Description: The values of life insurance and annuity liabilities move in opposite directions in response to a change in the underlying mortality. Natural hedging utilizes this to stabilize aggregate liability cash flows. Our study shows empirical evidence that insurers who utilize natural hedging also charge lower premiums than otherwise similar insurers. This indicates that insurers who are able to utilize natural hedging have a competitive advantage. In addition, we show how a mortality swap might be used to provide the benefits of natural hedging to a firm that writes only one of the lines of business.

Description: Recently, there has been growing interest among insurance and investment experts to focus on the use of a tail conditional expectation as a measure of risk, since it shares properties that are considered desirable and applicable in a variety of situations. This paper examines above risk measure in the case of a multivariate gamma portfolio. We demonstrate the explicit formulas for tail conditional expectation and based on it capital allocation when the proposed multivariate model consists of dependent and independent gamma marginals

Description: This is a Fellowship Credit Research Paper. A portfolio of different insurance policies such as temporary, endowment and whole-life insurance policies is studied in a stochastic mortality and interest environment. The first two moments of the present value of the benefits of the portfolio are derived. The riskiness of the portfolio as measured by the variance of the present value of the benefits can be divided into an insurance risk and an investment risk in two different ways. One way leads to a more natural interpretation of the two risk components. A simple portfolio is used to illustrate the results.

Description: This paper explores Indian futures and options market as a market for hedging by equity holders. The authors have tried to examine optimal hedge ratio and hedge efficiency, and to provide empirical evidence from India.

Description: Presents results of 2003-2012 cohorts of insurance company private placement bonds. Finds private bonds show a 15bp annual advantage relative to public bonds, due to lower loss severity.

Description: This paper discusses both the theoretical and the application aspects of stress testing in managing enterprise risks. Effective stress testing maximizes the risk adjusted enterprise profit by controlling major risks financial, strategic, operational and hazard upon identifying risk metrics and modeling the correlations. A case study is included for demonstration purposes.

Description: This session covers the differences between quantitative models and traditional techniques for measuring credit exposure pricing models versus portfolio risk management models and an introduction to some commercially available models, such as J. P. Morgan’s Credit Metrics and Moody’s/KMV Portfolio Manager. From the Record of the Society of Actuaries, Volume 29, No. 1, Washington, D.C. Spring Meeting, May 29–30, 2003, Session 19PD.