Academic journal article Risk Management and Insurance Review

Recent Research Developments Affecting Nonlife Insurance-The Cas Risk Premium Project 2012 Update

Academic journal article Risk Management and Insurance Review

Recent Research Developments Affecting Nonlife Insurance-The Cas Risk Premium Project 2012 Update

Article excerpt


This article reports the main results of the 2012 Risk Premium Project update, a yearly review of actuarial and finance literature on the theory and empirics of risk assessment for property-casualty insurance. Pricing and modeling insurance risks and methodological advancement in risk valuation were popular fields of research in 2012. Of special note is new work on behavioral pricing and liquidity. Additionally, underwriting cycles attracted some controversy, and emerging risks, such as systemic risk and potential interrelations between insurance and other financial markets, were also areas of intense discussion.


The aim of the Risk Premium Project (RPP) is to provide a structured summary of the main theoretical and empirical results on risk assessment of property-casualty insurance companies. The project was initiated by the Committee on Theory of Risk (COTOR) of the Casualty Actuarial Society (CAS) in 2000 with a review of actuarial and finance research conducted up to that point in time (RPP I; see Cummins et al., 2000). Due to the vast development of research in both finance and actuarial science, RPP II was conducted to review the research from 2000 to 2010 (Eling and Schmeiser, 2010). Since then, yearly updates of the literature review have been provided (see Eling, 2013, for the 2011 review). Moreover, a database summarizing all research findings is provided online at

This work reports the results of the 2012 update and summarizes the main findings from publications added to the database. The core elements of the update process included (1) updating the literature collection and (2) writing the update report. The bibliography update involved the addition of newly published work and was conducted from November 2012 to March 2013. The review of the literature was based on the same principles used for RPP II. These principles include the literature search strategy and evaluation of search results (for details on the review process, see Eling and Schmeiser, 2010). Comments from CAS members and other interested parties were received via e-mail or via an online template that was introduced for the first RPP continual update (see Research papers recommended in this step were incorporated into the database. The RPP II website was updated based on the results of the literature review.

This article summarizes the most important developments from the literature update, with a focus on research published in academic journals in the fields of actuarial science, risk management, and insurance. Related fields were also considered, especially articles published in the finance literature. Moreover, new working papers, for example, those suggested by CAS members, are integrated into the review. In total, 95 new papers were considered in the review process.

In the following section we present the main results of the continual update. Conclusions and a brief outlook are given in the final section.


Table 1 provides an overview of the thematic categories that were developed for RPP II and the number of papers that were added during the 2012 continual update process. The three top-level categories are based on the classic risk management process: risk identification, followed by risk valuation, and ending with the application of appropriate measures to address the identified risk exposure (risk management). Each of the top-level thematic categories is subdivided into several subcategories. There has been some discussion as to whether new subcategories need to be added to the RPP review framework, such as regulation or systemic risk. These aspects could form a separate category, but they also can be fit into existing categories. Work on systemic risk can be found in the category "Other Emerging Risks" and work on regulation is under "New Valuation Techniques." The existing structure thus still concisely covers all relevant aspects of risk assessment in property-casualty insurance. …

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