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093043 (M52) An integrated pricing and reserving process for reinsurers
Abstracts and Reviews Courts S.M., Thomas T.R.H., Casualty Actuarial
Society, 1997, pp. 115-140.
265
third party actions. They discuss how these components of clash cover reinsurance can be priced.
An earlier paper by the same authors developed the Daykin et al. (1994) asset/liability model to examine the effects of different reinsurance programmes on the capital of a direct property/casualty insurance company. By modelling the gross premiums and claims separately from the impact of reinsurance on them, it is possible to examine directly the effects of different reinsurance programmes on a company's expected performance just as easily as changes in asset mix or business volumes. This paper goes on to discuss how such a model can be used to quantify capital at risk for management reporting purposes, both for the company as a whole, and within individual profit centres, and how this is affected by different reinsurance strategies. It therefore links closely to the Dynamic Financial Analysis project being sponsored by the Casualty Actuarial Society.
Keywords: Excess of policy limits, loss exposures, extra contractual obligations.
Keywords: Reinsurance programmes, capital at risk, dynamic financial analysis.
093042 (M52) Loss Development and Annual Aggregate Deductibles Conner V.P., Casualty Actuarial Society, 1997, pp. 219-235.
093039 (M52) Comparing Reinsurance Programs - A Practical Actuary's System Daino R.A., Thayer C.A., Casualty Actuarial Society, 1997, pp. 141-177. This paper describes the elements of a simulation system used by the authors. A "user manual" approach is used to describe the elements of the system. A practical sample scenario is used to show how the system is used in practice. It is not the authors' intent herein to discuss in any depth the technical issues involved in selecting the many parameters involved in a simulation. Rather, the authors try to show how a system can be used to control the parameters needed, and also help users analyse and communicate the results to others.
Keywords: Reinsurance, Simulation. 093040 (M52) Pricing Extra-Contractual Obligations and Excess of Policy Limits Exposures in Clash Reinsurance Treaties Braithwaite P.,Ware B.C., Casualty Actuarial Society, 1997, pp. 179-199. The authors examine the loss exposures due to extra-contractual obligations and excess of policy limit
093041 (M52) Evaluating Variations in Contract Terms for Casualty Clash Reinsurance Treaties Canelo E., Ware B.C., Casualty Actuarial Society, 1997, pp. 201-218. The authors examine variations in event definitions and communication clauses which are commonly encountered in casualty catastrophe reinsurance contracts in the market today. Changes in these aspects of the contract may affect the exposures the reinsurer is asked to cover. In this paper, the variations are constrained with special emphasis given to the effects this may have on the pricing/underwriting process.
Keywords: Reinsurance, Pricing process, Underwriting process.
The use of an Annual Aggregate deductible by a reinsurer can cause inconsistencies in loss development and incorrect IBNR reserves. This paper describes how AAD business can be added to non AAD business with the combined used to select loss development factors and estimate IBNR reserves when using a chain ladder or Bornhuetter/Fergusson method. The inclusion of similar AAD and non AAD business in loss development triangles increases the credibility of the loss development factors.
Keywords: IBNR reserves, Annual aggregate deductible. 093043 (M52) An integrated Pricing and Reserving Process For Reinsurers Goldberg L.R., LaBella J., Casualty Actuarial Society, 1997, pp. 237-288. In today's market of increased competition, more complex reinsurance contracts and tightening (or should we say frightening) profit margins, actuaries are increasingly being called upon to improve their pricing and reserving practices concerning individual accounts as well as aggregate books of business. In-
266
Abstracts and Reviews
creased understanding of that business is critical to continued success for both reinsurers and their clients. The purpose of this paper is to describe a framework for an integrated pricing and reserving process on a individual risk basis. Utilizing this framework, increasing levels of sophistication and knowledge can be brought to bear, risk by risk, on understanding a reinsurer's book of business.
This paper presents and compares five analytical formulas for the approximation of stop-loss premiums. Two of them, based on the inverse Gaussian distribution, are not widely known. The authors also suggest a technique which improves the precision of these approximations for portfolios.
Keywords: Stop-loss premiums, Inverse Gaussian distribution.
Keywords: Reinsurance, Pricing process, Reserving process. INSURANCE E C O N O M I C S
093044 (M52) Reinsurance Contracts with a Multi-Year Aggregate Limit Berens R.M., Casualty Actuarial Society, 1997, pp. 289-308. Excess of Loss reinsurance contracts commonly include an aggregate limit which specifies the maximum amount the reinsurer will pay under the contract. This paper discusses pricing implications of an aggregate limit which applies over multiple years. Monte Carlo simulations are used to test the sensitivity of the pricing to relationships between the average ground-up loss, the per-claim limit and the aggregate limit under the contract. A pricing example using historic data is also included. Risk charges and applications to clash covers are explored. Underwriting and reserving considerations of a contract with a multiyear aggregate are discussed. Keywords: Reinsurance, Monte carlo process, Multiyear aggregate limit. 093045 (M52) A Simulation Approach in Excess Reinsurance Pricing Papush D.E., Casualty Actuarial Society, 1997, pp. 330. This paper illustrates the application of a simulation method in excess reinsurance pricing. The author considers the simulation approach in computing aggregate loss distributions. The scope of the simulation method is more broad than for other aggregate loss distribution techniques. Keywords: Simulation, Reinsurance, aggregate loss.
093046 (M52) Some analytical approximations of stop-loss premiums Dufresne F., Niederhauser E., Bulletin de l'Association Suisse des Actuaires, Heft 1, 1997, pp. 25-47.
EIO: INSURANCE R E L A T E D M A T H E M A T I C A L ECONOMICS, G E N E R A L AND M I S C E L L A N E O U S
093047 (El0) Consumer Risk Perceptions and Information in Insurance Markets with Adverse Selection Ligon J.A, Thistle P.D., The Geneva Papers on Risk and Insurance Theory, Vol. 21, No 2, 1996, pp. 191210. Standard Models of adverse selection in insurance markets assume policyholders know their loss distributions. This study examines the nature of equilibrium and the equilibrium value of information in competitive insurance markets where consumers lack complete information regarding their loss probabilities. The authors show that additional private information is privately and socially valuable. When the equilibrium policies separate types, policyholders can deduce the underlying probabilities from the contracts, so it is information on risk type, rather than loss probability per se, that is valuable. They show that the equilibrium is "as if" policyholders were endowed with complete knowledge if, and only if, information is noiseless and costless. If information is noisy, the equilibrium depends on policyholders' prior beliefs and the amount of noise in the information they acquire. Keywords: Adverse selection, Hidden information, Informational equilibrium, Learning. 093048 (El0) Plausible Upper Bounds: Are their Sums Plausible? Cogliano V.J., Risk Analysis, Vol. 17, No.l, 1997, pp. 77-84. Quantitative cancer risk assessments are typically expressed as plausible upper bounds rather than estimates of central tendency. In analysis involving
Society, 1997, pp. 115-140.
265
third party actions. They discuss how these components of clash cover reinsurance can be priced.
An earlier paper by the same authors developed the Daykin et al. (1994) asset/liability model to examine the effects of different reinsurance programmes on the capital of a direct property/casualty insurance company. By modelling the gross premiums and claims separately from the impact of reinsurance on them, it is possible to examine directly the effects of different reinsurance programmes on a company's expected performance just as easily as changes in asset mix or business volumes. This paper goes on to discuss how such a model can be used to quantify capital at risk for management reporting purposes, both for the company as a whole, and within individual profit centres, and how this is affected by different reinsurance strategies. It therefore links closely to the Dynamic Financial Analysis project being sponsored by the Casualty Actuarial Society.
Keywords: Excess of policy limits, loss exposures, extra contractual obligations.
Keywords: Reinsurance programmes, capital at risk, dynamic financial analysis.
093042 (M52) Loss Development and Annual Aggregate Deductibles Conner V.P., Casualty Actuarial Society, 1997, pp. 219-235.
093039 (M52) Comparing Reinsurance Programs - A Practical Actuary's System Daino R.A., Thayer C.A., Casualty Actuarial Society, 1997, pp. 141-177. This paper describes the elements of a simulation system used by the authors. A "user manual" approach is used to describe the elements of the system. A practical sample scenario is used to show how the system is used in practice. It is not the authors' intent herein to discuss in any depth the technical issues involved in selecting the many parameters involved in a simulation. Rather, the authors try to show how a system can be used to control the parameters needed, and also help users analyse and communicate the results to others.
Keywords: Reinsurance, Simulation. 093040 (M52) Pricing Extra-Contractual Obligations and Excess of Policy Limits Exposures in Clash Reinsurance Treaties Braithwaite P.,Ware B.C., Casualty Actuarial Society, 1997, pp. 179-199. The authors examine the loss exposures due to extra-contractual obligations and excess of policy limit
093041 (M52) Evaluating Variations in Contract Terms for Casualty Clash Reinsurance Treaties Canelo E., Ware B.C., Casualty Actuarial Society, 1997, pp. 201-218. The authors examine variations in event definitions and communication clauses which are commonly encountered in casualty catastrophe reinsurance contracts in the market today. Changes in these aspects of the contract may affect the exposures the reinsurer is asked to cover. In this paper, the variations are constrained with special emphasis given to the effects this may have on the pricing/underwriting process.
Keywords: Reinsurance, Pricing process, Underwriting process.
The use of an Annual Aggregate deductible by a reinsurer can cause inconsistencies in loss development and incorrect IBNR reserves. This paper describes how AAD business can be added to non AAD business with the combined used to select loss development factors and estimate IBNR reserves when using a chain ladder or Bornhuetter/Fergusson method. The inclusion of similar AAD and non AAD business in loss development triangles increases the credibility of the loss development factors.
Keywords: IBNR reserves, Annual aggregate deductible. 093043 (M52) An integrated Pricing and Reserving Process For Reinsurers Goldberg L.R., LaBella J., Casualty Actuarial Society, 1997, pp. 237-288. In today's market of increased competition, more complex reinsurance contracts and tightening (or should we say frightening) profit margins, actuaries are increasingly being called upon to improve their pricing and reserving practices concerning individual accounts as well as aggregate books of business. In-
266
Abstracts and Reviews
creased understanding of that business is critical to continued success for both reinsurers and their clients. The purpose of this paper is to describe a framework for an integrated pricing and reserving process on a individual risk basis. Utilizing this framework, increasing levels of sophistication and knowledge can be brought to bear, risk by risk, on understanding a reinsurer's book of business.
This paper presents and compares five analytical formulas for the approximation of stop-loss premiums. Two of them, based on the inverse Gaussian distribution, are not widely known. The authors also suggest a technique which improves the precision of these approximations for portfolios.
Keywords: Stop-loss premiums, Inverse Gaussian distribution.
Keywords: Reinsurance, Pricing process, Reserving process. INSURANCE E C O N O M I C S
093044 (M52) Reinsurance Contracts with a Multi-Year Aggregate Limit Berens R.M., Casualty Actuarial Society, 1997, pp. 289-308. Excess of Loss reinsurance contracts commonly include an aggregate limit which specifies the maximum amount the reinsurer will pay under the contract. This paper discusses pricing implications of an aggregate limit which applies over multiple years. Monte Carlo simulations are used to test the sensitivity of the pricing to relationships between the average ground-up loss, the per-claim limit and the aggregate limit under the contract. A pricing example using historic data is also included. Risk charges and applications to clash covers are explored. Underwriting and reserving considerations of a contract with a multiyear aggregate are discussed. Keywords: Reinsurance, Monte carlo process, Multiyear aggregate limit. 093045 (M52) A Simulation Approach in Excess Reinsurance Pricing Papush D.E., Casualty Actuarial Society, 1997, pp. 330. This paper illustrates the application of a simulation method in excess reinsurance pricing. The author considers the simulation approach in computing aggregate loss distributions. The scope of the simulation method is more broad than for other aggregate loss distribution techniques. Keywords: Simulation, Reinsurance, aggregate loss.
093046 (M52) Some analytical approximations of stop-loss premiums Dufresne F., Niederhauser E., Bulletin de l'Association Suisse des Actuaires, Heft 1, 1997, pp. 25-47.
EIO: INSURANCE R E L A T E D M A T H E M A T I C A L ECONOMICS, G E N E R A L AND M I S C E L L A N E O U S
093047 (El0) Consumer Risk Perceptions and Information in Insurance Markets with Adverse Selection Ligon J.A, Thistle P.D., The Geneva Papers on Risk and Insurance Theory, Vol. 21, No 2, 1996, pp. 191210. Standard Models of adverse selection in insurance markets assume policyholders know their loss distributions. This study examines the nature of equilibrium and the equilibrium value of information in competitive insurance markets where consumers lack complete information regarding their loss probabilities. The authors show that additional private information is privately and socially valuable. When the equilibrium policies separate types, policyholders can deduce the underlying probabilities from the contracts, so it is information on risk type, rather than loss probability per se, that is valuable. They show that the equilibrium is "as if" policyholders were endowed with complete knowledge if, and only if, information is noiseless and costless. If information is noisy, the equilibrium depends on policyholders' prior beliefs and the amount of noise in the information they acquire. Keywords: Adverse selection, Hidden information, Informational equilibrium, Learning. 093048 (El0) Plausible Upper Bounds: Are their Sums Plausible? Cogliano V.J., Risk Analysis, Vol. 17, No.l, 1997, pp. 77-84. Quantitative cancer risk assessments are typically expressed as plausible upper bounds rather than estimates of central tendency. In analysis involving