By Scott Lennox
The curriculum for the General Insurance (GI) fellowship track includes a five-hour exam covering fundamental topics in GI. Although candidates are introduced to fundamental GI topics as part of the ASA requirements, a more comprehensive education is included in the GI Ratemaking and Reserving (GIRR) exam. The learning objectives for the GIRR exam were written to ensure the curriculum would provide in depth coverage of the fundamentals of reserving and ratemaking for GI, as well as various other topics fundamental to the GI actuary’s work, including professional responsibilities and considerations, preparation and review of data, claim and premium liabilities for financial reporting, and monitoring of results. Jacqueline Friedland was selected to author a textbook to bring all these topics together in a single text together with comprehensive real-life examples. The textbook, Fundamentals of General Insurance Actuarial Analysis, was written and published in 2013 and has served as the main source of material for the GIRR syllabus. This textbook is a comprehensive treatment of the fundamentals that GI actuaries need to know in their day-to-day work.
An additional GIRR learning objective required candidates to understand the nature and application of catastrophe models used to manage risks from natural disasters. This leaning objective was met with a textbook by Grossi & Kunreuther, Catastrophe Modeling: A New Approach to Managing Risk.
The GI curriculum committee met in 2018 to discuss various topics to include in a second edition of the textbook. At the same time, a detailed analysis of the various topics that actuaries need to know to be recognized by the U.S. National Association of Insurance Commissioners (NAIC) for signing the NAIC P/C Statement of Actuarial Opinion (SAO) was in progress. This analysis commissioned by the NAIC resulted in 91 knowledge statements that were required to be included in basic education. These were used to identify any topics that could be enhanced in the SOA GI syllabus.
A second edition of the Friedland textbook was drafted to include various topics to be enhanced or added. In addition, numerous references were updated. The 2019 Supplement to the Friedland textbook was created to enhance various topics to the educational standard required to satisfy the NAIC knowledge statements (the 2019 Supplement can be found here). As noted in the June 2019 General Insurance Insights article written by Stuart Klugman, the NAIC concluded that the SOA’s GI track is an NAIC Accepted Actuarial Designation, meeting NAIC standards of a qualified actuary in general insurance, pending agreed-upon updates to the curriculum. The 2019 Supplement contains the updates to the GIRR syllabus relating to the NAIC knowledge statements and are in place for the SOA’s Fall 2019 GIRR exam.
The SOA’s 2013 Friedland textbook was significantly more comprehensive than the author’s previous work (Estimating Unpaid Claims Using Basic Techniques published in 2010), and the 2019 Supplement builds on that. The main topics in the 2019 Supplement include:
- A new section has been added to Chapter 11 (Earning Exposures) that provides additional details on GI policies where exposures are not evenly earned through the policy term, with examples.
- A new section has been added to Chapter 20 (Impact of Changing Conditions on Projection Methods) that contains more detailed discussions of the implications to projections of ultimate claims when there are changes in policy limits, coverage triggers, judicial decisions, policy terms and conditions, endorsements and exclusions, attachment points, and reinsurance reinstatement provisions.
- Appendix H on reinsurance was enhanced with some additional material and some examples to help illustrate the concepts. The original appendix provided a very good background to reinsurance topics that actuaries need to know, and the additional material adds a little more depth to this subject. This material belongs with Part 2 of the textbook and will form a new chapter immediately following Chapter 9 (Professional Judgement) when the second edition is finalized.
- The 2013 Friedland textbook provided some basic understanding of claims by layer. A new appendix has been added in the 2019 Supplement to provide a more comprehensive treatment of claims by layer. This material will be a new chapter and included with Part 4 of the textbook when the second edition is finalized.
The 2013 Friedland textbook and the 2019 Supplement will form the requirements to meet the ratemaking and reserving learning objectives of the GIRR exam until the second edition of the textbook is finalized and published. The second edition will be finalized once the NAIC has completed their review of the additional material. Changes to Chapter 24 (Premium Liabilities) may be included to incorporate the accounting rules of IFRS 17.
In addition to the 2019 Supplement to the 2013 Friedland textbook, a decision was made to switch the syllabus source material used to cover the catastrophe modeling topic. Starting with the Fall 2019 GIRR exam, the source used for this topic is now the July 2018 monograph by the American Academy of Actuaries entitled Uses of Catastrophe Model Output. This new source material is written for actuaries and provides a better coverage of the catastrophe modeling learning objective for candidates.
Scott Lennox, FSA, FCIA, FCAS, is a staff fellow for the Society of Actuaries. He can be contacted at slennox@soa.org.