ERM Individual Scenarios Playout
Background and Purpose
What would be the impact of a large-scale solar flare putting most computers out of commission for an extended period? What would be the impact of Quebec/Texas/Scotland/Hungary seceding from Canada / the United States / the UK / the EU on the insurance activity of a given company? A large-scale armed conflict? A large earthquake or other cat event? Nationalization of the US health care system? A deep recession in OECD countries.
The SOA is interested in understanding how companies are performing scenario analysis, thinking through how various stakeholders (regulators, general public, competitors) could be reacting to a large-scale large-impact event over a multi-year period.
Research Objective
The SOA is seeking researchers to select the scenario, support the impact analysis, and document the process.
Selecting the scenario
- articulate the key characteristics of the chosen scenarios, including the period preceding the event, the unfolding of the event itself, and the period following the event where the adaptation to the new reality is playing out.
Supporting the impact analysis
- engage in a dialogue with companies’ risk management departments to play out the scenarios, helping them realize the consequences and quantify the impact.
Document the process
- document the process to select the suitable scenario, and items to consider during the selection and run.
The SOA will appoint a Project Oversight Group (POG) to oversee the project. With the help of the POG, the research team will articulate the details of a plausible scenario that represents a significant rupture in the marketplace. This scenario will be shared with a representative sample of companies within the insurance industry for both insight into the process and a high-level impact analysis in the short to mid-term horizon.
The deliverable of the project will be a written report that will highlight:
- The process the POG and research team followed to create the plausible scenario.
- The insight gathered from the industry response regarding their scenario analysis process; how they estimate the impact of that scenario on their stakeholders and how they evaluate the management response, the regulatory response, and other stakeholders’ responses to the event and its consequences. Reading the report should help a company perform such scenario analysis in their company.
- The insight gathered from the industry response itself, i.e. the actual impact of this particular scenario.
Proposal Requirements
To facilitate the evaluation of proposals, the following information should be submitted:
- 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.
- 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.
- A description of the expected deliverables and any supporting data, tools or other resources.
- 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.
Please note that as a policy, the SOA Research Institute generally does not provide funding to cover academic institution overhead expenses.
As a guide for developing the project budget, please review the Historical Project Cost Guide (see Appendix) - A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The SOA is interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
- Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.
Selection Process
The SOA will appoint a Project Oversight Group (POG) to oversee the project. The SOA is responsible for recommending the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the POG will make the final recommendation, subject to the 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 research@soa.org.
Notification of Intent to submit Proposal
If you intend to submit a proposal, please email written notification by January 5, 2024 to research@soa.org.
Submission of Proposal
Please email your proposal to research@soa.org; proposals must be received no later than January 19, 2024. It is anticipated that all proposers will be informed of the status of their proposal by the end of February 2024.
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 SOA 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 SOA also reserves the right to redirect the project as is deemed advisable.
The SOA plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).
The SOA 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/sponsoring entity] in publicizing or promoting the research and responding to media requests.
The SOA 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 SOA, 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 SOA.
Appendix
The cost ranges below are intended as a guide for budgeting project costs for proposals in response to SOA Research Institute Request for Proposals (RFP). Please note these figures span the 33rd to 66th percentiles for all projects as well as projects that involve a specific approach (lit review, survey, etc.). They are based on historical costs over several recent years. Expected costs for some RFPs may fall outside these ranges depending on the nature of the work and resources required for completion.
All Contracted Projects
This category includes all contracted projects that the Institute has undertaken within the last several years.
The 33rd-66th percentile project costs range is $25,000 - $50,000.
Literature Reviews
This category includes projects that involved only a literature review or the cost for the portion of a larger project that included a literature review.
The 33rd-66th percentile project costs range is $15,000 - $20,000.
Surveys
This category includes all projects that had a survey as their primary component.
The 33rd-66th percentile project costs range is $28,000 - $55,000.