Bickerstaff , Whatley, Ryan & Burkhalter Consulting Actuaries: Risk Simulation Models

The BWR&B team has developed a family of risk simulation models which have a wide variety of uses for both small insurance companies and self-insured entities. The model "simulates" the five-year underwriting and investment experience of the entity over a designated number of random trials (usually 10,000 or more). Using this "Monte Carlo" technique, the user can estimate the probability distribution of aggregate losses, which can be used to address questions such as:

Optimal loss retentions to cover retained losses at an acceptably high confidence level.
Minimum number of exposure units required to self insure (at a given retention limit) at an acceptably high confidence level.
Amount of assets and/or contingency margin in rates required to cover payout of prior years' unpaid claims and future years' claims - given a particular retention and other parameters.

Versions of the BWR&B risk model have been used extensively for self insured trust funding for various liability lines and Workers' Compensation. Other versions have been used as valuable input in reinsurance negotiations.



	Risk Simulation Models


	The BWR&B team has developed a family of risk simulation models which have a wide variety of uses for both small insurance companies and self-insured entities. The model "simulates" the five-year underwriting and investment experience of the entity over a designated number of random trials (usually 10,000 or more). Using this "Monte Carlo" technique, the user can estimate the probability distribution of aggregate losses, which can be used to address questions such as: Optimal loss retentions to cover retained losses at an acceptably high confidence level. Minimum number of exposure units required to self insure (at a given retention limit) at an acceptably high confidence level. Amount of assets and/or contingency margin in rates required to cover payout of prior years' unpaid claims and future years' claims - given a particular retention and other parameters. Versions of the BWR&B risk model have been used extensively for self insured trust funding for various liability lines and Workers' Compensation. Other versions have been used as valuable input in reinsurance negotiations.