REX POOL PROJECT LOOKS AT POTENTIAL SOURCES OF BIAS IN HEALTH RISK ADJUSTMENT  

During the past few months, we have been featuring ideas and projects selected for funding by the REX pool in 2012. This month's selection is an idea to explore potential sources of bias in health risk adjustment for the small group and individual markets. Following up on this idea, the Health Section Research Committee has since issued a request for proposals in search of a researcher. The expected project deliverables include the production of a numeric model and accompanying paper. Using numeric examples, visual displays, models and formulas, the eventual report is intended to provide practical guidance on how to evaluate bias. Proposals are due by April 1.

NEW PAPER EXPLORES VALUE INVESTING/ENTERPRISE RISK MANAGEMENT: TWO SIDES OF THE SAME COIN

The paper examines the similarities between value investing and enterprise risk management (ERM) methods and describes the concepts shared between ERM and value investing. For example, both risk managers and value investors look at integrated risk analysis, seeking to understand aggregate risk across the entire entity. To accomplish its objectives, the paper uses existing publications and mosaic theory to develop its conclusions, using previously published material to make specific points. The report was authored by Max Rudolph of Rudolph Financial Consulting LLC and sponsored by the Committee on Knowledge Extension Research.

RESEARCH EXAMINES APPLICATION OF ACTUARIAL SCIENCE TO SYSTEMIC RISKS

This report, authored by Shaun Wang of Risk Lighthouse LLC examines the circumstances that lead to systemic risk and proposes a new definition of systemic risk: A systemic risk to a financial system is manifest when changes in conditions, internal and/or external, lead to major disruptions beyond the collective tolerance level of the participants in the system, thereby causing the participants to change behavior in a way that inhibits the ongoing functioning of the system. The report further identifies the need for innovative methods and approaches for measuring and managing systemic risk. It also proposes using an actuarial valuation method for assets and liabilities based on long-term intrinsic value that is more sustainable than market values at a point in time. The report was sponsored by the CAS-CIA-SOA Joint Risk Management Section.

UPDATE TO SEGMENTING THE MIDDLE MARKET: RETIREMENT RISKS & SOLUTIONS PHASE 1 REPORT

This update to the Segmenting the Middle Market: Retirement Risks & Solutions Phase 1 report uses 2010 data from the Federal Reserve Board's Survey on Consumer Finances (SCF). The original Phase 1 report used 2004 data.The report provides a segmentation scheme of the middle market that was developed to satisfy several key criteria.The total middle market is divided into two broad classes with demographic and financial data shown in accompanying tables: 1) Six "Middle Mass" Market Segments; and 2) "Six Middle Affluent" Market Segments. The update was authored by Noel Abkemeier of Milliman, Inc. and sponsored by the Committee on Post Retirement Needs and Risks.

NEW REPORT, "RECOGNIZING WHEN BLACK SWANS AREN'T" JUST RELEASED 

Read this new research report, sponsored by the Reinsurance and Joint Risk Management Sections and Committee on Life Insurance Research, to better recognize, assess and respond to emerging events. Authored by Guntram Werther of Temple University with the assistance of Thomas Herget, this paper provides a holistic framework for foreseeing large scale, large impact rare events (LSLIREs). The report covers, among other topics, the definition of a black swan vs. LSLIRE; why current recognition methods for these extreme events fail; potential solutions for better foreseeing emerging LSLIREs; and how to improve timing and recognition of the trigger points within an LSLIRE.

REPORT COMPLETE: COMPARATIVE FAILURE EXPERIENCES OF BANKS AND INSURERS  

Much has been written about the underlying causes and effects of the most recent financial crisis. The effects of this crisis on financial institutions have certainly differed in the United States, compared to Canada. A new study, sponsored by the Financial Reporting Section and Joint Risk Management Section Research Committee, and authored by Stephen Robb, Paul Della Penna, and Alicia Robb, examines what factors account for these differences; how the recent events differ from previous financial crises; and how their effects differ among the various types of financial institutions. The research uncovered limitations in the available data for the number of failures. The research also indicates that without good data, setting public policy or solving the problems that led to the financial crisis might be difficult.

DATA NEEDED FOR POST LEVEL TERM "SHOCK LAPSE" RESEARCH

The SOA has engaged RGA to perform research into level-premium term products, with a particular focus on the magnitude and impact of the "shock lapse" and mortality deterioration at the end of the level premium period. The SOA is in need of insurer data to make the research a success. This project will consist of two phases:

• Phase1 is a survey covering lapse and mortality assumptions for level period term products at the end of the level premium paying period. (Survey response deadline March 31)
• Phase 2 is an experience study of level term business as it transitions into the post-level period (Data submission deadline April 30).

For questions, please contact Tim Rozar at trozar@rgare.com or 636.736.7541.

WORK IN RESEARCH POSITIONS AT THE SOCIETY OF ACTUARIES

Research has always been an important function of the SOA. Did you know that there may be as many as 90 research projects and experience studies in progress at any point in time? Today, research is in more demand than ever. Principal-based reserving, the Affordable Care Act and the recent economic downturn's impact on the valuation of life and pension liabilities have put actuaries in the spotlight and have greatly increased the need of our members to substitute fact for opinion.

The SOA is committed to help our members meet their increasing demand for research. To accomplish this, the SOA will be increasing its research resources and now has three open positions for research actuaries. The first opening is an executive-level actuary to lead actuarial practice research activities, including the organizational strategy for research. The next position is an experience studies actuary to conduct and enhance industry wide experience studies. Finally, a modeling research actuary is needed to develop and complete research on a variety of important retirement and health care topics. These positions are exciting and unique in the actuarial community, in that they will be shaping actuarial research around the world. If you would like to be an integral part of the future of actuarial research, be sure to explore these new opportunities at the SOA.

ABSTRACTS DUE MAY 22 FOR ACTUARIAL RESEARCH CONFERENCE  

Submit a proposal to make a presentation at the July 1-Aug. 3 Actuarial Research Conference in Philadelphia. Research or education papers on any actuarial topic (traditional or nontraditional) are welcome. Specific subject areas include actuarial mathematics, health actuarial, financial mathematics, quantitative risk management, reinsurance, university actuarial education, professional actuarial education and insurance economics. In addition, actuarial issues in regulation, insurance company operations, corporate governance, public policy, international actuarial and insurance issues, financial reporting, pension plans, retirement, employee benefits, social insurance and public finance are also welcome. Abstracts (not exceeding two pages) for proposals can be submitted through May 22 via the Research Submission page or by mail to J. David Cummins.

PROPOSALS DUE APRIL 1--POTENTIAL SOURCES OF BIAS IN HEALTH RISK ADJUSTMENT 

The SOA seeks researchers to produce a paper and numeric model with practical guidance on how to evaluate bias, with numeric examples, visual displays, models and formulas. Proposals are due April 1.

REGISTER NOW FOR ACTUARIAL MODELING CONTROLS WEBCAST

Don't delay in registering for the April 30 webcast on actuarial modeling controls in a model-based valuation (MBV) world.This webcast will present the results of a study sponsored by the Financial Reporting Section, Committee on Life Insurance Research and Committee on Finance Research that summarizes the results of an online survey and follow-up discussions with survey respondents on the control systems U.S. and Canadian life insurance and annuity companies have currently implemented. The presenters evaluate the current state against the controls expected to be in place for PBA and other MBV approaches and offer insights for enhancing the current state to get to the necessary controls that will be needed within a MBV framework.