Description: Discussion of solvency problems and the actuary's role in addressing them in the life insurance industry.

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: The costly, time-consuming and complicated process of enterprise risk management (ERM) can be improved in many companies and made less tedious for managers by using reasonable data and templates obtained from peer group entities. The models used to calculate economic capital (EC) often underestimate its value because they do not consider decision-maker perception about risk. We assume here that managers, as the decision-makers, have appropriate business understanding and they can provide substantial information about risk characteristics regarding all business processes. Therefore we are focused, in this paper, on collecting data from managers across the different businesses to derive the appropriate knowledge about risky events, the importance of particular types of risk, the relationship between the risk outcomes and the level of risk control in a particular industry. We conclude that the collected data has a high potential for use as a benc hmarking reference and analysis for improving ERM models for individual businesses.

Description: Increased attention was paid to regulatory capital with the global financial crisis in 2008. Whilst companies may not have the incentives to retain a large amount of capital in the absence of regulatory capital requirements, overcapitalized entities can have drawback such as its impact on competitiveness. There are other weaknesses in the regulatory capital model such as its limitation in facilitating risk-based decisions as regulatory capital does not necessarily reflect the economic reality and risks an entity faces. Nonetheless, there are ways for regulators and/or companies to handle the weaknesses in the regulatory capital model. For instance, granularity can be introduced in determining regulatory capital. Economic capital can be used to encourage entities to implement risk management controls and facilitate risk-based business decisions (e.g., risk-adjusted performance assessment and risk-based capital allocation). Ultimately, hav ing effective risk management and risk-based capital determination are ways to prevent company failures and bankruptcies.

Description: A discussion of the possible effort required and impacts resulting from the implementation of C3 Phase II for establishing risk-based capital for variable annuities. This article will describe practical considerations gleaned from actual valuation calculations recently performed by a consulting firm.

Description: The Federal funds rate increased by 4.25% in 2022 with further increases in 2023, which have already resulted in a liquidity crisis for a few banks. As the rapid increase of the interest rates pushed the new money rates above the yields of many life insurers’ investment portfolios, insurance companies are facing a dilemma between compressed margins from peer pressure and the concern with liquidity shortfalls and realized capital losses should mass surrenders happen. This paper discussed main emerging risks under rising interest rate environment, and several ways to mitigate these risks.

Description: The Federal funds rate increased by 4.25% in 2022 with further increases in 2023, which have already resulted in a liquidity crisis for a few banks. As the rapid increase of the interest rates pushed the new money rates above the yields of many life insurers’ investment portfolios, insurance companies are facing a dilemma between compressed margins from peer pressure and the concern with liquidity shortfalls and realized capital losses should mass surrenders happen. This paper discussed main emerging risks under rising interest rate environment, and several ways to mitigate these risks.

Description: This article discusses the current state of the IAIS' initiative on their group Insurance Capital Standard.

Description: An insurance product’s return on required equity demonstrates how successfully its results are covering the company’s basic capital. Using some simplified assumptions, it is possible to calculate this return ratio and decompose it without a full projection of liabilities.

Description: Abstract: A model for analyzing the probability and severity of default of sovereign entities and banks. The methodology analyzes the risks inherent in the investment of debt of sovereign governments and large financial institutions side-by-side, taking into consideration macroeconomic interactions among the sovereign fiscal and monetary authorities, the financial institutions, and the real economy. The signature aspect of the methodology is that it adapts a Merton-style default model to use explicit measures of sovereign assets and asset volatility.