Description: From the 1985 Valuation Actuary Symposium Discussion of the process for evaluating the financial soundness of an insurance organization from organizations outside of the Company

Description: In this comprehensive exploration led by Eric Milner, viewers are immersed in the intricate realm of actuarial science and quantitative finance. The video navigates through interest rate modeling, yield curves, and financial derivatives, shedding light on their practical significance in global financial operations. Key concepts such as Cox-Ingrersoll-Ross and Hull-White models are elucidated, alongside standard yield curve models and advanced quantitative tools like the Black-Scholes model and Monte Carlo Simulations. Actuaries gain indispensable insights into managing complex financial risks, fostering stability, and resilience against market fluctuations, crucial for strategic decision-making and investment planning and risk management across various sectors. Contributors: Eric Milner, ASA, MAAA; Richard Vaccaro, FSA, MAAA ; Diyi Zhao ASA, MAAA; Jon Forster ASA, MAAA

Description: A research report providing a primer on the mechanics and uses of the Hidden Markov Model for actuarial and financial applications.

Description: Insurance companies utilize derivatives in a variety of ways to manage and mitigate risks that are inherent in their investment or liability portfolios. They can be characterized by three main features: medium long-term duration; large volumes; and significant market risk exposure. Given the persistent low interest rate environment across the curve since the 2008 financial crisis, large companies need to hedge their liabilities, as illustrated by the significant recent increase from $786 billion as of fiscal year 2010 to $1,885 billion as of FY 2014 by insurance companies.As the Variable Annuities (VA) guarantees embedded within those liabilities hold a strong convex risk profile with respect to the underlying stock, VA carriers need to buy some convex hedge assets such as options to match the liability risk profile to improve hedge effectiveness, implying the growing cost of hedging. Such market impact of the quantity on the cost of hedging is further magnified in the recent period with the short-lived, but sharp transitions from low volatility to high volatility, when market volatility suddenly increases, even when there were no well-known fundamental catalysts. This partially stems from the growing managed volatility funds embedded within VA ($bn 400).VA carriers willing to trade a large quantity of options will see such market impact as an important dilemma, as the cost of placing one large order to close position will be far greater than the sum of infinitely small orders differed in time. In that context, managing market impact requires introducing an explicit market impact function, the influence of which the agent will try to minimize. The effect on hedge asset prices significantly depends on whether there is or not significant delta hedging activity. In case of no significant delta hedging activity, the risk appetite has a significant influence on the optimal execution strategy. If there is significant delta hedging activity, the optimal trading involve

Description: Interest rates steadily declining ever since the Volcker Fed tackled inflation in the early eighties. Ten years of stimulating monetary policy brought new lows. We should have braced ourselves for a return to neutrality, but that concept remains elusive. We will explore structural issues that have brought rates to these low levels and the potential impacts on the insurance business.

Description: The author notes that equity investment management is often classified into a number of different styles, the simplest being growth and value. In discussing both approaches the author also brings in the concept of momentum and concludes that momentum should be an additional parameter reviewed in the investment decision.

Description: Dynamically Hedging Insurance Product Risk by Marshall C. Greenbaum from Risks and Rewards Newsletter, April 2000, Issue No. 34. A dynamic hedging program cab be an effective solution to insurance company market risk management problems.

Description: Panelists discuss issues faced by the insurance-company portfolio manager, how to measure or value interest-rate risk, some of the new cash investment vehicles available, the futures and options market, construction of a synthetic security, and the review of mortgage-backed securities under new analytical techniques. From the 1987 Record of Society of Actuaries, Vol. 13, No. 3.

Description: Our previous article, “Introduction of Cashflow Matching Strategic Asset Allocation (SAA) Framework,” introduced the concept and included a real-world case study that developed a liability-driven investment strategy for a single line of business (LOB) for a life insurer. This article expands the framework and the case study from a single LOB to simultaneously optimize asset allocation across multiple LOBs. It discusses how this multi-line SAA framework can enable an insurance company to efficiently tag its asset holdings to each LOB, identify opportunities in the public and private asset markets to enhance risk-adjusted returns, and develop a deeper understanding of the trade-off between the degree of cashflow matching and risk-adjusted returns across LOBs.

Description: The article provides a summary of the Drake Risk & Opportunity Forum held on October 21, 2022. The forum was a hybrid conference that attracted more than 200 attendees from 17 states, two countries, 48 employers, and five universities. Following an introduction by the Zimpleman College of Business Dean, the forum held six sessions. First was an insurance company CRO panel followed by a panel of non-insurance company CROs. Gary Zhu shared his outlook for interest rates and capital markets. The fourth panel discussed insurance capital models. The fifth panel discussed environmental, social, and governance (ESG) criteria when building insurance company investment portfolios. The final session of the day was a discussion about the NAIC, how they operate, and their priorities for the coming year.