Actuaries Scrambling to Respond to Sub-Prime Crisis
Here is a snippet from an email I just got
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Here is a SWAG, without consulting any actuaries:
In the future, banks should not lend money to people who do not have the income to support the payments. Hey, that's just me, though. I'm no professional. It will be really interesting to see what the actuaries come up with after months of analysis. |
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Insurance companies don't hold much in the way of equities; their portfolios are pretty conservative. Mortgage-backed securities are an attractive investment option for insurance companies given their alleged low risk, rate of return and relative predictibility of the timing of the cashflows. Since MBS represent a sizeable portion of an insurance company's portfolio, it leaves them very exposed if they end up being significantly less secure an investment than originally believed. This going to cause a significant shakeup in the industry in terms of investment strategy, ERM and cashflow testing. |
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