CAS Research Council Issues Request for Proposals - The Impacts of Climate Change

07/06/2022

The CAS Research Council is issuing a Request for Proposals (RFP) to gauge the impact of climate change on the insurance industry by product line.

Casualty Actuarial Society (CAS)

The CAS was organized in 1914 as a professional society for the promotion of actuarial and statistical science as applied to insurance other than life insurance, such as automobile, liability other than automobile, workers compensation, fire, homeowners, commercial multiple peril, and others. Such promotion is accomplished by communication with those affected by insurance, presentation and discussion of papers, attendance at seminars and workshops, collection of a library, research, and other means. The membership of the CAS includes over 8,600 actuaries worldwide, employed by insurance companies, industry advisory organizations, national brokers, accounting firms, educational institutions, state insurance departments, the federal government, and independent consultants.

The CAS Research Council

The CAS Research Council was formed in 2021 to prioritize the research needs of the general insurance actuarial community. This work will augment the existing work of standing research working groups which focus on specific practice areas like ratemaking, reserving, reinsurance, and risk analysis. The operational oversight of projects will be designated to a project oversight group (POG) made up of CAS staff and volunteers.

Research Problem Description

The necessity of considering climate change in financial risk management is well-established. Although mainstream coverage tends to focus on hurricane and other natural catastrophes, research has also explored the impact on other coverage lines like crop insurance and mortality. It is easy to envision how climate change may affect many other coverages as well, from the assignment of liability for human activity which affects the climate, to comorbidities which impact workers compensation claim value, to professional liability when engineers and architects are unable to foresee all of the complications associated with a changing physical landscape, and challenged infrastructure. Not all effects will increase the cost of risk. Longer and milder winters, in more northerly latitudes will reduce the harms associated with ice, or the weight of snow.

The CAS wants a document which will look ahead to a future which has been impacted by climate change. We want to understand how things will play out for the major coverage lines, so that industry professionals – actuaries, claims, underwriters, and risk managers – may begin to prepare. Authors should develop plausible, scientifically grounded scenarios and describe how they will impact insurance coverages. Where future events lead to new product offerings, or the elimination of existing products, that information will be quite relevant. Insofar as quantitative forecasts are possible, that sort of detail will strengthen the paper.

When thinking about coverage lines, an obvious point of reference would be the Schedule P lines of business as defined by the NAIC annual statement. Authors should strongly consider aligning their work with this structure as it presents a ready comparison to existing public data. That understood, any proposed breakdown which is comprehensive, yet intelligible will be given consideration.

Project Requirements

The end product of the research should be a paper, saved as (or converted to) a Microsoft Word file. The length should be sufficient to give meaningful, practical guidance to practitioners in a way that is concise yet complete. This typically means a paper of 15-50 pages. Those page counts should be regarded as rough guidelines only.

Where actuarial/statistical methods are used, they should have sound foundations, rooted in established principles. With that understood, the techniques within a method should be intelligible to an actuary working in reserving. Moreover, a method’s output should be explainable to insurance industry decision makers who may not have the experience or education of an actuary.

Any accompanying code examples will be shared on the CAS GitHub site (https://github.com/casact). All material on GitHub is released under the Mozilla Public License, version 2.0 (https://www.mozilla.org/en-US/MPL/2.0/).

Proposal Requirements

Proposals should include a clear outline of the work that will be performed and the time frame in which it will be performed (including key dates). The proposal should be accompanied by the resumes of the researcher(s), indicating how their background, education, and experience bear on their qualifications to undertake the research.

The CAS contract will be awarded to the respondent who - in the judgment of the Reinsurance Research Committee and entirely based on their written proposal - is best able to perform the work as specified herein. If the committee determines that no proposal meets the requirements of the RFP, then no contract will be awarded.

Receipt of proposals will be acknowledged in a timely manner. Respondents who are not awarded the contract will be informed shortly thereafter.

Interested researchers should submit their proposals and any questions to:
Brian A. Fannin, Research Actuary
Casualty Actuarial Society
bfannin@casact.org
(919) 457-3439

Timeline

Interested parties are welcome to submit questions about the RFP. All questions and responses will be circulated to all who submit a proposal.

Week of July 4	RFP announcement
July 29, 2022	Question response
August 12, 2022	Final submission
August 26, 2022	Selection

Compensation

Compensation to researchers will be commensurate with the time required to carry out the work. Respondents should include an estimate of cost in their proposals. Total cost is not expected to exceed $30,000. Where a proposal exceeds this amount, sufficient justification should be provided by the respondent.

Presentation, Ownership and Publication of Report

As a condition of selection, the CAS requires that all rights, title, and interest, including copyright and patent, in and to the report be owned by the CAS. The selected researcher/research team must sign a formal research agreement that assigns all such rights to the CAS. In any publication of the report, the researcher(s) will receive appropriate credit with regard to authorship. The CAS may publish the report in its entirety, or any sections thereof, in any format and medium as it finds fit, including but not limited to CAS publications, and electronic versions such as on its Web site or physical storage media.

The researcher(s) should make every effort to be available to present the report at a CAS meeting or seminar.

Bibliography

Pan, Qimeng. 2021. "Assessing the effectiveness of the actuaries climate index for estimating the impact of extreme weather for crop yield and insurance applications." Master's Thesis. January.

The Economist. 2019. "Changing weather could put insurance firms out of business." November 19.