Pinnacle Actuarial's Derek Freihaut, Chris Holt and Rob Walling have co-authored a paper to assist insurance professionals in determining whether an insurance company has achieved sufficient risk distribution from an actuarial point of view.
The paper, Expected Adverse Deviation as a Measure of Risk Distribution, is in response to the increased scrutiny around captives from the Internal Revenue Service and US Tax Court, which, according to Pinnacle, calls for “a rigorous actuarial approach” to modelling risk distribution for insurance companies and programmes has become necessary.
An innovative risk distribution assessment methodology is developed based on the number of statistically-independent risk units in the insurance programme.
Joe Herbers, Pinnacle’s managing principal, stated: “We saw an immediate need for an actuarially rigorous tool to assess risk distribution that would be easy to understand and explain to insurance professionals."
He added: "This tool is indicative of Pinnacle’s commitment to research in order to serve our clients and the larger captive insurance market.”
The paper is available to download here.