastrophe loss data by state are used in this study to produce a model for rating catastrophe covers for insurers in any region of the Continental United States. Smooth surfaces are fitted to the data by region, and experience rating is applied in an attempt to give appropriate weight to regional departures from the smoothed results.
1993
The paper which is printed here has its roots in meetings of the General Insurance Study Group in 1991 and 1992 and the Discussion Meeting held by the Institute of Actuaries on 22 February 1993, based on a discussion document drawn up by a working party whose member were: R.C. Wilkinson, B.Sc., F.I.A., P.K. Clark, M.Sc., F.I.A., D.H. Craighead, B.Sc., M.A., F.I.A., J.W. Dean, M.A. A.C.A., A. H. Silverman, M.A., F.I.A. and M.G.
1993
Is the U.S. property & casualty (P&C) insurance industry overcapitalized? Many practitioners and industry observers claim that the industry is awash in capital, and that this excess capital has driven prices to historical lows.
