Reserving for Loyalty Programs

Loyalty Programs issue points or miles to members, rewarding them for being loyal to their Hotel Brands and Airlines. These points/miles serve as a currency and represent an obligation to the programs that need to cover the cost of a potential award stay or flight into the future. Estimating future redemption rates is a non-trivial exercise; for programs that do not have expiration rules, members can redeem today points/miles that were earned 20+ years ago.

For actuarial models to accurately estimate the liability associated with Loyalty programs they need to properly reflect changes in members’ redemption behavior over time, in light of programs evolution and rapidly changing external economic conditions. Our session will describe at a high level the structure of Loyalty programs, and present different models that can be used to assess these estimates, from simple to complex.

  • Date:Tuesday, September 14
  • Time:2:15 PM - 3:30 PM EDT
  • Session Type:Concurrent Session
  • Session Code:ST-4
  • Learning Objective 1:Provide background on the history and structure of loyalty rewards programs.
  • Learning Objective 2:Recognize how customer behavior and engagement impacts loyalty rewards valuation.
  • Learning Objective 3:Develop a basic understanding of loyalty rewards liability reserving techniques.
  • Level of Knowledge:Level 1: No prior knowledge of the subject
  • Moderator:Rachel Dolsky


Emmanuel Bardis, FCAS
Willis Towers Watson
Alexander Turrell, FCAS
Willis Towers Watson