Risk Management (General)

Preferred Risk Criteria and Values: Can We Move from Good to Better?

With decades of underwriting experience to research, the author reviews some of the criteria commonly used to try to answer the question: “We have done well in the past, but could the industry use its criteria to make risk selection more effective?”

A New Response (Best's Review)

Hybrid life insurance/long-term care product sales are rising, but the industry must pay attention to pricing and risk mitigation techniques.

Predictive Analytics Articles (SOA)

The Society of Actuaries is providing a selection of articles on the use of predictive modeling. Articles included in the PDF package:

  • Risk Segmentation: Application of Predictive Modeling in Life Underwriting
  • Predictive Modeling Techniques Applied to Quantifying Mortality Risk
  • Utilizing Frequent Itemsets to Model Highly Sparse Underwriting Data
  • Producing Actionable Insights from Predictive Models Built Upon Condensed Medical Records
  • Predicting Emergency Room Frequent Flyers

Reading Risk Right (Best's Review)

Hank’s new Best’s Review essay exposes the risks of overemphasis on productivity, at the expense of quality, in unde

A Second (Risk) Opinion After a Coronary Event

Can a man in his 50s with a history of heart disease ever be considered better than a sub-standard risk for life insurance? The answer is, sometimes, YES.

Rock Star Mortality: High Risk for Hard Living

Do rock stars really die earlier compared to the average population? If so, why is this of interest for the insurance industry?

Decision Biases: How To Break the Snap and Stick Routine and Thrive in a World of Grey

In my last blog discussing Gen Re’s work on decision biases, I shared how something called the fundamental attribution error inclines us to overweight the contribution that individual attitude and skill makes to our performance and underweight the role of the context in which we work.

Misclassification of Risk: Dealing With a Fact of Life (Insurance)

Risk misclassification sometimes occurs no matter how much underwriting a life insurance policy receives. What happens if the risk we are taking is misclassified?

Life Insurance Acceleration Riders

In recent years, life insurance companies have started offering acceleration of a portion of the face amount of the life insurance policy to those who are chronically or critically ill. This article discusses the more common form of the chronic illness riders found in the U.S. marketplace today, as well as considerations to control the risks under that rider.

Canadian Perspective on Genetic Risk

Genetic Testing Model - If Underwriters Had No Access to Known Results: A report to the Canadian Institute of Actuaries Committee.

Did Xs Future Lifetime Just Get a Little Less Random?

If you could find out when you were going to die, would you want to know? A groundbreaking research aims to tell patients exactly that, with a test to determine how long you have left to live poised to hit markets in Britain.

Risk, Regulation and Retirement (LOMA Resource)

Despite headwinds from the economy, interest rates, and tax reform proposals, life insurance and annuity companies have more opportunities for success than ever.

Select Period Mortality Survey

The Product Development Section and Committee on Life Insurance Research announce the release of a new report that examines the results of a company survey on select period mortality assumptions used in the pricing of individual life insurance. Performed by Al Klein and Michelle Krysiak of Milliman Inc., the study illustrates a variety of assumptions utilized in the marketplace and provides insights into practices for setting the assumptions.

Risk Management and The Power of Simplicity

The problem with this narrative—and the focus of this article—is the very real risk management costs associated with the increased complexity, efficiency and overconfidence in the predictive power of models.

Metropolitan Underwriting Discussion Group Presentations

Presentations from the 44th Annual M.U.D. Group Conference have been posted at their website. These include:

  • The Changing Face of Life Insurance
  • What Lies Beneath Your Underwriting? Tips on Risk Management and Fraud Awareness
  • Tumor Markers – Yesterday, Today and Tomorrow
  • “Death By Prescription”- The Impact of Prescription Drug Abuse
  • Risk Assessment of Seizure Disorders
  • “Serious as a Heart Attack – To BNP or Not to BNP” – Updates and Cases Studies
  • “Dying On Time”: Elderly Mortality and Pricing Implications
  • Dysplastic Nevi –“Little Brown Dots, Harmless or Not?”
  • Performance enhancing drugs: Too much of a good thing or too good to be true?
  • Pituitary Adenomas
  • Attack of the Self; Autoimmune Connective Tissue Diseases

Underwriting the Applicant with Diabetes: How Important is Glycemic Control?

Recent studies have addressed particularly the relationship between glycemic control (typically measured using HbA1c) and complications of type 2 diabetes mellitus. Those findings are reviewed in this article in the context of underwriting and risk management.

Underwriting Executives: "The Chiefs’ Table"

Enjoy a lively menu of the topics that underwriting executives are facing today: balancing production and quality, determining the correct underwriting requirements, risk management, simplified or non-bloodtested business. And for dessert, some advice about career development and opportunities for future underwriting executives.

Mortality Improvement or Not (Slides)

The slides from this presentation by Al Klein have been posted at the Actuaries Club of the Southwest website.

What Genetic Testing Means for Life Insurers

Genetic testing: it’s the crystal ball of health predictions. Are you more likely to develop cancer, Alzheimer’s or Huntington’s disease later in life? With a few strokes of a cotton swab, you can have that information. And life insurers argue they should have it, too.

Underwriting Presentations from the 2013 SEHOUA Annual Conference

Presentations include:

"Opioid Use and Medical Marijuana: A Review of the Data and an Approach to Underwriting"
by Dr. Cliff Titcomb, HLR

"Motor Vehicle Records & All-Cause Mortality"
by Scott Rushing, RGA

"Older Age Underwriting is No Place for Sissies"
by Dr. John Greene, LFG

"Underwriting with Rx Histories: A Pharmacist's Perspective"
by Scott Whitmore, Milliman

"Understanding & Underwriting Breast Cancer"
by Dr. Steven Zimmerman, SCOR

"Do You Know Who I Am? New Innovations in Identity Risk Management, Anti-Selection & Conservation"
by Elliot Wallace, VP Lexis/Nexus

Is Big Data Insurers Savior — Or Destroyer?

Big data can be an incredible competitive differentiator for insurance companies -- or could be the source of their demise, if they allow other businesses to gain the upper hand in the use of analytics and data to better manage and price risk and create new, more profitable products.

2012 SCOR Pandemic Risk Conference Highlights

Pandemic risk is one of the most important tail risks for life (re)insurers and to a lesser degree, for non-life (re)insurers. Estimated losses from a 1-in-200 year pandemic event could be equal to or even greater than major property and casualty events such as a major earthquake or major tropical storm.

Risk-Based Modeling Comes of Age

After decades of work by Academy volunteers, it looks like the era of principle-based reserving for life insurance products is finally upon us.

Preferred Underwriting Structures Survey Report

The Preferred Structures Survey Subcommittee of the Society's Committee on Life Insurance Mortality & Underwriting Surveys has completed its report on the results of a survey to capture the current state of preferred risk underwriting practices in the US life insurance market. This Survey was sent to Canadian and US life insurance companies that write preferred risk business in the US.

The Growing Influence of Lab Scoring in Underwriting Mortality Risk

Labs serve an essential role in life insurance underwriting by providing information about relevant medical markers in blood and fluid panels for underwriters’ use in risk assessment. In recent years, labs have expanded these services, capitalizing on data collected through life insurance applications to create mortality scoring algorithms.

Leading Contributors to Mortality Risk in Life Insurance Applicants

Stratification of mortality risk in prospective insured individuals is a central function of underwriters, but one upon which the performance of actuaries’ pricing projections is ultimately dependent. Until recently, life insurance underwriting was a relatively unsystematized offshoot of clinical medicine, tending to reflect the diagnostic preoccupations of practicing physicians concerned with the diagnosis and treatment of discrete medical conditions.

Predictive Modeling

Predictive models and predictive analytics have recently begun to permeate the U.S. individual life insurance market.

Can Predictive Analytics Revolutionize Risk Management for Health Insurers?

When we think of predictive analytics in insurance, perhaps it calls to mind weather risks, earthquake exposures or other types of disasters, but newly-reported research indicates that a form of predictive analytics will be of great use to health insurers, who should be able to geographically localize the spread of diseases, and in turn, better assess health risks.

Are Insurers Systemically Significant?

Actuaries propose metrics as regulators here and abroad work to determine which companies pose a systemic risk.

Fair Risk Assessment in Life & Health Insurance

This Swiss Re report examines the private insurance pricing and risk selection process, risk selection and the regulatory environment, and evidence-based ratings and their application.

Insurance Risk Index Nears Historical Low

TransUnion's Insurance Risk Index for Q4 2010 is 0.2% lower than Q4 2009.

Scottish Re Unwinds Securitization

Scottish Re Group Ltd. says it is unwinding a securitization deal and implementing a merger that should provide liquidity for ordinary shareholders.

NAIC Meets With European Counterparts

Regulators convene to foster better international coordination and discuss impact of Solvency II, Dodd-Frank reforms.

Solvency III

Analysis from Gen Re.

An Uncertain Future for Insurers?

Ongoing low-growth environment presents a multitude of challenges, and technology will be a competitive differentiator, says new report from Deloitte.

ERM and Business Intelligence

Contingencies looks at lessons from World War II code breakers as a model for today's risk managers.

Bracing For Solvency II

U.S. insurers can't ignore E.U. actions in an era of harmonizing global regulations.

Solvency II's Long Reach -- Beyond Europe

Solvency II, the imminent new European Union (EU) capital and regulatory regime for insurance and reinsurance, will have many and varied impacts outside the EU. This RGA brochure presents you with an overview of these impacts and attempts to place them in an understandable and practical context.

Milliman: Life ILS: 2010 year in review and looking ahead to 2011

More than $7 billion in transactions related to life insurance-linked securities (life ILS) were completed in 2010, and the market saw a number of additional life capital market transactions as well. Redundant reserve financings are likely to continue to drive the life ILS market in 2011. The move toward principles-based reserves, the introduction of term universal life products, and Iowa's new collateral regulations are other issues to watch in 2011.

Enterprise Risk Management for Small Insurers—It’s Still Three Words

Insurance and actuarial organizations seem more likely than banks to use the term ERM, even when all discussions really pertain to the functions and responsibilities of enterprise risk management. Banks seem sensitive today to the critical need for better management of risks they undertake. But at least some insurance-related organizations see the broader, firm-wide nature of ERM. To them, traditional silos must be overturned so that the entire organization is committed. Emphasis on “risk management,” as such, runs the danger of being much too narrowly focused. In other words, ERM is indeed still three words. (Article begins on p. 11)

A Risk Management Reset for Life Insurers

In an era of shifting demographics, economic unease and regulatory transformation, life insurers confront new risks.

WikiLeaks Imbroglio Renews Focus on Risk Management

With insurers storing vast amounts of potentially sensitive or embarrassing information, a risk mitigation culture must pervade the enterprise.

The Slow-Motion Catastrophe

S&P report ponders consequences of interest rate risk to insurance industry.

A Risk Management Reset for Life Insurers

In an era of shifting demographics, economic unease and regulatory transformation, life insurers confront new risks.

Dodd-Frank: AXA Gives Views on Systemic Risks

AXA S.A is telling federal regulators that “life insurance companies are highly unlikely to pose a system risk to the U.S. financial system.”

What kind of risk adjustment systems are necessary for health insurance exchanges?

The Patient Protection and Affordable Care Act (PPACA) mandates that states establish one or more health insurance exchanges by January 2014. Under this business paradigm, private health insurance carriers will compete on price and quality in order to attract this new pool of insured consumers. People who have previously been under- or uninsured may find exchanges an attractive option when purchasing health insurance. But claim experience, including cost and utilization patterns, of the under- and uninsured population are mostly unknown to private health insurers at this time. This paper examines the adequacy of current risk adjustment systems when applied to a wholly new type of enrollment—the "all-population risk pool"—and offers considerations and explores options for exchange designers.

Risk adjustment: Health calculus for the reform environment

Risk adjustment, a method for adjusting healthcare costs to reflect the health status of a given population, will take on new significance under healthcare reform. In order to harness the true potential of such a powerful tool, critical stakeholders like governmental agencies, health plans, provider organizations, and employer groups must understand how to properly select, implement, and evaluate risk-adjustment models. Using the appropriate risk-adjustment methodologies in the correct context will contribute to more accurate healthcare pricing, more efficient utilization, and improved quality of care.

Country Risk Management: Making Societies More Resilient

Societies are becoming more vulnerable as the risks they face become more interconnected. Integrated risk management approaches can help countries identify and prepare risks. A country risk officer could act as a focal point in the process of systematic risk management and provide a public face.

Swiss Re Securitizes Again

Swiss Reinsurance Company says it has succeeded at securitizing a substantial amount of extreme mortality risk for the third time in less than 12 months.

Emerging risks in the marketing and distribution of life insurance and annuities

Milliman and LIMRA conducted a joint study to identify emerging operational and strategic risks to the life insurance industry. Using data from interviews with senior executives from 15 U.S. insurance companies, the study applied Millman's CRisALIS methodology in order to assess the risks and offer strategies for managing them.

Next Steps on the Road to Global Solvency Regulation for Insurers

As the regulatory landscape shifts, insurers and reinsurers should take the opportunity to remain alert and aware as efforts to modernize and streamline the industry unfolds. This Deloitte “point of view” examines the discussion and outlines the current and proposed initiatives between international insurance regulatory authorities around the world.

Are (Re)Insurance Operations Source of Systemic Risk?

Report from The Geneva Association.

Rating Agency: De-Risking Has Risks

Life insurers’ efforts to decrease exposure to risk could hold down future earnings growth.

Risk Management Issues in Short Term Disability

Presentation from the SOA '10 Health Meeting, held on June 28–30, in Orlando, FL.

PartnerReviews: Systemic Risk – What Risk?

Why legislate for systemic risk in an industry that apparently has none? Patrick Thiele calls for intelligent regulation informed by the unique economics of the reinsurance industry.

NAIC Staff: Life RBC Levels Improve

Fewer than 3% of life insurers faced regulatory action in 2009 as a result of low risk-based capital levels.

The percentage of life insurers with RBC levels triggering regulatory action fell to 2.32% in 2009, from 2.83% in 2008, staffers at the National Association of Insurance Commissioners, Kansas City, say in a new report.

Implementation and Challenges of the New PRC GAAP for Life Insurance Industry in China Seminar

The Society of Actuaries has posted presentations from Implementation and Challenges of the New PRC GAAP for Life Insurance Industry in China Seminar held on May 28, 2010 in Beijing.

Report on the possible impact of the likely Solvency II QIS5 Standard Formula on the European life market

The European Commission's draft technical specification for the fifth Solvency II Quantitative Impact Study (QIS5) indicates how the standard formula is likely to be set for QIS5. In order to determine how the new rules will affect solvency positions under the standard formula for Europe's life insurance market, Milliman analyzed the potential impact of QIS5 in several European markets: France, Ireland, Italy, the United Kingdom, Poland, Romania, and Slovakia.

IAIS: Insurers Are Not Banks

"Widespread distribution of financial products that contain a minimum guarantee” could increase the risk of insurers crashing the financial system, according to the International Association of Insurance Supervisors.

Enterprise Risk Management (ERM) Practice as Applied to Health Insurers, Self-Insured Plans, and Health Finance Professionals

The SOA Health Section is pleased to make available a research report that describes the current state of Enterprise Risk Management practices for health organizations. The report was prepared by Max Rudolph of Rudolph Financial Consulting, LLC.

Enterprise Risk Management (ERM) for Small Insurers—An Evolving Concept

Article from the November 2009 issue of Small Talk, the newsletter of the SOA's Smaller Insurance Company Section.

Actuaries Back Systemic Risk Oversight

As an overhaul of financial services regulation is debated in Washington, the American Academy of Actuaries is throwing its support behind creation of a federal systemic risk regulator for the entire financial services sector.

Establishing a Pro-active Risk Management Culture

Swiss Re outlines its recommendations for risk management in relation to each of the main elements of the Solvency II framework directive: risk and capital modelling, governance as well as disclosure and transparency.

Risk Management Practice in Insurance Companies and Banks for Variable Annuities

Presentation from the SOA 2010 Life & Annuity Symposium, May 17-18, 2010.

What Are The Key Risks Facing The Insurance Sector?

Highlights some of the key insurance risks from these reports and outline what steps you can take to mitigate the risks.

Risk Management At Life Insurers: Dynamically Managing Economic Cycles

From the January 2010 edition of the Americas Insurance Digest features PricewaterhouseCooper's insights on issues of vital importance to the insurance industry.

Life & Longevity Markets Association

The LLMA has been established as a not-for-profit venture in order to promote a liquid traded market in longevity and mortality-related risk.

The LLMA’s founder members are: AXA, Deutsche Bank,
J.P. Morgan, Legal & General, Pension Corporation,
Prudential, RBS and Swiss Re.

The Global Risks Report 2010

Fundamentally, there is no new story to tell about the bewildering array of inter-related risks facing our world. What is new – and troubling – is that the linkages between them have reached unprecedented levels of intensity.

Consistent Performance Measurement: Aligning Risk, Value and Capital Management

Insurers know well that using a consistent approach to managing and measuring diverse risk portfolios is an ERM essential that can help them make informed decisions about pricing, product strategy, capital budgeting and linking pay to performance. And yet most insurers use any number of measurements to gauge financial results across varied businesses.As part of Towers Perrin's ongoing series on embedding ERM in insurance, this new article sheds light on a consistent analytical framework that can be applied to an insurer's internal measurement and management system to align value assessment, risk and capital management.

Update: Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management

In April 2009, Guy Carpenter's Financial Intelligence Team published a briefing entitled Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness. That briefing included definitions of Risk Profile, Appetite and Tolerance and how these concepts fit into an Enterprise Risk Management (ERM) framework. It also presented the results of their initial Risk Tolerance Benchmarking study, which summarized the information publicly disclosed in this area.

Systemic Risk Bill Includes Insurers

Drafters of the new systemic risk bill proposal have applied roughly the same to rules to insurers that they apply to other financial services companies.

The Financial Crisis and Lessons for Insurers

The CAS, CIA, and the SOA's Joint Risk Management Section Research Team and the SOA's Committee on Finance Research are pleased to make available a research report that examines the subprime mortgage crises and related financial consequences from the perspective of the insurance industry. The report was authored by a team led by Shaun Wang of Georgia State University.

Getting Up To Speed: ERM In The Life Insurance Industry

Article in the October/November issues of The Actuary magazine.

Insurance Studies Institute Partners with Wharton School

The Insurance Studies Institute (ISI) and Professor Kent Smetters of The Wharton School of the University of Pennsylvania will work together on Designing a Systemic Risk Regulator, a research project to study the need and optimal design of a systemic risk regulator in light of the recent financial crisis.

Globalisation of Collective Redress | Swiss Re

Swiss Re’s new Focus Report: “The Globalisation of Collective Redress: Consequences for the Insurance Industry” provides an update on the global spread of collective actions and assesses both the risks and the opportunities that this development carries for insurers.

The role of indices in transferring insurance risks to the capital markets | Swiss Re

According to Swiss Re’s new sigma study, “The role of indices in transferring insurance risks to the capital markets”, both (re)insurers and investors benefit when clearly defined and regularly updated indices are used in insurance-linked securities (ILS) and other risk-transfer instruments. These instruments provide (re)insurers with an additional capital management tool, while investors gain access to an attractive, diversifying asset class.

Pandemic Declaration Spurs Need for Risk Management

The World Health Organization (WHO) has declared the H1N1 flu a pandemic.

This marks the first global flu epidemic in 41 years. In response to this development, members from the Society of Actuaries are advising businesses to revisit and/or create business continuity and preparedness plans.

Insurance-Linked Securities Reaching Critical Mass

Despite the financial crisis, the ILS market has more than held its own and appears poised for further growth, says Towers-Perrin.

Catastrophe Risk Management Options for the Smaller Insurance Company

Every life insurer is exposed to catastrophe risk. The largest carriers, of course, tend to have the capital on hand to absorb substantial losses and can rely on economies of scale to make reinsurance more affordable. Smaller life insurers, on the other hand, do not always have the same risk management tools available at a proportionate cost. Thus, they may feel forced to retain risks which, if realized, could imperil solvency. Fortunately, there are products on the market that make cover attainable for smaller life insurers.

Insurance-Linked Securities Reaching Critical Mass

Despite the financial crisis, the ILS market has more than held its own and appears poised for further growth. This Towers-Perrin article appears in the 2009/1 issue of Emphasis.

Risk Communication - The Illusion of Certainty

How do we picture probability? How can a patient deciding on a course of drugs be expected to translate “a 7% chance of dying” or “a 20% likelihood of negative side-effects” into a meaningful image?

Insurance Banana Skins 2009

PricewaterhouseCoopers shares research conducted by the Centre for the Study of Financial Innovation (CSFI). It questions insurers on three areas: current risks, future trends, and their preparedness to respond to the risk environment. With 403 insurers and industry observers responding from 39 countries at a difficult time for financial services, they see significant change in how risks are perceived and prioritised.

ReFocus: Enterprise Risk Management for Life Insurers and Reinsurers

Presentation at ReFocus 2009.

Scenario Analysis In Insurance: Swiss Re Sigma

Insurers are increasingly using scenario analysis to evaluate multiple risks, but the industry could do more to fully exploit state-of-the-art approaches, according to Swiss Re’s new sigma study.

Building Smart Internal Models

A U.K. life insurer improved its risk and financial management capabilities with the help of more sophisticated models based on a replicating portfolio of its liabilities.

Virtual Roundtable: Online Risk

Managing the risks, liabilities and solutions associated with electronic processes and interactions related to conducting business over the Internet is a challenge for every insurance company today. The exposure to online risks is pervasive, potentially affecting most aspects of an insurance organization, including assets, operations, finances, legal, regulatory compliance and even reputation. Exactly how serious is the threat of cyber attacks on insurance operations, and what currently are the most dangerous cyber threats to carriers' systems?

Life in the Future

Life cover is the cornerstone of the protection industry. But with premium rates having fallen so low, what lies ahead for this market: expansion or stagnation?

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