2000 CLRS Papers Focus on Emerging Insurance Issues

by Steven M. Visner

With the upcoming Casualty Loss Reserve Seminar (CLRS) this fall, the CAS Committee on Reserves completes its call for reserves papers on the topic "Estimating Liabilities for Emerging Insurance Issues." The purpose of the call is to encourage the communication of work being done in upcoming areas of concern to those actuaries responsible for estimating a company's loss and loss adjustment expense reserves. The call addresses areas that actuaries will be increasingly called upon to evaluate and measure. These exposures may have the potential for future mass tort issues, may be potentially volatile, and may have limited relevant historical data. They will certainly present significant challenges to the reserving actuary.

Five papers have been accepted into the program and will be presented at various sessions at the 2000 CLRS. The papers cover areas as diverse as tobacco, political disorder and civil unrest, satellites, and unearned premium reserves.

One paper addresses the measurement of U.S. tobacco liabilities for insurers and provides a conceptual framework for developing an exposure-based model. The paper describes the model-building process and includes the parameters required and sources of data that can be used. A second paper will discuss issues related to satellite insurance, including the disposition of the marketplace; the causes of satellite failures; and the nature, measurement, and modeling of various insurer liabilities. A simulation model outlined in the paper considers satellite insurance as an "active life" exposure. This model can be used to evaluate the profitability of the unearned premium reserve and compare competing reinsurance programs and pricing. This topic is especially relevant as commercial communications providers attempt to create global communications networks through the use of satellites. A third paper will address issues related to insurers' exposure to political disorder and civil unrest. The paper considers the types of unrest that are likely to arise in different territories and discusses techniques for evaluating frequency, severity, claims control, financing, and reinsurance. A fourth paper addresses a gap in the actuarial literature concerning calculation of "premium deficiency reserves." This paper will be especially timely given that, effective in 2001, the NAIC's codification project will create the need for such a statutory reserve requirement. The paper will discuss how the reserve differs under current U.S. GAAP accounting rules and the new statutory accounting rules. The fifth paper addresses the heavy toll that asbestos and pollution claims have already taken on U.S. property/casualty insurers. Exploring the characteristics of these two enormous categories of claims, the paper also focuses on the characteristics of several of the emerging potential mass torts facing the insurance industry and likelihood of mass torts of similar dimensions.

All the call papers will be included in the CAS Fall Forum, which will be distributed later this summer and will be available on the CAS Web Site (http://www.casact.org/pubs/) prior to the CLRS. A $1,000 prize will be awarded at the CLRS to the best paper submitted in response to the call. The CLRS is scheduled for September 18-19 in Minneapolis, Minnesota.