Downwards counterfactual analysis

Stress and scenario testing are important risk assessment tools.  They also provide useful ways to prepare in advance for adverse scenarios so that management doesn’t have to create everything from first principles when something similar occurs. But trying to imagine scenarios, particularly very severe scenarios, isn’t straightforward. We don’t have many examples of very extreme […]

The importance (or not?) of actuarial exams

Erik Wenzel posed a provocative question on his LinkedIn stream. I began my reply there, but the character limit foiled me. Erik asks: “Thought experiment– what if there were no more actuarial exams?” He gives a starting set of pros and cons, many of which are interesting. That, and the comments on his post, left […]

Move over cholera, here’s the Black Death

The Black Death, caused by the bacterium Yersinia pestis, wiped out 30 to 50 percent of Europe’s population between 1347 and 1351 Now, South Africa has been placed on high alert for a potential plague infection. Mortality rates are estimated anywhere between 30% and 100% without treatment. Many estimates are towards the top end of this […]

Collective nouns for cats

In my ASSA convention presentation on systemic risk last week, I took pains to highlight the difference between real systemic risk and mere catastrophic claim risk or even concentration risk. In this post I will cover these and other cats, the place of reinsurance including “feelings” and why this is hyper relevant for captives. To […]

Credit Life Aside: banning sale of credit life alongside lending?

Some markets have banned sale of insurance alongside lending Another way to deal with the problem of competition in credit life is to simply not permit the sale of insurance at the same time as the loan. This means that more providers will have an opportunity to make the sale since the lender doesn’t have […]

Credit Life regulations and reactions (2)

In part 1 I discussed the implications of basing premiums on initial balance or declining balance for profitability and the threat of substitute policies. In this post I want to discuss substitute policies again, talk about cover for self-employed persons and definitions of waiting periods. What is a substitute policy Substitute policies are one of […]

What is Systemic Risk?

Systemic risk is risk to the “system” in some way. In the financial services world, it is often defined in one of two ways: The risk of contagion, where failure of an entity leads to distress or failures of others [micro prudential] The risk of an event that can trigger serious consequences for the real economy. […]