Actuarial Research on General Insurance

R. Dale Hall

The Society of Actuaries (SOA) continues to develop, foster and collaborate on a wide variety of research projects and studies pertaining to general insurance (property and casualty). Here is a snapshot of some of the new activities.

Good Research Reads

PRACTICAL GUIDE AVAILABLE ON ECONOMIC SCENARIO GENERATORS
The SOA released a practical guide on working with economic scenario generators, including specific applications to insurance, pensions and retirement funding. The guide also describes the use of economic scenario generators for economic capital modeling, stress testing and liability valuation. The guide has been designed for use by several different audiences, from business practitioners and senior financial leaders to students looking for a manual on this topic.

READ RISK SCORING FOR HEALTH CARE INSURANCE PRIMER
The SOA has made available a primer on risk scoring in health care insurance applications. Risk scoring represents the first stage of a risk adjustment program that is used for spreading risk among participating entities. The primer describes the history and methodology related to risk scoring, both in its application to the Affordable Care Act and other settings.

MASSACHUSETTS HEALTH CARE REFORM FOCUS OF REPORT
The SOA has released an extensive research report that describes and analyzes health care reform in Massachusetts between 2006 and the passage of the Affordable Care Act (ACA) in 2010. Health care reform in Massachusetts served as an initial model for the ACA, and the report examines a number of expected outcomes and results.

NEW TOOL ON RELATIVE RISK
The SOA developed a resource for actuaries working with preferred class structure programs. The Relative Risk Tool (RR Tool) is used to determine the preferred class relative risk value, referred to as a relative risk score. The score can be used as a guide in deciding on the appropriate 2015 Valuation Basic Tables (VBT) relative risk table to use for each risk class for valuation purposes. Access the RR Tool.

For more information about the RR Tool, please refer to the Terms and Conditions and Help links within the RR Tool. In addition, please read the report by the Underwriting Criteria Team.

The SOA General Insurance Practice Research Committee is currently developing and reviewing a number of research projects. The SOA General Insurance Practice Research Committee is working with the Casualty Actuarial Society (CAS) Auto Loss Cost Trends Working Party and the Property Casualty Insurers Association of America (PCI) to study trends and contributing factors with auto loss. This new project plans to develop a dashboard framework to identify, measure, monitor and report on insurance and noninsurance factors that may impact state-by-state auto loss trends. Deliverables from this project will include an enhanced analysis and dashboard report that summarizes the analytical findings.

The SOA will also examine takaful insurance, an Islamic co-operative reimbursement system for managing loss, which is seen as an alternative to conventional insurance. Takaful insurance is growing in prominence in international markets, and the research project will look at it from a North American market perspective. By exploring this research topic on behalf of our members, we can all better understand how to apply this business model.

Through a project with Resources for the Future, an independent economic research organization, the SOA will sponsor research papers on public and private financing of catastrophic risks. Papers will cover a range of topics, such as the National Flood Insurance Program, terrorism risk insurance, state wind pools, the California Earthquake Authority and the federal catastrophe pool, among others. These papers will be presented this November.

We are developing research to quantify the financial implications of extreme climate and also to understand mitigation risk associated with environmental sustainability. In past columns, I have mentioned the SOA’s research activities on climate and extreme weather events. We continue to gather volunteers to serve on the SOA Project Oversight Group (POG) on climate, weather and environmental sources, which will help determine future projects.

Earlier this year, the SOA, along with the CAS and the Canadian Institute of Actuaries (CIA), announced a project focusing on past insurer impairments and insolvencies. While this project is still in early stages of development, it is another example of how we are working within the industry and overall field to help actuaries be better equipped to prevent or mitigate future insolvency situations.

I encourage you to visit SOA.org for updates on our ongoing research projects and new proposals. Also, visit SOA Engage at engage.SOA.org. It is our online community where you can comment on the latest ideas and research, share your perspectives and more.
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Research Opportunities

R. Dale Hall, FSA, CERA, MAAA, is managing director of Research at the Society of Actuaries.