ADVANCED INSURANCE AND ACTUARIAL METHODS

The course belongs to the two curricula “Economics-QEM” and “Finance”, and will allow the students to acquire a solid theoretical and quantitative grounding about insurance and actuarial methods. The main objectives of the course are
• to acquire knowledge about the different insurance products;
• to understand the main aspects of life insurance, with respect to reserving and linking life insurance benefits to the investment performance;
• to understand the foundations of post-retirement income and contribution pension plans;
• to understand the foundations of non-life insurance.

1. Knowledge and understanding:
• To understand the riskiness of a portfolio of risks and the transfer of risks.
• To understand and evaluate the main non-life insurance products;
• To understand the theory behind pension plans and to be able to assess a specific pension plan;


2. Ability to apply knowledge and understanding:
• To be able to compute the premium of non-life insurance contracts;
• To be able to quantify the technical reserves of non-life insurance contracts;
• To be able to communicate to others the knowledge acquired.

3. Ability to make judgements:
• Ability to choose the most suitable insurance products to cover specific insurable risks;
• Ability to determine if the market premium for a non-life insurance product is correctly determined.

4. Ability to communicate
• To be able to communicate to others the knowledge acquired;
• To be able to interact with his/her peers and tutor.

5. Ability to learn
• To be able to take notes and to share them on-line;
• To be able to look into the textbooks and the bibliography therein.

Students are expected to know the basic elements of financial mathematics, as they are taught in a course of Financial Mathematics at the laurea/bachelor degree:
• Basics of interest rates;
• Annuities;
• Amortization of a debt.

Students are also expected to be familiar with the following elements of calculus:
• Single variable functions;
• Several variable functions.
• Derivatives;
• Integrals.

Reserves and profits in a life insurance portfolio
• The portfolio reserve
• The total profit
• Expected annual profits

Linking benefits to the investment performance
• Adjusting benefits
• Participating policies
• Unit-linked policies
• Financial options in unit-linked and participating policies
• Variable annuities

Pension plans: technical and financial perspectives
• Pension programmes
• Individual and group pension plans
• Benefits and contributions
• Timing of the funding
• Transferring risks to the provider
• Pension savings before retirement
• Arranging the post-retirement income
• Some basic features of life annuities
• Packaging benefits into the life annuity product
• Life annuities versus income drawdown
• Phased retirement
• Risks for the provider

Non-life insurance: pricing and reserving
• Non-life insurance products
• General aspects
• Main categories of non-life insurance products
• Loss and claim amount
• The equivalence premium
• The net premium
• The expense-loaded premium
• Statistical data for the equivalence premium
• Stochastic modeling of the aggregate claim amount
• Risk classification and experience-rating
• Technical reserves
• Earned premiums, incurred claim amounts and profit assessment
• Deterministic models for claim reserves

A. Olivieri, E. Pitacco, Introduction to Insurance Mathematics, Springer-Verlag; chapters 2, 5, 6, 7, 8, 9.

Further readings: Yibo Wang, Wei Xu: Leveraging deep learning with LDA-based text analytics to detect automobile insurance fraud. Decision Support Systems 105 (2018) 87–95

Grading is based on a final written exam, taken at the end of the course. This consists of 2 exercises to be solved and 10 open-ended questions (duration: 2 hours). Each exercise accounts for 25% of the final grade of the exam; each question accounts for 5% of the final grade of the exam. The final grade will be the sum of the scores obtained in all exercises and questions.
The objective of the exercises is to test the student's ability to understand the computational aspects of the course and to apply them to compute the solution for a given problem. The objective of the questions is to test the acquisition of the knowledge acquired and the ability to understand the insurance products studied.
The exam is closed-notes and closed-book, but students are allowed to use a pocket calculator. Students need to register for the exam in advance.

Lectures. Additional lecture notes and exercises will be available on the platform moodle.unive.it.

Some exercises are available here
https://www.soa.org/globalassets/assets/Files/Edu/edu-exam-p-sample-quest.pdf

English

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