39. Monitoring

Question 1

Reasons for monitoring experience

Answer 1

• Update method and assumptions to ones more relevant to future experience
• Monitor trends in experience (esp adverse trends) to take corrective actions
• Provide info to management and other key stakeholders

Question 2

Data requirements

Answer 2

• Reasonable volume of stable, consistent data to deduce future trends and experience
• Ideally must be divided into homogeneous groups according to relevant risk factors
• Must be balanced against danger of creating data cells with too little data to be credible
• Necessary to have exposure to risk data, divided into same cell structure as experience data

Question 3

Analysis process: Statistical factors

Answer 3

• e.g. mortality and withdrawal rates
• calculate # of deaths/ ETR in each age band
• Compare results with assumptions or std tables

Question 4

Analysis process: Economic factors

Answer 4

1. Interest rates and investment returns
   
   • Compare actual returns and assumed
2. Expense inflation
   
   • Expense analysis from Ch 22
3. Salary growth
   
   • Distinguish between general inflation-related salary increases and promotional salary increases

Question 5

Adjustments to results

Answer 5

Allowance for:

• Trends (incl gradual changes over time)
• Cycles
• Abnorml events
• Random fluctuations

Must be adjusted to allow for data and modelling risk

Question 6

May result in

Answer 6

• Change in assumptions/models

- Change in assessment if risks and/or risk management process