Description: This article summarizes presentations given at the 1998 Bowles Symposium concerning the use of genetic testing in underwriting life insurance and the medical, legal and ethical issues that arise.

Description: Sometimes, rare things happen and the least expected occurs. Indeed, some events occur once or twice in a lifetime leaving little room to learn from experiences. In financial markets, extreme events, no matter how rare, could have a profound impact on a company or even the whole country. Insurers are also not free from the impact of catastrophic large-scale extreme events. As a result, with pervasive economic and financial revolutions sweeping our world and potential devastative catastrophes, the increasing interest in tail risk management is fuelled by practical issues, including investment downside risk and insurance catastrophe risk. Thus, developing statistical techniques to model extreme investment and insurance losses is certainly a major task for risk managers. the purpose of our paper is to apply moment methods to estimate the joint events such as concurrent extreme investment loss and insurance loss. A novel aspect of this article is that it takes into account the correlation between different assets and insurance lines of business.

Description: This paper addresses some pervasive problems in using secondary data in actuarial research. An approach to solving these problems is based on information theory. From Transactions of Society of Actuaries 1995, Vol. 47.

Description: We devise an approach, using tobit models for modeling annuity lapse rates. The approach is based on data provided by the Society of Actuaries’ Risk Management Task Force. Kim [2005a] models annuity lapse rates using a logit model and the same US data (he also used Korean data separately). We find that the tobit model is a more than suitable approach for all levels of the explanatory variables including interest rates, unemployment rates, and GDP growth rates. Specifically, policyholder behavior in the tail of the distribution of lapse rates is explained as well as it is in the normal range of lapse rates.

Description: This session from the 1995 SOA New York Meeting covers securitization of insurance liabilities. Securitization of insurance risk is an alternative risk transfer other than reinsurance based on the idea that investors participate directly in the insurance risk. From the Record of the Society of Actuaries, Vol. 21, No. 2.

Description: This paper incorporates a jump-diffusion process into the original Lee-Carter model, and uses it to forecast mortality rates and analyze mortality securitization.

Description: 1993 SOA Annual Meeting, New York. This session discussed the panelist's approach to actuarial education and training in other countries.

Description: The values of life insurance and annuity liabilities move in opposite directions in response to a change in the underlying mortality. Natural hedging utilizes this to stabilize aggregate liability cash flows. Our study shows empirical evidence that insurers who utilize natural hedging also charge lower premiums than otherwise similar insurers. This indicates that insurers who are able to utilize natural hedging have a competitive advantage. In addition, we show how a mortality swap might be used to provide the benefits of natural hedging to a firm that writes only one of the lines of business.

Description: This paper employs the theory of real option pricing to address problems in the area of operational risk management. Particularly, it develops a two-stage model to help firms determine the optimal triggers in the event of an influenza pandemic. The first stage proposes a regime-dependent epidemic model to simulate the spread of the virus, depending on whether the firm is active or inactive. The second stage views the reactivation decision as a call option and the suspension decision as a put option, and uses dynamic programming method to determine the optimal switching thresholds.