EAA Web Session Inflation Risk Management

Over the last five years many countries have seen substantial swings in inflation. This volatility, following an extended period of relative stability, has reminded actuaries that unexpected changes in inflation rates can have big implications for organisations that they work for.

Insurers and pension funds wanting to manage inflation risks will typically find it beneficial to approach this task from a range of perspectives. They will likely want to explore recent as well as more historic inflation experiences and the roles played by different actors as well as by broader social and economic trends. They may also want to draw on stylised descriptions of how inflation might be expected to impact assets and liabilities. They then should bear in mind that actual behaviours of many assets and liabilities in past inflationary and deflationary periods have often only loosely corresponded to such stylised descriptions.

Risk management is, of course, ultimately more about seeking to optimise what happens in the future rather than about explaining what went on in the past. So, in this web session we will introduce the contexts referred to above and we will also explore approaches that can be used by insurers to model, manage and hedge risks arising from unexpected changes in inflation rates. In some cases, the inflationary link may be explicit (e.g. if claims include direct inflation indexation clauses). In other cases, the link may be less precise or more indirect, but these risks may still need highlighting and exploring if risk management is to be successful.
Anmeldeschluss: 2024-12-08
Link: https://actuarial-academy.com/seminars/seminar?No=E0464