Description: ongoing discussion of the proper interest rate to use in discounting liability cash flows to reflect credit risk of the insurer in a fair value accounting system

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 essay explores the role that the emerging defined contribution retirement system may be playing in the growth of wealth inequality in the United States. The current system leaves many Americans with little or no retirement savings. Those with higher accumulation levels appear to invest proportionally more in equities, which may have an exponential effect of balances over long time periods. The author hypothesizes that willingness to take investment risk involves the relationship between the amount an investor has accumulated and what she/he needs in order to cover basic costs of living. This is one reason that investors with greater accumulation levels may be able to earn higher rates of return. The essay concludes by suggesting that the U.S. defined contribution system should include all workers and provide additional fiduciary guidance. Examples reforms, both in the U.S. and other countries, are provided.

Description: Some are arguing to require actuaries to fund public plans like an insurance company. It is not the place of the actuary to make this call.

Description: Feature article summarizing a talk given by Andrew Lo at the SOA 2009 Annual Meeting on the credit crisis and why risk management failed to stop the excessive risk taking.

Description: The article makes reference to how the intervention by government agencies and institutions into the financial marketplace are creating distortions. This artificial tampering into market mechanisms will likely result in major financial dislocations down the road as natural economic forces (coined by the term "invisible hand") eventually are allowed to come into play.

Description: Risk management techniques do not include system science. System science requires that the uncertainty of the world is incorporated into the results. The articles explains the difference between risk and uncertainty. Learn how risk practices create an overoptimistic view of future outcomes.

Description: Risk management techniques do not include system science. System science requires that the uncertainty of the world is incorporated into the results. The articles explains the difference between risk and uncertainty. Learn how risk practices create an overoptimistic view of future outcomes.

Description: Chairperson's column for the September issue of The Financial Reporter

Description: This is the second part of a 2 part series on Real options analysis (ROA). This article looks into the limitations of using financial option theory when doing real options analysis with projects that are long-dated and uncertain, such as: 1. First-degree homogeneity, 2. Uncertainty must derive from Brownian motion, and 3. Risk neutrality.