David Kirk
@daveactuary.bsky.social
Actuary, figuring out the future and the now.
Decaf proponent.
For more: https://linkedin.com/in/davidkirk/
https://twentythirdfloor.co.za
Decaf proponent.
For more: https://linkedin.com/in/davidkirk/
https://twentythirdfloor.co.za
Errors cluster. One observation carries information about what you can't directly see.
This applies to insurance pricing to, in ways that feel unfair but might not be. And "fair" turns out to mean different things depending on who's asking.
twentythirdfloor.co.za/2025/12/17/w...
This applies to insurance pricing to, in ways that feel unfair but might not be. And "fair" turns out to mean different things depending on who's asking.
twentythirdfloor.co.za/2025/12/17/w...
twentythirdfloor.co.za
December 23, 2025 at 11:37 AM
Errors cluster. One observation carries information about what you can't directly see.
This applies to insurance pricing to, in ways that feel unfair but might not be. And "fair" turns out to mean different things depending on who's asking.
twentythirdfloor.co.za/2025/12/17/w...
This applies to insurance pricing to, in ways that feel unfair but might not be. And "fair" turns out to mean different things depending on who's asking.
twentythirdfloor.co.za/2025/12/17/w...
Getting this right matters for your own risk management and decision making, supported by robust analysis. Regulatory approvals should then follow more easily.
September 16, 2025 at 10:37 AM
Getting this right matters for your own risk management and decision making, supported by robust analysis. Regulatory approvals should then follow more easily.
If you think the standard formula doesn't fit your risk profile, analyse your own experience and volatility. Actually, even if you think it does, it's good practice to do the analysis to demonstrate that it is appropriate.
September 16, 2025 at 10:37 AM
If you think the standard formula doesn't fit your risk profile, analyse your own experience and volatility. Actually, even if you think it does, it's good practice to do the analysis to demonstrate that it is appropriate.
All of these affect your true 99.5th percentile. This is especially relevant for niche or unusual or developing products. It may be that those seemingly harsh premium volatility factors still understate risk for your developing portfolio.
September 16, 2025 at 10:37 AM
All of these affect your true 99.5th percentile. This is especially relevant for niche or unusual or developing products. It may be that those seemingly harsh premium volatility factors still understate risk for your developing portfolio.
This also links to another interest area of mine: are the standard formula factors appropriate for your specific portfolio? The standard formula has no allowance for small portfolio size, heterogeneous exposure sizes, or different levels of dependence.
September 16, 2025 at 10:37 AM
This also links to another interest area of mine: are the standard formula factors appropriate for your specific portfolio? The standard formula has no allowance for small portfolio size, heterogeneous exposure sizes, or different levels of dependence.
Some LoB classifications automatically exclude catastrophe risk. Others require specific regulatory approval for the same exclusion. So the choice matters more than just the applicable premium volatility factor.
September 16, 2025 at 10:37 AM
Some LoB classifications automatically exclude catastrophe risk. Others require specific regulatory approval for the same exclusion. So the choice matters more than just the applicable premium volatility factor.
It's still a crude approximation, where the specific distribution of underlying risks should in theory be known through analysis of historical index data.
September 16, 2025 at 10:37 AM
It's still a crude approximation, where the specific distribution of underlying risks should in theory be known through analysis of historical index data.
This matters because agricultural business under SAM doesn't have its own catastrophe module - instead, the premium volatility factor is set high to capture both normal volatility and large losses in one factor.
September 16, 2025 at 10:37 AM
This matters because agricultural business under SAM doesn't have its own catastrophe module - instead, the premium volatility factor is set high to capture both normal volatility and large losses in one factor.
The challenge extends to newer products that don't fit traditional categories. Parametric insurance in South Africa often gets allocated to agricultural classes regardless of the actual exposure.
September 16, 2025 at 10:37 AM
The challenge extends to newer products that don't fit traditional categories. Parametric insurance in South Africa often gets allocated to agricultural classes regardless of the actual exposure.
Same underlying risk - vet bills for cats and dogs with some third-party liability - yet different capital charges depending on where you're regulated.
September 16, 2025 at 10:37 AM
Same underlying risk - vet bills for cats and dogs with some third-party liability - yet different capital charges depending on where you're regulated.
Take pet insurance. In the UK and Germany, most insurers classify it as miscellaneous financial loss (MFL). French insurers often use medical expenses. Swedish insurers report it as property damage.
September 16, 2025 at 10:37 AM
Take pet insurance. In the UK and Germany, most insurers classify it as miscellaneous financial loss (MFL). French insurers often use medical expenses. Swedish insurers report it as property damage.
For anyone ready to look past regulatory convenience and see what actually happens in the tail.
September 9, 2025 at 10:37 AM
For anyone ready to look past regulatory convenience and see what actually happens in the tail.
The article expands on an earlier post with concrete cases (synthetic CDOs and a mass-lapse reinsurance analogue), why banking moved to ES after 2008, how equal 99.5% VaR can mask very different CTEs (and shaky SCR multiples), and why explicit uncertainty beats false confidence
September 9, 2025 at 10:37 AM
The article expands on an earlier post with concrete cases (synthetic CDOs and a mass-lapse reinsurance analogue), why banking moved to ES after 2008, how equal 99.5% VaR can mask very different CTEs (and shaky SCR multiples), and why explicit uncertainty beats false confidence
Quick reminder: VaR tells you how bad it gets at 99.5% and then stops. CTE gives the average of what lies beyond.
September 9, 2025 at 10:37 AM
Quick reminder: VaR tells you how bad it gets at 99.5% and then stops. CTE gives the average of what lies beyond.
September 9, 2025 at 10:37 AM
The worst policies are risk-management busy-work. The best improve consistency, quality, and speed of decisions.
September 2, 2025 at 10:37 AM
The worst policies are risk-management busy-work. The best improve consistency, quality, and speed of decisions.
You cannot send a 300-page pack of all policies once a year to committees and boards expecting insight or value. It may feel like death by a thousand cuts, but spreading policies throughout the year means you might actually get useful input. I’m not convinced the opposite is ever true.
September 2, 2025 at 10:37 AM
You cannot send a 300-page pack of all policies once a year to committees and boards expecting insight or value. It may feel like death by a thousand cuts, but spreading policies throughout the year means you might actually get useful input. I’m not convinced the opposite is ever true.
When reviewing policies, it’s easy to criticise. The challenge for reviewers: what would you actually want the policy to say? What would be practical and useful for people complying? What could go wrong if it wasn’t there? Sometimes that makes petty issues disappear, or drafts really great wording.
September 2, 2025 at 10:37 AM
When reviewing policies, it’s easy to criticise. The challenge for reviewers: what would you actually want the policy to say? What would be practical and useful for people complying? What could go wrong if it wasn’t there? Sometimes that makes petty issues disappear, or drafts really great wording.
Actually, speaking of legalese, there is a valid view that as much as culture eats strategy, culture snacks on governance policies like you eat popcorn in a dark movie theatre. If you rely solely on policy compliance for sensible risk aware decisions and checks and balances, you're bound to fail.
September 2, 2025 at 10:37 AM
Actually, speaking of legalese, there is a valid view that as much as culture eats strategy, culture snacks on governance policies like you eat popcorn in a dark movie theatre. If you rely solely on policy compliance for sensible risk aware decisions and checks and balances, you're bound to fail.
Same goes for passive voice, which kills clarity about roles and responsibilities.
September 2, 2025 at 10:37 AM
Same goes for passive voice, which kills clarity about roles and responsibilities.
That way you’re not just reviewing policies, you’re reviewing real processes, and strengthening both.
As much as possible, cut the legalese. No “forthwiths”, no “abovementioneds”, and absolutely no "Without prejudice to the generality of the foregoing".
As much as possible, cut the legalese. No “forthwiths”, no “abovementioneds”, and absolutely no "Without prejudice to the generality of the foregoing".
September 2, 2025 at 10:37 AM
That way you’re not just reviewing policies, you’re reviewing real processes, and strengthening both.
As much as possible, cut the legalese. No “forthwiths”, no “abovementioneds”, and absolutely no "Without prejudice to the generality of the foregoing".
As much as possible, cut the legalese. No “forthwiths”, no “abovementioneds”, and absolutely no "Without prejudice to the generality of the foregoing".
They’re also far more likely to be understood and lived by the people who have to follow them.
That doesn’t mean there’s no place for independent risk or compliance review. There is, and this second step brings the independent perspective, fresh challenge, familiarity with regulations.
That doesn’t mean there’s no place for independent risk or compliance review. There is, and this second step brings the independent perspective, fresh challenge, familiarity with regulations.
September 2, 2025 at 10:37 AM
They’re also far more likely to be understood and lived by the people who have to follow them.
That doesn’t mean there’s no place for independent risk or compliance review. There is, and this second step brings the independent perspective, fresh challenge, familiarity with regulations.
That doesn’t mean there’s no place for independent risk or compliance review. There is, and this second step brings the independent perspective, fresh challenge, familiarity with regulations.