Risk distribution is a prerequisite for an insurance transaction. But how much risk distribution is enough for a transaction to qualify as insurance?

In “Expected Adverse Deviation as a Measure of Risk Distribution,” an article recently published in the journal Variance, Pinnacle Principals and Consulting Actuaries Derek Freihaut and Rob Walling evaluate the different methods used to answer the risk distribution question and discuss all the dimensions, advantages and benefits of EAD.

EAD is a straightforward and effective way to measure risk distribution for a number of key reasons. But perhaps the most compelling characteristic is how easy it is to understand and communicate—particularly for non-actuaries.

Variance is a publication of the Casualty Actuarial Society (CAS) and is considered one of the premier forums for actuarial concepts, ideas and dialogue.

You can read the article in its entirety here.