Inside Track ERIC P. HARDING
New Experiences, New Risks
I HAVE TWO SONS. AS I’VE MENTIONED in this space previously, they bring me great joy … and great
terror. See, these boys are fearless. And while that may sound like a humblebrag of the highest order, this
trait has its downsides.
They love to push themselves, to try new things. That’s a natural
and desirable developmental urge, of course, but it can result in
I’ll give you two examples:
■ ■ In September, the day before he started first grade, my older
son screwed up the courage to play laser tag with a group of
older kids. He had a great time … until a teammate rushed past
him, sending him sprawling to the ground. He landed wrong
and sustained a buckle fracture in his wrist.
■ ■ And the weekend before this issue when to print, my younger
son decided he was ready to emulate the older kids playing
superheroes on the steps, and leapt down to the landing from
the eighth (!) step. You guessed it—another new experience,
another buckle fracture.
But when they talk about their choices and the results of those
choices, they don’t dwell on the pain—instead, they revel in their
bravery. They’re coming to understand that trying new things can
be exciting and scary in equal measure.
Our cover feature this issue, “Outer Space for All” (page 26),
confronts this idea directly. For those among us who’ve always
dreamed of experiencing space travel, enterprising companies
are working hard to make that dream a reality. But when something goes wrong—and something will go wrong—who’s on the
hook? From property insurance for the spaceflight providers to
short-duration health insurance during the experience, insurers
and participants need to consider the risks of this out-of-this-world
endeavor—and how to mitigate against them.
New possibilities force us to re-examine how we think about
risk. But, argues the author of our second feature, “Risk Is Not
a Four-Letter Word” (page 32), that might not always be a good
thing. The rise of computational power allowed actuaries to describe
many possible outcomes of intricate models. But without the proper
perspective, according to author Hilary Salt, decision-makers may
focus on the possible rather than the probable—with deleterious
effect. The feature concludes with a call to action for actuaries to
help the broader public understand what “risk” really means, to
provide needed perspective to colleagues in other areas of the
business, and to exercise professional judgment in framing model
results for all users.
In “How to Survive—and Thrive—Amid Regulatory Change”
(page 38), the authors examine what happens when new regulations force a company, and indeed a whole industry, to change
how it goes about its business. The financial crisis of last decade
has led to new and expanded regulation in the United States
and around the world, and new political administrations often
come with new approaches to regulatory oversight. The authors
discuss how companies can be proactive, make a plan, deal with
downstream impacts, and ensure they understand the effects of
the regulation on the financial results of the company. The feature
then puts these ideas into practice with a case study—the recent
adoption of VM- 20 for principle-based reserves.
Our final feature this month, “Bayes’ Gift—How Actuaries
Discovered (and Rediscovered) a Powerful Analytical Tool” (page
44), offers a rumination on how new technologies and their associated challenges can give old methods renewed vitality. Author
Roy Goldman highlights how mathematicians and actuaries have
considered interrelated probabilities throughout history, and one
elegant formula keeps cropping up—Bayes’ theorem. Historical
vignettes show how this once-ridiculed theorem can help explain
complex, intertwined probabilities.
One final note: We’re excited to announce the winner of last
year’s fiction contest. Please join me in congratulating Steve Abbs,
who wrote “The Full Spectrum of Risk” (May/June 2016).
I hope you enjoy this issue, and that the new experiences you
undertake this summer lead to much pleasure—and minimal pain.