Conference paper

It is as well to admit at the start that Reinsurance is such a vast subject that in the time available the working Party could barely scratch the surface. We deliberately set out to avoid constructing elaborate theories since these rarely have any practical applications. In particular the much-neglected field of Retentions can only be approached empirically in practice.

The working party regrets that they could not complete their work in time to present a fully considered report to this convention. However we feel that the results so far obtained are of interest to a wider audience and that our work will benefit from comments and criticisms from such a wider circle. The working party wish to continue their work over the next twelve months in order to present a fuller report to GISG in October 1989. There are many areas of interest yet to be addressed.

The only major area of insurance in the UK without substantial actuarial involvement is that referred to as MAT: Marine, Aviation and Transport. Incidentally this state of affairs seems to apply to most overseas countries also. The Institute library is practically devoid of literature on the subject although the Chartered Institute of Insurance does have a fair amount of related information. This paper provides a basic introduction to Marine Insurance and Reinsurance, emphasising aspects of particular interest to Actuaries.

The London Market comprises Lloyd's Syndicates and London Market Companies (companies in London or London operations of large composites writing Lloyd's type business). These entities write a wide variety of business, both insurance and reinsurance, and cover all classes of business including such exotic business as professional indemnity and aggregate products liability. Because of the nature of the business it is a necessity to obtain protection covering single risk accumulations and pure catastrophe exposure by way of excess of loss reinsurance.

The purpose of this note is to demonstrate the part which actuaries can play in assisting underwriters to rate excess of loss business. I stress the word "assist" because it is important that we do not see ourselves as in any way replacing underwriters.

The first International Conference on Insurance Solvency was held in June 1986 in Philadelphia, U.S.A. At this Conference, the Solvency Working Party presented a paper which reported their work to date. The Conference was also attended by a collection of individuals from the U.S. who were trained as financial economists and whose approach to the solvency question was entirely different from our own. The second International Conference on Insurance Solvency is now being planned for May 1988. Its stated objective is the integration of the different approaches of actuaries and economists.

The starting point for modern portfolio theory is the efficient market hypothesis. This comes in three forms but it can be summarized simply in the statement that it is extremely difficult for the ordinary investor to make money from trading in shares. This is hardly a concept which is likely to upset the typical investment manager. That is until he works out the corollary:- such a high proportion of the money invested in the Stock Exchange is professionally managed that he (the investment manager) may be an ordinary investor.

The material which we are presenting consists of two complementary papers, by Russell Devitt on "Financial Economics and the Theory of Solvency" and Geoffrey Bernstein on "Fundamental Principles of Modern Portfolio Theory and Option Pricing". It is hoped that these will give other members of the GISG a reasonably gentle introduction to these topics, about which we may hear a lot more in future.

Progress with the Manual has, regrettably, been slower than hoped. To produce a fully satisfactory work has proved a larger task than at first envisaged. But momentum has been regained, and publication in mid-1988 is now confidently expected.

The objective is not to consider the logic, merit or wisdom of discounting technical reserves in general insurance. The starting point is the assumption that if it were to be decided that provisions should be discounted, then there would be practical problems to be resolved. The objective of this paper is to identify and consider the practical issues that arise.