Description: Economic capital models are getting increasingly complex. An alternate copula free approach is presented which uses accounting data and an implicit correlation model to simplify economic capital calculations. Model simplification leads to robust and stable models. A banking case study is used to showcase how the model can be deployed using publicly available accounting data, capital adequacy, leverage ratios and shortfall tools.

Description: Feature article discussing the IASB’s and FASB’s introduction of the use of other comprehensive income (OCI) to report certain changes in the value of insurance contracts.

Description: The letter from the editor discusses some recent loss events driven by model error and provides an overview of the articles in this issue of Risk Management.

Description: Insurers can leverage information from their required Own Risk Solvency Assessment (ORSA) and use it internally to improve the likelihood of solvency and gain a competitive advantage.

Description: Panelists discuss different aspects of self-selection among Medicare options. From the Record of the Society of Actuaries, Vol. 24, No. 2.

Description: A risk map is an effective and dynamic tool in helping companies develop a broader view of their risks.

Description: Recent advances in mortality modeling have enabled applicant-specific quantification of mortality risk in life insurance applicants using laboratory and physical measurements. Relative to more conventional underwriting, this approach identifies a small population of significantly under-priced policy and a much larger, cross-subsidizing group whose risk is presently overestimated. Applicants placed in the highest percentile by this scoring methodology are more than 10X as likely to die in a given period as their demographic peers, and represent approximately 5% of short-term claims. Implications for product design are substantial in both the short- and long-term, as the possibilities for adverse selection grow, and the opportunity for fully individualized pricing raises the more distant prospect of products with as many rate classes as applicants.

Description: Update of the activities being carried out by the Joint Risk Management Section

Description: This paper presents actuarial (mathematical) models for cyber breach probability as function of the level and allocations of security spending by a firm.

Description: The editorial cautions that while the development of more sophisticated models may increase efficiency, it is important to consider the very real risk management costs associated with the increased complexity, efficiency and overconfidence in the predictive power of models.