Vol. 8 | No. 4
Date:10/01/2024
Q&A—ACI/ACRI Work Group Eyes Updates, Seeks Volunteers
Ott
The ACI/ACRI Work Group, which covers the Actuaries Climate Index (ACI) and Actuaries Climate Risk Index (ACRI), examines both indexes and explores ways to improve them. The ACI is a joint project of the Academy, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries. The Academy released the ACRI in 2020.
ACI—The ACI is intended to provide a useful monitoring tool, as an objective indicator of the frequency of extreme weather and the extent of sea level change. It provides graphics and data for download for those who wish to explore the index. The ACI is available for the United States and Canada and 12 subregions. Read more.
ACRI—The ACRI follows on the ACI by providing an objective and independent analysis to assist in answering the question: Are the extreme weather conditions that result from a changing climate producing increased property losses? Originally released in 2020 with preliminary findings, a revised and finalized ACRI is planned for release in 2025, after the completion of the ACI revision, with plans to update it periodically. Read more.
- Interested in volunteering on the ACI/ACRI Work Group? The ACI/ACRI Work Group is always seeking volunteers to help with their climate data analysis. Contact the Academy by filling out the volunteer contact form. (Please note your interest in joining this work group.)
ACI/ACRI Work Group Chairperson Peter Ott, a 2023 Academy Rising Actuary Award recipient, offered some insight on the work group’s progress so far, and key issues going forward.
How do you think a revised, more granular, ACI might be used by actuaries?
With a revised ACI, actuaries will have metrics at their fingertips that are at a level of granularity that was not possible in the original ACI. This granularity is in large part due to reanalysis data. Actuaries will be able to analyze geographies more relevant to their specific needs, rather relying on larger pre-defined regions.
How might it be used by policymakers and/or regulators?
Regulators and policymakers are already using the ACI to help inform how extreme events have changed over time. I hope the update will further inform non-actuaries of the various extreme events that regions are subject to. With the increased granular data that will be available, regulators and policy makers can also drill down into specific regions within their jurisdiction.
How important is the shift of data sources—from station-based data in the current ACI to reanalysis data for the revised version?
The shift to reanalysis data is a huge gain for the ACI. Station-level data has its own drawbacks when stations go offline, or when stations report erroneous data points. Also, you’re clearly limited by the density and availability of physical stations. Extensive analysis was done to understand the differences between station data and the new reanalysis data sets. We’re confident the reanalysis data will provide increased resolution in both spatial and temporal elements.
What are the biggest challenges which climate events are posing for insurers?
For insurers, one of the greatest risks is the non-stationary aspect of climate change. Actuarial methods and catastrophe modeling have historically been parameterized on past loss data. However, climate change is forcing insurers to try and incorporate more forward-looking views into their estimates. This is a tremendously difficult problem, and an area where much needed research is being conducted.
Are the challenges the same for reinsurers?
Reinsurers are in a similar situation as insurers, albeit they may be able to distance themselves from some risks via the structure of the reinsurance agreement. However, for some reinsurance structures that are concerned with tail events, climate change risk will have a leveraging effect. There is additional uncertainty for extreme events, and reinsurers will need to be extra cautious when estimating these remote losses.
Koca (at podium) leads a session on ASOPs
Academy Hosts Sold-Out P/C Opinion-Writing Seminar
The Academy hosted a successful, sold-out Seminar on Effective P/C Loss Reserve Opinions Dec. 9–10 in New Orleans, covering the entire opinion-writing process from becoming qualified to signing opinions, adherence to actuarial standards of practice, and how to write reports. Attendees gained significant hours of continuing education (CE) credit, including professionalism and bias CE under the U.S. Qualification Standards.
New to the program this year were two-opinion writing workshop sessions, up from one previously; a new session on practice guidance that contained elements of documentation and report writing as well as how to read the annual P/C Practice Note; and a roundtable on updates to ASOP No. 36, led by Michelle Iarkowski and Jim Leonard.
About a third of the audience were first-time seminar attendees, who gained valuable learning experience from both the faculty and more experienced opinion-writing attendees. Seminar faculty collected attendees’ feedback and will convene in the new year to discuss the location of next year’s seminar.
“The P/C Opinion Seminar is a highlight of the year, bringing an experienced faculty across consulting, insurance company, and regulator actuaries along with an engaged audience leading to fantastic sessions and discussions,” said new Academy Member-Selected Director Stephen Koca, chairperson of the Committee on Property and Liability Financial Reporting (COPLFR) and a seminar faculty member.
“The seminar provides appointed actuaries with an intensive day-and-a-half of focused continuing education, featuring interactive workshops designed to tackle challenging hypothetical scenarios and equip attendees with the skills to navigate novel situations in their SAOs,” said Opinion Seminar Chairperson Aaron Hillebrandt.
Coming Soon—Annual COPLFR P/C Practice Note on SAOs
COPLFR will release its annual practice note on statements of actuarial opinion (SAOs) on property and casualty loss reserves by the end of December. The practice note describes practices commonly employed by actuaries working on SAOs on loss and loss expense reserves in accordance with the NAIC’s Property and Casualty Annual Statement Instructions.
P/C Law Manual Available for Order
The P/C Loss Reserve Law Manual, updated for 2024, is available for preorder. Place your order today and be one of the first to have this useful reference tool.
Designed to help appointed actuaries know the requirements for SAOs, the manual contains a compilation of insurance laws relating to P/C loss and loss expense reserves for all 50 states, Washington, D.C., and Puerto Rico.
“I refer to the Law Manual multiple times throughout the year as my clients come up with any number of reserving-related regulatory questions that they want me to assist with,” said Leslie Marlo, chairperson of the P/C Law Manual Subcommittee. “It’s great to have one handy resource in order to help them out.”
What’s New This Year: Changes were made to the pages of 27 states/territories, including changes to laws in 11 states/territories, and 16 states/territories with updates made due to clerical changes.
The manual is available for order in multiple formats, allowing you to select the version that best meets your needs. It is also available by jurisdiction, providing an excellent way to select areas relevant to your work. The manual will be available for delivery this winter—reserve your copy today.
Academy Presents at NAIC Fall Meeting
Academy volunteers and staff presented at the NAIC Fall National Meeting in Denver in mid-November, covering a host of issues and interacting with regulator stakeholders. Presentations were made to all three actuarial task forces, including an update on Casualty Practice Council (CPC) activity to the NAIC’s Casualty Actuarial and Statistical (C) Task Force (CASTF).
During the CASTF meeting, there was a discussion of the NAIC’s request for help from the Academy, the Casualty Actuarial Society (CAS), and the Society of Actuaries (SOA) in a review of the current property/casualty knowledge statements in light of recent educational changes from the SOA.
Work on this request will continue into early 2025. An Actuarially Sound blog post offers meeting highlights and you can watch a recap by Academy staff on the Academy’s YouTube page.
Other P/C-related presentations included:
- President Darrell Knapp, Actuarial Board for Counseling and Discipline member and Past President Shawna Ackerman, and Actuarial Standards Board (ASB) Chairperson Kevin Dyke gave professionalism updates to CASTF and the NAIC health and life task forces.
- Senior Casualty Fellow Rich Gibson presented to the Antifraud (D) Task Force on the recent issue brief, Insurance Fraud: Impacts on Premiums, Claim Costs, and the Public.
- Director of Research Steve Jackson gave an update on the title insurance research project to NAIC’s Title Insurance (C) Task Force.
The Academy luncheon at CAS
Volunteers and staff attended and presented at the CAS annual meeting Nov. 3–6 in Phoenix. The Academy hosted a luncheon for newly credentialed fellows and associates, providing information about new membership requirements that will be effective Jan. 1, 2026.
Outgoing Academy President Lisa Slotznick led a session on “Self-Regulation and the Code” and a roundtable on “2024 Mega Issues—Climate, Cyber, AI—and Policymaker Interactions.”
Senior Casualty Fellow Rich Gibson, Casualty Vice President Susan Kent, and New Mexico Office of the Superintendent of Insurance Chief Actuary Christian Myers presented on “P&C Regulatory and Legislative Environment.”
CLRS Presentations
CPC volunteers and staff also attended the Casualty Loss Reserve Seminar (CLRS) in San Francisco in September, co-sponsored by the Academy and CAS, with volunteers presenting in a wide range of sessions.
Senior Casualty Fellow Rich Gibson moderated a well-attended session on property insurance and wildfires and earthquakes that also featured Academy Past President Shawna Ackerman as a presenter. Gibson also moderated sessions on technology and reserving-process implications, and on international capital standards with NAIC Senior International Solvency Policy Advisor Ned Tyrrell.
Susan Kent Becomes Casualty VP; Two Casualty Members Join Academy Board
Kent
Armstrong
Koca
During the Academy’s leadership transition in mid-November, Susan Kent became the new casualty vice president, and two of the three incoming member-selected directors (MSDs) are from the casualty practice area. Watch a replay of the transition on the Academy’s YouTube page.
MSD Steve Armstrong has been a member of the P/C Committee on Equity and Fairness since its inception, and serves on the Automobile Insurance Committee, the ASOP No. 12 Task Force, and the Volunteer Engagement Subcommittee. A past president of the CAS, Armstrong is also a board member of the Sexuality and Gender Alliance of Actuaries (SAGAA).
He said in his candidate statement: “I intend to use my seat at the Board table to find more direct and timely ways to bring insights, solutions, and education to the growing concerns of accessibility and affordability of insurance across all sectors here in the United States.” See Armstrong’s full bio.
MSD Stephen Koca is chairperson of COPLFR, which prepares three major offerings each year—the annual P/C opinion practice note, the Seminar on Effective P/C Loss Reserve Opinions, and the P/C Loss Reserve Law Manual. Koca is also a past member of the Workers’ Compensation Committee.
Koca said in his candidate statement: “I plan to help the Academy contribute to the U.S. actuarial profession with important input to regulatory requirements and educational offerings to assist P&C actuaries interpret ever-increasing requirements.” See Koca’s full bio.
Kunst (standing), Giammanco (left), and Niami
ICYMI—Envision Tomorrow Sessions Cover Key P/C Topics
P/C breakout sessions at October’s Envision Tomorrow, the Academy’s annual meeting, included:
- “Identifying and Measuring the Impact of Mitigation Solutions for Extreme Weather Events,” which looked at how mitigation efforts anticipating hurricanes, wildfires, and other natural catastrophes can protect property from damage providing a positive financial effect for policyholders and insurers.
- “Florida and California Reforms and Their Impact on the P&C Insurance Market” examined the effects of climate change on property insurance. Panelists examined the property insurance market in the two states facing significant climate risk-related challenges.
- “Cost Drivers in Property and Casualty Insurance” explored the state of the P/C insurance market, examining key cost drivers and pressure points, and delving into affordability, availability, and the effects of public policy initiatives.
For a full recap of the event, read the Envision Tomorrow supplement to the October Actuarial Update .
Actuary Voices Features Past Casualty VP Rade Musulin,
Rising Actuary Isabelle McCullough
Two recent episodes of Actuary Voices, feature Academy casualty volunteers:
- Past Casualty Vice President Rade Musulin discusses hurricane season and ways to mitigate the growing threat of climate-enhanced extreme weather.
- Committee on Cyber Risk member—and 2024 Rising Actuary Award recipient—Isabelle McCullough talks about the committee’s work, the trends it is seeing, and what drew her to working in this area.
Subscribe to Actuary Voices wherever you get your favorite podcasts.
Highlights From Casualty Quarterly
Prefer to watch your news? Check out this “Highlights From Casualty Quarterly” video for a quick recap of what you need to know.
ASOP No. 41 Second Draft
Open for Comment
A second exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 41, Actuarial Communications, is open for comment. The draft reflects revised guidance and updated definitions in response to comments received on the first exposure draft. ASOP No. 41 applies to all practice areas. Comments are due to the ASB by Feb. 15, 2025. For more information and to comment, visit the ASB website.
Insurance News Net covered Gen. Wesley Clark’s Envision Tomorrow keynote address, in which he cited cybersecurity, climate change, and AI risks.
Envision Tomorrow coverage also included the presentation of Outstanding Volunteerism Awards and Rising Actuary Awards, which was included in a PropertyCasualty360 roundup of P/C activities.
A subscriber-only Bloomberg Law “deep dive” about the challenges that financial firms have had in defining and meeting climate pledges quoted Peter Ott, vice chairperson of the Academy’s Climate Change Joint Committee.
Two of the Academy’s senior fellows—Rich Gibson (casualty) and Cori Uccello (health)—provided insights to Best’s Review for a story on the evolving risk landscape.
Legislative/Regulatory Activity
Federal
The Biden administration hosted the first White House Summit on Extreme Heat, bringing together more than 100 participants from across government. The administration invited federal and state governments, as well as local communities, to join them in an Extreme Heat Call to Action to protect the public from heat, and announced publication of a Draft Community Heat Action Checklist.
The Occupational Safety and Health Administration (OSHA) proposed a new standard, Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings. It applies to all employers conducting outdoor and indoor work in all general industry, construction, maritime, and agriculture sectors where OSHA has jurisdiction and requires employers to create a plan to evaluate and control heat hazards in their workplace. Comments on the proposal will be accepted until Dec. 30.
The Senate Homeland Security and Government Affairs Committee approved S 3067, requiring the Federal Emergency Management Agency (FEMA) to evaluate ways to reduce the complexity of cost effectiveness requirements for several grant programs administered by the agency related to reducing the effects of future disasters, including the Flood Mitigation Assistance Program.
The House Financial Services Committee approved HR 7462, the Wildfire Insurance Coverage Study Act of 2024, offered by Rep. Maxine Waters of California, which would require the U.S. Government Accountability Office (GAO) to report on trends in wildfire declarations, mitigation practices, state and federal programs regarding wildfire risk, and the need for a national map of wildfire risks, as well as on the availability and cost of wildfire insurance coverage for homes and commercial property.
The House passed HR 5490 in late September removing about 900 private residences from the federal Coastal Barrier Resources System, which makes it easier for those owners to purchase federal flood insurance.
State
California Gov. Gavin Newsom signed AB 2743, requiring a personal vehicle sharing program to require, at a minimum, $45,000 of insurance for bodily injury or death of a single person; $90,000 for bodily injury or death for all persons; and $15,000 for property damage.
The California Legislature passed three bills that currently sit on Newsom’s desk:
- AB 2983, requiring the state’s Department of Insurance to be added to the California Wildlife Mitigation Program Board;
- SB 1217, mandating a pet insurer disclose if it reduces coverage or increases premiums based on the age of the covered pet or a change in the geographic location of the insured; and
- SB 1295, requiring that a 10-day notice period for nonpayment of automobile insurance be instituted after a specified due date and that any policy cancellation not occur until it has expired.
Illinois Gov. J.B. Pritzker signed HB 5357, requiring homeowner’s insurance policies to disclose whether they cover damage from a sewer backup or overflow from a sump pump and, if not, to offer supplemental insurance to cover them.
The New York Legislature passed S 9481/A 10342, allowing standalone business interruption insurance to be offered by insurers instead of the current practice of tying such policies to physical loss or damage. The new offering is meant to cover closures due to a pandemic. It also passed A 9407, providing supplemental spousal liability motor vehicle insurance coverage for the spouse of an insured.
Mississippi issued final rules outlining peer-to-peer car-sharing programs. The rules include requiring a permit issued by the state to operate, as well as insurance requirements for both the shared car’s owner and the drivers.
Webinar Examines Workers’ Comp Issues
A casualty webinar, Diamonds in the Rough: A Discussion of Lesser-Known Workers’ Compensation Resources for Actuaries, examined resources used by actuaries in workers’ compensation work. Archived webinars are accessible via Academy Learning. (Member sign-in required.)
Committee Releases Insurance Fraud Issue Brief
The P/C Committee on Equity and Fairness released an issue brief, Insurance Fraud: Impacts on Premiums, Claim Costs, and the Public, which discusses regulatory actions to prevent and report fraud and approaches actuaries can take to quantify the damage fraud causes.
P/C News in Brief
- COPLFR asked NAIC’s Actuarial Opinion Working Group for clarification on 2024 regulatory guidance pertaining to immaterial long-duration unearned premium reserves.
- The P/C Extreme Events and Property Lines Committee submitted comments to the Federal Emergency Management Agency on its request for information on the redesign of the National Flood Insurance Program’s Community Rating System.
- The CPC submitted comments to the ASB on the exposure draft of ASOP No. 30, Profit Margins and Contingency Provisions in Property/Casualty Risk Transfer and Risk Retention.