polimi 20121122 r&a
TRANSCRIPT
Statistics: Understanding & managing the world we live in
Actuarial Sciences
Alumni Politecnico di Milano – Parigi – 22/11/2012
What an actuary do in R&A?
Deterministic Versus Stochastic
Solvency 2, what’s this?
21/12/2012 Gender directive : the end of gender-based pricing
Statistics: Understanding & managing the world we live in : Actuarial sciences
References
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
What we do ?
• Implementation, audit & reviews of models
• Insurance portfolio analysis & product engineering
• Process engineering
• Enterprise Risk Management expertise
• Asset-Liability Management
• Pension & Benefits advisory services
• CRM
• Data Mining
• R&D
• Training
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
What an actuary do in R&A?
Deterministic Versus Stochastic
Solvency 2, what’s this?
21/12/2012 Gender directive : the end of gender-based pricing
Statistics: Understanding & managing the world we live in : Actuarial sciences
References
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Deterministic Versus Stochastic
• Deterministic model : use single best-estimate parameters to produce a single best-estimate of the probable outcome
• A deterministic calculation assumes that there is only one way for the future
• Pros : it is simple
• Cons : Is it always enough & realistic?
• Example : will a 70 years old woman life expectancy be the same in 2050 compare to 2012?
• What will be the yield curve in 5 years? Will it be different compare to the current zero coupon yield curve?
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
Deterministic Versus Stochastic
• Stochastics models : deliver full probability distributions of potential outcomes that include random variable in one or more of the parameters
• A stochastic calculation is the study of a time dependent random variable
• Advantage : an exhaustive risk-based approach is possible
• Example : how much capital an insurance company should hold if we want to prevent its failure over the year in 99,5% of the cases ?
• Limits : what happened if the model is wrong? A model will always be a simplification of a more complex reality? The statistician must never be totally confident in the model and at the end, the man make the decision
A scenario of the death rate surface Source : http://freakonometrics.blog.free.fr
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
What an actuary do in R&A?
Deterministic Versus Stochastic
Solvency 2, what’s this?
21/12/2012 Gender directive : the end of gender-based pricing
Statistics: Understanding & managing the world we live in : Actuarial sciences
References
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Solvency 2 : what’s this?
What about the European directive 2009/138/CE?
• 3 pillars of quantitative and qualitative rules
• A risk-based capital framework and holistic approach : the P&L is a assumed to be a multivariate random variable
• The Solvency 2 project is in line with Basel 2, it is not applied yet
• Insurance companies invest a lot of money to implement Solvency 2, it is a very big project for the insurance industry
• Despite the Basel 2 system, the banking industry is closed to a catastrophic collapse, what about Solvency 2?
What should the stakeholders expect of Solvency 2?
• A standardization of rules accross EU
• More transparency and a guarantee of a better gouvernance
• Early warning in case of trouble
• will S2 be effective during or after the end of the crisis
• systemic risk impulsed by S2?
• an increase of procyclicality for insurance market?
• an increase of insurance premium on a short-middle term even if S2 would impact would be positive on the long term view
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
Risk-based capital : a risk measure
To choose the random variable
To set the parameters
To choose the percentile
To choose the measure: VaR? TVaR?
Marginal distribution of each random variable Correlation & dependence
For example the required capital should be at least equal to the 99,5% worst variation of the net asset value over a given period (1 year for S2)
In the standard formula of S2, we use the VaR 99,5% over a year, and we assume a multivariate normal distrubution with linear correlations
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
What are the correlations between variables?
What an actuary do in R&A?
Deterministic Versus Stochastic
Solvency 2, what’s this?
21/12/2012 Gender directive : the end of gender-based pricing
Statistics: Understanding & managing the world we live in : Actuarial sciences
References
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Gender Directive
What about the European directive 2004/113/CE?
• The end of gender-based pricing
• Whatever the change in the pricing strategy of insurers, IT systems will be impacted by the different treatment of new business
• Increase of adverse selection, moral hazard & insurance exclusion
• Risk of change of the market equilibrium, potential impact on the socio-economic consumer behaviour
• Gender-based risk management & marketing is still possible
• Will unisex insurance pricing be combined with less discrimination on other fields? Not sure
What should the consumers expect of the Gender Directive?
• Motor insurance premium would increase
• Death insurance premium would increase
• Annuity premium would decrease
• Motor insurance premium would decrease
• Death insurance premium would decrease
• Annuity premium would increase
• Redistribution effects
• One-off compliance & marketing costs
• Gender mix risk premium
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
What an actuary do in R&A?
Deterministic Versus Stochastic
Solvency 2, what’s this?
21/12/2012 Gender directive : the end of gender-based pricing
Statistics: Understanding & managing the world we live in : Actuarial sciences
References
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
References
Polimi Parigi 22/11/2012 - R&A – Lionel Texier - Associate director
Statistics: Understanding & managing the world we live in : Actuarial sciences
Actuary : • http://www.italian-actuaries.org • http://www.institutdesactuaires.com • http://www.actuaries.org/
European Insurance supervisor : • https://eiopa.europa.eu/
Gender Directive : • http://genderdirective.actuariacnam.net • Official text
Solvency 2:
• http://forumactuariat2011.actuariacnam.net
R&A: • www.riskandanalysis.com • [email protected]
Cocktail ActuariaCnam 12.12.12: • http://cocktail-actuariacnam.evenium.net
Blogs : • www.techsandtools.com • http://freakonometrics.blog.free.fr • www.actuariacnam.net
Books : • www.lalibrairieducnam.fr • (please visit the EMS/Assurance/actuariat category )
GRAZIE PER L’ATTENZIONE