JAN/FEB 2022 theactuary.com
The magazine of the Institute and Faculty of Actuaries INTERVIEW Kit Yates talks demystifying maths for the general public
DATA SCIENCE Harnessing data to help solve critical business challenges
HEALTH Why electronic records spell a seachange in healthcare
A SYSTEM STRETCHED
MODELLING How fractals can be applied in dynamic hedging
1 cover_The Actuary JAN FEB 22_The Actuary.indd 1
s
A
CL
IM
AT E
Are we getting closer too so solving lving the social care crisis? sis?
FU TU RO L UN Sp I V R E DT o IN W M nso G O An oo re I AB al dy d b N RT yt ’s y H LE ic
000086000
24/01/2022 10:28
p02_ACT.JanFeb22.indd 2
24/01/2022 10:43
Contents January/February 2022
16 Data science: Decision time Decision-making can be treated as a scientific process, says Stephen Carlin 17 Data science: Built to skill Valerie du Preez, Xavier Maréchal and Anja Friedrich on why, and how, we can harness the power of data science
A
14
Up Front 4 Editorial Ruolin Wang on the topics that will be especially relevant in the coming year
20 Technology: Digital first Modern marketing is needed to drive penetration, says Evan Tanotogono 22 General insurance: Walking it off Jeremy Keating takes a look at the FCA’s new rules on price walking
43 37 World view: Zimbabwe & Namibia Working in small actuarial communities can present unique opportunities, says Blessing Mbukude 38 General insurance: Peering ahead Michel Denuit and Christian Robert examine mutualised general insurance 40 Regulation: On balance IFRS 17 regulation will prompt changes to asset and liability management, say Richard Schneider, Jon Neale and Apostolos Papachristos
5 President’s comment Louise Pryor talks about the importance of continued learning
24 Health: Electric dreams Electronic health records can optimise healthcare coverage, say Atreyee Bhattacharyya and Kanishka Jindal
5 CEO’s comment The IFoA is making good progress on its strategy goals, says Stephen Mann
27 Sponsored survey: IFRS 17 Our study on firms’ preparedness for IFRS 17, with Moody’s Analytics
43 Student Ciara Izuchukwu on the reforms that could impact offshore (re)insurers
6 IFoA news The latest IFoA news and events
28 Health: A duty of care Actuaries can find the solution to fix social care, says Colin Redman
44 Puzzles
31 Modelling: Taking shape Andrew Smith and Oliver Bentley share their ‘Brownian blancmange’ – the use of fractals in hedging
Features
COVER: ISTOCK/SHUTTERSTOCK
13 Interview: Kit Yates The maths lecturer discusses the importance of making his subject more accessible to the public
34 Sponsored roundtable: A future worth living in Huw Morris reports on a roundtable sponsored by Moody’s Analytics, on the financial impacts of climate change
Get the app Did you know you can now read The Actuary magazine on any tablet or A Android phone? Click through to read more online, download resources, or sshare on social media via our links in the app. It’s an exclusive free benefit for o our members. Download on the App Store at: www.theactuary.com/ipad V Visit: www.play.google.com
www.theactuary.com
3 CONTENTS_The Actuary JAN FEB 22_The Actuary.indd 3
At The Back
46 People/society news The latest news, updates and events 47 Inside story Craig Ritchie on thinking long-term
Web Exclusive Pensions: Dawn of a new era The emergence of collective defined contribution pensions in the UK bit.ly/NewEra_CDCs
Additional content including daily news can be found at www.theactuary.com Weekly newsletter: for all the latest actuarial news, features and opinion direct to your inbox, sign up at bit.ly/1MN3bXK JANUARY/FEBRUARY 2022 | THE ACTUARY | 3
25/01/2022 12:13
theactuary.com
PUBLISHER Redactive Publishing Ltd Level 5, 78 Chamber Street, London, E1 8BL +44 (0)20 7880 6200 PUBLISHING DIRECTOR Anthony Moran MANAGING EDITOR Sharon Maguire +44 (0)20 7880 6246 sharon.maguire@redactive.co.uk SUB-EDITOR Kate Bennett NEWS REPORTER Christopher Seekings +44 (0)20 7324 2743 christopher.seekings @redactive.co.uk D I S P L AY S A L E S theactuary-sales@redactive.co.uk +44 (0)20 7324 2753 RECRUITMENT SALES theactuaryjobs@redactive.co.uk +44 (0)20 7880 6234 ART EDITOR Sarah Auld PICTURE EDITOR Akin Falope SENIOR PRODUCTION EXECUTIVE Rachel Young +44 (0)20 7880 6209 rachel.young@redactive.co.uk
EDITOR Ruolin Wang editor@theactuary.com F E AT U R E S E D I T O R S Travis Elsum: Environment and sustainability Blessing Mbukude: Life Fiona Neylon: General insurance Yiannis Parizas: General insurance and data science Rajeshwarie VS: General insurance PEOPLE/SOCIETY NEWS EDITOR social@theactuary.com Sharon Maguire sharon.maguire@redactive.co.uk STUDENT EDITOR Adeetya Tantia student@theactuary.com IFOA EDITOR Kate Pearce +44 (0)207 632 2118 kate.pearce@actuaries.org.uk EDITORIAL ADVISORY PANEL Peter Tompkins (chairman), Chika Aghadiuno, Nico Aspinall, Naomi Burger, Matthew Edwards, Jessica Elkin, Martin Lunnon, Richard Purcell, Sonal Shah, Nick Silver INTERNET The Actuary: www.theactuary.com Institute and Faculty of Actuaries: www.actuaries.org.uk
PRINT PCP
SUBSCRIPTIONS Subscriptions from outside the actuarial profession: UK: £100 per annum. Europe: £130 per annum, rest of the world: £160 per annum. Contact: The Institute and Faculty of Actuaries, 7th floor, Holborn Gate, 326-330 High Holborn, London WC1V 7PP. T +44 (0)20 7632 2100 E kate.pearce@actuaries.org.uk. Changes of address: please notify the membership department. E: membership@actuaries.org.uk Delivery queries: contact Rachel Young E: rachel.young@redactive.co.uk Published by the Institute and Faculty of Actuaries (IFoA) The editor and the IFoA are not responsible for the opinions put forward in The Actuary. No part of this publication may be reproduced, stored or transmitted in any form, or by any means, without prior written permission of the copyright owners. While every effort is made to ensure the accuracy of the content, the publisher and its contributors accept no responsibility for any material contained herein. © Institute and Faculty of Actuaries, Jan/Feb 2022 All rights reserved ISSN 0960-457X
4 | THE ACTUARY | JANUARY/FEBRUARY 2022
4 editorial_The Actuary JAN FEB 22_The Actuary.indd 4
Action all areas Happy New Year, and happy Lunar New Year to those who celebrate it. Welcome to the first issue of The Actuary for 2022. I’d like to start by thanking Dan Georgescu for his work on the magazine during the past couple of years. I’m delighted to be taking over as the new editor. In November 2021, the omicron variant of the coronavirus was designated a variant of concern. In this issue, I speak to Kit Yates, mathematical biologist and a member of Independent SAGE. Our conversation about the importance of, and challenges around, scientific and risk-related communication – especially in the context of COVID-19 – turned out to be prescient, with the omicron variant soaring during the Christmas period (p13). Sustainability is a topic that is becoming more urgent by the day: both for the world and for our profession. We open the year with an assessment of our industry’s progress and shortcomings so far with regard to climate change (p34). In the cover article, Colin Redman zooms in on social care, a topic that, he argues, deserves more actuarial attention (p28). This month, with IFoA president Louise Pryor encouraging us to keep learning, we bring data and technology into focus. We envision the place where the valuable intersection of data and business knowledge in the actuary’s toolset can take us (p16), why we must seize this opportunity as a profession, and how we might get there (p17). We also look at concrete examples of how artificial intelligence and machine learning can enable us to extract value from health data (p24), and how technology and a digital-first strategy can help to drive insurance penetration (p20). RUOLIN WANG I hope you enjoy this issue. EDITOR editor@theactuary.com
www.theactuary.com
25/01/2022 12:14
LOUISE PRYOR
STEPHEN MANN
Rise to the challenge
Making good progress
hen I delivered my presidential address, we were living through a period of immense change, presenting both challenges and opportunities. Six months later we are still living in uncertain times, with no slowdown in the pace of change. I said then, and continue to believe now, that the best way for actuaries, the profession and the IFoA to succeed and be sustainable is for us to keep learning. I made a commitment that my presidency would focus on supporting you to develop your skills so you can adapt to change in existing areas of work, as well as move into new areas. With the start of the New Year, and halfway through my presidential term, I feel now is a good time to check in on that commitment. I have believed for some years that climate-related risk is the biggest problem facing the world. Its broad reach and widespread effects mean it is a risk that actuaries cannot ignore. I also believe our profession can make a real impact. Assessment and management of climate-related risk is a relatively new field for actuaries, underscoring the need for us to keep learning and adapting our skillsets. The IFoA offers a broad range of resources to support you in this area, including a curated library, practical guides, a new credential and a deep dive into what sustainability means for our profession. All these and more are easy to find through our Sustainability Hub (bit.ly/IFoASustainHub). Many of you are playing a leading role in the policy conversation on climate change and sustainability, while others are just starting out on their journey in this area, but we can’t rest on our laurels. The field is changing so rapidly that all of us need to develop and enhance our skills in climate risk and related areas, such as biodiversity. In doing so, we can help to ensure the profession continues to make an impact. And there’s so much to learn! LOUISE PRYOR I hope all of you will join me in learning is the president of something this year that you feel will the Institute and contribute to a brighter future. Faculty of Actuaries I wish you all a happy and healthy 2022.
W
www.theactuary.com
5 CEO PREZ_The Actuary JAN FEB 22_The Actuary.indd 5
J
anuary marked two years since I joined the IFoA. This, coupled with the passing of another calendar year, presents a good opportunity to reflect on what I’ve learnt during this period – and what has changed. Working remotely for much of the time was not in the original plan, and has made some things easier, others more difficult. We have responded well to the pandemic – and the sense of urgency it brought has accelerated trends and action in areas that might otherwise have taken longer to get around to. I joined to help implement the bold strategy developed by Council in the preceding two years. The strategy has been robust enough to withstand the impact of the pandemic, and at the November 2021 Council strategy session it was good to sensecheck progress against what we had expected to see at this stage. During the past 18 months we have seen the launch of our ‘New World, New Thinking’ campaigns, which aim to reset how the IFoA comes across and showcase what we and our members do for society. We have also launched a revised events strategy, with all IFoA online events now free for you to access; a shift to fully online exams; a sustainability pathway; a simplified CPD scheme; and two series of thought leadership events. There is more to come, but the test will be if our members really feel a change in their experience. There is a lot in train for 2022. We have just launched our new five-year diversity, equity and inclusion strategy, which recognises that diverse and inclusive thinking is important for our profession’s sustainability, and for attracting and retaining actuaries who want a career that is rewarding and valued in a wide sense. We are investing in a new member-friendly website, and upgrading our IT so we can offer you a better service. There are also big investments in our learning offer, which will maintain high standards while supporting career-long learning. STEPHEN MANN There is a lot to get done, but our is the chief executive ability to progress despite the pandemic of the Institute and gives me confidence that we can do so Faculty of Actuaries further in 2022. JANUARY/FEBRUARY AUTUMN 2017 2022 | THE ACTUARY | 5
24/01/2022 17:34
Upfront News
EVENT
IFoA hosts speech from Bank of England governor On 1 December, the IFoA was pleased to welcome the governor of the Bank of England, Andrew Bailey, to deliver a speech on the Bank’s priorities for regulating insurers. In front of a live audience at Lincoln’s Inn and many more online, he outlined the Bank’s plan to “focus on the soundness of insurers and protection of policyholders while supporting the industry to invest in the UK economy and the green transition”. Bailey touched on several important issues, such as Solvency II, and pledged that the Bank of England would engage with the insurance industry in a collaborative manner to identify solutions that meet statutory objectives. He also took part in a Q&A with IFoA president Louise Pryor. Watch the full speech and discussion at bit.ly/IFoA_ BoEGov, and read an article summarising the speech at bit.ly/Actuary_BoEPriorities
IFOA
Council strategy day and meeting Council met virtually for its second meeting of the sessional year on 24 November 2021. The day before, Council had met virtually for its annual strategy day. At the strategy day, Council discussed the progress that has been made against the strategy agreed in 2020 and the key things that need to happen in 2022 to continue to move it forward (bit.ly/IFoA_Strategy). Council also took the opportunity to begin discussions about the IFoA’s membership model to ensure it is fit for the future, and to input into the horizon-scanning work being carried out across the organisation to inform strategic thinking. At the full meeting we focused on the areas of activity that are under way to deliver the IFoA’s strategic objectives and improve member experience. We received an update from our CEO Stephen Mann on the projects and initiatives in place to increase member engagement levels, including the launch of our Banking Pathway (bit.ly/IFoA_Banking) and the Frank Redington Prizes (bit.ly/Redington_Prizes). We will continue to keep you updated on all we are doing to improve the experience of our members. Management Board chair Grahame Stott updated us on the ongoing review of the effectiveness of the IFoA’s Practice Boards. He set out how we propose to implement what we have learned from the two pilot Digital Communities (Banking and Data Science) to enhance the value that the Practice Boards deliver to members. Detailed recommendations in this area will be presented to Council’s next meeting
in March 2022, and we will let you know the outcome as soon as we can. We also heard from Kartina Tahir Thomson, Council member and chair of the IFoA Foundation, on the work the Foundation is doing to support actuaries across the world. If you would like to find out more about the Foundation, or donate to it, visit bit.ly/IFoA_Foundation To support our purpose to ‘champion and embody the benefits of a globally diverse and inclusive profession’, Council approved the IFoA’s new Diversity, Equity and Inclusion Policy. We hope the actions outlined in this policy will mean the IFoA is recognised as a leader in this area, supporting the actuarial profession to attract a diverse range of talent. Look out for more information in the coming weeks. On the regulatory front, we received an update on the UK government’s review of actuarial regulation and discussed the IFoA’s position in relation to that review. We also explored the findings of an independent review into events at another professional membership body, the Royal Institution of Chartered Surveyors, and what the IFoA can learn from it. In addition, we received our first annual report from the IFoA’s Regulatory Board following changes to our regulatory governance arrangements, which Council agreed last year. Council’s next meeting will take place on 10 March 2022. The minutes of our meetings are available at bit.ly/IFoA_council and you can contact us at Presidents@actuaries.org.uk
P U B L I C AT I O N
Longevity Bulletin: The social care issue How best to provide social care is an increasingly urgent question, and one that has been highlighted by the tragedy of COVID-19’s impact in care homes. A decade after the Dilnot Commission set out its recommendations for improving the UK care system, the new issue of the IFoA’s 6 | THE ACTUARY | JANUARY/FEBRUARY 2022
6-8 news_The Actuary JAN FEB 22_The Actuary.indd 6
Longevity Bulletin considers the key areas and how to address them. Contributors are drawn from a range of fields, from the actuarial world to technology and epidemiology, and consider both UK and international perspectives. Read the latest edition of the bulletin at bit.ly/LongevityBulletin_14 www.theactuary.com
24/01/2022 17:35
Upfront News
IN BRIEF... Call for pensions actuary to join Financial Reporting Group Are you a pensions actuary with an interest and expertise in financial reporting and accounting? Do you enjoy keeping up with the latest developments and issues in that space? The Financial Reporting Group (FRG) supports the IFoA in the formulation and delivery of its opinion on accounting and financial reporting matters, through consultation responses or wider engagement with stakeholders. It also provides thought leadership in accounting and financial reporting issues that affect the relevant IFoA practice areas, both for the UK and internationally. The FRG is currently looking for a pensions actuary to join the group. If you’re interested in the role, take a closer look at the specifications at bit.ly/IFoA_VolunteerVacancies
Go paperless Did you know that you can receive The Actuary magazine digitally instead of receiving a paper copy? If you are an IFoA member and would prefer to receive the digital newsletter only, sign into the ‘My account’ area on the IFoA website and update your preference. For non-IFoA members who would like to switch, visit www.theactuary.com and complete your details in the box ‘Sign up to our newsletter’.
Thematic review on equity release mortgages A reminder that the Equity Release Mortgages Thematic Review, which will consider the work carried out by actuaries in this area – particularly in propositions and pricing activity – is open to submissions until 4 March 2022. To take part, and for more information on planned reviews, visit bit.ly/IFoA_Reviews or contact the IFoA Review Team at reviews@actuaries.org.uk www.theactuary.com
6-8 news_The Actuary JAN FEB 22_The Actuary.indd 7
Count On Us Primary Maths Challenge project
I F O A F O U N D AT I O N
A year of reaching new heights The IFoA Foundation would like to wish all our supporters, partners and beneficiaries a happy new year, and to express our thanks for helping us towards some exciting achievements in 2021. Through programme activities, such as our education grants for students, university scholarship funds, and partnership grants with grassroots organisations, we were able to make a positive impact in the UK and across the globe. We were delighted to launch a new partnership in support of the Count On Us Primary Maths Challenge project. This maths-based competition, held in collaboration with the Mayor’s Fund for London, will run in primary schools across the capital, focusing on disadvantaged areas. It allows the Foundation to achieve grassroots impact and visibility in primary schools in the hope of inspiring more young people towards an actuarial career. Louise Richmond, director for development for the Mayor’s Fund for London, said: “The IFoA Foundation’s contribution to the programme couldn’t have come at a better time, helping to not only challenge, motivate and inspire more young people but making sure they develop their confidence as mathematicians as well. Thank you again so much for your support.” In the coming months, the Foundation is endeavouring to reach even more schools and colleges across the UK with additional partnerships. Further afield, we supported actuarial students such as Rymon Takudzwa Gurure (inset) from Zimbabwe who, due to financial difficulties, requested support with his IFoA membership and
examination fees. “I am incredibly grateful for being one of the beneficiaries of the IFoA Foundation in 2021. The grant gave me a unique opportunity, which saw me writing and passing my first actuarial exam in the journey to becoming an actuary. I hope and wish that the Foundation will continue giving students from poor backgrounds an opportunity to pursue and fulfil their actuarial dreams.” Having successfully passed the CB2 examination, for which the Foundation provided funding, Rymon has become a passionate advocate for the Foundation, spreading the word about the support we offer to other students in need. By encouraging students such as Rymon to apply to the Foundation, we can open up the profession to promising young actuaries from all backgrounds. Whether you are interested in empowering young actuaries from diverse backgrounds across the globe or in encouraging more UK schoolchildren to become actuaries, the Foundation has a range of grant programmes that achieve positive impacts in various regions. Thanks to the financial support of our community we can continue to deliver this impact in 2022, with several new projects and initiatives launching. If you would like to find out more about our work and how you can get involved, visit bit.ly/IFoA_Foundation or contact the Foundation co-ordinator via holly.atkinson@actuaries.org.uk. Thank you, and we hope you have a great start to 2022!
JANUARY/FEBRUARY 2022 | THE ACTUARY | 7
24/01/2022 17:35
Upfront News CPD
Mr Gavin Rogaly FFA On 17 November 2021 the Adjudication Panel considered an allegation of misconduct against Mr Rogaly (the respondent) relating to historic non-compliance with the CPD Scheme. The panel found evidence that the respondent failed to comply with the requirements of the 2019/2020 CPD Scheme and did not fully engage with, and/or adequately respond to, communications from the IFoA on the matter. The panel upheld that his actions were a breach of the compliance principle in the Actuaries’ Code (version 3.0) and determined that these allegations disclosed a prima facie case of misconduct. In considering sanction, the panel considered all relevant information and was satisfied that the appropriate and proportionate sanction was a reprimand, a fine of £1,500 and a period of education, training or supervised practice. Find a full copy of the determination at bit.ly/IFoA_determinations
Climate Risk and Sustainability course launched After a considerable amount of hard work and support from a small group of volunteers, we are delighted to be launching our new Climate Risk and Sustainability course in the spring of 2022. The eight-week course will be delivered through the Virtual Learning Environment and is available to all members. We expect the commitment to be around eight to 10 hours a week, but this will vary between individuals. You can complete it at your own pace, and there will be opportunities to come together virtually to discuss key issues and enhance your learning. The first course will begin on 9 March 2022 and will cost £550, with a reduced rate of £330. The course is designed to be of value to a wide range of individuals, beginning with foundation modules (1-5) covering basic knowledge and concepts,
and followed by a set of application modules (6-9) that are directly relevant to the actuarial community. The modules are: Evidence of man-made climate change and its physical and transitional impacts UN, NGOs, other stakeholders and sustainability TCFD and financial regulation Economics and sustainability Intergenerational issues Strategy and risk management Climate models/modelling Reporting and communication Closing workshop. If you are interested, please complete our Expressions of Interest form at bit.ly/Climate_EOI so we can update you with further news. Find out more at bit.ly/IFoA_CRScourse
IMAGES: ISTOCK
A DJ U D I C AT I O N PA N E L
Call for speakers
The IFoA Conference 2022 22–23 June – etc.venues, 133 Houndsditch, London The IFoA is proud to announce the inaugural IFoA Conference. The theme of the conference is ‘Focusing on tomorrow’s actuary’ and will explore the contribution actuarial science is making to some of tomorrow’s biggest issues. This two-day event will bring together actuaries and nonactuaries across 70 technical topics such as Sustainability, Data science, IFRS 17, Finance and Investment, Banking, Risk management, Health and Care, Pensions, Pandemics, Mental wellbeing and Professional skills.
If you would like to contribute to this exciting conference, please follow this link:
www.actuaries.org.uk/call-for-speakers For sponsorship and exhibition packages at this conference, please contact Hannah Watson:
hannah.watson@actuaries.org.uk
We are looking for a diverse range of dynamic and entertaining speakers to generate thought-provoking discussion.
8 | THE ACTUARY | JANUARY/FEBRUARY 2022
6-8 news_The Actuary JAN FEB 22_The Actuary.indd 8
www.theactuary.com
24/01/2022 17:35
The magazine of the Institute and Faculty of Actuaries
FEATURES LIST 2022 PLEASE NOTE THE THEMES FOR EACH ISSUE ARE NOT EXCLUSIVE. The schedule is subject to occasional revisions. Please check with the features team prior to contributor deadlines for further details. Contact: features@theactuary.com
ISSUE
DEADLINES
SUBJECT THEMES ■ PANDEMIC SPECIAL ■ ESG/Business/Health ■ Investment/Economics
April 2022
Published: Contributor deadline: Ad booking deadline:
07 April 2022 14 February 2022 18 March 2022
May 2022
Published: Contributor deadline: Ad booking deadline:
05 May 2022 14 March 2022 12 April 2022
■ Pensions/Investment/Finance ■ Life insurance ■ Environment/Sustainability
June 2022
Published: Contributor deadline: Ad booking deadline:
01 June 2022 11 April 2022 12 May 2022
■ EDUCATION SPECIAL ■ Careers/CPD/Upskilling/Jobs ■ General insurance
July 2022
Published: Contributor deadline: Ad booking deadline:
07 July 2022 09 May 2022 17 June 2022
■ Health and care ■ Life insurance ■ Environment/Sustainability
August 2022
Published: Contributor deadline: Ad booking deadline:
04 August 2022 13 June 2022 15 July 2022
FURTHER INFORMATION For further information and advice please contact features@theactuary.com
WRITING FOR THE ACTUARY See terms and conditions at www.theactuary.com/contribute
MORE CONTENT ONLINE Additional content can be found at www.theactuary.com
APRIL 2021 theactuary.com
MARCH 2021 theactuary.com
The magazine of the Institute and Faculty of Actuaries
The magazine of the Institute and Faculty of Actuaries
The growing significance of lifestyle factors
■ RISK SPECIAL ■ ESG/Business/CSR ■ Finance/Investment/Economics
NOVEMBER 2021 theactuary.com
INTERVIEW Andreas Kyprianou on working in ‘the era of mathematics’
HEALTH
HEALTH
It’s time to rethink the impact of diabetes on insurance coverage
Closing the protection gap via customer retention
PENSIONS Plotting the journey’s end for defined benefit schemes
GENERAL INSURANCE Does automation have a place in the reserving process?
RISK How are insurance firms approaching counterparty credit risk?
TECHNOLOGY A look at our new Certificate in Data Science programme
NEW FEATURES EDITORS Averting environmental collapse in a world of hyper-connectivity INTERVIEW Paul Johnson on the economics of public policy today
MODELLING The models allowing us to evaluate credit migration and default risk
INTERVIEW LIFE
Sid Malik on the PRA’s breadth of actuarial work
Is there evidence linking temperature extremes with mortality?
MAY 2021 theactuary.com
JAN/FEB 2021 theactuary.com
theactuary.com
97.3 53.9 62.1 91.5
The magazine of the Institute and Faculty of Actuaries
The magazine of the Institute and Faculty of Actuaries
Would you like to join our editorial team as a health & care editor, pensions & investment, or sustainability editor? Successful applicants can play a key role in the ongoing development of the IFoA’s award-winningg magazine. For details g bit.ly/ACT2Vol visit: bit.ly/AC CT2Vol
100% 96%
How insurers can leverage social media sentiment
98% 90% 89%
Digital Diagnosis sis Key lessons around electronic health records ure holds for insurance, and what the future
95% 81% 91%
37%
90%
42% 2%
75% %
...
90% 95%
me
INTERVIEW
d
Christian Dominic Christ titian ttia ian on climate tackling climat atte cchange hang nnge gee collaboration through colla abor bboratio or or oonn
l to A little bird
How COVID-19 galvanised actuarial mindsets
HEALTH HEALT TTHH Investigating Investigat attting ingg the rise iss of o cancer lung canc nccce cer err in in female ma ma non-smokers non-smo moook oke keers
ENVIRONMENT ENVIR VIRO VIR IRONM IR RRON OONM ONNM NMENT ENT How insurers ers rs ca can tackle t and
INTERVIEW
MODELLING
RISK
Iain Allan on the opportunities that await actuaries in the banking world
A proposal for a less volatile alternative to the Euler rule for capital allocation
Stress testing the potential geopolitical impacts of the COVID-19 pandemic
extreme weather ecosystem loss
INTERVIEW
PENSIONS
ENVIRONMENT
Cassandra Coburn on healthy longevity and healthy diets
Are pooled annuity funds the future of retirement income?
Why actuaries should pay attention to biodiversity risk
www.theactuary.com
9 NEW FEATURES_The Actuary JAN FEB 22_The Actuary.indd 9
JANUARY/FEBRUARY 2022 | THE ACTUARY | 9
24/01/2022 17:36
Upfront News
Softly does it In our second article on the IFoA Curriculum we look at how professional work is evolving, and how non-technical ‘soft’ skills are playing an increasing role alongside traditional actuarial competencies
www.theactuary.com
10-11 ifoa_The Actuary JAN FEB 22_The Actuary.indd 10
24/01/2022 17:37
Upfront News
A
s professions recognise that their members need a wider and more holistic skillset to face the demands of the 21st century, ‘soft’ skills are starting to feature prominently in the professional’s toolkit. In the future, employers will look for actuaries who can demonstrate these skills. Chief among these competencies will be emotional intelligence, a growth mindset and, perhaps most importantly, the ability to embrace change. What does this mean for actuaries in practice? And how can they apply it to their careers?
A changing profession All professionals know that the future of work will be very different. They will work for longer, move jobs more frequently and potentially shift careers. Actuaries are already seeing how their profession is evolving and adapting to this brave new world. An IFoA survey last year revealed that more than 50% of respondents believed actuarial skills and competencies will need to change in all areas of the profession. Technological developments, changes in regulation and societal factors will be the most significant drivers. When asked what they thought would be the most important competencies in the next five years, respondents consistently identified ‘soft’ skills as being most critical, including qualities such as agility, adaptability and the ability to communicate.
IMAGE: ISTOCK
Reflective practice
10-11 ifoa_The Actuary JAN FEB 22_The Actuary.indd 11
A 21st-century learning profession How will actuaries access the professional development they seek from their reflective practice? In a recent IFoA survey on career-long learning, respondents consistently identified that they will access the future skills they need through a combination of self-directed study, digital communities, peer-to-peer learning, professional learning and IFoA post-qualification learning. Alert to this more complex learning environment, the IFoA has recognised the distinctive role it will need to play in helping members access their learning. Its Learning Change Programme (bit.ly/IFoA_LearningChange) is centred on refreshing and continually evolving content that has global relevance to IFoA members and draws on the highest quality provision – such as its Certificate in Data Science and the soon-to-be-launched Sustainability and Climate Risk programme. This will ensure IFoA members can either be ‘signposted’ to the most contemporary material from high-quality independent learning providers, or access it directly from the IFoA. However, this cradle-to-grave approach to career-long learning, as highlighted by Curtis, means that a passion for professional learning needs to start early in an actuary’s career. The qualification process needs to expose early-career professionals to the most contemporary content that is relevant to their futures. This means instilling a growth mindset and a desire to keep learning. Qualification must also assess new actuaries based on the skills and competencies they will need to demonstrate in the future. This also forms part of the IFoA’s Learning Change Programme and will result in a step-change in maintaining both the quality and future relevance of its qualifications. It will result in new routes to qualification, such as the recently launched pre-Fellowship Pathway in Banking, and introduce new types of assessment using the most contemporary and high quality approaches, such as online objective-based assessment, that focus on the competencies actuaries are required to demonstrate in the workplace. This will ensure that newly qualified actuaries have both the demonstrative skills that are appropriate for the contemporary world of actuarial work, and the growth mindset they will need to continuously reinvent themselves professionally in what will be a rapidly evolving actuarial landscape. The next article in this series will highlight more of the changes the IFoA’s Learning Change Programme is introducing to ensure newly qualified actuaries are equipped with the skills and competencies for successful and sustainable careers.
“When asked what would be the most important competencies, respondents consistently identified ‘soft’ skills as most critical”
Alongside this is the growing recognition that responsibility for developing careers sits with the individual. Reflective practice is a significant and meaningful way in which actuaries can focus on what they want to achieve professionally. It allows an individual to think through their ambitions and career aspirations consider their strengths and weaknesses, and compare these with the skillset they will require in the future. It creates a longer-term perspective to help identify career goals and, if there are gaps in their competencies, direct them to the place in which they can access the required professional development. As former IFoA president and Aon partner Jane Curtis, who is a reflective practice discussion (RPD) mentor and advocate for this change, says: “I have long been passionate about career-long learning and that it doesn’t stop at qualification. It’s a cradle-to-grave approach and I’m pleased the IFoA is embracing this, as we all have a lot to learn. “It keeps us motivated and stops us from becoming stale by embracing new ideas.” In the summer of 2020, the IFoA introduced RPDs as part of its commitment to developing a more learning profession. Fiona Morrison, also a former IFoA president and previously a pensions partner at Lane Clark & Peacock LLP, said of her experience taking part in reflective practice discussions: ‘The
www.theactuary.com
fact that you stop the treadmill and reflect on what you are doing is very valuable. The supportive challenge of the conversation helps you look above the horizon and think: am I being too narrow?’
JANUARY/FEBRUARY 2022 | THE ACTUARY | 11
24/01/2022 17:38
Digital first New technologies are the key to driving take-up in low-penetration markets, says Evan Tanotogono
INSIDE Maths for the masses
Electric dreams
A future worth living in
Current events show why it’s so important for the public to understand maths, says Kit Yates
Electronic health records and machine learning offer a more precise approach to healthcare, say Atreyee Bhattacharyya and Kanishka Jindal
Huw Morris reports on a recent roundtable about the financial impact of climate change
Decision time Stephen Carlin discusses decision science, and how it may be useful in actuarial work
World view IFRS 17 Preparedness Report Are firms ready for IFRS 17? Results from The Actuary and Moody’s Analytics’s survey
Built to skill
Innovation is important for actuaries in Zimbabwe and Namibia, says Blessing Mbukude
Peering ahead
Actuaries need data science skills if they are to make an impact in the future, say Valerie du Preez, Xavier Maréchal and Anja Friedrich
A duty of care
Walking it off
Taking shape
Jeremy Keating delves into the FCA’s new rules on price walking, and their implications
A fractal curve to help with dynamic hedging, developed by Andrew Smith and Oliver Bentley
Colin Redman on what needs to be done to finally solve the crisis in social care
Michel Denuit and Christian Robert look at mutualisation in general insurance
On balance
12 | THE ACTUARY | JANUARY/FEBRUARY 2022
12 section opener_The Actuary JAN FEB 22_The Actuary.indd 12
Asset liability management will need to alter in light of IFRS 17, say Richard Schneider, Jon Neale and Apostolos Papachristos www.theactuary.com
25/01/2022 09:58
Features Interview
Ma ths for themasses
Kit Yates tells Ruolin Wang why making mathematics more accessible to the public is so important – especially in light of COVID-19 and the climate challenge Kit Yates, senior lecturer in mathematics and co-director of the Centre for Mathematical Biology at the Universityof Bath, is on a mission to make mathematics more accessible. Pre-pandemic, this involved giving engaging interactive talks and publishing his first book, The Maths of Life and Death, in 2019. He is now an active scientific voice on COVID-19, and since October 2020 has been a member of Independent SAGE – a group of scientists working to provide independent scientific advice to the UK government and public on COVID-19. “Mathematics is this real, living, breathing subject that people can take part in for enjoyment, and which has real implications,” he says. “During the pandemic, we’ve seen lots of instances in which data has been abused by different sides to tell stories, which might not necessarily be true.”
The maths of life, death and COVID-19 One of Yates’s motivations for writing his first book was to help people understand the everyday importance of mathematics. A lack of mathematical-mindedness can leave one open to exploitation and deception. The pandemic has provided plenty of opportunities for this, “particularly in places like newspapers, where people will use www.theactuary.com
13-15 INTERVIEW_The Actuary JAN FEB 22_The Actuary.indd 13
statistics to make a particular point, but it is not necessarily the whole story”. One example is from the very early days of the pandemic, where death rates were being reported as the ratio of deaths recorded on a particular day to the number of cases recorded on that day. “This did not take account of the big lag between diagnosis, hospitalisation and death. When cases were growing exponentially, cases on a particular day might be very high, but deaths would be lagging behind. It was giving the false impression that there weren’t that many deaths per case, and that was making it seem like COVID-19 was less serious than it was.” Another early misunderstanding was related to models. Yates pointed out that, in early 2020, the Imperial College model suggested that there would be 250,000 deaths if the government continued with their policy of mitigation, and this was a key factor in leading the government to impose lockdown. “Because those 250,000 deaths didn’t come to pass, people said, ‘the model is rubbish. There is no credibility’. But, in fact, the model influenced reality. It caused the lockdown. The fact that it was a self-defeating prophecy doesn’t mean that the model was not appropriate under the assumptions that it started with.” Subtleties like these can get lost, and Yates believes that, as scientists and risk professionals, “it’s our job to explain them”.
Start simple For Yates, a balance needs to be struck when it comes to jargon. “We need to use jargon less if we can, and explain things in terms which everyone can relate to and understand.” At the same time, he cautions that over-simplifying can risk losing important nuances. A strategy for striking a balance can be to use a ‘cartoon model’ that is not overly difficult to grasp, but which gives the audience a sense of the types of complexities at play. For example, “an SIR model is the most basic type of model we can use for epidemiology. No one, in reality, uses SIR models, but it gives people a flavour of what we do.” Once people can grasp these simple models, it’s easier to introduce them to more complex ideas in extended models. Another strategy is to make sure the audience understands any unintuitive mathematical concepts that are key to the conversation. For a discussion around COVID-19, this could be a concept like exponential growth. “We tend to think linearly, and in a straight line. We find exponential growth hard to grasp unless we understand the mathematics – how something growing in proportion to its current size can very easily get out of control.” Luckily, once people grasp this concept, it can really change their behaviour. “There’s good evidence to show that when people understand exponential growth, they JANUARY/FEBRUARY 2022 | THE ACTUARY | 13
24/01/2022 17:38
Features Interview
comply better with mitigations that are put in place. Because they get it.” For scientists, actuaries and other mathematically-minded people, it can be easy to forget that concepts such as exponential growth are not intuitive to many people. This is why Yates recommends having “a couple of interested, intelligent friends who don’t have a mathematical background” as sounding boards. “It reminds me of the terms that I need to explain and the level that I need to talk at.”
Science and policy One of the reasons that Independent SAGE was set up, Yates explains, was to increase transparency. “Minutes from SAGE were not being released; we didn’t know who sat on SAGE.” Independent SAGE proactively engages with the public, including through weekly briefings. In addition to helping inform the public, Yates believes that transparency in science can help hold governments accountable. “If the public thinks your ideas are sensible and the government goes against them, then the government can be held accountable for that. On the other hand, if scientific ideas are not made available to the public, then it’s 14 | THE ACTUARY | JANUARY/FEBRUARY 2022
13-15 INTERVIEW_The Actuary JAN FEB 22_The Actuary.indd 14
www.theactuary.com
24/01/2022 17:38
Features Interview
more difficult to hold the government to account when they ignore scientific advice.” How far should scientists go? Should they make policies? While Yates is clear that policymaking should remain the government’s role, he also urges scientists to be more active and explicit in the advice they give. “Many scientists would say that it’s not our job to advocate for particular policies. I personally don’t think that’s the case.” For Yates, it would not be enough for a scientist to simply state that “COVID-19 is airborne”. With this fact should come specific policy recommendations: improve ventilation or ask people to wear masks. “We have to be advocating for policies. It’s not enough to just present the facts and leave it at that.” Scientists, of course, don’t always agree on the policies they advocate. “The pandemic has created some rifts between different groups of scientists,” Yates recognises. “I think there have been instances where the reputation of science has been damaged – partly by bad-faith actors, and partly due to different groups of scientists falling out with each other, very publicly, over what would have been very quiet, backwater scientific debates in previous times.” While debate is at the very heart of science, “it can damage people’s confidence www.theactuary.com
13-15 INTERVIEW_The Actuary JAN FEB 22_The Actuary.indd 15
in science” when it plays out on social media, he says.
Progress and lessons In the almost two years since COVID-19 was declared a pandemic, has progress been made? When it comes to the UK government’s responses, Yates doesn’t think so. A key communication error, he believes, is when the government gives the impression that the easing of restrictions is irreversible. “It’s so hard to go back on that.” He commended the UK government’s first roadmap, where, coming out of the third national lockdown in 2021, it took a data-driven approach. While a datadriven approach may lead to more uncertainty for individuals and business owners than a guaranteed easing of restrictions, Yates points out that restrictions are inevitable when cases rise. The only difference is in the timing and extent. “The people who advocate for no restrictions are effectively the people who are advocating for lockdowns later on because, by doing nothing, you allow the situation to get out of hand. So I don’t think the government has learned many lessons, unfortunately.” On the other hand, Yates does think there has been progress in the public’s understanding of science and
mathematics. “Most people had never heard of the reproduction number before, but many people would be able to give a rough definition of what it means now. It’s got people interested in science. From that point of view, there is a small positive to be taken out of an awful situation.” There have also been valuable lessons that scientists and risk professionals can learn from. “There are a lot of parallels between COVID-19 and climate change, which is a bigger existential threat than COVID-19,” he says. “I’d like to think that the mechanism and method that we’ve developed for communicating science with Independent SAGE would also be useful for climate change.” In fact, Sir David King, the founder of Independent SAGE, has also set up the Climate Crisis Advisory Group, an independent group of scientists that advises on climate change and biodiversity. However, Yates suggests the communication challenge around climate change may be even greater. “COVID-19 has immediately gripped everyone’s imagination because it’s changed people’s lives very quickly. Climate change is more of a slow burn. There’s a difference in the level of attention that will be paid to these two crises.”
How to expect the unexpected In addition to academic work and public engagements, Yates is also working on his second book – How To Expect The Unexpected – which explores what could go wrong when we try to predict the future. With the ideas in this new book, including negative feedback loops, our inability to comprehend non-linear relationships and randomness, and our tendency to see patterns when they don’t exist, Yates again hopes to bring mathematics to life. “I like to try and explain the intricacies and the usefulness of mathematics, and convince people that maths doesn’t have to be like it was at school,” he says. “It isn’t just written down in textbooks, with all the answers figured out 400 years ago. It is an important, interesting subject, and a little bit of mathematical knowledge can go a very long way.” JANUARY/FEBRUARY 2022 | THE ACTUARY | 15
24/01/2022 17:39
Features CEO science Data
The first is developing a granular propensity-to-claim model to identify the policyholders who are most likely to claim. This is a fairly standard machine learning application. However, constructing a consistent data universe for the analysis requires deep expertise and understanding of the datasets, covering policyholder information, claims, medical data and social determinants of health. It also requires the ability to slice and dice the dataset and explore different customer segmentations. The second role is the ability to model the efficacy of interventions, and how this translates to changes in claims rates, claims costs, and impacts on reserves and capital. Again, this sits at the intersection of data science and actuarial modelling. The third and perhaps most distinguishing aspect is treating this process as a dynamic learning system. Efficacy data for interventions may be limited, especially for new intervention types, so new interventions often start out as pilot programmes. Decision science maximises the data and lessons from these programmes and feeds this back through the claims propensity and intervention modelling to refine and improve the models.
DECISION TIME
Stephen Carlin explains the concept of decision science, and how its use can benefit actuaries
D
ecision science is an interdisciplinary domain that brings together data science, machine learning and artificial intelligence, business context and subject matter expertise. It offers actuaries a framework with which they can leverage their unique and valuable skills, and an opportunity to take on new, influential roles to deliver better results for insurers and their customers. Crucially, decision science leads with the decision to be made, not the data or technology available. It also treats decision-making as a scientific process. Whether informed by data or intuition, decisions are built around hypotheses that can be tested, refined and improved. While data science and programming languages are key enablers, decision science goes further. It recognises that current approaches create siloes and leave gaps between data and the people who make decisions. For example: Starting with the data, rather than the decision, can lead to insights that are not actionable, or that have limited value A lack of domain expertise leaves room for misinterpretation of data, or the ‘discovery’ of insights that are already well understood Data may be imperfect or even biased, meaning expert judgment plays an important role Data, and the insights it delivers, are not static; taking an agile and iterative approach can refine analysis over time Key business decisions are often made on a recurring basis, but results are rarely monitored in a way that ties those decisions back into day-to-day actions.
Increasingly, big tech firms such as Google and many fintechs are appointing ‘head of decision science’ roles to plug these gaps. The ability to gather data, experiment and model scenarios, monitor results, and feed that information back into the decision-making process is how insurers can transform their decision-making so that it meets modern demands and opportunities. Actuaries can and will play a vital role here, due to their industry expertise and technical skillset.
IMAGE: ISTOCK
A use case For products such as long-term care or disability income, wellness and rehabilitation interventions could produce a win-win outcome, lowering claims costs for insurers while improving customer outcomes. The challenge is to design intervention packages that do the most good for the best return on investment. Decision science plays three important roles here. 16 | THE ACTUARY | JANUARY/FEBRUARY 2022
16 decision time_The Actuary JAN FEB 22_The Actuary.indd 16
Decision science and actuaries It’s often said that actuaries are the original data scientists. Similarly, actuaries have a unique set of skills that lend themselves directly to the application of decision science: Domain knowledge, including a deep understanding of the decisions that insurers must make Experience and comfort working with a wide variety of data sources Increasing comfort with data science Experience and expertise with actuarial processes, including their advantages and inefficiencies, that decision science could leverage or improve on Recognition that data may be imperfect, and promoting a test-learn-monitor-iterate approach – familiar to actuaries from the actuarial control cycle. There are an incredible number of use cases for decision science within insurance, including pricing, go-to-market decisions, sales and distribution analysis, and claims interventions. Combining actuarial skillsets with the granular and effective insights provided by decision science, actuaries can deliver value beyond traditional compliance-oriented roles. Instead, they can apply their skills and time in strategic, commercial-oriented ways to improve business outcomes, process efficiency and results.
STEPHEN CARLIN is the UK customer success director and product owner at Montoux
www.theactuary.com
24/01/2022 17:39
Features Data science
IMAGE: GETTY
BUILT TO SKILL By embracing modern data science tools and techniques, actuaries can operate more efficiently, increase value and better manage risk, say Valerie du Preez, Xavier Maréchal and Anja Friedrich
www.theactuary.com
17-19 DATA_The Actuary JAN FEB 22_The Actuary.indd 17
T
oday’s actuaries have a unique opportunity. The huge increase in data generation, data capture and data storage, and the significant increase in available computing power, are leading insurance organisations to assess the additional value their data can bring, and the skills and technologies that can help them extract this value. With the rise of open-source execution environments, computational notebooks and off-theshelf end-to-end data science platforms, as well as accessible data science communities, programming is becoming more accessible and easier to use. Actuaries, who have professional business and risk management expertise and are proficient in working with data, can maximise the value of data. But what is our duty in identifying and seizing that opportunity, and how can we do it properly? JANUARY/FEBRUARY 2022 | THE ACTUARY | 17
24/01/2022 17:40
Features Data science
Why should actuaries care about data science?
42 opted to take part in the study. Responses from those who opted out included: data science was not their priority, their organisation or team was too small, or they did not have proper data. Despite various initial barriers (for example a reported lack of appropriate quality or quantity of data, a lack of internal expertise, or a lack of senior stakeholder buy-in), most respondents commented that their teams had embarked on a data science journey.
Actuaries combine subject matter expertise with analytical rigour. The current economic and pandemic situation, and other recent commercial, regulatory and statutory challenges, are prompting actuarial teams to use their skills to respond and adapt in new ways. Up-to-date skills, tools and technologies can help us focus on areas other than just turning the handle when calculating numbers. At a micro level, they could help us manipulate and use data in different ways, and make improved predictions. At a macro level, technologydriven changes have helped us automate various repetitive tasks, leaving more time for analysis and strategic decision-making. Actuaries have a societal and ethical duty to use data in a legal, secure, domain-appropriate and fair way, as well as to understand and communicate its limitations and associated practices. This requires a knowledge of data science that, as well as embracing the principles, helps to provide us with an in-depth understanding of its appropriate applications. We should prepare ourselves for future changes by learning new skills, proactively collaborating with other professionals and venturing into new areas.
Data science tools Except for two, all respondents’ teams were using R or Python (or both) for data science-related activities. Spreadsheets were still common for data checks and exploration. Most teams opted to use R when starting their data science journey, for example for preliminary data analyses and visualisation. Teams furthest along in their journey had embraced both R and Python for statistical modelling and machine learning, and Python for supporting integrated systems. We noticed that Python was rapidly closing the ‘use gap’ relative to R.
Reported data science use cases How are actuaries embracing data science? Last year, we conducted a benchmarking study to assess how actuarial teams are embracing data science. Of the 100 representatives we contacted, from teams at insurance organisations in the UK, South Africa, Switzerland, Belgium and Luxembourg,
Respondents commented that, in their wider organisations, data science was used across the insurance value chain; the actuarial teams mainly got involved with data science through traditional actuarial activities such as pricing, reserving, experience analyses and reporting. As with many other strategic decisions, the challenge
FIGURE 1: Data science use cases per line of business. These are responses to the question ‘Please describe how you are using data science or planning to use it in your function’, posed to actuarial teams. Pricing and reserving
Claim management and operations Underwriting/policy admin
Marketing and sales
100%
90%
Percentage of respondents
80%
70%
60%
50%
40%
30%
20%
10%
17-19 DATA_The Actuary JAN FEB 22_The Actuary.indd 18
pm
en t
ks tw or ne io n Ne w
bu s
in e
ss
rib ut st Di
de ve lo
g ar ge tin
se ell
Cu st om
s-s
er t
/u
p-
ke tin ar Cr os
m te d
se gm
ll
g
n en ta t Ta rg e
rw er cu st om w
at ed
Ne
to m
io
rit in
g
en t un de
an ag m
io n Sim
pl ifi
ed /au
Re te nt
pe ex al e/ ps
La
em
tu dy
ng
rie nc es
rti
n
dr aw ith P/ w PU
aim
18 | THE ACTUARY | JANUARY/FEBRUARY 2022
Re po
et ec tio
tio
dd
isa Fr au
pt im to
sm an ag
em en
io
n
nc y
n
ns effi cie
tio en ta
pe ra t O Cl
In -fo
rc es
eg m
xp er
M
or
ta li
ty i
m
pr ov em
en t/ l
on ge
vit
ye
Te le
Pr
m at
ici
ien ce
ng
ics
0%
Use cases
Life
Non-life
Composite
www.theactuary.com
24/01/2022 17:40
Features Data science
“Actuaries require a sufficient understanding of these skills and tools, and how they could form part of an effective, validated and controlled solution” for actuarial teams appeared to be in identifying how to use data science in a way that gave a better benefit-versus-effort outcome, compared to that achieved through traditional practices. From responses, we identified the following key criteria for successful use of data science techniques: Being able to identify and justify the appropriate use cases and necessary order of prioritisation Having ready access to a high quality and quantity of internal and external data Being able to fit and interpret models with better predictive power Being able to measure and evidence that the additional cost or effort to incorporate data science results in meaningful increased potential value compared to traditional practices (in other words, a higher benefit-versus-effort outcome). The takeaway was that actuaries and data scientists should identify, understand and answer to the business’s needs, rather than solely focusing on developing complex models or applying new techniques.
Justifying the need to embrace data science Many respondents said that the need to focus on regulatory, statutory or compliance-related activities left little room for, and in some cases negated the need for, innovation or upskilling in new techniques. Many also remarked that one barrier to adopting data science was a lack of appropriate skills. Where dedicated internal data science teams had been set up outside the actuarial team, there was limited expectation from the wider business that actuarial teams would perform data sciencerelated tasks outside of the traditional actuarial workflow. However, in these scenarios, actuaries were still often asked to contribute business and risk management expertise. The impact may be that actuarial teams’ tools and techniques may become outdated compared to those of innovative data science teams. This could lead to inefficient operating models, and collaboration challenges for actuarial and data science teams through mutual misunderstanding of each team’s discipline.
Adopting data science techniques in actuarial teams To overcome these challenges and reap the benefits of data science in insurance and wider fields, we need to update our methods and use emerging technological advances in an efficient and, where appropriate, risk-controlled way. We recommend actuarial teams identify an upskilling strategy that involves implementing new tools, techniques and skills across the data science pipeline, where appropriate. Examples of such opportunities may include: www.theactuary.com
17-19 DATA_The Actuary JAN FEB 22_The Actuary.indd 19
Business technical skills – the ability to identify and solve business problems better, more quickly and in a more controlled way, with a modern-day toolkit and in the context of understanding the business Specialist data management and storage – storing, accessing and integrating relevant data and model outputs securely and effectively Model building, machine learning and artificial intelligence – ensuring the choice of model is appropriate, and that the model’s output, impact and decisions can be validated, interpreted and communicated Visualisation and reporting – preparing powerful visuals and reports to support effective communication to various stakeholders Modern DevOps – controlled model deployment and maintenance to ensure the model is useable in the future, and that the next team using or taking ownership of the model understands how to maintain it Advanced data science risk management – model review, challenge and validation; identification and management of risks related to new techniques, including explainability, bias, fairness and so on; and the ability to use data legally and securely. The actuarial team will have an important role to play in solving critical business challenges if it can sufficiently upskill (both in principles and hands-on application) in the application of professional judgment when choosing, justifying, interpreting, validating and communicating the decisions and implications of a particular technique, model, tool or system. These challenges could be regulatory, statutory or compliance-related, or more strategic and value-seeking activities.
A unique opportunity We are not saying actuaries should become data scientists or that actuaries should hire or retrain for the sake of it. Rather, actuaries require a sufficient understanding of these skills and tools, and assess how they could form part of an effective, validated and controlled solution. This should go above just understanding the principles involved. It will involve some technical upskilling in more complex tools, and even knowledge beyond what is narrowly thought of as data science, data management, computer science and information technology. This could help ensure we don’t miss out on a strategic opportunity for our profession and our organisations.
ANJA FRIEDRICH is associate partner at Synpulse Schweiz AG
XAVIER MARÉCHAL is an actuary and CEO of Reacfin
VALERIE DU PREEZ is a senior consulting actuary and founder of Actuartech
A full report summarising the benchmarking findings will be available from info@actuartech.com JANUARY/FEBRUARY 2022 | THE ACTUARY | 19
24/01/2022 17:40
Evan Tanotogono discusses how a digital approach to product development could help drive up penetration in low-coverage markets such as Indonesia
20 | THE ACTUARY | JANUARY/FEBRUARY 2022
20-21 insurtech_The Actuary JAN FEB 22_The Actuary.indd 20
Introducing a better way of providing insurance requires getting rid of the old mindset. We need to go back to the heart of what insurance is – a product that brings value, improves lives and helps without any hassles. To make insurance products more
sellable, they must be repositioned so that they cater to people’s needs. A more holistic approach to health would deliver better value while saving costs. There are three big levers that insurers can use to optimise pricing: optimising claim flows through appropriate primary care, enhancing wellness, and digital-first marketing.
Primary care The essence of primary care is to optimise the claim process – providing optimised referrals to specialists or more advanced courses of care, without patients having to do the guesswork. Ideally, this would be done by GPs serving patients face to face. However, Indonesians sometimes skip this step and pursue what they think is best, which leads to inefficiencies. We can change this by integrating primary healthcare with digitisation, making healthcare processes more efficient. Patients often equate good medical treatment with expensive hospitals, without regard for what treatment they need – something primary carers would be able to advise on beforehand. For example, Indonesians often feel dissatisfied if they are not given medications – the word berobat, which in the Indonesian language literally means ‘to obtain medicine’, has been used by
IMAGE: SHUTTERSTOCK
I
t’s a concerning fact that penetration of private health insurance in Indonesia is very low (less than 5%). For a country with a large young population and a growing economy, where affording insurance should not pose an insurmountable hurdle, it’s worth asking why. Indonesians don’t buy insurance because they feel they are not getting the best value for their money. While many have the purchasing power to afford insurance, around six out of 10 Indonesians still think it’s too expensive and complex. Providing insurance is complicated – from modelling its prices to marketing a counterintuitive product (pay a part of your income now for something you hope won’t happen later). Every step, from product creation to sales, is challenging. When we look at how insurance is done, there are three main issues with conventional models: 1 Using high-touch distribution to address low penetration: Companies address the low insurance appetite using high-touch marketing, spending a fortune on hiring agents and conventional distribution channels, which drives prices
up. In turn, insurance companies must enrich their product specifications, sometimes with gimmicks, to justify their pricing and model. This makes the products more complex and expensive. 2 Non-streamlined health claim flows: There are many inefficiencies in the insurance claim process. Policyholders often don’t know how best to pursue healthcare, adding to extra costs. Additionally, hospitals fail to optimise services where an insurance claim is made, a problem exacerbated by the tedious process. To make up for costs and time, insurance companies are forced to create products with higher price buffers. 3 Limited attention to wellbeing: Health is not a priority for most. People often choose short-term pleasure over long-term health effects, or brush symptoms of illness off as something for later. As a result, health claims are often made at a stage where illness is severe and costs are expensive.
www.theactuary.com
24/01/2022 17:41
Features Technology
with digital technologies to gain 360-degree view of patients. This leads to better diagnoses and recommendations for users.
Indonesians to describe a doctor’s visit. This mindset leads to over-prescription. Other issues, such as unstandardised treatments from providers, worsens the issue. Insurance companies are forced to spend on excessive costs, which drives insurance prices up and does not serve the saleability of the products. This problem can be solved via digitised primary care, standardising the process while saving costs and time for patients and insurers alike. This would include: Artificial intelligence-assisted teleconsultation: Artificial intelligence can minimise repetitive questions and translate patients’ complaints to symptoms that are understood by doctors, leading to faster and more standardised treatment. Standard protocols: Using technology, there can be set rules for triage, prescription, dosage of medication, and monitoring important metrics such as prescription rate and basket size – this optimises treatment and allows for data-driven improvements.
Wellness Research shows that the mathematics of non-communicable diseases (NCDs) are driven by simple metrics: body mass index (BMI), fat, sugar and blood pressure. These metrics can reliably tell how prone an individual is to NCDs and their overall risk. The healthier somebody’s BMI, the less likely they are to be admitted to a hospital – and even if they are, they will spend fewer days there and incur fewer expenses. It is therefore in the interest of insurance companies to incentivise people’s health. It’s basic behavioural economics: burn some amount upfront; save more later. This new targeting strategy requires insurers to create better value for money by managing premiums that are still attractive to healthy individuals. After all, healthy people are less likely to feel they need insurance, and expect to be differentiated. The model in Indonesia incentivises the unhealthy to buy, as they can do so at roughly the same price as a healthy person. An insurance that can entice more healthy people to join would enjoy a healthier pool and lower risk, which leads to affordability.
There are two challenges in implementation. First, there needs to be a balance between creating something convenient for users and controlling costs, because it takes a lot of work to create digital primary care products that users are comfortable with. Second, the product needs to be trustworthy. Since digitised care offers users a different path than what is conventionally seen as ‘best’, digital care service providers need to make a compelling case that it would offer efficient and effective health outcomes. The key to resolving these issues is data analytics. By keeping and analysing patients’ electronic health records, digital care service providers can help primary doctors working
“Done properly, digital marketing can deliver returns that improve over time, instead of stagnating”
FIGURE 1: Gross written premiums over total digital marketing spend. 500% 400% 300% Product launched 200% 100% 0% Ist
2nd
Source: Indonesian digital insurance internal data (sanitised).
www.theactuary.com
20-21 insurtech_The Actuary JAN FEB 22_The Actuary.indd 21
3rd
4th
Trimester
5th
6th
Digital-first marketing plays a big role At some point, Indonesia’s leading health and life insurers became convinced that insurance is a product that needs a push to sell, and so cannot be sold digitally – and that even if it was, sales would be difficult and returns low. This has since been proven wrong. What an insurer needs to sell a product is simple: a saleable product. They also need to do digital-first marketing properly. Note that this is digital-first, not digital-only; insurance providers still need an omnichannel approach, but it would be spearheaded by digital interactions. What people get wrong about digital marketing is they think it is like marketing via a billboard: plan once, prepare relevant assets, put it on digital ads and pray for conversion. Then comes the monthly review, where, unsurprisingly, results are disappointing – and management concludes that digital marketing doesn’t work. To market digitally, you need to do a lot of A/B tests and micro-segmentations to see what works best. You also need to bear in mind that insurance has a long purchase funnel, meaning insurers need to tag strangers and have proper behavioural analytics. Retargeting and lookalike marketing are key here. Done properly, digital marketing can deliver returns that improve over time, instead of stagnating in a ‘billboard mentality’. Insurance providers must adopt the view that digital marketing is an evolution of thought. Continually improve your strategy and your sales will improve, too. Insurance is not an easy business, but it can be made easier if insurers pay attention to the right EVAN things. By integrating TANOTOGONO proper primary is CEO and cofounder of Rey, a care, wellness new health, life and digital-first marketing, insurance and critical illness insurtech in providers can solve Indonesia major issues in traditional insurance, and drive sales and penetration. This is what insurers should aim to deliver: better value for customers. JANUARY/FEBRUARY 2022 | THE ACTUARY | 21
24/01/2022 17:41
Features General insurance
P
rice walking is when a company continually increases prices on renewal for loyal customers. As a result, long-term customers pay ever-increasing margins that end up being higher than those paid by newer customers. Price walking may also sometimes be accompanied by some form of unscrupulous behaviour – insurers might make it difficult for customers to decline a renewal, or to find out what price they would be offered if they were a new customer. As margins continually increase, the most loyal customers are the most disadvantaged – something confirmed by the Financial Conduct Authority’s (FCA) in-depth study of the UK market. Price walking is not the same as a price increase on renewal. It is not price walking when a price needs to rise on renewal but the margin remains reasonably constant. If the price rises on renewal due to a one-off need to increase margin for some genuine reason, this is also not generally considered price walking. Price walking is when margins are systematically stepped up at multiple renewals.
The impact of price walking Some people consider price walking the natural consequence of a competitive market, and there is good reason to believe that this is the case – particularly in hyper-competitive commoditised markets such as UK car and home insurance. When companies are forced to, or choose to, compete on price, and they sell products that have some form of repetitive future element, it is natural to offer the lowest possible initial price; future repeat business should, on average, at least cover the cost of customer acquisition and initial incentives such as discounts. Over time, many companies will find that they must adopt this behaviour to attract customers in the main part of the market. In the most commoditised segments of the market it becomes the dominant, and possibly only, pricing strategy. Offering a price that is higher than the competition’s at new business, for what is generally a similar product, will not generate sales, so companies seek ways to
lower and lower the new business price in order to gain customers. To generate margins, they become reliant on the customers who stay with them and renew at higher prices. Conversely, this could be good for customers who are willing and able to shop around each year, as they are likely saving money year after year by getting the absolute best deals they can.
Price walking and regulation The FCA’s study found that six million policyholders paid prices that were more than 50% above the average of a cohort with similar risk characteristics. There was a reasonable correlation between higher prices and how many times a customer renewed with the same provider. The excess amount above the average paid by these consumers totalled £1.2bn. Other countries have come to similar conclusions and taken steps to improve customer outcomes (Table 1). Common regulatory strategies include: Requiring insurers to explain how their premiums are calculated, and common reasons for increases Mandating a breakdown of the premium to customers, showing how much is paid for each element. This could be for different covers, or perhaps even different perils Insisting insurers publish rating factors and segmentation in a way that is accessible to customers Standardising definitions and products across multiple providers – in other words, the regulator decides what should be in a policy for it to be acceptable for consumers Releasing complaints information showing the common causes of customer dissatisfaction with different providers.
The FCA’s new approach The FCA has brought in rules to deal with price walking that have not been tried anywhere else. Of particular interest to actuaries are the Pricing Remedy and the Reporting Remedy.
mean plains s e l u r g walkin y Keating ex e c i r p w A’s ne ustr y? Jerem C F e h t l d il W h a t w K i n s u r a n ce i n for the U 22 | THE ACTUARY | JANUARY/FEBRUARY 2022
22-23 price walking_The Actuary JAN FEB 22_The Actuary.indd 22
24/01/2022 17:42
Features General insurance
IMAGE: ISTOCK
TABLE 1: How countries are approaching price walking.
APPROACH
COUNTRY
Explanation of premiums
Ireland, Australia
Premium breakdown
Ireland
2022 to 30 June 2022). After this, the reports will be for whole calendar years and must submitted by 31 March the following year. The FCA has said that it will review the reports and attestations closely, and plans to work with firms to ensure compliance.
Published rating factors
Belgium
Will the remedies work?
Standardising definitions and products
Australia
Releasing complaints information
Italy
The remedies and the FCA’s actions will cause firms to change their behaviour, and will make it extremely difficult for price walking to continue. We should expect that, when business decisions are made, thought will be given to their impact on the attestation and reports. Some firms may run off their business due to an inability to compete for new business, but there may also be new entrants, unencumbered by existing renewals. The FCA is signalling a more interventionist approach to general insurance, especially in pricing, and in future it may be normal for pricing teams to need individuals with both pricing and compliance experience. The FCA may also roll out these reforms to other areas of general insurance, such as commercial business. We should expect financial regulators in other countries and other industries to adopt similar approaches, especially those that are perceived to have similar issues with price walking.
The Pricing Remedy, which came into effect on 1 January 2022, means renewal prices cannot be higher than new business prices (they can be lower). The FCA also requires an annual attestation from all firms involved in setting prices for consumer motor and household insurance. At each attestation, a company leader must state adherence to these rules personally. The leader needs to be a senior member of the organisation, for example the chief executive or chief underwriting officer. The Reporting Remedy requires motor and household insurers and intermediaries to submit annual reports to the FCA, showing customer outcome metrics by tenure. This is the most granular regular reporting ever required by the FCA directly on customer outcomes in general insurance. On the surface it appears the reports should be of items that are already being monitored, but firms are likely to have to build new reports because the FCA requires items to be assessed in novel and uncommon ways. The first report needs to be submitted to the FCA by 30 September 2022 and must cover the first six months that the new rules are in effect (1 January
JEREMY KEATING is an underwriting data expert at errars.com
22-23 price walking_The Actuary JAN FEB 22_The Actuary.indd 23
24/01/2022 17:42
Features Health
I
n recent years, the healthcare industry has witnessed significant growth in the use of electronic health records (EHRs); in the US, the proportion of non-federal acute care hospitals using least a basic EHR system increased from 9.4% to 83.8% between 2008 and 2015. Government agencies are also recognising the value of EHRs: in 2014, the Indian government introduced a uniform system for the maintenance of EHRs by hospitals and healthcare providers across the nation, and the Indian insurance regulator has expressed its hopes that EHRs will benefit the industry. EHRs provide an integrated, digitised view of patients’ medical records, capturing patients’ health conditions over time and enabling the secure exchange of information between authorised providers. Good EHRs are expected to contain patient demographics, allergies, clinical notes and diagnoses, diagnostic imaging reports and radiology images, lab and test results, administrative and billing data, regulatory compliance and legal permissions. Most importantly, they should allow data compilation for research and analysis, and provide time efficiency.
their health condition, makes it easier to control their health status, and enables better self-care, greater empowerment and easier communication with health care providers. EHR data analytics also enhances disease management. Predictive modelling using EHR data can help estimate clinical outcomes such as mortality and re-admission probability. It can identify higher risk lives and hence enable preventative care for such lives. Population studies based on EHR data can help to predict disease progression by the type of condition, and thus aid disease management.
EHRs, artificial intelligence and machine learning The broad adoption of EHRs presents a huge opportunity for the application of artificial intelligence (AI) and machine learning (ML) techniques. Meaningful analysis of clinical notes can be performed with the help of natural language processing techniques, which analyse unstructured data and obtain meaningful information from the notes. Deep neural networks such as convolutional neural networks (CNNs) can be used in radiology image classification.
Core benefits
Structured and unstructured data
EHRs help to improve the quality of care provided by offering quick access to patients’ records and improving patient-physician communication. They can also improve co-ordination and resource planning, for example by avoiding the ordering of duplicate tests – saving costs for hospitals, patients and insurance companies. EHR systems are also shown to provide higher patient satisfaction. The biggest benefit here is experienced by patients with complex, long-term or chronic conditions. A Norwegian survey (bit.ly/NorwayEHRs) on patient-accessible EHRs has shown that most respondents think EHR data provides enhanced knowledge of
MIMIC-III is a large, freely available database of de-identified health-related data relating to patients who were admitted to critical care units at a large tertiary care hospital between 2001 and 2012. It contains both static and longitudinal structured data and sequential unstructured data. Static structured data includes demographics such as gender and marital status. Temporal data includes: Structured: vital signs, pulse, systolic and diastolic blood pressure, and many clinical test results Unstructured: sequential unstructured clinical notes.
ELECTRIC DREAMS
Applying machine learning techniques to electronic health records could revolutionise healthcare and insurance, say Atreyee Bhattacharyya and Kanishka Jindal www.theactuary.com
24-26 EHR_The Actuary JAN FEB 22_The Actuary.indd 24
24/01/2022 17:42
Features Health
In a 2020 study, structured and unstructured data from the dataset was combined directly through multi-modal deep neural networks for learning patient representation (bit.ly/CombiningDL). The resulting model was used to predict patient outcomes such as mortality, length of stay and re-admission. The models were based on fusion CNN and fusion long short-term memory, which can have general broader applications without requiring domain knowledge. The results showed that by combining unstructured clinical notes with structured data, the proposed models outperformed models that use either unstructured notes or structured data alone.
Machine learning versus logistic regression Rajkomar et al. performed a study that incorporated the University of California’s entire EHR from 2012 to 2016 and the University of Chicago Medicine’s EHR from 2009 to 2016 (go.nature.com/3nlQWqR). Both of the datasets contained structured data, and one also included free-text medical notes. Three models were built – the first based on recurrent neural networks, the second on a tri-attention neural network, and the third on a neural network with boosted time-based decision stumps. The results from these models were combined using ensembling. For prediction of inpatient mortality, the area under the receiver operating characteristic (AUROC) of this model was significantly higher than the AUROC of a traditional predictive model (in this case, a 28-factor logistic regression model). The models also outperformed existing traditional models for predicting re-admission and length of stay.
www.theactuary.com
24-26 EHR_The Actuary JAN FEB 22_The Actuary.indd 25
JANUARY/FEBRUARY 2022 | THE ACTUARY | 25
24/01/2022 17:42
Features Health
“ML models were able to identify which predictors to include for a particular prediction without hand-selection of variables by an expert” particular health conditions. This can help to improve predictions of expected costs of future claims for both health and life insurers, and thus lead to better claims management. Understanding of disease progression should help in the development of disease management tools, which could reduce claims cost.
Challenges and considerations
Crucially, the datasets had tens of thousands of potential predictor variables for each patient, including clinical notes, but the ML models were able to identify which predictors to include for a particular prediction without hand-selection of variables by an expert.
Explanations Lauritsen et al. developed xAI-EWS – an explainable AI model with an early warning score system that predicts acute critical illness using EHRs (bit.ly/ExpAI_EHR). The model comprised a temporal convolutional network prediction module and a deep Taylor decomposition explanation module, tailored to temporal explanations. xAI-EWS was able to explain how the prediction outcomes are driven by specific input variables, which helped clinicians to understand the reasoning behind the predictions.
IMAGES: ISTOCK
What’s in it for actuaries? In life and health underwriting, EHRs provide a quicker and easier process than obtaining an attending physicians’ statement, thus resulting in lower underwriting costs. Data analytics and predictive modelling can be used to produce a risk score on which underwriting loadings could be based. Automated underwriting through a rules engine should allow automatic acceptance and decline for the super healthy/super unhealthy lives. When it comes to pricing, EHR data can accurately predict hospitalisation and thus the expected cost of future claims for health insurance. This is particularly important where past claims data is sparse or not available – for example for new business. Researchers at Atrius Health found that, using patients’ demographics, past use of health facilities, medical diagnoses and medications, they could accurately predict hospitalisation in the next six months. Models using EHR-only and claims-only data had similar predictive power. Additionally, longitudinal population studies based on EHR data can improve the existing understanding of the progression of 26 | THE ACTUARY | JANUARY/FEBRUARY 2022
24-26 EHR_The Actuary JAN FEB 22_The Actuary.indd 26
EHRs could revolutionise insurance underwriting and healthcare analytics, but critical obstacles remain relating to their privacy and security. There is continued demand for assurance that patients’ records are securely protected. Due to the data’s sensitive nature, EHRs are governed by strict government privacy laws such as the Health Insurance Portability and Accountability Act in the US and the Data Protection Act in the UK. These have important implications for actuarial access. EHRs also have challenges in their implementation. There is currently no single format for EHR data, which reduces its ease of use for actuaries. The cost to insurers of piloting and implementing an EHR system is also significant. Insurers can have access to EHR data through vendors (who obtain data by logging into a patient portal), or through ATREYEE aggregators (which allow acquisition of BHATTACHARYYA applicant-authorised EHRs from multiple is an associate vendors). However, the information director at Willis available to insurers on these portals is often Towers Watson in less than the full EHR. Current hit rates on London, and chair EHRs for insurance applicants are still low, of the AI and although this is expected to increase. Wide Automation Working Party access to EHR data for actuarial or underwriting purposes, however, depends on challenges around data security and standardisation being overcome. Although work is ongoing in these areas, uncertainties remain, and widespread access should only be expected in the near to mid-term future. As use of EHRs matures across the globe, KANISHKA they will be very useful for patients, JINDAL is an healthcare professionals and insurers. The actuarial manager future lies in the development of flexible at Munich Re in Mumbai, and a factor-based architectures that can operate member of the AI effortlessly within the workflow of a and Automation healthcare environment. EHR data Working Party combined with the emergence of genomic data is opening up the potential for precision healthcare and personalised medicine. However, the challenges around ease of access, interoperability, low hit rates and so on need to be addressed before the full benefits can be realised. www.theactuary.com
24/01/2022 17:42
Sponsored survey IFRS 17
IFRS 17 PREPAREDNESS REPORT:
EXECUTIVE SUMMARY The Actuary and Moody’s Analytics conducted a survey to seek actuarial practitioners’ views on IFRS 17 preparedness The IFRS 17 preparedness survey was carried out in Q2 2021 and explored several key areas of methodology, aiming to capture a sense of the progress made on implementation. Highlights from the report, including some comparisons to the Q2 2020 survey, are noted here.
of respondents envisage using liquidity buckets – the discount curve should reflect the characteristics of the insurance contract, and liquidity buckets provide one way to do this. Perhaps the approach to classification is deemed too subjective or firms are adopting a similar approach to the volatility adjustment under Solvency II (currently under review).
Risk adjustment IFRS 17 allows for different approaches in risk adjustment (RA) calculation, and this has been refined since last year’s survey. With parallel reporting looming, one third of respondents have still not finalised their methodology choice. Of those that have, the cost of capital remains most popular for general insurers; in a change from the margins/ provisions for adverse deviation last year, Value at Risk is most popular for life insurers. Most respondents will calculate the RA off-cycle, or off-cycle with some form of approximation. This suggests firms are considering IFRS 17 in the context of the wider reporting cycle and are planning to leverage existing processes.
Discount rates IFRS 17 allows for two approaches to yield curve construction and discounting: top-down and bottom-up. The results suggest we will see both in the first set of financial statements published under IFRS 17. However, the bottom-up approach (where the discount curve is constructed by adding an illiquidity premium onto the risk-free curve) is most popular, with two thirds of participants choosing it. Given the bottom-up approach’s popularity, it is surprising that only a quarter
27 moodys_The Actuary JAN FEB 22_The Actuary.indd 27
Contractual service margin The contractual service margin (CSM) is a complex part of the calculation under IFRS 17, and a consensus has not been reached on several aspects. One important area is coverage units where there is still uncertainty around the appropriate definition for many products. Another important area is contract grouping, where most firms intend to have additional CSM groupings beyond the level at which the CSM is calculated to support internal management reporting.
Implementation planning Many firms expected to make significant progress over 2021, but this has not materialised. Firms are at a similar stage to last year regarding end-to-end dry runs, producing business plans under IFRS 17 and reporting sensitivity analysis. This suggests implementation has been harder than expected, or that the IFRS 17 delay was used to re-plan and revisit methodology, calculation and implementation decisions rather than push ahead, or that COVID-19 delays were greater than anticipated.
Transitional measures Firms are finding more barriers to implementing the full retrospective approach and are opting to use the modified retrospective and fair value approaches.
Business readiness and concerns There is more detailed consideration of actuarial cash flow models, with many firms indicating that more dramatic changes are required than were expected last year. This year, many more opted for outsourced or vendor-packaged solutions over in-house solutions, again suggesting implementation has been harder than anticipated. Concerns remain in areas such as reinsurance, coverage units and interim financial reporting.
Accounting Respondents offered useful insights on calculation and consolidation challenges, frequency of reporting and disclosures. Firms experience foreign exchange challenges. They also face challenges such as dual CSMs driven by different assumptions, intercompany transactions and contract grouping. Respondents with more than one consolidation level prefer the step-by-step approach over the direct approach. Most plan to use a thin general ledger approach, with the detailed calculations for IFRS 17 being produced in a subledger or actuarial system. Many of these challenges require more granular calculation and reporting systems that can consolidate on multiple levels. To access the full IFRS 17 Preparedness Report from The Actuary magazine and Moody’s Analytics, please go to theactuary.com/2022/01/21/ ifrs-17-preparedness-report We hope you find this report insightful. Please contact Moody’s Analytics representatives for more information.
Sponsored by
25/01/2022 10:01
Features Health
A DUTY OF CARE
O
n 24 July 2019, in his first speech as prime minister, Boris Johnson could not have been clearer about his intention to find a solution to one of the great issues in our society: “I am announcing now – on the steps of Downing Street – that we will fix the crisis in social care once and for all, with a clear plan to give every older person the dignity and security they deserve.” This was a bold pledge: for decades, the issue of fixing social care in England and Wales has proved too big and difficult to resolve for both Labour and Conservative governments. Ending the worsening scandal of care service under-provision is one of the most expensive of promises to deliver.
000086000
Colin Redman takes a look at the UK government’s plan to fix social care, and the role actuaries can play in helping to solve the issue 28 | THE ACTUARY | JANUARY/FEBRUARY 2022
28-30 social care_The Actuary JAN FEB 22_The Actuary.indd 28
www.theactuary.com
24/01/2022 17:43
Features Health
“In real terms, government expenditure on adult social care is still significantly lower than a decade ago, despite the growth in the elderly population”
IMAGES: SHUTTERSTOCK
The crisis in care Total government expenditure on adult social care fell between 2009 and 2014; levels have subsequently recovered, but in real terms they are still significantly below those of a decade ago, despite the growth in the elderly population. Past chronic underfunding has produced a chasm of unmet need. Local councils have tightened their eligibility criteria since 2010 in response to deep cuts to their budgets from Whitehall; consequently, 1.6 million people aged 65 and over do not receive the care and support they need, according to Age UK. As a nation, we are increasingly reliant on unpaid carers – 5.4 million of them. They are mostly spouses and daughters, but also sons, neighbours and friends. It is essential we recognise their contribution and their need for support. The sector is under enormous pressure. Working conditions for care workers are poor, which results in high levels of staff turnover – reaching up to 40% in some areas. The salaries of the country’s 1.5 million care workers are low, with most earning at or just above the minimum living wage (£8.91 per hour). According to researchers at Skills for Care, there is a recruitment crisis – there are “more than 100,000 posts with no-one to fill them”. Care companies are being forced to turn down work to support patients as they move from hospital back to their own homes or care homes. Many patients www.theactuary.com
28-30 social care_The Actuary JAN FEB 22_The Actuary.indd 29
end up staying in hospital longer, putting more pressure on an NHS that is already struggling with COVID-19 and waitinglist backlogs. Domiciliary care in some areas is collapsing. Underlying inequalities between those on lower incomes and the well-off, and large regional differences in the delivery of services, are further problems that need to be tackled.
The white paper and the plan to reform social care In December 2021, the government published a white paper on reforming social care. Its vision of choice, control, quality, fairness and accessibility was generally welcomed. To help pay for social care reforms and provide more funding for the NHS, the government is introducing a new tax – the Health and Social Care Levy – which is expected to raise £30.3bn during the next three years. However, only £5.4bn of this will go to adult social care; much of this extra funding will be used to pay for the new care cap of £86,000 and the introduction of a more generous means test. These reforms will reduce the contributions many have to pay for care, and are welcome, but social care will get very little extra money to deal with
the problems that have been caused by past and current underfunding. A significant concern is that the division of the income from the Levy, which is heavily weighted towards the NHS for its first few years, will continue that way for the longer term, and that social care reform will therefore suffer.
How much will it cost to fix social care? Will the government’s plan “fix the crisis in social care once and for all”, as Boris Johnson pledged? The answer is no – not unless a firm commitment is made to provide sustainable funding at the level required to bring about real change. The Health Foundation, an independent charity, has produced an estimate of what it would cost to fix the crisis in adult social care. Based on their projections, there will be a £7.6bn shortfall in funding in 2022/23, rising to £9bn in 2024/25; this could amount to £14.4bn by 2030/31. This extra money will be needed to meet the expected growth in demand from an ageing population, deal with unmet current demand, and improve care workers’ pay and conditions.
Finding the money How do we find this extra money? What mix of taxation, insurance and payments for care would be fair? One option is to allocate the income from the Health and Social Care Levy (expected to raise around £12bn per annum when fully implemented) to meet the whole of the social care shortfall. This would result in a very high proportion of the Levy being allocated to social care, with little available to support the NHS. There are alternatives if only part of the shortfall is funded by the Levy, as is currently envisaged. For example, the Health and Social Care Levy could be developed and expanded into a national compulsory insurance scheme, as JANUARY/FEBRUARY 2022 | THE ACTUARY | 29
24/01/2022 17:43
Features Health
is the case in Germany. Or lessons could be learnt from Japan, which funds its system through a mixture of social insurance contributions that are paid by everyone from the age of 40, employer contributions, general taxation, and co-payments from those accessing the services. Some insurance could be provided by the financial services industry to complement state and personal provision. In the past, funding shortages have been solved via short-term cash injections and reprioritisation of existing funding. These measures solve immediate problems, but by their very nature they are not sustainable. Effort needs to be put into developing a mix of complementary long-term funding solutions that spread the burden of cost fairly between individual and state, between those who are well off and those who are on low incomes, and between generations.
“Properly funded social care will help improve the health, wellbeing and standard of living of all those involved, and will reduce the burden on the NHS” Is fixing social care practical and affordable? There is a body of opinion which says that the problems of social care are too difficult to solve, and that the costs of doing so are unaffordable – but the impact of a failing care service cannot be justified, with so many people currently deprived of the care and support they need. It boils down to priorities. The shortfall in social care funding is tiny compared to the UK’s total GDP of around £2,150trn. It is also small in relation to the total managed expenditure of the government, which was more than
THE ROLE OF ACTUARIES The challenges facing social care are significant, and it will take creativity and commitment to overcome them. Actuaries can play a vital role in helping develop sustainable methods of paying for care that will stand the test of time. The IFoA Health and Care Board has recognised social care as a key theme in the current session, and a working party has been established to conduct research. This will only be successful with the help of more committed and passionate volunteers. If you have an interest in social care and would like to contribute, please make contact via Caroline Winchester at the IFoA.
30 | THE ACTUARY | JANUARY/FEBRUARY 2022
28-30 social care_The Actuary JAN FEB 22_The Actuary.indd 30
£1,050bn in 2020/21. Annual expenditure on the NHS and social care combined is around £160bn, so an extra £9bn (5.6% of the total) for social care seems possible. We can afford to pay the price if we really want to fix the problem. Paying more for social care should not be viewed as a cost to society – it should be seen as an investment in its people. Most of the extra cash would benefit those most in need in our community – people who receive care, unpaid carers and the low-paid who provide formal care. Properly funded social care will help improve health, wellbeing and living standards for all those involved, and will reduce the burden on the NHS. It is arguably the biggest single action the government could take towards its objective of ‘levelling up’. Additionally, those who need care and who provide care would have their lives enriched. Care workers would spend COLIN REDMAN is a member of the their extra earnings, IFoA’s Health and creating new jobs, Care board increasing tax revenue and reducing their dependency on other benefits. It represents good social policy and good economics. www.theactuary.com
24/01/2022 17:43
Features Modelling
TAKING SHAPE B
rownian motion has many uses in actuarial work, but stochastic models based upon it can be complex and difficult to replicate. By their nature, Monte Carlo scenarios start from a common point but end in random places. We show how to construct paths that are similar to Brownian motion, using a deterministic method that is simple and easily replicated, and which has end points that a user can choose. Applications include the assessment of Value at Risk for dynamically hedged portfolios. Dynamic hedging is a technique for reducing market risk exposure when an insurance product embeds financial options or guarantees. Firms rebalance their portfolios many times a year – perhaps monthly, weekly or daily. The high frequency of hedge trades sits uneasily in a regulatory capital regime that is based on a one-year horizon. Expressing stress tests over a one-year period requires assumptions about asset price paths within a year and hedging operations over smaller intervals. The most important attributes of price paths in relation to hedging are well understood. The start point and end point matter, of course. In addition, a key determinant of hedge performance is the realised volatility of the underlying asset, as this affects the magnitude of typical hedge trades and the impact of the convexity (also called gamma) in option prices. We might, for example, wish to construct a path in which an equity market falls by 40% over a year, and in which the realised volatility is 30%.
Andrew Smith and Oliver Bentley share their ‘Brownian blancmange’ fractal, and how it can be used in hedging
Suppose an asset has log price x(t) t for times 0 t 1, and let n be a positive integer. The realised volatility, , of the log asset price is defined as the estimated standard deviation per unit time – that is:
IMAGES: GETTY
Realised volatility
JANUARY/FEBRUARY 2022 | THE ACTUARY | 31
31-33 Fractals and hedging_The Actuary JAN FEB 22_The Actuary.indd 31
24/01/2022 17:44
Features Modelling
Brownian blancmange We propose a new fractal curve, Brownian blancmange, for interpolating stress tests. It is Brownian because the fractal resembles a Brownian path, and it is blancmange because the fractal satisfies a self-similarity property which is similar to that defining Takagi’s blancmange fractal. Brownian blancmange is not stochastic and is zoomable, meaning it is easy to calculate points in any time order and at any resolution. This contrasts with Brownian motion and more general processes from economic scenario generators, which are simulated with increasing time and at a preset time spacing. The idea is to start with a discrete random walk on the (n+1) time points t = 0, t = 1/n, t = 2/n ... t= 1. To keep unit variance per unit time, the steps in that random walk must be ±n-1/2 with equal probability. Our trick is to make Brownian blancmange a random walk path simultaneously for many different scales. If we have a random walk with n steps, we might hope to break each step into two or three sub-intervals, consistent with a 2n-step or 3n-step random walk. Unfortunately, this fails, because there is no way to express one increment of n-1/2 from two increments of size ±(2n)-1/2. We can, however, decompose one step of size n-1/2 into one step of –(4n)-1/2 and three steps of +(4n)-1/2. Starting with n = 1, we can then develop a function that is a random walk path when n is any power of four. Figure 1 shows just one of eight good ways to refine the random walk paths, which we call Pattern 1A. For large n, the nested discrete random walks converge to a continuous path, which is Brownian blancmange. Figure 1 also highlights the division into 12 intervals, corresponding to hedging at monthly intervals. While the Brownian blancmange path represents only a single scenario, it is representative of all random walk paths in the sense that it has a realised volatility of 1, for a range of values of n including whenever n is a power of two, or thrice a power of two. If we want, for example, to create log asset price paths with a realised volatility of 30%, we can take pattern 1A, multiply by 0.3 (or -0.3), then add a linear trend to fit the chosen start and end points.
FIGURE 1: Approximating Brownian blancmange with random walks. 1.5
Pattern 1A: n=4 1
0.5
0
-0.5
-1 0
0.25
0.5
0.75
1
0.5
0.75
1
0.5
0.75
1
0.5
0.75
1
1.5
Pattern 1A: n=16 1
0.5
0
-0.5
-1 0
0.25
1.5
Pattern 1A: n=64 1
0.5
Computer implementation Brownian blancmange satisfies a self-similarity property, which we can exploit to create compact code. The following function in Visual Basic computes pattern 1A:
0
-0.5
Function Blancmange1A(t As Double) As Double If t <= 0 Then Blancmange1A = 0 ElseIf t >= 1 Then Blancmange1A = 1 ElseIf t < 0.25 Then Blancmange1A = 0.5 * Blancmange1A(1 – 4 * t) - 0.5 ElseIf t < 0.5 Then Blancmange1A = -0.5 * Blancmange1A(2 – 4 * t) ElseIf t < 0.75 Then Blancmange1A = 0.5 * Blancmange1A(4 * t – 2) Else Blancmange1A = 0.5 + 0.5 * Blancmange1A(4 * t – 3) End If End Function 32 | THE ACTUARY | JANUARY/FEBRUARY 2022
31-33 Fractals and hedging_The Actuary JAN FEB 22_The Actuary.indd 32
-1 0
0.25
1.5
Pattern 1A: n=∞ 1
0.5
0
-0.5
-1 0
0.25
24/01/2022 17:45
Features Modelling
FIGURE 2: Hedging profit as a function of year-end price of the underlying asset. Implied volatility = 20%. Realised volatility = 30%. 0
Net hedging profit
Pattern 1A is one of eight Brownian blancmange patterns. We label them 1A, 1B, 2A, 2B, 3A, 3B, 4A and 4B. The initial number indicates the quarter in which the fractal falls by ½, with rises of ½ in the other three quarters. The final letter describes the changes over the six periods of two months (A = two periods of no change, one -½ and three +½, while B = five periods of no change and one +1). An Excel workbook illustrating all eight fractals and the Visual Basic for Applications code necessary to generate them can be found at github.com/AndrewDSmith8/Fractals-and-Hedging. With it, readers can easily confirm that the realised volatility is indeed 1 when n is a power of two or thrice a power of two.
-1
-2
-3
Stress tests and hedging example Consider a firm writing a guarantee on an underlying asset whose initial value is 120, with a strike of 100 and a two-year term. The guarantee is delta-hedged four times a month – that is, 48 times during the year. To calculate the option value (and the delta), the firm uses an implied volatility of 20%. The hedge profit is the gain on the hedge over a one-year horizon, minus any increase in the option value according to the Black-Scholes formula. The year then turns out to be unexpectedly turbulent, with realised volatility of 30%. We consider 16 asset price paths, consisting of the eight Brownian blancmange patterns, multiplied either by +0.3 or -0.3 to achieve the 30% realised volatility, then exponentiated (Figure 2). All 16 paths show a hedge loss because the realised volatility exceeds the implied volatility so that, with hindsight, the guarantees were underpriced. For a fixed realised volatility, the losses are most severe when the underlying asset ends the year close to the strike, because this is where the convexity of the option most amplifies the gap between implied and realised volatility. If we reset the realised volatility to be equal to the implied volatility of 20%, then the hedge profits move close to zero (regardless of year-end asset prices). That represents a benign base case rather than a stress test for the hedging exercise. When implied and realised volatilities coincide, the hedge should, in theory, work perfectly with sufficiently frequent trading. This illustrates another use of Brownian blancmange, which is to assist with the testing of hedge coding. While the realised volatility and the year-end price of the underlying asset are the most important drivers of hedging profit, the range of results between the 16 paths shows that other aspects of the paths also matter. The yellow curves correspond to price paths that spend most of their time during the year above the average of the start and end points – so in the case of low year-end values, these paths have spent more time near the strike, where the
“Brownian blancmange is not stochastic and is zoomable, meaning it is easy to calculate points in any time order and at any resolution” www.theactuary.com
31-33 Fractals and hedging_The Actuary JAN FEB 22_The Actuary.indd 33
-4 40
60
80
100
120
140
160
180
200
Year-end price of underlaying asset convexity is greatest, compared to the grey curves whose price paths spend longer below the strike. The yellow paths thus experience the most pronounced hedging losses in the event of a general fall in market levels. Pattern 1A generates a grey asset price path (when multiplied by 0.3) and a yellow path (when multiplied by -0.3).
Satisfying the middle ground We have presented a process for generating deterministic fractal paths that mimic Brownian motion in some respects. We can control the end points and realised volatilities of those paths. Furthermore, the paths do not have to be calculated in increasing time sequence, allowing analysts flexibility and consistency across different hedging frequencies. We propose these as a tool for stress-testing strategies for dynamic hedging, including the calculation of associated capital requirements in relation to hedge failure. The fractal approach may not be appropriate for all firms. For those where ANDREW SMITH the dynamically hedged liabilities are a is an assistant small part of a business, simpler approaches professor at might suffice, such as an instant stress test University College combined with an assumed percentage Dublin hedge effectiveness. At the other extreme, for the most sophisticated firms, a focus on 16 deterministic paths may be too restrictive, and a full nested stochastic approach may be needed. There is, however, a middle ground of firms that carry out some hedging, for whom OLIVER BENTLEY explicit intra-year models are becoming important for evaluating alternative hedging is a manager in Deloitte’s Actuarial approaches. A full nested stochastic model Insurance and can be cumbersome and introduces further Banking team complexity, which may obscure the underlying profit drivers. For these firms, deterministic fractals can provide useful insight into hedging performance and stress test design, allowing investigation of typical and stressed paths without the need for more complex or expensive modelling tools. JANUARY/FEBRUARY 2022 | THE ACTUARY | 33
24/01/2022 17:53
Sponsored by
Sandy Trust roundtable chair and chair of the IFoA sustainability board
Lars Erik Mangset KLP chief climate change adviser
Kaisie Rayner Royal London climate change lead
Nick Jessop Moody’s Analytics head of scenario modelling research
Jérôme Crugnola-Humbert Deloitte director of sustainability services
Wendy Walford Legal & General head of climate risk
Moody’s Analytics sponsored a roundtable event where experts considered the controversial and complex issue of how to assess climate change’s financial impact – Huw Morris reports 34 | THE ACTUARY | JANUARY/FEBRUARY 2022
34-36 Moodys round table_The Actuary JAN FEB 22_The Actuary.indd 34
www.theactuary.com
25/01/2022 10:05
Sponsored roundtable Environment
A FUTURE WORTH LIVING IN nvestors, regulators and actuaries are grappling with the financial impact of climate change. However, that struggle is posing as many questions as it gives answers. A joint roundtable expert discussion by The Actuary and Moody’s Analytics reveals how the issue is informing companies’ strategic focus – or not. Much has changed in recent years, even before COP26 last November. Royal London climate change lead Kaisie Rayner says the biggest difference is the engagement across the financial services sector, with recognition of the problem now widespread. “Five years ago, I would have been talking about climate change to two people and have to force them to be in a room with me, and now I can be talking about what it means for financial institutions every week, with 100 people on a call,” she says. “We’ve got buy-in across the industry. We don’t have the answers yet, but the first step is recognising that there is a problem and that financial institutions have a role to play in addressing it. “As advisers on climate change, our skillset and conversation needs to change. Before, we were banging on the door. That door has now opened and we’ve flown through, but the skillset needed for talking about the solution and what needs to change is different to the skillset needed for talking about what the problem is. “There is a ratcheting up, but it’s not a ratcheting up of action yet. There have been 26 COPs, and more than 50% of global emissions have occurred during the period of climate negotiations. We are at risk of losing the social licence around climate negotiations unless we start to see intention matched by action – fast.”
IMAGE: SHUTTERSTOCK
I
www.theactuary.com
34-36 Moodys round table_The Actuary JAN FEB 22_The Actuary.indd 35
Scenario modelling
This leaves investors dealing with how to position portfolios long term. KLP chief climate change adviser Lars Erik Mangset says aligning portfolios with a net-zero target – a 1.5°C emission trajectory – provides a benchmark to assess investments against. However, this is an inexact science that is full of unknowns, with the scope of climate risk assessment being “quite wide” under Taskforce on Climate-Related Financial Disclosure (TCFD) recommendations. “It’s not only carbon pricing and development in the energy sector, but also political intervention, technological development, and the pace and diffusion of that and anything that happens in the marketplace,” said Mangset. “We want to align ourselves with the Network for Greening the Financial System (NGFS), because we think it’s important that the financial industry looks at the same scenarios if we want to have any sort of comparability between different types of institution. We also need to figure out how we address risk factors that are not so easy to quantify today.” Deloitte sustainability services director Jérôme Crugnola-Humbert notes that, while NGFS scenarios are central as a reference for regulators and companies, interpretation is needed of their “high-level specifications”, which may differ between firms and regulators. “Here is where actuaries have a role to play in helping bridge the high-level economic variables from the NGFS scenarios so they can be used in insurers’ financial projection models,” he says. Siloed working is an issue, he adds, with actuaries specialising in underwriting or assets, life or non-life, and so on. “Companies
that I’ve seen, either from the regulatory point of view or as a consultant, are trying to acknowledge that and make various types of actuaries work together, as well as with other professionals and scientists.” Nevertheless, there are shortcomings in using scenarios. “We might fall into the pitfall of false accuracy,” Crugnola-Humbert continues. “Integrated assessment models tend to be complex and technical, and may hide huge model risk. Sometimes I wonder – and I know this hurts comparability – whether it would be better to have simpler models that are more transparent about which subjective assumptions are being made around transition pathways, policy, technology and the like, rather than retreating behind a NGFS scenario.” Legal & General head of climate risk Wendy Walford agrees that this is a crucial area for actuaries to engage in. The fact that there is uncertainty and that outputs from these models are going to be wrong “doesn’t mean they don’t have useful information”, she says – but “balancing that understanding” is vital. “The concept of false accuracy in these scenarios is important, because it’s not telling you that if we delay action for 10 years, we’ll still achieve 1.5°C – I don’t think that’s likely at all. It is trying to explore some of the interactions and changes in the risk profile that can inform the decisions made today.”
Potential pitfalls Moody’s Analytics head of scenario modelling research Nick Jessop points out that there is huge uncertainty around the economic implications of confronting climate risk, despite widespread acceptance that this must be done. “In the past 10 or 20 years, people have realised that the costs of doing nothing are going to exceed the costs of dealing with climate change.” However, Rayner points out that there are huge gaps in the models, which consequently
JANUARY/FEBRUARY 2022 | THE ACTUARY | 35
25/01/2022 10:05
Sponsored roundtable Environment
do not take key issues into account. “If we’re just thinking about asset values and how they might impact an insurer, the models aren’t looking at other things that impact company profitability. What does your client base look like? Who do you provide products to? What if half your customers work in sectors facing large climate transition risks? Does that mean your income-generating potential goes away, so you are impacted from a commercial perspective, even if not from a solvency standpoint?” she asks. “If we’re heading down a pathway in which the world delays climate action, at what point does the social norm about saving for the future break down? At what point do people say, ‘I’m going to spend my money while I can’, so we end up in a society where nobody saves? How uncertain and volatile must the economy be before saving and insurance take lower priority than immediate needs? None of these things are accounted for in scenarios for actuarial processes.” Crugnola-Humbert points to the growing gap between the most advanced companies and other practitioners, with minimal regulation on investing in thermal coal or in new oil exploration, for example. “Big companies that are members of the net-zero alliances are moving beyond that and excluding it, but it’s still allowed from a regulatory point of view, and you don’t yet have any green or brown factors that would discourage it in capital calculations and capital management. “I’m worried that there’s a huge gap, becoming bigger by the day, where some opportunistic financial players that don’t care much about their public reputation and society at large would keep financing and insuring it.”
In practice Legal & General was one of the first UK insurance companies to publish a TCFD report; it has now done so for the past three years. “Starting is the most important thing you can do,” says Walford, acknowledging that “a lot of what we’re doing in this space is on a best endeavours basis” and that the process will “evolve and mature”. Hedge funds will be required to start reporting to TCFD over the next two to three years depending on their size, with bigger pension funds expected to do it sooner. “Just
36 | THE ACTUARY | JANUARY/FEBRUARY 2022
34-36 Moodys round table_The Actuary JAN FEB 22_The Actuary.indd 36
about everybody’s going to be caught up in it,” points out Jessop. Are there lessons for TCFD from Own Risk and Solvency Assessment (ORSA)? CrugnolaHumbert describes ORSA as a “default box for climate risks”, traditionally involving a three-to-five-year business planning horizon, and adds that, for climate change scenarios to be meaningful, “we need to look several decades ahead”. Comparability is a contentious point, with regulators, investors, NGOs and civil society trying to make sense of individual factors that land in ORSA. This is highlighting a skills gap. “Every year, every actuary in every country should have some continuous education about sustainable finance and climate change, both from a qualitative and quantitative point of view,” CrugnolaHumbert says.
“There isn’t just one metric that works – a lot of them are evolving over time” Rayner argues that TCFD is “not just about disclosure” but also making sure companies have thought about climate risks and opportunities – particularly when it comes to governance structures and risk management. Transition plans need to be credible. “If a company says ‘we’re going to offset our Scope 3 emissions by planting trees over the whole planet’ and you have 17 competitors in your industry all saying the same thing, we only have one planet, so that’s clearly not possible,” she says. Jessop notes that various methodologies and metrics are being applied to transition plans to enable advisers to “boil an assessment of a plan or firm down into a single number that you can link back to your view on what outcome you’d like to see”, with some assessment models looking at how carbon budgets should be divided up. “If you think about what happens at a global level
when different companies make commitments based on scientific modelling, you start to see that being brought down to sector-level exposures and potentially firm-level exposures,” he says. “With a lot of forward-looking metrics there are limitations, so they provide nothing more than an opinion on how well aligned you are. I personally like some of the metrics that focus as much on how you’ve done over the past few years, and are actually looking at progress to decarbonising or reducing your carbon intensity as a firm.” For Walford, this raises questions about the purpose of metrics and targets. Huge systemic change is needed in the industry’s thinking and approach, but also globally and in the real economy, as well as in the directing of capital flows, she says. “Some of the firms that will be most pivotal in achieving a net-zero outcome may currently have a high carbon footprint, but are strongly investing in transitioning. They need to incorporate a full suite of metrics to be able to understand all the different exposures and what’s needed to support the strategic plan on transitioning. There isn’t just one metric that works – a lot of them are evolving over time.” The elephant in the room is greenwashing; Crugnola-Humbert calls it “worse than climate inaction” because it creates the illusion that climate change is being addressed and the financial sector will “save the world”. He thinks actuaries have a role to play in giving a “clearer view of what’s green and what’s not”. This will mean working to a common framework; the EU and the UK are working on taxonomies. “This is not perfect, and there will always be loopholes and it is subject to fierce lobbying battles, but at least it gives a level playing field.” Actuaries, investors, regulators and companies must still look at first principles, Rayner says. “If we fail in our response to climate change, we won’t have investment, we won’t have the economy, we won’t have our houses, we won’t have humanity. Without a habitable biosphere, all of those things disappear. It can’t just be a factor. It is the context, the theatre in which our lives, the economy, the market, everything else exists. Without the theatre, what are we doing? I think that’s the way we’ve got to look at it if we want our investment decisions to create a future worth living in.”
www.theactuary.com
25/01/2022 10:05
Features World view
WORLD VIEW:
Assessment and Management framework. The Actuarial Society of Zimbabwe and the Society of Actuaries of Namibia are very active in lobbying the regulator on these policy changes, and the societies create very close-knit actuarial communities. It’s amazing to be at the forefront of this transformation.
emerge – for example, borrowing. Imagine borrowing US$100,000 to purchase your first home, only to watch that borrowed amount fall in value to less than US$1,000 in just two years. You clear the mortgage with your monthly salary and go back to the bank to borrow again. Aside from the economy, my personal experience has been unique in so many ways. By the time I qualified, I had worked in pensions, life, general insurance and health, and had been actively involved in setting up two insurance companies from scratch, starting with a core team of five people. I was single-handedly responsible for product development, underwriting, actuarial and reinsurance. Three years after its launch, the company was insuring more than three million individual lives, and I replicated the same responsibility when we launched a general insurance company. When you work in a country with a smaller talent pool, specialisation is a luxury you cannot afford. This presents interesting and unique opportunities.
Unique opportunities
Small city living
Zimbabwe’s pension and life industry is not as prominent as it once was, and is certainly not as prominent as it is in developed countries. Every actuary who has worked in Zimbabwe during the past 20 years will speak of the unique opportunities there. When I started my career, the economy was experiencing eight-digit inflation; we were working on assets that had 35 zeros on them. A dollar in premiums received on the first of the month would grow (on the stock market) to be enough to pay expenses worth a million dollars by the 30th of the month. Traditional models were rendered useless, and we had to invent new methods. The impact of this period is still a hot topic within our actuarial communities. The country went through a second bout of hyperinflation in 2019. Despite the well-documented negative effects of hyperinflation, some positives did
There is another perk of living in a city the size of Harare, the capital of Zimbabwe, or Windhoek, the capital of Namibia: commuting. My home in Windhoek is exactly eight minutes from my office, and I live outside the central business district, in the surburbs. My commute is so traffic-free that BLESSING there is no difference MBUKUDE is the in peak periods. This actuary for NAMFISA, Namibia’s all comes with the non-banking perks of a big city, financial institutions such as clean water, regulator proper sanitation, functional banking and reliable transport systems – and you get to eat the best beef in the world!
ZIMBABWE AND NAMIBIA Blessing Mbukude shares his experiences of working as an actuary in Zimbabwe and Namibia
IMAGE: SHUTTERSTOCK
T
he actuarial profession is one of the world’s most prestigious, and especially so in the southern African nations of Zimbabwe and Namibia, where there are only a very small number of qualified actuaries. Due to this scarcity, qualifiers are accorded much respect. Many Zimbabwean actuaries qualify and work abroad. Until recently, only one university in the country offered actuarial science as an undergraduate degree, and there was nothing at postgraduate level. This has changed during the past two years, with more universities now offering the programme and more students competing for opportunities – which are not growing as fast. Namibia, meanwhile, is highly dependent on South Africa for talent, as there is no actuarial programme offered by the universities there. Having qualified in Zimbabwe and recently moved to Namibia, I can see parallels between the two countries. One significant parallel is that both are currently implementing risk-based supervisory frameworks: the Zimbabwe Integrated Capital and Risk Programme, and Namibia’s Financial Institutions and Markets Act. These borrow concepts from both Europe’s Solvency II and South Africa’s Solvency
www.theactuary.com
37 Namibia_The Actuary JAN FEB 22_The Actuary.indd 37
JANUARY/FEBRUARY 2022 | THE ACTUARY | 37
24/01/2022 17:45
Features General insurance
PEERING
T
he insurance sector’s progressive demutualisation has broken its link with the ancestral mutual aid principle, where the contributions of many balance the misfortunes of a few. The development of peer-to-peer (P2P) insurance communities, in line with the sharing economy, is an attempt to remedy this situation. P2P insurance refers to emerging technology-based risk-sharing networks where a group of individuals (such as friends, family members or individuals with similar interests, like members of the same profession or patients suffering the same disease) pool their resources to insure against a given peril. Several insurtechs promote this approach. Their dominant business model essentially reduces to a shared, or pooled, deductible, in which the lower layer is retained by the community and the upper layer is transferred to a partnering (re)insurance company. Thanks to the risk-reducing effect of pooling, participants gain access to higher amounts of retention than they would with individual deductibles. The P2P community also benefits from the (re)insurer’s claim settlement expertise 38 | THE ACTUARY | JANUARY/FEBRUARY 2022
38-39 peer to peer_The Actuary JAN FEB 22_The Actuary.indd 38
and risk-bearing capacity. The coverage can be sold as a white label product, or the (re)insurer’s brand may be explicitly mentioned in the offer. In practice, participants pay a deposit ex ante, with the guarantee that the final amount due never exceeds this down payment. Part of the deposit feeds a common fund, while the remainder is paid to the (re)insurer. If the common fund is insufficient to pay for the claims, the (re)insurer pays the excess. Conversely, if the pool has few claims, the surplus is given back to the participants or to a cause they care about. The ‘cash-back or give-back’ mechanism thus operates ex post. This new approach to insurance is expected to mitigate the conflict that is inherent in commercial
insurance, in which insurers keep the part of premiums that is not paid out for claims, and to lower prices. Actuarial modelling can also support P2P insurance for situations in which communities are partitioned into teams, where a high level of solidarity is desirable within teams but to a lesser extent across teams.
Risk sharing, cash-back and give-back These new systems pose interesting questions in terms of risk sharing. With cash-back – as well as with give-back, when participants can choose between different causes they care about – it is important to allocate the surplus individually and in a fair and transparent way. When the pool is homogeneous, it is natural that every participant gets an equal part of the surplus. However, it is considerably more complex to find an appropriate risk-sharing rule for heterogeneous cases. In this setting, one possibility is the conditional mean risk-sharing rule, in which each participant contributes the expected loss he or she brings to the pool, given the total loss that is experienced by the pool. This turns out to be particularly effective within P2P insurance communities. It means risk-averse participants are always ready to welcome new members into the pool, whatever the distribution of their losses, because the sharing rule attributes the fair amount of contribution to every member. In addition, pure premiums can be obtained as limiting individual contributions in an infinitely large pool.
IMAGE: ALAMY ISTOCK
Can mutualisation work for general insurance? Michel Denuit and Christian Robert investigate peer-to-peer insurance
www.theactuary.com
25/01/2022 10:33
Features General insurance
From a pedagogical perspective, this approach provides actuarial instructors with the missing link from the homogeneous case, where total losses are evenly distributed and pooling benefits are clear from the law of large numbers and centrallimit theorem, to the general heterogeneous case. It also helps to formalise the fixed premium guarantee included in commercial insurance, and demonstrates that accurate risk classification does not conflict with mutual aid.
Participating property and casualty policies P2P insurance is not just a few insurtechs operating online: established insurers could also embed this approach into a regular insurance policy, including a participation to the surplus. This mechanism has been applied in the life insurance industry for many years, but can also apply to property and casualty insurance. In particular, our paper ‘Risk sharing under peer-to-peer property and casualty business models’ (bit.ly/RiskShare_P2P) proposed to extend it to the lower layer of total losses experienced by a policyholder community. Instead of simply transferring risk to the insurance company, policyholders take part
of the aggregate risk of the group they chose to adhere to, and take back a fraction of the end-of-period surplus or attribute it to their chosen charity. This participating policy model somewhat reconciles insurance with the mutual aid principle at its origin. Sharing the lower risk layer among policyholders is an effective way to access the best of the two worlds: protection by equity capital for the higher layer, with mutualisation for the lower layer. Insurance operations are often very opaque, but the new generation of participating contracts should make explicit the split into taxes, intermediary’s commission, claim costs (including settlement expenses, on an incurred basis), running expenses and shareholders’ profit (better presented as cost of regulatory capital), with calculations based on up-to-date actuarial modelling. A fully transparent account can then be communicated to policyholders, with surplus distributed or allocated to a common project. This demystifies insurance (up to outputs of actuarial models calculating incurred losses or allocating capital) and revives policyholders’ feelings of belonging to a community. It is also important to adopt an appropriate pricing mechanism by charging insurer’s fees for the lower layer that are equal to a percentage of the corresponding benefits paid to policyholders. In this way, interests of both parties are aligned, and agency problems at the heart of commercial insurance are solved.
Following energy’s example Parallels with the electricity market seem instructive. Consumers joining P2P
insurance communities are comparable to those who are part of local energy communities that provide inhabitants with renewable electricity produced nearby by their members, while keeping links with established energy providers as a safety net in case of insufficient power. We believe there is a strong potential for a P2P insurance offer developed along these lines. If the energy sector succeeded in attracting people’s interest to turn them into prosumers, it would MICHEL DENUIT is a professor of be a shame if actuarial science at insurers were not UCLouvain, Belgium, able to re-enchant and a co-founder of mutual aid through Detralytics, a new risk-sharing consulting office based in Brussels solutions. The and Paris give-back mechanism, and the adoption of insurance fees proportional to benefits, should restore the spirit of insurance: CHRISTIAN improving ROBERT customer loyalty is a professor of actuarial science at with the feeling of ENSAE-IPP, France, belonging to a and scientific community, and director at helping its less Detralytics fortunate members. A list of further reading can be found at the online version of this article at bit.ly/ Peering_ahead JANUARY/FEBRUARY 2022 | THE ACTUARY | 39
38-39 peer to peer_The Actuary JAN FEB 22_The Actuary.indd 39
24/01/2022 17:46
Features Regulation
I IMAGE: GETTY
FRS 17 introduces new challenges to the management of insurers’ assets and liabilities, as well as to discount rate estimation. Discount rates will include only relevant factors, such as the time value of money, the characteristics of the cash flows and the liquidity characteristics of the insurance contracts. More details on the theoretical and practical challenges posed by IFRS 17 discount rates are available in the article ‘IFRS 17: Defining the discount rate’, from the August 2021 issue of The Actuary (bit.ly/IFRS17_ DefineDisc). Under IFRS 17, the valuation of liabilities is based on the determination of a current value of the insurance contract, considering market perspectives for financial risks and companyspecific perspectives for non-financial risks. The process of asset liability management focuses on the development of strategies that include assets and liabilities. The objectives of asset liability management are: To protect the value of own funds against changes in interest rates or, more broadly, changes in asset values To influence investment strategies and achieve financial objectives through ‘risk– reward’ optimisation.
The management of assets and liabilities will be affected by the approach adopted to determine discount rates. Several sources of asset liability mismatch can be identified. First, the well-known duration mismatch. The duration mismatch between the actual portfolio of assets and liabilities is a significant source of profits volatility, should interest rates move. Under IFRS 17, the difference in duration between actual portfolio and reference portfolio should also be monitored, because the reference portfolio is used to estimate the discount rates for the valuation liabilities. Therefore, a material duration gap between the actual and reference portfolio may increase profits’ sensitivity to interest rates. Next, the treatment and estimation of credit and liquidity risk premiums. The estimation of credit risk premiums remains a significant challenge, and several
methodologies have been proposed for estimating credit risk (bit.ly/IFRS17_ DefMod). The profits’ sensitivity could be greater if the average credit rating of the reference portfolio was very different to that of the actual asset portfolio. The estimation of liquidity risk premium as a component of the reference portfolio yield to maturity is a difficult task, and several approaches have been proposed to address this issue – examples can be seen in the IAA’s International Actuarial Note 100: Application of IFRS 17 Insurance Contracts (bit.ly/IAAnote_100), Thomas Bulpitt’s analysis IFRS 17: Liquidity characteristics of insurance liabilities (bit.ly/IFRS17_LiqChar) and Apostolos Papachristos’s Case study on the ‘top-down’ approach (bit.ly/IFoA_TopDown), the latter two published as part of the work of the IFoA Future of Discount Rates Working
Party. The profits’ sensitivity could be greater if the liquidity profile of the reference portfolio is very different to that of the actual asset portfolio.
Annuities From 2023, annuity insurers reporting under IFRS 17 are likely to see their balance sheets behaving differently as market conditions change. Insurers will currently be determining policy choices for IFRS 17 reporting. As well as determining the rate of profits emergence, opening equity and so on, this also has implications for future earnings volatility and hedging. The IFRS 17 balance sheet has three liability elements. The best estimate liability (BEL) represents the best estimate of the amount needed to pay liabilities, and is
Richard Schneider, Jon Neale and Apostolos Papachristos discuss asset liability management for an IFRS 17 balance sheet
40 | THE ACTUARY | JANUARY/FEBRUARY 2022
40-42 IFRS 17_The Actuary JAN FEB 22_The Actuary.indd 40
24/01/2022 17:48
Features Regulation
heavily impacted by the discount rate, demographic and maintenance expense assumptions, all of which will affect the sensitivity of the BEL to market conditions. For example, a low discount rate will increase the size of the BEL and its sensitivity to interest rates. Next there is a risk adjustment (RA), which is calibrated to the compensation an insurer requires to take non-financial risk. Broadly, a higher RA will lead to high sensitivity to market conditions, although some methods will also increase sensitivities (a cost of capital approach is likely to be more sensitive than a confidence interval approach). The last liability item, the contractual service margin (CSM), will be calculated as business is written. It prevents the recognition of any Day 1 profit, instead deferring profit over time. For profitable annuity business, this will essentially lead to the total initial reserve (BEL + RA + CSM) being equal to the premium, meaning the choices over assumptions for the BEL and RA drive the balance between the different liability items, rather than the size of the initial reserve. The CSM is designed to spread profits over the lifetime of the insurance business. As, say, non-financial assumption changes are made to the BEL, there will be a broadly offsetting impact through the CSM to ensure impacts are spread over time. However, the CSM is only updated for non-financial changes – so changes in market conditions don’t impact the CSM. This means that changes in other liability components due to economic assumption changes will not be ‘offset’ by a corresponding change in the CSM. In other words, while the total reserve at initial recognition is not sensitive to initial assumptions, the total reserve in subsequent periods will be sensitive to economic assumption changes. IFRS 17 recognises that RA calculations are complex, so gives an option to treat all changes in the RA the same way, or to separate financial and non-financial impacts. Where financial assumptions are separated out, they will change the size of the RA, but do not impact the CSM. However, if changes are not identified separately, a change in the RA due to, say, interest rates will be offset by a change
JANUARY/FEBRUARY 2022 | THE ACTUARY | 41
40-42 IFRS 17_The Actuary JAN FEB 22_The Actuary.indd 41
24/01/2022 17:48
Features Regulation
in CSM, and the sensitivity of the IFRS liabilities is reduced (although the CSM cannot fall below zero). So how might the sensitivity of IFRS liabilities change from today? Currently, annuity liabilities are set on a prudent basis, so can be viewed as BEL plus a prudent margin. The sensitivity of the IFRS liabilities will therefore depend on how the RA compares to the prudent margin. The RA will only reflect compensation for non-financial assumptions, whereas the current prudent margins normally also include margins for financial assumptions. As a result, the RA may be lower than current prudent margins. In this case, the sensitivity of the liabilities will fall relative to today. Insurers may also prefer a higher CSM than a higher RA and may select choices that lead to this outcome, driving a reduction in the sensitivity of liabilities. Where an insurer hedges mismatches between assets and IFRS liabilities and continues to do so, hedging assets will need to be rebalanced, potentially leading to changes in solvency sensitivity. Even where an insurer hedges solvency, it will be important to consider how IFRS earnings volatility has changed so that stakeholders can be advised accordingly.
With-profits With-profits funds are exposed to numerous sources of market risk, including the movement in value and implied volatility of the underlying asset shares backing participating contracts, which affect the value of financial guarantees and options. Further, variability in bonus rates expose both policyholder and – depending on ownership structure – shareholder to market risks. Hedging of these risks can involve taking derivative positions and/or the construction of internal dynamic hedges. Under IFRS 17, most traditional UK-style with-profits is expected to be measured under the variable fee approach (VFA). As always, recognition of profit is deferred via the CSM. In the with-profits context, this relates to the present value of future shareholder transfers, plus a proportion of the contract’s contribution to the estate, less the contribution to burn-through cost liability.
42 | THE ACTUARY | JANUARY/FEBRUARY 2022
40-42 IFRS 17_The Actuary JAN FEB 22_The Actuary.indd 42
“From 2023, annuity insurers are likely to see their balance sheets behaving differently as market conditions change” The specifics will depend on the fund structure, mutualisation features and so on, but this is the basic picture. As always, the CSM is adjusted from one reporting period to the next based on movements in the variable fee, and importantly, under the VFA, the CSM is adjusted for both financial and nonfinancial risks. But if the CSM is adjusted for financial risk, then why hedge? There are several reasons: 1 The CSM only ‘hedges’ in-period market movements; the overall profit and loss impact of a market stress over the life of a contract is unchanged. In other words, the economics of the contract are unchanged. 2 Most firms would not focus asset liability management purely on IFRS 17 impacts, and other metrics do not typically have such an explicit profit deferral mechanism. 3 As such, the CSM is a pure ‘accounting hedge’. If the fund is already hedged on a more economic basis, there is a potential ‘double-hedge’ effect. In other words, a mismatch arises as the movement in the hedged item is taken to CSM, but the movement in the hedging instrument is recognised in profit and loss. 4 Not all with-profit contracts will necessarily be eligible for the VFA. 5 The CSM cannot go negative, so large shocks may not always be offset. Regarding point (3), the standard allows for a risk mitigation option, the effect of which is to allow preparers to ‘switch off’ the VFA in certain circumstances. One of these circumstances is where a documented hedging strategy exists, and in the latest text the scope has been increased to cover both derivative and non-derivative hedging assets.
This allows firms to flow market-related liability movements directly through profit and loss to match the movement in the hedging instruments, instead of deferring them via the CSM. One potential area of contention relates to internal hedging strategies. For example, firms might delta-hedge equity risk by running a short position in equities relative to the stated asset share mix. This is not too different from running a dynamic futures position, and may in fact involve less basis risk. In theory, one might therefore argue that the risk mitigation option should apply to such situations, too. If this argument JON NEALE fails, however, then works for a leading the VFA stays bulk annuity insurer switched on, and the implementing asset share IFRS 17 ‘mismatch’ results once again in profit and loss volatility.
A shifting situation While we are not suggesting that IFRS 17 will be the primary metric on which asset liability management will be based going forwards, firms will at least want to understand the drivers of profit and loss volatility and how these might be addressed. There are many things to consider, and these differ by product type. We hope the material presented here is of use to firms as the balance starts to shift from building compliant models to the commercial and financial implications of the new standard.
APOSTOLOS PAPACHRISTOS is an investment actuary involved in asset liability management and IFRS 17 implementation
RICHARD SCHNEIDER is an independent actuarial consultant focusing on regulatory change implementation
www.theactuary.com
25/01/2022 10:34
At the back School of thought
Student A shore bet? Ciara Izuchukwu examines the potential impact of a new tax reform on offshore (re)insurers, and the other benefits and challenges they face
ILLUSTRATION: SIMON SCARSBROOK
O
ffshore insurance companies operate outside the UK and are a legal way for companies to manage international business. They are commonly located in the Cayman Islands, the Republic of Ireland, Malta, Switzerland and Bermuda, the last of which has a reputation as the world’s ‘risk capital’ due to the high number of captive insurers and reinsurance companies there. Traditionally, the motivation for setting up an insurance company in one of these locations was their low-tax environment, which made them good places to be domiciled in and good places to cede some of the tail risk events – freeing up capital that a company could better use elsewhere. The early-to-mid 2010s saw a surge in the number of insurance intermediaries and insurance companies being set up in these locations. Recent events, however, threaten these motivations. In late 2021, the OECD announced that 136 countries and jurisdictions had agreed to join an accord imposing a two-pillar global tax reform plan. Pillar Two of this plan established a 15% global minimum tax rate, meaning the advantageous tax status these offshore locations enjoy for the (re)insurance industry will be reduced at the margin. Previously, each country set its own corporate tax rate, which any company domiciled within it would have to pay. However, with budgets strained after the COVID-19 pandemic, governments want to discourage multinationals from shifting their profits and tax revenues to low-tax countries. The change may dramatically www.theactuary.com
43 STUDENT_The Actuary JAN FEB 22_The Actuary.indd 43
reduce the attractiveness of these low-tono-tax jurisdictions. The OECD estimates that the minimum tax will generate US$150bn in additional global tax revenues annually, and companies may start to repatriate capital back to the UK and the US, where most of their sales take place. How certain is this to happen in the insurance industry on a mass scale? These offshore locations are established business centres with well-regulated insurance industries. Bermuda, for example, is the domicile of many of the world’s leading insurance and reinsurance companies, and has an enhanced regulatory framework for commercial insurers and reinsurers. Many offshore locations have Solvency II equivalence, and the Republic of Ireland and Malta also have the benefit of being in the EU. In addition, these places have become hubs for innovation, allowing companies to test out new business models and products. Generally, there are two types of innovators: traditional reinsurance companies with new insurtech projects, and new insurtech companies that need to pilot, test and launch their innovations before taking them to market. With local governments and regulators encouraging and supporting innovation, this continually forwardthinking, paradigm-changing work enhances offshore locations’ standings as innovative, globally connected business communities. Some of these locations have access to a highly skilled workforce that allows insurers to get value from them, as well as tax benefits. The Republic of Ireland, for example, has the most actuaries per capita of any country. It is
harder to find such skills locally in more remote locations, so companies face costs in getting people out to them. In addition, high living costs in such locations may be a deterrent for some insurers. Climate risk is also threatening offshore locations, as the most common risks in many of these territories are remote risks such as natural and manmade catastrophes. Mounting awareness of global warming’s impact is showing insurers that their risk exposures are far greater than they thought. The increasing frequency of natural catastrophes in the past 30 years has seen the industry establish a new model, with reinsurers playing a greater role in taking on the growing risks. A wave of new companies were incorporated in offshore locations, such as Bermuda, from which capital could be most efficiently and rapidly deployed. The drive to find new ways of managing increased climate risk in offshore locations, and these locations’ expertise on such matters, make them key players in helping (re)insurers manage the increased risks to which they are exposed. The global tax reform was designed more for tackling large software firms than insurers, so it is hard to predict how the tax reform will play out. As an Irish student actuary currently seconded in Bermuda, I look forward to seeing how these locations will navigate the difficult paths ahead.
CIARA IZUCHUKWU is a student editor
JANUARY/FEBRUARY 2022 | THE ACTUARY | 43
24/01/2022 17:48
At the back Puzzles
iQ
A MATHS ARE YOU ESTRO? A & LOGIC M hs, logical
at a mind for m If you have yptic clues and other cr e reasoning, to us and w s, send them difficult m ru d n u n co the most will publish very pages. se e th in ntact terested, co If you are in actuary.com e social@th
Th M word The Member Mem puzzle 18 Courtesy of Aktoro Co
Across
1 Clue to 1d – that’s mistaken, M! (6)
19 Bacteria ends after finding blood group (4)
4 Club I left, mixed double gin (8)
21 Almost part of the Levant gains nothing for M (7)
10 In private discussion notes repeatedly shown to include introduction to autobiography (4-1-4)
24 M ran round best team – Dortmund agreed (9)
11 M heard one who stops squeaking (5)
25 We accept twenty-year-old computer could be right – or could be a killer (5)
26 Ancient Greek toyed with 12 M’s trunk is doubly round (5) mathematics shamelessly and lost head (5) 13 The last of the chocolate, before that a sin: canned fruit (9) 27 They’re sort of like a musical superstar ending in disarray (9) 14 It’s a bit fishy – one end’s in Toronto, the other end’s in 28 Co-ordinate a degree with Montreal (4,3) one’s school first and then get a good grade (8) 16 Way to connect museum head with live collection (4) 29 Fly Spitfire wings after exam’s overturned (6) Down 1 29’s wings follow one-time instrument to dispense with medical equipment (8)
7 Sweet rice cooked with salt – no way! (6)
20 Changes down to right and first to last (7)
2 All-embracing feline fancier? (8)
8 Jules corrupted and finally enters agitated state (6)
21 Biological data that’s gone astray starts to mimic Excel (6)
3 Picture that’s in magazine – quite the reverse! (5)
9 M went out before working (6)
22 Spelling mistakes in the Vulgate Bible? (6)
15 M lie over car crash – there’s no sign of damage (9)
23 Overacts sometimes without finishing when I’m lost and confused (6)
17 Cryptically was smart (5-3)
25 M tricks (5)
5 M misrepresent informal business that takes in any number (7) 6 Fuel ends the Spanish who I lubricate internally (6,3)
18 M’s nothing to add spirits to (8)
Money troubles Mensa puzzle 821
IMAGE: SHUTTERSTOCK
In processing a payment, a cashier transposed the pounds for pence and the pence for pounds, resulting in far too much money being given out. The person receiving the money then spent £5.54 of it, and still had twice the amount she should have received. What was the correct amount that should have been paid out?
44 | THE ACTUARY | JANUARY/FEBRUARY 2022
44-45 puzzles_The Actuary JAN FEB 22_The Actuary.indd 44
www.theactuary.com
24/01/2022 17:49
At the back Puzzles
Squaring up Mensa puzzle 823
What number should replace the question mark?
AAAAAEEL RRSSSSVY Use the letters given to complete the square so that four other words can be read downwards and across.
? 4 7
1
2
5
What are the words?
8 2 7 9
2 4
7 6
3 8 1 9 5
3 4
8 6 9
A P P L E P P L E
Going loco Mensa puzzle 824 A 275-yard long train, travelling at 30 mph, enters a tunnel of two and a half miles in length. How long will elapse between the moment the front of the train enters the tunnel and the moment the end of the train clears the tunnel?
www.theactuary.com
44-45 puzzles_The Actuary JAN FEB 22_The Actuary.indd 45
Reader puzzle 18 Across: 1 Euclid 4 Bludgeon 10 Tête-à-tête 11 Euler 12 Boole 13 Tangerine 14 Tail fin 16 Zoom 19 Abba 21 Galileo 24 Ramanujan 25 Whale 26 Attic 27 Simulacra 28 Abscissa 29 Tsetse Down: 1 Extubate 2 Catholic 3 Image 5 Liebniz 6 Diesel oil 7 Eclair 8 Nerves 9 Newton 15 Fibonacci 17 Clean-cut 18 Lovelace 20 Adjusts 21 Genome 22 Errata 23 Emotes 25 Wiles. Mensa puzzle 821: £44.95 822: 9. In each quarter of the circle, the second sector totals double the first sector. 823: Pleas, pears, larva and essay 824: 5 minutes and 18.75 seconds.
Slice of the pie Mensa puzzle 822
JANUARY/FEBRUARY 2022 | THE ACTUARY | 45
24/01/2022 17:49
At the back Society news
HONOURS
D E AT H S
IFoA members recognised in New Year Honours list The UK’s New Year Honours list saw three actuaries awarded MBEs by the Queen in recognition of their outstanding contributions to society and the public interest during the past year. Having three prominent members recognised in this fashion underscores the incredible contribution that actuaries are making to society, deploying their unique skills and insights to help create a better world for everyone.
Stuart McDonald MBE Stuart has been awarded the MBE for his invaluable contribution to the understanding of the COVID-19 pandemic and its impact. Through his work with the IFoA, the Continuous Mortality Investigation, the COVID-19 Actuaries Response Group and the UK government, Stuart has played an important role in the UK’s response to the pandemic. On receiving this award, Stuart said: “I’m humbled to have received an MBE for services to Public Health in the New Year Honours list. Sincere thanks to all those I have worked with and learned from as part of the COVID-19 Actuaries Response Group, the Continuous Mortality Investigation and the IFoA-led volunteer work supporting the Department for Health and Social Care, and ultimately SAGE. Thanks to all those who have supported our work, whether by contributing your own expertise, providing constructive criticism or by helping us reach a bigger audience. “Congratulations to other worthy recipients of honours. It was great to see such good representation for the sciences and those involved in the COVID-19 response, and to see other actuaries being recognised. “Lastly, thanks to my family and friends, and to my colleagues at Lloyds Banking Group/Scottish Widows who have supported me through a challenging period and created the capacity for me to play a small part in responding to this crisis.” 46 | THE ACTUARY | JANUARY/FEBRUARY 2022
46 people and society_The Actuary JAN FEB 22_The Actuary.indd 46
Mitesh Sheth MBE Mitesh was awarded the MBE for his contribution and leadership on various diversity initiatives, including the Diversity Project, the LGBT Great #50For50 initiative, and the Race and Ethnicity workstream. On receiving his award, Mitesh said: “I feel blessed to have been recognised for this important work we have been doing over the past few years. It has been a big collaborative effort and it needs to be, as there is still a very long way to go. The pandemic has further increased inequalities in society, which requires ‘less talk and more action’. As leaders we have a responsibility and opportunity to change ourselves, our teams and our organisations. We must begin with empathy and compassion for our fellow human beings, create a safe space to talk and learn openly, conduct research on the barriers, trial new solutions, be agile in failing fast and sharing lessons to build bridges for all those that are being left behind.”
Fiona Mackenzie MBE Fiona was awarded the MBE for her outstanding services in raising awareness of sexual violence against women through the We Can’t Consent To This campaign. On receiving her award Fiona said: “There is still so much to be done, but I’m hopeful that change is in the air. I’m really humbled by this award, and so grateful to everyone who has lent their support and hard work to We Can’t Consent To This. In 2022 and beyond, we’re going to keep working to make sure that victims and their families see real change in the criminal justice system.”
It is with great regret that we announce the death of the following members. We offer our condolences to their families, friends and colleagues. Mr Paul Karfoot Berry, based in the UK, gained Fellowship in 1973, died aged 78. Mr Alexander Wall, based in Australia, gained Fellowship in 1960, died aged 88. Mr Vijay Balgobin, based in Mauritius, became an Associate in 1982, died aged 60. Mr David James Congram, an Affiliate member based in Canada, died aged 78. Mr Randolph Colin Henry, a student based in Barbados, died aged 69. Mr Geoffrey Ross, based in Scotland, gained Fellowship in 1968, died aged 75. Miss Lucy McPartlan, a resigned student based in the UK, died aged 34. Mr Killian Lawton, a student based in the UK, died aged 25. Mr Richard Pocock, gained Fellowship in 1972, died aged 70. Mr William Allison, based in the US, gained Fellowship in 1958, died aged 86.
Call for your news… We would be delighted to hear from you.If you have any newsworthy items for these pages, please contact us at: social@theactuary. com www.theactuary.com
24/01/2022 17:50
At the back Volunteer
Inside story Where are you based? Edinburgh, Scotland.
What volunteer role(s) do you do for the IFoA?
CRAIG RITCHIE senior consultant at Hymans Robertson
“I want to be part of a thriving and successful profession, and it takes volunteers to make that happen”
Council member, Community Leadership Team for the Data Science Community, and Scottish Board member.
Has this assisted your lifelong learning?
How long have you been volunteering?
Yes, in terms of my softer skills and the way I approach problems.
Since 2014 in various roles.
What’s involved in your role(s)? With Council we deal with the big picture strategic issues. Within the Data Science Community, we have been building the pilot Digital Community, developing a space where all those with an interest in data science can connect with each other and with everything the IFoA offers in that area.
What motivates you to volunteer for the IFoA? I want to be part of a thriving and successful profession, and it takes volunteer time to make that happen. I also want to ensure the voice of younger members is represented.
What have you/do you hope to achieve in your volunteer role? Ensure the continued relevance of the profession in a changing world, to support our careers in the future! It has also helped me develop my global network.
IMAGES: ISTOCK
What new skills or knowledge do you think you have developed? Strategic thinking and decision making. An understanding of how actuarial skills are already being applied across so many different sectors and areas. www.theactuary.com
46 inside story_The Actuary JAN FEB 22_The Actuary.indd 47
Do you think volunteering has helped you in your day job? It has given me a new perspective on how my advice will be received by my clients.
Have there been any memorable moments? I was heavily involved in the development of the Certificate in Data Science, launched in 2018. Within a couple of days of opening for registrations, we had fully booked the first two cohorts through the Certificate. It was great to feel we had created something that lots of members were excited about.
What would you say to others considering a volunteer role? Do it! You meet lots of great people and get involved in interesting projects. There are roles to suit whatever you’re looking for.
Who is your role model – in life or in business? I’d look to Elon Musk. His commitment to a long-term vision and tireless work to ensure it is successful is inspiring.
What was your earliest dream job? Footballer – a shame I wasn’t good enough!
What word best describes you? Adaptable.
How do you balance your day job and your volunteer role?
Do you prefer a staycation or holiday abroad?
It’s easier than balancing working and studying. I’ve never found it a problem to delay volunteering meetings or deliverables due to work taking priority.
Abroad – there is so much to explore.
How do you relax away from the office?
Everything in defined benefit pensions is measured in the long term, but moments such as winning a new client or delivering ground-breaking advice have been exciting.
Prior to 2020 I spent lots of time travelling with my girlfriend, but that’s not been easy recently. When it’s sunny I get out to play golf as much as possible. Occasionally I’m a bit more adventurous, being an extra on TV shows or heading to a karaoke bar.
What would you consider to be the most brilliant moment of your career to date?
To share your volunteer involvement or find out about volunteering for the IFoA, contact: engagement.team @actuaries.org.uk JANUARY/FEBRUARY 2022 | THE ACTUARY | 47
24/01/2022 17:49
At the back Appointments
KEEPING YOU IN THE LOOP As a professional, you’ll no doubt want to keep up with the latest industry developments, people and news? That’s why The Actuary’s weekly email alert brings you a handy round-up of only the most relevant news stories and comment, straight to your inbox every Thursday.
Register for weekly email newsletters at www.theactuary.com Browse www.theactuaryjobs.com and www.theactuaryjobsasia.com the official jobsites of the actuarial profession.
www.theactuaryjobs.com
The magazine of the Institute and Faculty of Actuaries
48 | THE ACTUARY | JANUARY/FEBRUARY 2022
ACT recr JanFeb22.indd 48
24/01/2022 16:23
RESERVING MANAGER London, up to £100,000
NEW BUSINESS PRICING MANAGER,
A new and growing London Market syndicate is looking for a reserving manager to join their team and manage a part-qualified actuary. The candidate will be giving support to the chief actuary on their quarterly reserving exercises across their property and specialty lines of business. The role involves developing strong relationships with senior professionals so excellent communication and interpersonal skills are essential. Our client is looking nearly/newly qualified actuary, ideally with London Market or commercial lines reserving experience.
A growing motor insurer is looking to expand its pricing team and is seeking a pricing manager to lead their new business pricing function. You will manage a team of two analysts, building pricing models within Emblem and Radar, whilst working closely with the data science team to improve modelling capabilities. This is an exceptional opportunity for senior analyst to become a first time manager, with a growing team providing scope to expand your responsibilities. The ideal candidate has strong experience within personal/commercial lines, ideally with great communication and a desire to manage.
Contact: james.rydon@eamesconsulting.com | 0207 092 3239
£80,000 AtLondon, the back Appointments
Contact: sam.baker@eamesconsulting.com | 0207 092 3230
REINSURANCE PRICING ACTUARY, London, up to £100,000 A large London Market insurer looking for a treaty pricing actuary to join their team. The candidate will be giving support to the head of London Market pricing and this role will be responsible for assisting the underwriters in pricing risks and providing a strategy setting for the pricing team. You will be communicating with the wider areas of the business so strong leadership and communication skills will be essential. You will also be involved in the improvement of their data science capabilities. For this role, our client is looking for a nearly/newly qualified actuary with London Market pricing experience. Contact: james.rydon@eamesconsulting.com | 0207 092 3239
SENIOR ACTUARIAL ANALYST,
London, £65,000
Our client is a leading home and motor insurer. They are seeking a part qualified actuary to join their corporate actuarial team, supporting both capital modelling and reserving. This role will be a 50/50 split between the two functions, providing excellent opportunities for a student actuary to gain wider exposure prior to qualifying. You will focus on providing data and analysis to capital modelling and reserving, influencing and then implementing changes to each process. You will also be able to support the ongoing transformation of each process. Candidates will ideally have either general insurance reserving or capital modelling experience, whilst making good progress through the IFoA exams. Contact: sam.baker@eamesconsulting.com | 0207 092 3230
PRICING ACTUARY - LLOYD’S SYNDICATE London, up to £115,000 A leading Lloyds syndicate is seeking a qualified actuary to join their pricing function. Reporting into the head of analytics, this role will focus on specialty business and will cover case pricing, model development and will work with underwriters directly. Ideally you will be a qualified actuary with demonstrable experience in pricing specialty lines of business. Pricing experience is essential, but you don’t need to have reinsurance. Contact: curtis.browning@eamesconsulting.com | 0207 092 3242
CAPITAL ACTUARY,
London, £95,000
A leading Lloyd's syndicate is looking to bring on board a capital actuary to undertake a unique role in their growing team. The role will focus on their syndicate book of business and reports directly to the head of capital modelling. You will be supporting in the modelling and validation of 3 of their entities. The ideal candidate is a nearly/newly qualified actuary with capital modelling or reserving experience, ideally with London Market experience but we are open for candidates with personal/commercial lines background as well. Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909
LONDON MARKET PRICING MANAGER, London, £100,000 A Lloyd's insurer is looking to hire a pricing manager. You will be giving support to the head of pricing on their financial lines of business and will support delivery of pricing and portfolio management solutions. The role involves developing strong relationships with senior professionals so excellent communication and interpersonal skills is essential. We are looking to speak to candidates who are nearly/newly qualified with strong financial lines pricing or reserving experience. Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909
ERM ANALYST,
London, up to £50,000
A Lloyd's/London Market insurer is hiring a senior ERM analyst. This role is open to both actuaries and non-actuaries in risk. The company has a 50/50 split between office and home work. This is an excellent opportunity to support the ERM team and get involved (and take a lead) in stakeholder meetings. Each year you will get allocated different risk types to broaden your experience. You will be involved in ERM reporting, validation and ORSA reports, presenting to committees and other responsibilities. They are looking to speak to candidates who have a risk background. Candidates must have excellent written skills and have experience in risk management requirements under SII. Contact: hannah.turner@eamesconsulting.com | 0207 092 3249
CAPITAL ACTUARY, London, up to £85,000 One of the larger Lloyd’s syndicates is looking to bring on a qualified or nearly qualified actuary into their capital team. This reports into the head of capital and will focus on supporting internal modelling duties. The role sits within a small team, and you will need to work on both BAU and project work. You will also have heavy exposure to the underwriters and third parties and will need to build strong relationships internally. Capital experience is essential, with a preference towards one of the major modelling platforms.
RESERVING ACTUARY,
London, up to £100,000
A well-known Lloyd’s insurer is looking to hire an experienced qualified actuary into their team. This will focus on predominantly on business planning and SII technical provisions, and will regularly face off to senior stakeholders. This is an opportunity to focus more on the business facing aspects of actuarial and shape portfolio strategy going forwards. You will work directly with pricing, UW, finance and regularly present to a range of senior leaders. You will have junior resource to support you and also be part of the reserving leadership team. The ideal candidate will have experience in reserving, with a particular focus on business planning and SII. FIA or equivalent status is strongly preferred for this role. Contact: curtis.browning@eamesconsulting.com | 0207 092 3242
PROJECTS ACTUARIAL ANALYST, London, up to £50,000 A Lloyd's insurer is looking to hire an actuarial analyst to join as a projects actuarial analyst. This role would suit an individual who wants breadth in work – you will be involved with maintaining and optimising key actuarial processes across reporting, capital model parameterisation and validation. You will also have the opportunity to get involved in other areas which could include pricing and exposure analyses, reserving analyses and SII TPs. This role has significant interaction with stakeholders across a number of departments. They are keen to speak to candidates with the Lloyd's/London Market who are part qualified. Contact: hannah.turner@eamesconsulting.com | 0207 092 3249
PRICING ACTUARY, London, up to £90,000 A leading Lloyd's/London Market insurer is looking to hire a pricing actuary to join their team. This is a fantastic opportunity for a candidate to gain real breadth over a number of lines of business. In this role you will provide oversight, guidance, and analysis on all aspects of the pricing function. You will be working on large account pricing and getting involved in projects such as the move of its rating models into a web-based enterprise rating engine. They are looking to speak to nearly/newly qualified pricing actuaries who have either a commercial or Lloyd's pricing background. Experience of predictive analytics is highly desirable. Contact: hannah.turner@eamesconsulting.com | 0207 092 3249
SENIOR RESERVING ANALYST/ACTUARY London, up to £85,000 A leading London Market legacy insurer is hiring two reserving analysts. You will be giving support to both reserving managers and the role involves developing strong relationships with senior professionals so excellent communication and interpersonal skills is essential. One of the roles will be focusing on their live business programme team and the one in their legacy team. Our client is looking for part-qualified or nearly/newly qualified actuaries ideally with London Market or commercial lines reserving experience. They are open to someone with a pricing and capital modelling background in London Market or personal, commercial lines reserving experience. Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909
Contact: curtis.browning@eamesconsulting.com | 0207 092 3242
DECEMBER 2021 | THE ACTUARY | 49
ACT recr JanFeb22.indd 49
24/01/2022 16:24
At the back Appointments
Star Actuarial Futures is seeking exceptional new consultants to expand its award-winning team. You will currently be working as an actuary or actuarial student in industry, with an actuarial recruitment consultancy, or in-house with exposure to actuarial recruitment. You must possess a strong work ethic, the highest levels of integrity and a passion to deliver to a wide range of clients. You will become part of a hard working, professional and successful team with a wealth of knowledge to share. We offer a market-leading commission structure, a supportive and flexible working environment and a strong, well-respected brand. This is an exciting time to join the business in a period of growth. Please contact Louis or Joanne for a confidential discussion.
Louis Manson
Joanne O’Connor
MANAGING DIRECTOR
OPERATIONS DIRECTOR
M +44 7595 023 983 E louis.manson@staractuarial.com L uk.linkedin.com/in/louismanson
M +44 7739 345 946 E joanneoconnor@staractuarial.com L uk.linkedin.com/in/joanneoconnor3
staractuarial.com
DIVERSITY AND INCLUSION • Star Actuarial values a diverse work force and an inclusive culture. • We recognise the importance of equality, diversity and inclusion in building successful, high-performing teams. • We offer a fully inclusive and agile working environment. • Flexible working options are available.
50 | THE ACTUARY | JANUARY/FEBRUARY 2022
ACTUARIAL POST RECRUITER OF THE YEAR 2012 . 2013 . 2014 . 2015 . 2016 . 2017 . 2018 ACT recr JanFeb22.indd 50
staractuarial.com 24/01/2022 16:42
Gravitas’ UK Actuarial & Insurance promoting...
Current roles
At the back Appointments To view more of our current jobs, please visit:
www.theactuaryjobs.com
Exclusive Role - Modelling Analyst London/WFH, up to £60,000 + competitive bonus & benefits
Capital & Reserving Actuary, up to 90% WFH, up to £75,000 + competitive bonus & benefits
Reserving Actuarial Analyst Up to 90% WFH, up to £85,000 + competitive bonus & benefits
I am working exclusively with an insurer to find a modelling analyst with experience building models from beginning to end and high proficiency in Python and R. This role reports directly into the Lead Pricing Data Scientist and has a huge amount of autonomy. Those from both a GI and Life background are encouraged to apply. If you have a keen interest in modelling and programming please reach out
An incredible opportunity to join a regulatory body to strengthen their capability for all Insurance supervision and regulation. The role holder will support the wider team across the full life-cycle from policy development and research through to negotiation and implementation. You’ll need to be a qualified Life Actuary with at least 1-2 years post-qualified experience and sound experience in Capital requirements and understanding of insurance liability valuation.
I am looking for an actuarial associate who is either looking to continue with exams or even stopped that wants to be part of this extremely profitable Lloyds business. A varied role, with Quarterly Reserving, Reserve Risk and S2TPs ownership. An opportunity to manage for those seeking to step in to a management positions to. Very flexible working policy. Those from a personal lines background or consultancy that want to move in-house are also encouraged to apply.
c.wright@gravitasgroup.com | 07765 134 727
c.wright@gravitasgroup.com | 07765 134 727
c.wright@gravitasgroup.com | 07765 134 727
Multi-Function Actuary - Lloyd’s, London / WFH, up to £95,000 + competitive bonus & benefits
Senior Capital Actuary – Igloo, London / WFH, up to £130,000 + competitive bonus & benefits
Reserving Actuary, Commercial & Speciality, London/WFH, up to £90,000 + competitive bonus & benefits
A high performing managing agent is looking for a nearly or newly qualified actuary to play a critical part in their pricing function, whilst supporting the capital and reserving functions. The split of the role will depend on the successful candidate’s prior experience, their personal preference and the changing demands in the environment. Actuaries who are looking for a diverse opportunity within the Lloyd’s market are encouraged to apply as long as you’re already or almost qualified and have GI UK experience.
I’m working with a top performing Syndicate who want a Capital Actuary to come in and take over their internal modelling strategy. The role differs from traditional capital opportunities as the regulatory and validation requirements fall outside of your day-to-day responsibilities so it’s a great opportunity to further your modelling and technical skills within a Lloyd’s environment. The ideal candidate will be qualified but those who are making good progress with their exams and are highly motivated for their career progression are also highly recommended to reach out.
A Syndicate is looking for an experienced actuary with extensive reserving experience in either London or Lloyd’s to join their team. You’ll report directly to the Head of Reserving and be involved in the reserving process from start to finish with ad-hoc project work. There will be the opportunity to present at board level along with working closely with finance teams so strong communication skills are required. The ideal candidate will have reserving experience within London or Lloyd’s and exposure to capital modelling or pricing will be highly beneficial
c.stewart@gravitasgroup.com | 07808 117 802
c.stewart@gravitasgroup.com | 07808 117 802
c.stewart@gravitasgroup.com | 07808 117 802
Actuary – M&A – Reinsurance, London, up to £100,000 + competitive bonus & benefits
Life Actuary - Reporting, London, up to £85,000 + competitive bonus & benefits
Longevity Actuary – Reinsurer, London, up to £110,000 + competitive bonus & benefits
An exciting opportunity to work with a leading Reinsurer in London in a more non-traditional capacity to work alongside Insurance, Investment and M&A professionals. You’ll need to be a qualified Life Actuary (or nearly qualified) with a minimum of 4 years working experience, ideally within a transaction focused role.
A unique opportunity to work for an Insurance start-up (Life) in their growing Reporting team. So far the team consists of 3 employees but with ambitious growth plans over the coming 12 months across the business, this is a great opportunity for someone wanting a role that offers more breadth of experience to upskill. You’ll need to be a nearly or newly qualified actuary with a minimum of 3 years’ experience. This can be gained from a Consultancy or Insurer.
A leading Reinsurer in London is seeking an experience Longevity Pricing Actuary to join their team in London. This is a role with a reputable brand where there already is an existing team of 6 given the nature of what the team do, this offers a lot of autonomy in the role. You’ll need to be a qualified Life Actuary with at least 1-2 years PQE and, specific knowledge and/or experience of Longevity Risk.
a.gryson@gravitasgroup.com | 07523 342 006
a.gryson@gravitasgroup.com | 07523 342 006
a.gryson@gravitasgroup.com | 07523 342 006
Senior Capital Actuary, London / WFH, £75,000 - £100,000 + competitive business & benefits
Pricing Actuary London / WFH, up to £85,000 + competitive bonus & benefits
IFRS17/Reserving Contractors London/WFH, £950 - £1,300/day
We have partnered with a leading Lloyd’s / LMKT player with a footprint in all the key markets who are looking for an ambitious individual looking to move into the capital space or take a step up in their career. Work will include but not limited to, Capital Management, Validation, ORSA, Parametrisation, Model Manipulation as well as reporting results to the wider group and regulators. Those who have a non-life background and want to move in to the capital space should reach out.
A diverse role has come about to work on the Company and the Syndicate business for a small but growing team. You’ll be involved in the building, development and maintaining of the pricing models along with portfolio reviews. The ideal candidate will be nearly / newly qualified with LMKT experience. Those in Personal Lines wanting to move are encouraged to apply
This leading global insure are looking for multiple contractors for their IFRS17 project and BAU reserving team. Those with IT/ Reserving systems background are encouraged to apply.
rupa@gravitasgroup.com | 07543 176 000
rupa@gravitasgroup.com | 07543 176 000
rupa@gravitasgroup.com | 07543 176 000
MEET THE TEAM Kirsten Quarman
Rupa Pithiya
Arabella Cooke
Debbie Jackson
Charlie Stewart
Charlotte Wright
Alyssa Gryson
See something you like?
REACH OUT TODAY! actuarial@gravitasgroup.com
One of the fastest growing actuarial teams in the UK - already #1 in Asia Pacific DECEMBER 2021 | THE ACTUARY | 51
ACT recr JanFeb22.indd 51
24/01/2022 16:42
TI
ES 0+ ANCI 30VE VAC
AC
At the back Appointments
Contact us now if you want to make a difference. CHIEF ACTUARY - RESERVING
HEAD OF PRICING (NORTH AMERICA)
SENIOR RESERVING MANAGER
Qualified
Qualified
Qualified
NON-LIFE LONDON
STAR7219
SENIOR MANAGER - LONDON MARKET Qualified
Leading Global Consultancy
NON-LIFE LONDON
STAR7248
CAPITAL SOLUTIONS, LEGACY & M&A Qualified
Reinsurance Broker
NON-LIFE LONDON
STAR7229
(Re)Insurance Group
NON-LIFE BERMUDA / LONDON
STAR7236
LEAD REPORTING ACTUARY Qualified
Global Leader
NON-LIFE LONDON / LEEDS
STAR7256
FIRST ACTUARY IN THE BUILDING
London Market
NON-LIFE FLEXIBLE / AGILE
STAR7303
CAPITAL ACTUARY
Qualified
Specialist Global Insurer
NON-LIFE FLEXIBLE WITH TRAVEL
STAR7220
PRICING MANAGER
Qualified
Major Global Group
NON-LIFE LONDON
STAR7249
Qualified
Managing Agency
NON-LIFE LONDON
STAR7261
CLIMATE CHANGE & TRANSFORMATION
CAPITAL MODELLING ANALYST
SENIOR RESERVING & REPORTING
Qualified
Part-Qualified / Qualified
Part-Qualified / Qualified Leading Specialist Reinsurer
Leading-Edge Global Consultancy
NON-LIFE LONDON
STAR7284
RISK ACTUARY Part-Qualified / Qualified
Major Insurer
NON-LIFE FLEXIBLE
STAR7270
PLANNING ACTUARY
Global Insurance Group
NON-LIFE LONDON / SOUTH EAST
STAR7301
Leading Insurer
SENIOR PRICING ACTUARY
Part-Qualified / Qualified
Part-Qualified / Qualified Major International Reinsurer
Major Global Reinsurer
NON-LIFE INTERNATIONAL
STAR7307
Qualified
Major Global Consultancy
HEALTH NON-LIFE LIFE GREATER LONDON STAR7271
ALL FIELDS FLEXIBLE
CAPITAL ACTUARY
ASSISTANT LIFE ACTUARY
Qualified
Insurance Group
LIFE SOUTH EAST / SOUTH COAST
STAR7260
Qualified
Market Leader
LIFE WIDER FIELDS LONDON
STAR7263
Qualified
STAR7177
Large Insurer
LIFE BIRMINGHAM / HYBRID WORKING
Qualified
NON-LIFE ZURICH
STAR7306
VALUATIONS ACTUARY Part-Qualified / Qualified
Large Mutual
LIFE SCOTLAND
STAR7269
RISK REVIEW ACTUARY STAR7304
IFRS17 REPORTING ACTUARY
HEAD OF DATA SCIENCE
STAR7217
PRICING TOOLS EXPERT
SENIOR MANAGER - SUSTAINABILITY
Part-Qualified / Qualified
NON-LIFE LONDON
Leading Global Reinsurer STAR7300
ASSOCIATE DIRECTOR - PROTECTION
Major Global Insurer
LIFE SOUTH WEST
Part-Qualified / Qualified LIFE LONDON
STAR7280
Part-Qualified / Qualified
Leading-Edge Firm
LIFE LONDON
STAR7294
TECHNICAL LEAD - MODEL CHANGE
RETAIL PROTECTION PRICING
MACHINE LEARNING CONSULTANT
Part-Qualified / Qualified
Part-Qualified / Qualified
Part-Qualified / Qualified
Leading Employer
LIFE SOUTH COAST
STAR7312
PENSIONS ACTUARY Qualified
LIFE SOUTH WEST / FLEXIBLE
Major Insurer STAR7254
SCHEME ACTUARY Specialist Consultancy
PENSIONS MIDLANDS
STAR7238
Qualified PENSIONS FLEXIBLE
Leading Global Consultancy
LIFE WIDER FIELDS FLEXIBLE
STAR7251
ALM CONSULTANT OR MANAGER Major Consultancy STAR7297
Qualified
Major Global Firm
INVESTMENT LONDON
STAR7241
Antony Buxton FIA
Louis Manson
JJoanne O’Connor
MANAGING DIRECTOR
MANAGING DIRECTOR
OPERATIONS DIRECTOR O
PARTNER P
+44 7766 414 560 antony.buxton@staractuarial.com
+44 7595 023 983 louis.manson@staractuarial.com
+ 7739 345 946 +44 jjoanne.oconnor@staractuarial.com
+ 7545 424 206 +44 ir irene.paterson@staractuarial.com
Jan Sparks FIA Ja
Peter Baker
Jo Frankham
Paul Cook
PARTNER PA
PARTNER
PARTNER
PARTNER
+44 7477 757 151 jan.sparks@staractuarial.com ja jan
+44 7860 602 586 peter.baker@staractuarial.com
+44 7950 419 115 jo.frankham@staractuarial.com
+44 7740 285 139 paul.cook@staractuarial.com
Clare Roberts
Satpal Johri
Diane Anderson D
Shaneene Reid
ASSOCIATE DIRECTOR
ASSOCIATE DIRECTOR
SSENIOR CONSULTANT
SENIOR CONSULTANT
+44 7714 490 922 clare.roberts@staractuarial.com
+44 7808 507 600 satpal.johri@staractuarial.com
+ 7492 060 219 +44 ddiane.anderson@staractuarial.com
+44 7517 994 815 shaneene.reid@staractuarial.com
52 | THE ACTUARY | JANUARY/FEBRUARY 2022
ACTUARIAL POST RECRUITER OF THE YEAR 2012 . 2013 . 2014 . 2015 . 2016 . 2017 . 2018
ACT recr JanFeb22.indd 52
+44 20 8176 0473
Irene Paterson FFA Ir
Star Actuarial Futures Ltd is an employment agency and employment business
Leading Reinsurer
staractuarial.com
staractuarial.com 24/01/2022 16:24