As the national organization for all U.S. actuaries, the Academy’s volunteer groups will be keeping busy this year.
In the ever-evolving landscape of risk assessment and mitigation, the American Academy of Actuaries takes center stage once again with its visionary initiatives set to shape the future of the actuarial profession in 2024. As we step into a new era marked by unprecedented challenges and opportunities—artificial intelligence, anyone?—the Academy is gearing up to redefine its role in safeguarding financial stability and promoting informed decision-making.
This feature delves into the Academy’s 2024 initiatives, exploring the strategic roadmap laid out by our volunteer-driven organization to address emerging trends and disruptions. From embracing cutting-edge technologies to fortifying professionalism standards, the Academy’s goals and initiatives promise to reinforce the actuarial profession’s relevance in a rapidly changing world. We invite readers to envision a future where actuaries play a pivotal role in shaping the financial landscapes of tomorrow.
Casualty Practice Council
Practical, actionable workstreams for the practicing P/C professional
The Casualty Practice Council (CPC) in 2024 will continue to underscore the importance of providing practical assistance to actuaries. The Committee on Property and Liability Financial Reporting (COPLFR) will issue its annual updates of the Practice Note on Statements of Actuarial Opinion on P/C Loss Reserves and the P/C law manual. COPLFR will also hold its in-person seminar on statements of actuarial opinion. The CPC has convened a working group to prepare a new practice note on ASOP No. 20, Discounting Property & Casualty Claim Estimates.
The Property & Casualty Committee on Equity and Fairness (PCCEF) has been engaged with regulators in Colorado and the District of Columbia on practice considerations related to unintended bias in insurance ratemaking. For 2024, the PCCEF is looking to expand its focus to include issue briefs on bias in marketing, underwriting, and claims administration.
The CPC, together with the Prudential Regulation Committee (PRC) of the Risk Management and Financial Reporting Council (RMFRC), is looking forward to another round of Capitol Hill visits in 2024. Topics to be covered will include detecting and adjusting for unintended bias in actuarial work, climate risk, and developments in cyber risk. These meetings will be hybrid in 2024 and we are excited to schedule some in-person meetings with volunteers and government stakeholders.
The Committee on Cyber Risk continues to update and enhance the Cyber Risk Toolkit. For 2024, the Toolkit updates will include refreshes to previous papers and new material on comparing cyber vendor models, international cyber, and comparing standalone cyber policies and policies included in homeowners insurance. In addition, the CPC continues to sponsor a Research Committee project on cyber risk together with RMFRC. The next phase of the research will seek to better understand the range of costs associated with cyber events.
The Climate Change Joint Committee (CCJC, a joint committee of RMFRC and CPC) is nearing completion of a paper that will highlight the financial implications of various climate events having equity concerns. Upon completion of the paper, the CCJC will host a webinar to discuss equity issues of disproportionate impacts of climate events on different populations. The CCJC is also planning to write papers about attribution science and data quality for climate models and applications.
The Automobile Insurance Committee, Extreme Events Committee, and the Workers’ Compensation Committee are all busy with new work products as well. Subjects include cost drivers in auto insurance, compound natural disasters, flood insurance, and effects of inflation on workers’ compensation.
The CPC is looking to convene new work groups to explore emerging areas of risk, such as the affordability and availability of housing insurance, third-party funded litigation, and other developments in liability claims.
Health Practice Council
Bringing a unique understanding of complex issues during a pivotal election year
Looking ahead to the 2024 health policy landscape, the Health Practice Council is focusing on familiar issues and challenges. While the election will heighten the public’s focus on certain aspects of traditional public policy issues, the Academy’s key health priorities reflect the value of our actuarial perspective—regardless of the landscape.
As we continue to focus our energies on the incorporation of a health equity perspective, the HPC will actively explore potential contributors to disparities, as well as ways to address them. This means taking a deeper look at health insurance benefit design, provider contracting and network development, premium pricing, population health management, and data collection for the measurement of health disparities.
If our recent experience with COVID-19 has taught us anything, it underscored the value of public health. We’ll continue to champion actuarial perspective on various public health challenges, including behavioral health issues, the integration of behavioral health with overall health, mental health parity in insurance coverage, and the economic and cost impact to the health care system. As we continue to track the near- and longer-term effects of COVID-19, the HPC will also explore the impacts of other public health challenges, such as climate change, gun violence, and chronic disease. By considering the effects on health care utilization, costs, and health outcomes, as well as potential opportunities, we can better address these challenges.
With our specific expertise related to health insurance markets and the Affordable Care Act, including proposals to reduce uninsurance and underinsurance rates while increasing the availability of affordable coverage, we continue to be dynamic voices on proposed changes to health insurance laws or regulations in the individual, employer group, Medicare, and Medicaid markets. Actively engaging with policymakers, our perspective on innovations to health care payment and delivery systems will continue to promote a focus on improving health care affordability and health care outcomes. The HPC continues to evaluate implications of novel approaches, including those related to value-based purchasing, access to care, prescription drug pricing, price transparency requirements, and telehealth.
A likely focus of the election will be Medicare financing, solvency, and sustainability, as the program continues to face near- and long-term financial problems. Program sustainability also requires meeting the needs of beneficiaries. Actuaries are in the unique position to help policymakers and other stakeholders understand the implications of potential Medicare changes on trust fund solvency, program spending, beneficiaries, providers, and taxpayers. Along with Medicare, we play a crucial role in the financing and design of long-term care systems—from private long-term care insurance to public programs that provide long-term care benefits and services. Our insights on the implications of potential financing approaches on access and affordability will be crucial, particularly as we continue to struggle to find the right approach when aligning current public programs, such as Medicaid, newer program design considerations, and the short- and long-term demographic challenges affecting long-term care systems.
The year ahead will likely introduce other challenges that will demand our unique understanding of health in the United States. With a focus on how health care influences and impacts consumers, communities, and our economy, the HPC will continue to be a strong, consistent policy voice with policymakers.
Life Practice Council
From structured securities to economic scenario generators, the life space will remain active in ’24
As we look forward to 2024, the Life Practice Council at the Academy will be working on a number of activities to support the practice of life insurance actuaries and related regulatory developments. Some highlights include:
Our C1 Subcommittee recently presented to the NAIC’s Risk-Based Capital Investment Risk and Evaluation (E) Working Group on risk-based capital (RBC) principles for structured securities, an important topic for 2024. The newly formed Investment Analysis Subcommittee will be monitoring investment-related trends and regulatory developments in the life insurance industry to assess actuarial implications and coordinate comments and proposals to regulators as the NAIC continues its increased focus on life insurance company investments.
Our Economic Scenario Generator (ESG) Subcommittee has been busy offering feedback on the NAIC’s Generator of Economic Scenarios (GOES) project. In 2023 the group developed a framework for working with ESGs, including stylized facts and acceptance criteria for simulated interest rates and returns on equity and bond funds. This group expects to continue to offer feedback this year on the NAIC’s candidate scenario sets and related governance issues. A primary project for the group in 2024 is to begin work on a report for Academy members laying out a framework for working with ESGs and other relevant considerations for actuaries that work with ESGs and the scenarios they produce.
On a related note, the Life Valuation Committee (LVC) will be following ESG developments at the NAIC, focusing on the impact that a new ESG could have on reserves and capital. The LVC will also continue to work with the NAIC as regulators continue their efforts to implement principle-based reserves (PBR) for fixed annuities and conduct a field test next fall. In 2024, the LVC will also be publishing an important update to the Academy’s practice note on asset adequacy testing.
At the Life Products Committee, the Life Underwriting and Risk Classification Subcommittee will continue to monitor and offer actuarial perspectives and recommendations on Colorado’s initiative to prevent unfairly discriminatory practices in insurance, including related testing and governance considerations. The Index-Linked Variable Annuity Subcommittee will continue to offer feedback on new interstate compact standards for index-linked variable annuities. And the Non-Guaranteed Elements Subcommittee will be working to finalize and publish a new practice note on Actuarial Standard of Practice No. 2: Nonguaranteed Elements for Life Insurance and Annuity Products.
Pension Practice Council
Shaping the future of U.S. retirement with sound analysis of timely issues
Heading into 2024, the Pension Practice Council is eager to propel discussions on critical pension and retirement issues within the actuarial community, with policymakers, and among stakeholders. Our focus areas for the upcoming year include managing pension risk in a higher interest rate environment, exploring the potential unfreezing of defined benefit pension plans, conducting a comprehensive retrospective and prospective analysis of ERISA on its 50th anniversary, and actively contributing to the ongoing debate on addressing the Social Security solvency crisis.
With interest rates reaching levels unseen in over 15 years, actuaries are presented with a unique opportunity to guide pension plan sponsors in adopting improved risk management strategies. While liability-driven investing strategies have gained traction with some plan sponsors, others have found them to be cost-prohibitive in the previous low-interest-rate environment. Actuaries will play a pivotal role in devising risk management strategies, working in partnership with plan investment advisers. The actuarial interest rate assumption remains a crucial discussion point for public and multiemployer plans.
In the 2000s, most corporations froze their defined benefit (DB) pension plans, switching to defined contribution (DC) plans. While DC plans have certain advantages, they are inherently inefficient at providing lifetime retirement income. In recent months, however, there has been increased chatter around unfreezing pension plans, perhaps motivated by higher interest rates and the desire to attract and retain employees. Hybrid and variable plan designs could play an important role in a resurgence of DB plans in cases where traditional designs remain unattractive. The Academy is committed to provide trusted insights in helping plan sponsors and policymakers navigate this potential “thaw.”
As the Employee Retirement Income Security Act of 1974 (ERISA) approaches its 50th anniversary in 2024, the Academy will undertake a reflective and forward-looking examination of this landmark legislation. Through multiple issue briefs and events, we will assess ERISA’s successes, shortcomings, and lessons learned for the future. This retrospective and prospective analysis aims to inform policymakers on shaping U.S. retirement legislation for the next 50 years and beyond.
Projections indicate that Social Security may exhaust its trust fund assets by 2034, which may necessitate a mandatory 20% cut in benefits. Addressing this crisis remains a top priority for the Academy. We are publishing a series of issue briefs on possible reform options, several of which are already available. We also recently refreshed the “Social Security Challenge,” an interactive tool that allows users to evaluate the impacts of various reform options. Ahead of the 2024 elections, the Academy will actively engage in continued discussions on potential Social Security reforms that will hopefully secure the future of this vital program.
Risk Management and Financial Reporting Council
Engaging stakeholders across numerous workstreams
The Risk Management and Financial Reporting Council (RMFRC) is looking forward to 2024 with a mixture of old and new activities.
Together with the Casualty Practice Council (CPC), RMFRC continues to sponsor a Research Committee project on cyber risk. The next phase of the research will seek to better understand the range of costs associated with cyber events.
The Data Science and Analytics Committee (DSAC) will add Auditing Algorithms for Bias to the series of technical papers that it released in 2023 or is about to release. (Two papers are nearing completion as I write this in November.) Close behind its recent webinar on “Defining Data Bias,” DSAC will soon present webinars on “Natural Experiments” and on “Identifying Bias in Models and Data.”
Our Prudential Regulation Committee (PRC), together with the Casualty Practice Council (CPC), is looking forward to another round of Capitol Hill visits in 2024—perhaps including some in-person meetings after two years of (Covid-induced) remote meetings. The PRC is also joining forces with our Financial Reporting Committee (FRC) to more closely monitor international developments so that we may more actively engage with regulatory and standard-setting bodies outside of the U.S. on matters that affect us. As new concerns arise, they will bring them back to the council and to other groups within the Academy who might want to be engaged in further developments.
After a long effort to produce a practice note on GAAP’s targeted improvements to the accounting for long-duration contracts, the FRC now has a group working on an IFRS 17 practice note to provide U.S.-specific content, supplementing the International Actuarial Association’s International Actuarial Note 100. As follow-up to a meeting with Financial Accounting Standards Board (FASB) staff, the FRC has joined forces with the Enterprise Risk Management / Own Risk and Solvency Assessment Committee (ERM/ORSA) to develop educational material for the FASB on insurance company risk management practices.
ERM/ORSA is also working together with the Life Practice Council to help with the development of an improved Generator of Economic Scenarios for use with statutory principles-based reserves and risk-based capital. ERM/ORSA is also planning for a series of Actuarial Voices podcasts on a variety of risk management topics.
The Climate Change Joint Committee (CCJC, a joint committee of RMFRC and CPC) is nearing completion of a paper to highlight the financial implications of various climate events having equity concerns. Upon completion of the paper, CCJC will host a webinar to discuss equity issues of disproportionate impacts of climate events on different populations. CCJC is also planning to write two papers about attribution science and data quality for climate models and applications.
Council on Professionalism and Education
Supporting the needs of the profession
The Council on Professionalism and Education (COPE) is a cross-practice council—each member represents a practice council, professionalism committee, education committee, the Actuarial Standards Board (ASB), or the Actuarial Board for Counseling and Discipline (ABCD). As such, COPE provides a forum where professionalism and education issues can be raised, discussed, and coordinated.
In 2024, COPE will continue to support the professionalism and education needs of our members as they adapt to the changes brought by newly revised standards, newly enacted legislation, and advances in technology. COPE plans to focus on ensuring that actuaries have access to articles, webinars, issue briefs, discussion papers, and other materials to support and improve their understanding of professionalism and to allow them to earn relevant continuing education. Some of the topics we plan to cover next year include artificial intelligence, bias, peer review, the Code of Professional Conduct, actuarial standards of practice (particularly exposure drafts and new or revised standards), the U.S. Qualification Standards, and other professionalism tools and issues. In addition, COPE will monitor announcements of Society of Actuaries’ curriculum changes for possible professionalism impacts. COPE will respond to any such changes with recommendations on education needed to fulfill the knowledge and competencies required for actuarial professionals seeking membership in the Academy and/or practicing in the U.S.
As we do every year, we will present at least four professionalism webinars, providing the credit needed to fulfill the USQS requirement of at least 3 hours of professionalism continuing education and 6 hours of organized credit. We also aim to host webinars that will help actuaries meet the 1-hour bias requirement and other webinars that will help enrolled actuaries meet the Joint Board’s requirements for core ethics credit. In addition, we will continue to offer speakers, content, and resources for members, employers, and other stakeholders through the Academy’s Speakers Bureau as well as in Contingencies and various publications, and Academy and other actuarial organization events.
By providing the tools to help actuaries keep their professionalism sharp, through COPE, the Academy is helping actuaries retain the public’s trust, thereby ensuring we retain the privilege of regulating the profession ourselves.