072073 (M52, B91) Rating the partnership clause

Abstracts

Renshaw

A.E., City University,

London,

Actuarial

Research Paper No. 72, 1994. The process whereby the first and second moment properties of the response variables of a generalised linear model are jointly modelled is described and the potential of applying this approach to modelling in a claims reserving setting investigated. A new perspective on certain existing stochastic claims reserving methods (Author) is established as a consequence. Keywords:

Claims

Reserving,

Generalised

Linear

Models, Joint Mean-variance Modelling.

and Reviews

219

independently. In this article, the authors show that, using Rank Dependent Expected Utility rather than Expected Utility as the basic uncertain choice model, numerous analogies between the two fields may be identified and exploited. The key result is the derivation of a natural analogy between risk-aversion and impatience. This permits the reinterpretation of wellknown results on stochastic dominance and comparative risk-aversion in the context of intertemporal choice. It is also possible to reinterpret results on intertemporal optimization in order to derive new results for portfolio choice problems under uncertainty. (Authors) Keywords:

M43:

FLUCTUATION MARGINS

RESERVES, SOLVENCY

Uncertainty,

Intertemporal

Choice,

Lfe-

cycle, Stochastic Dominance, Temporal Dominance.

072070 (M43, M13) Measuring the effect of control and dividend on the surplus. Labie E., Geerardyn J., Goovaerts M.J., K.U. Leuven, Universiteit Amsterdam, XXIV Astin Collo-

M52:

quium, Vol. 2, 1993, pp. 357-365.

Deutschen

Based on functional integration (see e.g. “A stochastic approach to insurance cycles”, IME 1992, V 11,2 pp. 97-109) a modified Brownian motion process for the surplus of an insurance portfolio is considered, describing the effect of control activities forcing the surplus level upwards and taking into account the influence of dividend payments pushing the surplus downwards. As a result the distribution of the surplus at time t derived under a realistic assumption of no ruin is obtained. (Authors)

Band XXII, Hefi 1, 1995, pp. 143-152.

Keywords: Pension Promise, Salary, Linear Equation

Keywords: Surplus, Brownian Motion Process, Control

System.

REINSURANCE, RETENTIONS

072072 (M52, M20, B13) Reinsured pension promise instead of salary. Heep-Altiner M., Heieis M., Kijln, Bliitter der Gesellschaft ftir

Versicherungsmathematik,

For high earning people it seems reasonable to renounce parts of their salary in order to achieve a higher pension for instance by a reinsured pension promise. On the whole the employer’s and employee’s interest form a linear equation system. To make it more practical a simpler equation system is introduced where we consider only the most important stipulations. (Author)

Activities, Dividend Payments. 072073 (M52, B91) MS& GAME THEORY AND DECISION THEORY

IN INSURANCE, GENERAL AND MISCELLANEOUS 072071 (MSO, ElO) Time and risk. National Quiggin J., Horowitz J., Australian University, Australia, University of Maryland College Park, College Park, Journal of Risk and Uncertainty, Vol. 10, nr. 1, 1995, pp. 37-55.

Intertemporal choice has obvious similarities with choice under uncertainty. However, because of technical difficulties in mapping results between the two domains, theoretical analysis of these topics has proceeded

Rating the partnership clause. Krieter F., Swiss Re, Ztirich, XXIV Astin Colloquium, Vol. 1, 1993, pp. 99-107.

In proportional reinsurance, there is a marked move away from pure “follow the fortunes” towards technical pricing, similar to that of nonproportional treaties. A consequence of this trend is the development of new treaty conditions. One of these is the partnership clause (PSC). Obviously, it is an attempt to use the “experience” of the treaty to construct a self-adjusting determination of reinsurance conditions. Averaging over this period of experience mitigates the fluctuations of profit and loss experienced by the ceding company. Thus there should

280

Abstracts and Reviews

be time to counter adverse trends by taking appropriate corrective action. From the nature of the calculational procedure it is clear that the clause should not be applied to the catastrophic content of a treaty. Also, the problem of fixing claims reserves precludes the use of the PSC in long tail business. (Author) Keywords: Proportional Reinsurance, Pricing, Rating, Partnership Clause. 072074 (M52, B90) The design of catastrophe reinsurance programs: practical problems. Craighead D.H., XUV Astin Colloquium, Vol. 2, 1993, pp. 13-19. Ideally, the complete outward reinsurance program should be written before any inwards business is accepted. Such as by no means always the case and is often difficult or impossible. In such a situation, the underwriters should restrict themselves to writing within the office’s net retention until the outward program allows for more business to be written. Even then, additional higher layers may be written or back-up layers may be purchased. The judgement of the management and underwriters will come into play as to the extent, if any, that they can exceed the limits of exposure provided by the reinsurance cover outward. It is misjudgment in this regard that has provided the spate of insolvencies in recent years. It is essentially a question of the cost of (Author) being able to “sleep soundly”. Keywords: Catastrophe Reinsurance, Underwriting. 072075 (M52, E50, B90) Quantitative analysis of financial reinsurance. Hindley D., Smith A., XYIV Astin Colloquium, Vol. 2, 1993, pp. 25-60. Financial reinsurance is as varied and complex as the more traditional forms, and ranges from the relatively straightforward retrospective ‘loss portfolio transfer’ or ‘time and distance’ contracts, to the prospective aggregate or ‘spread loss’ type contracts which can have complex commission and surcharge clauses. Agreeing on a sensible accounting treatment is only part of the problem and the authors believe there are other equally important actuarial issues which also need addressing, particularly for those contracts ~which are designed, at least in part, to transfer some degree of underwriting risk.

This paper describes a practical approach, based on sound theoretical principles, for measuring the following issues: a) the degree to which underwriting risk is transferred between the reinsured and reinsurer, b) whether or not the contract provides value for money, and C) whether or not the contract provides equitable cover across separate account cohorts. It can be applied to all forms of reinsurance, including financial. Prima facie, the techniques proposed in this paper may be considered more appropriate for internal management purposes than for statutory reporting. (Author) Keywords: FinancialReinsurance, QuantitativeAnalysis. 072076 (M52, B92) When the wind blows - an introduction to catastrophe excess of loss reinsurance. Sanders D.E.A., XYIV Astin Colloquium, Vol. 2, 1993, pp. 211-262. The catastrophe XL market is one of the most interesting and stimulating markets open to actuaries. This paper briefly touches the surface of many of the issues involved. The greater challenge is to find methods of managing the uncertainty and profitability of a market where demand exceeds supply, and where profits, though great, can be just as easily blown away with the wind. Next time a major catastrophe event occurs, many UK insurers may be exposed to considerable loss. The challenge is to find methods of managing and funding for these potential loss. If the tile should fall today, the claim paid by the direct insurer is going to impact more substantially on the profit and loss account. In addition, the cost to the individual policyholder can only increase as the impact of storm damage is felt by UK insurers. (Author) Keywor&: Catastrophe XL Reinsurance, United Kingdom.

ElO: INSURANCE RELATED MATHEMATICAL ECONOMICS,GENERALANDMISCELLANEOUS 072077 (ElO, M50) The impact of testing errors on value of information: a quality-control example.