Monthly Archives: October 2010

Why aren’t insurers on Facebook?

The question comes from Reinsurance Girl, Mairi Mallon. A surprising number of insurers – Lloyd’s of London, Scor, QBE, Hannover Re – have failed to create their own area on Facebook. For them, Wikipedia has created an automatic entry. (To her list, I’d add Berkshire Hathaway – see the screen shot. Click for larger.)


Now Mairi isn’t suggesting that these insurers have exposed themselves to reputation risk. Anyone can change a Wikipedia entry, and any damaging information will likely find its way to Facebook. And creating a Facebook page takes all of about one minute.

But I think she’s being a bit hard on insurers. Here is a shot of Apple Computer’s Facebook page:



Halloween by the numbers

That's the way it is.

Via Flowing Data.



Halloween: Be careful out there

Halloween is probably our most dangerous holiday, after New Years – lots of kids in dark costumes scooting about after dark. Via Insurance Journal, Allstate has quantified the problem:

The number of people in California hit by cars jumps 25 percent on Halloween versus the rest of October, according to Allstate Insurance Co. The insurer recently looked at its California auto insurance claims involving pedestrians over the past three years and found the dramatic jump in October accidents at trick-or-treat time.
This is a much worse problem than tainted candy, where it is difficult to find even a single legitimate occurrence. Most news reports turn out to be hoaxes.
So hang onto your kids tonight!

Claim of the week, marathon edition

From Insurance Journal:

A former Massachusetts prison guard has pleaded not guilty to charges that he ran long-distance races while collecting worker’s compensation for an on-the-job injury he said made it impossible to do strenuous activities.
The attorney general’s office said it received an anonymous tip that the 45-year-old Cloutier ran a half-marathon and then a full marathon the very next day in Florida in January 2009.



School testing: An actuarial analysis, Part 3

[Ed. note: In this series, I use actuarial techniques on data behind the Nation’s Report Card, a regular testing of 9-, 13- and 17-year-olds, to argue that:

  • The gap between white and black students has been declining and will continue to decline.
  • Whatever gap exists is in place by the age of 9 and stubbornly resists change thereafter.

Part One is here. Part Two is here.]

The first graph looks at the gap in reading scores for 9-year-olds born between 1962 to 1999. (Remember the years represent the years the kids were born. They were tested nine years later.)

Reading gap: shrinking

The gap starts at nearly 45 points for kids born in 1962. It declines steadily until we get to kids born between 1979 and 1993, then steadily declines. At last report, the gap is under 25 points.

So whatever steps we’re taking up to age 9, they seem to be working. It’s after this that the results get discouraging, if you look at the data as it has been traditionally been presented. Black students “give back” the gains they made through age 9.

Looking at the data by cohort, a different story emerges. Continue reading


AAA’s Social Security spin grows

The Committee for a Responsible Federal Budget swallows AAA’s line about a cut in Social Security benefits not being a benefit cut. I wrote about it here.

The committee got AAA’s obfuscation and passes it along heartily:

So when the American Academy of Actuaries sent a letter to the Commission arguing for raising the retirement age, it was something worth noting……..

They point out that for all the years that the retirement age remained fixed (and even after adjustments included in 1983 legislation), retirees have been getting a de facto benefit increase, since they will spend more years collecting benefits in the system than previous generations. This increase comes on top of the fact that initial benefits grow with wage inflation and retirees have (for the most part) recevied annual COLAs.

Ergo, reducing benefits won’t be a benefit cut.

As before, I’m not upset that the AAA favors increasing the retirement age. I am upset that they are abusing the image of actuaries as honest brokers of information, because saying a reduction in benefits is not a reduction is, in my opinion, not honest.

I can think of another place where we can cut the deficit, using the AAA approach. The last time Social Security reform passed was 1984. A Senator made $72,600 a year. Today, that Senator makes $174,000. Let’s save $10 million a year by returning Senators’ salaries to where they were 26 years ago. We won’t be cutting their salaries, we will merely be returning it to where it was.

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Malta grapples with Solvency II

The Actuary reports on how the EU’s smallest member is handling the prospect of Solvency II. It’s a nice story because it makes this monster of a topic manageable, since Malta – a spec just south of Sicily – has less than €1B in premiums (life and non-life combined).

The main QIS4 results were:

  • Solvency ratio under Solvency I was 291% for all insurers. In QIS4 the Solvency ratio was reduced to 187% (cf. CEIOPS QIS4 report, Annex, Table 29,A-34 and Table 35, A-40)
  • Five of the 16 companies saw a decrease of at least 50% in their available surplus (cf. CEIOPS QIS4 report, Annex, Table 14, A-19) Three of the 16 companies did not have sufficient ‘own funds’ to fund their solvency capital requirement (SCR) (cf. CEIOPS QIS4 report, Annex, Table 14, A-19).

Available capital cut in half – that’s a pretty big deal, eh? And this was from 2007’s QIS4 – before the market meltdown of 2008. And QIS5, going on now, won’t help things:

  • The correlation within some of the risk modules has been increased, with only a few reductions proposed (for example, there is now a dependency factor of 25% between the premium and reserve risk in the non-life underwriting module). The consensus among many commentators is that this is expected to increase capital requirements further.
  • Within the non-life underwriting risk module, there is now an increased allowance for the use of non-proportional reinsurance. An adjustment factor may be multiplied with the capital requirement for the premium risk. This adjustment factor will reflect the extent of coverage provided by the reinsurance arrangement more accurately than in QIS4.

The article’s authors, Jean-Paul Shipley and Louis Heng of Munich Re, see four likely options: restructuring, raise additional capital, better asset-liability management (especially among life companies) and increased purchase of reinsurance.


School testing: An actuarial analysis, Part 2

[Ed. note: In this series, I use actuarial techniques on data behind the Nation’s Report Card, a regular testing of 9-, 13- and 17-year-olds, to argue that:

  • The gap between white and black students has been declining and will continue to decline.
  • Whatever gap exists is in place by the age of 9 and stubbornly resists change thereafter.

Part One is here.]

As I wrote in Part One, to learn how well test scores among 9-year-olds translate into test scores among 17-year-olds, we should be testing by cohort – testing a group of kids at 9, then testing them again and again as their education progresses. Since testing occurs at 9, 13 and 17, the tests should be conducted every four years.

Unfortunately, the testing behind the Nation’s Report Card doesn’t do that. Reading has been tested 12 times, and math has been tested 11. The testing has occurred at irregular intervals. Sometimes five years passed between tests; sometimes only two.

There’s a second concern about the data – the people being tested changed in 2004. The test was changed to accommodate Spanish-speaking students and was also administered to more special needs students. So the scores before 2004 are not directly comparable to those in 2004 and later.

However, we can work with the data to handle these problems. Continue reading


For ACAS, a bill of rights

It’s not a Bill of Rights (note the caps) because it hasn’t been passed by the membership.

In the Casualty Actuarial Society, career associates hold a weird second-class status. A career associate is one who reaches ACAS, then stops taking exams. They can sign a company’s Statement of Actuarial Opinion, but they can’t vote in CAS elections and can’t serve on the society’s ruling board.

That could change soon, after votes on CAS bylaws and constitution that would:

  • Give Associates the right to vote either upon attainment of Fellowship or five years after they are recognized as Associates, whichever occurs first.
  • Allow all voting members to be eligible to be elected members of the Board.

The CAS has struggled for a while on how to handle the ACAS. The periodic exam restructurings sometimes seem designed to kill off the designation.

In the ’90s, you had to pass three post-associate exams to become a fellow, and the late ’90s restructuring cut that to two. Ten years or so before that, you needed just five exams to become associate but 10 to make fellow. The trend has been to effectively discourage associateship and encourage fellowship.

In the early aughts, there was even talk of doing away with the designation. That’s practically impossible, as the organization could never figure out what to do with the existing career associates.

They couldn’t strip them of their attainment. First it wouldn’t be the right thing to do. But the ethical problem wasn’t the biggest one.

Every state’s laws recognize associateship as the level of competency needed to sign an opinion. To change that, the NAIC would have to draft model legislation, then 50 state legislatures would have to enact it.

Aside from bothering 51 important organizations with inside baseball – which would be bad enough – the CAS would have been left to explain why associates were the right people to sign opinions before, but not anymore.

And of course, career associates would have sued the CAS, noting the action would be an unfair taking of their ability to make a living by signing opinions.

Bringing career associates fully into the fold seems to me an idea overdue. I’ve worked with a couple of chief pricing actuaries who were career associates, and they were certainly bright and sober enough to cast a CAS ballot.

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Canadian regulator: Actuaries must explain reserve changes

Canadian Underwriter has the story:

“Whenever significant differences in ultimate estimates occur for any accident year, the actuary should provide commentary explaining such changes in ultimate estimates for each accident year,” OSFI says in a memorandum explaining the change, posted online on Oct. 26. “In addition, the actuary should discuss any actions taken to reduce the likelihood of similar differences in the future.”

The standard also will also require a comparison of actual experience with expected experience.

Details here.

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