Adapting to the “New” New Normal

Background and Purpose

As the operating environment has changed through the years the insurance industry has proven to be resilient. Three decades of declining interest rates was followed by a global recession and then another decade of near-zero rates. Now the world is changing again.

Among the challenges facing us are

• Rising interest rates;
  
  High inflation;
  
  Pandemic mortality and morbidity along with business interruption;
  
  Geopolitical risk;
  
  and Supply chain logistical unreliability.

How should the industry respond to these challenges? Have we learned from the past? Are we ready to live in the “new new normal”?

Research Objective

The Joint Risk Management Research Committee (JRMRC) is seeking researchers to identify changes the “New” new normal will bring in a constantly changing world, identify the nature of the accompanying new risks and discuss how the industry should respond to these changes changes and manage these new risks.

Research should be from the point of view of a Chief Risk Officer for each of the following types of insurers:

1. Life and Annuity Company
2. Health
3. Property and Casualty
4. Catastrophe

The following are examples of topics that may be addressed:

How will the company be impacted by higher inflation?

• Sales
• Replacement costs / disaster costs / policyholder behavior / lapses

How will higher interest yields (and/or the view of moving from lower to higher interest yields) impact the company?

• Disintermediation
• Portfolio yield crediting rate companies

Product Design

• In the last decade many companies designed flexibility into their products in anticipation of financial shocks, particularly for low interest rates. In such a company, does the flexibility already built-in work to our advantage in a higher rate/inflation environment?
• In terms of inforce products – can they adapt to the new environment?
• In terms of current product for sale – are they competitive, profitable, and sustainable?

Scenarios

• Create a set of deterministic scenarios to walk-through several forecasts to test product / policyholder / consumer behavior

Note that the list above is not meant to be exhaustive but merely examples oof proposed topics that may be researched.

Proposal Requirements

To facilitate the evaluation of proposals, the following information should be submitted:

1. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
2. An outline of the approach to be used (e.g. literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
3. A description of the expected deliverables and any supporting data, tools or other resources.
4. Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
5. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The JRMRC is interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
6. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

Selection Process

The JRMRC will appoint a Project Oversight Group (POG) to oversee the project. The JRMRC/POG is responsible for recommending the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the JRMRC/POG will make the final recommendation, subject to Society of Actuaries Research Institute (SOA) leadership approval. An SOA staff research actuary will provide staff actuarial support.

Questions

Any questions regarding this RFP should be directed to David Schraub, SOA Senior Practice Research Actuary at dschraub@soa.org or +1-847-706-3550.

Notification of Intent to submit Proposal

If you intend to submit a proposal, please email written notification by July 15, 2022 to Jan Schuh at jschuh@soa.org

Submission of Proposal

Please email your proposal to Jan Schuh at jschuh@soa.org; proposals must be received no later than July 29, 2022. It is anticipated that all proposers will be informed of the status of their proposal by the end of September 2022.

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries Research Institute and the researcher.

The Society of Actuaries Research Institute /JRMRC reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Society of Actuaries Research Institute /JRMRC also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries Research Institute /JRMRC plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s). The Society of Actuaries Research Institute /JRMRC may choose to seek public exposure or media attention for the research. By submitting a proposal, you agree to cooperate with the Society of Actuaries Research Institute/JRMRC in publicizing or promoting the research and responding to media requests.

The Society of Actuaries Research Institute/JRMRC may also choose to market and promote the research to members, candidates, and other interested parties. You agree to perform promotional communication requested by the Society of Actuaries Research Institute/JRMRC which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.

Conflict of Interest

You agree to disclose any of your material business, financial and organizational interests and affiliations which are or may be construed to be reasonably related to the interest, activities, and programs of the Society of Actuaries Research Institute /JRMRC.