The Actuary June/July 2015

68 Pages·2015·47.01 MB·English

JUNE/JULY 2015 VOLUME 12 ISSUE 3

BETTER INSURANCE WHAT IS OPERATIONAL
INDUSTRY? P. 18 RISK? P. 36
INTEGRATION OF TRUTH SEEKING
ERM, P. 28 DEBATE, P. 42
We’re interested
in the person
behind the paper,
because we don’t
submit resumes,
we present people.
let us get to know you. A phone
call today is the best career
move you can make, even if you
aren’t looking right now.
R
ActuAriAl cAreers, inc.®
Westchester Financial Center
11 Martine Avenue, 9th Floor
White Plains, NY 10606
Tel: [phone] / Toll Free: 800-766-0070
Fax: [phone]
E-mail: [email protected]
www.actuarialcareers.com
‘
15
POST-FINANCIAL CRISIS
FEATURES
18 H AVE WE BUILT A 28 I NTEGRATION OF 36 OPERATIONAL
BETTER INSURANCE ERM IN CAPITAL RISK—WHAT IS IT?
INDUSTRY? AND STRATEGY AND WHAT DO
A panel of industry DECISIONS I DO ABOUT IT?
experts shares its views The challenges It’s time to get
on how insurers have preventing a greater really serious about
changed seven years uptake of ERM as monitoring, measuring
after the financial crisis a strategic partner, and managing
and whether the industry techniques to overcome operational and
is better positioned to these challenges, and business risks.
weather the next storm. benefits offered by By Larry Zimpleman
Compiled by Jeff further integrating ERM
Schuman and the programs are explored. 42 T HE TRUTH SEEKING
Editorial Staff By Vikas Shah, Mark DEBATE
Stephens, Jim Stoltzfus How to maintain our
and Fiona Ng integrity and reputation
as unbiased truth
seekers.
By Kurt J. Wrobel
DEPARTMENTS
6 EDITORIAL
ACTUARIES TO THE RESCUE?
10 LETTER FROM THE PRESIDENT
SOA PRESIDENT CONTRIBUTING EDITORS
MID-YEAR REPORT
Errol Cramer Rod Bubke
FSA, MAAA FSA, MAAA
[email protected] [email protected]
48 EDUCATION
SOA STAFF CONTACTS Alan Cooke
48 ADVANCED BUSINESS
Patrick Gould FSA, FCIA, MAAA
Managing Director of Marketing [email protected] ANALYTICS—THE SOA TODAY
& Communications
[email protected] Carl Hansen 50 THE HICKMAN SCHOLARSHIP—
FSA, EA, FCA, MAAA
TRAINING ACTUARIAL
Cheré LaRose [email protected]
Director of Member & Candidate EDUCATORS
Communications Christine Hofbeck
[email protected] FSA, MAAA
[email protected] 52 BOOK REVIEW
Karen Perry
Publications Manager Wilbur Lo WHAT’S YOUR FUTURE WORTH?
[email protected] FSA
[email protected]
Jacque Kirkwood 54 SECTION HIGHLIGHTS
Magazine Staff Editor Albert Moore
[email protected] ASA, MAAA • THE MANAGEMENT AND
[email protected] PERSONAL DEVELOPMENT
Erin Pierce
Graphic Designer Jeffrey Schuman SECTION
[email protected]
FSA, MAAA
• THE PRODUCT DEVELOPMENT
[email protected]
The Actuary is published bi-monthly (February,
April, June, August, October, December) by the SECTION
Society of Actuaries, 475 N. Martingale Rd., Suite Lloyd Spencer
600, Schaumburg, IL 60173-2226. Periodicals post- FSA, CERA, MAAA
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ing offices. USPS #022-627.
Karin Swenson-Moore 60 SOA BOARD APPROVES
This publication is provided for informational
and educational purposes only. The Society of FSA, MAAA GOVERNANCE TASK FORCE
Actuaries makes no endorsement, representa- [email protected]
tion or guarantee with regard to any content, RECOMMENDATIONS
and disclaims any liability in connection with The Actuary welcomes both solicited and unsolic-
the use or misuse of any information provided ited submissions. The editors reserve the right to 62 AN INDIVIDUAL HEALTH
herein. This publication should not be construed accept, reject or request changes to solicited and
as professional or financial advice. Statements of unsolicited submissions, as well as edit articles EXCHANGE AND PENT-UP
fact and opinions expressed herein are those of for length, basic syntax, grammar, spelling and
the individual authors and are not necessarily punctuation. The Actuary is copyedited according DEMAND
those of the Society of Actuaries. to Associated Press (AP) style.
63 E-COURSES: GROWING
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YOUR KNOWLEDGE
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64 GOOD RESEARCH READS
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EZRA PENLAND SUMMER ROLES
SOUTHEAST USA - FIRST IN-HOUSE ACTUARY SOUTHEAST USA -
Client seeks first in-house health actuary for Position 62540. ENTERPRISE RISK MANAGEMENT
FSA/ASA up to $260K. VP with data analytics skills. FSA sought by life insurer for Position 64144.

USA - GROUP LEADERSHIP ROLE CONNECTICUT - FSA, MODELING SKILLS
USA health insurer is searching for an actuary for a leadership For Position 63782, an FSA life actuary with modeling skills
role for Position 63724. Compensation up to $250K. FSA/ASA and great communications skills is sought. Recently-creden-
with group health experience preferred. Pricing, analytics, re- tial ed Fellow preferred.
serve analysis and financial forecasting experience ideal. Must ILLINOIS - RISK MGMT/FINANCIAL MODELING
hav e management experience. For Position 63836, Chicago client is now searching for an
CALIFORNIA - HEALTH CONSULTANT FSA life actuary. High profile risk management and financial
Firm is looking to hire a health actuary for Position 63590. mo deling opportunity.
FSA or ASA with 8+ years of experience and advanced statisti- COLORADO - PRICING/PRODUCT DEVELOPMENT
cal analysis skills. Life pricing and product development actuary at the ASA level

INDIANA - HEALTH ACTUARY needed by our Colorado client for Position 63811. 2 to 9
Indiana client is seeking an FSA for Position 63885. Experi- yea rs of experience.
ence with actuarial modeling, advanced statistical analysis and NORTHEAST USA - ERM ACTUARY
statistical programming skills ideal. Insurer seeks life actuary for a just-opened, high-profile risk

management opportunity for Position 64186. FSA preferred.
VIRGINIA - HEALTH CONSULTANT
Must have exceptional modeling skills.
Group is looking to hire a health consulting actuary for Posi-
tion 63594. FSA or ASA with predictive modeling skills. IOWA - FINANCIAL REPORTING

Life and annuity near-ASA or ASA financial reporting actuary
MASSACHUSETTS - GROUP ACTUARY
is sought by an Iowa insurer for Position 63949. MG-ALFA
Valuation actuary at the ASA or FSA level is sought by our
software experience a plus.
Boston-area client for Position 63759. Group life and health
opportunity. MIDWEST USA - ANNUITY RISK MANAGEMENT

Insurer is looking to a hire an annuity risk management VP and
MIDWEST USA - EXECUTIVE DIRECTOR
actuary for Position 63562. FSA with 10+ years of experience
For Position 63945, a health financial reporting actuary and
required.
executive director is sought. FSA with financial reporting or
reserving experience needed. ILLINOIS - PENSION ACTUARY

Chicago group is hiring pension actuaries at the ASA/FSA level
MICHIGAN - HEALTH ACTUARY
for Position 63756. Significant travel. Requires 10+ years of
Insurer is searching for an FSA/ASA for Position 63870. 7+
consulting experience. Immediate need.
years of experience required.

NEW YORK - PENSION ASA/NEAR-ASA
NORTHEAST USA - MEDICARE ACTUARY
New York consulting firm seeks pension actuaries with 5+
ASA/FSA sought by insurer for Position 63793. Must have 8+
yyeeaarrss ooff eexxppeerriieennccee ffoorr PPoossiittiioonn 6633664400.. AASSAA oorr nneeaarr--AASSAA
years of healthcare experience.
pprreeffeerrrreedd..
EZRA PENLAND
ACTUARIAL RECRUITMENT
Over 35 Years of Industry Experience
[phone]
[email protected]
These Roles and Many Other Actuarial Jobs Can Be Found at EzraPenland.com
Editorial
ACTUARIES TO THE RESCUE?
BY JEFF SCHUMAN
IN THIS ISSUE OF THE ACTUARY, our
authors and panelists provide some
perspectives on how the insurance industry
has changed since the financial crisis of
2008. There are reasons to be optimistic:
Higher capital levels, better liquidity
management, more integration of risk
management into strategic decisions, etc.
But there is always more work to be done
and new risks to anticipate and manage. As
we look to the future, what role will we, as
actuaries, play in affecting the outcome of
future downturns and crises?
2. Actuaries understand that while 8. Actuaries are accustomed to
In the midst of the 2008 crisis, former SOA choosing the right model is very transparency.
President Jim MacGinnitie published an important, it’s even more important 9. Actuaries have professional
excellent essay, “Actuaries Would Have to calibrate it appropriately. standards.
Made a Difference.” He offered 10 reasons 3. Actuaries understand “model drift.” 10. Actuaries accept a quasi-fiduciary
why he believed the crisis would have 4. Actuaries understand spirals, and obligation.
been less severe if more actuaries had been seek to avoid them.
involved in financial markets: 5. Actuaries are accustomed to Please read MacGinnitie’s essay for an
developing values for liabilities explanation and an elaboration of these
1. Actuaries understand that the where no deep liquid market exists. points: soa.org/Library/Essays/rm-essay-
distribution function for most risks 6. Actuaries are used to taking a long- 2008-toc.aspx.
is not the bell curve or normal term view.
distribution, but rather one of several 7. The Actuarial Control Cycle is a well- MacGinnitie’s reasons can be simply
distribution functions that have developed concept that would be summarized as follows: Actuaries have
longer, fatter tails. helpful in the capital markets. a strong fundamental understanding
6 | THE ACTUARY | JUNE/JULY 2015
of risk, are skilled risk modelers, are the exam curriculum must continue to key decision-makers.
accountable for their work, and have a expand and evolve to become more Persistence, aggressive
deep professional commitment to the long- relevant in more situations. These must tactics and a good
term well-being of the financial systems be sustained, long-term initiatives. I presentation got me
they address. This is an impressive set know there have been some important the job.
of characteristics, and I agree that these strides made in these areas. For example, Jeff Schuman
attributes mean that actuaries can play an the SOA’s Cultivate Opportunities team Another opportunity for greater actuarial
important role in reducing the severity of has a number of initiatives in place impact is on the federal regulatory front.
future financial crises. But “can” is one to identify new and different career Given the important role of the U.S.
thing; “will” is another. To what extent paths for actuaries including predictive Federal Reserve in guiding monetary
will we make a difference and what must modeling, business analytics, risk policy and its large and expanding role
be done to increase our impact? I believe management, financial services, and in regulating financial institutions, the
there are several areas we can address. more. In addition, the SOA Board’s complexion of future financial crises will
Learning Strategy Task Force is working be partly a reflection on the Fed. However,
EXPAND OUR SPHERES OF
INFLUENCE Let’s face it, if actuaries are going to have
Let’s face it, if actuaries are going to have a
a much bigger impact on future crises, we’ll
much bigger impact on future crises, we’ll
need to expand our presence in financial
need to expand our presence in financial
sectors outside of our traditional domains
in insurance, pensions and health care. sectors outside of our traditional domains in
The U.S. banking industry is about double
insurance, pensions and health care.
the size of the insurance industry by assets
and has a proportionately larger impact
on the economy and markets. Investment to address many education-related issues. despite the Fed’s significantly increasing
banks also have a significant economic Recommendations will be finalized at the role in the insurance industry, the actuarial
and market impact. However, the number June Board meeting. directory lists just six SOA and Casualty
of actuaries working in these industries is Actuarial Society (CAS) members among
still relatively small. Furthermore, many While marketing the profession is helpful, the Fed’s approximately 20,000 employees.
of the actuaries who work in commercial actuaries who want new opportunities Surely, there is room for actuaries to
and investment banks are there to provide in new industries will also have to work contribute more significantly.
products and services to the insurance hard to market themselves individually.
industry, rather than to function in Doors can be broken down, jobs can be ADD MORE VALUE IN TRADITIONAL
financial and risk management roles. won, but it often takes a creative and ROLES
determined effort. Showing up and flashing I believe another avenue for actuaries to
Establishing a more significant actuarial an actuarial credential doesn’t cut it when impact future crises is through enhanced
presence in these other industries will approaching a nontraditional opportunity, execution of traditional roles. Actuaries
require effort at both the organizational but creatively demonstrating the relevance have long provided essential technical
level and at the personal level. In my of your skills sometimes does. I broke expertise to insurance and health care
opinion, it’s important that the Society into my first job in the investment organizations. Over time, many traditional
of Actuaries (SOA) and other actuarial banking industry partly by campaigning actuarial roles have become even
organizations look at ways to better aggressively for an opportunity to more important and more technically
market the capabilities of actuaries, and present formally to an audience of the demanding. It’s natural that actuaries can
JUNE/JULY 2015 | THE ACTUARY | 7
Best’s State Rate Filings ®
Be confident you have the details you need to
develop an intense, specialized focus as highly responsive models and operating they’re denied leadership opportunities?
they execute many of these roles. them with great sensitivity to changing I’m not wise enough to answer that, but
make the right pricing and filing decisions.
circumstances. As MacGinnitie pointed I do believe there are opportunities for
However, we can contribute to better risk out, actuaries normally operate from a well-rounded actuaries who gain broader
management outcomes if we can reach long-term view, and this is generally a management experience. Best’s State Rate Filings is a must-have resource for monitoring approved rate, rule and form filings by state, line,
outside specific areas of specialization great virtue when building sound financial program, company and other criteria.
and achieve more outward perspective systems and managing risk. However, I hope we continue to address many of
and engagement. One of the biggest things can move quickly in extreme tail these opportunities as a profession and as When you’re researching rate changes in the markets that are important to you, rely on Best’s State Rate Filings to
weaknesses of risk management coming events. In the 2008 crisis, companies had individuals. Let’s realize the potential that find out which insurer…
MacGinnitie identified and make an even
I think there are things we can do to help break bigger difference in the future. A
down silos and help our organizations manage …decreased …increased
Jeff Schuman, FSA, MAAA, is a Connecticut-based Homeowners rates, Directors & Officers …increased
risk more holistically and effectively. ... consultant. He can be reached at [email protected]. effective 3/15/2015, Liability rates, Commercial Auto
in Alaska. effective 3/18/2015, rates, effective 6/1/2015,
Rate effect: -4.6% in Minnesota. in Vermont.
Rate effect: +4.1% Rate effect: +14.6%
into the last crisis was its often “siloed” difficulty marking some of their risk and
nature. Risks and business lines were capital positions to market in real time.
too often analyzed and managed in This created an enormous perception
isolation. I think there are things we can problem that became a real problem, as
do to help break down silos and help our markets assumed the worst.
organizations manage risk more holistically
and effectively: PRODUCE MORE BUSINESS LEADERS
Another opportunity to be more impactful
• From wherever we sit, we have is to have more actuaries in executive
an opportunity to think more leadership positions. I’ve just asserted that
…increased
deliberately about how the risks and actuaries throughout the organization have
Crime & Fidelity rates,
activities we address might interact the potential to increase their impact, but, effective 8/1/2015,
and correlate with other exposures in of course, the biggest decisions will always in Connecticut.
our organizations. be made at the top of the house. Rate effect: +4.7%
• We can enhance our contribution
…increased
by proactively engaging actuaries Among the 15 largest U.S.-based life
Personal Auto rates,
in other business lines and areas to insurers and the three largest Canadian- effective 2/1/2015,
compare risk perspectives, tools and based, there are 44 individuals holding the in Colorado.
techniques. title of chairman, CEO or CFO. (There are Rate effect: +3%
…increased …increased
• Lastly, we can further develop our 44, rather than 54, because 10 individuals Dwelling Fire Non-Standard
communication skills. Generating serve as both CEO and chairman.) There rates, effective Personal Auto rates,
important risk insights will only have are eight actuaries among the 44, which 12/15/2014, in Iowa. effective 1/20/2015,
Rate effect: +3.8% in Tennessee.
value to the extent we can effectively suggests upside potential. There seems to
Rate effect: +1.4%
communicate them. be a chicken-and-egg question here—are
actuaries sometimes denied leadership
We can also add more value and roles because they lack certain skills, or do
change outcomes by creating more they sometimes lack certain skills because To find out about rate changes in the states and lines you’re tracking,
contact us at [phone] or [email protected].
4
8
www.ambest.com/sales/staterate 04
5.
8 | THE ACTUARY | JUNE/JULY 2015 1
Best’s State Rate Filings ®
Be confident you have the details you need to
make the right pricing and filing decisions.
Best’s State Rate Filings is a must-have resource for monitoring approved rate, rule and form filings by state, line,
program, company and other criteria.
When you’re researching rate changes in the markets that are important to you, rely on Best’s State Rate Filings to
find out which insurer…
…decreased …increased
Homeowners rates, Directors & Officers …increased
effective 3/15/2015, Liability rates, Commercial Auto
in Alaska. effective 3/18/2015, rates, effective 6/1/2015,
Rate effect: -4.6% in Minnesota. in Vermont.
Rate effect: +4.1% Rate effect: +14.6%
…increased
Crime & Fidelity rates,
effective 8/1/2015,
in Connecticut.
Rate effect: +4.7%
…increased
Personal Auto rates,
effective 2/1/2015,
in Colorado.
Rate effect: +3%
…increased …increased
Dwelling Fire Non-Standard
rates, effective Personal Auto rates,
12/15/2014, in Iowa. effective 1/20/2015,
Rate effect: +3.8% in Tennessee.
Rate effect: +1.4%
To find out about rate changes in the states and lines you’re tracking,
contact us at [phone] or [email protected].
4
8
www.ambest.com/sales/staterate 04
5.
1