Notes in General
By Anthony Cappelletti
Welcome to the December 2022 issue of General Insurance Insights, the SOA’s biannual newsletter for those with an interest in general insurance (aka, P&C or property and casualty insurance). This issue includes a couple of articles of interest to general insurance actuaries. The first article is one that I wrote, “Pay-As-You-Drive Insurance and Usage-Based Insurance: A Look at Two Recent Articles in the NAAJ.” In this article, I provide a non-technical review of two recent articles from the SOA’s North American Actuarial Journal. The second article is “Certificate in Climate Risk Announced” by Stuart Klugman, FSA, CERA, Ph.D. This article describes the SOA’s latest certificate program. Also included in this issue is “GI PD Opportunities Update,” an update of professional development (PD) opportunities with significant GI relevant content.
Earlier this year, the SOA published two articles that are relevant to GI actuaries. The first is “Meet Hybrid Data: A Blend of Alternative and Traditional Data. A Case Study to Construct an Improved Inflation Index” from the Emerging Topics community in the SOA’s digital publishing platform. The second is “Climate Risk Modeling: What You Need to Know to get Started” from the Risk Management Section. Be sure to read through these articles if you have the time.
In October of this year, the California Department of Insurance (DOI) enacted legislation requiring property insurers to provide discounts for wildfire risk mitigation efforts. Furthermore, insurers will be required to provide wildfire risk determinations to their policyholders. This legislation has the potential to reduce property losses from wildfires and reduce property insurance premiums. It will take some time to determine if this will occur.
In September of this year, Hurricane Ian hit Florida as a Category 4 storm. Estimates of total insured losses for this catastrophe range from $35 billion to $55 billion.[1] The costliest hurricane in the U.S. was Hurricane Katrina in 2005 with insured losses of $90 billion (in 2021 dollars). The second costliest was Hurricane Ida in 2021 with insured losses of $36 billion and the third costliest was Superstorm Sandy in 2012 with insured losses of $35 billion (in 2021 dollars).[2] It is likely that Hurricane Ian will be the second costliest hurricane in the U.S. The Federal Emergency Management Agency estimates that losses to the National Flood Insurance Program (NFIP) will be between $3 billion and $5 billion.[3] This level of insured losses is significant. It will have an adverse effect on the operating results for Florida property insurers and the NFIP. In addition to this, it has been estimated that uninsured losses from Hurricane Ian will be over $10 billion.[4]
Regarding NFIP reauthorization, nothing has really changed over the past six months. Since 2017, the program has been kept operational through an unprecedented sequence of temporary extensions each lasting between several weeks and 12 months. The latest temporary extension expires on Dec. 16, 2022. A longer-term reauthorization is required for stability. It should also be an opportunity to consider reforms to benefit all the program’s stakeholders.
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 General Insurance Insights, 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 volunteer opportunity in the database and are interested, contact me directly. We can always use new volunteers for GI exam item writing and grading. In addition to this, we are also looking for ideas on GI continuing education offerings and authors (or ideas) for articles in upcoming issues of General Insurance Insights. 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.