Notes in General
By Anthony Cappelletti
Welcome to the December 2023 issue of General Insurance Insights, the SOA’s biannual newsletter for those with an interest in general insurance (aka, GI, property and casualty insurance, or P&C). This issue includes several articles of interest to GI actuaries. The first article is one that I wrote, “The NFIP: GAO Report to Congress.” In this article, I highlight some of the key elements included in the United States Government Accountability Office (GAO) report to Congress in July of this year regarding the National Flood Insurance Program (NFIP). The second article is another one I wrote, “SOA Climate Risk Certificate Program, General Insurance Course,” which is an overview of the GI Course within the SOA’s Climate Risk Certificate Program. The third article is “Revision to the FSA Pathway” by Stuart Klugman, FSA, CERA, Ph.D., in which he outlines how the recently announced changes to the FSA pathway affect those in the GI track. The fourth article is “GI Research Update” by Scott Lennox, FSA, FCAS, FCIA, in which he provides information on the latest SOA research involving general insurance.
I invite readers to read the Insurance Business article “How many decades in a 100-year event?” In it, David Saric interviews SOA’s managing director of research R. Dale Hall, FSA, MAAA, CERA, CFA, on issues related to the changing environment regarding general insurance exposures to floods and wildfires. It’s an interesting article—and it provides some insight into how general insurance companies must adapt to the increasing likelihood of catastrophic losses from floods and wildfires. It would appear that catastrophe modeling companies will also have to adapt their models.
Back in the June 2019 issue, I explored the increase in insured losses from wildfires in the article “The Increasing Risk of Wildfire Catastrophes.” In this article, I made note of the challenges the insurance industry in California faced from this risk. Since that article was written, several property insurers have exited the California market or stopped writing new policies. Steve Hallo’s article on PropertyCasualty360.com, “More insurers exiting California's home insurance market,” delves into the reasons for this. The biggest factor appears to be increasing natural catastrophe costs (mainly wildfires) and the state regulator’s efforts to control premium increases. In response to this, the California Department of Insurance is working on regulatory revisions that will allow property insurers to increase rates sufficiently so that they can remain in the market. The revisions should be in place by year-end 2024.
Regarding the NFIP, the reauthorization cycle continues. Since 2017, the program has been kept operational through an unprecedented sequence of temporary extensions each lasting between several weeks and 12 months. As I write this article, the latest temporary extension was put in place on Sept. 30, 2023. I anticipate another temporary extension when it expires on Nov. 17, 2023. A longer-term reauthorization is required for stability of the program. However, a longer-term reauthorization should also include reforms to benefit all the program’s stakeholders. The GAO report released this past summer investigates potential reforms. An overview of this report is in my article “The NFIP: GAO Report to Congress.”
Back in the December 2017 issue, I looked at the use of artificial intelligence (AI) in general insurance in the article “AI in GI: Overview of an Annual Meeting Session.” Much has happened in the world of AI since that time. AI continues to evolve as a tool for data analysis. But it also is developing in constructing text responses. The release of the AI-powered language model ChatGPT (Chat Generative Pre-trained Transformer developed by OpenAI) has fueled this use of AI. ChatGPT has been used to write poems, essays, and reports. While initial results are mixed, it will only get better over time. So, it has the potential to affect many professions including the actuarial profession. A couple of recent articles in the Actuarial Post look into this. They are “Transforming Actuarial Practices with AI” by Tom Chamberlain, VP Customer & Consulting at hyperexponential and “When will ChatGPT write my actuarial report” by Ed Harrison, senior consultant at LCP. Continuing with the topic of AI, the SOA recently published Amarnath Suggu’s article, “Impact of Climate Change on Insurance, An AI Perspective,” in The Actuary. It takes a look at how AI models are being used for the assessment of climate change-induced weather risks. All of these articles are worth taking the time to read.
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 this e‑newsletter, 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 committee or GI research committee volunteer opportunity in the database and are interested, contact me directly. We can always use new volunteers. In addition to this, we are also looking for ideas on GI continuing education offerings and authors (or ideas) for articles in upcoming issues. 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.