Notes in General

By Anthony Cappelletti

Welcome to the June 2022 issue of General Insurance Insights, the SOA’s biannual newsletter for those with an interest in general insurance (aka, P&C or property and casualty insurance). This issue includes a couple of articles of interest to general insurance actuaries. The first article is one that I wrote, “SOA Announces Changes to FSA Requirements for 2023—How it Affects the GI track.” In this article, I provide details into the revisions to the GI track exams and modules for 2023. The second article is “Actuaries Can Excel® at Data Science (Pun Absolutely Intended)” by Nick Hanewinckel, FSA, CERA, MAAA. This article is a reprint from an article published on Feb. 23, 2022, in the SOA’s Emerging Topics Community. It discusses an approach to analyzing big data in Python using an interface similar to Excel. This approach is helpful for those proficient in Excel but not yet up to speed in using Python or R.

Also included in this issue:

• “GI PD Opportunities Update,” an update of professional development (PD) opportunities with significant GI relevant content.

I’d like to take this opportunity to briefly comment on the Russian invasion of Ukraine. This has created a humanitarian crisis and the level of suffering is immeasurable. My thoughts go out to all of those that are harmed. It will take a long time for things to return to normal. In addition to the humanitarian crisis brought on by this invasion, there are also worldwide financial implications. Increasing stock market volatility, increasing fuel costs and transportation/supply-chain disruptions resulting from the invasion are causing an escalation of inflationary risk. This will affect many products and services that are directly and indirectly included in the cost of general insurance. Some of these inflationary increases will be temporary. Some may be long-lasting. Both reserving and pricing actuaries will need to consider this.

Earlier this year, the SOA introduced a new certificate program Ethical and Responsible Use of Data and Predictive Models Certificate Program. This certificate program is highly relevant to GI actuaries as they move towards greater use of big data, predictive analytics, and artificial intelligence. I encourage you to consider earning this certificate. The topics covered in it are extremely important to our profession.

In January of this year, the Joint Risk Management Section (JRMS) of the Canadian Institute of Actuaries (CIA), the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA) released the 15th Annual Emerging Risk Survey. For the fifth year in a row, the top two emerging risks in the survey are climate change and cyber. Both of these risks are of significant interest to general insurance actuaries. Be sure to take a look at the survey to see the complete results.

In March of this year, the International Association of Actuaries (IAA) released the report Climate Science: A Summary for Actuaries, What the IPCC Climate Change Report 2021 Means for the Actuarial Profession. This report summarizes information on climate change targeting the elements that actuaries should understand as risk professionals. I found this report informative. In my opinion, it is an important addition to the literature on climate risk that is geared toward an actuarial audience.

In the June 2021 issue of General Insurance Insights, I looked at the potential for significant social inflation affecting liability insurance in the post-pandemic near future in the article Developments in Social Inflation. In March of this year, the Insurance Information Institute looked at what may be the three major categories of the causes of social inflation in the article Social inflation: hard to measure, important to understand. This article provides some interesting insights on the topic.

In the June 2019 issue of General Insurance Insights, I took at brief look at The Increasing Risk of Wildfire Catastrophes. In January of this year, the American Academy of Actuaries Extreme Events and Property Lines Committee released the report, Wildfire: An Issue Paper—Lessons Learned from the 2017 to 2021 Events. This report takes an in-depth look at wildfire risk. I encourage anyone that is interested in wildfire catastrophes to read the Academy’s report.

Finally, I always find something to say about the National Flood Insurance Program (NFIP). And it’s always the same. Since 2017, the NFIP has been kept operational through an unprecedented sequence of temporary extensions each lasting between several weeks and 12 months. The latest temporary extension expires on Sept. 30, 2022. But this time I have a little more to say on the NFIP. Through the cycle of temporary reauthorizations, FEMA updated NFIP’s pricing methodology to what they refer to as Risk Rating 2.0. This updated rating became effective Oct. 1, 2021, for new business and April 1, 2022, for renewals. The goal of this pricing methodology is that rates should be actuarially sound. The result of this is that some properties will have massive increases. To alleviate this, increases on renewals are capped at 18 percent. It will be interesting to see if the rate increases faced by policyholders brings about pressure on Congress to take action. In my opinion, the potential for a longer-term reauthorization (i.e., greater than two years) by Congress is unlikely in the near future. Having said that, a longer-term reauthorization by Congress is required for stability. It should also be an opportunity to consider reforms to benefit all of the program’s stakeholders.

NFIP reauthorization is an opportunity for Congress to take bold steps to reduce the complexity of the program and strengthen the NFIP’s financial framework so that the program can continue helping individuals and communities take the critical step of securing flood insurance.
- FEMA website, accessed April 7, 2022

Our goals with General Insurance Insights are to keep readers informed on topics of interest to GI actuaries and to develop the GI actuarial community within the SOA. We welcome your feedback and ideas to help us achieve these goals. If you have questions, feedback or ideas regarding General Insurance Insights, feel free to contact me.

I would also like to take this opportunity to inform our readers that we are always looking for volunteers in general insurance at the SOA. Please visit the SOA Volunteer Opportunities Database. The database includes all open volunteer opportunities at the SOA. If you do not see a GI exam volunteer opportunity in the database and are interested, contact me directly. We can always use new volunteers for GI exam item writing and grading. In addition to this, we are also looking for ideas on GI continuing education offerings and authors (or ideas) for articles in upcoming issues of General Insurance Insights. Let me know if you would like to contribute.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.

Anthony Cappelletti, FSA, FCIA, FCAS, is a staff fellow for the SOA. He can be contacted at acappelletti@soa.org.