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Carvm And Naic Actuarial Guidelines 33 & 34, Keith P. Sharp

Journal of Actuarial Practice (1993–2006)

Annuity valuation under the NAIC Standard Valuation Law is determined according to methods different from those methods used for life insurance. The CARVM assumption of efficient policyholder selection is clarified under NAIC Actuarial Guidelines 33 and 34 to allow for non-elective (e.g., death) benefits. In particular, Actuarial Guideline 34 is oriented toward variable annuities and prescribes methods to be used in the presence of a minimum guaranteed death benefit. In this paper these methods are examined and illustrated with examples.

Journal Of Actuarial Practice, Volume 7, Nos. 1 And 2, 1999, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

A Study Note on the Actuarial Evaluation of Premium Liabilities • Claudette Cantin and Philippe Trahan (First Prize)

Recognizing Actuarial Assumptions • Victoria Stachowski and Alice Underwood (Second Prize)

Commissioners Annuity Reserve Valuation Method (CARVM) • Keith P. Sharp (Third Prize)

CARVM and NAIC Actuarial Guidelines 33 & 34 • Keith P. Sharp

Multilife Premium Calculation with Dependent Future Lifetimes • Michel Denuit and Anne Cornet

A Fuzzy Approach to Grouping by Policyholder Age In General Insurance • Richard J. Verrall and Yakoub H. Yakoubov

Determination of Optimal Premiums as a Constrained Optimization Problem • Farrokh Guiahi

Credibility Calculations …

Using Parametric Statistical Models To Estimate Mortality Structure: The Case Of Taiwan, Shih-Chieh Chang

Journal of Actuarial Practice (1993–2006)

A mixture parametric model is used to analyze the changing pattern of Taiwanese mortality from 1926 to 1991. Three different age ranges are modeled as mixtures of extreme value distributions, namely the Weibull, inverse Weibull, and Gompertz distributions. The results show a significant improvement of mortality over the years.

Principles And Application Of Credibility Theory, Vincent Goulet

Journal of Actuarial Practice (1993–2006)

We review the history of the practical development of credibility theory. Emphasis is placed on the two main approaches to credibility theory: limited fluctuation credibility and greatest accuracy credibility. We explain when each approach should and should not be used. The presentation of greatest accuracy credibility theory starts with a review of (exact) Bayesian credibility and then moves to the Buhlmann-Straub model. Estimators of the structure parameters are discussed. Examples are presented to illustrate the concepts. Finally, the hierarchical credibility and crossed classification credibility models are presented.

Outlier Analysis Of Annual Retail Price Inflation: A Cross-Country Study, Wai-Sum Chan

Journal of Actuarial Practice (1993–2006)

Wilkie's stochastic investment model and its variants have been increasingly applied by actuaries around the world to actuarial modeling and simulation. This paper performs time series outlier analysis on retail price inflation, which is the driving force of Wilkie's composite model. The data come from four developed countries: the United Kingdom, the United States, Canada, and Australia. The fit of the model is significantly improved after the adjustment of outliers. The analysis also identifies exogenous events that have intervened in the inflation dynamics. An example is given to demonstrate the importance of outlier analysis on stochastic simulation. Finally, inflation trends …

Stability Of Representative Crediting Rate Scenarios Under Monte Carlo Simulations, Sarah L.M. Christiansen, Kelley Buchacker

Journal of Actuarial Practice (1993–2006)

We develop a methodology to ensure that a Monte Carlo simulation of the distribution of the primary rates, used for determining an interest crediting rate, is stable regardless of the initial random number seed. We consider the implications of the use of antithetic random normal deviates upon the scenario process and modifications to the candidate list and the choice function within the representative process. It is shown that the use of antithetic random deviates alone does not have a statistically significant effect on our results. The other two modifications (candidate selection algorithm and choice function) are statistically significant. Furthermore, the …

An Analysis Of Australian Pensioner Mortality By Pre-Retirement Income, David Knox, Andrew Tomlin

Journal of Actuarial Practice (1993–2006)

The existence of a relationship between an individual's socioeconomic status and his or her mortality is often accepted, but it is difficult to measure this relationship objectively. This study analyses the relationship between an individual's final salary immediately prior to retirement and mortality rates during retirement. The data used are taken from a large Australian public sector pension plan. A strong inverse relationship is found, which decreases with age. Some of the implications of these results for individual annuity markets and public pension policy are discussed.

A Frailty Model For Projection Of Human Mortality Improvements, Shaun S. Wang, Robert L. Brown

Journal of Actuarial Practice (1993–2006)

Based on the everyday observations that individual human beings vary significantly in their capacity to combat death, we adopt a so-called frailty model of human mortality. This frailty model assumes that each individual in a given population is endowed with his or her own frailty index, r, which remains constant for life. In addition, we assume that the individual's force of mortality (hazard rate function) at age x, Ux(r), satisfies Ux(r) = rUx where Ux is the population's base force of mortality at age x. Given the probability distribution of the frailty index among the newborns in the population, an …

Actuarial Techniques In Risk Pricing And Cash Flow Analysis For U.K. Bank Loans, Philip Booth, Duncan E.P. Walsh

Journal of Actuarial Practice (1993–2006)

A cash flow model is developed to set the price for a loan to a borrower with known risks. Similarities are noted between this model and those used for profit testing in life insurance. We emphasize aspects that reasonably can be treated in several ways and also indicate where the cash flow model differs from the pricing methods usually employed in bank lending. The sensitivity of interest rates to various parameters of the model such as the length of loan and the expected default rate is examined. Also, we examine how features of loans, including cash back and early repayments, …

Journal Of Actuarial Practice, Volume 6, Nos. 1 And 2, 1998, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

Principles and Application of Credibility • Vincent Goulet

Actuarial Techniques in Risk Pricing and Cash Flow Analysis for U.K. Bank Loans • Philip Booth and Duncan E.P. Walsh

Stability of Representative Crediting Rate Scenarios Under Monte Carlo Simulations • Sarah L.M. Christiansen and Kelley Buchacker

Outlier Analysis of Annual Retail Price Inflation: A Cross-Country Study • Wai-Sum Cha

An Analysis of Australian Pensioner Mortality by Pre-Retirement Income • David Knox and Andrew Tomlin

Using Parametric Statistical Models to Estimate Mortality Structure: The Case of Taiwan • Shih-Chieh Chang

A Frailty Model for Projection of Human Mortality Improvements • Shaun …

A New Approach For Determining Claim Expense Reserves In Workers Compensation, Kay Rahardjo

Journal of Actuarial Practice (1993–2006)

This paper describes a new approach for determining a reserve for claim expenses. While the discussion focuses on workers compensation claims, the methodology is equally applicable to other lines of business. The approach also can be applied to the calculation of the reserve for all claims (including IBNR claims) and the reserve for claims reported to date (excluding IBNR claims). In addition, a methodology for pricing claims-handling services is discussed. The implications of pricing claims-handling services on a handle-to- conclusion basis versus pricing claims-handling services on a limited time handling basis are examined. Finally, the paper discusses a methodology for …

Providing Pensions For U.K. Employees With Varied Working Lives, Deborah R. Cooper

Journal of Actuarial Practice (1993–2006)

Several different working lives are investigated, including employees with breaks in employment, part-time employment, and temporary employment. The pensions that could be provided to the different employees by final salary, revalued career average, or money purchase pension schemes (plans) are calculated and compared. Some of the weaknesses in a final salary pension scheme (the treatment of deferred pensioners and cross subsidies between different groups of member) are considered. Possible alternative benefit structures are considered to address the problems.

Fuzzy Underwriting: An Application Of Fuzzy Logic To Medical Underwriting, Per-Johan Horgby, Ralf Lohse, Nicola-Alexander Sittaro

Journal of Actuarial Practice (1993–2006)

One of the most difficult issues in the medical underwriting of life insurance applicants is diabetes mellitus. Compiling the prognosticating parameters for diabetic applicants results in a complex system of mutually interacting factors. In addition, neither the prognosticating factors themselves nor their impact on the mortality risk is clear cut. We show how a fuzzy inference system can be used in underwriting diabetes mellitus. A fuzzy inference system can cope with the imprecise nature of medical parameters by converting them into fuzzy sets and aggregating them using mathematical techniques. The fuzzy underwriting system presented goes further than previous applications of …

Seeking The Profitability-Risk-Competitiveness Frontier Using A Genetic Algorithm, Ronnie Tan

Journal of Actuarial Practice (1993–2006)

Monte Carlo simulation is used to develop a flexible framework to measure the profitability, risk, and competitiveness of any insurance product. A genetic algorithm is then used to seek the optimum asset allocations that form the profitability-risk-competitiveness frontier and to examine the profitability, risk, and competitiveness trade-off's. We also show how to select the appropriate asset allocation and crediting strategy in order to position the product at the DeSired location on the profitability-risk-competitiveness spectrum.

Comments On Some Parametric Models For Mortality Tables, Kam C. Yuen

Journal of Actuarial Practice (1993–2006)

Parametric models for the entire age pattern of mortality have been suggested by Heligman and Pollard (1980) and Carriere (1992). The former is designed to fit the classical mortality pattern while the latter is supported by a statistical theory. Insights into their papers motivate us to consider a variation of the Heligman-Pollard model. We also apply these models to the 1993 Hong Kong Assured Lives Mortality Tables as well as the 1991 Hong Kong Female Life Table. This paper is not intended to construct a better parametric model for mortality tables; the main purpose is simply to provide insights into …

Accelerated Death Benefits, Viatical Settlements, And Viatical Loans: Options For The Terminally Iii, Paula Schmidt

Journal of Actuarial Practice (1993–2006)

There are three options available for terminally ill insureds who are interested in accessing all or part of the face value of their life insurance policies: through the life insurance company (accelerated death benefits), through a viatical company (a via tical settlement), or through a via tical loan company (a via tical loan). This paper explores the definitions and tax regulations, calculations, and the claims process associated with accelerated death benefits and via tical settlements and loans.

Actuarial Model Assumptions For Australian Inflation, Equity Returns, And Interest Rates, Michael Sherris

Journal of Actuarial Practice (1993–2006)

Though actuaries have developed several types of stochastic investment models for inflation, stock market returns, and interest rates, there are two commonly used in practice: autoregressive time series models with normally distributed errors, and autoregressive conditional heteroscedasticity (ARCH) models. ARCH models are particularly suited when there is heteroscedasticity in inflation and interest rate series. In such cases nonnormal residuals are found in the empirical data. This paper examines whether Australian univariate inflation and interest rate data are consistent with autoregressive time series and ARCH model assumptions.

Pricing Earthquake Exposure Using Modeling, Debra L. Werland, Joseph W. Pitts

Journal of Actuarial Practice (1993–2006)

This paper demonstrates a practical methodology for determining a statewide rate level indication for the earthquake insurance and for determining more equitable territorial relativities within a state. The methodology is based on the output from a certain commercially available earthquake modeling software package. The methodology addresses some of the complex issues involved in pricing earthquake insurance exposure and potential regulatory acceptance. The paper also features a section dealing with the net cost of reinsurance in the proposed direct rates. A final consideration is the treatment of a model's output when it is believed the modeled results art' less than fully …

Dynamic Immunization And Transaction Costs With Different Term Structure Models, Eliseo Navarro, Juan M. Nave

Journal of Actuarial Practice (1993–2006)

A bond portfolio selection model is developed in a dynamic framework using different term structures, but without transactions costs. We show that the optimal portfolios are consistent with Khang's dynamic immunization theorem, i.e., the optimal path consists of making portfolio duration equal to the investor's horizon planning period. The model is then extended to include transaction costs. The resulting optimal portfolios are no longer consistent with Khang's dynamic immunization theorem. In fact, the strategy for constructing the optimal portfolio consists of initially choosing a portfolio with a duration that is smaller than the horizon planning period.

The Right To Underwrite? An Actuarial Perspective With A Difference, Thomas A. Moultrie, Guy R. Thomas

Journal of Actuarial Practice (1993–2006)

For a long time underwriting has been a part of the actuarial canon. With increasing frequency, however, challenges are being issued against the right of insurance companies to underwrite applications for new bUSiness, arguing that certain aspects of the practice are undesirably discriminatory. We explore the role of the actuary in the underwriting process and the challenges that are being set for the profession (as opposed to the life insurance industry) as a result of this role. As the distinction between the interests of the actuarial profession and the interests of the life insurance companies has become increasingly blurred, we …

Discussion Of T.A. Moultrie And R.G. Thomas's ''The Right To Underwrite? An Actuarial Perspective With A Difference", Charles L. Trowbridge

Journal of Actuarial Practice (1993–2006)

This interesting but controversial paper studies a subject I too have seriously considered. Nearly a decade ago I was commissioned to prepare a monograph that appeared in 1989 under the auspices of the Actuarial Education and Research Fund under the title Fundamental Concepts of Actuarial Science. 1 Chapter VII of this work, "Classification, Selection, and Antiselection," claims that the cluster of ideas surrounding these three words form a fundamental actuarial concept. I have recently reviewed this monograph (hereinafter FCAS) and am struck by the dissimilarities between the two treatments. The authors of "The Right to Underwrite?" (RTU) were unaware of …

Journal Of Actuarial Practice, Volume 5, No. 2, 1997, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

Articles:

With Different Term Structure Models • Eliseo Navarro and Juan M. Nave

A New Approach for Determining Claim Expense Reserves in Workers Compensation • Kay Rahardjo

Pricing Earthquake Exposure Using Modeling • Debra L. Werland and Joseph W. Pitts

Actuarial Model Assumptions for Australian Inflation, Equity Returns, and Interest Rates • Michael Sherris

Comments on Some Parametric Models for Mortality Tables • Kam C. Yuen

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 5, No. 1, 1997, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

Providing Pensions for U.K. Employees with Varied Working Lives • Deborah R. Cooper

Seeking the Profitability-Risk-Competitiveness Frontier Using a Genetic Algorithm • Ronnie Tan

Fuzzy Underwriting: An Application of Fuzzy Logic to Medical Underwriting • Per-Johan Horgby, * Ralf Lohse, and Nicola-Alexander Sittaro

Accelerated Death Benefits, Viatical Settlements, and Viatical Loans: Options for the Terminally III • Paula Schmidt

The Right to Underwrite? An Actuarial Perspective With a Difference • Thomas A. Moultrie and R. Guy Thomast

Discussion of T.A. Moultrie and R.G. Thomas's ''The Right to Underwrite? An Actuarial Perspective With a Difference" • Charles L. Trowbridge

Editor …

Asset Allocation In Investing To Meet Liabilities, Anthony Dardis, Vinh Loi Huynh

Journal of Actuarial Practice (1993–2006)

We present some rudimentary concepts on asset/liability management and describe an approach to asset allocation modeling for institutions that invest to meet liabilities. The traditional risk/reward framework of financial economics is used as a starting pOint. The definitions of risk and reward are then refined with regard to the institution under consideration. A simple model of a U.S. life office is examined. We assume that the only investments available are domestic stocks and long-dated government bonds. Stochastic simulation is used to create a large number of future investment scenarios using historical total return data for these asset classes. The ability …

Constrained Forecasting Of The Number Of Ibnr Claims, Louis G. Doray

Journal of Actuarial Practice (1993–2006)

We consider the problem of forecasting the number of claims incurred. After subtracting the number of claims reported to date, the number of claims incurred but not reported (IBNR) can be forecasted. The basic model assumes that the number of claims per accident period follows an autoregressive moving average time series process. Instead of assuming the data are available in the usual claim run-off triangle format, we assume that the only data available are the number of claims reported at the valuation date for each accident interval of an observation period. Box-Jenkins methods are used to forecast the ultimate number …

What We Say In The Naic Annual Statement Blank Actuarial Opinion, Kenneth W. Faig Jr.

Journal of Actuarial Practice (1993–2006)

The new language adopted for the actuarial opinion in the National Association of Insurance Commissioners' model actuarial opinion and memorandum regulation has been weakened at the same time the responsibilities of the opining actuary have been increased. The restoration of stronger language to the actuarial opinion would enhance the professional image of the actuary. If the legal environment for professional liability inhibits such a change, the opinion should be changed to describe more precisely the work performed and the conclusion reached by the actuary.

Concentration In American Property-Casualty Companies, Edward Nissan

Journal of Actuarial Practice (1993–2006)

A Theil's entropy index utilizing premiums written as units is employed to measure trends in concentration of the largest 200 property-casualty companies in the United States between 1985 and 1993 based on Best's Insurance Report data. Each of the indexes confirms that concentration trends experienced no increase for the whole period for all 200 firms, the top 20, and subsets of lower ranked companies. Significant differences are observed, however, between groups of companies for the same period.

Disclosure And Confidentiality Requirements Of Corporate Pension Plan Actuaries, Theodore Konshak

Journal of Actuarial Practice (1993–2006)

Corporate pension plan actuaries are subject to the standards of the Joint Board for the Enrollment of Actuaries. The Joint Board is empowered to establish such standards under the provisions of the Employee Retirement Income Security Act of 1974, a federal law. In consideration of these statutory standards, this article will discuss whether standards published by professional actuarial organizations have any applicability. The contrast between the disclosure requirements of federal law and the confidentiality standards of the Society of Actuaries will be highlighted.

Methodologies For Determining Reserve Liabilities In The Workers Compensation High Deductible Program, Jerome J. Siewert

Journal of Actuarial Practice (1993–2006)

In this paper I describe several approaches for estimating liabilities under a high deductible program, including a proposal for a more sophisticated approach relying upon a loss distribution model. The discussion addresses several related issues dealing with deductible size and mix, absence of longterm histories, and the determination of consistent loss development factors among deductible limits. In addition, I propose several approaches for estimating aggregate loss limit charges, if any, and the asset value for associated servicing revenue.

Discussion Of Theodore Konshak's "Disclosure And Confidentiality Requirements Of Corporate Pension Plan Actuaries", Richard Daskais, Brian A. Jones

Journal of Actuarial Practice (1993–2006)

No abstract provided.