Reputational risk in an age of radical uncertainty
By Alyssa Oursler
In the 1950s, Equitable Life—the oldest mutual company in the world and the first to label an employee an actuary—planted seeds that, decades later, sowed its collapse: the introduction of Guaranteed Annuity Rate (GAR) policies. Despite the guarantee promised by the policy’s name and nature, Equitable found itself unable to pay its GAR policies by the mid-90s. In 1994, Equitable cut the size of its payout to 90,000 GAR policyholders, causing retired investment manager David Hyman to bring a suit against the company.[1] When the court ruled in favor of Hyman, Equitable Life was ordered to pay out £1.5 billion that it didn’t have.[2] Attempted sales fell through, and the company instead closed to new business and slashed the retirement savings of nearly 1 million customers. For customers, having less money to rely on in retirement was a crisis—one that became particularly dire when the largest postwar recession hit in 2008. By 2009, hundreds of people were rallying outside the House of Parliament in London, demanding the government provide compensation to Equitable Life customers who had lost money when the company abruptly closed to new business. The protesters carried 15 coffins symbolizing the 15 Equitable Life pensioners “who would die each day, waiting for justice.”[3]
While government compensation was requested, the blame for the situation, by and large, fell on Equitable—and for good reason. As a report by the European Parliament put it, Equitable’s failure to “correctly predict the increase in life expectancy of the general population” and “the historical fall in interest rates” created a ticking time-bomb and ever-increasing asset shortfall—one that highlights the challenges embedded in any effort to model, much less underwrite, the future.[4] While the company’s success, per the report, was partly based on its reputation, the scandal and subsequent collapse deeply sullied it. Equitable’s downfall sent shockwaves through the industry and spurred a string of investigations. The 900-page Penrose Report, published in 2004, was critical of company management, particularly Equitable’s chief executive Roy Ranson, an actuary, who was accused of being obstructive of scrutiny and dismissive of regulatory concerns.[5] But the report also leveled criticism at the actuarial profession more broadly.[6] Indeed, the importance of upholding the reputation of the actuarial profession cannot be understated—hence its presence in the first precept of the Code of Professional Conduct.
Lessons From the Past
Around the same time as Equitable Life’s scandal, Independent Insurance also collapsed. Years of record profits had been made possible through under-pricing premiums and under-reserving losses. Eventually, the bottom fell out. In analyzing the situation and comparable case studies, the Cass Business School pinpointed insufficient checks on the decision-making of executives and the shrugging off of early warning signs as reasons for the failure.[7]
Reputation as Foundation
A good reputation represents a crucial foundation for any company, regardless of industry. Research suggests that a quarter of a company’s market value can be attributed to reputation.[8] But upholding the reputation of actuarial science is particularly critical to its longevity. In a paper describing determinants of insurers’ reputational risk, researchers noted that a favorable reputation is particularly important for insurers “because consumers cannot observe how an insurer will actually perform before purchasing the policy.” As a result, “both insurers and customers must heavily rely on insurers’ reputation in insurance transactions, even though regulators restrict insurers’ performance such as excessive risk-taking in investment and inappropriate underwriting practices.”[9] As major trends present new and potentially unforeseen risks, there will be more opportunities for events and losses that could damage a company’s reputation. It has been shown that events like fraud and operational losses tend to affect a company’s stock price to a degree that “exceeds the underlying loss value, indicating reputational effects”—a trend that holds true for insurers even more so than banks.[10]
Additionally, as uncertainty grows, so does the risk of unforeseen losses and, in turn, a reputational crisis for individual companies and, possibly, the actuarial industry writ large. Uncertainty has always been built into the actuarial profession, yet it continues to grow. When the COVID-19 pandemic shook the world, it added urgency to existing conversations about the relationship between uncertainty and actuarial science. In 2020, for instance, John Kay and Mervyn King introduced the concept of “radical uncertainty,” which—in contrast to resolvable uncertainty—refers to things we do not and cannot know.[11] The same year, Sam Gutterman noted that major events, from the pandemic to climate change, make it “difficult to maintain that future events can be represented by probability distributions.” The year after that, Rod Lester noted that setting probabilities is virtually impossible for highly uncertain but material events—a reality that contributes to the profession’s ongoing “existential angst.”[12] Uncertainty is by no means a new phenomenon, but it does seem as if we are living under an ever-growing cloud of it.
Is Risk Really New?
Of course, the actuarial industry is no stranger to risk—and is distinguished by its policies and techniques to mitigate it. The inherent marriage between actuarial science and risk leaves us at a particularly interesting junction: The reputation of particular companies, and potentially the industry writ large, will likely be solidified or undermined in the years ahead. To describe insurance companies as particularly exposed to reputational risk at this moment in time is accurate, but the end of the story is yet to be written. One might argue that perhaps no people or companies are better suited for modeling and mitigating high-risk environments than actuaries themselves. Then again, the story unfolding does not have to fall cleanly into either extreme. More likely than not, the future will be a mixed bag, with some actuaries successfully adapting and rising to the top, and others facing a crisis of confidence.
Acknowledging the presence of radical uncertainty and the existential threat it presents to actuaries is important, as any misstep or miscalculation—like those made by Equitable—can quickly compound, undermining fundamental faith in actuarial endeavors. Reputational risk can be thought of as “a risk of risks.” Once again, while such risk is present regardless of industry, it is even more important for insurers, “whose activities are based on trust.”[13] In fact, reputational risk is considered a top threat for insurance companies.[14] Gaps between reputation and reality, along with changing beliefs and expectations, are two drivers of reputational risk, while insufficient internal coordination can undermine a company’s ability to identify and respond to both drivers, particularly considering the degree to which executives “have a natural tendency to overestimate their organizations’ and their own capabilities.”[15]
Naturally, the trends that present the greatest threat to the actuarial industry and its reputation are ones that are truly unforeseen. At the same time, several trends are most clearly steering us into unprecedented waters. Climate change, demographic shifts, and the rise of artificial intelligence (AI) are three trends expected to dramatically shift the workings of the world, capital markets included. Thus, there is a good chance they can and will change stakeholder beliefs and/or shift reality for insurance companies in the process, subsequently creating or increasing reputational risk. So exploring these three trends is a useful exercise for thinking about reputational risk in the actuarial industry and strategies for mitigation.
I. Climate change
In 1906, an earthquake shook San Francisco. In addition to the physical damage caused by the event—$24 million from the earthquake and $500 million from related fires, which translates to about $10 billion today—the natural disaster also shook the insurance industry to its core. At least 12 American insurers went bankrupt, as did an insurance company from Austria and one from Germany.[16] Some insurers only paid out 80% of claims under the pretense of not being able to determine the cause of losses. And yet, while the earthquake destroyed the reputation and existence of some insurance companies, it had the opposite effect on others. Lloyd’s of London paid out every claim related to the earthquake—an achievement some have dubbed the beginning of modern catastrophe coverage.[17]
It is natural to assume such a disaster is an outlier, but in the wake of climate change, disasters are increasingly becoming the norm. This summer, for example, Hurricane Beryl barreled into the Caribbean and flooded Texas, causing everything from power outages to death. On Union Island in St. Vincent and the Grenadines, nearly 90% of buildings were destroyed.[18] While the strength of the storm was notable, so was its timing: Beryl was the earliest Category 5 Atlantic hurricane in the past century, as stronger storms usually come later in the season.[19] The storm’s early, exceptional strength—as marked by 165 mile per hour winds—was caused by warmer water temperatures, as the oceans have been breaking heat records every year for the past half-decade.[20] According to the Intergovernmental Panel on Climate Change (IPCC), this upward trend is “unequivocally” the result of human activity—namely, increased greenhouse gas emissions.[21] In the United States alone, the estimated financial impact of Hurricane Beryl was $32 billion.
Looking ahead, Hurricane Beryl has been interpreted as a worrisome sign of what’s to come.[22] As of early July, the U.S. already experienced 15 extreme weather disasters with losses of $1 billion or more—a figure almost double the average annual total during the previous four decades.[23] Last year, there were 28 billion-dollar disasters—the highest tally ever.[24] It is estimated that up to 3.6 billion people live in regions that are highly vulnerable to the physical impact of climate change: extreme heat, heavy rains, rising sea levels, fires, droughts, etc. [25] And yet, because climate models rely on averages, they “can’t predict the outliers—those extreme events with the most potential for destruction, and the ones we most need to prepare for.”[26]
Many believe climate change represents an existential threat to the planet and human life itself, which makes it unsurprising that it could also represent an existential threat to the actuarial industry. But the latter’s threat precedes the former, with many dubbing the insurance industry “the canary in the coal mine” for the financial risks associated with climate change.[27] Mark Carney, former governor of the Bank of Canada, has described a looming “tragedy of the horizons” for financial and insurance companies, as “the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors”—namely, beyond the business cycle, political cycle, and horizon of technocratic authorities.[28] Exceeding traditional horizons means exceeding traditional modeling capabilities, while the dramatic changes resulting from climate change can also spur “decreasing credibility to inform actuarial assumptions in the short, medium, and long term.”[29]
More specifically, climate change poses several levels of risk to insurance companies: the physical risks themselves (wildfires, storms, floods, etc.) which dramatically increase the insured losses, particularly for property and casualty insurance; liability risks, if those who face losses seek compensation from responsible parties; and transition risks, which refers the investment impact of policies and actions that aim to transition the economy away from fossil fuels. These risks have the potential to then be compounded, as the inability to successfully mitigate risks related to climate change could then undermine customer trust and a company’s reputation.[31] While chatter around climate change has been growing for some time, knowing it presents new risks is a far cry from adjusting business practices to account for them. According to researchers Jason Thistlethwaite and Michael O. Wood, “the majority of US insurers have yet to rescale practices consistent with an organizational logic necessary for managing the industry’s exposure to climate change risk.”[32]
Divesting From Coal?
Because climate change is driven by the continued use of fossil fuels, it is also worth considering whether the reputation of insurance companies could be sullied by continued investments in dirty energy sources like coal. At least 20 companies, representing 20% of the insurance industry’s assets worldwide, have exited the coal business, while 43% of the reinsurance market has restricted the coal coverage, including Swiss Re and Munich Re.[30] But the trend of divesting from coal is more prominent in Europe than it is in the United States. As things currently stand, no major U.S. insurance company has restricted the underwriting of coal projects or divested from the coal sector despite its role in the climate crisis. In fact, the top 40 U.S. insurance companies hold over $450 billion in coal, oil, and electric utility stocks, meaning they are more invested in fossil fuels (literally) than the average index fund.
With that said, both the industry and financial markets have taken steps to respond to climate change. Climate bonds, catastrophe bonds, carbon trading, and sustainability indices represent several ways that capital markets are responding to climate change, while new regulations, stress tests, and initiatives have been created to help companies understand the extent of climate risks.[33] State-backed insurance pools have also been created in areas where risk has become too expensive to insure. But such undertakings may only serve to shift systematic risk from the private sector to the public sector and delay the inevitable.[34] Put another way, the dramatic nature of climate change is such that regions, individuals, and events may quickly become uninsurable or large-scale catastrophes could create insolvency—in turn undermining the relevance and reputation of actuaries and insurance more broadly.
In California, for instance, State Farm is seeking to dramatically increase insurance rates in order to remain financially viable. Two recent filings with the Department of Insurance proposed rate increases of 30% for homeowners, 36% for condo owners, and 52% for renters—a proposal that, per the Los Angeles Times, raises “serious questions about [State Farm’s] financial condition.”[35] “If the variance is denied,” the company stated in its filing, “further deterioration of surplus is anticipated.”[36] At the same time, the company—like Farmers and Allstate—has already limited new property owner policies in California as the result of wildfires, increased construction costs, and higher prices for reinsurance. In turn, thousands of homeowners have settled for limited coverage through California’s insurer of last resort, causing its risk exposure to increase sixfold in just five years.[37]
While California has long been situated on the front lines of catastrophe, the impact of climate change is broad to say the least, leaving more regions and people at risk. The state of Louisiana, for one, also faced an insurance exodus after hurricanes in 2020 and 2021 generated 800,000 insurance claims totaling $22 billion.[38] In turn, the insurance market is already significantly destabilized and over-exposed to risk, with Aon President Eric Anderson comparing the situation to the mortgage crisis of 2008 in a recent Senate committee hearing.[40]
Why Premiums Are Rising
Across the board, insurance premiums have been on the rise because of inflation, natural disasters, and—according to many insurance executives, rising legal costs, often referred to as social inflation. According to Bloomberg, “social inflation came up on insurers’ earnings calls about 130 times in the past year—and more than 550 times from 2020 to ’23, compared with fewer than 80 in the previous four-year period.”[39] While insurance companies believe many lawsuits to be frivolous or unnecessary, representatives for consumers argue they are often the only way fair payouts are made—suggesting an increasingly adversarial relationship between insurers and the customers they serve, as opposed to one based on trust.
Witnessing and understanding the risk of climate change is also a far cry from truly integrating it into an actuary’s everyday work. Some actuaries are constrained by organizational structures and hierarchy (i.e. asset managers and trustees). As Nick Taylor put it in an article in New Political Economy, there are “no magic bullets in terms of financial or mathematical tools to incorporate climate risk so that the true cost of climate change externalities will be priced into markets.”[41] As Milliman actuary Nancy Watkins noted, any mispricing can easily snowball, as “it’s possible for weakened markets to collapse quickly through a crisis of confidence triggered by one event.”[42] Thus, regarding climate change, radical uncertainty is the new norm—and difficult to mitigate.
II. Demographic shifts
While actuaries are faced with the dauting task of preparing for actual tsunamis (and other natural disasters), they must also do what they can to prepare for the coming gray tsunami: a term that refers to the overall aging of the population. By 2030, Baby Boomers—the generation of people born immediately after World War II and the largest cohort in the country—will all be aged 65 or older.[43] Demographics have long been a key factor in actuarial forecasts, hence the existence of the phrase “demographic destiny.” While the phrase accurately captures the broad impact of demographics on a wide variety of trends, the reality is that, regarding most things, destiny cannot be known. Thus, demographic shifts also present a significant challenge for the actuarial profession—one that could also undermine the industry’s reputation if trends are not modeled or mitigated sufficiently.
The gray tsunami is expected to have a dramatic impact on capital markets, for instance, as Baby Boomers control 70% of all disposable income in the U.S.[44] From a financial perspective, the “life-cycle hypothesis” stipulates that aging Boomers will transition from wealth accumulation to decumulation in retirement. In simplest terms, young people tend to borrow larger amounts of money, whether for school or a downpayment on a home; middle-aged people tend to accumulate money for retirement; and the eldest age cohort then spends more money than they earn.[45] As this spending takes place, it is expected to drive higher interest rates and inflation.[46]
But this hypothesis, like so many, is contested. The “wealth decumulation puzzle” cites evidence that older people don’t spend as quickly as the life-cycle hypothesis predicts. This is particularly true in the aftermath of the pandemic, which bred “hermit-like habits … they are struggling to shake off.” Additionally, many retirees are reluctant to spend heavily, as longer lifespans require more funds, particularly given the high price tag of long-term care.[47] The existence of such conflicting hypotheses is an example of the uncertainty embedded in modeling never-before-experience phenomenon—a challenge that is particularly pertinent for actuaries engaged in life insurance, long-term care, and pensions.
Inter-generational wealth differences are only one piece of the demographic puzzle. Fertility began a downward slide in the early 1970s, fluctuated for a few decades, and fell again in the wake of the Great Recession—a global trend that is expected to continue.[48] Much like forecasting the spending habits of retired Baby Boomers, fertility forecasting is a challenge. In 1949, a report by the Royal Commission Population calculated 16 population projections and came in on the low side of reality for each one.[49] The aforementioned Equitable Life crisis was spurred by the mismodeling of life expectancy as well. As Yair Babad, Dermot Grenham, and Sam Gutterman wrote in a recent piece for the British Actuarial Journal, “Uncertainty is inherent in looking forward to the future, including public attitudes and behaviors of population segments, and behavioral and public policy responses to changed conditions.” Even under normal circumstances, significant changes can take years to unfold. And yet, population forecasting has become even more important as planning encompasses a longer horizon.[50]
While shifting demographics represent an important variable for modeling and pricing, there is also a chance that the gray tsunami could shift the role of insurance providers more fundamentally. Given the expensive nature of caring for an elderly population—and the lack of preparedness in many regions—some expect insurers to fill an important care gap. At the same time, the ripple effects of an aging population are widespread and cannot be fully separated from the risks associated with other trends, including climate change, as older individuals are more likely to be affected by extreme weather conditions.[51] The good news is that demographic shifts are slower moving than the rapid increase in extreme weather conditions, offering the insurance industry more time to adapt—both in terms of underwriting and investment practices.[53] Still, the trends themselves remain impactful and dramatic, particularly considering the degree to which they will likely converge with other mega-trends, rearranging both the markets and the world. If actuaries and insurance companies fail to properly account for dramatic shifts in demographic trends, losses and overexposure could impact stability.
Predicting Mortality
The first life insurance policy was issued in 1583 to a man named William Gibbons. A resident of London, Gibbons bought a 12-month policy at a premium of 8%.[52] Later, in 1693, Edward Halley published “An Estimate of the Degrees of Mortality of Mankind, Drawn from Curious Tables of the Births and Funerals at the City of Breslaw, with an Attempt to Ascertain the Price of Annuities Upon Lives” in the Philosophical Transactions of the Royal Society of London. The work, which compiled the Breslau Tables, laid the foundation for the establishment of pension funds and life assurance companies.
III. The rise of artificial intelligence
While demographic shifts are relatively slow-moving, technological shifts can happen quickly and may have the most widespread impact of all. The concept of artificial intelligence (AI) “technology that enables computers and machines to simulate human intelligence and problem-solving capabilities”—has been around since the 1950s, but it reached critical mass and mainstream status only of late, thanks to a dramatic increase in the availability of both data and computing power.[54] When ChatGPT was publicly released late last year, it reached 100 million users in just two months, earning it the title of the fastest-growing consumer application in history.[55] Chipmaker Nvidia also became the most valuable public company this year, driven primarily by the AI boom.[56] Many have likened the rise of AI to the rise of the Internet: something that has the potential to transform nearly every facet of society. Indeed, 77% of companies are already exploring or using AI in their businesses.[57] The industry is expected to grow by almost 30% each year through 2030, while some experts believe human-level AI will be developed in the decades to come.[58]
And yet, at the risk of redundancy, knowing AI will be impactful is not the same thing as preparing for said impact. Just as it was impossible to predict how and when the Internet would transform the foundation of society, it is difficult to fully account for the impact of AI. One of the major discussions related to AI is regarding employment, as AI is well-suited for automating repetitive tasks. Researchers have suggested that there is a 50% chance that all occupations will be fully automatable within 120 years.[59] In the meantime, many are worried AI will drive higher unemployment. From an insurance perspective, high unemployment would naturally impact business and capital markets—and actuaries must factor the possibility into their models and products.[60] But there are other less obvious side effects of this technological revolution as well. For instance, AI is already taxing the energy grid, as a generative AI system uses about 33 times more energy than machines running task-specific software, creating demand that is roughly equivalent to the electricity consumption of Japan.[61] Disruptions in electrical power can impact millions of people in a single outage, causing economic damages that may be insured. When a storm left 5 million people without power in 1998, a subsequent 840,000 insurance claims worth more than $1.2 billion followed.[62] If AI overtaxes the power grid—particularly as the grid must accommodate more electric vehicles—similar situations could arise.
AI is also distinct from the other trends mentioned here because actuaries themselves are subject to disruption due to the technology. Ping An is a prime example of an insurance company that has integrated AI deep into its operations and business model, with recommendations calculated by the machine and final sales handled by humans.[63] While there is much handwringing about AI replacing jobs, a more optimistic take is that, in insurance and beyond, the automation provided by AI will actually free up employees, actuaries included, for more creative and systematic thinking, which could be crucial to grappling with the convergence of unprecedented trends and a rapid pace of change.
Indeed, AI is already being used to model some of the trends outlined here, such as climate change and data on migration, agriculture and supply chains. By blending formerly disparate models, researchers hope to create a complete digital replica of Earth by 2030. With such a replica, it will then be possible to use AI to “fully exploit the vast amounts of data collected and simulated over decades and understand the complex interactions of processes.”[64] Ideally, such work could help insurance companies improve the accuracy of risk assessments related to climate change and other complex trends. But while AI offers greater computational power and higher-resolution models than past technologies, there is no way around the fact that it is trained on historical data, which may prove insufficient given the unprecedented nature of a quickly warming earth.
AI by the Numbers
While artificial intelligence holds tremendous promise, research suggests many people remain apprehensive about its effect. Two-thirds of people familiar with chatbots like ChatGPT are concerned the government will not sufficiently regulate such tools. Among people concerned about AI, the fear of losing their job to the tools is the top concern, while concerns about the misuse of personal information also exist.[65] For companies looking to leverage AI, it’s important to be aware of the perspective of consumers and to implement tools in a way that is both transparent and well-communicated to avoid any negative implications for trust.
As demonstrated so far, actuaries face a steep uphill challenging when it comes to accounting for major and unprecedented trends, even with the help of new technology like AI. Additionally, from a reputational perspective, AI brings new risks to the table—particularly related to trust, bias, and data security. While AI can handle tasks such as premium pricing, underwriting and claims handling, calculations should never take place in a black box. Put another way, to ensure AI is an enabler as opposed to a risk, insurers “should provide detailed documentation or reports that outline the factors and data inputs considered by AI models as these will help companies understand the rationale behind decisions.”[66] Some insurance companies have also suffered data breaches, which could become more common as bad actors use a growing array of AI-powered tools to more easily carry out cyberaattacks. Prudential Insurance said hackers stole the information, names, addresses, and driver’s license or ID card numbers of more than 36,000 people in February.[67] Meanwhile, insurance consulting and brokerage firm Keenan & Associates suffered a breach that compromised the information of 1.5 million individuals last year.[68] These incidents may be a preview of what’s to come and have a clear reputational impact. A recent Ponemon Institute global survey of data breaches found the average total cost of a breach was $3.79 million, with $1.57 million in reputational costs.[69]
Conclusion
In a sense, to call the future unprecedented is to call the sky blue. But the sky indeed looks bluer than it’s ever been. Between a warming Earth, rapidly evolving technology, and a generally aging population, it is safe to say we are living in unprecedented times, marked by radical uncertainty. This is particularly true when considering that the examples sketched out here represent a relatively rudimentary exploration of artificial intelligence, demographic shifts, and climate change. Any given trend could be dramatically shifted or impacted by other global factors and/or may converge with them in unforeseen ways. Still, they are helpful use cases to highlight the transformative nature of the present and its impact on actuarial science and the industry’s reputation. The sheer nature of these trends has the potential to dramatically change the financial equation for insurance companies, which may result in compounded risks should a number of situations—outsized losses, refusal of claims, poor communication with customers—serve to crack the industry’s foundation: trust.
The actuary, then, has a difficult albeit particularly important job in at the current juncture. The job of the actuary has always been to mitigate the risk of worst-case scenarios through careful pooling and pricing, but that becomes far more difficult in the current environment, particularly as new and dramatic trends interact. Nevertheless, actuaries must try to model and account for risk and communicate it sufficiently to customers to maintain the trust the industry is built on. While failure to properly forecast policies and trends can do substantial financial damage to a company, as the downfall of Equitable Life showed, it also presents a very real reputational risk.
Of course, a company’s reputation can suffer for a wide range of reasons—not all of them as grand and existential as those outlined here. Bad-faith practices such as misrepresenting an insurance contract’s language to a policyholder to avoid paying a claim or failing to disclose policy limitations and exclusions to policyholder should not be overlooked. Much like cyber-attacks, they can still undermine faith in actuaries and the companies they work for. But major and unprecedented trends offer a more existential threat to the profession. As Louise Pryor, president of the U.K.’s Institute and Faculty of Actuaries, noted, by not acting to account for major risks like climate change, actuaries could lose all credibility and even be accused of professional negligence.[70]
In scrutinizing the Equitable Life collapse and other failures, researchers noted that “risks can interact in complex ways, including causal links between different types of and unexpected.” In turn, there may be a need to rethink the “scope, purpose, and techniques” of risk analysis. In his report on the incident, professor Richard Roberts concluded that “inquiry after inquiry, report upon report, point to the same, consistent fault lines: hubristic executives, weak board governance, risky business models, product complexity and opacity, and regulatory shortcomings.”[71] The trends outlined here have the potential to act as dynamite to said fault lines—and could very well create new ones. Insurance is inherently the transfer of risk, yet risk is inherently unpredictable. Actuaries may be particularly well-suited to model and adapt to emerging scenarios, but only if they proceed with a full understanding of the unprecedented nature of the times.
ALYSSA OURSLER is a freelance writer.
References
[1] “Policyholders say they know exactly whom to blame”; The Guardian; Dec. 9, 2000. [2] “Equitable Life closes to new business”; BBC News; Dec. 8, 2000. [3] “Honor Blackman joins fight for Equitable Life payouts”; The Guardian; Nov. 4, 2009. [4] Report on the crisis of the Equitable Life Assurance Society; European Parliament; 2007. [5] “Equitable Life: the issue explained”; The Guardian; Mar. 8, 2004. [6] Report of the Equitable Life Inquiry; Lord Penrose; 2004. [7] Did anyone learn anything from the Equitable Life?; Richard Roberts; 2012. [8] Managing reputation risk; Deloitte; 2014. [9] Determinants of Insurers’ Reputational Risk; 2010. [10] Ibid. [11] Radical Uncertainty; John Kay; Feb. 12. 2020 [12] Quo Vadis Actuarius; Rodney Lester; 2004. [13] Modeling Operational Risk Incorporating Reputation Risk: An Integrated Analysis for Financial Firms; Christian Eckert, Nadine Gatzert; 2015. [14] Reputational Risk in the context of A.M. Best’s Rating Analysis; Michael Zboron; The Geneva Papers on Risk and Insurance, 2006. [15] “Reputation and Its Risks,” Robert Eccles, Scott Newquits, Roland Schatz; Harvard Business Review, 2007. [16] “Lloyd’s sees 1906 San Francisco earthquake as a turning point”; Insurance Journal, 2006. [17] Breaking the tragedy of the horizon – climate change and financial stability; Mark Carney; 2015. [18] “Solitary wooden house on Union Island escapes fury of Hurricane Beryl”; The Guardian; 2024. [19] “After Hurricane Beryl’s destruction, climate scientists fear for what’s next”; The Guardian; 2024. [20] “Oceans break heat records five years in a row”; Nature; 2024. [21] Climate Change Synthesis Report; IPCC; 2023. [22] “Category 5 Hurricane Beryl makes explosive start to 2024 Atlantic season”; Climate.gov; 2024. [23] U.S. Billion-Dollar Weather and Climate Disasters; NOAA NCEI; 2024. [24] “2023: A historic year of U.S. billion-dollar weather and climate disasters”; Climate.gov; 2024. [25] IPCC. [26] “Are We Entering The Golden Age Of Climate Modeling?”; Eos; 2022. [27] “Chapter 6: Insurance industry”; New York City Panel on Climate Change Report; 2010. [28] Carney. [29] Climate Risks Pose Broad Impacts on Financial Security Systems; American Academy of Actuaries; 2023. [30] “The Global Insurance Industry’s $6 Billion Existential Threat: Coal Power”; Forbes; 2019. [31] Insurance and Climate Change Risk Management: Rescaling to Look Beyond the Horizon; British Journal of Management, Vol. 29; 2018. [32] Ibid. [33] Climate Change for Actuaries: An Introduction; IFoA; 2019. [34] Ibid. [35] “State Farm seeks major rate hikes for California homeowners and renters”; Los Angeles Times; 2024. [36] Ibid. [37] “California’s home insurer of last resort sees enrollment surge, raising concerns over its finances”; Los Angeles Times; 2024. [38] “Louisiana House advances bills to address insurance crisis”; AP News; 2024. [39] “Premiums Are Rising, and Insurers Say Lawsuits Are to Blame”; Bloomberg; 2024. [40] “Climate Change Is Destabilizing Insurance Industry”; Scientific American; 2023. [41] “‘Making financial sense of the future’: actuaries and the management of climate-related financial risk”; Nick Taylor; New Political Economy, 2022. [42] Scientific American. [43] “By 2030, All Baby Boomers Will Be Age 65 or Older”; Census.gov. 2019. [44] The future of wealth in the United States Mapping trends in generational wealth; Deloitte; 2015. [45] “Baby-boomers are loaded. Why are they so stingy?”; The Economist; 2024. [46] “The great demographic reversal and what it means for the economy”; LSE; 2020. [47] From saving to spending: A second front emerges in the US retirement challenge; McKinsey; 2022. [48] World Population Prospects; United Nations; 2022. [49] Fertility Forecasting; G.R.G. Wilson; 1975. [50] Wilson. [51] ERI Paper. The CRO Forum, 2020. [52] Actuarial History Seminar; Chris Lewin; 2007 [53] ERI Paper. [54] “What is artificial intelligence (AI)?”; IBM [55] “ChatGPT sets record for fastest-growing user base—analyst note”; Reuters, 2023. [56] “Nvidia Becomes Most Valuable Public Company, Topping Microsoft”; New York Times; 2024. [57] “Using AI in Business”; CompTIA; 2024. [58] Artificial Intelligence; Our World in Data [59] “Four Futures for Actuaries in the Wake of AI”; Actuarial Review; 2023. [60] Risk Implications of Unemployment and Underemployment; Kailan Shang; 2015. [61] “Electricity grids creak as AI demands soar”; BBC; 2024. [62] An Insurance Perspective on U.S. Electric Grid Disruption Costs; The Geneva Papers on Risk and Insurance; 2016. [63] “How Ping An, an insurer, became a fintech super-app”; The Economist; 2020. [64] Eos. [65] “What the data says about Americans’ views of artificial intelligence?” Pew Research Center; 2024. [66] The Impact of AI on Insurance Underwriting”; Risk Management; 2024. [67] “Giant US insurer admits second data hack”; Insurance Business; 2024. [68] “1.5 Million Affected by Data Breach at Insurance Broker Keenan & Associates”; Security Week; 2024. [ [69] Calculating the reputational cost of cybersecurity breaches; Barclays [70] “The greatest challenge of our time”; IFoA, 2022. [71] Roberts.
