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Actuaries Abroad
Rain, Rain, Go Away
by Kendra M. Felisky-WatsonThere is a theme to the column; let's see if you can guess what it is…(drip, drip,drip.)
This summer was one of the wettest summers on record here in the U.K., and those of you who are familiar with the typical "English summer" know how wet, grey, and cold it must have been! A month's worth of rain landed in a very scenic part of Cornwall one morning in August. Unfortunately, at Bocastle, a picturesque village at the confluence of several rivers leading to the sea, a wall of mud and debris swept through the village pretty much destroying everything in its path. Amazingly, no one had any serious injuries. Another mudslide happened in Scotland where part of a road on the side of the mountain disappeared in a huge bog of mud. This is in complete contrast to last August, which was the hottest and driest on record. Insurers were not too pleased with the dry summer last year as they had a huge increase in subsidence claims. This year there are flooding and mudslide problems. They can't win.
European reinsurers have been watching the developments of Hurricanes Charley, Frances, and Ivan with much interest. At the time of writing, Munich Re is estimating these hurricanes will cost them in the low hundreds of millions of U.S. dollars and Swiss Re is estimating $300 million.
Regulation of insurance companies is undergoing a change here in the U.K. The Financial Services Authority is implementing a risk-based capital regime, but they are doing it by making the insurers assess their own capital needs based on their own risk profile. The FSA also has a standard assessment calculation and insurers must explain the difference from this standard.
Another facet the FSA is investigating is the appropriateness of statutory actuarial reserve opinions. At the moment, on the property/casualty side, only Lloyd's syndicates are required to have actuarial opinions. The General Insurance Board of the Institute and Faculty of Actuaries set up a working party to investigate the role of actuaries in statutory certification of reserves. The working party intentionally took no stance in favor of any specific option but, instead, wrote a paper intended to promote debate, starting at GIRO 2004, that will help the profession formulate its position on this important topic. The paper identifies various issues that might be associated with a formal actuarial role within nonlife reserving. Some ways in which these issues could be used to argue both for and against the introduction of such a role are set out. The authors are not schizophrenic—this format is used merely to provoke thought amongst the readers about the various arguments. Therefore, there are some arguments or viewpoints put forward in this paper that none of the authors would support, but which they recognize "some might say." Whatever the arguments, the authors do not believe this is a "take it or leave it" matter. They feel that a formal role for actuaries within nonlife reserving could take many different forms, and that these should be considered before statutory actuarial involvement is either promoted or rejected. The paper is a very entertaining read and has some thought provoking observations about the possibilities regarding the extent of a statutory actuarial role. This working party is especially apropos in regard to the Morris enquiry into the actuarial profession in the U.K.
And to continue the rain theme, by the time you read this the annual conference of U.K actuaries (GIRO 2004) will have taken place in Killarney, Ireland, a place noted for its greenness due to…that wet stuff—rain. Or is it mold?
And then there is the Ryder Cup....
