Organised by the EAA - European Actuarial Academy GmbH in cooperation with the Institute of Actuaries in Belgium

As recently as the mid-1990s, most models used in financial analysis of insurance were deterministic. Based on sets of static parameters and assumptions, these models largely ignored random fluctuations that were likely to occur. Sensitivity analyses were performed but were generally limited to a fixed number of defined scenarios. This deterministic approach is rapidly being replaced by stochastic modeling that can better inform insurers on pricing, financial planning, and capital assessment strategies. Huge advancements in computing power have made it possible for actuaries and financial planners to better understand the increasingly complex risk profiles of insurers’ evolving product design.

This seminar is based on the book “Stochastic Modeling – Theory and Reality from an Actuarial Perspective” (copyright © 2010 International Actuarial Association) which intends to provide actuaries with a comprehensive resource that details current stochastic methods, provides background on the stochastic technique as well as their advantages and disadvantages.

The seminar is suited for actuaries, actuarial students and other professionals involved and interested in actuarial modeling in life and non-life.

Attendees are encouraged to bring a laptop computer with Microsoft Excel installed.  

The seminar will cover a wide range of topics presented in the book “Stochastic Modeling – Theory and Reality from an Actuarial Perspective”. The first day of the seminar will focus on risk management and actuarial modeling issues. The day will start with an introduction to stochastic modeling, including a practical discussion of when stochastic models are appropriate or necessary and when they may not be. The day continues with a case study designed to be of interest to actuaries in all practice areas.

The second day (and the morning of the third day) of the seminar will be split into two separate sessions, one that will focus on life actuarial issues and the other will focus on non-life actuarial issues. In the life session, the lecturers will present stochastic models for interest rates, mortality, and morbidity, among other risk factors, and will demonstrate how these models can be developed, calibrated, implemented and reviewed. This will also involve detailed case studies illustrating the use of stochastic models in life insurance business.

In the non-life sessions, the lecturers will present an overview of stochastic models, including triangle based, frequency / severity, catastrophe financial and dynamic risk models, and will demonstrate how these models can be developed, calibrated, implemented and reviewed. Building on this overview, the lecturers will then take you through a deeper look at the Mack and ODP Bootstrap models and discuss the calculation of one-year reserving risk. As with the life session, the early sessions will focus on the technical aspects of stochastic models and the later sessions will be a case study format intended to demonstrate the practical application of these models.

The third day will continue the separate life and non-life sessions in the first session. In the second session, we will again have a joint session to discuss a concluding case study.

All participants will receive a copy of the book “Stochastic Modeling – Theory and Reality from an Actuarial Perspective” which is presented by the International Actuarial Association (IAA) in collaboration with Milliman. A guide for practitioners interested in understanding this important emerging field, this book 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.

Eileen Burns
Eileen is a consulting actuary in the Seattle life insurance consulting practice of Milliman. As a consultant at Milliman, Eileen led the industry’s first variable annuity lapse study using predictive modeling and will be leading similar studies on variable annuity partial withdrawals as well as fixed annuity lapses. She has also completed a variety of modeling projects covering fixed and indexed annuity valuations, projections, and merger and acquisition projects. Prior to Milliman, Eileen accumulated extensive quantitative modeling experience through several years at a large international insurer and through a master’s degree in quantitative ecology from the University of Washington.

Jeff Courchene
Jeff’s area of expertise is international property and casualty insurance: particularly reserving, reinsurance analysis, mergers and acquisitions (M&A) activity, advanced pricing techniques, and dynamic financial modeling. Jeff has extensive experience in matters related to both personal and commercial lines of business in the United States, United Kingdom, Middle East, and continental Europe. His experience includes leading the review of reserves of various European (re)insurers as part of due diligence assignments, leading dynamic financial modeling projects both in the United States and Europe, and contributing to Milliman internal Solvency II working party as an author and presenter.  Jeff is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. 

Andrew H. Dalton
Andrew is a Principal and Consulting Actuary in Milliman’s Philadelphia office and a primary author contributing to Life sections of the book “Stochastic Modeling – Theory and Reality from an Actuarial Perspective”. Andrew’s professional experience includes work on actuarial appraisals for mergers and acquisitions, asset and liability analysis, cash flow testing, and economic capital for life and health companies. Andrew is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He holds a Masters Degree in Business Administration, concentrating in Finance and Statistics, from the Leonard N. Stern School of Business of New York University.

Grzegorz Darkiewicz-Moniuszko
Grzegorz is a consultant with the Warsaw office of Milliman. His expertise includes risk management and Solvency II, market consistent embedded value, asset-liability management, replicating portfolios, economic scenarios, and interest rate modeling.  Grzegorz has an MSc in Mathematics from the University of Poland, Warsaw, and a PhD in Applied Economics from the Catholic University of Leuven, Belgium. 

Kurt Lambrechts
Kurt is a consultant with the Brussels office of Milliman. His expertise includes  asset-liability management, replicating portfolios, ECAP and  IFRS. 
His current activities include model validation, MCEV reporting and supporting insurance entities with setting up their Solvency II ORSA process and pillar 3 reporting. Kurt has an MSc in Actuarial Sciences from the Catholic University of Leuven, Belgium.

Mark Shapland
Mark is a Consulting Actuary in Milliman’s Dubai office and a primary author contributing to Non-Life sections of the book. Mark’s area of expertise is non-life insurance, particularly pricing (personal and commercial lines), reserving (including reserve variability and asbestos liabilities), individual risk and association-type dividend plans and premium rates for large accounts, reinsurance, data management, and dynamic risk modeling. Mark has international experience, having worked in Europe for four years, as well as shorter assignments in many other countries. He also has extensive experience in the development of actuarial software tools and is the lead actuary for the Milliman Reserve Variability software development team. Mark is a Fellow of the Casualty Actuarial Society, an Associate of the Society of Actuaries and a Member of the American Academy of Actuaries.

David Wang
David is a principal and consulting actuary of Milliman. David has worked extensively on annuity projects in U.S., Europe, and Asia that include pricing, capital assessment, and financial reporting. He is also the coordinator of the quarterly variable annuity market update report. In addition, David has worked on other projects that involve stochastic and nested stochastic modeling, MCEV reporting, and Solvency II reporting. He was a key contributing author to case studies in the textbook, Stochastic Modeling: Theory and Reality from an Actuarial Perspective.  David is also a key member of the Milliman team that works on applying predictive analytics to the life and annuity industry. He holds a degree of Master in Financial Engineering from HAAS Scholl of Business, University of California at Berkeley. He possesses the knowledge and skill to consult on dynamic hedging, derivative valuation, and stochastic modeling.