The Actuarial Standards Board (ASB) of the American Academy of Actuaries approved an exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 39, now titled Treatment of Catastrophe or Extreme Event Losses in Future Cost Estimates for Property/Casualty Risk Transfer and Risk Retention. The ASB adopted ASOP No. 39, Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking, in 2000 to provide guidance to actuaries in evaluating catastrophe exposure and in determining a provision for catastrophe or extreme event losses and loss adjustment expenses in property/casualty insurance ratemaking.
Since this ASOP was adopted, there have been many developments in ratemaking and modeling that are not adequately addressed in the current standard such as events that impact casualty insurance or multiple insurance lines, or other events that the industry now faces, such as cyber-attacks, terrorism, and the effects of climate change. The standard is also being updated to recognize ASOP No. 53, Estimating Future Costs for Prospective Property/Casualty Risk Transfer and Risk Retention, and ASOP No. 56, Modeling, as well as changes to ASOP No. 38, Catastrophe Modeling (For All Practice Areas). Notable changes from the existing standard include broadening the scope to include both catastrophes and extreme events and expanding the guidance for casualty coverages, catastrophe models, and scenario analysis.
The comment deadline is May 1, 2025. Information on how to submit comments can be found in the exposure draft.
