ENTERPRISE RISK ANALYSIS AND MODELLING IN INSURANCE

SHE Level 5
SCQF Credit Points 15.00
ECTS Credit Points 7.50
Module Code MMN325364
Module Leader Derek Thrumble
School School of Computing, Engineering and Built Environment
Subject GCU London
Trimesters
  • A (September start)
  • B (January start)
  • C (May start)

Summary of Content

The aim of this module is to assist students in gaining knowledge and skill in measuring and modelling insurance risks. Although a range of topics from several modules of this programme will be covered, the main focus is the process of pricing general insurance risk (i.e., ratemaking) using actuarial techniques from an enterprise-wise (i.e., portfolio optimisation) perspective. The contents will also cover the measurement of insurance risk, simulation and analysis of results and reporting for efficient and effective decision making (e.g., capital charge and allocation). A core element of this module is the use of EXCEL spreadsheets to solve case-studies using real world data. This is used to encourage the development of analytical skills and serves as a useful practical exercise for those that may want to pursue a career in risk analysis and modelling in the insurance sector.

Syllabus

Syllabus -360 1. Introductory insurance statistics and key EXCEL operations 2. The mean variance framework 3. Statistical Distributions in Insurance and Fund Management 4. Pricing models for Non-Life underwriting risk 5. Pricing models for Life underwriting risk 6. Pricing models for Health underwriting risk 7. Credit Risk Models and Management 8. Modelling Market Risk 9. Loss reserve modelling (Life and non-life) -360 10. Insurance Econometric Models -360 11. Modelling catastrophe risk and Extreme Value Theorem 12. Value centric capital modelling and capital management strategies

Learning Outcomes

On successfull completion of the module the students should be able to:-1. Understand the pricing process of insurance risk [CW1, CW2]2. Understand pricing techniques - Burning Cost Analysis [CW1]3. Design frequency modelling: adjusting for claim count IBNR [CW1]4. Design severity modelling: adjusting for IBNER and other factors and selecting and calibrating a severity model [CW1]5. Understand capital consideration, design capital allocation and understand risk measures in pricing [CW1, CW2]6. Understand and apply experience rating for non-proportional reinsurance [CW1]7. Understand and design exposure rating for property insurance [CW1]8. Understand and design catastrophe risk modelling [CW2]9. Understand the theoretical perspective of pricing - credibility theory, generalised linear modelling, utility theory, Extreme Value Theory [CW1, CW2]10. Understand and structure the optimisation model for insurance portfolios [CW1, CW2]

Teaching / Learning Strategy

The learning and teaching strategy uses a blended approach of lectures, tutorials, labs and directed learning supported by GCU Learn. Lectures will be used to highlight the key issues in a specific topic and point the way towards relevant journal articles and other appropriate literature. Students are expected to prepare for following week's lectures on each topic by engaging in literature searches, undertaking relevant reading and where necessary, attempt computational questions. Every student will receive a comprehensive study guide in the form of a module handbook. The lectures will adopt a variety of teaching styles including seminar style contributions such as group discussions to enhance intellectual, critical and analytical skills. For more applied topics, students will be required to attempt relevant problem or scenario based questions prior to the lectures, providing the basis for deepening professional skills, knowledge and understanding. The lab sections will provide the medium for gaining practical skills through the use of spreadsheets to explore the lecture themes in more detail. Spreadsheet solutions and solutions to quantitative questions will be available on GCULearn. All students will be directed to further reading to support the theoretical and practical contents of the module.

Indicative Reading

Parodi, P. (2014) "Pricing in General Insurance", Chapman & Hall/CRC Press Klugman, S. A., Panjer, H. H. and Willmot, G. E. (2012) "Loss Models: From Data to Decisions", fourth edition, John Wiley & Sons, Inc. Morris, J. R. and Daley, J. P. (2017) "Introduction to Financial Models for Management and Planning", 2nd Edition, Chapman & Hall/CRC Finlay, S. (2012) "Credit Scoring, Response Modelling, and Insurance Rating: A Practical Guide to Forecasting Consumer Behaviour", second edition, Palgrave Macmillan Hindley, D. (2017) "Claims Reserving in General Insurance", Cambridge University Press Gray, R. J., and Pitts, S. M. (2012) "Risk Modelling in General Insurance: From Principles to Practice", Cambridge University Press Bf8lviken, E. (2014) "Computation and Modelling in Insurance and Finance: An Introduction, Cambridge University Press Wener G., Modlin C. et. al (2010) Basic Ratemaking, Fourth Edition, Casualty Actuarial Society.Friedland J., Dutil R, ans Lam E (2010), Estimating Unpaid Claims Using Basic Techniques, Version 3, Casualty Actuarial Society. Newspapers and Magazines: Insurance Journal at <https://www.insurancejournal.com/> Business Insurance at <https://www.businessinsurance.com/> Best's Review at <http://www.ambest.com/review> Newsweek Global at http://www.thedailybeast.com/ <javascript:__doLinkPostBack('','target~~URL||args~~http%3A%2F%2Fwww.thedailybeast.com%2F||type~~','');> Claims at http://www.claimsmag.com/ <javascript:__doLinkPostBack('','target~~URL||args~~http%3A%2F%2Fwww.claimsmag.com%2F||type~~','');> The Journal [official magazine of the Chartered Insurance Institute] Insurance Advocate at http://cms.nationalunderwriter.com/cms/ia/website <javascript:__doLinkPostBack('','target~~URL||args~~http%3A%2F%2Fcms.nationalunderwriter.com%2Fcms%2Fia%2Fwebsite||type~~','');> Risk Management at http://www.rmmag.com/ <javascript:__doLinkPostBack('','target~~URL||args~~http%3A%2F%2Fwww.rmmag.com%2F||type~~','');> Financial Times at www.ft.com <http://www.ft.com> The Wall Street Journal at www.wsj.com <http://www.wsj.com> Journals: British Actuarial Journal ASTIN Bulletin Geneva Papers on Risk and Insurance - Issues and Practice Journal of Risk and Insurance Asia-Pacific Journal of Risk and Insurance Risk Management and Insurance Review Journal of Risk and Financial Management North American Actuarial Journal Scandinavian Actuarial Journal Journal of Actuarial Practice Insurance: Mathematics and Economics International Journal of Forecasting Journal of Forecasting Internet sites: Geneva Association at www.genevaassociation.org <http://www.genevaassociation.org> Institute and Faculty of Actuaries at www.actuaries.org.uk <http://www.actuaries.org.uk> Society of Actuaries at www.soa.org <http://www.soa.org> Casualty Actuarial Society at www.casact.org <http://www.casact.org> European Insurance and Occupational Pensions Authority (EIOPA) at www.eiopa.europa.eu <http://www.eiopa.europa.eu> International Association of Insurance Supervisors (IAIS) at www.iaisweb.org Bank of England at www.bankofengland.co.uk <http://www.bankofengland.co.uk> ARTEMIS at www.artemis.bm <http://www.artemis.bm> Association of British Insurers (ABI) at www.abi.org.uk <http://www.abi.org.uk> Chartered Insurance Institute (CII) www.cii.co.uk <http://www.cii.co.uk> Insurance Information Institute at www.iii.org <http://www.iii.org> CRO Forum www.thecroforum.org <http://www.thecroforum.org> Database for Research: A M Best Willis Limited Energy Loss Database Thomson Reuters DataStream and EIKON Aon Benfield - Catastrophe Insight Insurance Intelligence Centre GlobalData Softwares: Python Remetrica SAS R

Transferrable Skills

This module will develop the following skills in a manner that encourages independent initiative and critical thinking: -360b7 Modelling building and risk measurement using EXCEL and Risk Software -360b7 Data gathering, analysis and interpretation b7 Theoretical explanation of computational results b7 Problem solving and critical thinking b7 Ability to work independently b7 Research skills in order to complete the courseworks As a part of the broader transferable skills students will be able to demonstrate: -360 1. Advanced knowledge in the subject area. 2. Advanced usage of computers and associated software as a learning tool to explore models, ideas and for problem solving.

Module Structure

Activity Total Hours
Seminars (FT) 12.00
Independent Learning (FT) 72.00
Assessment (FT) 40.00
Tutorials (FT) 2.00
Lectures (FT) 24.00

Assessment Methods

Component Duration Weighting Threshold Description
Course Work 02 n/a 60.00 45% 2,500 words analytical report on given exercise(s) or problem(s) [individual submission for both on-campus and distance learning students]
Course Work 01 n/a 40.00 45% 2,000 words report/briefing document solving scenario based computational problem(s) or exercise(s) using computer pakages (e.g, EXCEL) and Risk Modelling software [individual submission for both on-campus and distance learning students]