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Sessional Research Programme 2014/2015

  • Expert judgement. 8 June 2015

    Presented to an IFoA Sessional Meeting in Edinburgh on 8 June 2015, and to the IAA Colloquium in Oslo on 10 June 2015

    Abstract:
    Expert judgement has been used since the actuarial profession was founded. In the past, there has often been a lack of transparency regarding the use of expert judgement, even though those judgements could have a very significant impact on the outputs of calculations and the decisions made by organisations. The lack of transparency has a number of dimensions including the nature of the underlying judgements, as well as the process used to derive those judgements. This paper aims to provide a practical framework regarding expert judgement processes, and how those processes may be validated. It includes a worked example illustrating how the process could be used for setting a particular assumption. It concludes with some suggested tools for use within expert judgement. Although primarily focused on the insurance sector (including consideration of the impact of Solvency II), the proposed process framework could be applied more widely without the need for significant changes.

  • Sustainability in the financial system. 11 May 2015

    Sessional Research Meeting, 11 May 2015, Staple Inn, London. Research commissioned by the Resource and Environment Board

    Abstract:
    Much actuarial work is underpinned by the use of economic models derived from mainstream academic theories of finance and economics which treat money as being a neutral medium of exchange. The sustainability of a financial system whose understanding is based on a limited view of the role of money has increasingly been subject to criticism. In order to identify needed research programmes to address such criticisms and improve these disciplines, we sought to understand the current state of knowledge in economics and finance concerning the link between monetary and financial factors and sustainability.

    We have approached this through a search for relevant literature published in the highest-rated academic journals in economics, finance and the social sciences for titles and abstracts containing both references to the financial system on the one hand and sustainability and environmental factors on the other.

    The systematic search of a universe of 125 journals and 355,000 articles yielded the finding that surprisingly few research papers jointly address these concepts. Nevertheless, we find that current research shares a broad consensus that the implications of the growth-oriented economic model results in an increasingly interconnected and fragile financial system whose participants are not incentivised to fully recognise the natural environment and resource constraints. We further observe that the prescriptions offered are relatively limited and small-scale in their outlook and that there is a vital need for further research, particularly for actuaries who are required to take a longer term outlook.

    The Resource and Environment Board has supported this work with two key objectives: first to identify research that may have direct application to actuarial work and, second, to identify gaps in academic research that would help drive the IFoA's own research agenda. With this in mind there are three further areas of potential actuarial research. These are the policy aim of pursuing growth without limit within a finite ecosystem; discount factors as the primary means of capital allocation and investment decisions; and the use of GDP as the key metric of economic activity and success. We also conclude that further academic research is urgently needed to understand the sustainability of the banking and monetary system.

    Keywords:
    Literature review; Banking; Finance; Monetary policy; Sustainability; Green economy; Actuarial science

  • Model risk. 23 March 2015

    Sessional Research Meeting, 23 March 2015. Paper by the Model Risk Working Party, presented by N Mojaria

    Abstract:
    With the increasing use of complex quantitative models in applications throughout the financial world, model risk has become a major concern. Such risk is generated by the potential inaccuracy and inappropriate use of models in business applications, which can lead to substantial financial losses and reputational damage. In this paper, we deal with the management and measurement of model risk. First, a model risk framework is developed, adapting concepts such as risk appetite, monitoring, and mitigation to the particular case of model risk. The usefulness of such a framework for preventing losses associated with model risk is demonstrated through case studies. Second, we investigate the ways in which different ways of using and perceiving models within an organisation both lead to different model risks. We identify four distinct model cultures and argue that in conditions of deep model uncertainty, each of those cultures makes a valuable contribution to model risk governance. Thus, the space of legitimate challenges to models is expanded, such that, in addition to a technical critique, operational and commercial concerns are also addressed. Third, we discuss through the examples of proxy modelling, longevity risk, and investment advice, common methods and challenges for quantifying model risk. Difficulties arise in mapping model errors to actual financial impact. In the case of irreducible model uncertainty, it is necessary to employ a variety of measurement approaches, based on statistical inference, fitting multiple models, and stress and scenario analysis.

    Keywords:
    Model; Model Risk; Model Error; Model Uncertainty; Risk Culture

  • Considerations of State Pension Age in the UK. 16 March 2015

    Sessional Research Meeting, 16 March 2015, Edinburgh. Paper presented by Rob Hammond, Steven Baxter and Mark Sadler.

    Abstract:
    State Pension Age (SPA) is an issue of topical interest in the UK at the time of writing due to the Government’s plans to link SPA at future dates to estimates of the projected longevity of the population. This paper considers the background to the current position, how the linkage is proposed to work, other factors that may need to be considered and some changes in the proposed State pension regime that could be alternatives to, or complementary with, a changing SPA.

    Keywords:
    State Pension Age; State pensions; Life expectancy;

  • The link between classical reserving and granular reserving through double chain ladder and its extensions. 2 February 2015

    Sessional Research Meeting, 2 February 2015, Staple Inn, London. Paper presented by Jens Nielson, Professor of Actuarial Science, Cass Business School

  • Forecasting death rates using exogenous determinants. 26 January 2015

    Sessional Research Meeting, 26 January 2015. Paper presented to the Society of Northern Ireland Actuaries (SoNIA) by Declan French and Colin O'Hare.

  • Towards the optimal reserving process. 19 January 2015

    Sessional Research Meeting, 19 January 2015. Paper by the Toward the Optimal Reserving Process (TORP) Working Party presented by Neil Bruce

    Abstract:
    Our principal focus in this paper is on ways that a Fast Close process (or indeed any reserving process) can be structured to maximise the value added within the process given the time and resource available. This builds on the use of actual vs. expected techniques investigated in our previous paper, and also looks at forces external to the reserving function that may derail smooth progress. We highlight a number of practical ways that the balance can be restored in favour of adding value rather than crunching numbers. This paper forms the second in the TORP series.

    Keywords:
    Fast Close, TORP, Reserving, Actual vs. expected

  • The benefits and challenges for insurers considering non-traditional investments. 19 January 2015

    Sessional Research Meeting, 19 January 2015, Staple Inn, London. Paper by the Non-traditional Investments Working Party

    Abstract:
    Life insurers have historically relied upon investment markets as a key source of profit and crucially have been able to do this whilst embarking on relatively ‘vanilla’ investment strategies. In the current low yield environment, broadening their investment horizons is critical to maintaining profitability.

    This paper summarises some relevant external literature and the working party’s own research in understanding the potential benefits and pitfalls for insurers seeking to invest in non-traditional assets.

    The objective of this paper is to help educate and promote understanding by all (the many) relevant parties. In doing so, we hope to help organisations to achieve some further economic success for the ultimate benefit of society.

    Whilst this paper has primarily been written from the perspective of a life insurer, we hope it will be of interest to a much wider audience. Many of the asset classes considered here are relevant to general insurers, pension funds and the wider capital markets.

    It is very important to note that the paper does not contain investment advice and the analysis represents the views of the individuals and the working party and not the companies which they represent or the Profession. The paper does not make any comment as to the suitability (or otherwise) of specific investments for particular investors.

    Keywords:
    Non-traditional assets, alternative assets, investments, ALM, loans, infrastructure, PPP, PFI, social housing, real estate, residential mortgage, commercial mortgage, ground rent, student accommodation, asset backed securities, ABS, RMBS, CMBS, aircraft lease, emerging markets debt, high yield, private placement, private equity, hedge fund, insurance linked security, ILS.

  • Longevity basis risk methodology. 8 December 2014

    Executive Summary:
    This paper summarises the work to date of Cass Business School and Hymans Robertson LLP in relation to assessing longevity basis risk. This work was commissioned by the Longevity Basis Risk Working Group (LBRWG) and funded by the Life and Longevity Markets Association (LLMA) and Institute and Faculty of Actuaries (IFoA). The LBRWG was formed by the LLMA and IFoA in December 2011 with a remit to investigate how to provide a market-friendly means of analysing longevity basis risk.

    The key outputs of this work are:

    • for modelling books which are ‘self-credible’ (i.e. a large number of lives & sufficient back history) a shortlist of ‘best of breed’ 2 –population models (specifically the M7-M5 model, or in some situations the CAE+Cohorts model);
    • for modelling the majority of books which are not self-credible, an alternative, easy to apply “characterisation approach”;
    • a clear decision tree framework to aid the selection of an appropriate methodology for assessing basis risk from those mentioned above;
    • a clear recognition of the importance of choice of time series underpinning any 2- (or multi-) population model

    These outputs are backed up by an extensive body of research, including:

    • a review of how trends have varied between different (sub) populations in the past, covering both the highlights of existing literature and additional research based on the Club Vita dataset of UK occupational pension schemes;
    • a review, classification and general formulation of two-population models that could be considered for modelling longevity basis risk;
    • a thorough and systematic assessment of candidate two-population mortality models to identify those which provide the most suitable balance between flexibility, simplicity, parsimony, goodness-of-fit to data and robustness;
    • case studies, review of key challenges and consideration of practical issues in relation to both the M7-M5 model and the characterisation approach.

    Keywords:

  • The effect of model uncertainty on the pricing of critical illness insurance. 24 November 2014

    Sessional Research Meeting, 18 November 2014. Paper presented by George Streftaris

  • Quantitative approaches to model uncertainty. 29 October 2014

    Sessional Research Meeting, 29 October 2014, at Staple Inn Hall, London. Presented by Andreas Tsanakas, Cass Business School, City University, and Andrew Smith, Deloitte

  • Adverse selection in a start-up long-term care insurance market. 22 September 2014

    Sessional Research Meeting, 22 September 2014. Les Mayhew, Cass Business School.

Contact Details

If you have any questions or wish to discuss any aspect of our funding for member-led research please contact the Research and Knowledge Team:

arc@actuaries.org.uk

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Events calendar

  • TIGI 2020 (Technical Issues in General Insurance)

    Webinar Series
    22 June 2020 - 7 July 2020

    Spaces available

    Technical Issues in General Insurance provides content across all key areas of the general insurance sector whilst also offering cross-practice area technical topic deep-dives.

  • Spaces available

    Technical Issues in General Insurance

    Across the General Insurance market actuarial pricing tools are being migrated from Excel to web-based technologies. Web based pricing technology offers many synergies with AI and Machine Learning. But they are often hampered by poor design and practically always perform worse than their Excel counterparts!

    The following will be presented: 

  • Spaces available

    Offering insight on the 'New Normal', this webinar shares how the arsenal of weaponry at the disposal of ethical hackers is being deployed by those intent on breaching organisational security. The webinar is for all employees that would like a cyber context of what defines the “New Normal” and how it exposes an organisation.

  • Spaces available

    In this talk we cover the practicalities of implementing ESG within real asset investment decisions. Capital deployed in real assets is invested for a long term and has far reaching impact on the environment and society.  However, implementing ESG into real asset investment decisions is not straightforward and requires a different approach to public market assets.

  • Spaces available

    A practical and theoretical look at risk from wider perspectives, drawing on theories and examples from other fields, as well as social experiments, the session aims to stimulate members to consider information asymmetry, bias, Bayesian methods, behavioural finance and behavioural psychology when determining pension scheme risk. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series

    This webinar will provide an overview of how and why we built a Death Toolbox using Shiny.  This includes a live demonstration of the tool that enables a user to explore mortality datasets without knowing specialist coding techniques.

  • Spaces available

    Technical Issues in General Insurance webinar series. Lloyd’s will be presenting on the recent Casualty Market Study that was conducted across a section of the market. This study looked at the Non-Marine General Liability, Directors & Officers and Medical Malpractice from an underwriting, reserving and claims perspective. The presentation will cover the reasons for why the Study was conducted, the approach taken to determine the focus classes and participants, the key general findings as well as the next steps that Lloyd’s are proposing to take.

  • Spaces available

    An update from the Continuous Mortality Investigation (CMI). Content will focus on the work of the Self-administered Pensions Schemes (SAPS) Mortality Committee and the Mortality Projections Committee and will cover the most relevant and up-to-date outputs.

  • Spaces available

    The PPF’s Purple Book provides the most comprehensive data on the UK universe of Defined Benefit (DB) pension schemes in the private sector.  Analysing how this landscape has changed over time shows that whilst the risk profile of DB schemes has reduced underfunding has persisted.  The session will explore these trends and provide an insight into how funding may evolve in the future under a number of our modelled scenarios.   

  • Spaces available

    The IFoA is running a webinar on Thursday 9 July 2020 which will focus on the challenges and issues facing defined contribution savers who wish to access illiquid investments.

    Our speakers will provide perspectives from their diverse experience, including DC fund implementation, platforms, master trusts, the role of trustees, regulation, and parallels with other fund types. They will then come together in a panel discussion with audience interaction. 

    The webinar is likely to be of interest to actuaries working across the spectrum of financial services, including investment advisers, asset managers, insurers, fund platforms and DC master trusts.

  • Spaces available

    An online webinar delivered by John Taylor, immediate past-President of the Institute and Faculty of Actuaries who will look at the prospects for the actuarial profession in the era of unprecedented technological innovation.

  • Spaces available

    In this webinar you will hear first-hand from two lead authors; Louise Pryor - President Elect of the IFoA, Chair of the London Climate Change Partnership and Non-Executive Director of the Ecology Building Society. Paul Pritchard – Former IEMA Board Member with a focus on financial services and value chains. Paul also served as a Fellow at the University of Cambridge Institute for Sustainability Leadership. This webinar will provide key insights for all professionals interested in understanding and engaging with climate related financial disclosures.

  • Spaces available

    This webinar is intended to raise awareness of the shifting landscape of climate liability risk and what it means for actuaries, including how it impacts on their professional and legal duties. Presentations will cover the legal risks around climate change for investment consultants and actuaries advising DB pension schemes as well as consideration of climate risk for insurers.

  • Spaces available

    Climate change risks are likely to become material for many risk management and investment decisions. This will require to incorporate explicitly climate change in the tools used for risk management and investment decisions. At present existing climate change tools are often too crude for decision making.

  • Current Issues in Life Assurance (CILA) Webinar series

    Webinar Series
    15 July 2020 - 3 August 2020

    Spaces available

    CILA is one of the pre-eminent events in the annual 'Life' calendar. Due to COVID-19 we are running the programme as a series of webinars covering topics aimed at practicing life actuaries from life offices, consulting firms and other employers of actuaries and those who work in or advise on, the life assurance market in the UK and Europe.

  • Spaces available

    Current Issues in Life Assurance

    For annuity writers, a key challenge is the need to fund capital-consumptive new business strain (NBS) as a consequence of writing the business intended to fund future distributions.

    Reinsurance, investment strategy and capital provision all have roles to play. Here, we:

  • Spaces available

    Current Issues in Life Assurance

    Mortality in 2020 is now dominated by one thing, although – in our future-focused world – the pandemic is just one of many mortality considerations.  In this session, three well-regarded mortality/longevity specialists provide an overview of:

  • Spaces available

    Because of Covid-19, forecasters predict a severe recession in 2020, followed by a V or U-shaped recovery. This impacts both individuals and companies. However, compared to previous recessions, the impact on banks of higher credit losses should be mitigated to some extent by government actions. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series

    This session will provide an overview of the Population Health Management Working Party's research including defining impactability and impactability modelling, discussing some examples of specific modelling approaches, considering the practical challenges across the NHS as well as wider public perception and ethical issues.

  • Spaces available

    Many actuaries consider career opportunities in the Finance and Investment practice area after having started off in more traditional actuarial roles such as valuations, capital management or pricing. This session is aimed at helping actuaries to better understand roles in Finance and Investment and how they can fine tune their skills to pursue such careers.

  • Mortality and Longevity Webinar Series 2020

    Webinar Series
    22 July 2020 - 10 August 2020

    Spaces available

    Due to COVID-19, we are running this programme via a series of webinars commencing 22nd July.

    This webinar series will provide topical and practical updates and discussion on the latest thinking and innovations in mortality and longevity, and is designed to be very accessible to a broad range of experience.

     

  • Spaces available

    Predictive risk assessment and risk stratification models based on postcode-level consumer classification are widely used for life insurance underwriting. However, these are socio-economic models not directly related to health information. Similar to precision medicine, precision life insurance should aim to tailor policy pricing/reserving to the individual health characteristics of each client.

  • Spaces available

    This webinar has been re-scheduled from its original date of the 1st July. Although ESG has many buyers across the asset allocation community, from pension funds to sovereign wealth funds, it still hasn’t found its place within the core asset management strategy desks where the money is actually invested. The problem as well as the opportunity is Fixed Income. Plenty of strategies exist for incorporating ESG within Equities, from screening, integration to a combination. ESG has picked up relatively quickly within Equities with rating,indices created using ESG factors. This talk will discuss how we price a quantifiable ESG credit risk premium and make it alpha worthy in a strategy. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series

    With the rising prevalence of dementia, how can we manage this risk effectively and can insurance do more? Matt Singleton, Ageing Lead at Swiss Re, will cover these topics and demonstrate how insurance could help people address their concerns.

  • Spaces available

    Current Issues in Life Assurance

    This talk will look at a range of such techniques (e.g. mass lapse risk transfer, contract boundaries, risk margin relief, non-standard longevity risk transfer) that have been applied or considered by UK and EU insurers, and the pros and cons of each.

     

  • Spaces available

    Current Issues in Life Assurance.

    The International Association of Insurance Supervisors announced on 14 November 2019 the adoption of v2.0 of the global Insurance Capital Standard (ICS) which will undergo confidential reporting for 5 years starting from 2020. This session will include specific experiences from Legal and General (L&G) as well as global industry perspectives from EY.

  • Spaces available

    Current Issues in Life Assurance

    This session will cover the PRA supervisory statement on financial impacts related to climate change, industry insights into PRA climate risk business plans, examples climate risk strategy setting out key workstreams and activity steps for successful execution, an overview of a climate risk strategy execution timeline and the future.     

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. Using new and unique research and data from the UK, US, Sweden and China, this presentation investigates how consumers use the internet through their insurance journey and analyzes the role culture and generation plays in their online behaviour. We use this research to show the online landscape for insurance sales in the UK and suggest ways to shape new products and effectively engage with the consumer who is buying them.

  • Spaces available

    Chief Medical Officer (CMO) for Gen Re Life/Health Research and Development, Dr John O'Brien, will discuss the impacts of Gene Modification for life/health insurance. 

  • Spaces available

    As an industry, it has been important to be able to look to the future to identify the next quantifiable risk. In this session, I will explore some of the less tangible, but none-the-less concerning risks to future health, such as the health risks associated with exposure to pesticides, ingestion of plastic in the food chain, and the hazards of indoor air pollution through exposure to volatile organic compounds.

  • Spaces available

    The working party will help the industry to update and enhance how potential risk from diabetes and excess mortality is considered, including the need to understand the underwriting implications as treatments improve, and potentially to develop new products that are tailored to those with diabetes.

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. Modelling the structure and trends of cancer morbidity risk is important for pricing and reserving in related health insurance fields such as critical illness insurance and care provision. We model the dynamics of cancer incidence over time in different regions in England, using 1981-2016 ONS data. The modelling allows estimation of cancer rates at various age, year, gender and region levels, following a Bayesian setting to account for statistical uncertainty. Our analysis indicates significant regional variation in cancer incidence rates. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. In this talk we will outline the steps Aviva took in pulling together our first large-scale disclosures on the exposure of our business to climate change published in March 2019; in line with the recommendations of the Taskforce on Climate-related Financial Disclosures. After touching on why insurers have such an important role in climate change, we'll cover a brief “how-to” guide for those who have not yet embarked on thinking about these topics before giving a case study of how the learnings from a TCFD disclosure exercise can be applied to investment portfolios.

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. 

    The insurance industry currently underwrites customers with diabetes based on a range of factors, medical expertise and various medical studies. The work undertaken by the Diabetes Working Party would help the industry to approach this using current research findings to update and enhance how potential risk from diabetes is considered. This includes the need to understand the underwriting implications as treatments improve, and potentially to develop new products that are tailored to those with diabetes. This webinar will present our latest findings in the management of this important chronic condition which will include research in collaboration with the ARC.