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Incorporation of Catastrophic Risks into Actuarial Practice: Call for Essays

Background and Purpose

Although a great deal of literature has addressed the identification and discussion of potential catastrophic risks (also referred to as tail risks), limited attention has been devoted to how these risks can be integrated into day-to-day regular actuarial practice.

Actuaries have characterized and modeled these risks using a range of approaches and probability distributions, some of which have been presented in professional papers and reports. In some cases, they have focused on probabilities covering the overall frequency or severity of overall loss or damage outcomes, while in others, the focus has been on the extreme portion of the loss function.

With the exception of a few outstanding examples (e.g., determining regulatory capital for insurers, stochastic analysis for social insurance, a general provision for risk and uncertainty in applications such as risk adjustment in the calculation of liabilities for insurance products under International Financial Reporting Standards, and some risk management processes), catastrophe risk has not been effectively integrated into most actuarial practice, such as pricing or reserving. What could or should be done once these scenarios have been developed?

The purpose of this Call for Essays is to advance discussions and encourage further research on how to integrate the evaluation of catastrophic events and risks into actuarial practice.

Some of these risks manifest as acute, that is, sudden and/or one-time discontinuity events. Others can take the form of chronic or ongoing outcomes, acting in an accumulative manner and emerging as significant risks over time, possibly affecting the financial sustainability of a financial entity or program.

Examples include:

  • Economic
    • Government debt default
    • Super-inflation
    • Severe losses in stock and/or bond markets
    • Widespread private credit defaults, an asset class with no complete loss cycle at current scale
  • Demographic
    • Accelerated population aging
    • Pandemic
    • Antimicrobial resistance
  • Climatic or environmental
    • Sea level rise, land subsidence, and erosion
    • Extreme temperature, precipitation, or other compound or cascading climatic factors, such as long-term droughts
  • Other
    • Geopolitical, such as a major war or conflict
    • Electricity - data center undercapacity and strain: how much is too much
    • Cyberwar, particularly such risks initiated or exacerbated by AI
    • Over-reliance on satellite communication
    • Unknown unknowns

Such an event may be unique or represent a combination of risks, resulting in a wide range of damage and losses linked to their underlying causes. At the same time, they can also have both adverse and possibly favorable effects. Their impact can be extreme. Therefore, recognizing and integrating these risks into regular management, planning, actuarial, risk management, and modeling practices can be challenging. Selecting the scenarios or confidence levels in advance can also be challenging.

In addition, both expected and unanticipated effects may be considered when quantifying the effects of a catastrophe. Catastrophe risks can significantly impact the operational and financial performance of the institutions that actuaries provide services to or about. They may affect mortality, morbidity, property damage, liability, and asset values. Therefore, actuaries and other risk managers need to address these risks in a systematic and comprehensive manner. Educating key stakeholders, including policyholders, staff, and those involved in corporate governance, may also be relevant.

This Call for Essays aims to provide actuaries and others with ideas and methods for incorporating and considering the effects and losses associated with possible catastrophes or tail events into actuarial practice. It is hoped that contributed essays may assist actuaries in making better decisions/recommendations and may also spark or provide an impetus for developing or implementing future approaches and research.

Topics of Interest

The SOA Research Institute (SOA) invites essay submissions on integrating catastrophic risks into actuarial practice. This Call is intentionally broad to encourage diverse perspectives and approaches. Contributors may explore one or more of the sample topics listed below or propose alternative subjects that align with the overall theme and objectives of this Call.

The following examples are illustrative and are neither mutually exclusive nor exhaustive.

  • How should an actuary decide whether a potential catastrophe should be considered as part of the ERM risk rather than in the pricing process?
  • Assuming a range of scenarios has been developed, how should they be combined or aggregated, if appropriate, into a recommendation for decision-makers?
  • How should the expected frequency and/or costs of a catastrophic event[1] be developed and presented so that decision-makers can understand and incorporate them into their decision-making process?
  • How to assess or determine the probabilities of an adverse extreme scenario?
  • How to integrate an assessment of catastrophic risks into one or more actuarial processes, such as pricing or reserving of insurance products, management reporting or ERM?
  • How can actuaries play a role in catastrophe risk integration that aids in meeting global regulatory filing requirements?
  • How can actuaries develop an early warning system, including quantitative guardrails, to better prepare for a catastrophic event? How should an actuary integrate both favorable and unfavorable scenarios into actuarial practice and communication?
  • What conditions, such as the state of the economy, may exacerbate or mitigate the impact of a catastrophe?
  • To what extent are unforeseen events (“unknown unknowns”) already embedded in models calibrated to historical experience? Should they be included in models or model governance?
  • How should the value of resilience be quantified so that it can compete with the drive for cost savings of consolidation? Practices such as minimized inventory, reliance on a single infrastructure provider and rapid adoption of AI reduce expected cost but may increase tail exposure that is rarely measured. Can actuarial methods assist in valuing what such choices give up?
  • Is the level of unforeseeable risk increasing or decreasing, and what observable evidence would settle the question? Construct one or more case studies that use one or more types of catastrophes and how they can be integrated into actuarial practice or processes.

Rules for Essay Submission

Timeline

The deadline for submissions is November 17, 2026. Essays will be published as soon as possible in a formal collection.

Length and Instructions for Submission

Essays must be submitted in English with a desired length of between 500 to 2,500 words in Word format. Except for citing quotations or controversial information, formal or extensive footnoting is not required. Essays must comply with the SOA's antitrust guidelines. Essays that contain any overt political statements, commercial content, inflammatory tone, and other inappropriate material will not be accepted for publication.

At the beginning of the essay, please provide the following information about the author: name, credentials or designations (if appropriate), email address, phone number, and either personal street address or title, company/organization name, and company/organization address. Essays accepted for publication will show the author’s name but no further contact information.

Please submit your essay via email to Research-CC@soa.org with the subject line “Incorporation of Catastrophic Risks into Actuarial Practice CFE.”

Originality

Essays must be the original work of the author or authors, must not have been previously published except by the SOA, must not have been plagiarized, must not have been previously assigned, licensed, or encumbered, must not infringe on any third-party intellectual property rights, and must not materially rely on content generated by artificial intelligence or similar automated tools, except as disclosed or for performing non-substantive, mechanical, or editorial functions (such as spelling, grammar, or formatting corrections).

Awards

Up to 2,500 USD has been allocated to awards for this call for essays. The review committee will select the leading essays and determine how to allocate the award money among them. Consideration will be given to creativity, originality and the extent to which an idea might help promote further thought in this area. In exchange for award money, selected authors will be required to assign all copyrights in their essays to the Society of Actuaries Research Institute.

Authors are ineligible for awards if an essay is based on an SOA Research Institute-sponsored and funded research study conducted by the author. However, authors are welcome to submit such essays for publication consideration.

Publication and Presentation

The SOA will publish and disseminate the essays selected for publication in an electronic format. Essays may also be presented at an SOA meeting, webcast, or other professional development event.

In addition, other venues for publication or presentation of the ideas outside of the SOA may be considered. It is hoped that publication of the collected essays will further knowledge and stimulate discussion as well as promote future efforts in this area.

Rights Granted

By submitting an essay for consideration, the essay author(s) is granting to the Society of Actuaries Research Institute an unlimited license to print or republish their essay with proper attribution given to the author(s).

Questions

Please direct any questions regarding this Call for Essays to Research-CC@soa.org with the subject line “Incorporation of Catastrophic Risks into Actuarial Practice CFE.”

Endnotes

[1] An event can be a single immediate or ongoing occurrence; or a broad economic, demographic, or climatic shift.