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Co-authored by Joe Herbers and Rob Walling
What we love about the property/casualty insurance business is that each day presents new and different challenges. Fresh out of college, we were both looking for a dynamic and stimulating field in which to work. We chose to start in this industry and have had no regrets.
When we remember 2018, its events and circumstances have been more varied and challenging than one might imagine. Hacks, ransomware and data intrusions were announced weekly. Volcanic eruptions, wildfires and mudslides decimated a record number of homes and forest acreage. The entire island of Puerto Rico continues to suffer Hurricane Maria’s devastating effects. We have also become numb to the numerous senseless shootings in places where we used to feel safe.
On the technology front, infant gene editing is raising profound ethical questions while offering hope to those suffering from hereditary diseases. The benefits and risks of fast-advancing technologies like autonomous vehicles provide new perspectives. Artificial intelligence applied in service to humanity proffers great promise yet potential threats.
The advent of captive insurance companies fundamentally changed the commercial casualty market many years ago and now constitutes more than half of that premium volume. Even as enterprise risk captives (i.e., small captives making an 831(b) election) are under fire by the Internal Revenue Service and threatening to give the entire captive industry a black eye, captives are finding new footholds in renewable energy, insurtech, start-ups and the cannabis industry.
When motivated professionals face challenges, their collective spirit will spawn new approaches and alternative ways to deal with thorny issues. Pinnacle’s staff endeavor daily to embrace the changing world in which we live. This is exemplified by our work on risk distribution. Consulting Actuaries Derek Freihaut, Chris Holt and Rob Walling co-authored a seminal paper on the issue of risk distribution as it relates to insurance entities. Variance, a Casualty Actuarial Society (CAS) peer-reviewed journal, has accepted it for publication, and it has already been presented in several forums. Pinnacle’s new approach provides a tool to address the risk distribution criteria required by the deliberations in the Avrahami and Reserve Mechanical U.S. Tax Court decisions.
Following many years of research and preparation, Pinnacle Consulting Actuaries Aaron Hillebrandt and Joe Herbers completed a professional paper on solvency regulation in the property/casualty insurance industry and the actuarial profession. Variance also accepted this paper for publication. This formative retrospective documents many of the industry's and profession’s challenges since the late 1970s and is a valuable tool in helping the insurance business anticipate future issues.
What might cyber, artificial intelligence, autonomous vehicles, healthcare or any unforeseeable developments bring to make us dig even deeper in 2019 and beyond? Will once mighty institutions or companies be shadows of their former selves when the clock turns toward 2020? No matter what the new year has in store for us, Pinnacle’s committed professionals will continue to find innovative solutions to meet our industry’s and our clients’ needs.
Joe Herbers is Pinnacle’s Managing Principal and a Consulting Actuary with over 30 years’ experience. His practice focuses on providing loss reserving and funding studies for a wide variety of entities – both traditional insurers and alternative markets. Joe’s specialties include policyholder-owned group captives, large-deductible and/or self-insured entities, lawyers’ professional liability carriers, Florida property writers and non-standard auto writers in the state of Illinois. Joe is an Associate of the Casualty Actuarial Society (ACAS), a Member of the American Academy of Actuaries (MAAA) and Chartered Enterprise Risk Analyst (CERA). He served as long-time member and Chair of the American Academy of Actuaries Committee on Property Liability Financial Reporting (COPLFR) as well as several other professional committees. He is a regular speaker at industry events.
Rob Walling is a Principal and Consulting Actuary with Pinnacle Actuarial Resources, Inc. and has been in the insurance industry since 1989, consulting since 1997. He is focused on commercial lines ratemaking and product development, actuarial studies for captives and self-insureds, commercial lines loss reserving, legislative costing, litigation support, regulatory consulting and expert testimony. Mr. Walling is a Fellow of the Casualty Actuarial Society (CAS), a Member of the American Academy of Actuaries and a Chartered Enterprise Risk Analyst. He currently serves as a member of the CAS Board of Directors. He has previously served as the Chairman of the CAS Ratemaking Seminar Committee, Risk and Capital Management Seminar Committee, and the New Fellows Committee. Mr. Walling is a frequent speaker at industry meetings on professionalism, predictive analytics, captives and alternative markets, medical professional liability and government insurance program topics.
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