This page is part of an in-progress commentary by Roger
Frye
on High Altitude
Thinking: The International Informatics Summit.
People have to move up front to play the game, but I need to stay back near the ethernet cable.
Lee Ann collecting business cards to draw a lottery for the 5 who will play the game. Rudi Frei Bishof from Swiss Re is one of the winners.
Now they want 3 inputs to control the drama over 10 year simulation.
1) Desired ratio of premiums to capital. Should be 50-300%. A target ratio of annual premiums to total assigned capital.
2) Combined ratio. (annual retained losses + expenses) / premiums. Should be 70 - 120% A target net combined ratio.
3) Primary objective of market share over profits. Should be 0 - 100%.. A measure of whether the company should set its premium price low in order to capture market share. A value of 100% means that the company agreessively pursues its desired market share, while zero meanss that the company intensely focuses on short-term profits.
Goal is to achieve the highest net earnings plus divends over a ten year period.
Book prize is Out Of Control by Kevin Kelly.
Let's think like an agent. From Harvard Business Review Article by Eric Bonabeau and Chris Meyer. Pick two people in the room at random. Label them A and B.
Scenario 1 - Move around and keep A between you and B. Result was spread out.
Scenario 2 - Move around and keep self between A and B. Result was one clump.
Shows Party Box Demo. Available on-line at Redfish.com.
The nature of risk has changed. Why is risk different today? Events more costly and less predictable. Inter-relations of the industry and global economy creates new vulnerabilities. Industry interconectedness creates new vulnerabilities.
Traditional risk management tools are not sufficient. Dynamic analysis is required. Only non-linear simulations can track interactivity. ....
The new tools of risk management. Model emergent agent behavior. Provides in-depth perspective and insigh. Anticipates counter intuitive outcomes. Provides a holistic view. ..
Revisioning the Risk network
Topography of Traditional Risk Management. Shows Flood, auto, hurricaines, mortality, fire, terrorism, etc. A risk map.
Shows a demo of a risk landscape. Bubbles rising and falling on a landscape. Cones above represent insurance companies searching over the map, but affecting the landscape.
Assuratech's approach. Build the simulator fromt he agenst and their rules. Introduce risk factors. Ovserve results.
Insurance World. A capital management simulator. Simulates the impact of terrorsis and other extreme events. Tracks changing financials, etc. We can build very quickly.
What are the agents in your system?
Slide show over. Sven brought up the results. Shows the computer screen. There is a chart of the events that happene to occur. Will show cmulative effect on the company's balance sheets and earnings. Goes into the various inputs. Explains how the game is played. Shows Rudi's choices. Chose to go after 88% of market share.
Rudi came in second. Lyle edged him out. Jack 3rd. Chad 4th. Bingham lost.
Lyle lowest combined ratio and invested all his capital. People ask why me? We go back and slightly modify the strategies in order to figure out why.
Sven shows plots of strategic parameters against return.
Question can you change parameters each quarter. Answer yes.
END