Research interests include insurance pricing, risk pricing,
capital and risk allocation, insurance statistics, data
visualization, insurance economics, actuarial science,
impact of technology on insurance, communicating risk.
Pricing Insurance Risk
Pricing insurance risk is a book I am writing with
It describes the last mile of underwriting.
Actuaries and accountants have determined the cost of goods sold:
the expected loss cost, direct and allocated expenses. In fact
they have gone beyond simple point estimates and have provided a
full range of potential outcomes, understood within the context
of all the other risks written by the company. All
that remains is to set a manual rate or quote a price or to accept
or reject an offered market price (firm order). The book will
describe the actuarial, risk theory, finance and accouning
approaches to pricing insurance risk.
Bounds on Consistent Prices
We introduce an straightforward algorithm
to determine a range of prices consistent with complete information about
the risk but only partial information about the pricing risk measure. In
many cases the algorithm produces bounds tight enough to be useful in
practice. We illustrate the theory by applying it to three important problems:
pricing for high limits relative to low limits, evaluating reinsurance programs,
and portfolio-level strategic decision making. We also show how the theory can
be used to test if prices for known risks are consistent with a single partially
specified risk measure.