| CODE | INS4010 | |||||||||
| TITLE | Risk Management, Insurance and Credit Risk | |||||||||
| UM LEVEL | 04 - Years 4, 5 in Modular UG or PG Cert Course | |||||||||
| MQF LEVEL | Not Applicable | |||||||||
| ECTS CREDITS | 4 | |||||||||
| DEPARTMENT | Banking and Finance | |||||||||
| DESCRIPTION | The purpose of this study-unit is to give students a solid background in risk modeling methods and their application to quantifying and managing risk. Hazard rate analysis for the case of a single risk will be discussed in reference to the demand for insurance, its technicalities and its social welfare aspects. In addition to the traditional insurance context (i.e. mortality and catastrophe risk, among others), the course will elaborate on intensity based models for credit risk. A qualitative overview of the operations of insurance companies will also be covered. This unit provides the intellectual foundation for actuarial work which has been used in Life Insurance and Consulting companies for mortality management in life insurance, pensions and other employee benefit plans for a long time. More recently, the actuarial (intensity) approach has been used to model credit risk: modeling of a company’s “time-to-default” in a similar way to mortality risk. Topics include present value of random variables for contingent annuities and insurance, their distributions and the principles underlying the determination of actuarial fair values. The case of discrete and continuous multiple decrement models for single variables and their use in health insurance and pension funding is also discussed. Study-unit Aims The class provides a solid foundation for students who also want to pursue professional credentials from International Actuarial Associations (U.S.A. and U.K.) or an advanced degree in Risk Management and Actuarial Science. References to the Basel II (Banks) and Solvency II (Insurance Companies) regulatory frameworks give the class a pragmatic approach to modern actuarial practices. Learning Outcomes 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: - determine probabilities of default using the actuarial (intensity) approach - assess fair values for complex products covering mortality and credit risk - derive multiple (portfolio) loan default from single loan default with and without correlation at a fixed or a stochastic horizon - compare and contrast actuarial fair values and market prices for mortality and credit risk. - communicate using the common language of life contingencies to quantify costs and risks of insurance products. - link individual insurance and financial products to the operations of insurance companies, through the Regulatory framework: Solvency II. - discuss the implications of entering a new insurance market to the solvency of the insurance company. 2. Skills: By the end of the study-unit the student will be able to: - identify and quantify potential insurable risks - estimate actuarial fair prices for insurance products available in the markets - apply probability theory in the context of mortality and credit risk - solve problems involving the application of life contingencies in life insurance and annuities, including relevant portions of actuarial professional examinations. Main Text/s and any supplementary readings Books for Reference: - Actuarial Mathematics: Bowers, Newton L.; Hickman, James C.; Nesbitt, Cecil J.; Gerber,Hans U; Jones, Donald A. 2nd Edition / ISBN# 0938959468. - Measuring and Managing Credit Risk by Arnaud de Servigny and Oliver Renault (S&R), McGraw-Hill, 2004. ISBN 0-07-141755-9 |
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| ADDITIONAL NOTES | Pre-requisite qualifications: Probability theory, Calculus, Corporate Finance (present values) | |||||||||
| STUDY-UNIT TYPE | Lecture | |||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Dominic Cortis |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2025/6. It may be subject to change in subsequent years. |
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