I’m listening to a legal “true crime” podcast. Guilty-as-anything defendant keeps complaining about this error, this oversight, this unfair ruling. But the thing is, none of those things really mattered. They didn’t materially contribute to the guilty verdict. The judge can say, when refusing an appeal, that those are “harmless errors” in that they did …
Author archives: David Kirk
Guidance for actuaries making decisions with Covid-19
Actuaries need to update estimates, contribute to the discussion on appropriate bonus levels and help make calls on new and existing products and pricing. There is usually more than enough uncertainty and we’ve developed a set of tools and heuristics and ways to go about this under normal conditions. What happens when the conditions are …
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Does Business Rescue count as default?
What does Business Rescue mean for credit risk, ratings and cross-default? Business Rescue precludes creditors from applying for liquidation of the business. This is the removal of an existing right of lenders: “a temporary moratorium on the rights of claimants against the company or in respect of property in its possession” From what I gather …
Capital implications of infrastructure assets for insurers under SAM
Infrastructure as an asset class is hardly a new idea. Retirement funds are attracted to the promise of higher turns, long-dated cash flows, and consistency with increasingly important ESG factors. Insurers, unlikely retirement funds, have to hold risk-based capital against the risks inherent in their investments. This makes it more difficult to underestimate the risks …
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Why gender at birth is not a coin toss
I love analogies. As analogies go, many things are well approximated by the “toss of a coin”. Gender at birth is not. And it’s not for two reasons, only one of which you can probably guess. The sex ratio at birth is not 1 boy to 1 girl. As of 2017, according to World Bank …
ERP and how expensive is the US market now?
The US market is expensive. Less expensive than it was a few days ago before the yield curve inverted and the S&P500 had several days of large losses, but expensive still. But how expensive is it really? The Cyclically Adjusted Price Earnings (CAPE) or Shiller PE ratio is 28.5. Although this is down from January …
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Voice authentication, spoofing and rates of change
“My voice is my password” and similar phrases have begun to be used for secure voice authentication for banks and health insurers and other critical services that require security and privacy. It’s likely that several of your own service providers will roll this out in the next couple of years. Progress, right? The problem is …
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Unbelievable Risk Discounts Rates
Setting discount rates is a crucial and subjective exercise. This is true for life insurance embedded values too. Many researchers are comfortable with a range for Equity Risk Premiums of between 3% and 5%. Many corporate finance practitioners use a range from 5% to 8% or even higher. My nearly eight-year-old blog post on mis-estimating …