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IAA Risk Book
The Risk Book, which currently consists of 20 chapters, provides high-quality reference materials to help readers better understand how actuaries contribute to the assessment and management of risks and inherently uncertain future outcomes often in the financial services (insurance, investment, pension etc.) but also more broadly.
The Risk Book is written to be accessible to a wide range of readers, many of whom may not be actuaries or experts in the areas discussed but may be decision-makers in those areas. Consequently, the Risk Book should provide insight into the ideas and concepts behind actuarial topics and concepts and is therefore focused on being descriptive rather than being formal and mathematically precise.
The Risk Book is intended to be a dynamic and evolving resource, updated over time, reflecting new areas where actuarial expertise can add value, experience and advances, and topics of current interest and importance.
All chapters from the IAA Risk Book are available free of charge.
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Risk Adjustments for Insurance Contracts under IFRS 17
In the world of insurance, based on the business of managing uncertainty and risk, adjustments for risk have been an integral part since the earliest days of accounting for such business. Practices have emerged over time where often such risk adjustments have been implicit, and included in a conservative estimate of the outcome from insurance of the risk. In many parts of the world, specific risk margins have become well established to enable a more realistic interpretation of the economic and financial impact of risk in the insurance business. The specific recognition of the financial implications of insurance risk has helped increase stakeholder confidence in the business. Developments in accounting for insurance, both for general purpose accounting and for regulatory purposes, show specific recognition of, and accounting for, risk.
The measurement model within the International Financial Reporting Standard for Insurance Contracts (IFRS 17) was designed to include risk in a key constituent in financial reporting. While a substantial amount of actuarial literature is available for various applications of risk margins, much of that material is not directly applicable to the specific needs of IFRS 17. There is a need to provide such a focused source of technical education material as IFRS 17 goes into effect. Many of the relevant risk adjustment methods for IFRS 17 transcend national borders and are relevant in any country. For this reason, this monograph has not focused on practice in a specific country. However, parameters and assumptions have been illustrated more generally rather than specific to regions and countries, and case studies have been included as practical illustrations of the various methods in use. Readers can use the educational material to help them develop their own parameters and assumptions based on their current and historical experience and their specific economic environment.
This monograph is sponsored by the International Actuarial Association (IAA). The author team is Deloitte Consulting LLP.
This book is available for purchase, in electronic or printed format, via the IAA Website.
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Discount Rates in Financial Reporting
The time value of money is significant to economics and in turn to the current value of projected cash flows. Recent decades have seen a growth of knowledge and available information in the areas of finance and capital markets. There still remains a need for more widespread understanding of the important aspects, from a conceptual perspective and the practical techniques relating to the discounting process in actuarial practice. The primary areas of application include financial reporting for insurance contracts and the financial reporting of pension/employee benefit plans. The objective of this monograph is to help fill this void.
Many of the methods transcend national borders and are relevant in any country. For this reason, we have not focused on practice in a specific country. However, parameters and assumptions have been illustrated for specific regions and countries, and case studies have been included as practical illustrations of the various methods in use. Readers can develop their own parameters and assumptions based on the current and historical experience of each one’s specific economic environment.
In many cases, technical formulas used in this document were obtained from other publications, as noted in the References section at the end. Additional information should be obtained from the source documents. We are not promoting one method or technique over any other, and other techniques are possible. Our goal is to provide commonly used or developing methods in financial reporting. To that end, this monograph covers the following five major parts:
General methodology
Current applications, including economic scenarios, life, non-life and pension examples, and country-or region specific issues
Recommended procedures for the evaluation of results audits, peer reviews and communication
A number of case studies that show various applications of real situations
References and additional resources available to the reader
It is intended for practitioners in the insurance, pension and employee benefit sectors.
This monograph is sponsored by the International Actuarial Association (IAA). The author team is Milliman, Inc. (Milliman).
This book is available for purchase, in electronic or printed format, via the IAA Website.
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Stochastic Modeling
A guide for practitioners interested in understanding this important emerging field, Stochastic Modeling - Theory and Reality from an Actuarial Perspective presents the mathematical and statistical framework necessary to develop stochastic models in any setting (insurance or otherwise). Sufficient mathematical detail is presented but no advanced background in mathematics or statistics is required.
You will find:
Techniques – such as Monte Carlo simulation and lattice models – commonly used in various applications of stochastic modeling.
Risk metrics that have applications in stochastic modeling, such as Value at Risk (VaR) and Conditional Tail Expectation (CTE).
Stochastic scenario generation for key risk factors affecting life insurance products, including interest rates, credit defaults, exchange rates, mortality and lapses.
Practical considerations of stochastic modeling, including model calibration and validation.
Model review and communication of results, of interest to senior practitioners already familiar with the fundamentals of stochastic modeling.
Case studies of life and non-life insurance companies, covering a range of topics relevant to capital and surplus modeling of life and non-life insurance companies, including Economic Capital calculations, stochastic reserve and capital calculations, embedded value analyses, and stochastic product pricing and risk management. Taken together, these case studies cover most of the widely-used insurance applications of stochastic modeling to date, and provide an illustrative framework from which future applications can be developed.
This book is available for purchase, in electronic or printed format, via the IAA Website.
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