According to InsuranceERM, actuaries (we don’t know which ones) have voted for Monte Carlo simulation as the most appropriate way to model the cost of no-negative equity guarantees. “Only 9% of the audience opted for the closed-form Black-Scholes model as the most appropriate tool for costing NNEGs.”
Boo hoo. But on the bright side, InsuranceERM asked whether, “given the strong presence of equity release mortgage (ERM) lenders on the IFoA’s ERM working party, such as Just, Legal & General and Aviva”, this raises any conflict of interest? Naturally the reply was that if working in the sector or on a product prohibited involvement in a working group “there would be very few experts” to support working parties. (Presumably Exxon made the same point about climate research).
Delegates (presumably those who managed to find the link on the IFoA’s website) heard that all the members of the ERM working party have been “very transparent” about who they work for and their contribution to consultation responses. Glad my three weeks of emails and phone calls to the IFoA finally paid off.
Have a good weekend!