Description: A discussion of risk-relevant resources available at the Society of Actuaries Risk Management Task Force Web site

Description: Risk management techniques do not include system science. System science requires that the uncertainty of the world is incorporated into the results. The articles explains the difference between risk and uncertainty. Learn how risk practices create an overoptimistic view of future outcomes.

Description: Model Risk Management continues to be an evolving area for insurers to be considering. This has grown from both internal and external forces and may require a different format to previous model risk frameworks held by insurers. Furthermore, there are a number of trends emerging that we believe will drive an increased focus on insurer’s model risk management frameworks such as technology automation, ever increasing data sources, and the use of predictive models. Risk management and the development of models is an area where insurance companies have performed well in the past. It is expected that frameworks currently exist within companies; the governance, documentation, validation and control of model risk are likely to be well established practices. The challenge that insurers must consider is how well these have been adopted throughout the company for all models used to make business decisions and if the same level of rigor has consistently been applied. Regulation in a high-velocity actuarial environment will to be a challenge that actuaries must spearhead and must be proactive in guiding rule making to ensure continued innovation while putting data security and risk management first.

Description: This is the second part of a 2 part series on Real options analysis (ROA). This article looks into the limitations of using financial option theory when doing real options analysis with projects that are long-dated and uncertain, such as: 1. First-degree homogeneity, 2. Uncertainty must derive from Brownian motion, and 3. Risk neutrality.

Description: The article provides a summary of the Drake Risk & Opportunity Forum held on October 21, 2022. The forum was a hybrid conference that attracted more than 200 attendees from 17 states, two countries, 48 employers, and five universities. Following an introduction by the Zimpleman College of Business Dean, the forum held six sessions. First was an insurance company CRO panel followed by a panel of non-insurance company CROs. Gary Zhu shared his outlook for interest rates and capital markets. The fourth panel discussed insurance capital models. The fifth panel discussed environmental, social, and governance (ESG) criteria when building insurance company investment portfolios. The final session of the day was a discussion about the NAIC, how they operate, and their priorities for the coming year.

Description: Duration matching is a risk management strategy, commonly used in the insurance industry, where the duration (price sensitivity to a yield curve movement) of an asset portfolio is adjusted to be made equal to the duration of the liability. However, this approach has flaws. In this essay, I note some key failures of duration matching and offer a potential alternative.

Description: Newly released spring 2019 data added to the Actuaries Climate Index show that more frequent extreme weather and increases in sea level continue to push the index upward. The ACI’s five-year moving average now stands at 1.16, up from 1.12 last quarter.

Description: Risk management techniques do not include system science. System science requires that the uncertainty of the world is incorporated into the results. The articles explains the difference between risk and uncertainty. Learn how risk practices create an overoptimistic view of future outcomes.

Description: Duration matching is a risk management strategy, commonly used in the insurance industry, where the duration (price sensitivity to a yield curve movement) of an asset portfolio is adjusted to be made equal to the duration of the liability. However, this approach has flaws. In this essay, I note some key failures of duration matching and offer a potential alternative.

Description: The mismatch between how interest rate impacts the value of assets and liabilities could have material negative impact to companies’ earnings and surplus. To quantify and mitigate the impact of such mismatches, companies have used matching a combination of duration and convexity. I will review these measurement techniques and their limitations.