Coherent Risk Measures casact一致性风险度量 casact.ppt

Reserve Margins and CapitalCLRS – New OrleansSeptember 11, 2001 Chuck Emma, MHL/Paratus Chandu Patel, KPMG LLP Kevin Madigan, MHL/Paratus Reserve Margins Chuck Emma, MHL/Paratus Risk Modeling Application Chandu Patel, KPMG LLP Accounting and Management Considerations Kevin Madigan, MHL/Paratus Reserve Implications in Runoff Companies Risk Modeling Application Casualty Loss Reserve Seminar New Orleans September 11, 2001 Chuck Emma, FCAS, MAAA Risk Modeling Application A Research Question Sample Company - background - modeling assumptions Coherent Risk Measures Conclusions A Research Question Question: Does recording a reserve higher than management’s best estimate have an effect on the capital required to support the company’s operations? One Answer: Model the company’s financial risk under different reserving strategies. Calculate the level of capital required to support operations. Company Example Initial Policyholder Surplus = $70MM Writes approximately 2 to 1 Modest Business Growth (3-6%) Risk Factors Economic Variables Interest Inflation Pure Loss Variability Five Year Projections of Operating Results Economic Risk Factors Cox-Ingersoll-Ross Interest Rate Generator Mean-reverting random walk for interest rates Cascading dependency of inflation rates Linear relationship with error term Reserve Variability Reserve adequacy defined by expected inflation rate Actual (generated) inflation rate provides hindsight reserve For example: 6.0% expected inflation at 12/31/00 6.2% generated in 2001 Effect of unanticipated 0.2% of inflation is calculated over life of reserve. Adverse development occurs. Company Reserving Policy Three Reserving Practices Examined Mean level reserving 75th percentile reserving 90th percentile reserving Management Reserving Practice: Eroding Margin Each year absorb any adverse reserve developments up to 50% of remaining margin For example: $5MM prior year “hit” reduces any available margin by $2.5MM. The other $2.5MM flo