CH 0: Actuarial Control Cycle Flashcards
Nodes of Actuarial control cycle
5 {Points)
Stages:
- Specify the problem
- Develope the solution
- Monitor the experience
Input:
- Professionalism
- General and commercial economic environment
Key Topics General Commercial and Economic Environment
ESPERIA, a magical environment far away
- External environment
- Stakeholders
- Providers of benefits
- Economic Influences
- Regulation
- Insurance products
- Asset Classes
Key Topics Professionalism
- Professional conduct standards
- Technical and ethical standards
- Views of all stakeholders
- Act with integrity and detachment from the problem
- Personal situation
- Build a relationship with the client
- Avoid conflicts of interest
- Communicaiton
Key topics when specifying the problem
- Assessment of NEEDS
- Assessment of RISKS
- Core Business Requirements
- Strategic Courses of Action
Key topics in developing the solution
- Selecting Appropriate Actuarial Models
- Appropriate Assumptions
- Implications for all Stakeholders
- Determine a Proposed Solution and Alternatives
Key topics in monitoring experience
- Monitor actual vs expected results
- Analysis of Surplus/Deficit
- Possible reasons for departures and adjust accordingly
Specifying the problem
Analyse the risks of the various stakeholders in detail
and set out clearly the problem from the point of view
of each stakeholder.
- Gives an assessment of the risks faced and how they
can be managed mitigated or transferred.
- Provide an analysis of the options for the design of plans to transfer risk from one set of stakeholders to the next.
Developing the solution
MODEL CONSTRUCTION
- An examination of the major actuarial models currently in use and how they may be adjusted for the
particular problem to be solved
- Selection of the most appropriate model to use for the problem, or construction of a new model
- Consideration and selection of the assumptions to be used in the model.
MODEL RESULTS
- Interpretation of the results of the modelling process
- Consideration of the implications of the model results
on the overall problem.
- Consideration of the implications of the results for all
stakeholders
SOLUTION
- determining a proposed solution to the problem
- consideration of alternative solutions and their effects on the problem
- formalising a proposal
- communicating the proposed solution and the alternatives
Monitoring the experience
- Critical that the models used are dynamic and reflect
current experience where it is relevant. - This stage deals with the monitoring of experience
and its feedback into the previous stages - Identifying causes of departures and considering the
recurrence of departures. - Feedback loops
ACC applied as risk management tool
Risk management also involves the following cyclical process:
- analyzing situations, products and projects to determine the risks to which they are exposed
- quantifying the financial consequences of the risk events occurring
- considering and quantifying appropriate methods for managing, mitigating and transferring the risks
- monitoring the situation and the risk management procedures implemented as time develops
- modifying or changing the risk management approaches adopted over time, in light of emerging experience
Types of Risk
- Market
- Investment
- Credit
- Mortality/Morbidity/Longevity
- Inflation
- Underwriting
- Insurance
- Exposure
- Finance
- Operational
- External
- Transfer