Description: This article analyzes mortality trajectories of supercentenarians (persons living 110+ years) and tests hypothesis about flat mortality at these extreme ages.

Description: Exploration of sources of volatility in retiree health valuations, noting how volatility arises and might be mitigated, with discussion of valuation parameters more problematic for retiree health benefits than for pensions. Three significant influences on retiree health valuation volatility are covered-- changes in benefit level, fluctuations in cost level, and alterations in eligibility for, or duration of, benefit – and attention focused on the last two. Specific conclusions result in recommendations, which are supported by practical examples contrasting volatile measurement results with those likely from the recommended practices. Theoretical discussion includes health claim variation, health trend usage, financial economics, option pricing, discount rates, and deterministic vs. stochastic modeling.

Description: For the purposes of risk management and stress testing, we characterize a spectrum of plausible extreme events, that we dub Grey Swans, by introducing a probabilistic method involving the concentration of measure phenomenon. As a result, stress tests can be triaged according to severity, probability and, now, information-based plausibility.

Description: Recently researchers, practitioners, and regulators had intense debates about how to treat the data collection threshold in operational risk modeling. There are several approaches under consideration—the empirical approach, the “naive” approach, the shifted approach, and the truncated approach—for fitting the loss severity distribution. Since each approach is based on a different set of assumptions, different probability models emerge. Thus, model uncertainty arises. When possible we investigate such model uncertainty analytically, otherwise we use Monte Carlo simulations. For specific parametric examples we consider exponential and Lomax distributions which are special cases of the generalized Pareto family. Our primary goal is to quantify the effect of model uncertainty on risk measurements. This is accomplished by evaluating the probability of each approach producing conservative capital allocations based on the value-at-risk measure. These explorations are further illustrated using a real data set for legal losses in a business unit (Cruz, 2002).

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: Analyzes the need for enterprise risk management for small businesses and the unique principles governing such a discipline. The paper describes a case study done by Goldenson Actuarial Research Center at the University of Connecticut and concludes with some suggestions on how ERM for small businesses can be done on a larger and sustainable scale using student resources supported by large corporations, banks and government organizations.

Description: This paper, originally published in 1969 in Transactions of Society of Actuaries Vol. 21, presents an analysis of the basic actuarial theory for life insurance policies with fixed premiums and variable benefits reflecting the investment performance of a separate account, where in its basic form, the policyholder bears the entire investment risk. The paper discusses various regulatory and other changes that would be needed or desirable, as well as variation in design such as minimum guarantees. Significant discussion is included, with over twenty individuals contributing in addition to the authors. The introduction to the Monograph notes that while not the first paper on this topic, it “clearly established the framework for subsequent developments of variable products.”

Description: This paper demonstrates that extreme value theory (EVT) can be used as a tool to model policyholder behavior in the extreme tail. This paper applies EVT to the study of variable annuity dynamic lapse behavior in the extreme tail. It illustrates a process whereby a company can fully model policyholder behavior, including the extreme tail, with existing data. No judgment about the extremal behavior is necessary.

Description: This paper will focus on default distributions and why they are important.

Description: Review of stochastic, modeled geo-spatial risk metrics for insurance loss concentration and clustering and their counter point use for diversification