Documentation of Insurance Model 3 2 13

Model Information	Number
Total Number of Variables	280
Total Number of State Variables (Level+Smooth+Delay Variables)	34
Total Number of Stocks (Stocks in Level+Smooth+Delay Variables) †	64
Total Number of Macros	1



Function Sensitivity Parameters	0
Variables with Source Information	0
Data Lookup Tables	0



Time Unit	Year
Initial Time	1960
Final Time	2010
Time Step	0.015625



Model Is Fully Formulated	Yes
Modeler-Defined Groups	- No -
VPM File Available	- No -

Model Information

Number

Total Number of Variables

280

Total Number of State Variables (Level+Smooth+Delay Variables)

Total Number of Stocks (Stocks in Level+Smooth+Delay Variables) †

Total Number of Macros

Function Sensitivity Parameters

Variables with Source Information

Data Lookup Tables

Time Unit

Year

Initial Time

1960

Final Time

2010

Time Step

0.015625

Model Is Fully Formulated

Yes

Modeler-Defined Groups

- No -

VPM File Available

- No -

Warnings	Number
Undocumented Equations	60
Equations with Embedded Data	49
Equations With Unit Errors	* *
Variables Not in Any View	0
Incompletely Defined Subscripted Variables	0
Nonmonotonic Lookup Functions	5
Cascading (Chained) Lookup Functions	0

Warnings

Number

Undocumented Equations

Equations with Embedded Data

Equations With Unit Errors

* *

Variables Not in Any View

Incompletely Defined Subscripted Variables

Nonmonotonic Lookup Functions

Cascading (Chained) Lookup Functions

Potential Omissions	Number
Unused Variables	20
Supplementary Variables	0
Supplementary Variables Being Used	0
Overly Complex Variable Formulations (Richardson's Rule = 3)	25
Overly Complex Stock Formulations	10

Potential Omissions

Number

Unused Variables

Supplementary Variables

Supplementary Variables Being Used

Overly Complex Variable Formulations (Richardson's Rule = 3)

Overly Complex Stock Formulations

Level Structure †

Accumulated Reported Variable = ∫Simulated Data-Drained Reported Variable dt + [0]
    Data : Return, Claims, Premiums, Profit
    Drained Reported Variable = IF THEN ELSE(Check Reporting=0, Accumulated Reported Variable/TIME STEP$, 0 )
    Simulated[Data] = Reported Simulated Variables[Data]+Correcection for no reporting on startup[Data]

Claims Pink Noise = ∫Claims Change in Pink Noise dt + [0]
Claims Change in Pink Noise = Claims Gap Between Pink and White Noise/Claims Noise Correlation Time

Count[Data] = ∫pick/dt dt + [0]
dt = TIME STEP
pick = STEP(1,Start Time)*(1-STEP(1,End Time + TIME STEP/2))*IF THEN ELSE(Time/Interval = INTEGER(Time/Interval),1 , 0 )

Current Premium per unit Exposure = ∫Change in Premium dt + [Initial Premium]
Initial Premium = INITIAL((Other Costs+Claims Expense+Claims Handling Costs+(Target Return on Assets-Investment Return)*Total Capital)/(Total Underwriting Exposure*(1-Commission per Dollar of Premium Written/Average Underwriting Term)))
Change in Premium = Gap Between Target and Actual Premiums/Time to Change Premiums

Current Scope of Insurance = ∫Change in Insurance Scope dt + [Reference Scope]
Reference Scope = 1
Change in Insurance Scope = Indicated Change in Scope/Time to Change Insurance Scope

Deferred Commission Costs = ∫Commission Costs Accrued-Commission Costs dt + [Initial Commissions]
Initial Commissions = Initial Premium*Underwriting Inflow*Commission per Dollar of Premium Written*Time to Pay Commissions
Commission Costs = Deferred Commission Costs/Time to Pay Commissions
Commission Costs Accrued = Premium Inflow*Commission per Dollar of Premium Written

Expected Casualty Rate of Oldest Underwriting = ∫Older to Oldest Expected Casualty Rate Flow-Expected Casualty Rate Expiration dt + [Underwriting Expected Casualty Rate*Initial Dollars Underwritten per Stage]
Expected Casualty Rate Expiration = Underwriting Outflow*Average Expected Casualty Rate of Oldest Underwriting

Expected Casualty Rate of Recent Underwriting = ∫Expected Casualty Rate Inflow-Recent to Older Expected Casualty Rate Flow dt + [Underwriting Expected Casualty Rate*Initial Dollars Underwritten per Stage]
Expected Casualty Rate Inflow = New Underwriting*Underwriting Expected Casualty Rate

Expected Growth Rate for Costs = ∫Change in Expected Growth Rate dt + [Initial Expected Growth Rate in Costs]
Initial Expected Growth Rate in Costs = 0
Change in Expected Growth Rate = (Indicated Growth Rate-Expected Growth Rate for Costs)/Time to Perceive Trend in Costs

GDP Pink Noise = ∫Change in GDP Pink Noise dt + [0]
Change in GDP Pink Noise = GDP Gap Between Pink and White Noise/GDP Noise Correlation Time

Older Dollars Underwritten = ∫Recent to Older Underwriting Flow-Older to Oldest Underwriting Flow dt + [Initial Dollars Underwritten per Stage]
Older to Oldest Underwriting Flow = Older Dollars Underwritten/Per Stage Underwriting Term
Recent to Older Underwriting Flow = Recent Dollars Underwritten/Per Stage Underwriting Term

Older Premiums = ∫Recent to Older Premium Flow-Older to Oldest Premium Flow dt + [Initial Premium*Initial Dollars Underwritten per Stage]
Older to Oldest Premium Flow = Average Older Premiums*Older to Oldest Underwriting Flow
Recent to Older Premium Flow = Average Recent Premiums*Recent to Older Underwriting Flow

Oldest Dollars Underwritten = ∫Older to Oldest Underwriting Flow-Underwriting Outflow dt + [Initial Dollars Underwritten per Stage]
Underwriting Outflow = Oldest Dollars Underwritten/Per Stage Underwriting Term

Oldest Premiums = ∫Older to Oldest Premium Flow-Premium Outflow dt + [Initial Premium*Initial Dollars Underwritten per Stage]
Premium Outflow = Average Oldest Premiums*Underwriting Outflow

Pending Claim Pool = ∫Claims Incurred-Claims Denied-Claims Expense dt + [Initial Claims]
Initial Claims = Normal Claims Incurred*Average Delay for Claim Investigation
    Claims Denied = Total Claims Settled*(1-Fraction of Claims Paid)
    Claims Expense = Total Claims Settled*Fraction of Claims Paid
    Claims Incurred = Normal Claims Incurred*Claims Random Noise Output

Perceived Costs = ∫Change in Cost Perception dt + [Total Expenses per unit Exposure]
Total Expenses per unit Exposure = (Claims Expense+Other Operating Costs)/Total Underwriting Exposure
Change in Cost Perception = Gap in Cost Perception/Time to Perceive Changes in Costs

Perceived Net Income = ∫Change in Net Income Perception dt + [Net Income]
Net Income = Total Revenue-Claims Expense-Other Operating Costs
Change in Net Income Perception = Gap in Net Income Perception/Time to Adjust Net Income Perception

Recent Dollars Underwritten = ∫Underwriting Inflow-Recent to Older Underwriting Flow dt + [Initial Dollars Underwritten per Stage]
Underwriting Inflow = New Underwriting

Recent Premiums = ∫Premium Inflow-Recent to Older Premium Flow dt + [Initial Premium*Initial Dollars Underwritten per Stage]
Premium Inflow = Current Premium per unit Exposure*Underwriting Inflow

Reference Costs = ∫Change in Reference Costs dt + [Perceived Costs/(1+Initial Expected Growth Rate in Costs*Time Horizon for Reference Costs)]
Perceived Costs = ∫Change in Cost Perception dt + [Total Expenses per unit Exposure]
Time Horizon for Reference Costs = 3.2
Change in Reference Costs = (Perceived Costs-Reference Costs)/Time Horizon for Reference Costs

Stochastic Return = ∫Change in Stochastic Return dt + [Return Noise Long Run Mean]
Return Noise Long Run Mean = 10.5
Change in Stochastic Return = Gap Between Mean and Current Level/Return Mean Reversion Delay+Scaled Change in Gaussian Noise

Stock of Capital = ∫GDP Investment-Abandonment of Capital dt + [GDP Investment*Insurable Life of Capital]
GDP Investment = GDP Simulated*GDP Investment Fraction
Insurable Life of Capital = 14
Abandonment of Capital = Stock of Capital/Insurable Life of Capital

Sum AE[Data] = ∫ABS(Xi[Data] - Yi[Data])/dt dt + [0]
Xi[Data] = pick*X[Data]
Yi[Data] = pick*Y[Data]

Sum APE[Data] = ∫ABS(ZIDZ(Xi[Data]-Yi[Data],Yi[Data]))/dt dt + [0]

Sum Xi[Data] = ∫Xi[Data]/dt dt + [0]

Sum Yi[Data] = ∫Yi[Data]/dt dt + [0]

SumX2[Data] = ∫Xi[Data]*Xi[Data]/dt dt + [0]

SumX3[Data] = ∫Xi[Data]*Xi[Data]*Xi[Data]/dt dt + [0]

SumXY[Data] = ∫Xi[Data]*Yi[Data]/dt dt + [0]

SumY2[Data] = ∫Yi[Data]*Yi[Data]/dt dt + [0]

SumY3[Data] = ∫Yi[Data]*Yi[Data]*Yi[Data]/dt dt + [0]

Total Invested Capital = ∫Investment Income+Insurance Cash Flows-Payments to Shareholders dt + [Initial Invested Capital]
Initial Invested Capital = Desired Capital
    Insurance Cash Flows = MAX(Total Premiums-Total Costs,Minimum Cash Flow)
    Investment Income = MAX(Total Capital*Investment Return,Minimum Cash Flow)
    Payments to Shareholders = Dividends Declared

Variance State = ∫Increment Variance State-Drain Variance State dt + [0]
Drain Variance State = Variance State*IF THEN ELSE( Random Variable for Markov>Transition to Low , 1 , 0 )/TIME STEP
Increment Variance State = (1-Variance State)*IF THEN ELSE( Random Variable for Markov>Transition to High, 1 , 0 )/TIME STEP

† Level Structure Report still under development.

Source file: Insurance Model 3 2 13.mdl (3/2/13 - 3:32 PM)
Report Created on 3/2/13 - 3:33 PM
SDM-Doc Tool Version 4.7.16
Decision and Information Sciences Division
Argonne National Laboratory

Module	Group	Type	Variable (60)
Default	Insurance Model 3 2 13	F,A	Abandonment of Capital (dollars/Year)
Default	Insurance Model 3 2 13	L,iM	Accumulated Reported Variable (Simulated Data*Reporting Period)
Default	Insurance Model 3 2 13	C	Boot Claims (dmnl)
Default	Insurance Model 3 2 13	C	Boot Profit (dmnl)
Default	Insurance Model 3 2 13	F,A	Change in Cost Perception (dmnl/Year/Year)
Default	Insurance Model 3 2 13	F,A	Change in Expected Growth Rate (dmnl/Year/Year)
Default	Insurance Model 3 2 13	F,A	Change in Reference Costs (dmnl/Year/Year)
Default	Insurance Model 3 2 13	A,iM	Check Reporting (Reporting Period)
Default	Insurance Model 3 2 13	A	Claims White Noise (dmnl)
Default	Insurance Model 3 2 13	A	Correcection for no reporting on startup ($/Year)
Default	Insurance Model 3 2 13	Sub	Data
Default	Insurance Model 3 2 13	F,A,iM	Drained Reported Variable (Simulated Data)
Default	Insurance Model 3 2 13	F,A	dt (Year)
Default	Insurance Model 3 2 13	A	Effect of Capital on Scope (dmnl)
Default	Insurance Model 3 2 13	A	Effect of Costs on Premium (dmnl)
Default	Insurance Model 3 2 13	A	Effect of Income on Scope (dmnl)
Default	Insurance Model 3 2 13	A	Effect of Premiums on Demand for Insurance (dmnl)
Default	Insurance Model 3 2 13	A	Expected Current Costs (dmnl/Year)
Default	Insurance Model 3 2 13	L	Expected Growth Rate for Costs (dmnl/Year)
Default	Insurance Model 3 2 13	A	Fraction of Assets Desiring Insurance (dmnl)
Default	Insurance Model 3 2 13	A	Function for GDP (dollars/Year)
Default	Insurance Model 3 2 13	A	Gap in Cost Perception (dmnl/Year)
Default	Insurance Model 3 2 13	LI,F,A	GDP Investment (dollars/Year)
Default	Insurance Model 3 2 13	C	GDP Investment Fraction (dmnl)
Default	Insurance Model 3 2 13	A	GDP Pulse (dollars/Year)
Default	Insurance Model 3 2 13	A	GDP White Noise (dmnl)
Default	Insurance Model 3 2 13	A	Income Adequacy (dmnl)
Default	Insurance Model 3 2 13	A	Income Effect on Insurance Demand (dmnl)
Default	Insurance Model 3 2 13	C	Income Elasticity of Demand (dmnl [0,1])
Default	Insurance Model 3 2 13	A	Indicated Growth Rate (dmnl/Year)
Default	Insurance Model 3 2 13	LI,C	Initial Expected Growth Rate in Costs (dmnl/Year [-0.2,0.2])
Default	Insurance Model 3 2 13	LI,A	Initial Invested Capital (dollars)
Default	Insurance Model 3 2 13	LI,I	Initial Premium (dmnl/Year [0,0.1])
Default	Insurance Model 3 2 13	LI,C	Insurable Life of Capital (years [10,35])
Default	Insurance Model 3 2 13	C	Normal Fraction of Assets Desiring Insurance (dmnl [0,0.25])
Default	Insurance Model 3 2 13	A	Percent Error (dmnl)
Default	Insurance Model 3 2 13	C	Price Elasticity of Demand (dmnl [-2,0])
Default	Insurance Model 3 2 13	A	Proxy for Insurable Assets (dollars)
Default	Insurance Model 3 2 13	L	Reference Costs (dmnl/Year)
Default	Insurance Model 3 2 13	I	Reference Income (dollars/Year)
Default	Insurance Model 3 2 13	LI,C	Reference Scope (dmnl)
Default	Insurance Model 3 2 13	A,M	Report Variable (Simulated Data)
Default	Insurance Model 3 2 13	A	Return on Assets (dmnl/Year)
Default	Insurance Model 3 2 13	A	Scaled Variation Historical (dmnl)
Default	Insurance Model 3 2 13	A	Scaled Variation Simulated (dmnl)
Default	Insurance Model 3 2 13	C	Sensitivity of Scope to Income (dmnl [0,3])
Default	Insurance Model 3 2 13	A	Shareholder's Equity (dollars)
Default	Insurance Model 3 2 13	L	Stock of Capital (dollars)
Default	Insurance Model 3 2 13	L	SumX3 ((dollars/Year)(dollars/Year)(dollars/Year))
Default	Insurance Model 3 2 13	L	SumY3 ((dollars/Year)(dollars/Year)(dollars/Year))
Default	Insurance Model 3 2 13	C	Switch for Forecasting (dmnl [0,1])
Default	Insurance Model 3 2 13	C	Switch for Impulse Response (dmnl [0,1])
Default	Insurance Model 3 2 13	C	Test Pattern for Interest Rates (dmnl/Year)
Default	Insurance Model 3 2 13	LI,C	Time Horizon for Reference Costs (Year [1,5])
Default	Insurance Model 3 2 13	C	Time to Perceive Trend in Costs (Year [0.5,2])
Default	Insurance Model 3 2 13	A	Total Assets (dollars)
Default	Insurance Model 3 2 13	A	Total Liabilities (dollars)
Default	Insurance Model 3 2 13	F,A	Underwriting Inflow (dollars/Year)
Default	Insurance Model 3 2 13	A	Underwriting Renewal ($/Year)
Default	Insurance Model 3 2 13	C	Wiener Unit Fix (Year)

Module	Group	Type	Variable (5)
Default	Insurance Model 3 2 13	L	Table for Historical GDP (dollars/Year)
Default	Insurance Model 3 2 13	L	Table for Historical Non-Life Claims (dollars/Year)
Default	Insurance Model 3 2 13	L	Table for Historical Operating Income (dollars/Year)
Default	Insurance Model 3 2 13	L	Table for Historical Premiums (dollars/Year)
Default	Insurance Model 3 2 13	L	Table for Insurance Rate of Investment Return (dmnl/Year)

Module	Group	Type	Variable (10)
Default	Insurance Model 3 2 13	L	Count (Dimensionless)
Default	Insurance Model 3 2 13	L	Sum AE (dollars/Year)
Default	Insurance Model 3 2 13	L	Sum APE (dmnl)
Default	Insurance Model 3 2 13	L	Sum Xi (dollars/Year)
Default	Insurance Model 3 2 13	L	Sum Yi (dollars/Year)
Default	Insurance Model 3 2 13	L	SumX2 ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	L	SumX3 ((dollars/Year)(dollars/Year)(dollars/Year))
Default	Insurance Model 3 2 13	L	SumXY ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	L	SumY2 ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	L	SumY3 ((dollars/Year)(dollars/Year)(dollars/Year))

Module	Group	Type	Variable	Complexity Score
Default	Insurance Model 3 2 13	L	Expected Casualty Rate of Oldest Underwriting (dollars/Year)	4
Default	Insurance Model 3 2 13	L	Expected Casualty Rate of Older Underwriting (dollars/Year)	4
Default	Insurance Model 3 2 13	F,A	Drain Variance State (dmnl/Year)	4
Default	Insurance Model 3 2 13	A	Claims Scaled White Noise (dmnl)	4
Default	Insurance Model 3 2 13	L	Total Invested Capital (dollars)	4
Default	Insurance Model 3 2 13	A	Target Premium per Dollar of Underwriting (fraction/Year)	4
Default	Insurance Model 3 2 13	L	Recent Premiums (dollars/Year)	4
Default	Insurance Model 3 2 13	L	Reference Costs (dmnl/Year)	4
Default	Insurance Model 3 2 13	L	Oldest Premiums (dollars/Year)	4
Default	Insurance Model 3 2 13	A	GDP Simulated (dollars/Year)	4
Default	Insurance Model 3 2 13	A	GDP Scaled White Noise (dmnl)	4
Default	Insurance Model 3 2 13	L	Older Premiums (dollars/Year)	4
Default	Insurance Model 3 2 13	LI,A	Initial Commissions (dollars)	4
Default	Insurance Model 3 2 13	F,A	Increment Variance State (dmnl/Year)	4
Default	Insurance Model 3 2 13	I	Initial Dollars Underwritten (dollars)	4
Default	Insurance Model 3 2 13	L	Expected Casualty Rate of Recent Underwriting (dollars/Year)	4
Default	Insurance Model 3 2 13	F,A	pick (Dimensionless)	4
Default	Insurance Model 3 2 13	L	Pending Claim Pool (dollars)	4
Default	Insurance Model 3 2 13	A	GDP (dollars/Year)	4
Default	Insurance Model 3 2 13	A	r (Dimensionless)	5
Default	Insurance Model 3 2 13	A	Historical ($/Year)	5
Default	Insurance Model 3 2 13	A	Skewness Y (dmnl)	6
Default	Insurance Model 3 2 13	A	Skewness X (dmnl)	6
Default	Insurance Model 3 2 13	A	Reported Simulated Variables (dollars/Year)	7
Default	Insurance Model 3 2 13	LI,I	Initial Premium (dmnl/Year [0,0.1])	9

Module	Group	Type	Variable (49)
Default	Insurance Model 3 2 13	L,iM	Accumulated Reported Variable (Simulated Data*Reporting Period)
Default	Insurance Model 3 2 13	A	Change in Return Gaussian Noise (dmnl/Year/Year)
Default	Insurance Model 3 2 13	F,A	Claims Denied (dollars/Year)
Default	Insurance Model 3 2 13	L	Claims Pink Noise (dmnl)
Default	Insurance Model 3 2 13	A	Claims Scaled White Noise (dmnl)
Default	Insurance Model 3 2 13	A	Claims White Noise (dmnl)
Default	Insurance Model 3 2 13	A	Correcection for no reporting on startup ($/Year)
Default	Insurance Model 3 2 13	L	Count (Dimensionless)
Default	Insurance Model 3 2 13	A	dif cov ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	A	Dividends Declared (dollars/Year)
Default	Insurance Model 3 2 13	F,A	Drain Variance State (dmnl/Year)
Default	Insurance Model 3 2 13	F,A,iM	Drained Reported Variable (Simulated Data)
Default	Insurance Model 3 2 13	A	Expected Current Costs (dmnl/Year)
Default	Insurance Model 3 2 13	A	Expected Future Costs (dmnl/Year)
Default	Insurance Model 3 2 13	A	GDP (dollars/Year)
Default	Insurance Model 3 2 13	L	GDP Pink Noise (dmnl)
Default	Insurance Model 3 2 13	A	GDP Pulse (dollars/Year)
Default	Insurance Model 3 2 13	A	GDP Scaled White Noise (dmnl)
Default	Insurance Model 3 2 13	A	GDP Simulated (dollars/Year)
Default	Insurance Model 3 2 13	A	GDP White Noise (dmnl)
Default	Insurance Model 3 2 13	A	Historical GDP (dollars/Year)
Default	Insurance Model 3 2 13	A	Historical Income (dollars/Year)
Default	Insurance Model 3 2 13	A	Historical Non-Life Claims Incurred (dollars/Year)
Default	Insurance Model 3 2 13	A	Historical Premiums (dollars/Year)
Default	Insurance Model 3 2 13	A	Historical Rate of Return (dmnl/Year)
Default	Insurance Model 3 2 13	A	Income Adequacy (dmnl)
Default	Insurance Model 3 2 13	F,A	Increment Variance State (dmnl/Year)
Default	Insurance Model 3 2 13	LI,I	Initial Premium (dmnl/Year [0,0.1])
Default	Insurance Model 3 2 13	A	Investment Return (dmnl/Year)
Default	Insurance Model 3 2 13	A	New Underwriting (dollars/Year)
Default	Insurance Model 3 2 13	F,A	pick (Dimensionless)
Default	Insurance Model 3 2 13	A	Random Variable for Markov (dmnl)
Default	Insurance Model 3 2 13	A	Rate of Return (dmnl/Year)
Default	Insurance Model 3 2 13	L	Reference Costs (dmnl/Year)
Default	Insurance Model 3 2 13	A	Return Noise Standard Deviation (dmnl)
Default	Insurance Model 3 2 13	A	Skewness X (dmnl)
Default	Insurance Model 3 2 13	A	Skewness Y (dmnl)
Default	Insurance Model 3 2 13	L	Sum AE (dollars/Year)
Default	Insurance Model 3 2 13	L	Sum APE (dmnl)
Default	Insurance Model 3 2 13	L	Sum Xi (dollars/Year)
Default	Insurance Model 3 2 13	L	Sum Yi (dollars/Year)
Default	Insurance Model 3 2 13	L	SumX2 ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	L	SumX3 ((dollars/Year)(dollars/Year)(dollars/Year))
Default	Insurance Model 3 2 13	L	SumXY ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	L	SumY2 ((dollars/Year)*(dollars/Year))
Default	Insurance Model 3 2 13	L	SumY3 ((dollars/Year)(dollars/Year)(dollars/Year))
Default	Insurance Model 3 2 13	A	Sx (dollars/Year)
Default	Insurance Model 3 2 13	A	Sy (dollars/Year)
Default	Insurance Model 3 2 13	L	Variance State (dmnl)

Documentation of Insurance Model 3 2 13

View the 280 variables sorted by type, module, group, variable name, module/group/name, Level Structure, or in a view summary.

List of 60 Undocumented Variables

List of 5 Non-Monotonic Lookup Functions

List of 10 Overly Complex Stock Formulations

Formulation Complexity Summary (Violations of Richardson's Rule)

List of 49 Equations with Embedded Data

List of 34 State Variables

List of 20 Unused Variables

List of 4 Macro-Related Variables

List of 15 Views and Their 281 Variables*

* Includes Time, if used in a view. Excludes variables not present in any view.

Level Structure †

TOP	Dashboard (28 variables)
Module	Group	Type	Variable Name and Description
Default	Insurance Model 3 2 13 (Default)	C	Average Delay for Claim Investigation (years [0.4,3]) = 2.678 Description: The length of time on average that it takes for a claim to be settled can be very short for certain kinds of insurance and very long for others Present in 3 views: Dashboard Claims and Costs Investment and Capital Used by: Initial Claims - The initial value of claims is set up in balanced equilibrium Total Claims Settled - The total value of all claims currently being settled whether they are paid or denied.
Default	Insurance Model 3 2 13 (Default)	C	Claims Handling Costs per Dollar of Claims (fraction [0,0.15]) = 0.036 Description: The costs from adjusting and handling claims will vary directly with the size of the flow of claims for the industry Present in 2 views: Dashboard Claims and Costs Used by: Claims Handling Costs - Costs arising from handling claims will tend to be proportional to the flow of claims being generated.
Default	Insurance Model 3 2 13 (Default)	C	Commission per Dollar of Premium Written (years [0,0.3]) = 0.25 Description: Insurance companies pay agents a commission on policies written, the units of year represent the fact that the commission can be conceptualized as the years of premium flow the companies pay in order to secure the business Present in 3 views: Dashboard Claims and Costs Premiums Used by: Commission Costs Accrued - The inflow of commissions Initial Commissions - The initial value of the commissions to be paid Initial Premium
Default	Insurance Model 3 2 13 (Default)	C	Critical Claims Solvency Ratio (years [0.5,3]) = 1 Description: The desired capital of the industry is determined through a desire to have surplus capital over and above the reserve for claims Present in 2 views: Dashboard Investment and Capital Used by: Desired Capital - The level of desired capital
Default	Insurance Model 3 2 13 (Default)	Sub	Data : Return, Claims, Premiums, Profit Present in 2 views: Dashboard Statistics Used by: Accumulated Reported Variable Correcection for no reporting on startup dif cov - Difference of covariances dif mean - difference of the means dif var - Difference of the Variances M X - Mean of x (sum x)/n M Y - Mean of y (sum y)/n MAE over Mean - Mean Absolute Error as a fraction of the mean MAPE - Mean Absolute Percent Error MSE - Mean Square Error MX2 - Mean of x^2 (sum x^2)/n Mxy - Mean of xy (sum xy)/n MY2 - Mean of y^2 (sum y^2)/n Percent Error r - Correlation coefficient. Calculated through the 'hand computation' formula.Sterman (1984) pg. 63 R^2 - Correlation coefficient squared RMSE - Root Mean Square Error RMSE over Mean - Root Mean Squared Error as a fraction of the mean Scaled Variation Historical Scaled Variation Simulated Simulated - Set equal to the simulated data series. Skewness X - A hand calculation of the skew of the data accomplished through an expansion of the equation for whole sample skew. Skewness Y - A hand calculation of the skew of the data accomplished through an expansion of the equation for whole sample skew. Sum AE - Sum Absolute Error Sum APE - Sum of Absolute Percent Errors Sum Xi - Sum of x's (simulated) Sum Yi - Sum of y' SumX2 - Sum of x^2 SumX3 SumXY - Sum of x*y SumY2 - Sum of y^2 SumY3 Sx - Standard Deviation of x. Calculated using the 'hand computation'formulato calculate the standard deviation without prior knowledge ofthe mean.Sterman (1984), pg. 64 Sy - Standard Deviation of y. Calculated using the 'hand computation'formulato calculate the standard deviation without prior knowledge ofthe mean.Sterman (1984), pg. 64 Uc - Covariance inequality proportion Um - Bias inequality proportion Us - Variance inequality proportion Var X - the variance of the data X - The historical data input Xi - The historic data series Y - The simulated data series Yi - Sampled simulated variable
Default	Insurance Model 3 2 13 (Default)	C	Desired Insurance Adjustment Time (Year [0.5,8]) = 5.11 Description: The time it takes consumers and insurance companies to adjust the level of insurance towards the current stock of insurance Present in 2 views: Dashboard Demand for Insurance Used by: Adjustment for Desired Insurance - The rate at which desired insurance is being underwritten, may be negative if the level of insurance desired is lower than the current level
Default	Insurance Model 3 2 13 (Default)	C	Dividend Payout Ratio (dmnl [0,0.4]) = 0.11 Description: For dynamic equilibrium, set this to 1 Present in 2 views: Dashboard Dividends Used by: Indicated Dividend - The dividend indicated by the payout ratio and the net income used for dividend calculation
Default	Insurance Model 3 2 13 (Default)	C	Income Elasticity of Demand (dmnl [0,1]) = 0.453 Present in 2 views: Dashboard Demand for Insurance Used by: Income Effect on Insurance Demand
Default	Insurance Model 3 2 13 (Default)	LI,C	Insurable Life of Capital (years [10,35]) = 14 Present in 3 views: Dashboard Demand for Insurance Underwriting Used by: Abandonment of Capital Initial Dollars Underwritten - The initial level of underwriting is initialized in balanced equilibrium Stock of Capital
Default	Insurance Model 3 2 13 (Default)	C	Natural Casualty Rate (dmnl/Year [0,0.12]) = 0.0597 Description: The normal fraction of the underwritten policies that are insured Present in 2 views: Dashboard Scope Used by: Underwriting Expected Casualty Rate - When reserves are high the industry will attempt to capture market share from each other causing them to insure more risky clients overall as they branch out into areas of business that they have not previously insured
Default	Insurance Model 3 2 13 (Default)	C	Normal Fraction of Assets Desiring Insurance (dmnl [0,0.25]) = 0.0408 Present in 3 views: Dashboard Demand for Insurance Underwriting Used by: Fraction of Assets Desiring Insurance
Default	Insurance Model 3 2 13 (Default)	C	Other Costs per Dollar of Underwriting Exposure (dmnl/Year [0,0.1]) = 0.015 Description: The assorted other costs of the industry are assumed to scale directly with the size of the book of business Present in 3 views: Dashboard Claims and Costs Premiums Used by: Other Costs - The flow of assorted other costs
Default	Insurance Model 3 2 13 (Default)	C	Price Elasticity of Demand (dmnl [-2,0]) = -1.5 Present in 2 views: Dashboard Demand for Insurance Used by: Effect of Premiums on Demand for Insurance
Default	Insurance Model 3 2 13 (Default)	A	Scaled Variation Simulated (dmnl) Scaled Variation Simulated[Data] = ZIDZ(Sy[Data],M Y[Data]) Present in 2 views: Dashboard Statistics
Default	Insurance Model 3 2 13 (Default)	C	Sensitivity of Expected Casualty Rate to Scope (dmnl [0,3]) = 1 Description: The reserve adequacy is raised to this power when determining the net effect on underwriting quality Present in 2 views: Dashboard Scope Used by: Underwriting Expected Casualty Rate - When reserves are high the industry will attempt to capture market share from each other causing them to insure more risky clients overall as they branch out into areas of business that they have not previously insured
Default	Insurance Model 3 2 13 (Default)	C	Sensitivity of Premiums to Capital (dmnl [-1,0]) = -0.0875 Description: The aggressiveness of the power function for the effect of capital on premiums Present in 2 views: Dashboard Premiums Used by: Effect of Capital on Premiums - The multiplicative effect of capital on premiums
Default	Insurance Model 3 2 13 (Default)	C	Sensitivity of Premiums to Net Income (dmnl [-2,0]) = -1.03 Description: Controls the slop of the power function for the effect of capital and earnings on premiums Present in 2 views: Dashboard Premiums Used by: Effect of Profit on Premiums - The multiplicative change in premiums indicated by the current financial situation
Default	Insurance Model 3 2 13 (Default)	C	Sensitivity of Scope to Capital (dmnl [0,2]) = 0.2 Description: strength of the power function for the relationship between capital adequacy and the desire of the industry to underwrite Present in 2 views: Dashboard Scope Used by: Effect of Capital on Scope
Default	Insurance Model 3 2 13 (Default)	C	Sensitivity of Scope to Income (dmnl [0,3]) = 0.2 Present in 2 views: Dashboard Scope Used by: Effect of Income on Scope
Default	Insurance Model 3 2 13 (Default)	C	Switch for Forecasting (dmnl [0,1]) = 1 Present in 2 views: Dashboard Cost Forecasting Used by: Expected Future Costs - The current projection of expected growth in costs onto current perceived costs
Default	Insurance Model 3 2 13 (Default)	C	Switch for Impulse Response (dmnl [0,1]) = 0 Present in 3 views: Dashboard Demand for Insurance Investment and Capital Used by: GDP - The US gross domestic product GDP Simulated - The current GDP being used in the simulation Investment Return - Controls whether the simulation is conducting an interest rate test or using a more complex path for investment income
Default	Insurance Model 3 2 13 (Default)	LI,C	Time Horizon for Reference Costs (Year [1,5]) = 3.2 Present in 2 views: Dashboard Cost Forecasting Used by: Change in Reference Costs Indicated Growth Rate Reference Costs
Default	Insurance Model 3 2 13 (Default)	C	Time to Adjust Net Income Perception (years [0.125,4]) = 2 Description: Time passes before perceptions about return on equity are solidified Present in 2 views: Dashboard Profitability Measures Used by: Change in Net Income Perception - The rate of change in return on equity perceptions
Default	Insurance Model 3 2 13 (Default)	C	Time to Change Insurance Scope (years [0.5,6]) = 4.5 Description: The delay in adjusting the types of clients insured Present in 2 views: Dashboard Scope Used by: Change in Insurance Scope - The rate of change of the scope of insurance
Default	Insurance Model 3 2 13 (Default)	C	Time to Change Premiums (years [0.125,2]) = 1.2 Description: The length of time it takes agents to understand and adjust to new underwriting standards. Present in 3 views: Dashboard Scope Premiums Used by: Change in Premium - Premium reductions will occur more quickly when indicated than will premium increases.
Default	Insurance Model 3 2 13 (Default)	C	Time to Pay Commissions (Year [0.125,9]) = 0.56 Description: Commissions are paid to agents mostly over the course of the first year Present in 2 views: Dashboard Claims and Costs Used by: Commission Costs - The current flow of commissions costs Initial Commissions - The initial value of the commissions to be paid
Default	Insurance Model 3 2 13 (Default)	C	Time to Perceive Changes in Costs (Year [0.125,1]) = 0.35 Description: This is how long it takes the industry to perceive changes in costs Present in 2 views: Dashboard Cost Forecasting Used by: Change in Cost Perception Expected Current Costs
Default	Insurance Model 3 2 13 (Default)	C	Time to Perceive Trend in Costs (Year [0.5,2]) = 0.9 Present in 2 views: Dashboard Cost Forecasting Used by: Change in Expected Growth Rate
TOP	Demand for Insurance (44 variables)
Module	Group	Type	Variable Name and Description
Default	Insurance Model 3 2 13 (Default)	F,A	Abandonment of Capital (dollars/Year) = Stock of Capital/Insurable Life of Capital Present in 1 view: Demand for Insurance Used by: Stock of Capital
Default	Insurance Model 3 2 13 (Default)	A	Adjustment for Desired Insurance (dollars/Year) = Gap in Desired Insurance/Desired Insurance Adjustment Time Description: The rate at which desired insurance is being underwritten, may be negative if the level of insurance desired is lower than the current level Present in 1 view: Demand for Insurance Used by: New Underwriting - The flow of new underwriting in the industry
Default	Insurance Model 3 2 13 (Default)	F,A	Claims Incurred (dollars/Year) = Normal Claims IncurredClaims Random Noise Output Description:* Total claims generated are computed in the underwriting quality view Present in 9 views: Demand for Insurance Underwriting Scope Claims and Costs Cost Forecasting Premiums Investment and Capital Profitability Measures Statistics Used by: Desired Capital - The level of desired capital Pending Claim Pool - The stock of claims waiting to be settled Reported Simulated Variables - The reported variables use the reporting macro developed in my thesis. The first argument is the variable to be reported and the second is the reporting period
Default	Insurance Model 3 2 13 (Default)	A	Consumer Desired Insurance (dollars) = (Proxy for Insurable Assets)Effect of Premiums on Demand for Insurance Description:* The level of underwiting desired by the consumer after considering the value of assets in the economy, the fraction of those assets normally insured and the effect of current premiums on the demand for insurance. Present in 1 view: Demand for Insurance Used by: Desired Insurance - The industry can manipulate the level of desired insurance by being more or less aggressive in their oferings to the marketplace
Default	Insurance Model 3 2 13 (Default)	L	Current Premium per unit Exposure (dmnl/Year) = ∫Change in Premium dt + [Initial Premium] Description: The actual premium per year per dollar of underwriting written. Units are dollars/year per dollar. Present in 3 views: Demand for Insurance Underwriting Premiums Used by: Effect of Premiums on Demand for Insurance Gap Between Target and Actual Premiums - A measurement of the distance between current premiums and the target premiums Premium Inflow - total premiums collected each year enter the aging chain at the current premium per dollar of underwriting Target Premium per Dollar of Underwriting - Overall premium indicated is adjusted by several effects
Default	Insurance Model 3 2 13 (Default)	A	Desired Insurance (dollars) = Consumer Desired Insurance Description: The industry can manipulate the level of desired insurance by being more or less aggressive in their oferings to the marketplace Present in 1 view: Demand for Insurance Used by: Gap in Desired Insurance - The difference between the amount of insurance desired after considering the preferences of the consumer, the desires of the industry and the level of assets in the economy.
Default	Insurance Model 3 2 13 (Default)	C	Desired Insurance Adjustment Time (Year [0.5,8]) = 5.11 Description: The time it takes consumers and insurance companies to adjust the level of insurance towards the current stock of insurance Present in 2 views: Dashboard Demand for Insurance Used by: Adjustment for Desired Insurance - The rate at which desired insurance is being underwritten, may be negative if the level of insurance desired is lower than the current level
Default	Insurance Model 3 2 13 (Default)	A	Effect of Premiums on Demand for Insurance (dmnl) = (Current Premium per unit Exposure/Initial Premium)^Price Elasticity of Demand Present in 2 views: Demand for Insurance Underwriting Used by: Consumer Desired Insurance - The level of underwiting desired by the consumer after considering the value of assets in the economy, the fraction of those assets normally insured and the effect of current premiums on the demand for insurance.