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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

  • Pensions Conference 2019

    Bristol Marriott Hotel City Centre, 2 Lower Castle Street, Old Market, Bristol, BS1 3AD
    18-19 June 2019
    Spaces available

    Five plenaries and 13 workshops cover current topics and industry trends in the Pension sector with the opportunity to develop your network at the pre-conference evening dinner (18 June).  There is also a day ticket option available for the 19 June. 

  • KSS event – FinTech and The Actuarial Profession

    EY, Atria One, 144 Morrison Street, Edinburgh
    19 June 2019

    Spaces available

    This KSS talk from FinTech Scotland's CEO will explore the mission to create an integrated Fintech ecosystem through provision of funding, support, infrastructure and talent that recognises and responds to the needs of all stakeholders - and the overarching aim for Scotland to be one of the top 5 Fintech global leaders by 2020.

    To book your place, please email Barry_Shannon@standardlife.com 

  • Current Issues in General Insurance (CIGI) 2019

    Inmarsat, 99 City Road, London, EC1Y 1BJ
    19 June 2019

    Fully booked.

    CIGI is a well-established one-day seminar designed to increase awareness and encourage discussion on a variety of topical issues across the general insurance industry. 

    There will be an excellent and diverse line-up of speakers to provide a variety of perspectives and challenge covering technical and professional areas. 

  • Cass Event – New Thinking about Deferred Annuities

    Cass Business School, Executive Education Facilities 200 Aldersgate St, London EC1A 4HD
    25 June 2019

    Spaces available

    Our motivation for discussing this important subject comes from some exciting recent research which has analysed the impact of behavioural factors on the decision to purchase an annuity. This work has shown that behavioural factors can explain the well-known low demand for immediate annuities but this research also identifies an important opportunity in relation to deferred annuities (DA). The research suggests that these factors lead to positive incentives to purchase a DA and that, for longer deferred periods, a DA could be an attractive product for both consumers and insurers.

  • IFoA/SAS Joint Professional Skills Training – Singapore

    Room 903, NTUC Centre, Level 9, One Marina Boulevard, Singapore 018989
    25 June 2019

    Spaces available

    The Institute and Faculty of Actuaries (IFoA) and Singapore Actuarial Society (SAS) are organising a joint Professional Skills Training (PST) in Singapore. This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Life, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Webinar Series: Risk and Investment Conference 2019, 26 June

    These are online webinar events.
    26 June 2019

    Spaces available

    The IFoA’s Risk Management and Finance and Investment Boards are delighted to host a series of webinars covering a range of topical and trending topics ranging from climate related risks to Brexit.

  • AGM and Presidential Address 2019 + Volunteer and Member Drinks Reception

    The Hub  Castlehill Edinburgh EH1 2NE
    26 June 2019

    Spaces available

    Notice is hereby given that the ANNUAL GENERAL MEETING of the INSTITUTE AND FACULTY OF ACTUARIES will be held at The Hub, Edinburgh on Wednesday 26 June 2019 at 16.30 (Preceded by tea from 16.00) and followed by a PRESIDENTIAL ADDRESS given by John Taylor.

  • IFAM event - Actuarial Teachers’ & Researchers’ Conference 2019

    Institute for Financial and Actuarial Mathematics Department of Mathematical  Sciences The University of Liverpool Mathematical Sciences Building Peach Street Liverpool, L69 7ZL
    27 June 2019 - 29 June 2019

    Spaces available

    The Institute for Financial and Actuarial Mathematics (IFAM) at the University of Liverpool is pleased to host the 2019 Actuarial Teachers’ and Researchers’ Conference from 27-28 June 2019. This annual two-day event has been running annually now for many years, each time hosted by a different university, and provides all those interested in actuarial research and education a great opportunity to share their ideas and catch up on the latest developments.

  • IFoA/ASM Joint Professional Skills Training – Kuala Lumpur

    Menara AIA, Auditorium, 99 Jalan Ampang, 50450, Kuala Lumpur
    28 June 2019

    Spaces available

    The Institute and Faculty of Actuaries (IFoA) and Actuarial Society of Malaysia (ASM) are organising a joint Professional Skills Training (PST) in Kuala Lumpur. This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Life, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • SIAS: The Impact of Air Pollution on Health and Life Expectancy

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    2 July 2019

    Spaces available

    Air pollution has gained increasing attention lately. Nicola Oliver, head of longevity and mortality research for Medical Intelligence, will discuss not only the impacts of air pollution on health and life expectancy but also how as an industry we should be addressing it.

  • Spaces available

    The actuarial profession has much to offer the world of banking. In this webinar actuaries with experience in various fields of banking will talk about the opportunities there are in banking; describing the actuarial aspects of the work they do as well as other roles within their area of banking.

  • Implications of 2019 IFRS 17 Exposure Draft

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    24 July 2019

    Spaces available

    Towards the end of June, the International Accounting Standards Board (IASB) is expected to publish an Exposure Draft (ED) of limited changes to its insurance contracts standard IFRS 17, effective date 2022. To help IFoA members, the IFoA’s cross-practice Financial Reporting Group (FRG) is hosting an event at Staple Inn covering these developments. 

    For more information on the FRG please visit this webpage

  • KSS event – The Regulatory Perspective

    Deloitte Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
    5 September 2019

    Spaces available

    This KSS talk, presented by the FCA Head of Department in Scotland, will focus on the following 3 main areas:

    • FCA business plan priorities
    • The future of regulation
    • FCA Engagement in Scotland
  • Sessional Research Event - Risk Margin Working Party

    Staple Inn Hall, High Holborn London, WC1V 7QJ
    9 September 2019

    Spaces available

    For life insurers in the UK, the risk margin is one of the most controversial aspects of the Solvency II regime. Following its implementation, the risk margin came under considerable criticism for being too large and too sensitive to interest rate movements. These criticisms are particularly valid for annuity business – such business is of great significance to the national system for retirement provision. This criticism has led to political interest, and the risk margin was a major element of the Treasury Committee inquiry into Solvency II.

  • GIRO Conference 2019

    EICC, The Exchange, 150 Morrison St, Edinburgh EH3 8EE
    24-26 September 2019
    Spaces available

    GIRO is attended annually by over 800 delegates and speakers who are keen to discuss key topics such as Pricing, Reserving, Modelling and the future of the insurance industry. GIRO 2018 was a huge success and we have opened bookings early for what we hope will be another brilliant conference at the EICC in Edinburgh this year. 

     

  • Life Conference 2019

    The Convention Centre Dublin, Spencer Dock, North Wall Quay, Dublin 1
    20-22 November 2019
    Spaces available

    The Life Conference is the premier event for professionals interested in life insurance.  Offering a wide range of workshops and plenary sessions it’s the perfect opportunity to discover what’s hot and current in life insurance ensuring you get up to date on the latest thinking and innovation whilst meeting and exchanging ideas with a broad range of professionals.

  • Autumn Lecture 2019, London - Rt Hon Nicky Morgan MP

    Lincoln's Inn The Treasury Office, London WC2A 3TL
    2 December 2019

    Spaces available

    The IFoA is pleased to announce that this year’s Autumn Lecture will feature the Rt Hon Nicky Morgan MP as its guest speaker.  Nicky has previously served as Financial Secretary to the Treasury and Minister for Women. She now chairs the Treasury Select Committee whose remit is to examine the expenditure, administration and policy of HM Treasury, along with all of its agencies and associated bodies.