How Fair Value Measurement Changes Risk Management Behavior in the Insurance Industry

The Society of Actuaries’ Financial Reporting Section is pleased to announce the release of a new report that is a study of risk mitigation practices about fair valued liabilities. Authored by Bruce Rosner and Mark Freedman, this report examines how fair value measurement generates volatility and identifies the various techniques used to manage the volatility resulting from the fair value measurement of liabilities or similar accounting measures that have market-consistent elements. Among the techniques discussed is reinsurance, hedging and policy feature design. The researchers relied on data and qualitative information for the study obtained through interviews of insurers, review of existing literature on this subject as well as financial statements produced by insurance companies, and their own prior experience.

The Sponsor would like to thank the following individuals that served on the Project Oversight Group:
Kathryn McCarthy (Chair)
Robert Baldwin
Mark Bergstrom
Jim Bridgeman
Joonghee Huh
James Norman
Jim Reiskytl
Doug Van Dam
Ronora Stryker, SOA Research Actuary
Jan Schuh, SOA Sr. Research Administrator

If you have questions or comments on this research, please contact Ronora Stryker, SOA Research Actuary, at rstryker@soa.org.