Actuarial practitioners have traditionally utilised conventional economic theory to identify the approach to adopt in economic and financial issues. For example, using the Black-Scholes formula to value options held by their client companies, or relying upon the Efficient Markets Hypothesis to explain and validate the valuation of shareholdings.
The experience of the 2008 economic and financial crisis challenged conventional economic tools, with other schools of economic thought brought into sharp focus. This has opened up a number of questions that the IFoA would like to explore through a research programme focused on economic modelling.
Dr Iain Clacher of Leeds University Business School was engaged in June 2017 to undertake the first phase of the research; a survey of the economic theories used, both explicitly and implicitly, by firms which employ actuaries in the UK. Dr Clacher undertook a series of detailed interviews with a range of experts, both internal and external to the Profession, looking at economic theories in common use in actuarial practice. Dr Clacher's initial findings were discussed at an Actuarial Research Centre (ARC) event, held in May 2018 with senior actuaries and experts, looking at how the Profession could improve economic understanding in areas that inform actuarial work. Following these thought-provoking discussions, the ARC and IFoA actuarial volunteers will be progressing further research and stakeholder discussion to ensure the profession is contributing to, and learning from, this important debate. Dr Clacher's report - summarising his research findings - has been published. Download the report.
Research methodology (Qualitative)
Face to face interviews with relevant individuals working in firms including, but not limited to, insurance companies, consultancies, banks and pension funds. The research was carried out in two phases to allow for a round table event at which preliminary results were discussed and used to guide the second phase of research.
The initial output of this research was a report summarising Dr Clacher's findings as well as presentations at relevant IFoA events.
Dr Clacher's initial report, June 2019: The report provides a picture of the current opinions of a range of actuaries and economic experts on the subject of economic thought, how the traditional concept of economic thought is changing and the likely impact this change could make on approaches towards long-term investment and risk.
ARC Launch Event, May 2018: The ARC hosted a round table launch event on 29 May 2018 at Staple Inn Hall, to share thinking so far, following a series of confidential interviews of leading actuarial thinkers in a wide range of roles. An introduction to the ARC's Economic Modelling programme was given by Professor Mark Cross, chair of the IFoA's Research and Thought Leadership Board (RTLB), 2015-18. Dr Iain Clacher and Professor Steve Keen also presented at this event. View Dr Iain Clacher's presentation. View Professor Steve Keen's presentation.
IFoA Life Conference, November 2017: Dr Iain Clacher (Leeds University Business School) delivered a workshop on "Economic Theory and Actuarial Practice". Following this, the economic modelling programme will host a round table event to share thinking and look at how the Profession could improve economic thought in actuarial practice. View Dr Iain Clacher's presentation
In the news
Diversity of economic thoughts - why it matters. An article in The Actuary highlights key areas for consideration by the actuarial profession, following Dr Iain Clacher's report on 'Economic Thinking and Actuarial Practice'. Erik Vynckier's response to the report is also included in the article. Erik is the chair of RTLB, 2018 - present.
'Animal spirits' vs the efficient market hypothesis. Alex Waite asks whether actuaries are evolving to remain relevant in their economic predictions. Read the full article in The Actuary.
In a letter to The Actuary Mr W John Bishop, FIA responds to the article.
If you want more information about our research programmes please contact the IFoA Actuarial Research Centre:
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Welcome to the programme for our 2nd Virtual Pensions Conference. This year's conference features 11 webinars offering members and non-members the opportunity to get up to date content from leading experts in the pension industry. There will also be opportunity to ask questions and contribute to the discussion.
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The IFoA’s Actuarial Review Team will publish its second thematic review in June 2021. The review is looking at the involvement of actuaries in the pricing of UK home and motor insurance, during a period of significant developments in the sector from both regulation and innovation.
As part of the Behavioural Science Series, David Rooke will explore the leadership capacities and capabilities that may enable actuaries to successfully navigate the challenges of our times. He will discuss how actuaries can apply these principles to ensure the profession succeeds, flourishes, and plays a positive societal role in our global community.
Following his presentation, David Rooke will be joined by Stephen Mann, CEO at the Institute and Faculty of Actuaries and Anusha Thavarajah, Allianz’s Regional Chief Executive Officer, Life and Health for Asia Pacific for a panel discussion around the themes of the session The panel will be chaired by Tan Suee Chieh.
We have made it through 2020 but the COVID-19 crisis continues to have a significant impact on individuals, societies, businesses and the wider economy across the globe. Navigating the world post COVID-19 in an uncertain and highly unstable time brings along many uncertainties, challenges and exciting opportunities. Hence the theme of this year’s IFoA Asia Conference Webinar Series is “Risk. Adapt. Thrive.”
Internal audit is often the Cinderella of the audit world. It’s a regulatory requirement for insurance companies to have an internal audit function, so why not make it as useful as possible? This session will look at how to link an internal audit plan to the risk register, and how that helps audit committees and boards to spot problems and fix them.