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Sessional Research Programme 2015/2016

  • Information for actuaries valuing periodical payment orders. 27 June 2016

    Sessional Research Meeting, 27 June 2016, at Staple Inn Hall, London. Paper by the Periodical Payment Orders Working Party

    Abstract:
    Periodical Payment Orders (PPOs) have challenged actuarial professionals as they rose to prominence as a new means of settling third-party liability claims, consisting of regular payments in the future, usually for a claimant’s lifetime.

    This paper explores how this new settlement method has brought about new risks to consider for actuarial professionals working in Motor and Casualty insurance, or any other line where a claim for future periodical payments may arise. Life contingencies have entered the space of general insurance in a new way. In addition, actuarial professionals have investment risk to consider, and for PPOs the inflation risk is unusual, significant and not currently fully hedgeable.

    The paper highlights methods that could be considered for setting important assumptions, including mortality, indexation, investment return and PPO settlement propensity.

    For reserving actuaries, the paper explains that the nature of the liabilities does not lend itself to triangulation. Cash flow techniques are needed and actual versus expected results can be analysed for discount-rate unwinding and mortality profit for example. Scenario testing will be important to understand the sensitivity of the results and to explain them to senior management.

    Stochastic modelling is considered in the Capital Modelling section, amongst other significant considerations for actuarial practitioners working with PPOs in this field.

    Pricing is also affected, as PPOs are a proportion of large loss loadings.

    The paper also touches briefly on reporting requirements. This is to help provide some basic background for actuaries interacting with those undertaking financial reporting.

    Keywords:
    PPO, Periodical Payment Order, variation order, valuation, reserving, pricing, capital modelling, risk, mortality, propensity, inflation, indexation, investment return, discounting, cash flow, scenario testing, stochastic modelling, IFRS, Solvency II, reinsurance, reporting.

     

  • Simulation Based Capital Models: Testing, justifying and communicating choices. 27 June 2016

    Sessional Research Meeting, 27 June 2016, at the Royal College of Physicians, Edinburgh

    Abstract:
    The development of an economic capital model requires a decision to be made regarding how to aggregate capital requirements for the individual risk factors while taking into account the effects of diversification. Under the Individual Capital Adequacy Standards (ICAS) framework, UK life insurers have commonly adopted a correlation matrix approach due to its simplicity and ease in communication to the stakeholders involved, adjusting the result, where appropriate, to allow for non-linear interactions. The regulatory requirements of Solvency II have been one of the principal drivers leading to an increased use of more sophisticated aggregation techniques in economic capital models. This paper focuses on a simulation based approach to the aggregation of capital requirements using copulas and proxy models. It describes the practical challenges in parameterising a copula including how allowance may be made for tail dependence. It also covers the challenges associated with fitting and validating a proxy model. In particular, the paper outlines how insurers could test, communicate and justify the choices made through the use of some examples.

    Keywords:
    Copula; Tail Dependence; Proxy Model; Validation; Communication

  • Spring Lecture 2016. Communicating risk and uncertainty, by David Spiegelhalter.  22 June 2016

    Thought Leadership Lecture given on 22 June 2016, in London.

  • Resource and Environment Sessional Debate. 20 June 2016

    Sessional Research Meeting, 20 June 2016, at Staple Inn Hall, London

  • Designing successful post retirement solutions. 23 May 2016

    Sessional Research Meeting, 23 May 2016, Edinburgh. Paper presented by Lesley-Ann Morgan and Scott Lothian

  • Incentives facing UK listed companies to adopt risk reporting requirements. 16 May 2016

    Sessional Research Meeting, 16 May 2016, London

    Abstract:
    Recent changes made to the UK Corporate Governance Code require UK firms to report new or enhanced narrative information concerning their principal risks, their risk management processes and their future viability. This paper analyses whether the level and nature of voluntary compliance with these new requirements is consistent with alternative economic and political visibility incentives. We analyse relevant sections of financial reports produced by industry matched samples of large-, mid- and small-cap UK listed firms during the transitional 2013-14 financial reporting years. Both specific and generic readability attributes of the reports are measured. We find that virtually no firm in our sample has provided any viability statement. Empirical analysis of disclosures concerning principal risk assessment and review processes appear to be primarily motivated by political visibility reasons. Examples of particularly good and cases of poor corporate risk reporting practices are also discussed. Possible implications for the actuarial profession are discussed.

  • The future of social care funding - Who pays? 18 April 2016

    Sessional Research Meeting, 18 April 2016, London. Paper by the Products Research Group of the Pensions and Long Term Care Working Party.

    Abstract:
    With the UK population ageing, deciding upon a satisfactory and sustainable system for the funding of people’s long term care (LTC) needs has long been a topic of political debate. Phase 1 of the Care Act 2014 (‘the Act’) brought in some of the reforms recommended by the Dilnot Commission in 2011. However, the Government announced during 2015 that Phase 2 of ‘the Act’ such as the introduction of a £72,000 cap on Local Authority care costs and a change in the means testing thresholds1 would be deferred until 2020. In addition to this delay, the ‘freedom and choice’ agenda for pensions has come into force. It is therefore timely that the potential market responses to help people pay for their care within the new pensions environment should be considered.

    In this paper, we analyse whether the proposed reforms meet the policy intention of protecting people from catastrophic care costs, whilst facilitating individual understanding of their potential care funding requirements. In particular, we review a number of financial products and ascertain the extent to which such products might help individuals to fund the LTC costs for which they would be responsible for meeting. We also produce case studies to demonstrate the complexities of the care funding system. Finally, we review the potential impact on incentives for individuals to save for care costs under the proposed new means testing thresholds and compare these with the current thresholds.

    We conclude that:

     

    • Although it is still too early to understand exactly how individuals will respond to the pensions freedom and choice agenda, there are a number of financial products that might complement the new flexibilities and help people make provision for care costs
    • The new care funding system is complex making it difficult for people to understand their potential care costs
    • The current means testing system causes a disincentive to save. The new means testing thresholds provide a greater level of reward for savers than the existing thresholds and therefore may increase the level of saving for care; however, the new thresholds could still act as a barrier since disincentives still exist.
  • Good practice guide to setting inputs for operational risk models. 21 March 2016

    Sessional Research Meeting, 21 March 2016.

    Abstract:
    This paper seeks to establish good practice in setting in inputs for operational risk models for banks, insurers and other financial services firms. It reviews Basel, Solvency II and other regulatory requirements as well as publicly available literature on operational risk modelling. It recommends a combination of historic loss data and scenario analysis for modelling of individual risks, setting out issues with these data and outlining good practice for loss data collection and scenario analysis. It recommends the use of expert judgement for setting correlations, and addresses information requirements for risk mitigation allowances and capital allocation, before briefly covering Bayesian Network methods for modelling operational risks.

    Keywords:
    Internal loss data, External loss data, Scenario analysis, Business environment and internal control factors (BEICFs), Correlations.

  • Mis-estimation risk: measurement and impact. 29 February 2016

    Sessional Research Meeting, 29 February 2016, Edinburgh. Paper presented by Stephen Richards of Longevitas

    Abstract:
    When deriving a demographic basis from experience data it is useful to know (i) what uncertainty surrounds that basis, and (ii) the financial impact of that uncertainty. Under the Solvency II regime in the European Union, insurers must hold capital against a number of risks. One of these is mis-estimation risk, i.e. the uncertainty over the current rates of mortality and other biometric risks experienced by a portfolio. We propose a general method for assessing mis-estimation risk, and by way of illustration we look at how mis-estimation risk can be assessed for a portfolio of pensions in payment from a U.K. pension scheme. We find that the impact of mis-estimation risk varies according to the risk factors included in a model, and that the inclusion of some necessary risk factors increases the financial impact of mis-estimation risk. In particular, the inclusion of risk factors which improve the model's fit and financial applicability can lead to an increase in the mis-estimation risk. We also find that a full portfolio valuation is preferable to using model points when assessing mis-estimation risk.

    Keyword:
    Mis-estimation risk, parameter risk, Solvency II, mortality risk, longevity risk, survival model, annuities.

  • Bias, guess and expert judgement in actuarial work. 18 January 2016

    Sessional Research Meeting, 18 January 2016. Paper by the Getting Better Judgement Working Party

    Abstract:
    Expert judgement is frequently used within general insurance. It tends to be a method of last resort and used where data is sparse, non-existent or non-applicable to the problem under consideration. Whilst such judgements can significantly influence the end results, their quality is highly variable. The use of the term 'expert judgement' itself can lend a generous impression of credibility to what may be a little more than a guess. Despite the increased emphasis placed on the importance of robust expert judgements in regulation, actuarial research to date has focused on the more technical or data driven methods, with less emphasis on how to use and incorporate softer information or how best to elicit judgements from others in a way that reduces cognitive biases. This paper highlights the research that the Getting Better Judgement Working Party has conducted into this area. Specifically it covers the variable quality of expert judgement, both within and outside the regulatory context, and presents methods that may be applied to improve its formation. The aim of this paper is to arm the insurance practitioner with tools to distinguish between low quality and high quality judgements and improve the robustness of judgements accordingly, particularly for highly material circumstances.

    Keywords:
    Expert judgement; Elicitation; Cognitive biases; Heuristics; Bayesian statistics

  • Actuarial Function Working Party. 16 November 2015

    Sessional Research Meeting, 16 November 2015, Staple Inn Hall, London. Working Party paper presented by Jahan Anzsar and Matthew Byrne

     

    Abstract:
    The Solvency II Directive introduces the idea of a formal Actuarial Function to have responsibility over delivering the requirements of Article 48 of the Directive. Article 48 describes the responsibilities as being concerned with technical provisions, an opinion on reinsurance adequacy, an opinion on underwriting policy and contributing to the risk management system. Considerable documentation has been produced by the Prudential Regulation Authority (PRA), the Institute and Faculty of Actuaries (IFoA) and the European Insurance and Occupational Pensions Authority (EIOPA) on the subject, much of it very recent to the publication of this paper. The purpose of this paper is to provide the reader with some practical insights and suggestions around addressing the requirements of Article 48 of the Solvency II Directive in General Insurance firms, taking into consideration the publications of the aforementioned regulatory authorities. It is not our intention to give advice, nor to be seen to give advice, but rather to make suggestions and observations that we hope the reader will find useful.

    The Regulations lay down the tasks of the Actuarial Function, so Insurers should consider the need for formal terms of reference, backed up by proportionate governance procedures. The Regulations also require the production of an Actuarial Function Report to document the tasks undertaken by the Actuarial Function and its results. Such a report can be an aggregate report, made up of individual component reports completed at suitable points in the Actuarial Function’s work cycle, so long as it reports on all the required tasks. The technical provisions section should cover at least all the areas laid down in the Delegated Acts. The opinions required covering reinsurance adequacy and underwriting policy are not formal “sign-offs”, but contributions to the effective running of the Insurer by applying the skills and knowledge of actuaries to areas for which they are not normally responsible. Again, the Delegated Acts mandate the minimum contribution the Actuarial Function should make.

    The responsibility for delivering the work of the Actuarial Function does not have to be given to a member of the IFoA, however the PRA is going to require (at least) one person to be designated the “Chief Actuary”, defined as the person responsible for delivering the requirements of Article 48 of the Directive. In response, the IFoA has stated its intention to require its members holding the role of Chief Actuary, as defined by the PRA, to hold a practicing certificate.

    Any Actuarial Function will need to consider issues of governance, independence and conflicts of interests. The PRA intends to require the Actuarial Function to be independent of an insurer’s revenue-generating functions. In addition, normal good governance requires a degree of separation between those who perform Actuarial Function work and those who review and supervise it. There are numerous stakeholders in the Actuarial Function’s work. Some of these will rely on the output of the Actuarial Function, other will provide inputs to its work. Setting out stakeholder responsibilities clearly and in advance will be of vital importance. Good communication and coordination between these groups will be important to the efficient running of the Insurer. Bringing together issues of governance, independence and meeting the Directive and regulators’ requirements will require a suitable organisational structure which will also need to consider practical issues, such as the availability of suitable staff. Many such arrangements may be possible, but all will require trading off advantages and disadvantages.

    The Actuarial Function is primarily about good practice and getting the most out of the actuarial skills available. For many Insurers, meeting the requirements should not be unduly burdensome.

    Keywords:
    Solvency II; General insurance; Actuarial function; Regulation.

  • Autumn Lecture 2015. Exploring the role of banking and business in society. Lady Susan Rice.  9 November 2015

    Thought Leadership Lecture given on 9 November 2015, in Edinburgh

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 2019 (Technical Issues in General Insurance)

    Royal College of Physicians, 11 St Andrews Place, Regent's Park, London, NW1 4LE
    25-26 April 2019
    Spaces available

    This General Insurance CPD offering has been changed from former years of individual one day seminars to include individual sessions for IFRS 17, Pricing, Capital Modelling and Reserving over a two-day event  packaged as Technical Issues in General Insurance, providing attendees with a varied program . The event is suitable for anyone who works, or are interested, in these areas.

  • Fully booked.

    Data Visualisation helps to communicate information clearly and effectively through graphical means.  This talk will showcase some visualisations that the working party has found useful for common actuarial situations.  The event is now full, however if you would like to join a waiting list, please email Barry_shannon@standardlife.com

  • Francophone Actuaries Meeting 2019

    Aviva, Saint Helen's, 1 Undershaft, London EC3P 3DQ, UK
    2 May 2019

    Spaces available

    L'Institut des Actuaires and French actuaries in the UK, partnered with Aviva, are delighted to be hosting their annual "l'afterwork" event for French speaking actuaries in the UK. The event will mix French and English interventions.

    Register via this link to be added to the guest list:  https://www.eventbrite.com/e/rencontre-annuelle-des-actuaires-francophones-londres-tickets-59758941603

     

     

  • Spaces available

    CPD

    CPD
    1.00 hours

    The CMI SAPS Mortality Committee and Mortality Projections Committee will be holding a joint webinar, aimed primarily at pension scheme trustees, describing considerations relating to setting longevity assumptions in 2019.

  • SIAS EVENT - Hurricane Clustering: A New Reality?

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    7 May 2019

    Spaces available

    The 2017 North Atlantic hurricane season was one of the most active on record. We saw multiple hurricanes coming close together causing significant damage and human loss. The talk discusses whether 2017 was an exceptional year or indicative of what we expect to see in the near future, and the implications for (re)insurers.

  • IFoA Asia Conference 2019, Chengdu

    Crowne Plaza Chengdu Panda Garden, Poly Park 198, No. 1980 ShuLong Avenue,Xindu District, Chengdu
    09-10 May 2019
    Spaces available

    IfoA Logo for eventsOffering a diverse selection of plenary sessions and cross-practice workshops, the annual Asia Conference is the perfect opportunity to discover and discuss current and developing actuarial topics in Asia, whilst providing excellent opportunity to grow your network of contacts.

  • DAG event - Can we overcome unconscious bias?

    KPMG LLP  Saltire Court,  20 Castle Terrace, Edinburgh EH1 2EG
    9 May 2019

    Spaces available

    This session will examine our biases, look at what it feels like to be an outsider and give attendees practical tools and actions we can all take to support and grow diversity and inclusion, within the profession. This session is also designed to meet the objectives of the IFoA’s Stage 3 Professional Skills Training for experienced members.

  • KSS event – IQ+EQ = Future Success

    Royal London, 1 Thistle Street, Edinburgh
    14 May 2019

    Spaces available

    In this interactive session, our facilitators, Russell Borland and Thomas Chalmers, Partners of UK-based coaching consulting firm, Leading Figures, will explore how we can enhance our EQ to make the most of our IQ. They will introduce an Emotional Intelligence framework developed by psychologist Daniel Goleman and provide participants with an opportunity to personally assess their own Emotional Intelligence.  To register please email Caitlin.stronach@royallondon.com

  • CILA 2019

    30 Euston Square, London NW1 2FB
    14 May 2019

    Spaces available

    CILA is one of the pre-eminent events in the annual Life calendar. It is aimed at practicing life actuaries from life offices, consulting firms and other employers of actuaries. It will also be of interest to all those who work in or advise on, the life assurance market in the UK and Europe.

  • KSS event – Bulk Annuity Market Update

    Willis Towers Watson 2 Lochrin Square, 96 Fountainbridge, Edinburgh EH3 9QA
    15 May 2019

    Fully booked.

    This KSS talk will give a bulk annuity market update over 2018 and for 2019 and beyond.  The presenters will also consider bulk annuity options as part of pension scheme de-risking strategies, and how pension schemes can best prepare when requesting a quote in order to achieve a favourable outcome. Please note this event is now full, however, if you wish to join a waiting list, please email Dawn.Neil@willistowerswatson.com.

  • KSS event – Bulk Annuity Market Update

    Willis Towers Watson 2 West Regent Street Glasgow G2 1RW
    16 May 2019

    Spaces available

    This KSS talk will give a bulk annuity market update over 2018 and for 2019 and beyond. The presenters will also consider bulk annuity options as part of pension scheme de-risking strategies, and how pension schemes can best prepare when requesting a quote in order to achieve a favourable outcome. To book a place please email Dawn.Neil@willistowerswatson.com

  • How to protect SMEs from Cyber Attacks

    Staple Inn Hall, High Holborn, London, WC1V 7QJ.  
    16 May 2019

    Spaces available

    The aim of this interdisciplinary symposium is to gain understanding and awareness of UK private SMEs about their insurance need as a part of cyber risk management and mitigation strategies.

  • Risk and Investment Conference 2019

    Amba Hotel, Charing Cross, Strand, London WC2N 5HX
    20-21 May 2019
    Spaces available

    This year's event begins with a Professional Skills Training plenary to help build your CPD, followed by a formal drinks reception and dinner on the evening of 20 May.  The following day will then be a programme full of topical plenaries and workshops covering the latest trends and topical issues in the risk and investment sector with plenty of opportunities to network with colleagues and build your CPD.

  • LMS Invited Lectures 2019

    ICMS, The Bayes Centre, 47 Potterrow, Edinburgh EH8 9BT
    20 May 2019 - 24 May 2019

    Spaces available

    On May 20-24 2019, Prof Søren Asmussen (Aarhus University) will deliver a course on lectures on advanced topics in life insurance mathematics.  This will be held at the International Centre for Mathematical Sciences, Edinburgh, and will be accompanied by supporting lectures from Prof Corina Constantinescu (University of Liverpool) and Prof Andrew Cairns (Heriot-Watt University). To register, please visit https://www.icms.org.uk/LMSAsmussen.php.

  • Mortality and Longevity Symposium 2019

    ICC Birmingham, Broad St, Birmingham B1 2EA
    04-05 June 2019
    Spaces available

    The Mortality and Longevity Symposium aims to expand delegates’ horizons by giving a better view of the scope of current mortality research in a wide variety of relevant disciplines, and by providing a forum to discuss the implications for actuarial practice and it will be of interest to all actuaries concerned with setting or reviewing mortality and longevity assumptions, underwriters, demographers, epidemiologists, policy-

  • Protection, Health and Care Conference 2019

    ICC Birmingham  Broad St, Birmingham B1 2EA
    04-06 June 2019
    Spaces available

    The Protection, Health and Care Conference is an annual conference aimed at all insurance professionals with a passion for harnessing insurance risk in their organisations. The conference uses a combination of workshops by individuals who work at the coalface and ‘big name’ experts to explore how innovation, technological/medical advances, the political landscape and other market development will impact the Protection, Health and Care markets.

  • NED Event: Behavioural Finance and Boards

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    18 June 2019

    Spaces available

    Substantial work has been undertaken in the field of behavioural finance to explore the psychological factors affecting investment decisions made by individuals.  In contrast, “behavioural” factors (such as politics or human psychology) affecting decisions and actions made by institutional investors, such as insurers or pension schemes, are less understood.

  • Pensions Conference 2019

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

    Covering current topics and industry trends, the conference also includes a pre-conference evening dinner (18 June) giving you the opportunity to develop your network. 

  • 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

    Spaces available

    CIGI will provide an excellent and diverse line-up of speakers, each providing their insight and knowledge on a range of topics.  The programme will be broad in nature, so will be of most value to those with some experience in the industry. 

  • AGM and Presidential Address 2019

    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.

  • 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.

  • 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.