Milliman has announced a new report summarizing the results of a recent survey of current practice in the modelling of dynamic policyholder behaviour(DPB) and management actions(MA) for life insurance business. Survey participants included major insurance companies across Europe, the US, and Japan.
“Realistic modelling of how management may react to future economic and other circumstances(“dynamic management actions”) is a key aspect of modern actuarial modelling,” says Ed Morgan, Milliman principal. “This new survey from Milliman shows that many life insurers need to develop their models much further in this area, if projected results are to be fully meaningful.”
DPB and MA are becoming increasingly important aspects of modelling as more focus is placed on stochastic calculations and the tails of distributions. In particular, Solvency II in Europe specifies requirements for both DPB and MA, so we expect significant work being required of companies in these areas, particularly as this should form a key component of a company’s risk management.
Market turmoil in recent years across various regions highlights the importance of working to understand and model how management may react to such scenarios. However, the survey results show that many companies are failing to model DPB for some key options. Modelling of MA is also underdeveloped in many cases, with some key actions not being modelled at all, or in an over-simplistic way which doesn’t appropriately reflect reality. DPB and MA predicted by models should be monitored against actual experience as it emerges, with models being refined over time, says Milliman.
|
