Description: A summary of how the Forecasting and Futurism Section is networking with other SOA sections and with external organizations to collaborate on various projects. Also highlights new events and projects happening on the forecasting and futurism front.

Description: The author discusses the use of genetic algorithms as they apply to actuaries, specifically the application of characteristics and their potential to solve life insurance asset and liability management problems. He also highlights various ways genetic algorithms can be used to solve a variety of actuarial problems.

Description: Given the limits of classical actuarial modeling and forecasting techniques, this newsletter contains articles discussing several ways to supplement your toolset.

Description: As the portion of inforce business valued under PBR grows, it becomes increasingly important to not only calculate reserves for point-in-time valuation but to also project reserves. This is especially critical for actuarial functions such as pricing, business strategy/forecasting, and asset adequacy testing. In this session, we will review PBR projection techniques based on work completed by the American Academy of Actuaries when developing the PBA Projection Practice Note. In addition, this session will examine specific challenges that can arise when actuaries use models to project reserves at future dates. Topics covered include mortality improvement, credibility, scenario generation, starting asset projections, and various other technical issues related to nested modeling requiring both inner and outer loop projections.

Description: The author explains how he used judgmental forecasting techniques to develop a dynamic lapse assumption. He defines the techniques and provides readers with a step-by-step process.

Description: A discussion of the process and results report “A Study of the Use of the Delphi Method, A Futures Research Technique for Forecasting Selected U.S. Economic Variables and Determining Rationales for Judgments.”

Description: In Complexity: A Guided Tour, readers are given a short history lesson on the roots of dynamical systems theory, chaos and prediction.

Description: This paper addresses rainfall insurance using financial derivatives. Usual modeling is done for temperature related products. The authors gathered rainfall data in Mexico City over a period of five decades. This showed that the time series data is stationary and normally distributed. Therefore, the authors applied a closed-form solution to value swaps, calls and puts, with and without limits. The model can be used for practical purpose of pricing rainfall derivatives. From Actuarial Research Clearing House, 2006.

Description: The author reviews the book, The Perfect Swarm: The Science of Complexity in Everyday Life, by Len Fisher. He provides his own interpretation of the power of the swarm and touts the book as a straightforward and informative introduction to various aspects of complexity science.

Description: Regression to the mean is a phenomenon that arises when comparing sequential data points. It states that when an initial observation is extreme or an outlier, future observations will be closer to the average. Health care actuaries need to understand and be able to mitigate the effects of regression to the mean to avoid misapplying predictive models or misstating measurements of historical effects.