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Global developments in the modelling and application of risk for life companies

Peter Larsen, Mike Callan and Michael Stumbles

The purpose of the paper is to assist readers to understand current global developments in modelling and application of life insurance risks.

Actuaries have been involved in the modelling of risk for life insurance companies for many years. Often, this has taken the form of completing stochastic modelling of insurance risk to assess economic capital requirements.

Many methods have been used ranging from applying simple factors to full simulation modelling of key assumptions.

With the increased focus on risk based frameworks in the shape of Solvency II in Europe and also in Australia with ICAAP requirements for conglomerates applying to wealth management subsidiaries, modelling techniques have moved on from traditional mean variance optimisation techniques.

In our presentation, we look at:

  • Some of the global developments in modelling of insurance risk
  • Interaction of insurance risks with other risks
  • Aggregation of risks and reducing run times
  • Some practical applications for insurance risk modelling
  • Some interesting ways to present insurance risk concepts to non technical audiences.

    Download a copy of the presentation here

About the presenters

Peter Larsen is a Principal at Deloitte with over 15 years of experience across superannuation, insurance and wealth management. Since joining Deloitte in 2008, Peter has been involved in a broad range of complex actuarial projects including valuation, modelling, capital, pricing and profitability. Prior to joining Deloitte, Peter worked for a large Australian life insurer in a number of finance/actuarial roles and has also spent over 10 years providing consulting and actuarial advice in all areas on superannuation and employee benefits.

Mike Callan is a UK qualified actuary (FIA) with over 20 years experience in financial services. He has worked in a number of European markets, notably Germany, Austria, Italy, Luxembourg and the UK and was responsible for setting up an actuarial department supporting life assurance companies located in the UK, Germany and Luxembourg.

Michael Stumbles is a Fellow of the Institute of Actuaries and has recently returned to Australia having spent the last two years working as Deloitte Switzerland's Solvency II Program Manager in Zurich where he led a number of multi-disciplinary transformational Solvency II and Swiss Solvency Test programs for key Swiss and European insurance and reinsurance clients. Such programs have included quantitative, risk management and disclosure aspects. He has a wide range of experience in life insurance and wealth management consulting in Europe and in Asia Pacific, including experience in the implementation of market consistent valuation techniques, capital allocation and stochastic asset-liability modelling. He has also worked with large Australian life insurers and pension providers to develop products addressing longevity risk issues for retirees. Upon returning to Australia Michael has been involved in a number of projects including M&A and the impacts of APRA's review of capital standards for general and life insurers.




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