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Splitting The Bill: Estimating Personal Consumption In Case Of Wrongful Death, Kathleen Ellis, David I. Rosenbaum Apr 2018

Splitting The Bill: Estimating Personal Consumption In Case Of Wrongful Death, Kathleen Ellis, David I. Rosenbaum

UCARE Research Products

In cases of wrongful death, the decedent’s survivors may sue alleged responsible parties for lost financial support. Forensic experts estimate a deceased individual’s personal consumption rate in order to separate the portion of the decedent’s income spent on him- or herself from the amount available as financial support for dependents. This paper enhances the prevailing estimation process by regressing consumption rates over individual households surveyed by the United States Bureau of Labor Statistics in its annual Consumer Expenditure Survey. We contend that this method improves the precision of estimates by accounting for the inherent heterogeneity in consumption ...


Climate Change And Its Implications For The Insurance Industry, Adam Liska, Eric Holley Sep 2014

Climate Change And Its Implications For The Insurance Industry, Adam Liska, Eric Holley

Adam Liska Papers

Climate change will lead to a probable increase in the occurrence of weather-related disaster events. These events could lead to declining revenue in the insurance industry, the world’s largest economic sector, with revenue of $4.6 trillion per year, or 7% of the global economy (Mills, 2012). Climatic events have accounted for 72% of global insurance claims and insured losses from 1980 to 2012, totaling $0.97 trillion (Munich Re, 2013). Estimated losses are ~0.5% of global Gross Domestic Product (GDP) and losses are increasing at ~6% a year in real terms (Lomborg, 2010). The United Nations Framework ...


Journal Of Actuarial Practice - Volume 13 (2006) - Contents And Masthead Jan 2006

Journal Of Actuarial Practice - Volume 13 (2006) - Contents And Masthead

Journal of Actuarial Practice 1993-2006

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, Actuarial Frameworks ○ Samuel Cox, Georgia State ...


Estimation Of Large Insurance Losses: A Case Study, Tine Buch-Kromann Jan 2006

Estimation Of Large Insurance Losses: A Case Study, Tine Buch-Kromann

Journal of Actuarial Practice 1993-2006

This paper demonstrates an approach to analyzing liability data recently developed by a Danish insurance company. The approach is based on a Champernowne distribution, which is corrected with a non-parametric estimator. The correction estimator is obtained by transforming the data set with the estimated modified Champernowne cdf and then estimating the density of the transformed data set by using the classical kernel density estimator. Our approach is illustrated by applying it to an actual data set.


Solvency Of Life Insurance Companies: Methodological Issues, Rosa Cocozza, Emilia Di Lorenzo Jan 2006

Solvency Of Life Insurance Companies: Methodological Issues, Rosa Cocozza, Emilia Di Lorenzo

Journal of Actuarial Practice 1993-2006

The paper deals with solvency assessment for life insurance business; some methodological issues concerning the solvency of life insurance companies, particularly connected to the investment risk, are suggested. Considerations about the technical equilibrium of an insurance portfolio and the financial regulation lead to a dynamic system involving risk measure and solvency assessment. The formal model is applied to a life annuity cohort in a stochastic context in order to exemplify the potential of the model, especially referred to the need to frame solvency assessment in a dynamic perspective.


Bivariate Archimedean Copula Models For Censored Data In Non-Life Insurance, Michel Denuit, Oana Purcaru, Ingrid Van Keilegom Jan 2006

Bivariate Archimedean Copula Models For Censored Data In Non-Life Insurance, Michel Denuit, Oana Purcaru, Ingrid Van Keilegom

Journal of Actuarial Practice 1993-2006

We describe a methodology based on Archimedean copulas for analyzing nonlife insurance data with censoring present. Specifically, we propose a graphical selection procedure for the nonparametric estimation of the generator. An actual loss-ALAE data set is used for the numerical illustrations and for comparisons of our approach to a few others.


A Note On The Instability Of The Unprojected Individual Level Premium Cost Method, Pierre Devolder, Valerie Goffin Jan 2006

A Note On The Instability Of The Unprojected Individual Level Premium Cost Method, Pierre Devolder, Valerie Goffin

Journal of Actuarial Practice 1993-2006

We compare the unit credit and the unprojected individual level premium cost methods in a continuous time environment and show that the latter may produce unstable contribution rates in a dynamic environment. Specifically, assuming there are no unfunded liabilities, we prove that the unprojected individual premium cost method may produce non-bounded contributions if benefits change too close to the normal retirement age.


Consistent Assumptions For Modeling Credit Loss Correlations, Jan Dhaene, Marc J. Goovaerts, Robert Koch, Ruben Olieslagers, Olivier Romijn, Steven Vanduffel Jan 2006

Consistent Assumptions For Modeling Credit Loss Correlations, Jan Dhaene, Marc J. Goovaerts, Robert Koch, Ruben Olieslagers, Olivier Romijn, Steven Vanduffel

Journal of Actuarial Practice 1993-2006

We consider a single period portfolio of n dependent credit risks that are subject to default during the period. We show that using stochastic loss given default random variables in conjunction with default correlations can give rise to an inconsistent set of assumptions for estimating the variance of the portfolio loss. Two sets of consistent assumptions are provided, which it turns out, also provide bounds on the variance of the portfolio's loss. An example of an inconsistent set of assumptions is given.


On Some Risk-Adjusted Tail-Based Premium Calculation Principles, Edward Furman, Zinoviy Landsman Jan 2006

On Some Risk-Adjusted Tail-Based Premium Calculation Principles, Edward Furman, Zinoviy Landsman

Journal of Actuarial Practice 1993-2006

This paper explores two tail-based premium calculation principles, the tail standard deviation (TSD) premium and the tail conditional expectation (TCE) premium, in their risk-adjusted and unadjusted forms. They are risk-adjusted using so-called distortion functions. We prove that the proportional hazard (PH) risk-adjusted TCE premium is larger than the unadjusted TCE premium. Additionally, given a risk distribution with location and scale parameters, we prove that the PH risk-adjusted TCE premium reduces to the unadjusted TSD premium.


Bayesian Analysis Of A Health Insurance Model, Helio S. Migon, Edison M.O. Penna Jan 2006

Bayesian Analysis Of A Health Insurance Model, Helio S. Migon, Edison M.O. Penna

Journal of Actuarial Practice 1993-2006

We consider the problem of determining health insurance premiums based on past information on size of loss, number of losses, and size of population at risk. The size of loss and the number of losses are treated as mutually independent random variables. The number of losses is assumed to follow a Poisson process, and the loss sizes are independent and identically distributed non-negative random variables, and the population at risk is assumed to follow a non-linear growth model. An expression for the premium is obtained through maximization of the insurer's expected utility under a Bayesian model. The parameter estimation ...


Spatial Distribution Of Frequency And Severity Of Water Claims In California, Gurbhag Singh, Max Tang, Don Mcneill, Lyn Hunstad Jan 2006

Spatial Distribution Of Frequency And Severity Of Water Claims In California, Gurbhag Singh, Max Tang, Don Mcneill, Lyn Hunstad

Journal of Actuarial Practice 1993-2006

We examine the frequency and severity of water loss claims for homeowners insurance across the state of California for the experience years 2000, 2001, and 2002. The spatial distribution patterns of frequencies and severities are mapped and analyzed at the zip code level. The maps reveal the pockets of high frequencies and severities. The information provided in this paper will assist actuaries and policy makers in their quest to set accurate rates for homeowners insurance.


Bayesian Analysis Of Insurance Losses Using The Buhlmann-Straub Credibility Model, Abraham J. Van Der Merwe, Kobus N. Bekker Jan 2006

Bayesian Analysis Of Insurance Losses Using The Buhlmann-Straub Credibility Model, Abraham J. Van Der Merwe, Kobus N. Bekker

Journal of Actuarial Practice 1993-2006

We propose a Bayesian analysis to develop credibility estimates of the well known Biihlmann-Straub model. We describe simple numerical methods to obtain exact posterior distributions and predictive densities under this model. These distributions are obtained through Monte Carlo simulations that generate independent samples from the joint posterior distribution. Our methods are therefore preferable to methods such as Gibbs sampling, which generates dependent samples from the joint distribution. The methods discussed also can be extended to more complicated credibility models.


Journal Of Actuarial Practice, Volume 13, 2006, Colin Ramsay , Editor Jan 2006

Journal Of Actuarial Practice, Volume 13, 2006, Colin Ramsay , Editor

Journal of Actuarial Practice 1993-2006

ARTICLES

Bivariate Archimedean Copula Models for Censored Data in Non-Life Insurance Michel Denuit, Dana Purcaru, and Ingrid Van Keilegom 5

Bayesian Analysis of Insurance Losses Using the Biihlmann-Straub Credibility Model Abraham J. van der Merwe and Kobus N Bekker . 33

Bayesian Analysis of a Health Insurance Model Helio S. Migon and Edison M. O. Penna 61

Solvency of Life Insurance Companies: Methodological Issues Rosa Cocozza and Emilia Di Lorenzo . 81

Pricing Insurance Policies with a Distribution-Free Financial Pricing Model Min-Ming Wen . 103

A Note on the Instability of the Unprojected Individual Level Premium Cost Method Pierre Devolder and Valerie Goffin ...


Analysis Of An Insurance Risk Model With Thinning Dependence And Common Shock, Lai Mei Wan, Kam Chuen Yuen, Wai Keung Li Jan 2006

Analysis Of An Insurance Risk Model With Thinning Dependence And Common Shock, Lai Mei Wan, Kam Chuen Yuen, Wai Keung Li

Journal of Actuarial Practice 1993-2006

We consider a continuous-time insurance risk model with m dependent classes of business with dependent claim number processes due to thinning dependence and a common shock. The impact of the dependence is studied via the adjustment coefficient. The case m = 2 is investigated analytically for exponential claim distributions and via simulation for non-exponential claim distributions.


Pricing Insurance Policies With A Distribution-Free Financial Pricing Model, Min-Ming Wen Jan 2006

Pricing Insurance Policies With A Distribution-Free Financial Pricing Model, Min-Ming Wen

Journal of Actuarial Practice 1993-2006

The highly skewed and heavy tailed distributions used to model insurance losses (claims) raise a concern about the validity of the applications of the capital asset pricing model (CAPM) to insurance pricing when market risks are essential. This paper provides an alternative pricing model, called the Rubinstein-Leland model, which can be used to price insurance contracts. The Rubinstein-Leland model has a distribution-free feature that can fully capture the asymmetry embedded in insurance losses. Thus, this model is better able to derive fair prices for insurance policies than is the CAPM.


Journal Of Actuarial Practice - Volume 12 (2005) - Contents And Masthead Jan 2005

Journal Of Actuarial Practice - Volume 12 (2005) - Contents And Masthead

Journal of Actuarial Practice 1993-2006

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, Actuarial Frameworks ○ Samuel Cox, Georgia State ...


Journal Of Actuarial Practice, Volume 12, 2005, Colin Ramsay , Editor Jan 2005

Journal Of Actuarial Practice, Volume 12, 2005, Colin Ramsay , Editor

Journal of Actuarial Practice 1993-2006

ARTICLES

Risk-Based Regulatory Capital for Insurers: A Case Study • Christian Sutherland-Wong and Michael Sherris 5

A New Hybrid Defined Benefit Plan Design • Wayne E. Dydo . 47

A Primer on Duration, Convexity, and Immunization • Leslaw Gajek, Krzysztof Ostaszewski, and Hans-Joachim Zwiesler 59

Modeling Clusters of Extreme Losses • Beatriz Vaz de Melo Mendes and Juliana Sa Freire de Lima 83

Modeling Insurance Loss Data: The Log-EIG Distribution • Uditha Balasooriya, Chan Kee Low, and Adrian Y W Wong 101

A Modern Approach to Modeling Insurances on Two Lives • Maria Bilikova and Graham Luffrum 127

On the Pricing of Top and Drop Excess of ...


Modeling Insurance Loss Data: The Log-Eig Distribution, Uditha Balasooriya, Chan Kee Low, Adrian Y.W. Wong Jan 2005

Modeling Insurance Loss Data: The Log-Eig Distribution, Uditha Balasooriya, Chan Kee Low, Adrian Y.W. Wong

Journal of Actuarial Practice 1993-2006

The log-EIG distribution was recently introduced to the probability literature. It has positive support and a moderately long tail, and is closer to the lognormal than to the gamma or Weibull distributions. Our simulations show that data generated from a log-EIG distribution cannot be adequately described by lognormal, gamma, or Weibull distributions. The log-EIG distribution is a worthwhile candidate for modeling insurance claims (loss) data or lifetime data. Examples of fitting the log-EIG to published insurance claims data are given.


A Modern Approach To Modeling Insurances On Two Lives, Maria Bilikova, Graham Luffrum Jan 2005

A Modern Approach To Modeling Insurances On Two Lives, Maria Bilikova, Graham Luffrum

Journal of Actuarial Practice 1993-2006

The analysis of life insurance contracts on two lives using the traditional deterministic approach has been an important part of actuarial education for the past fifty years or more. Recently there has been a shift from this deterministic approach to one using a more modern stochastic approach involving the future lifetime random variable. In this paper we will look at the problem using multiple-state models. In our view this approach allows a deeper analysis than either the traditional or the random future lifetime ones.


A Primer On Duration, Convexity, And Immunization, Leslaw Gajek, Krzysztof Ostaszewski, Hans-Joachim Zwiesler Jan 2005

A Primer On Duration, Convexity, And Immunization, Leslaw Gajek, Krzysztof Ostaszewski, Hans-Joachim Zwiesler

Journal of Actuarial Practice 1993-2006

The concepts of duration, convexity, and immunization are fundamental tools of asset-liability management. This paper provides a theoretical and practical overview of the concepts, largely missing in the existing literature on the subject, and fills some holes in the body of research on the subject. We not present new research, but rather we provide a new presentation of the underlying theory, which we believe to be of value in the new North American actuarial education system.


A New Hybrid Defined Benefit Plan Design, Wayne E. Dydo Jan 2005

A New Hybrid Defined Benefit Plan Design, Wayne E. Dydo

Journal of Actuarial Practice 1993-2006

Traditional defined benefit plans can be difficult to understand and complex to administer. Hybrid plans (cash balance and pension equity) arose in part to address the former issue, but at a price of greater administrative and litigation risk. I introduce a design for defined benefit pension plans that is easy to communicate to participants, allows for accrual patterns that closely replicate those of the two most common forms of hybrid pension plans, and avoids the controversial nondiscrimination issues that currently trouble sponsors of hybrid plans. The design defines the benefit as a fixed percentage of pay payable over a period ...


Optimal Dividend Strategies: Some Economic Interpretations For The Constant Barrier Case, Maite Marmol, M. Merce Claramunt, Antonio Alegre Jan 2005

Optimal Dividend Strategies: Some Economic Interpretations For The Constant Barrier Case, Maite Marmol, M. Merce Claramunt, Antonio Alegre

Journal of Actuarial Practice 1993-2006

We consider the surplus process of a non-life insurance portfolio with a dividend component represented by a constant dividend barrier strategy. The optimal dividend barrier is known when individual claim amounts follow an exponential distribution. This result for the optimal dividend barrier is used to develop combinations of the levels of the insurer's initial surplus and of the barrier which, under certain economic and financial criteria, can be regarded as optimal.


Risk-Based Regulatory Capital For Insurers: A Case Study, Christian Sutherland-Wong, Michael Sherris Jan 2005

Risk-Based Regulatory Capital For Insurers: A Case Study, Christian Sutherland-Wong, Michael Sherris

Journal of Actuarial Practice 1993-2006

We study the issues in determining regulatory capital requirements using advanced modeling by assessing and comparing capital requirements under the two alternative approaches. A dynamic financial analysis (DFA) model is used for this case study. These issues are of current international interest as regulators, insurers, and actuaries face the significant issues involved with the introduction of risk-based capital for insurers.


Modeling Clusters Of Extreme Losses, Beatriz Vaz De Melo Mendes, Juliana Sa Freire De Lima Jan 2005

Modeling Clusters Of Extreme Losses, Beatriz Vaz De Melo Mendes, Juliana Sa Freire De Lima

Journal of Actuarial Practice 1993-2006

We model extreme losses from an excess of loss reinsurance contract under the assumption of the existence of a subordinated process generating sequences of large claims. We characterize clusters of extreme losses and aggregate the excess losses within clusters. The number of clusters is modeled using the usual discrete probability models, and the severity of the sum of excesses within clusters is modeled using a flexible extension of the generalized Pareto distribution. We illustrate the methodology using a Danish fire insurance claims data set. Maximum likelihood point estimates and bootstrap confidence intervals are obtained for the parameters and statistical premium ...


On The Pricing Of Top And Drop Excess Of Loss Covers, Jean-Francois Walhin, Michel Denuit Jan 2005

On The Pricing Of Top And Drop Excess Of Loss Covers, Jean-Francois Walhin, Michel Denuit

Journal of Actuarial Practice 1993-2006

A top and drop cover is a treaty that can be found on the retrocession market. It offers capacity that can be used either to protect a top layer or a working layer. The former is called a "top" and the latter is called a "drop." Using the traditional collective risk model, we demonstrate the use of a multivariate version of Panjer's algorithm to price this cover. We also compare the premium obtained within the exact model with the premiums obtained either with the Frechet bounds or with the wrong assumption of independence.


Ultimate Ruin Probability For A Time-Series Risk Model With Dependent Classes Of Insurance Business, Lai Mei Wan, Kam Chuen Yuen, Wai Keung Li Jan 2005

Ultimate Ruin Probability For A Time-Series Risk Model With Dependent Classes Of Insurance Business, Lai Mei Wan, Kam Chuen Yuen, Wai Keung Li

Journal of Actuarial Practice 1993-2006

We consider a discrete-time risk model with m (m ~ 2) dependent classes of insurance business. The claim processes of these m classes are assumed to follow a multivariate autoregressive time-series model of order 1. Given this claims model, we explore the probability of ultimate ruin assuming exponentially bounded claims. As an example, we use simulations to study the case where there are two business and the underlying losses are of two types: bivariate exponential and bivariate gamma claim distributions.


Reputation Pricing: A Model For Valuing Future Life Insurance Policies, Rami Yosef Jan 2005

Reputation Pricing: A Model For Valuing Future Life Insurance Policies, Rami Yosef

Journal of Actuarial Practice 1993-2006

The reputation of a life insurer is used to develop a model for determining the value of future life insurance policies. An M / G / 00 process is used to describe the sales and terminations (due to death or maturity) of future policies. The intensity of the arrival process is assumed to depend on the company's reputation. Explicit expressions are derived for the actuarial reserves and expected profits of these future policies.


An Application Of Control Theory To The Individual Aggregate Cost Method, Alexandros A. Zimbidis, Steven Haberman Jan 2005

An Application Of Control Theory To The Individual Aggregate Cost Method, Alexandros A. Zimbidis, Steven Haberman

Journal of Actuarial Practice 1993-2006

The paper investigates the individual aggregate cost method (also known as the individual spread-gain method), which is normally applicable in small pension funds or fully contributory schemes, using a control theoretical framework. We construct the difference equations describing the mechanisms of the respective funding method and then calculate the optimal control path of the contribution rate assuming (first) a stochastic and (second) a deterministic pattern for the future investment rates of return. For the first case, the optimal solution is achieved through a linear approximation and using stochastic optimization techniques. It is proved that the contribution rate is (optimally) controlled ...


Journal Of Actuarial Practice, Volume 11, 2004, Colin Ramsay , Editor Feb 2004

Journal Of Actuarial Practice, Volume 11, 2004, Colin Ramsay , Editor

Journal of Actuarial Practice 1993-2006

ARTICLES (the entire volume)

Product Innovation in Financial Services: A Survey • Christopher O'Brien 5

Phased Retirement for Defined Benefit Plan Participants • Patricia L. Scahill and Jonathan Barry Forman . 43

The Actuarial Value of Life Insurance Backdating • James M Carson and Krzysztof M Ostaszewski . 63

Decision Tree Analysis of Terminated Life Insurance Policies • Robert Keng Heong Lian, Yuan Wu, and Hian Chye Koh . 79

A Comparative Study of Parametric and Nonparametric Estimators of Old-Age Mortality in Sweden • Peter Fledelius, Montserrat Guillen, Jens Perch Nielsen, and Kitt Skovsø Petersen 103

Estimation of Complete Period Life Tables for Singaporeans • Siu-Hang Li ...


Journal Of Actuarial Practice - Volume 11 (2004) - Contents And Masthead Jan 2004

Journal Of Actuarial Practice - Volume 11 (2004) - Contents And Masthead

Journal of Actuarial Practice 1993-2006

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, Actuarial Frameworks ○ Samuel Cox, Georgia State ...