Page 58 - ic92 actuarial

The Insurance Times

for all the complex analyses, for e.g, relation of
overall corporate sensitivity to multiple external
influences.

Static analysis gives a single answer, assuming no
changes in the external factors affecting the insurance
industry. Dynamic analysis gives results that vary with
the values of the external factors, such as inflation,
interest rates, unemployment rates, and claim frequency.
But people are not satisfied. These various forces are
never known with certainty.

Insurance variables, such as claim frequency or claim
severity, have always been uncertain. Now, the random
walks of interest rates and assets values are added, and
volatile economic environment adds yet another layer
of randomness to the results. Single results no longer
seem reasonable. So, the actuaries have learned to
simulate. For static analysis, the actuary predicts
whereas for dynamic analysis, he simulates. For e.g, he
does not predict the future inflation rate but simulates
the possible inflation rate of the coming years.

Website: www.bimabazaar.com Call: 033-22184184 /40078428 58

Copyright@ The Insurance Times. 09883398055 / 09883380339