Description: Insight on SOA research.

Description: This article talks about partnering with other risk professionals and the importance of research into the nature of risk and the responses to risk events.

Description: Many call this the sub-prime crisis, but risky mortgages were simply symptomatic of the underlying excesses building through the financial system. Investors, government, lenders and borrowers were all at fault. Where did the skeptics go?

Description: Interest rates rose from 2004 through 2007, so adjustable mortgage rates increased and many borrowers fell behind. After home prices topped out in 2006, speculators and some buyers who had overstretched found it impossible to refinance. This caused mortgage insurance claims. Insurers may want to study others’ missteps.

Description: A critical step in valuing a company for the purpose of financial reporting is the computation of the market value of economic surplus (MVES). This article provides a novel approach to the valuation of MVES that is stable and reasonably immune to “market noise.” Current approaches to the calculation of economic surplus of an insurance company generally define such surplus as the market value of the assets (MVA) supporting the liabilities less the market value of liabilities (MVL). While MVA is observable in the market, MVL is typically computed directly, without regard to the underlying supporting assets. Subtracting MVL from any value of assets that changes with market movements results in an unstable surplus. Consequently, a surplus that is not fully reflective of market sentiment has been rejected by many. This same approach is further used in the calculation of market consistent embedded value (MCEV) when a balance sheet approach is used .

Description: Here we are led to draw a distinction between “wild” markets and “free” markets. A wild market is unregulated and unscrutinized. Information flows are purposely impeded for competitive reasons and reduced to trickles from rumor and espionage. No one knows what anyone else is doing, and pricing is blind and haphazard. In such a market, there are no safeguards against anticompetitive behavior and no guarantees that the market will clear. The only guarantee is that there will be liquidity crises.

Description: The central question is that of viability. Specifically, is the configuration of life insurers’ products and balance sheets economically viable under current accounting and ongoing market conditions?

Description: In the current financial markets turmoil, it is tempting to ask whether things might have turned out differently. I think the pain in our financial markets would have been less if more actuaries had been involved. 10 reason are offered.

Description: This article focuses on how a risk appetite framework can help a company manage the “three-headed monster” and why a risk appetite framework is critical to effective business and risk management at both the corporate and product levels.

Description: With the possible exception of full faith and credit debts of the United States, every loan carries some risk with it regardless of the borrower, and this risk varies depending on the creditworthiness of the person or institution that is supposed to repay the debt. Bearing that risk requires some sort of capital, both as a legal requirement and as evidence of good sense in lending, but recently we seem to have forgotten the basic relationship between a loan and the capital associated with it. The lesson of the current debacle is, or certainly ought to be, that the risk inherent in a financial transaction cannot be made to go away by the mere act of repackaging that transaction and renaming it.