Bootstrapping Method for Capital & Reserves Estimates
Bootstrapping is a nonparametric approach for making statistical estimation and inference when standard parametric assumptions are questionable, or computationally infeasible.
Applying this process to insurance allows estimates to be made of the distribution of most values of interest: future claims, capital, profit, and market returns. Two important sources of uncertainty in the projected values can be taken into account: for instance, the intrinsic volatility of the claims process, and the uncertainty in our parameter estimates of that process.
Key Learning Outcomes:
- Understand the reasons why the bootstrap is being adopted in business modelling.
- Understand the approach underlying the bootstrap implementation, implicit assumptions, and
appropriateness to a particular problem.
- Learn to know when to use the bootstrap method.
- Be able to undertake a bootstrap process for estimating reserves, and as part of an ORSA/ICAAP.
- Able to explain to stakeholders why using bootstrapping is a necessary tool in your work
- What is the bootstrap?
- Why was it developed?
- Variations of the technique including block bootstrap.
- Example using time series of market returns.
- A quick review of the basic triangle of paid claims, and techniques for
- Stepping through the bootstrap process, demonstrating changes
required for different models of the claims process.
- Analysis of outputs (there is more information than just the reserve
- What justification is there for using the bootstrap?
- When can you use it?
- What is parameter error?
- Estimating the effect of future mortality risk on reserves & pricing
- Incorporating parameter error into the estimate of reserves.
- Bonus! You now have a pricing tool!
- Which is the correct model to use for claims estimation?
- What if you can’t decide which model is best?
- Estimating capital requirements – simple model.
- Communication of the results to the Board and regulator.
Who is This Course for?
- This programme is suitable for actuarial & risk management professionals wanting to learn more
about stochastic bootstrapping methods, particularly for estimating capital and reserves as well as
estimating mortality risk.
- Suitable also for managers of quantitative staff, risk committee members, auditors, researchers and
Meet Your Instructor
Dr. Frank Ashe
Quantitative Strategies Pty Ltd
Dr Frank Ashe has a consulting practice specialising in risk management, investments and
behavioural finance. Risk management covers the gamut from technical matters in option risk, to
strategy, to comparative corporate governance and risk culture. He is an Honorary Associate
Professorship at the Macquarie University Applied Finance Centre where he spent 2002 to 2006 as a
full-time Associate Professor.
Dr Ashe has worked in consultancies, insurers, investment management firms, bond dealers, and
financial software houses in Australia and Canada. His 30+ years of practical experience have been
predominantly in the measurement and management of financial risk and return, with an emphasis on asset-liability management and developing risk measurement and management tools for novel situations.
Dr Ashe has been presenting the 2-day course required for CERA qualification by the Actuaries
Institute (Australia) since 2010. He is a regular presenter at industry seminars and colloquia through
Asia, teaches financial risk management in East Asia and was President of the Australian Q-Group
from 2002 to 2011.
Dr Ashe obtained his PhD in Operations Research from the University of New South Wales.