Allocation of Surplus Based Upon Right Tail Deviation. Bob Bear PXRE Corporation CARE 6/99. Introduction.
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
Expected Policyholder Deficit has become a widely accepted method of assessing adequacy of surplus to support a book of business. It is an understandable way to quantify management’s risk tolerance level.
(1) EPD is not additive for layers (Shaun Wang, “An Actuarial Index of the Right-Rail Risk”, NAAJ, April 1998). Refer to 1998 PCAS paper by Wang.
(2) EPD produces counterintuitive results (e.g., EPD is bigger for a Gamma distribution than a Pareto); see 8/98 CARE presentation on “Getting to E in ROE” by Todd Bault.