Managing director of research at the Society of Actuaries (SOA), R. Dale Hall, provides research insights on technology and new practices.
Tell us about the latest flood insurance research.
Hall: The Casualty Actuarial Society (CAS), the Canadian Institute of Actuaries (CIA) and the SOA jointly developed a report examining how flood and other catastrophe model results have been incorporated into pricing and underwriting. Across the United States and Canada in recent years, hurricanes, storms and inland floods have caused some large catastrophic losses. The report focuses on a variety of examples in Canada, and the findings can also be broadly applied to other markets.
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What are some of the key areas of the report?
Hall: This research explored a variety of areas involving catastrophe models, as it is a more complete representation of risk. We looked at the basics of catastrophe models, which are used to create a set of building exposures and potential events. We specifically focused on flood models, so this meant understanding the different types of events. Model validation is another important component—actuaries should ensure the model is generating appropriate output. We were also able to draw out problem areas and make adjustments with the modeling of flood risk. For example, there may be a lack of historical data, difficulty in capturing the tail risk and challenges with pricing new areas.
Earlier this year, you spoke at the “Bernard Harris Memorial Symposium: Risk in the 21st Century” on analytics used for accelerated underwriting. What were the key points discussed?
Hall: We discussed the basis for actuarial risk analysis and how predictive analytics is increasingly being used across various business lines within insurance. We also covered relative risk mortality assessments and mortality statistics. Stay tuned for further updates on research projects involving models and related topics.