The CAS wants to know the stories you think made the greatest impact on the actuarial profession in 2012. Some stories are fairly obvious but we want you to dig deep into the year for those stories that may have been overshadowed.
Please leave a comment on this blog post telling us your top story and include a URL or description if you have it. Can’t decide on just one story? Tell us some more—as many as you deem important! We’ll close down the comment period on Friday, December 14.
Next, we will compile your story choices and comments into a survey to choose 2012’s top 10 stories. We will post a link to the survey on the blog the week of December 17. You’ll have until December 31 to take the survey and rank your top 10 stories of the year.
We’ll unveil the final top 10 in the February 2013 issue of the Actuarial Review.
We are looking forward to hearing from you!
NAIC adoption of ORSA Model Act will force most insurers to formalize their ERM process. This will impact US actuaries significantly. The companion work in the EU, Canada and elsewhere makes this material to all actuaries working in the reserving, ERM and financial reporting space.
Usage-based insurance is evolving quickly and is starting to become a requirement world-wide to be competitive in the auto/motor insurance market. Not all the market will probably be using it (due to concerns with “big brother”) but enough will for it to be part of the product mix for most auto insurers.
Hurricane Sandy defied history by taking a left hand turn to have the first landfall in New Jersey in over 100 years. The impact of Sandy will be felt for years and may change the way that cities and other communities think about building in the coastal areas of the mid-atlantic and New England.
California Governor Jerry Brown signs into law Senate Bill 863 effective January 1, 2013 to rein in escalating workers compensation costs and associated rate increases.
Supreme Court of the United States’ (SCOTUS) ruling on the Affordable Care Act. Probably the first of many SCOTUS rulings on this issue.
The outcome of the US government TARP bailout/loan to AIG deserves to be on the list.
SOA’s attempted takeover of the CAS including them starting a General Insurance track and eliminating joint exams.
Actuary Russell Thomas makes the Final Table of the World Series of Poker Main Event. He ultimately finishes 4th out of 6598 players and takes home $2.85 Million.
Three major events come to mind:
1. Hurricane Sandy, which is likely to result in significant changes to: how we use our coastal areas; how we construct and build our infrastructure; and, the seriously with which we begin to consider the potential impact of global warming.
2. The current status of the Fed’s bailout of AIG.
3. The decision that the Affordable Care Act is constitutional.
I would like to offer a story about a researcher who has provided a new approach to an old idea: the St. Petersburg Paradox. Dr. Ole Peters has written a few peer reviewed articles over the last few years exploring this paradox and has made some exciting observations based on differences between time averages and ensemble averages. The distinction matters because we exist in a world where time flows, so we have to be careful how we use ensemble averages in our modelling.
In 2010, Peters first presented a paper that showed that Daniel Bernoulli’s trick of introducing log utility functions to resolve the paradox can be avoided by using time averages (http://arxiv.org/abs/1011.4404). In another paper in 2010, he established that the classical approach to portfolio optimization can lead an investor to maximize leverage, whereas the time average approach gives an optimal portfolio that has a finite amount of leverage (http://arxiv.org/abs/0902.2965v2).
Peters has kept busy in 2012. He wrote a paper that strikes at a fundamental tenet of actuarial science: diversification. The paper shows that the time averages of all portfolios have some nasty theoretical properties(http://arxiv.org/abs/1209.4517). Even a well diversified portfolio “is linearly unstable, i.e. unstable with respect to arbitrarily small perturbations coming from the noise.”
In 2012, Peters has also worked hard to make his work accessible to people without sufficient technical skills (http://tuvalu.santafe.edu/~ole/publications.html). His website shows an interview published by Legg Mason, a technical piece published by Tower Watson, and a video recording of a public lecture titled “Time, for a change”.
Peters work may not be on the radar of many practicing actuaries today, but his work has the potential to shape the way we conduct our work tomorrow.
I would echo some of the above comments:
*Actuarial education and credentialing:
**The decision by the SoA to create its own general insurance track.
**The decision by the SoA to cease joint co-operation with the CAS on preliminary examinations
**The CAS becoming a signator to the CERA certification and issuing its first CERAs
**The CAS movement to a more sophisticated exam structure vis-a-vis Bloom’s taxonomy, and the, cough, interesting results of the first such sitting.
**The CAS decision to allow exam waivers for CIA students exempted via university credit, and its (the CAS’s) assurance that this will not happen for the US.
*Actuarial related events
**Hurricane Sandy’s effect on the east coast, and how that will almost certainly affect cat modeling, especially storm/tidal surge
**The supreme court’s ruling that the affordable care act was constitutional as a tax, and how that will affect the need for and work of actuaries in health-related disciplines.
**Solvency II delayed again.
**NAIC adopts ORSA model act
The Florida PIP reform bill, HB119, and its mandated rate reduction filings has impacted a subset of CAS members.
The use of telematics (which I think is the same thing Ralph refers to as “usage-based insurance”) is going to have dramatic effects, in many ways. It seems the use of telematic devices seems to also have a causative effect, in addition to being highly predictive. Beyond that, I expect a significant secondary effect on claims handling, as some of these devices can be (and are being) used to recreate accidents in a computer model. One can imagine that the prevalence of these devices might make assigning responsibility for accidents much easier and less fraught with ambiguity. I think when we look back in 10 years, this will seem like a momentous shift.
I think the Affordable Care Act and its effects will be significant to health actuaries.
Lastly, I think the budget debates and the potential fiscal cliff resoluion might have significant impact on social security and other entitlements.
Echoing some of the above, CERA including it being awarded to CAS members, Sandy, AIG, friction among societies.
On the technical front, MCMC and GLMM are suddenly exploding in popularity as statistical techniques actuaries use.
While I wasn’t aware that MCMC was “exploding in popularity” I agree that they should be a part of every actuary’s toolkit. The MCMC methodology makes practical the the task of quantifying uncertainty in any actuarial model for which we have data and can write down the likelihood model.
Only top actuarial stories in the US? How about the Asian ones?
As the developement of international insurance supervision, many countries in Asia put forward the proposals on solvency regulation reformation in 2012. China would spend 3-5 years setting up its second-generation solvency regulation system and Singapore would implement its RBC 2 in 2014.