Description: The purpose of this paper is to help practitioners and regulators more accurately quantify the potential impact of market risk on insurance products with equity-linked guarantees. To this end, this paper examines time series model selection and assessment based on residuals, with a focus on regime switching models. Also it discusses the difficulties in defining residuals for such processes and propose several possible alternatives. We determine that a stochastic approach to defining the residuals is the only way to generate residuals that are normally distributed under the model hypothesis.

Description: This paper focuses on business risks rather than market, credit and operational risks. The author proposes a bottom-up approach for modelling and measuring business risk where the dynamic of the underlying earnings is described in a continuous-time model.

Description: A central problem for regulators and risk managers concerns the risk assessment of an aggregate portfolio defined as the sum of d individual dependent risks Xi. This problem is mainly a numerical issue once the joint distribution of (X1,X2, . . . ,Xd) is fully specified. Unfortunately, while the marginal distributions of the risks Xi are often known, their interaction (dependence) is usually either unknown or only partially known, implying that any computed risk measure of the portfolio is subject to model uncertainty. Previous academic research has focused on the maximum and minimum possible values of a given risk measure of the portfolio, in the case in which only the marginal distributions are known. This approach leads to wide bounds, as all information on the dependence is ignored. In this paper, we integrate in a natural way available information on the multivariate dependence and provide easy-to-compute bounds for the risk measure at hand. We observe that incorporating the information of a well-fitted multivariate model may, or may not, lead to much tighter bounds, a feature that also depends on the risk measure used. We illustrate this point by showing that the Value-at-Risk at a very high confidence level (as used in Basel II) is typically prone to very high model risk, even if one knows the multivariate distribution almost completely. Our results make it possible to determine which risk measures can benefit from adding dependence information (i.e., leading to narrower bounds when used to assess portfolio risk), and, hence, to identify those models for which it would be meaningful to develop accurate multivariate models.

Description: This paper gives two explicit formulae that estimate the yield of a portfolio of fixed income securities that are not interest-sensitive. The yield is explicitly estimated in terms of the discounting interest rates of the securities that comprise the portfolio. From 2006 Enterprise Risk Management Symposium, M-AS06-1.

Description: This paper examines different objectives in managing credit concentration risk. The suitability of different measures and presentation techniques is discussed and illustrated in the context of a case study.

Description: Role of the Actuary: One of the most complicated tasks an actuary can perform is large-scale corporate modeling in an attempt to shed light on the relationship between value, performance and risk. In specialized situations such as mergers and acquisitions, it may be appropriate to have external actuaries perform the work rather than attempt the task with internal resources. From Actuarial Considerations in Insurance Mergers and Acquisitions, M-FI03-1.

Description: 2011 SOA ERM Symposium, Chicago. This paper addresses the contradiction between the financial theory of hedging and management practice. It also examines how consistent hedging policy is incompatible with management’s competencies and role in the company, requiring management to form strong future price expectations. Finally, this paper describes a process that management actually follows when making decisions about hedging and stress the role of the expectations discrepancy in this process.

Description: The sale process is a team effort. On the sell side, the team usually consists of the seller, their investment banker, the external actuaries and a legal team. On the buy side, the team consists of accounting and tax experts in addition to the previous disciplines. For a sale to be successful, the team on each side must be able to communicate the story of the company in a consistent, focused manner to their publics. From Actuarial Considerations in Insurance Mergers and Acquisitions, M-FI03-1.

Description: One of the primary goals of the actuarial appraisal is to provide enough information for potential investors to make informed judgments as to the potential value of a property. From Actuarial Considerations in Insurance Mergers and Acquisitions, M-FI03-1.

Description: The external actuary must balance the goals of the company with a realistic assessment of the chances of achieving them, uncovering hidden value while scaling back on aggressive targets to achieve a balanced, defensible end product with buy-in from the seller's team. From Actuarial Considerations in Insurance Mergers and Acquisitions, M-FI03-1.