Presentation by Noel Harewood - Actuary.com

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Stochastic mortality projections help the reinsurer better evaluate the risk profile of the stop-loss treaty Projecting the COLI cash flows over 1,000 stochastically generated Monte Carlo mortality scenarios produces the following range of returns for various quota-share percentages: NPV Reinsurance CFs <strong>by</strong> Quota Share % 1000 Trial Projection, Expected Mortality = 80% 83 GAM NPV Reinsurance CFs 2,000,000 - (2,000,000) (4,000,000) (6,000,000) Best Est Min 0.5% 1.0% 2.5% 5.0% 10.0% Percentile 30% 20% 10% 50.0% 90.0% 95.0% 97.5% 99.0% 99.5% Max more . . . 22
Stochastic mortality projections help the reinsurer better evaluate the risk profile of the stop-loss treaty (cont.) The best-estimate projection looks more like a best case scenario. The reinsurer can now not only evaluate whether the average returns are sufficient, but can also evaluate the treaty’s risk profile. 23
Page 1 and 2: Stochastic Modeling Workshop — Mo
Page 3 and 4: Overview
Page 5 and 6: Stochastic mortality techniques can
Page 7 and 8: Monte Carlo simulation is a common
Page 9 and 10: Stochastic mortality rates can also
Page 11 and 12: There are several practical applica
Page 13 and 14: Case Study 1: Senior Settlements
Page 15 and 16: We have analyzed a hypothetical sen
Page 17 and 18: Case Study 2: COLI Reinsurance
Page 19 and 20: Case Study 2: COLI Reinsurance (con
Page 21: Deterministic mortality projections
Page 25 and 26: Modifying the expected mortality as
Page 27 and 28: Case Study 3: Economic Capital for
Page 29 and 30: Projection of stochastic mortality
Page 31 and 32: Effect of a Mortality Shock on Capi
Page 33: Closing Thoughts Stochastic modeli

Presentation by Noel Harewood - Actuary.com

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