Gregory F. McNulty, FCAS, has been awarded the Variance Prize for his paper, “Severity Curve Fitting for Long-Tailed Lines: An Application of Stochastic Processes and Bayesian Models.” The prize-wining paper is published in Variance 11:1-2. CAS President Brian Brown presented the prize money to McNulty in Las Vegas during the CAS Annual Business Session on November 12, 2018.
McNulty’s paper presents evidence for a model in which parameters fit to the severity distribution at each report age and follow a smooth curve with random error. The stochastic process outlined in the paper allows users to estimate parameters of the ultimate severity distribution. McNulty also details a Bayesian hierarchical model that takes a modestly sized dataset of triangulated individual claim data and returns posterior distributions for the parameters of the ultimate severity distribution, trend and loss to an excess layer.
In 2013 McNulty won the Ratemaking Prize for best paper with his paper, “Extending the Asset Share Model: Recognizing the Value of Options in Insurance Rates.” He earned a bachelor’s and master’s degree in mathematics from UCLA and the University of Michigan, respectively. Currently a vice president, he joined SCOR Reinsurance in 2010 as a treaty pricing actuary where he developed new methodologies for modeling ALAE using copulas, large loss development using stochastic processes and severity curve fitting using Bayesian hierarchical models. His current work focuses on casualty catastrophe modeling and aggregation.
The Variance Prize honors original thinking and research in property-casualty actuarial science and is awarded to the author or authors of the best paper published in each volume year. To be eligible, a paper must show original research and the solution of advanced insurance problems.