Expert papers

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Using least squares Monte Carlo for Solvency II proxy modelling

A nested stochastic approach can prove difficult for many European life insurers implementing a Solvency II internal model, and some proxy modelling techniques such as replicating portfolios and curve-fitting have drawbacks. Mario Hörig and Michael Leitschkis describe an alternative approach that is growing in popularity: Least Squares Monte Carlo (LSMC)

Applying complexity science to risk appetite and emerging risk

Innovative approaches to identifying and managing adaptations and interactions of risks within companies have been developed in research carried out by Milliman and the Universities of Bath and Bristol for the Actuarial Profession. In an interview with InsuranceERM, Neil Cantle outlines the practical applications of the research to risk appetite and emerging risk

Using nested stochastic modelling for capital calculation

The previous five articles in this series looked at how you might use liability proxy methods to approximate and accelerate a nested stochastic calculation. Full nested stochastic simulation, the brute force approach to capital calculation, is beginning to come within the reach of many insurers, usually with a significant investment in hardware parallelisation. Even then, there are decisions that need to be made, pitfalls to avoid and clever tricks to make a nested stochastic calculation more efficient, as Adam Koursaris explains.

Building risk appetite into a risk dashboard

Risk appetite can now be extended into quantitative tools to assist decision-making on capital allocation, return on investment on allocated capital and balancing profitability against exposure, as well as providing the basis for the traditional risk tolerances. Peter Taylor looks at how insurers might exploit new stochastic data sources in business planning and performance monitoring through risk dashboards.

Using replicating portfolios to calculate capital

Using replicating portfolios to calculate capital

In the previous article in this series (A primer in replicating portfolios), Adam Koursaris explored a set of useful principles for replication -- general facts that govern the use of replicating portfolios in asset-liability modelling. Now he examines practical aspects of RPs in insurance capital calculation.

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