The procyclicality project was a joint venture between the IFoA and the Bank of England, led on our side by Ashok Gupta and Ronnie Bowie

It looked at the policy issues arising from the trend to short term investment behaviour by pension funds and life companies, lower equity holdings reflecting reduced willingness to take on risk, and procyclical investing that exacerbates market cycles.  The IFoA had a successful seminar on the subject in September 2015 which led to potential areas for future IFoA-sponsored research.  It identified three topics: long-term investment mandates, risk measures and countercyclical capital buffers with a Board leading each one.  The RM Board is overseeing the topic of “Risk Measures”.

The three strands coming out of the discussions are:

  • Risk Measures Working Party (RM Board)
  • Procyclicality of Life Insurers’ Capital Requirements – Countercyclical Capital Buffers Working Party (Life Board)
  • Long term investment mandates in insurance and pensions industry Working Party (F&I Board)

Key Objectives

The working party is focusing on:

  • Long term vs short term investors/investing
  • Investment risk vs market risk
  • Approaches to measurement of risk (practical applications)

The short term agenda driven by regulation such as the Solvency II framework does not wholly support the economic objectives of an insurer: to provide appropriate, affordable products which meet customers’ needs and deliver value to its stakeholders, whilst positively contributing to capital formation and growth investment in the real economy.

Working party vacancies

The Institute and Faculty of Actuaries (IFoA) is seeking to appoint a Research Assistant for a short-term project for a six week period from November to end of December 2018. This is suitable for qualified members of the IFoA and for suitably qualified non-members.

Find out more about this volunteer vacancy

Evolution of alternative approaches to risk measurement

The Risk Measures working party aims to help inform discussion of alternative risk measurement approaches and their practical usefulness, considering evolving global standards, economic run-off approaches, short-term market volatility versus investment horizon shortfall risk, and point in time balance sheets versus the ability to meet long-term and illiquid liabilities. Potential long-term shareholder value and policyholder returns are central to the discussion, as are behavioural incentives such as lock-ins, sunk costs, implementation costs and vested interests.

Outputs

 

 

Chair: Belinda Hue
Membership: 5
Established: 2016

 

Related documents

Contact Details

If you want more information about this research working party please contact the Communities Team.

professional.communities@actuaries.org.uk

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Start date
E.g., 26/10/2020
End date
E.g., 26/10/2020

Events calendar

  • GIRO 2020 Virtual Conference

    Available to watch globally in November.
    02-13 November 2020
    Spaces available

     

    This year's GIRO has been re-designed as a virtual conference to offer members and non-members the opportunity to get up to date content from leading experts in the general insurance field via online webinars. All sessions will be recorded and made available to purchase and re-watch post-event on the IFoA's GI Online Learning Resource area

  • Spaces available

    The webinar will discuss the challenges and opportunities schemes face in evaluating end game options, choosing a target state and understanding the impact this strategic decision could have on member outcomes long after the “end state” is reached. Adolfo, Kevin and Rhian bring over 60 years of experience in the industry and a variety of perspectives as scheme actuary, covenant adviser, trustee, de-risking adviser and insurer.

  • Spaces available

    Retail banking is going through a period of substantial change as it moves into the digital age. Banks have large amounts of data about their customers and about their risks. Open data application programming interface (APIs) and data science are enabling banks to use their data to offer innovative and sometimes personalised services. Data science is also adding value in risk areas such as fraud detection and cyber security. At the same time, the move to online banking is making it easier for firms including fintechs to enter banking without having to establish branch networks.

  • Spaces available

    Cash-flow driven investing is a game-changer for DB pension funds navigating their end-game. Suitable for sponsors who want to reduce risks on their balance sheets. And for trustees, it shifts the focus to providing greater certainty of returns, managing funding level volatility and ensuring they have enough income to pay cash-flow requirements.

  • Spaces available

    Patrick Kennedy, Partner at Gateley Legal and Founding Director of Entrust (a leading professional pensions trustee company), will be delivering an update on the latest legal developments during the course of 2020. With both a pensions legal perspective and over 25 years of trustee service, Patrick will seek to highlight how the letter of the law has continued to evolve against the backdrop of a difficult and challenging year

  • Spaces available

    The talk will provide an understanding of the priorities and relationships between deficit reduction contributions, in the context of wider scheme funding, and different types of value outflow from the employer based on the working party’s recently published report. 

  • Spaces available

    Covid-19 has required an urgent and cross-practice initiative to facilitate the extensive impact this pandemic has across all industries. IFoA members have been keen to contribute in a different way, so we developed the IFoA Covid-19 Action Taskforce [ICAT] to coordinate our effort, with a more efficient governance.

    We have over 500 volunteers and countless topics which we have amalgamated into 93 workstreams.