Risk Management
Task Force

Pricing for Risk Subgroup

 

 

Credit Risk Management | Economic Capital Calculation and Allocation
Enterprise Risk Management | Equity Modeling | Extreme Value Models
Health Risk Management | Policyholder Behavior in the Tail
Pricing for Risk | Risk Based Capital Covariance | Risk Management Metrics


Pricing for Risk
Dave Ingram, Leader

Goals

  • to evaluate the effectiveness of different pricing techniques as to their ability to capture and quantify the risks associated with the sale and administration of life and annuity products
  • to document and provide guidance to actuaries for when a given technique or measure may be appropriate and the limitations of its use

Initial Product and Process

  1. This research is focused on existing pricing techniques and measures, currently in use within and outside the life insurance industry.
  2. In the selection of pricing techniques to be evaluated, consideration will be given to:

    1. the accounting method used to manage the business;
    2. the use of expected value, or average, costing;
    3. the use of deterministic or stochastic scenarios;
    4. the use of simulation;
    5. the granularity of pricing cells; and
    6. the use of option pricing techniques.
  3. In the selection of the risk quantification methods to be evaluated, consideration will be given to:
    1. risk adjusted return on capital
    2. efficient frontier analysis
    3. return on equity
    4. profit margins
    5. capital charges
    6. risk charges
    7. statistical measures

This subgroup is focusing initially on producing a survey of industry practices in pricing for risk and will ultimately develop a specialty guide.

Documents & Links

Preliminary work products:
  Glossary
  SOA 2003 Survey
  Additional Survey Results (October 2003)
  RMTF Slides

Recent Meeting Minutes:
Pricing for Risk Minutes – January 29, 2004
Pricing for Risk Minutes December 17, 2003
Pricing for Risk Minutes
– November 13, 2003

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