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Equity Release Mortgages: Call for Tender

The Institute and Faculty of Actuaries (IFoA) and the Association of British Insurers (ABI), through the Actuarial Research Centre (ARC), are inviting research teams and organisations to submit proposals for a jointly commissioned research project on Equity Release Mortgages: No Negative Equity Guarantee.

Timeline:
Category Date
Opening date 13 August 2018
Closing date 7 September 2018 (12.00 UK time, BST) Extended
Expected award Mid September 2018
Expected commencement October 2018 onwards

ARCABI

Eligibility
Proposals would be welcomed from any research-led organisations within the university, not-for-profit, public or private sector.  Organisations may be based in the UK or elsewhere in the world.
 
Call document
Download the Call for Research on Equity Release Mortgages: No Negative Equity Guarantee.  This document includes essential information for applicants, including how to apply.
 
Call description
The objectives of the commissioned research are to determine appropriate methods for determining ERM cashflows and their value:
  • To give a more academically rigorous view than previously, given the increasing importance of the market.
  • To consider appropriate stochastic models, including the range of demographic and economic factors taken into account, how they are modelled, and the correlations assumed. Any modelling should consider the range of ERM product features and options.
  • To give a view on whether it is necessary to model all factors stochastically or could some factors (e.g. mortality) be valued deterministically without any great impact on the results.
  • To consider practical approaches to approximating any models proposed.
  • To consider whether it is reasonable to use closed form solutions based on Black Scholes (as adjusted) or whether there are alternative closed form solutions which might be better.  It is recognised, for example, that the geometric Brownian Motion (GBM) underlying Black Scholes does not truly represent the ERM risks.  However, the research proposal is interested in practical solutions, so closed form solutions such as Black Scholes should be supported (or at least not ruled out) if with suitable parameters and adjustments they gave similar results to stochastic modelling.
  • To consider the relative merits of ‘real world’ and arbitrage free (risk neutral) methods and how the assumptions should be set on both bases.  In the context of the insurance industry, particular attention is drawn to the different uses to which cashflows and value might be put and the importance of appropriately determining expected cashflows and future outcomes through the economic cycle, distinct from the current price or fair value, and the relationship between the two under different economic conditions, e.g. under a low risk free rate environment.
  • To consider whether there are any “halfway house” solutions between real world and risk-neutral approaches given, in relation to the latter, the absence of a deep and liquid market.  It should be noted that the 2007 paper suggested that there was a significant difference in the value of the NNEG on the two approaches.
  • To consider the theoretical reasonableness of applying a deferred possession cap (positive deferment rate) on the projected ERM cashflows and on the value of the ERM assets and how this cap should be assessed under different economic conditions.  For example, the implications when real yields are negative and resulting impact on the difference between real world and risk neutral cashflows.
  • To provide results based on detailed modelling.  The 2007 paper had a very simple model and it was felt that a more realistic approach was desired.  However, it was recognised that there would be significant commercial constraints on providers giving information directly.  It is considered that academic research based on real ERM data and past experience would add to the credibility of this research, compared to past professional and academic papers.
  • To provide commentary in terms of theoretical coherence, consistency with current and historical market data, ease of implementation and explanation, and objectivity.
 

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Start date
E.g., 27/11/2021
End date
E.g., 27/11/2021

Events calendar

  • The Growth Mindset for Actuaries

    13 October 2021 - 8 December 2021

    Fully booked.

    This practical course is aimed at actuaries at any stage of their career who want to develop their own growth mindset and apply it to their work setting and personal or professional lifelong learning. The content of the course builds on the lecture given by Dr Helen Wright on Growth Mindset as part of the President’s 2021 Lecture series, and will be delivered over a period of 2 months, from mid-October to early December.

  • Spaces available

    The role of actuaries within the health sector varies considerably from one country to another, due to differences in the local evolution of health systems and the funding models for health services. 

  • Spaces available

    This paper outlines key frameworks for reserving validation and techniques employed. Many companies lack an embedded reserve validation framework and validation is viewed as piecemeal and unstructured.  The paper outlines a case study demonstrating how successful machine learning techniques will become and then goes on to discuss implications.  The paper explores common validation approaches and their role in enhancing governance and confidence.

  • Spaces available

    Content will be aimed at all actuaries looking to understand the issues surrounding mental health in insurance and in particular those looking to ensure products and processes widen access for, and are most useful to, those experiencing periods of poor mental health.
     

  • Spaces available

    The IFoA Policy Briefing 'Can we help consumers avoid running out of money in retirement' examined the benefits of blending a lifetime annuity with income drawdown. Panellists, including providers and advisers, will look at the market practicalities of taking the actuarial theory through into the core advice propositions used by IFAs and Fund Managers. They will share a number of practical issues such as investment consequences before and after retirement and the level of annuity that is appropriate and answer questions from the audience.

  • Speech from the Governor of the Bank of England, Andrew Bailey

    Lincoln's Inn The Treasury Office, London WC2A 3TL
    1 December 2021

    The IFoA is pleased to be hosting the Governor of the Bank of England, Andrew Bailey, to deliver a speech on delivering policyholder protection in insurance regulation.

    The speech will be presented to an in-person audience, and simultaneously live-streamed, at 14.00 on Wednesday 1st December.

  • The Many Faces of Bias

    2 December 2021

    Spaces available

    This webinar looks at the many types of biases, both conscious and unconscious and the impacts they can have in the workplace.  Raising our own awareness and understanding of the issues can help us avoid the pitfalls of unconscious bias in particular.  We’ve all heard the phrase ‘office banter’ but are we sure that’s how those on the receiving end perceive it and is it ok to go along with it?

  • Spaces available

    Actuaries need to take action now - but how?  With a focus on climate change, this session will provide informed insight to enable you to improve your knowledge and understanding of the issues involved, demonstrate how it will impact advice to your clients, and highlight prospective opportunities for actuaries within pensions and wider fields.

  • Spaces available

    Pension scams have become more prevalent as a result of the pandemic, and Trustees have increased responsibilities to protect members, which means that actuaries need to be in a position to provide advice in this area. Our specialist panel will include a professional trustee, an IFA and head administrator, two of whom are members of PASA.

  • Spaces available

    The covid-19 pandemic creates a challenge for actuaries analysing experience data that includes mortality shocks.  To address this we present a methodology for modelling portfolio mortality data that offers local flexibility in the time dimension.  The approach permits the identification of seasonal variation, mortality shocks and late-reported deaths.  The methodology also allows actuaries to measure portfolio-specific mortality improvements.  Results are given for a mature annuity portfolio in the UK

  • Spaces available

    In this webinar, the authors of the 2021 Brian Hey prize winning paper present a new deep learning model called the LocalGLMnet. While deep learning models lead to very competitive regression models, often outperforming classical statistical models such as generalized linear models, the disadvantage is that deep learning solutions are difficult to interpret and explain, and variable selection is not easily possible.

  • Spaces available

    The dominant underwriting approach is a mix between rule-based engines and traditional underwriting. Applications are first assessed by automated rule-based engines which typically are capable of processing only simple applications. The remaining applications are reviewed by underwriters or referred to the reinsurers. This research aims to construct predictive machine learning models for complicated applications that cannot be processed by rule-based engines.

  • Spaces available

    With the Pension Schemes Act 2021 requiring a long term strategy from Trustees and sponsors, choosing a pensions endgame strategy has become even more critical. However, it is important that the endgame options available are adequately assessed before choosing one. With an ever-increasing array of creative and innovative options available, this decision may not be straightforward.