Work in actuarial science at the University of Kent can be divided
into three broad themes achieving a balance of theoretical and applied
investigations, as well as addressing social policy implications.
Economic capital and financial risk management
With the advent of new risk-based regulations for financial services
firms, specifically Basel 2 and Basel 3 for banks and Solvency 2 for
insurers, there is now a heightened focus on the practical
implementation of quantitative risk management techniques for firms and
defined benefit pension schemes operating within the financial services
sector.
In particular, financial services firms are now expected to
self-assess and quantify the amount of capital they need to cover the
risks they are running. This self-assessed quantum of capital is
commonly termed risk, or economic, capital.
At Kent we are actively involved in developing rigorous risk
management techniques to explicitly measure how much risk a firm or
pension scheme is taking, holistically, across the entire spectrum of
risks it accepts.
More about our research in this area
Longevity risk
Longevity risk represents a substantial threat to the stability of
support programmes for the elderly, most notably to the subset that
provides income protection but also to non-traditional products such as
home equity release schemes.
One approach to dealing with longevity risk is to model key factors
that influence mortality; this may be achieved using aggregate (causal)
mortality rates or panel data with individual-specific covariates.
Another approach to modelling longevity risk is via an investigation of
positive quadrant dependence between lives, which requires a
multivariate framework. Once this is in place, longevity risk may be
investigated on various fronts ranging from entire populations to
couples.
More about our research in this area
Public policy aspects of risk classification
Restrictions on risk classification can lead to adverse selection,
and actuaries usually regard this as a bad thing. However, restrictions
do exist in many countries, suggesting that policymakers often perceive
some merit in such restrictions. Careful re-examination of the usual
actuarial arguments can help to reconcile these observations.
Models of insurance purchasing behaviour under different risk
classification regimes can quantify the effects of particular bans, e.g.
on insurers’ use of genetic test results, or gender classification in
the European Union.
More about our research in this area
