UPR and Estimation of URR

1. Unearned Premium Reserve (UPR) is that portion of premium which is not earned by the insurer. The insurer has to maintain a premium reserve for this unearned period to meet their ongoing obligation to the policy holder. It is normal for insurer to use the 1/24th method for Non-Marine classes and for Marine, it is a norm to provide on basis of 25% of total net (of reinsurance) premium as unearned as at the end of each financial year. 

2.  Unexpired risk reserve (URR) works somewhat similarly like UPR. However for URR an actuary will be called to assess the development of losses with reference to time factor. The insurer needs to maintain an extra level of reserve (usually in the form of PROVISION FOR PREMIUM DEFICIENCY) if the appointed actuary deemed that the specified ‘unearned premium reserve’ level is not sufficient to meet its ongoing or future obligations.

Reinsurance Basics - Part 3 - Quota Share and Unearned Revenue

1. As a financing mechanism, a quota share treaty is very important to provide surplus relief

2. The more surplus (assets minus liabilities) a company has to “back up” its premium writings, the more financially stable that company will be.

3.Regulators focus on insurer solvency and apply what is known as “statutory accounting principles” which are very conservative. 

Reinsurance Basics - Part 2 - Pro Rata Quota/Surplus Share and XOL Treaties

1. As described earlier, pro rata, also called “proportional,” is a form of reinsurance in which the reinsurer shares a proportional part of the original losses and premiums of the ceding company. Pro rata forms are often used in property insurance, since this form provides catastrophic protection in addition to individual risk capacity

2. There are two distinct types of pro rata reinsurance - quota share and surplus share.

Reinsurance Basics - Part 1 - Fac/Treaty and Pro Rata/XOL

The purpose of reinsurance is to spread risk. This post provides a simple overview for those new to the industry.

Extending Falling Mortality Rates

1. It is a natural law that the historic longevity trend will continue into the future. 

2. Every stochastic mortality forecast model extrapolates the observed evolution of falling mortality rates.

3. What does it take to continue this trend? 

Understanding and Managing Anti Selection

One of the greatest threats facing life insurers is anti-selection (also called adverse selection or negative selection). Anti-selection occurs when an underwriting information deficit allows a higher-risk group (such as smokers) to purchase life or health insurance at the same price a lower-risk group (non-smokers)

Surety Insurance - Pricing, Reserving and Frameworks

1. Surety is a promise by a surety (the obligor or insurer) to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract.

2. They’re mistaken for insurance because they often involve payment when things don’t go as planned.

Automating the Supply Chain with Robotics

1. Process robotics works by automating the entire supply chain from end to end—not just individual tasks—enabling all different sections to be managed in tandem. 

2. The adoption of software robotics allows professionals to focus less time on day-to-day processes and, instead, provides more time to drive value for the entire business.

Strategic/Smart Beta in Investing

1. beta is a measure of a security's or portfolio's volatility in comparison to the stock market as a whole.

2. "beta" is also used as shorthand to describe getting broad stock-market exposure, typically through investments that often track the S&P 500 and other major indexes.

3. Smart beta strategies occupy a middle ground between passive and active investment approaches. Smart beta funds are similar to passive index funds in their use of a systematic, rules-based framework to create portfolios. Smart beta strategies deviate from traditional index funds by emphasizing factors that may enhance returns relative to capitalization-weighted indexes.

Passive Investing for Asset Management

1. A passive fund is composed to track its benchmark (for example a large-cap fund might be benchmarked against the S&P 500 index) without making any deviations or analytical bets. 

2. mutual fund industry seems to have realized that they face an existential threat not just to their growth but to their very existence, and many of them are responding by cutting fees and offering passive investment choices.

Active Fund Managers In a Negative market

1. Index funds will tend to underperform active managers in strongly positive and strongly negative markets.

2. The argument is based on the premise that active managers can position their portfolios to benefit from the prevailing conditions.

[Misconduct] FCA Probes Risk of Fund Manager Failures

1. In April The Financial Conduct Authority investigated how the financial system would cope in the event of a fund manager failure. 

2. The regulator is concerned that a 'disorderly failure' of investment managers and/or their portfolios could disrupt the financial system.

3. The regulator examined the design of investment products, probing investment managers' oversight of investors' portfolio oversight and questioning some of the motives behind the launch of new funds.

Correlations and Diversification Benefit

1. When a company writes risks across a number of classes, it seems reasonable to anticipate that the values assessed to give a 75% likelihood of sufficiency for each class

2. The reduction from this sum to arrive at the amount assessed to have a 75% chance of covering the company’s total Insurance Liabilities is called the diversification benefit.

3.  Correlation, between how the amount ultimately paid compares to the central estimate for different classes can arise in two categories (Direct and Indirect correlation)

Selecting Tail Factors for Actuarial Valuation

1. The selection of the loss development tail factor is extremely important because it affects estimates for all accident years.

2. A minor adjustment to the tail factor can have a significant impact on the unpaid claim liability.

3. We will demonstrate the selection of tail factors that consider three key variables: retention, location, and industry.

4. We will use examples of triangles at several different retentions for countrywide losses and state-specific losses.

Understanding Trade Credit Insurance

1. In April 2017, The Actuary reported trade credit insurers paid £210m to businesses last year due to non-payment claims, the equivalent of over £4m a week.

Malaysia's 2017 FDI Outlook

1. Malaysia's economy is performing well in the region in terms of efficiency and business regulations despite modest GDP growth of 4.1 percent in 2016 (below the ASEAN average of 4.5 percent).

2. Malaysia is a net recipient of FDI, which accounts for the majority of inflows into the economy. Inward FDI is projected to have grown by 40 percent year-on-year in 2016 to reach MYR 50 billion, with the 2015 total (MYR 36 billion) having been surpassed by the end of September. Manufacturing accounted for the majority (51.2 percent) of investment, followed closely by services (47 percent). Primary industries received the final 1.8 percent.

Hedge Funds - Part 2 - Process and Policies Due Diligence

1. Hedge funds trade securities in volumes that are a multiple of their traditional asset management counterparts. In addition, hedge funds have less regulatory oversight than traditional asset managers.

2. A sound operational due diligence (“ODD”) process can serve as an effective mechanism to mitigate the risk of investing in hedge fund frauds. 

3. Here are some detailed insights and recommendations pertaining to Due Diligence practices on hedge fund managers focusing on their policies and process.

Hedge Funds - Part 1 - Basic Risks and Due Diligence

1. Hedge funds are unregulated investment pools. They generally are more nimble and dynamic in their trading strategies than other investment funds.

2. Hedge funds are successful only if they make money in both up and down markets. To do this, they employ some creative and risky investment strategies—selling short, using leverage, trading put and call options, trading futures and investing in emerging markets. 

3. Here is some information about hedge funds and their risks CPAs can use to evaluate the suitability of this investment for their clients.

Solar Energy Global Demand and Value in the Supply Chain

1.  Malaysia is ranked number three in the world in the solar manufacturing industry with China at number one and Taiwan in second place.

2. In 2015, 48 solar projects had been implemented with total investments of RM28 billion to produce solar wafers, cells, modules and system components subsequently in 2016 Mida attracted seven solar manufacturing projects and 83 renewable energy projects in the solar industry worth RM1.77 billion and RM650 million.

Asset Liability Mismatch and Management

ASSET LIABILITY MISMATCH IN BANKS SYSTEM

1. Mismatch occurs when the tenure of maturing loans do not match the tenure of the sources of funds on the liabilities side. The liabilities side of the balance sheet of a bank includes sources of funds and for a bank one of the main sources of funds are the deposits.

2. From 2010 onwards with the economy recovered, disbursements of infrastructure loans were sanctioned by banks to projects such as power and roads had duration between 10 and 15 years. However, deposit tenures were getting shorter and this huge disparity in tenures between assets and liabilities created the instability in banks’ balance sheets.

3. Countries pegging interest on deposits to market-determined rates has resulted in a fall in the rates and deposits are now of shorter tenure. With the de-regulation of interest rates, most depositors are not looking beyond one or two years. 

4. Constant monitoring and periodic evaluation of its investment portfolio is important for a bank as many of its short-term liabilities are met through this resource.