Fwd: INARM Message - Banking standards

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Dave Ingram

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Oct 19, 2013, 11:17:02 AM10/19/13
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Begin forwarded message:

From: Seamus Creedon <seamus....@gmail.com>
Date: June 19, 2013 1:53:48 AM EDT
To: inarm inarm <in...@list.soa.org>
Subject: INARM Message - Banking standards

We actually got an external advisor to [assess how frequently a particular event
might happen] and they came out with one in 100,000 years and we said “no,” and I
think we submitted one in 10,000 years. But that was a year and a half before it
happened. It doesn’t mean to say it was wrong; it was just unfortunate that the
10,000th year was so near.


Regards

Seamus Creedon FSAI FIA CERA MAAA





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Dave Ingram

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Oct 19, 2013, 11:17:09 AM10/19/13
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Begin forwarded message:

From: "Ingram, Dave" <Dave....@willis.com>
Date: June 19, 2013 7:45:38 AM EDT
Subject: Re: INARM Message - Banking standards

We need frequency and severity estimates to do our work, but does it really do more harm than good to be talking about the 1/100,000 value? All we actually know is that for some reason we think that the 1/10,000 event is less likely than the 1/10,000 event, etc.

An alternate would be to talk about Resilience to events that are as adverse as the worst in our history, or 1.2 times as bad, etc. What I mean is speaking about a reverse stress test and using that worst scenario as the unit of measure.

That way we can avoid the credibility destroying discussion about how those 1/100 year events happen every year. And in the case below, a 1/10,000 event every 18 months.

Those results give folks a perfect excuse to completely ignore quantitative analysis of risk.

We live in a world where all 90% of people will ever hear of our work is the one phrase headline. We have to
David Ingram, CERA, FRM, PRM
Willis Re
+1 212 915 8039
+1 646 287 7929 (mobile)

 
From: Seamus Creedon [mailto:seamus....@gmail.com]
Sent: Wednesday, June 19, 2013 12:53 AM Central Standard Time
To: inarm inarm <in...@list.soa.org>
Subject: INARM Message - Banking standards
 
We actually got an external advisor to [assess how frequently a particular event
might happen] and they came out with one in 100,000 years and we said “no,” and I
think we submitted one in 10,000 years. But that was a year and a half before it
happened. It doesn’t mean to say it was wrong; it was just unfortunate that the
10,000th year was so near.


Regards

Seamus Creedon FSAI FIA CERA MAAA





If you no longer wish to received communications from this group, you can be removed by unsubscribing here.


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Dave Ingram

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Oct 19, 2013, 11:17:14 AM10/19/13
to inarm-emer...@googlegroups.com


Begin forwarded message:

From: "Adler, Avraham" <Avraha...@guycarp.com>
Date: June 19, 2013 10:51:14 AM EDT
To: inarm inarm <in...@list.soa.org>
Subject: RE: INARM Message - Banking standards

/sigh
 
While the quote "It doesn’t mean to say it was wrong; it was just unfortunate that the 10,000th year was so near" is technically possibly true, it reminds me of the age-old question: If I flip a fair coin in front of you 1000 times, and I get heads 820 times, what is the probability that the next result will be heads?
 
Most people answer 50%.
 
The more correct (at least in a Bayesian sense) answer is, if we got 820 heads on this coin, it probably isn't fair.
 
When the 1-in-10000 event happens in 18 months, or more famously, when David Viniar can say we see 25-standard deviation moves multiple times, the issue is not process risk but model risk.
 
--Avi
 

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Avraham Adler, FCAS, CERA, MAAA, Senior Vice President, GC Analytics™
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From: Seamus Creedon [mailto:seamus....@gmail.com]
Sent: Wednesday, June 19, 2013 1:54 AM
To: inarm inarm

Subject: INARM Message - Banking standards
We actually got an external advisor to [assess how frequently a particular event
might happen] and they came out with one in 100,000 years and we said “no,” and I
think we submitted one in 10,000 years. But that was a year and a half before it
happened. It doesn’t mean to say it was wrong; it was just unfortunate that the
10,000th year was so near.


Regards

Seamus Creedon FSAI FIA CERA MAAA





If you no longer wish to received communications from this group, you can be removed by unsubscribing here.
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