New York, NY

November 4, 2024

The Casualty Actuarial Society (CAS) has published a new monograph titled “Penalized Regression and Lasso Credibility,” authored by Thomas Holmes, Chief Actuary for the U.S. at Akur8, and Mattia Casotto, Head of Product for the U.S. and Principal Scientist at Akur8. CAS monographs are authoritative, peer-reviewed publications that provide in-depth analysis on important topics within property and casualty actuarial practice. This newly published monograph examines the limitations of Generalized Linear Models (GLMs) and introduces penalized regression, and a new procedure called Lasso Credibility as solutions to these shortcomings.

The monograph is divided into three parts. It begins with an essential actuarial introduction to the use of penalized regression, highlighting its advantages over traditional GLMs and exploring the statistical and intuitive connections between penalized regression and credibility. Building on this foundation, the monograph then presents a specific application of penalized regression as an actuarially sound credibility method known as Lasso Credibility. The monograph concludes with a case study that illustrates this new credibility procedure, helping readers grasp the nuances of this technique. 

“The CAS Monograph Series is designed to expand the body of knowledge available to actuaries, offering in-depth explorations of key topics that have a direct impact on their work. We are grateful to Thomas Holmes and Mattia Casotto for their invaluable contributions to this important work. This latest release exemplifies our commitment to providing members with the research and resources they need to advance their careers,” said Donna Royston, Managing Editor at CAS.

“The objective of this monograph is to help actuaries move beyond binary statistical significance and apply their expertise in credibility when evaluating model output. With practical guidance, case studies, and supporting code, it offers the actuarial community a comprehensive approach to applying lasso credibility in their ongoing projects,” said Thomas Holmes, Chief Actuary for the U.S. at Akur8.

“Traditional GLMs assume full dataset credibility, which can cause instability in parameter estimates for segments with sparse data. This monograph offers a solution by introducing penalized regression, specifically lasso penalization, to embed credibility within actuarial models,” noted Mattia Casotto, Head of Product for the U.S. and Principal Scientist at Akur8.

Samuel Falmagne, Co-founder and CEO at Akur8, highlighted the collaborative effort: “Tom and Mattia have worked closely with the CAS Monograph Editorial Board to produce this important and comprehensive work, which marks the 13th publication in the CAS Monograph Series. We are proud to contribute this valuable resource to the actuarial community.”

The new credibility monograph will be covered during the upcoming CAS Annual Meeting in Phoenix, Arizona on November 5, 2024, in the session “The Making of a Monograph” featuring Thomas Holmes, FCAS, Chief Actuary for the U.S. at Akur8, Brandon Smith, FCAS, Head of Portfolio Pricing at Markel Speciality, and Alice Xiang, AVP Actuary at Berkley Luxury Group.

The monograph can be accessed here.

About Akur8

Akur8 is transforming the non-life insurance industry with its innovative suite of pricing and reserving solutions. Our Next Gen Pricing and Reserving Platform combines cutting-edge technology with actuarial excellence to drive business value, bringing speed, performance, transparency, and reliability to insurers of all sizes. Akur8 serves 250+ customers across 40+ countries, including P&C global carriers AXA, Generali, Munich Re, Europ Assistance, Tokio Marine and MS&AD; commercial P&C insurers TMNAS, FCCI, NEXT, HDVI and Canal; personal and commercial P&C insurers Cypress, Madison Mutual, Western Reserve Group and Georgia Farm Bureau; and specialty P&C insurers Canopius and Bass Underwriters.  Over 3000 actuaries use Akur8 daily to build their pricing models and reserving projections across all lines of business. 

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Heide Sacher

AKUR8

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