Risk Management, Other Factors Cited In Gulf Oil Disaster | PropertyCasualty360

Risk Management, Other Factors Cited In Gulf Oil Disaster | PropertyCasualty360

Towers Watson: U.S. Economy A Factor In Decreased Tort Costs | PropertyCasualty360

Towers Watson: U.S. Economy A Factor In Decreased Tort Costs | PropertyCasualty360

RMS Cat Model Revision May Cause Homeowners Rate Shift | PropertyCasualty360

RMS Cat Model Revision May Cause Homeowners Rate Shift | PropertyCasualty360

Worldwide Insured Cat Losses Nearly Double In 2010 | PropertyCasualty360

Worldwide Insured Cat Losses Nearly Double In 2010 | PropertyCasualty360

Outlook Negative For Commercial Lines, Says A.M. Best | PropertyCasualty360

Outlook Negative For Commercial Lines, Says A.M. Best | PropertyCasualty360

New Model Now Available to Actuaries for Testing Loss Reserving Methods and Models

The Casualty Actuarial Society's Loss Simulation Model Working Party has just completed its charge. Their open source Loss Simulation Model (both run-time versions and source code) and a paper summarizing the working party's accomplishments, “Modeling Loss Emergence and Settlement Processes” was recently completed and posted on the CAS web site at http://www.casact.org/research/lsmwp/. The paper fully documents the model and tests completed to date, provides instructions for working with both the run-time and source code versions of the model, provides a bibliography for the benefit of those who will use the model to test loss reserving methods and models, and discusses future development and testing of the model.

Presentations on the Loss Simulation Model given at the 2010 Casualty Loss Reserve Seminar are also on the CAS web site, as well as help files for the model that include program instructions and instructions on how to customize this open source model.

A CAS Call Paper program was launched on October 20 entitled “Testing Loss Reserving Methods, Models, and Data Using the Loss Simulation Model.” Details are available at http://www.casact.org/research/. Participants will need to work with the Loss Simulation Model to develop enhancements to the model, perform additional testing, and apply the model to test alternative loss reserving methods and models.

Extreme Value Theory

Given the extreme natural catastrophe and extraordinary financial events of recent years, there has been renewed interest in a branch of statistics known as Extreme Value Theory. An introduction and additional references may be found on Wikipedia at http://en.wikipedia.org/wiki/Extreme_value_theory. I will be presenting a seminar on this subject at next week's 2010 Casualty Reserve Seminar. The slides my be downloaded at the Sites of Interest page on my website at http://www.rabsolutions.net/id5.html. Extreme value theory is useful for assessing the risk of low probability events that can have catastrophic consequences but for which we don't have credible data.