The IFoA’s Joint Risk, Investment, Pensions Conference 2017

The Age of Radical Uncertainty

Noreena Hertz will look at the impact of Brexit and the forthcoming Election in the UK and what this means to global trends for the UK’s economy.

Speaker: Noreena Hertz,  ITV News Economics Editor

Speaker: Colin Wilson, President, Institute and Faculty of Actuaries

The Professional Toolkit: A Simple Approach to Managing and Assessing Culture in the Workplace

Culture is widely reported as a root cause of several recent financial scandals. Governments and regulators, among others, assert that changes to culture are required. Culture is hard to define. Firms need a simple, action-able approach to understanding their cultures and to monitoring how their action affects or has affected culture. This presentation proposes such an approach.

Speaker: Paul Harwood, Holloway Friendly Society

Pensions Sessions

A1: Making Tax on Retirement Savings Fair and Efficient 

As the Government toys with further changes to pension taxation, the talk will review the extent to which current and possible future tax rules meet the needs of the bulk of the population across the range of retirement savings vehicles (including housing and ISAs), and in particular:
- Experience of good and bad approaches to tax system design
- Financial implications for individuals, government and society
- Implications for inter-generational equity and risk transfer
- Relative attractiveness for different socio-economic groups 

Speakers: Tim Keogh, Helen Turner, Barnett Waddingham and Philip Darke, Mercer

A2: Freedom and Choice - An Employers Perspective 

This talk will look at what employers can do to reduce the risks in their pension by reducing the liabilities. This will include member option exercises and scheme benefit changes. 

Speaker: Russell Laver, Jardine Lloyd Thompson and Jonathan Black 

Risk Sessions

A3: Assessing and Enhancing Risk Maturity in Your Organisation 

How do we look at our Enterprise Risk Management Framework? Do we have the proper processes and procedures in place?  How is our risk culture?  What can we do to determine where we focus our improvement efforts?
This presentation will look at the development of a risk maturity assessment tool in an International Group including:
- How one develops a risk maturity tool
- Implementation of the tool across Group
- Using the assessment to improve ERM in an organization including enhancement of best practice sharing
- Issues in completion of an assessment, especially taking local circumstances into account
- Use of the assessment by the CRO to enhance risk culture
- Best practice sharing across jurisdictions. 

Speakers: Willaim Von Seggern, Allianz SE and Stephen Wilcox, Allianz Insurance

A4: How a Standard Formula Firm can use an Economic Capital Model for Strategic Investment Decisions 

This session will describe a case study in which an economic capital model was used for a strategic asset allocation study for a firm using the Solvency II standard formula. The approach enabled the firm a) to adopt consistent definition and measurement of risk between underwriting and investment operations for steering purposes and b) to incorporate solvency ratios as a constraint in the selected investment strategy. 

Speakers: Peter Jackson, FBD Insurance, Nigel Hooker, Conning Risk Solutions and Alexander Tazov, Conning Risk Solutions

Finance and Investment Sessions

A5: DGFS – Too Much D and not Enough G?

Diversified Growth Funds have claimed to create equity like returns with lower risk attached and there has been an explosion in the number of assets under management (AUM) in recent years. However there is great variation in the performance and risk attached to these strategies. In recent analysis the annual variation was extreme with the difference between the worst and best DGFs varying 2200bps! The speaker will ask: How can schemes effectively choose DGFs to suit their risk and return appetite? Are there suitable benchmarks to put in place? Crucially for insurers, how do they constrain the range of potential capital requirements which may vary depending upon the manager's view of the economic cycle.

Speakers: Toby Nangle and Eugene Dimitriou, Columbia Threadneedle Investements

A6: CANCELLED 

Cross Practice Session

A7: Everything you need to know about Professional Regulation and How the Revised TASs are now Relevant for all Actuaries 

Representatives from the IFOA and from the FRC combine to share all the latest developments including important information on the new TASs which will affect all actuaries.

Speakers:Elena McLachlan,Christine McConnell, Institute and Faculty of Actuaries and Robert Inglis, Financial Reporting Council

Pensions Sessions

B1: Is Selling Gilts for Buy-in the Best Way of Securing Pension Promises?

Gilts are highly valued, but buying annuities incurs an annual regulatory asset drag. Now that stand-alone longevity insurance is widely available, is the third way of LDI + longevity hedge best? Ross Evans and Simon Richards apply their knowledge of the insurance balance sheet to discuss the pros and cons of all three routes. 

Speakers: Ross Evans, Hymans Robertson and Simon Richards, Insight Investment

B2: Multi-Employer, Charity Sector DB Schemes – The Section 75 Paradox

Public Sector pension provision - Affordability of DBIn 2014 Charity Finance reported that “pension deficits are the greatest risk to solvency of many charities.” Unprecedented market conditions have left many employers with significant increases in deficits, as well as additional costs from the end of contracting-out and the living wage.Many scheme participants are faced with an unenviable paradox – they cannot afford to continue accrual, but they cannot afford the exit debt if accrual ceases.  Meanwhile, the government shows no sign of acting to tackle this obvious anomaly.This presentation will discuss these topical issues and set out a clear vision on how to tackle them. 

Speaker: David Davison, Spence & Partners

Risk Sessions

B3: Liquidity Risk: the Insurance Industry’s Elephant in the Room

Liquidity risk is something that insurers have historically believed is immaterial to their businesses. However regulators are increasingly focussing on firms’ liquidity management frameworks, including plans to manage the business in a crisis. We will cover:
- Sources of liquidity risk for insurers
- Options available to insurers for day-to-day and crisis management
- Insights from EY’s 2016 global insurance liquidity risk management survey
- Our view of a market leading liquidity risk management framework

Speakers: Samuel Tufts and Gareth Sutcliffe, Ernst & Young

B4: Reducing Model Risk With Goodness-of-fit 

Copulas are used in risk management as a tool to combine several univariate probability distributions. The widespread usage of copulas in internal capital models has been challenged by contrasting goodness-of-fit procedures which do not coincide to present a unifying decision. Thus usage of copulas presents a model risk problem. In this session I present a goodness of fit model which builds upon the science of uncertainty quantification and addresses limitations of existing methods in turn. 

Speaker: Victory Idowu, PhD Student at the London School of Economics and Political Science, UK

Finance and Investment Sessions

B5: History and Evolution of Scenario Generators

Some UK insurers have been using real-world economic scenarios for more than thirty years. We interview experienced practitioners, investigate popular 'modelling regimes' and trace historical model evolution in the UK and abroad.
This provides information on potential future catalysts for change and factors influencing development of real world multi-period economic scenario generators in future.
Additionally, we provide some updated work by the Extreme Events working party on topical areas e.g. interest rate modelling philosophy.

Speakers: Parit Jakhria, Prudential 

B6: New Political Paradigm

A new political paradigm has emerged. The prominence of Brexit, Trump and others is not the result of idiosyncratic national issues; it reflects a systemic political shift. Politicians are responding to this backdrop of rising nationalism with a variety of solutions.
In the US , the President is seeking more nominal growth and protectionist policies while in Europe, there have been calls for wealth redistribution, higher minimum wages and robot tax. In this session, we will attempt to explain why populism is rising, estimate its impact on investment returns and consider how investors can adapt to this changing political/economic environment. 

Speakers: Lars Kreckel and John Roe, LGIM

Cross Practice Session

B7: What is the Cost of Equity Release Mortgages?

In the current low yield environment, Equity Release Mortgages (ERM) offer very attractive yields, making them relatively low cost. However, is there a reason for the higher yields? What are the risks and consequent capital costs? We'll start with an introduction to ERM, how their long duration make them attractive as a matching asset for pension funds and life insurers. We will touch on NNEG and property risk. Depending on the audience, there will then be a brief, or not, exposition on mortgage structuring and the impact of prepayment and logevity risk.

 Speaker: Zacky Choo and Rebecca Zhang, Just

Pensions Sessions

C1: Public Sector Pensions - Hot Topics and Thorny Issues   

Michael will discuss current public sector pensions issues, including changes to Fair Deal protection in the LGPS, exit payment caps and transfers.  It will offer a brief explanation on key differences between private and public sector pension provision and move on to an introduction to TUPE, New Fair Deal (and how it applies to the LGPS) and managing public service pension DB costs in an outsourcing context.  He will cover pensions in the context of the outsourcing of public services, how bulk transfers can be made to and from public service schemes (including restrictions on transfers) and will draw on his case load to illustrate common scenarios and some thorny issues.

Speaker: Michael Hayles, Burges Salmon LLP

C2: Running off Mature Schemes    

The Running Off Mature Schemes Working Party will report back analysis and recommendations later in 2017. Membership is drawn from actuaries working across pensions, asset management, insurance and risk.
The working party is focusing on the special features and the potential solutions for mature defined benefit pension schemes as they run off and wind down with a focus on the practical rather than the theoretical. 
This session will present preliminary findings for active audience discussion, with insights from the session incorporated into the Working Party's final report.

Speaker: Costas Yiasoumi, Legal and General and Tim Keogh 

Risk Sessions

C3: The 12-page ORSA Report...  

...and Standard ORSA Model. The regulatory pressure to produce shorter, more meaningful ORSA reports is clear, yet firms have to ensure that all of the requirements are covered. As a result of original research, it appears that a short report most naturally emerges from a robust standard process for conducting the ORSA. This session suggests a standard ORSA process model and a template for the the resulting internal ORSA report. 

Speaker: Paul Harwood, Holloway Friendly Society

C4: Risk Management Lessons Since the Financial Crisis  

In the last 9 years since the global financial crisis, investors, governments and regulators have spent time understanding what went wrong and consequently developed policies to stop it happening again. This session will remind us of the key lessons from the crisis and set out how this has shaped current day risk management practice. Using a multi asset portfolio as a case study, the session will share good portfolio risk management practices and also cover the behavioral side of risk management. 

Speakers: John Roe and Francis Chua, LGIM

Finance and Investment Sessions

C5: The Macro-economic Environment and Opportunities to Enhance Investment Strategy 

Discussion on the current economic climate and potential implications for insurers including:
- Regulatory volatility and the impact on insurers 
- The sustained low yield environment and the realisation that these yields are here to stay; this has triggered a wider review of firm’s strategic asset allocation
- Investment governance implications of changing an investment strategy; how do firms better understand their risk profile, achieve a well-integrated finance function and justify their asset allocation decisions?
- Exploring the operational complexity and risk management framework underpinning investment strategies

Speakers: Gareth Sutcliffe and Ryan Allison, Ernst & Young

C6: Private Credit Investment for Insurers – Unlocking the Challenges

Accessing private credit investments has been a priority for many insurers. However, insurers need to meet a number of complex regulatory requirements before they can invest. 

The “Private Credit Investment for Insurers - Meeting the Regulatory Requirements” working party will share emerging best practice among UK insurers for:

- Prudent Person Principle compliance, including risk assessment and on-going monitoring requirements

- Fair Valuation

- Internal Credit Ratings 

- Solvency Capital Requirements

- Matching Adjustment

- Oversight of outsourced investment management.

The working party are also considering how these regulatory requirements may evolve in light of the vote to leave the European Union.

Speaker: Iain Forrester, Rui Wang and James Hayes, Working Party members

Cross Practice Session

C7: Potential Implications of Brexit on Regulatory Regime for UK Pensions Annuities – A presentation by the IFoA matching adjustment working party

This interactive session will:

• Provide an overview of the “Matching Adjustment” framework for valuing UK annuity liabilities under Solvency II
• Highlight those areas of the matching adjustment framework that the working party feel are far from perfect
• Look at the impact these rules and regulations have on insurers, pension schemes, customers, the regulator as well as the UK economy (through insurers’ ability to invest in real assets such as infrastructure)
• Give our thoughts on how we believe the rules could be tailored post Brexit, to better meet the needs of these stakeholders
• Ask you for your opinions!

Speakers: Andrew Kenyon, Peter Maddern, Ravi Dubey, Members of the IFoA Matching Adjustment Working Party

Finance, Society and Sustainability

What is the finance system for? How do investment-decisions impact the real world? How can finance be harnessed for the benefit of society?

The session will discuss the relationship between the financial system and contemporary problems; such as the rise of populism, income inequality and global environmental challenges.  The session will explore possible alternatives to the current model and how the landscape might change given technological trends.

Speaker: Nick Silver, Callund Consulting Limited

Under Attack

Newspaper headlines about data breaches and hacking attacks are constant reminders to businesses that they need to be properly prepared.  Industry veteran Graham Cluley describes the changing landscape and the latest threats that organisations face on a day-to-day basis.        

Speaker:  Graham Cluley, Computer Security Expert

We are pleased to confirm that our after dinner speaker is Baroness Tanni Grey-Thompson.

Baroness Tanni Grey-Thompson is one of Britain’s most iconic Paralympic athletes. She competed in five Paralympic Games, winning 11 Gold Medals, and is acknowledged as one of the most gifted and courageous sportswomen of her generation. In addition to her outstanding Paralympic achievements, she won the London Wheelchair Marathon a total of six times.

Tanni has gone on to play a prominent role in public life, acting as a Non-Executive Director of the BBC, Chair of ukactive, Chancellor of Northumbria University and President of the National Council of Voluntary Organisations. Made a ‘Dame’ in 2005, she was elevated to the House of Lords in 2010 with a focus on sport, disability, health, welfare and youth development.

Finance and Investment Plenary

Forces That Will Shape Our World: Five Key Macro Drivers

Economies and societies around the world are being shaped by a number of key drivers – forces that are powerful, slow, but inexorable. These drivers are having major effects at the economic, societal, and political levels, and present both major opportunities and significant challenges. This talk will focus on five groups of drivers in particular: demographics; technology (including importantly artificial intelligence); debt; urbanisation and air pollution; and fossil fuels, energy, and climate.

Speaker: Dr. John Llewellyn, Llewellyn Consulting

Risk and Pensions Plenary

If DB Pensions Didn’t Exist, Would We Invent Them?

Private sector DB pensions – once considered a key strength of the UK -  are dead, if not buried.

How has this happened? What are the conventional challenges? What are the challenge from Financial Economics - “Exley, Mehta and Smith” was published 20 years ago. Are DB pensions even economically efficient?

In light of the Green Paper, what are the regulatory issues for legacy DB pensions? Is there really is a “crisis”, calling for crisis measures?

Should pension regulation be “strengthened” or “weakened”? Should companies be able to give no more than the legal minimum pension increases?

Speaker: John Ralfe, Independent Pension Consultant

Pensions Sessions

D1: Resource & Environmental Issues: Practical Guide for Pension Actuaries

A brief practical guide has recently been published for pension actuaries on resource & environmental issues which considers the implications of issues such as climate change and natural resource constraints for today’s actuarial advice for UK defined benefit schemes.  How might these risks affect advice on pension scheme funding, and should they?  How might this interact with investment and covenant advice?  This session will summarise the guide, the more detailed papers under preparation and discuss the practical implications with the audience. 

Speakers: Nick Spencer and Andrew Claringbold, Members of the Resource and Environment Implications for Pensions Actuaries Working Party

D2: Public Sector Pensions 

Allan Martin will be talking about public sector pensions, the last bastion of defined benefit pension provision in the UK. Allan’s comments on public sector pensions should whet your appetite from a lay economic, basic actuarial and tax payer perspective. Specific challenges will be included on the underlying discount rate and benefit revaluation. Any emerging concentration on words or phrases such as unsustainable, inter-generational inequality and political expediency, will not be coincidental. 

Speaker: Allan Martin, ACMCA Limited

Risk Sessions

D3: Risk Measures for Long Term Investment – Are They Fit For Purpose?

Long-term investors are pressured by regulatory requirements to measure and report on capital requirements using short-term projections and ‘market-based’ parameters.
We explore the consequences of this approach both for the investors’ management of risk and ability to generate long-term returns as well as the wider market and consumers the regulations are meant to protect.  We will also consider alternative approaches which might better align with investors’ economic objectives and business models, whilst simultaneously alleviating procyclicality and herding pressures in the capital markets - and invite you to share your insights in this discussion. 

Speakers: Belinda Hue and Elliott Golend, Risk Measures Working Party

D4: Evolving the Risk Management Function to Add Value to the Board 

A case study in using risk appetite and reporting to improve the effectiveness of risk oversight, including•Structuring risk appetite to business priorities •Use of the model and stress and scenario testing•Linking risk appetite to effective reporting framework •Creating impact through Board and Committee reporting and structure•Forward looking approach and emerging risk management•Pressure for continual improvement.

Speakers: Mike Wilkinson, Willis Towers Watson and Stav Tsielepis, Arch Insurance

Finance and Investment Sessions

D5: QE and the Inflation Dogma; Does it Work and Does it Make Sense?

The BoE’s mandate is explicit: 2% CPI inflation. As QE enters its 9th year, measuring its effectiveness is simple. QE has increased the CPI and succeeded.
But this masks a deeper and more troubling question: does the mandate make sense? The economy cannot be captured in a single metric. The sledgehammer approach of the BoE sidesteps serious questions for the economy and investors: what else did QE bring us and when/if/how will it unwind?
Asset price inflation, portfolio diversification, aggregate demand and fiscal vs. monetary policies are areas we explore to answer these and the natural follow-up: is there a better way?

Speaker: Richard Silveira, Deloitte

D6: Delivering Optimised Insurance Investment Strategies

Optimising insurance investment portfolios is complex, and delivering these solutions requires close collaboration between the insurer and its asset manager. In this session, Phoenix Group and Standard Life Investments will share their practical experiences through detailed case studies, including:
-Sourcing private debt assets
-Embedding a coherent internal credit rating framework
-Balancing a search for illiquidity premium with meeting liquidity demands
-Assessing relative capital-adjusted returns across asset sectors, geographies, and currencies
Finally, both speakers will take a look forward to the future trends in insurance investment activity. 

Speakers: Craig Turnbull, Standard Life Investments and Scott Robertson, Phoenix Group

Cross Practice Session

D7: Everything You Need to Know about Professional Regulation and how the Revised TASs are Now Relevant for all Actuaries 

Representatives from the IFOA and from the FRC combine to share all the latest developments including important information on the new TASs which will affect all actuaries.

Speaker: Elena McLachlan and Christine McConnell Institute and Faculty of Actuaries, Simon Wasserman, Financial Reporting Council 

Pensions Sessions

E1: Communicating Pensions: Addition to Merton's vision 

This workshop is one of the early research outputs from the IFoA-sponsored research programme Minimising Longevity and Investment Risk while Optimising Future Pension Plans through the Actuarial Research Centre (ARC). For more information about this programme, please visit the ARC website

Merton has been touring the US and Europe with an excellent vision for future pension contracts, although did not reveal technical details. Traditional financial mathematics would suggest building a financial hedging strategy based on power utility functions and then hedge Merton's vision via the very same financial mathematics for which he won the Nobel Prize. The purpose of this talk is to develop another similar type of theory via the exponential utility function and show that this improves customer-communication enormously. The research team has also recently submitted a paper from this research to the ASTIN Bulletin. 

Speaker: Munir Hiabu, Cass Business School and member of the IFoA’s ARC research programme

E2: Fiduciary Duty - The Past, the Present, the Future 

Overview of what Trustees are expected to do with regards to their fiduciary duty. How pension schemes have typically approached risk management (noting knowledge gulf between smaller and larger schemes). What have been the main return drivers and risk factors and given the low growth world we now appear to be in how can advisors and asset managers add value for Schemes and their stakeholders.

Speaker: Owen Davies, Russell Investments 

Risk Sessions

E3: Actuarial Risk Principles – Improving Decision Making 

As actuaries we have completed rigorous study which helps us consider financial uncertainties and explain this to others. The skills we use in our work may seem obvious and commonplace, but are often alien to non-actuaries. As a profession we should be seeking to use this expertise to help improve decision making and outcomes for others. With this in mind, a set of actuarial risk principles have been summarised providing a framework to approach risk management both within and beyond standard actuarial practice areas. This interactive session will provide a brief introduction to the risk principles before seeking feedback from the audience on the extent to which these principles are applied in their organisations.

Speaker: Matt Gurden, Government Actuary’s Department

E4: How Risk Personalities Help to Build a Stronger Risk Culture 

Individuals have a preferred approach to risk-taking which exerts a significant and persistent influence on risk culture.  We explain the derivation of the eight different Risk Types that describe these varied styles and the familiar personalities associated with them.  We consider how Risk Type contributes to effective decision-taking and monitoring, and present evidence that risk culture can be more influenced by the Risk Types of senior individuals than other factors (including reward).  Drawing on case studies from across industries, including financial services, we set out the process by which Risk Types are used to build a stronger risk culture. 

Speakers: Russell Beaumont, Russell Beaumont Associates Limited and Geoff Trickey, Psychological Consultancy Limited

Finance and Investment Sessions

E5: Extreme Risks: What are they and Why do we Care? 

Extreme risks are potential events that are very unlikely to occur but could have a significant impact on economic growth and asset returns, should they happen. We take a look at:
- Whether we are systemically prone to underestimating the probability of tail events given the number of “VaR99.5” events experienced in recent times
- What some of the more extreme events are that we should be concerned about, thinking well beyond VaR99.5 
- Why it is important for these very unlikely but high impact events to be considered and why a robust risk management approach should not stop at a particular percentile.

Speakers: Keith Goodby and Ashwin Belur, Willis Towers Watson

E6: Climate Asset Risk - it's all About Governance Now   

TCFD’s recommendations are published. The direction of travel for climate finance is even clearer. Specific recommendations for pension funds require their advisers to up their game too. Legal opinion highlights the risks trustees - and their advisers - face with regards to fiduciary duty. The EU’s High-level Expert Group on Sustainable Finance is working hard. What does TPR's investment guidance mean for pension schemes? This session will provide a financial system-level review of how decision-making structures are evolving after the Paris Agreement came into effect last year.  

Speaker: Mike Clark, Ario Advisory

Cross Practice Session

E7: Model Risk: Thinking Outside the Black Box    

This paper from the IFoA's Model Risk Working Party (Phase 2) builds on their Phase 1 work and presents:
- Practical examples of Model Risk Communication (to the Board, 
the Regulator and external stakeholders)
- A risk quantification framework to help manage and mitigate model risk including examples of good practice observed in financial services 
- Provides some lessons learned from other industries including Aerospace, Met Office and Credit Ratings

 Speakers: Louise Witts, Lloyds Banking Group and Clara Hughes, Fitch Ratings

Risk Plenary

Chief Risk Officer Panel: Reflections on the Role of the CRO, Now and in the Future

Alex Duncan (CRO of Just), Wayne Snow (CRO of The Phoenix Group) and Stephen Wilcox (CRO of Allianz UK) talk about their careers in this plenary panel discussion. These three CROs from leading insurance companies discuss the role of the CRO, including the characteristics and skillsets needed, what it takes to become a CRO and the future of the role. This panel session will be structured as a planned panel interview, but will also offer the audience an opportunity to ask the CROs any specific questions they have about the role.

Speakers: 

Alex Duncan, Just

Wayne Snow, The Phoenix Group

Stephen Wilcox, Allianz UK

Finance and Investment and Pensions Plenary

Intergenerational Fairness    

There are a whole host of issues where long-term view is essential if we are going to meet today’s needs, without putting younger, or future generations at a disadvantage. It is clear that much of the UK policymaking community is beginning to open its eyes to these issues. And many of these issues are central to the work of actuaries.

Over the course of 2017 the IFoA is producing a series of bulletins, bringing together academics, think tanks and thought leaders from across financial services and public policy to discuss three core intergenerational issues. Our aim is to highlight the role of actuaries in understanding the long-term implications of this policy challenge.  

This cross-practice session will bring together aspects of our first two bulletins on climate change and retirement and will feature contributions from both. 

Speakers:

Nico Aspinall, Chair of Resource and Environment Board

Professor Aled Jones, Director of the Global Sustainability Institute at Anglia Ruskin University

Dawn Turner, Chief Pension Officer, Environment Agency Pension Fund

Toby Belsom, Head of Research and Analytics, Share Action

Future for Actuaries?

Using examples from the animal kingdom and an analysis of the potential future feeding grounds for actuaries Ronnie considers whether there is a positive future for actuaries and, if there is, what actuaries (and their professional body) need to do to equip themselves to take advantage of it.

Speaker: Ronnie Bowie, Hymans Robertson