Pricing Insurance Risk Course (PIRC)

Course Contents

PIRC explores different approaches to loading loss costs for risk and allocating capital and risk margins. Current modules:

This course is offered for actuarial education and self-study. Obviously, there is no official credit.

Course Purpose

This course explains modern approaches to pricing insurance risk, the process of setting a technical premium, including a target risk margin or profit load. PIR is the last mile of underwriting, after loss costs and expenses have been estimated, and it is critical to insurance company management. A PIR framework embodies an insurer's risk appetite, determining which risks it accepts onto its balance sheet and how it structures its capital to support those risks.

Risk margins have an outsized impact on the insurance market despite being low for many lines of business. Personal property may have a single-digit margin, but it incorporates reinsurance priced with margins of 50 percent or more. When the reinsurance markets become stressed—as seen most recently after the events of 2017—the importance of understanding the economic cost of high-risk-margin, high-volatility business becomes clear.

Course Resources

Additional on-line resources:

The material in this course has been developed with John Major. It is the subject of our forthcoming book, Pricing Insurance Risk: A Guide for the Working Actuary.

Pricing Insurance Risk Course materials by Stephen J Mildenhall on this site are licensed under Attribution 4.0 International.