Risk Management
Task Force

The Society of Actuaries Finance Practice Area's Risk Management Task Force

 

Pricing for Risk
January 29, 2004
10:00 a.m. Central Time

Participants: Harold Dershowitz, Dave Ingram, Julie Perks, Guarav Upadhya

Novian was unable to attend the call, so Julie filled in.

It was apparent that no one had responded to the action items from the December 17 call.

The Group discussed briefly some of the action items:
What Phase 1 will look like/how much detail?

  • Those present did not seem to be contemplating the detail and amount of original work that went into the ALM specialty guide.

  • Should have a list of references and identify gaps in the literature. Perhaps identify research to sponsor.

  • Should be based on Product type. May need more volunteers for expertise to cover off different product lines.

  • May consider a split between current, traditional PFR techniques (less detailed), vs. new, advanced/alternative PFR (more detailed coverage) techniques

It was suggested and agreed upon that the Action Items from the last call should be re-circulated to make it easier for everyone to get back on track. Harold kindly agreed to collate the comments and suggestions again.

We will have Julie Young from the SOA poll for availability for the next call.

We will have a reminder of the action items sent out about 3 days before the call for last-minute contributions.

Here is a recap of the action items.
Please send comments to the list serve by the reminder date (TBA):

Next steps and identify volunteers
We will take the work that Dave and Andy did, dissect it and re-organize it and have a discussion on it.

ACTION ITEM: (All) Review the work that has been done. Give suggestions in a few sentences to the list serve on what phase 1 will look like. Comment on how much detail we should go into on a particular subject, .e.g. risk. Comments are due by January 15 to the list serve.

ACTION ITEM: Harold volunteered to collate the comments and suggestions, summarize them, and then distribute to the list serve.

Should we recruit other people? Yes, but we have to define the project first.

Wording of objectives for the subgroup
Proposed Objective
Develop a specialty guide that:

  • Identifies the common profit measures used in the insurance industry and the common methods for reflecting risk

  • Provides actuaries with information on those risks that have not been traditionally considered in their pricing models

  • Include recommended readings that provide indications of how to price each of the risks and how they should be incorporated directly and interactively or independently with traditional actuarial risk models

  • May include design modifications to products to eliminate/reduce risk in the first place, and/or hedging strategies and their cost to mitigate identified risks

  • Identifies gaps in current literature and practice with regards to pricing for risk.

ACTION ITEM: (All) Look at the proposed objectives and send Novian comments by January 15. Novian will finalize it and send it out before our next call on January 29.

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