Mis-estimation risk is the financial uncertainty over a liability value caused by finite experience data.  There are two use-case scenarios:

1. Pricing.  Uncertainty exists when pricing a block risk transfer, such as a bulk annuity, longevity swap or reinsurance treaty.  Here mis-estimation risk is viewed over the lifetime of a portfolio, i.e. in run-off.
2. Solvency capital.  Uncertainty exists over recalibration risk, such as the value-at-risk (VaR) approach under Solvency II.  Here mis-estimation risk is viewed over a fixed time horizon, such as one year.

The following resource links cover both types of mis-estimation.

Blogs

• On basic features of likelihood estimation.
• On the importance of acknowledging correlations.
• Using the delta method to estimate liability variance.

Videos

The Institute and Faculty of Actuaries (IFoA) recorded two sessional meetings on mis-estimation risk:

• Presentation and audience discussion of run-off mis-estimation at IFoA meeting in Edinburgh.
• Presentation and audience questions on value-at-risk mis-estimation.

Training materials

How to measure mis-estimation risk using the Longevitas survival-modelling software suite:

• Client webinar, January 2023.

Presentations

On mis-estimation risk for pricing:

• Institute and Faculty of Actuaries, February 2016.
• Scottish Independent Actuaries, June 2015.
• CASS Business School, November 2014.
• Life Convention, November 2014.

On VaR mis-estimation risk for solvency capital:

• Institute and Faculty of Actuaries, May 2021.
• Network of Consulting Actuaries, February 2021.

Papers

The British Actuarial Journal has published two technical papers on mis-estimation risk:

• For pricing and risk transfer (preprint available).
• For VaR-style solvency capital (preprint available).