The aim of this seminar is to get an understanding of how product valuation and the corresponding risk management in life insurance companies works and to be able to apply the theory in the concrete context. On day one we will focus on the Markov model and its application to real world problems. The aim of this first day is to acquire the necessary tools (both theoretically and practically) to apply them on day two to more complex situations. It is worth pointing out, that besides being able to understand the underlying mathematics, considerable focus is placed on the concrete design and modelling of certain products’ aspects. Hence, from this point of view, the Markov model can be considered as a very strong modelling framework, which helps actuaries to get results in a quicker and less error prone fashion.
During day two we will focus on some complex insurance products such as Long Term Care and Variable Annuities and will show how mathematical models can be used to value and risk manage these products.
More specifically, the aim of this seminary is to:
• Understand the general concept of how modelling and controlling is performed using Markov Models
• Be able to implement Markov Chain Models in a structured way in a productive environment
• Understand the modelling and the risks intrinsic in Long Term Care Insurance
• Basic understanding of Variable Annuities and the respective valuation approaches
• Understand the modelling and the corresponding risk of Policyholder Behaviour.
The seminar covers the following topics:
• Definition of Markov Process and Chapman-Kolmogorov equation
• Understand how products are modelled
• Understand how products are valued and how the controlling is performed
• Understand how to concretely model product; how to model policyholder behaviour
• Understand the risk intrinisc to (adverse) policyholder behaviour and how to quantify it
The key focus of the seminar is to put theory into practise. This means that the seminar is split into two sections, one where theory and concepts are presented, followed by a concrete application and implementation. The former section will be based on my book “Stochastic Models in Life Insurance” (published in the EAA Series of Springer). In the practical part we will use our own laptops either by means of excel or python (we expect that python 2.7.8 [freeware] from www.python.org is installed on the participant's laptop). Solutions for the exercises for the practical part will be made available.
All participants receive a copy of the book “Stochastic Models in Life Insurance”.