Risk Management
Task Force

Pricing for Risk Minutes

 

Pricing for Risk
December 17, 2003
10:00 a.m. Central Time

Participants: Novian Junus (Leader), Andy Chua, Harold Dershowitz, Ted Steven, Guarav Upadhya, Julie Young (SOA)

Update from Andy
Andy went over the information on the e-mail that he sent to the group. He went over a spreadsheet and a powerpoint presentation. In regards to the specialty guide we need to talk about how much time we have and determine how much detail that we want to go into. For example, it took the ALM Specialty Guide people one year to go into the detail that they did. The ALM specialty guide is different from most. In most cases they just give literature references. They do give good definitions. They haven’t provided any research. The definitions are very useful. There are two approaches that we can take: we can have the research done and provided for us or the second approach is to point out important considerations. This group has decided to develop our specialty guide using the second approach.

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.

Next call
The next call will be on January 29 at 10:00 a.m. Central Time.

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Update from Andy
Andy went over the information on the e-mail that he sent to the group. He went over a spreadsheet and a powerpoint presentation. In regards to the specialty guide we need to talk about how much time we have and determine how much detail that we want to go into. For example, it took the ALM Specialty Guide people one year to go into the detail that they did. The ALM specialty guide is different from most. In most cases they just give literature references. They do give good definitions. They haven’t provided any research. The definitions are very useful. There are two approaches that we can take: we can have the research done and provided for us or the second approach is to point out important considerations. This group has decided to develop our specialty guide using the second approach.

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.

Next call
The next call will be on January 29 at 10:00 a.m. Central Time.

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