Cluster analysis: A spatial approach to actuarial modeling
By Avi Freedman and Craig Reynolds
01 August 2008
Nested stochastic applications dramatically increase the run-time of an actuarial model. To streamline and expedite the process, Milliman has developed cluster modeling, a new type of automated model compression process, which enables users to efficiently model millions of policies into just a few thousand, or even a few hundred model points. The process can accurately reproduce the results of the original seriatim model across a range of economic or experience scenarios.