Description: This paper provides an overview of those cognitive biases most often responsible for flawed risk assessments and provides practical techniques to mitigate them. Through a combination of mathematical rigor, case study, metaphor, and logic, the author highlights systematic errors in our thinking about risk and provides ways to avoid them.

Description: Essays advocating for incentive compensation linked to the level of risk in an organization.

Description: From a session at the Spring meeting of the Society of Actuaries held in San Antonio, Texas, June 14-15, 2004 Discussion of risk and pricing issues of particular concern with respect to life insurance and annuity products in times of relatively low interest rates

Description: People naturally observe risk in the form of the range of experienced gains and losses which is usually represented in statistical terms by standard deviation. In most cases, there are not enough observed values to reliably discern the true amount of losses that are possible in extreme situations. Statistical techniques that have long been applied to insurance company risks are being used to extrapolate from observed risk to extreme tails of the distribution of gains and losses. These processes are essentially an extrapolation from the “known” risk of volatility near the mean to “unknown” risk of extreme losses. “Fat tails” is a term often applied to risks where the likely losses in rare situations significantly exceeds the predictions of a Gaussian (“thin tailed”) distribution. This paper will look at the relationship between the observed risk and the extreme risk in statistical insurance r isk models and discuss how we might create a discussion among model users about the appropriateness of that relationship for specific types of risks.

Description: Statistics show that the risk of fatality associated with motorcycle crashes far exceeds that of automobiles hereby Connecticut introduced mandatory motorcycle safety training. This paper develops a unifying framework to quantify the effectiveness of such mandatory programs and to translate this in terms of a possible insurance rate reduction.

Description: Panelists discuss the importance of credit-worthiness to the customer of an insurance company, a brief history and description of the Standard & Poor's and Moody's rating systems, the efforts an insurance company goes through in obtaining ratings by outside agencies, the efforts required to maintain the ratings, and the importance of the ratings to the insurance company. From the 1987 Record of Society of Actuaries Vol. 13, No. 3.

Description: This presentation is an open forum, session number 8OF, from the 1999 Valuation Actuary Symposium, held September 23-24 in Los Angeles. The panelists explore risk quantification from multiple perspectives, including: value-at-risk techniques and their application in the financial services industry, internal risk-based surplus formulas, and an NAIC Risk-Based Capital [RBC] Update. They discuss the application of existing and emerging risk evaluation techniques to one’s company or client circumstances. Discussion from participants is included.

Description: Although rate structures where low-cost cohorts subsidize high cost cohorts may be justified from a actuarial, marketing, or legal standpoint, the subsidization creates risks which must be understood and monitored. This article presents the concept of subsidization signature to measure and interpret the effects of rate subsidization, and to assess the sustainability of rating structures and the sensitivity of business mix assumptions.

Description: This article describes changes to financial reporting for variable annuities under US GAAP, IFRS and Statutory regulations, and implications for hedging.

Description: This paper presents a model designed to help actuaries analyze and quantify C3 risk, which is the risk of loss due to changes in interest rates or the shape of the yield curve.