ERM Ch.5 Flashcards
1
Q
4 stages of the evolution of insurance business
A
- Emergence
- Control
- Breakdown
- Reorganization
2
Q
Theories of the Underwriting Cycle
A
- Institutional Factors (lags in data)
- Competition
- Suppy & Demand, Capacity Constraints & Shocks
- Economic Linkages
3
Q
3 dimensions (comparing styles of modeling)
A
- Data Quantity, Variety & Complexity
- Recognition of Human Factors
- Mathematical Formalism & Rigor
4
Q
Modeling the cycle details:
Criterion variable
A
Loss ratio or Combined Ratio
5
Q
Modeling the cycle details:
Predictor Variables
A
- Historical criterion variable (eg. combined ratio), and it’s components – premium, losses, expense
- Internal Financial Variables – Reserves, Reserve Development, Capital, Capital Flows, Reinsurance Cessions
- Regulatory/Ratings Variables – especially downgrades and upgrades
- Reinsurance Sector Financials (eg. Capital held by reinsurers)
- Econometric Variables – inflation, unemployment, GNP
- Financial Market Variables – interest rates, stock market returns
6
Q
Modeling the cycle details:
Competitor Intelligence
A
- Customer surveys
- Trade publications/news
- Rate filings
7
Q
Soft Modeling Approaches
A
- Scenarios
- Delphi Method
- Formal Competitor Analysis
8
Q
Scenarios Method
A
- Written statement describing a possible future state of the world.
9
Q
Delphi Method
A
- Give background material to participants
- Gather opinions using a questionnaire
- Results are summarized, and distributed
- Allow participants to reconsider their opinions, and articulate reasons for disagreeing
- Repeat until a consensus is reached
10
Q
Formal Competitor Analysis
A
Use competitor information to try to determine turn in the market
11
Q
Technical Modeling Approaches
A
- Auto Regressive Model
- General Facor Model
12
Q
Price & Quantity Graph
A
13
Q
Capital Flows Graph
A
14
Q
Econometric Model Components
A
