Description: People naturally observe risk in the form of the range of experienced gains and losses which is usually represented in statistical terms by standard deviation. In most cases, there are not enough observed values to reliably discern the true amount of losses that are possible in extreme situations. Statistical techniques that have long been applied to insurance company risks are being used to extrapolate from observed risk to extreme tails of the distribution of gains and losses. These processes are essentially an extrapolation from the “known” risk of volatility near the mean to “unknown” risk of extreme losses. “Fat tails” is a term often applied to risks where the likely losses in rare situations significantly exceeds the predictions of a Gaussian (“thin tailed”) distribution. This paper will look at the relationship between the observed risk and the extreme risk in statistical insurance r isk models and discuss how we might create a discussion among model users about the appropriateness of that relationship for specific types of risks.

Description: Tools that should be in place to support a validation program and covers a case study of a validation of an Actuarial Guideline 43 (AG43) model.

Description: This article describes team dynamics of introverts and extroverts, with an actuarial audience in mind. The article references the works of author Susan Cain.

Description: Summary of common mistakes made by actuaries developing ACA rate filings. Outlines correct approach to ACA rate filing process. Suggests Peer Review process.

Description: This article goes through effective ways to give, and ask for, feedback in real time

Description: We define what we believe a model validation should entail and the value proposition that it offers.

Description: This article describes a hypothetical workplace dilemma. Suggested solutions and feedback are provided in the next issue of Stepping Stones. From the April 2010 issue of Stepping Stones.