Special Issues (Chapter 10)

With increasing frequency, casualty actuaries are using their skills to perform analyses that extend beyond the traditional actuarial functions associated with ratemaking and loss reserving. An actuary’s quantitative expertise, combined with an understanding—obtained through the examination process or experience or both—of an insurance company’s operational and financial processes, means that the actuary is often called upon to study and opine on important nontraditional questions and issues. These opportunities for expanded responsibility require familiarity with topics and techniques beyond those previously covered in this book. This chapter discusses a number of “special issues,” that include several recent developments in actuarial science and insurance. Only a brief outline of each topic can be provided in this chapter; it is hoped that these descriptions will encourage the interested reader to pursue the articles referenced in this chapter, along with other relevant material associated with these topics. The first section of this chapter covers the valuation of insurance companies, including accounting principles and the measurement of surplus or net worth, approaches to allocating surplus, and valuation issues involving environmental and catastrophic exposures. The second section considers issues relating to operating an insurance company, including planning and forecasting, dynamic financial analysis, and insurance securitization. The third section discusses the regulation of insurance companies, including solvency issues and risk-based capital. The final section describes data sources that might be useful in support of actuarial analyses.