Actuarial Techniques in Property-Casualty Insurance
PROF. GIAN PAOLO CLEMENTE
COURSE AIMS
The course is aimed at supplying the rigorous and organized study of the most
important decision problems regarding property-casualty insurance, both in terms
of defining rates (with particular reference to auto liability insurance) and the
appropriate valuation of the premium reserves and loss reserves.
The following topics will be tackled: the main types of property-casualty
insurance; the determination of the equitable premiums; the personalisation of the
premium; the determination of rate profiles, with particular reference to the Filippi
Commission Method; premium reserves and loss reserves; methods for
determining the value of the loss reserves (Chain-Ladder Paid, Chain-Ladder
Incurred, BF Paid and Incurred, Fisher-Lange and Cape Cod); and study of the
stochastic methods for valuing the variability of the estimate for the loss reserves,
both run-off (Mack formula and Bootstrapping) and one-year (Merz-Wuthrich
formula and Bootstrapping), the latter of which is linked to the estimation of the
reserve risk regarding the recent changes provided by Solvency II.
The course will mainly be taught through lectures on theory, with some classes
dedicated to exercises.
At the end of the course, the students should be able to determine the means for
defining and determining rate premiums, and for valuing loss reserves in
accordance with various deterministic and stochastic methods, with the consequent
estimation of volatility.
COURSE CONTENT
INSTRUCTIONAL OBJECTIVES THAT STUDENTS MUST MEET BEFORE TAKING THE COURSE
Before taking the course, the student should have an understanding of:
– the concepts of discrete and continuous random variables;
– the concepts of the probability function, density function and distribution
functions;
– the concepts of mean value, variance and asymmetry and methods for the
determination of moments;
– the principal distributions of discrete and continuous probabilities;
– the basic elements of the criteria for setting rates in property-casualty lines;
– the technical reserves for property-casualty lines;
– deterministic valuation methods for the loss reserves (Chain-Ladder Paid and
Fisher-Lange methods);
– equitable premium, pure premium and rate premium;
– the basic elements of reinsurance;
– the minimum capital requisites in effect for the European insurance market
(Solvency I).
INSTRUCTIONAL OBJECTIVES OF THE COURSE
– The types of property-casualty insurance coverage and the key statistics for
Italy's property-casualty market;
– Utility theory and its use in insurance;
– Indicators of technical and capital stability;
– Construction of rate premium for auto liability insurance;
– Construction of rate premium for other types of property-casualty insurance
(overview);
– Overview of credibility theory;
– Deterministic statistical-actuarial methods for valuing loss reserves;
– Stochastic methods for valuing loss reserves;
– The variability of the estimation of the run-off and one-year loss reserves and
comparisons between the various approaches used;
– Analysis of multiple case studies for studying the variability of the loss reserve;
– Reinsurance: an in-depth look at several aspects of reinsurance;
– Solvency II: the new criteria for valuing liabilities - best estimate and risk
margin;
– Solvency II: the estimation of property-casualty underwriting risk, with
particular reference to reserve risk (standard formula and internal model).
READING LIST
Instructional material will be distributed in class.
Reading materials for further study will be indicated during the course.
TEACHING METHOD
Lectures.
ASSESSMENT METHOD
Interview.
NOTES
Further information can be found on the lecturer's webpage at
http://docenti.unicatt.it/web/searchByName.do?language=ENG or on the Faculty notice
board.