This paper explores the use of long-term stochastic modelling for risk management. Life insurance is a long-term business and carries with it long-term risks, yet a lot of current actuarial risk management is focused on short-term modelling approaches.
The paper discusses the limitations inherent within existing approaches and considers how the focus of the next generation of actuarial models may be on long-term stochastic models. The paper also explores how existing techniques, together with new approaches, can be used to develop such models and the benefits of these.
Bill Curry is a risk management actuary responsible for capital oversight and resilience testing at LV=. Bill is passionate about stochastic modelling techniques and their application within a risk management framework.
Bill has previously presented research for the Institute and Faculty of Actuaries on full balance sheet proxy modelling techniques.
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