Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Property - Casualty / General Insurance
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

DW Simpson International Actuarial Jobs
Canada  Asia  Australia  Bermuda  Latin America  Europe


Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 05-04-2019, 09:46 AM
The_Polymath's Avatar
The_Polymath The_Polymath is offline
Member
CAS SOA
 
Join Date: Jun 2016
Posts: 2,437
Default Constructing an optimised reinsurance strategy (multi-line insurer)

An interesting modelling problem has crossed my desk.

A mid-sized P&C insurer needs some modelling help constructing an optimal reinsurance strategy based on combination of quota share and XoL for various different lines (nothing exotic - mostly property and medical).

They are looking at large loss modelling essentially, and I am curious if this is something someone esle has done before here. I can construct the model, but would like to do some additional readings on how to optimise the attachment points for XoL, assuming various layers are being used, with the possibility of various resinsurers participating.

There are also additional risk-based knock on effects, as any impact on the reinsurance strategy, will impact the recoveries, which would then flow to credit risk, and risk margin for Solvency II (I know that for US Actuaries this is probably meaningless, but just added it in for completeness)
__________________
Quote:
Consistency is the hobgoblin of little minds
Reply With Quote
  #2  
Old 05-04-2019, 10:41 AM
Colonel Smoothie's Avatar
Colonel Smoothie Colonel Smoothie is online now
Member
CAS
 
Join Date: Sep 2010
College: Jamba Juice University
Favorite beer: AO Amber Ale
Posts: 49,182
Default

nice humblebrag about having a desk
__________________
Recommended Readings for the EL Actuary || Recommended Readings for the EB Actuary

Quote:
Originally Posted by Wigmeister General View Post
Don't you even think about sending me your resume. I'll turn it into an origami boulder and return it to you.
Reply With Quote
  #3  
Old 05-04-2019, 10:44 AM
Colonel Smoothie's Avatar
Colonel Smoothie Colonel Smoothie is online now
Member
CAS
 
Join Date: Sep 2010
College: Jamba Juice University
Favorite beer: AO Amber Ale
Posts: 49,182
Default

My gut feeling is that this type of work is being done, especially at brokers. My advice is to just do exactly what you said you were going to do and look at the distribution of your target variable as a function of the attachment point, etc. Look at various combinations of 2-D plots and 3-D plots.

Readings may give you some guidance, but just do it - you ought to have the background to do some exploration here, independently.
__________________
Recommended Readings for the EL Actuary || Recommended Readings for the EB Actuary

Quote:
Originally Posted by Wigmeister General View Post
Don't you even think about sending me your resume. I'll turn it into an origami boulder and return it to you.
Reply With Quote
  #4  
Old 05-04-2019, 01:22 PM
Candidate X's Avatar
Candidate X Candidate X is offline
Member
CAS
 
Join Date: Oct 2015
Posts: 259
Default

Some good basic ideas here:
https://www.casact.org/pubs/forum/01sforum/01sf179.pdf

http://www.garyventer.com/wp-content...einsurance.pdf

...and references for more reading.
Reply With Quote
  #5  
Old 05-06-2019, 12:35 PM
tommie frazier tommie frazier is offline
Member
 
Join Date: Aug 2003
Favorite beer: The kind with 2 e's
Posts: 23,227
Default

large broker firm would have analytics team to assist with this for sure.
Reply With Quote
  #6  
Old 05-06-2019, 12:40 PM
The_Polymath's Avatar
The_Polymath The_Polymath is offline
Member
CAS SOA
 
Join Date: Jun 2016
Posts: 2,437
Default

Quote:
Originally Posted by tommie frazier View Post
large broker firm would have analytics team to assist with this for sure.
I have seem this done by brokers, but they do not do the model design. They get modelling help (from people just like me).
__________________
Quote:
Consistency is the hobgoblin of little minds
Reply With Quote
  #7  
Old 05-06-2019, 02:33 PM
Glenn Meyers Glenn Meyers is offline
Member
 
Join Date: Mar 2002
Posts: 273
Default

Quote:
Originally Posted by The_Polymath View Post
An interesting modelling problem has crossed my desk.

A mid-sized P&C insurer needs some modelling help constructing an optimal reinsurance strategy based on combination of quota share and XoL for various different lines (nothing exotic - mostly property and medical).

They are looking at large loss modelling essentially, and I am curious if this is something someone esle has done before here. I can construct the model, but would like to do some additional readings on how to optimise the attachment points for XoL, assuming various layers are being used, with the possibility of various resinsurers participating.

There are also additional risk-based knock on effects, as any impact on the reinsurance strategy, will impact the recoveries, which would then flow to credit risk, and risk margin for Solvency II (I know that for US Actuaries this is probably meaningless, but just added it in for completeness)
This was a hot topic in the mid 2000's. I gave a presentation on it at the 2005 CAS Ratemaking Seminar. The link to download the presentation is below -- 2nd one down in the "Presentations" tab.

The general idea is to use a collective risk model to calculate the amount of capital the company needs with, and without the reinsurance. Then compare the cost of capital without reinsurance, with the cost of capital with the reinsurance plus the margin charged by the reinsurer.

One complication is that you need to address how long you need to hold capital for long-tailed lines. I have an upcoming Variance paper on that addresses the problem from the Solvency II perspective. It does not address the reinsurance problem. It should be out any day now. The presentation linked below should give one a feel for the problem for reinsurance

The general result that jumped out of a number of analyses that I did back then was that for all but the fairly small insurers, one should not buy reinsurance for liability lines of insurance. But one should buy reinsurance for catastrophes. My caveat is that cost of capital is your sole consideration for buying reinsurance.

https://www.casact.org/education/ind...&submit=Search
Reply With Quote
  #8  
Old 05-06-2019, 04:50 PM
Tacoactuary's Avatar
Tacoactuary Tacoactuary is offline
Member
CAS
 
Join Date: Nov 2014
Location: Des Moines, IA
College: Vanderbilt, UIUC
Favorite beer: Yazoo Sue
Posts: 1,591
Default

Quote:
Originally Posted by Glenn Meyers View Post
The CAS seems to think you gave a talk on Generalized Addictive Models, btw.

__________________
ACAS 7 8 9 FCAS
Reply With Quote
  #9  
Old 05-06-2019, 09:27 PM
Glenn Meyers Glenn Meyers is offline
Member
 
Join Date: Mar 2002
Posts: 273
Default

Yeah, I made a lot of presentations that year. The one you referenced was the 4th one down. Look at the 2nd one above that on the same page that the link takes you to.
Reply With Quote
  #10  
Old 05-06-2019, 10:14 PM
lllj's Avatar
lllj lllj is offline
Member
CAS
 
Join Date: May 2011
Posts: 5,341
Default

Quote:
Originally Posted by Tacoactuary View Post
The CAS seems to think you gave a talk on Generalized Addictive Models, btw.

LOL. Looks like it's supposed to say "additive."
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 07:14 PM.


Powered by vBulletin®
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.24424 seconds with 9 queries