Insurers upgrade management actions models
Insurers are ignoring a fundamental part of their modelling processes, dynamic management actions, without which they are not getting a full picture of their risks and liabilities. Louie Woodall reports
Insurers’ internal models are like jigsaw puzzles. If there are pieces missing, the final picture doesn’t quite make sense. The rise of enterprise risk management (ERM) and risk-based regulatory regimes such as Solvency II have encouraged firms to fill in many of the larger gaps in their models. But some smaller ones remain.
One of the remaining gaps relates to the modelling of dynamic management actions (DMAs) to an appropriate level of detail.
DMAs comprise those actions made at the discretion
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