Description: Since insurance contract liabilities are uncertain in amount, an estimate is required. And under most accounting frameworks, the estimate of an uncertain amount should contain some sort of margin for uncertainty. This paper provides a mathematical connection between that margin and the market price of risk as measured by the cost of capital. The connection makes use of the theory of utility and an exponential utility curve.

Description: This article offers a possible resolution to certain circularity issues that may arise while implementing the SOP.

Description: Discussion of the existence of embedded derivatives and the consequent required accounting treatment in Modco and Similar Reinsurance Arrangements

Description: This article analyzes two common interpretations of SOP 03-1 in determining the guaranteed minimum death benefit GMDB liability in a variable annuity contract, and it analyzes the resulting impact on the initial GMDB reserve and on the volatility of GAAP earnings as actual experience emerges. This analysis could be applied to the guaranteed minimum income benefit GMIB, guaranteed minimum accumulation benefit GMAB, guaranteed minimum withdrawal benefit GMWB and other guaranteed benefits in a variable annuity contract that are subject to SOP 03-1, and the conclusions would be similar.

Description: A discussion of alternative meanings to “Best” in best estimate. When one is trying to estimate a result that is normally distributed, the mean, median and mode will all equal one another. However if the results are not normally distributed, different variance metrics will result in different “best” estimates. When different parts of a financial statement use different criteria for measuring best estimates and different processes for handling variances, the results can be volatile, unpredictable and perhaps unreasonable.

Description: A discussion of areas of AAT where the Actuary uses a considerable degree of discretion and judgment and guidance is limited.

Description: Discussions of alternative approaching to setting ascribed premiums for market risk benefits under FASB targeted improvements.

Description: An Overview of Stochastic Simulation modeling techniques and usages

Description: Implementation of Statement of Position 03-1 for Lapse Protected Life Products

Description: A discussion of the use of stochastic modeling in Embedded Value financial reporting