Life Expectancies - By Country & Relative to Income

This chart is very nice. It shows, in animation, how per capita income versus life expectancy has changed for dozens of countries over the last 30 years. A number of different viewing options are available. Quite interesting for its data, as well as a nice pedagogic tool.

Related tools (as well as a link to the above-mentioned chart) can be found at www.gapminder.org .

- Rick

Risky Business

I usually mention "securitization" -- whether as a reference to various types of asset-backed securities, or to the securitization of insurance risk -- at some point in most of my classes. This is becoming an area that most actuaries should understand and appreciate.

Here's an opinion piece from Saturday's (December 30, way back in 2006!) Wall Street Journal, available here via the free section of wsj.com . The piece emphasizes the good of derivatives and securitization in their potential to more effectively manage risk. The end of the piece sums up nicely: "Risk is still out there. But as we leave a successful financial year and enter a new one, take comfort in the fact that all that buying, selling, swapping, trading and securitization of risk has actually made the financial system less risky. "

- Rick

Math -- Giving It the Business

The December 18 issue of Business Week has a long section on the "Best of 2006" -- best with respect to leaders, products and ideas. One of the Best Ideas of 2006 is... MATH! Here's a link to the list of BW's best ideas (go to slide 12, or click on the little yellow "smiley-face" with the math symbols at the bottom).

- Rick

2006 Insured Catastrophe Losses

Swiss Re has posted their preliminary evaluation of worldwide catastrophe losses (go to their website, and click on the December 20 news release link). Based on their calculations, 2006 insured worldwide catastrophe losses are around $15 billion -- as opposed to 2005's $100+ billion figure. The 2006 figure, assuming it holds for the next ten days of the year, is the third lowest in the last 20 years.

Looking forward, we have already begun to see and hear some predictions that 2007's hurricane season will be worse. There's a very interesting dynamic in the catastrophe insurance / reinsurance market going on right now!

- Rick

Catastrophe Bond Sales are Anything But (a catastrophe)

Today's Wall Street Journal (page C1) has an article describing the active 2006 market in catastrophe bonds. According to data compiled by Goldman Sachs, investments in cat bonds and similar instruments have totalled over $9.2 billion this year (well more than twice 2005's total).

In addition to this recent activity, I think there may be some "unexplored" types of securitized insurance instruments whose markets will develop in the future -- e.g., contingent equity puts based upon the occurrence or non-occurrence of a specified catastrophe.

- Rick

Football and Actuarial Science

It has become popular to offer prizes or monetary awards in the event of something occurring. Examples are numerous:

• Prizes for holes-in-one at golf tournaments.
• Awards for successfully making a basket from half-court at half-time of an NBA game.
• Taco Bell's offer, a few years ago, of a free taco to everyone in the U.S. if the space station Mir hit a target off the coast of Australia when it fell back to earth (it missed....).
• The capture of the Loch Ness monster (I think it was Seagrams that offered an award for this a few decades ago -- they insured this contingency with Lloyd's of London) (no one cashed in....).

Here is a link to an article describing a recent example -- free furniture because the Bears shut out the Packers! (Woof woof!!!)

As an actuary, how would YOU have priced this?

- Rick

Where Do Pensions Come From?

Here's an interesting and thought-provoking article on some of the socioeconomic and political dynamics underlying the early days of pensions, and how changes in those dynamics are helping to cause the concerns and problems associated with current pension systems.

- Rick