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Course 2016-2017 a.y.


Department of Finance

Course taught in English

Go to class group/s: 31

CLMG (6 credits - I sem. - OP  |  SECS-P/11) - M (6 credits - I sem. - OP  |  SECS-P/11) - IM (6 credits - I sem. - OP  |  SECS-P/11) - MM (6 credits - I sem. - OP  |  SECS-P/11) - AFC (6 credits - I sem. - OP  |  SECS-P/11) - CLEFIN-FINANCE (6 credits - I sem. - OP  |  SECS-P/11) - CLELI (6 credits - I sem. - OP  |  SECS-P/11) - ACME (6 credits - I sem. - OP  |  SECS-P/11) - DES-ESS (6 credits - I sem. - OP  |  12 credits SECS-P/11) - EMIT (6 credits - I sem. - OP  |  SECS-P/11) - GIO (6 credits - I sem. - OP  |  SECS-P/11)
Course Director:

Classes: 31 (I sem.)

Course Objectives
The course introduces students to the most important operational aspects of life and non-life insurance business. The content is organized in twelve parts, which include tutorials based on real-world case studies. At the end of the course students are familiar with the most important life and non-life insurance products, with in-depth knowledge of the main issues affecting their design, valuation, and risk management. Students are able to carry out analysis relevant for pricing, reserving, and capital modelling exercises. They also get exposure to capital market instruments and risk transfer arrangements that allow insurers to make optimal use of their capital. The course provides a hands-on yet rigorous introduction to both foundational and more advanced methodologies that are essential to actuaries, risk managers, and structurers working in life and non-life business, as well as to investment bankers and asset managers operating in the insurance space.

Course Content Summary
Life insurance
  1. Insurance supply and demand: The demand for life insurance, life insurance products, product design, distribution channels,
  2. Modelling and managing the main risks: Reserves, sum at risk, asset share, risks of different products, stochastic mortality models, reinsurance for life business.
  3. Investing for a life company: Asset-Liability Management for life insurers.
  4. Life insurance valuation: Traditional vs. market-consistent valuation; Stochastic reserving; Economic Scenario Generators (ESGs); Profit testing and (market-consistent) embedded value; VIF securitization.
  5. Modelling options and guarantees: Variable annuities, Static hedging of Guaranteed Annuity Options, setting bonus rates in with-profit business, surrender values, and policy alternations.
  6. Regulatory framework: Market-consistent accounting standards, Solvency II, Stress testing, Nested Monte Carlo.
  7. Longevity risk market: Longevity/mortality risk transfer solutions, Mortality models, Longevity swap structuring.

Non-life insurance
  1. Non-life insurance markets: Modelling and transferring non-life risks; Lloyd’s of London and Bermudan market; reinsurance, retrocession, securitization.
  2. Pricing: Rating methodologies and bases; frequency-severity, burning cost, and original loss curve approaches; setting optimal (re)insurance retentions.
  3. Reserving and capital modelling: Triangulation, stochastic reserving methods, capital modelling techniques.

Detailed Description of Assessment Methods
Final written exam. One piece of coursework.

  • Handouts, articles, and case studies provided by the instructor.
  • Harvard Business School case studies: Tom Paine Life; Malcolm Life.

Students should be familiar with fundamental concepts covered in the courses of Quantitative finance and Derivatives, as well as some of the statistical tools covered in the course Financial Econometrics and Empirical Finance.
Last change 21/03/2016 12:31