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PENSIONS A MARATHON NOT A SPRINT
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EDITOR’S NOTE As the delayed Olympics 2020 in Tokyo brings Team GB an impressive haul of medals which includes a bronze medal in the Skateboarding from 13-year-old Sky Brown and must beg the question for all of us, what was the biggest achievement you had as a 13 year old, I look forward to your answers, however in the meantime a huge well done to Sky and all the competing athletes at the Olympics. This month’s magazine continues with the Olympic theme from Dale Critchley as he uses the well-worn adage, but nonetheless apt, pensions are a marathon not a sprint. We also have Bruce Penson from Pro Drive urging insurers not to get left on the starting blocks against ever more sophisticated cyber threats. Big Data once again is the subject of conversation from Jeffrey Skelton the MD at LexixNexis as he looks at disruption and the value of Big Data to insurers. Elizabeth Stone from PwC writes about the increased focus on ESG from investors and regulators alike. Our regular authors are also present to give their insights on our industry in a busy magazine. Please check our website for the launch this month of our 2021 Actuarial Post Awards when the race to find our 2021 Actuary of the Year begins.
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CONTENTS 10 News
Movers & Shakers
Data To Deliver
Solvency II & Beyond
Lights, Camera, Actuary
NEWS AUGUST Key considerations when outsourcing the Actuarial Function Prudential Regulation Authority (PRA) Supervisory Statement SS2/21 on outsourcing and third party risk management gives firms plenty to think about. In this article we outline some aspects firms should consider when outsourcing their Actuarial Function, including having
appropriate back-up arrangements and exit plans. And we discuss whether similar principles might be extended to internal actuarial departments. By John Hoskin FIA, Partner at Barnett Waddingham Outsourcing of the
Tik Tok is the clock ticking for pension communications At a recent DC team meeting, one of our new graduates presented on the history and features of Tik Tok. I must admit that while I use social media – Facebook, Instagram, Twitter – I’ve only seen limited amounts of Tik Tok videos. And where I have seen content, it’s generally been of dogs or sea shanties! It got me thinking, could Tik Tok – or whatever is the next “big thing” in social media - be the answer to introducing a younger generation to the importance of saving for their future? READ MORE
Actuarial Function In SS2/21 the PRA makes clear it considers outsourcing of a key function, such as the Actuarial Function (AF), a “material” outsourcing arrangement. Firms that outsource the AF, or are thinking of doing so, need to take action to comply READ MORE
Resilient TPR supporting the industry in a year of lockdown Despite the unprecedented challenges of COVID-19, The Pensions Regulator (TPR) continued its clear, quick and tough approach to respond to the needs of the pensions industry and meet its objectives, according to its Annual Report and Accounts for 2020-21 The report highlights how TPR provided clear guidance and easements to help protect savers and employers during the pandemic. In addition, it made positive progress in preparing for new legislation set out in the Pension Schemes Act 2021 while launching a bold new strategy to put the
saver at the heart of all its work. TPR Chair Sarah Smart said: “This has been an extraordinarily tough year for everyone and I am immensely proud of how TPR READ MORE
NEWS Actuarial Reporting Automation survey Global life and property and casualty (P&C) insurers want to improve the efficiency and auditability of their processes and close the gap between their current use of automation and where they aspire to be in five years. These key learnings stem from a new survey by Willis Towers Watson. The Actuarial Reporting Automation survey queried life and P&C insurers on how they use automation today in their valuation (life) and reserving (P&C) processes and where they aspire to use it in the future. “Insurers are looking to transform actuarial processes to achieve greater efficiency and efficacy, enabling more granular analysis and more frequent and timelier insights from their data,” said Max Drannikov, Global Product Leader, Business READ MORE
Mental health and cyber security are top people related risks
FCA loses 323 electronic devices including desktop computers The Financial Conduct Authority (FCA) has misplaced a total of 323 electronic devices estimated to be worth £310,600 over the last three years, according to official figures. The FCA, which operates independently from the UK government, is financed by charging fees to its members, and last November issued a warning to businesses to ‘be responsible when handling client data’. Details of the extent of device losses was obtained by niche litigation practice Griffin Law using the Freedom of Information (FOI) Act. The FOI revealed that over the three most recent financial years (FY 18/19, 19/21 and 20/21) hundreds of laptops, tablets, desktops
and mobile phones were reported as lost or stolen by FCA staffers. In the most recent financial year, overall lost devices surged by 369 per cent, with 197 devices being reported missing worth an estimated £193,400. This compares to losses of 42 devices in 2020 worth around £41,500 and 84 in 2019 worth an estimated £75,700. Tablet computers topped the lost devices list, with 201 lost and 14 stolen across the three financial years, worth an estimated £215,000 in total. A staggering 123 of these devices were reported as lost or stolen in 2021. Next was laptops, with 88 going missed over the READ MORE
Rapid changes to working conditions resulting from the COVID-19 pandemic have exposed gaps in the ability of organisations to respond to risks associated with their workforces, according to a new report by Mercer Marsh Benefits (MMB). Conducted a year after the declaration of the pandemic, UK respondents in the global survey of over 1,300 HR and risk management professionals ranked deteriorating mental health; cybersecurity, and talent attraction, retention and engagement as the top people-related risks facing firms. According to the report, Turning people risk into a business opportunity, the main barriers to addressing these issues were a lack of senior leadership engagement and a lack of skilled resources to READ MORE
MOVERS & SHAKERS The latest moves and appointments from the actuarial marketplace Hymans Robertson promote eleven to Partner in centenary year
Liberty Mutual appoints new Chief Actuary Reinsurance
Hymans Robertson has promoted eleven colleagues to Partner. This is the highest number of new Partners in the firm’s history and comes as it celebrates its 100th birthday and reaches the milestone of 1000 employees. Those newly promoted to Partner are Ailsa Dunn, Alan Garbarino, David McGruther, Jitske VanLonden, Joanne Gyte, John Pyburn, Karen Gilchrist, Lucy Steers, Robert Bilton, Sally Eagers and Shoko French. Commenting on the latest Partner promotions across the firm, John Dickson, Senior Partner, Hymans Robertson said: “As our firm grows, our sustainability and strength relies on our Partners not only being successful and skilled leaders in their specific areas, but also on their ability to embrace the highly collaborative approach that is at the heart of our firm. READ MORE
AIG appoint UK Life Chief Actuary
Liberty Mutual Re (LM Re), part of Liberty Mutual Insurance Group, announced the appointment of Hetul Patel as its new Chief Actuary, Reinsurance. Initially based in Singapore, Patel will relocate to Cologne, Germany later this year. Patel takes up his new role with immediate effect and will work alongside Brian MacMahon the current Chief Actuary, Reinsurance who retires at the end of 2021. Patel reports to Dieter Winkel, President, LM Re and Chris Short, Chief Actuary, Liberty Specialty Markets.
Award winning Actuary appointed by Stoneport Stoneport, the new DB pension consolidator scheme from Punter Southall, has expanded its team with the appointment of Margaret de Valois as a senior consultant, who will play a major role in driving business growth. Margaret will advise and guide Stoneport’s clients through the consolidation process and help with new business and developing the client portfolio. An award-winning actuary, Margaret brings to Stoneport over 20 years’ experience in the pensions industry advising clients on pension strategies. She has a track record of growing financial service firms, both as an independent consultant and as an executive leader READ MORE
Patel will be responsible for driving READ MORE
AIG Life has announced the appointment of Michael Aitchison as Chief Actuary.
London Group after five years as Financial Risk Director.
Aitchison joins the UK life insurance arm of AIG on 2nd August from Royal
He brings a wealth of experience, having been responsible for oversight of
financial and insurance risks and developing the actuarial and capital aspects of the risk appetite framework, as well as embedding and developing the Solvency II internal model. READ MORE
CITY DEALINGS Keeping up to date on acquisitions, mergers and the dealings of companies in the city
Aon and Willis Towers Watson mutually agree to end agreement Aon and Willis Towers Watson have announced that the firms have agreed to terminate their business combination agreement and end litigation with the U.S. Department of Justice (DOJ). The proposed combination was first announced on March 9, 2020. “Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice,” said Aon CEO Greg Case. READ MORE
Aviva announce 900m bulk annuity deal with Kingfisher SWISS RE DIVEST PHOENIX SHAREHOLDING FOR 437 MILLION READ MORE
Aviva announces it has completed a £900m bulk purchase annuity transaction in July, with the Kingfisher Pension Scheme. Kingfisher plc is a British multinational retailing company headquartered in London, which manages brands including B&Q and Screwfix. Aviva will insure the defined benefit pension liabilities for over 8000 members, taking responsibility for the investment and longevity risk of these members from the Plan. Members will see no change in the amount of their benefits or the way in which they are paid as a result of the transaction. READ MORE
Greg Case adds; “The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point.”
Phoenix Group completes bulk annuity transaction with Agfa Phoenix Group, the UK’s largest longterm savings and retirement business announces that it has completed a £230 million bulk purchase annuity transaction with the Trustee of the Agfa UK Group Pension Plan. This buy-in is the Plan’s first transaction, covering 70% of its pensioner liabilities. As part of the Trustee’s long term de-risking strategy, the Company provided additional funding support which facilitated a pensioner buy-in, increasing the long-term security of all members’ benefits. READ MORE
THE CONSUMER PENSION JOURNEY IS A MARATHON, NOT A SPRINT
The Olympics Games in Tokyo brings to my mind that well-used phrase – it’s a marathon, not a sprint. A phrase which accurately describes the pension journey for scheme members - which is front of mind now, given the joint call for input by the Financial Conduct Authority (FCA) and the Pensions Regulator (tPR) on the Consumer Pension Journey. The paper seeks to address a wide range of issues impacting consumers’ ability to save for retirement. The first thing to consider is that the journey to retirement is neither linear, nor homogenous. The pension journey isn’t a set distance, over a set course. It’s difficult for anyone to pace themselves when they don’t know where the
finishing line will be. There is always the risk of unexpectedly needing to change course any time, and onto what might be a more difficult route. The Consumer Pension Journey paper sets out the key regulatory communication milestones. For example, when providers must send out retirement communications. However, unless an individual has planned for their retirement in detail or aligned their life plan with the scheme’s retirement age, providers could be ringing the bell for the last lap either too early or too late. Those rare occurrences where an athlete in a distance race sprints for the line, only to find there’s another lap to go, illustrates the consequence of a mistimed communication.
The key is to communicate effectively over the whole of a scheme member’s life. Continuous engagement, helping consumers to plan, take ownership and make effective decisions. The paper points out many of the barriers to achieving this position. Pension professionals who work in the industry have a head-start, and even we know how difficult it is to get all those pension saving decisions right, and the different skills and knowledge required. Expecting all consumers and workplace employees to train to become the pension equivalent of Katarina Johnson-Thompson is probably an unrealistic expectation. Increased member engagement is an important goal, but they can’t be expected to do all the heavy lifting by themselves. A workplace pension is a team pursuit. Governance is vitally important to make sure that pension schemes are effectively run and provide a framework within which members can make their own decisions. Like the coxswain of an eight-person rowing team, trustees and provider committees are there to ensure that everyone involved in the pension scheme is pulling in the same direction. We should also consider the role of individual professional advice in the consumer pension journey. It’s something that can be easily disregarded, especially by those who feel confident in their ability to manage their financial affairs. To help maximise outcomes, it should be recognised that even the world’s most talented athletes are helped by having a coach. The paper also looks at the ‘structural’ barriers to achieving retirement goals. One of the biggest successes in improving pension
provision has been automatic enrolment. However, automatic enrolment only works for the employed and works best for those who earn the most. This can disadvantage some socio-economic groups who are disproportionately employed in lower paid jobs. Also, women who work fewer hours to assume the lead share of caring responsibilities, as evidenced by the gender pay gap. Anyone who has read the story of Helen Glover’s return to Olympic rowing over the past 12 months can’t fail to be impressed by how a parent to three children under three has been able to return to top class competition. Helen’s commitment has been amazing. She’s overcome set-backs to achieve her goals, while all the time balancing being a parent. As well as Helen’s personal drive and strength, what also struck me were the additional factors that played a part in helping to achieve her goal. The support of Helen’s partner, in sharing the child-care responsibilities, appeared to be key. As was the ability to work flexibly – training at times which allowed for a good work-life balance. And, lastly, the support from British Rowing who paired Helen with Polly Swan, who was also returning to rowing. Ultimately, helping both athletes achieve their goal. While not exactly a job-share, the analogy is an obvious one. There are some important lessons here for all employers and working parents. It could be argued that the Tokyo Olympics is far more exciting than pensions. However, I think the pensions industry, individuals and employers can all learn some valuable lessons from these super humans when it comes to considering the consumer pension journey.
by Dale Critchley Policy Manager Aviva page 11
DATA TO DELIVER COMPETITIVE EDGE
At the start of 2020, LexisNexis Risk Solutions hosted its annual Customer Advisory Meeting in London and at the start of that event we asked our audience of insurance professionals, how ready they were for disruption. Little did we know that what was ahead of us. The entire world, including the global insurance industries has been disrupted by the COVID-19 pandemic. Even though these disruptions have brought about a host of challenges over the last 15 months, it has also accelerated opportunities and allowed agile insurance providers to view disruption as a way to find new ways to serve customers and in doing so gain competitive advantage. For example, here in the UK, due to the change in the way people are now living and working, we’re seeing the market accelerate short term policy products, providing consumers with more flexibility in their motor insurance to accommodate for fewer car journeys being made. At the centre of innovation is the ability to leverage data. The pandemic has put the power of data on a world stage, in a whole new way. However, to put data at the heart of decision making you need to work out what’s just interesting data as opposed to meaningful
insights that will help decide the next best action – whether that’s how to price a policy or manage a claim. This difference is vital given the growth in data sources which could easily overwhelm and distract. We must all focus on meaningful insights because they create a shift in how we think, how we evolve, and how we address a challenge to gain a competitive advantage. To demonstrate this point, last year we invited insurance providers to sit down with us, look at the data that we have, and the data that they have and see if we can bring those things together in order to bring more value to their business. Broadly, we learned three different things sometimes the data didn’t tell us anything so it can be set aside, or the data reconfirmed what the insurance provider knew or had suspected, so getting confirmation from a third party was very helpful. The real opportunity came about when we found ways to create solutions that really solve industry problems using the meaningful insights our data and the insurance provider’s data revealed. For example, we can tell insurance providers about someone’s policy
behaviour, we can tell if they renew with the same provider, switched, or left the market altogether.
in shopping behaviour, or if there is an increase in those who have exited the market, by market segment.
Seeing these behaviour trends is important because a shift in behaviour or being able to identify a new pattern in behaviour, could be an indicator of the propensity to file a claim or be identified for fraudulent activity. The pandemic has disclosed some of these behaviours and exposed how this type of disruption can alter consumer policy behaviour abruptly.
We can also see how many times people have modified their No Claims Discount value and the number of mid-term policy adjustments made prior to a claim, which could also be a potential indicator of fraud.
During the pandemic we actually saw a decline in the number of people cancelling their policy and there have been fewer gaps in insurance cover during this time. We expected that financial stress, mixed with repeated lockdowns would have had a significant impact on the number of consumers seeking new motor insurance. On the contrary, consumers appeared to have invested their newfound time at home to shop around more for a competitive price. And therefore, switching providers. These interesting data sets can be leveraged to address a challenge and influence an insurance provider’s market strategy. Going further, to look at the policy behaviour data from a benchmarking perspective, we can see if there are any significant shifts in the market as whole and by market segment – broker – large and small - intermediated insurer, direct insurer. For example, we can identify the number of people renewing with their existing insurance provider, or if there’s a shift
Cancellation trends can also provide predictive attributes on the future claim risk associated with a consumer. We know there was an unexpected decrease during the pandemic so if a consumer did cancel their motor insurance cover, insurance providers need to understand the context to help support fair pricing when they take out a new policy. A cancellation is truly meaningful from a pricing perspective when you can look at it from a wider perspective. This past year or so has created pressure points and pain points across every industry, but it’s also opened up some unexpected advantages. Past policy and quote behaviour data is giving the insurance market the power to adapt to changes in risk for improved pricing accuracy at new business and renewal. With the FCA’s pricing rules on the horizon, attaining a more granular understanding of risk will heighten in importance. With these types of meaningful insights, insurance providers might feel empowered to change how they approach their business and gain competitive advantage.
by Jeffrey Skelton, MD for Europe, Lexis Nexis Risk Solutions page 13
GREEN IS THE NEW BLACK
by Tom Murray Head of Product Strategy LifePlus Solutions, Majesco There was a time when it was regarded as a sign that a person was boring if they just talked about the weather. That’s no longer true as the alarming rise in extreme weather events happening all over the world is emerging as a huge concern for everyone. These events show that there is a change happening driven by the climate altering in unexpected ways across different parts of the globe. The result is a big rise in the risks to life, health and property for many people across the planet. Places in North America that rarely experienced excessive heat are now having heatwaves as a regular occurrence and for the people there, the risk to them and their property is very different from what it was before. At the same time, much of Europe is now experiencing extreme levels of flooding in the middle of summer, an unheard of problem that is damaging property and taking lives whilst suppressing economic activity. For the insurance industry, this demands a major shift in the way risks are assessed for various regions as the probability of fire in properties that were
previously at normal levels are now increasing in line with the incidence of wildfires. Similarly, deaths occur more often in areas experiencing excessive temperatures, either hot or cold, than they do in more temperate climates. The bottom line is that as the climate changes in different parts of the globe, more countries experience more extreme weather. The knock on effect means that different hazards will emerge in places and among populations who were previously at much lower risk. It is the job of the insurance industry to be creative and come up with new underwriting approaches and new products to help people protect themselves against these risks. As the demand in the market rises for products more aligned to the risks that people are experiencing, rapid innovation is going to be a key attribute for the life and pension company of the future. Life and P&C insurers hold data that allow them to assess the risks their clients are exposed to. However, the models are going to have to get bigger and more dynamic as companies try to assess the
impact of climate change and the effect it is likely to have on the insurance market of the future. Given the scale of the data involved this is an area where insurers are going to have to get good at using machine learning and artificial intelligence techniques in order to manage these huge volumes of data and to trawl through it quickly enough for the results to be relevant. Insurers needs to partner with experts in other sciences and industries to get more information and to take a wider view of the impact of climate change. Working with government and industry groups to try to mitigate climate risk in different areas will be key. Reducing policyholders’ risk by building resilience will ultimately benefit the company as it reduces its exposure to the risks posed by climate change and will allow them to offer insurance at a price that is reasonable for the consumer. There is also the brand image to consider, with insurers increasingly trying to reduce their own carbon footprint by using digital methods for
interactions between their customers and staff. The benefit to the planet of reducing unnecessary travel was shown clearly during the heaviest days of the lockdowns across the planet as energy related greenhouse gas and air pollutant emissions in OECD countries dropped by seven per cent. If the climate situation continues to deteriorate, it is going to become more important for companies to show that they are playing their part in trying to reduce their impact on the planet. Clearly this is a huge subject and cannot be addressed in any depth in a single magazine article. However, Insurers will be greatly affected by climate change and have a big role to play in dealing with it, both from the point of view of reducing their own footprint and in devising solutions to help others mitigate the risks arising from the changes that are already underway. Any insurer that isn’t working on understanding their role in this and positioning their company to be a leader in dealing with the challenge is taking a major risk themselves, one for which they have no insurance.
RETIREMENT PUZZLE TALKING ABOUT MY POPULATION Almost all predictions are wrong. This isn’t particularly exciting or differentiated, but people are pretty bad at predicting what happens next. While we tend to see ourselves striding from the past forward into the future, the ancient Greeks supposedly saw themselves as peering into the past and occasionally getting whacked from behind by the future. If true, their visualization was broadly more reflective of reality. However, there are certain fields in which you can make fairly good predictions, and demographics can be one of them. For example, if I know how many 20-year-olds there are in the world, I can hazard a pretty good guess as to how many 30-year-olds there will be in 10 years’ time. These predictions could still be wrong (especially during wars or pandemics), and at a national level they can be shifted by net immigration; but you can still make a pretty good guess over a reasonably long horizon. So what do the demographics look like in the UK? For one thing, fertility rates are low. The total fertility rate (TFR) measures the number of children a woman will have if she has the average number of children at each age (and average life expectancy). To keep a stable population, the TFR needs to be just above 2, to offset deaths. In the UK, it is 1.65 and has been around that figure since the 1970s. The number of births per year is lower because the UK has an older population.
Already, then, this would imply a declining population. But the story gets worse because we can extrapolate how the population evolves (albeit somewhat crudely). We assume mortality in line with 2017-2019, 1% improvement per year, and that everyone has 1.65 children when they hit 30 (the median age for a woman to have her first child is 29, so for all children it will be slightly higher). The results are not very sensitive to any of these assumptions; for context, the picture is basically the same even with a fertility rate of 2. What we get is a declining working-age population and a rapidly growing pensioner population. Since pensioners make up the bulk of welfare state costs (via pensions and medical care), this would equate to a roughly 80% increase in those costs, funded by a working population roughly 15% smaller. Some of this can be partially mitigated by having everyone work longer and retire later, but as the experience in Japan has shown, managing an ageing population can be extremely difficult.
However, there is a deus ex machina missing here, and that is immigration. Needless to say, it is a complex subject with several societal and cultural nuances. However, at a high level, the maths is pretty clear. The UK needs an influx of young people over the next few decades to keep the economy going. Could it be, then, that immigration is the answer we are looking for?
by Alex White Head of ALM Research Redington page 17
SOLVENCY II AND BEYOND FUND MANAGERS EMBRACE ESG AS INVESTORS AND REGULATORS ADD WEIGHT
in ten (82%), said they had an ESG programme in place, with virtually all of these viewing this as a transformational exercise to drive fundamental change across their organisations.
The increased focus on environmental, social and corporate governance (ESG) issues is fundamentally altering the asset management industry, with regulatory imperative and investor demand driving the change. Our new survey shows that client pressure and the post-Covid realignment of the global economy have added to the regulatory imperative around ESG products The in-depth study across asset managers with £15.5trn of assets under management found that three-quarters are being significantly influenced by both investors and regulations - though the majority said they were not fully prepared for major regulatory changes. And, with governments investing in a green recovery from a pandemic that has starkly revealed the potential impacts of global systemic risk, the pressure is likely to remain. While rule changes are front of mind given the weight and diversity of the agenda, asset managers said even without any regulatory intervention, their path had been set by investors’ desire for more ESG products. Almost two-thirds who responded (63%) said there was a significant opportunity to develop new product ranges in response to changing consumer preferences on ESG. Of those asset managers surveyed, more than eight
However, many firms are still reacting to incoming regulatory initiatives and to new investor demand in a tactical, bottom-up sense, and have not yet formulated a comprehensive strategic response. The scale of demand for ESG products is revealed as the UK prepares to host COP26 in Glasgow in November. One quarter of asset managers surveyed said the conference - which is expected to deliver the biggest shake-up to global environmental policy since the UN Paris Agreement was signed in 2016 – was a significant driver of their increasing focus on ESG in recent months. However, while the Paris Agreement led to an acceleration in ESG products, COP26 is likely to lead to a tightening of UK regulation, such as the UK’s plan to make climate-related disclosure mandatory by 2025. This adds to regulations already in play, such as the EU’s Sustainable Finance Disclosure Regulation (SFDR). The research follows a previous report by PwC,
which revealed that managed funds focused on ESG could account for more than half of mutual fund assets by 2025, with more than three-quarters of institutional investors in Europe expected to stop buying non-ESG products.
research suggests that respondents are not yet fully prepared for the incoming UK and EU regulations. Only 25% and 13% of respondents said that they are fully prepared for EU SFDR and EU Taxonomy Regulation respectively.
By 2025 such funds are expected to have seen compound annual growth of 28.8% since 2019, with regulation and investor demand both driving this change.
Asset managers have an active role to play in addressing societal and environmental challenges and in helping to ‘build back better’. But to fulfil this role, firms will need to be clear on their ambition across the full range of ESG factors. Ultimately, those who are prepared for transformational change will see better results.
The wave of ESG regulation worldwide is one of the leading drivers of change, with global initiatives progressing in different ways regionally and nationally, including both in the European Union and the UK itself. Cross-border differences in regulations are creating a challenge for firms however, with almost two-thirds (63%) saying there was a lack of international consistency in ESG regulation. The
But if firms want to remain relevant and stay ahead of the competition, they should now think strategically rather than tactically, considering fundamental change across their organisations. Fundamental and comprehensive change will take time and sustained commitment, so asset managers need to think strategically rather than tactically.
by Elizabeth Stone, Asset & Wealth Management Leader, PwC UK
search & selection
LIGHTS, CAMERA, ACTUARY!
Bolton Associates’ focus is specifically in the non-life actuarial space; the largest dedicated GI actuarial specialist in the market. Working throughout the insurance market, the consultants at Bolton Associates offer an exceptional service, managing the process with the utmost tact and respect for all parties. We are passionate about our market, taking great interest in the insurance world as a whole, keeping up with trends and changes, and maintaining our everexpanding network. We are good at what we do, because we enjoy what we do.
The next focus for Bolton Associates’ Spotlight page, is an interview with one of the actuaries who dedicates their own time to sitting on GI Committees or establishing Working Parties, for the benefit of the wider GI Actuarial Profession. The Actuarial Profession relies heavily on volunteers, who are happy to design and implement annual events and conferences, or who are keen to present and share their expertise and findings, for the benefit of the profession and their peers. From the GI Board, to GILL, GIRTL and the GIRO Conference, Zoe Bolton will be talking to the actuaries who dedicate their time, and contribute to the continuous development of the actuarial community, and getting a brief insight into their career paths and visions for the future. This month Zoe talks to Laura Curtis, Risk Actuary at Brit Insurance.
What is your current role, and how did you end up in it?
out which pieces to work on what level of depth to do them to so that you are providing maximum value.
I’m an Actuary in the ERM and Analytics team at Brit, with a current focus on the Ki syndicate. Before moving to Brit I had a variety of actuarial roles in pricing, reserving, capital and risk working for personal lines, commercial lines and Lloyd’s managing agents. My first role was in private medical insurance before I moved into GI.
How does your actuarial training and background assist in your day-to-day role now?
What is the defining moment of your career to date? I don’t think that there is any one individual moment that particularly stands out, I’ve had some good managers who have pushed me, giving me opportunities that have broadened my skill set and supported me outside activities, such as volunteering for the IFoA. If I had to pick a single event that sticks out then I’d probably pick qualifying. In your opinion, what prepared you best to take on your current role?
My training is always ongoing and I use it in everything I do day-to-day, whether it’s using specific technical aspects or applying the wider skills sets. When did you first join the Institute & Faculty of Actuaries, and what advice would you give to those students looking to emulate your career path? I became a member in 2010, after sitting my first exam as a non-member and having worked for a couple of years in actuarial roles. I would recommend strong study planning, volunteering (opportunities at work & IFoA), challenge yourself and find your balance. Most importantly build a strong network of people you can trust, find a good mentor and a good manager – these can all provide invaluable advice and have been key to my achievements. If you had your time again, what would you do, career-wise?
The wide range of roles and companies I’ve worked with provided me with a good knowledge foundation and has allowed me to see a range of different approaches and ways of working. As mentioned in the question above, opportunities to challenge myself thanks to people I’ve worked for has also had a big impact.
I would say chocolate taster, but I suspect that I don’t have a refined enough palate! In all seriousness, I’m happy with my career, I’ve learnt a lot and met some great people so I wouldn’t make any changes even if some of the risks haven’t always gone as planned.
What is the biggest challenge you face in your role within this market? Ki is the first fully digital and algorithmically-driven Lloyd’s of London syndicate. Working on anything that is a first means that your biggest challenge is often thinking about the different risks that exist and how to approach them. In risk more generally there are always a whole range of interesting pieces of work that you could do and you could do them at anything from a very high level to really detailed. As a result of this I think the biggest challenge is working out the right balance of working
Please share your favourite piece of trivia with our readers! Eleven people were born in Antarctica as part of rival claims over land there between Argentina and Chile as both countries decided that having the first nationals born there would strengthen their land claims. All eleven survived, meaning the continent has a 0% infant mortality rate. Given the 1959 Antarctic Treaty signed before the first child was born (1978) doesn’t recognise any country’s territory claims, I find the back-up plan to strengthen their claims in case the Treaty fell apart interesting.
KNOW MORE ABOUT THE METAL THE VALUE OF VEHICLE DATA IN RENEWALS Changes to the composition of the UK car parc can have a direct impact on the motor insurance sector. In 2020, the average car was 8.4 years old – the highest age on record as the pandemic stifled new vehicle uptakei. This has heightened pressure on the motor insurance market to look at ways to improve the understanding of used vehicles as part of the risk assessment process at the point of quote – in essence they need to know more about the metal.
accuracy. This type of additional insight can help insurance providers build a more accurate picture of the vehicle risk and allows them to generate a fairer premium for the customer.
With new pricing rules on the horizonii, recent innovations in vehicle data that can be delivered direct into the quote process, can not only offer a much clearer view of the vehicle for more accurate risk assessment at new business and renewal – they can provide a way to do more for the customer. Every vehicle has a unique story that can be revealed through data, which could be predictive of future claims losses and can therefore be a powerful factor in pricing. Knowing, for example, that a vehicle had a series of MOT advisories can be an indicator of risk. Or that its value has decreased at a slower pace than expected over the last few years could help improve pricing
In our work with the insurance market to deliver near real-time vehicle data direct into the quote and renewal process, we have found that insights related to a specific car can be just as powerful for underwriting as insights used by insurance providers for the person or people being insured to drive the vehicle. Leveraging highly accurate data about the vehicle’s mileage; MOT history; its valuation; the number of present and past keepers as well as the exact dates of owner changes can offer a fairer basis to assess risk and can help eliminate the chance of underinsurance and avoid disputes over the car valuation during the claim settlement. Vehicle data also helps to overcome one of the biggest issues still facing the UK motor insurance market, which is the traditional reliance on customer self-declarations at quote and renewal. At new business, vehicle data can be used to
validate questions in the quote journey – such as how long the car has been owned for, engine capacity, the current mileage and the estimated mileage for the policy duration. But it’s at renewal that this data offers huge value in the new pricing environment.Vehicle data offers an informed and legitimate reason to re-contact the customer during the lifetime of the policy. For example, the insurance provider can see that the customer’s MOT is about to expire or the value of the vehicle has increased or perhaps their car has reappeared for sale. This provides an opportunity to speak to the customer before they leave. It provides a valuable way to engage with the customer and do more for them. When the renewal quote is being calculated, the insurance provider is able to understand both the current and future valuation of that individual vehicle based on a wide range of vehicle advertisements and sales data through our recent collaboration with Cazana. This same valuation data is used by the Financial Ombudsman Service when settling vehicle claims disputesiii. They can also use MOT enrichment such as previous test dates, pass/fail, advisories, and overall trends during the current ownership period. They can see whether the customer’s mileage was as estimated in the past year or was actually above or below this level. Plus, they can look at the number of present and
past keepers as well as the exact dates of owner changes. This all builds a much more comprehensive view of the risk for pricing. As Cazana states: “Vehicles are like fingerprints. No two are the same. Each has a unique risk factor written into the metal and understanding this is the key to pricing quotes accurately and competitively.” Motor insurance costs have fallen 8.4% in the last 12 monthsiv, largely due to lower claims volumes experienced in 2020. Insurance providers now need to prepare for an increase in claims as travel starts to recover to prepandemic levels while at the same time ready themselves for a new pricing regime from January 2022v. Knowing more about the ‘metal’ within the renewal process could offer insurance providers a competitive advantage, a new way to engage with customers to support retention and the means to ensure the renewal price offered is right for the risk. In essence, vehicle data-based insights can help to solve pain points for the market when used in combination with proprietary data, high-quality, third-party data and technology. One access point to a wide array of insurance insights related to the person and the vehicle can help insurance providers navigate the multiple challenges facing the motor insurance market and do more for their customers during the lifetime of the policy and at renewal.
https://media.smmt.co.uk/uk-motorparc-2020/ https://www.fca.org.uk/publications/policy-statements/ps21-15-general-insurance-pricing-practices-market-study iii. https://marketing.cazana.com/solutions/insurance iv. https://www.consumerintelligence.com/articles/uptick-in-telematics-provision-for-older-drivers v. https://www.fca.org.uk/publications/policy-statements/ps21-15-general-insurance-pricing-practices-market-study i.
by James Burton, Snr Director of Insurance Product Management, at LexisNexis Risk Solutions page 23
HYBRID WORKING: HOW CAN INSURERS GUARD AGAINST INCREASINGLY SOPHISTICATED THREATS? Since COVID-19 reared its ugly, virus-shaped head at the start of 2020, employees have become far more familiar with the concept of remote working. And even though lockdown restrictions have been lifted, things are unlikely to go back to how they were before. The rise of home working will last long beyond the pandemic — why would staff want to give up their newfound work-life balance? But rather than going fully remote, many companies will likely take a more hybrid approach, with workers dividing their time between home, the office and even coworking spaces. Sounds like the best of both worlds. There’s just one problem: cyber security. Remote working leaves gaps for increasingly sophisticated cyber threats to creep in. So, if home working is going to become a permanent feature of business — even on a flexible basis — the ‘temporary’ arrangements deployed in haste at the start of the pandemic will need an overhaul. Especially for regulated industries like insurance, where there’s even more at stake… What are the risks?
and maintained by professionals — not home IT setups installed by people with little or no IT expertise. Now, resources are stretched. Organisations are struggling to keep hardware, software and systems up to date. Fewer businesses are deploying security monitoring tools, network firewalls or malware protection. At the same time, remote workers are using home networks (an open invitation to cyber criminals), and companies are failing to train staff in preventing cyber crime. No wonder working from home has become the new gateway for cyber criminals. These criminals saw their opportunity and grabbed it with both hands. The stats don’t lie. Cyber crime has soared since the start of the pandemic as attackers help themselves to the feast of vulnerable IT systems available. According to McAfee, cloud-based attacks increased by 630% between January and April 2020. The UN also warns that malicious emails have spiked by 600% since the end of February last year, with a phishing attack now taking place every 39 seconds.
The pandemic has changed the way we work. But it has also paved the way for hackers to target the new wave of home workers and exploit the growing use of technology.
Then there’s the issue of productivity. If staff can’t work effectively in this hybrid manner due to slow or cumbersome IT systems, how can firms expect to remain competitive, attract top talent and maintain client relationships?
Pre-COVID, most forward-thinking insurance companies would’ve implemented various measures to secure their IT equipment and systems. But these measures were based around an office IT setup — designed, installed, monitored
Businesses — particularly those in regulated industries like insurance — are now also under closer scrutiny than ever before. Clients rely on these firms and their technology and will likely conduct increased due diligence due to tightening
with cyber security developments. So, it’s well worth enlisting an advisor — either internal or external — to help.
their own cyber processes. So, you can bet they’ll be looking at security when making buying decisions. What can you do? Going out and spending a fortune on security software isn’t the answer.Yes, software solutions play a part. But cyber security is, ultimately, a people-centric problem that requires a review of processes and procedures — as well as proper technical configuration.
Why should you care?
In fact, according to Cybint, 95% of cyber security breaches are caused by human error. An annual survey conducted by Apricorn also found 58% of UK IT decision-makers believe remote workers will expose their organisation to the risk of a data breach, yet 15% have no control over where company data goes or where it’s stored. A telling takeaway about the cyber security landscape in the post-pandemic world.
Even a simple virus or malware could disrupt business productivity — or worse, result in the loss of company or client data, severe reputational damage, hefty fines or even prosecution.
Considering Statista’s recent findings that the average cost of a security breach for UK businesses is £2,670 (increasing with business size), it’s not something companies can afford to neglect.
So, what can insurance companies and other regulated industries do to secure their equipment and systems? Government schemes such as IASME Governance and Cyber Essentials are a good place to start. They help firms understand where risks lie so that they can adapt accordingly. Cyber Essentials is a UK Government standard that can help insurance firms reduce the risk from the most common cyber threats, including remote workers, by up to 80%. A Cyber Essentials certificate demonstrates that a business has made a serious commitment to tackling cyber security and will help to reassure business and private clients that their data is in safe hands. However, even with all the right intentions and certifications in place, it’s almost impossible for businesses that don’t specialise in IT to keep pace
The General Data Protection Regulation (GDPR) requires organisations to have measures in place to protect all personal data. And regulated industries such as insurance and finance services also come under additional scrutiny from the likes of the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA). But why wait until a governing body or client demands action following a breach? Once the attack has taken place, it’s already too late. The damage is done. Instead, insurance companies should be taking a proactive approach to securing their equipment, systems and data — particularly as staff continue to work remotely. Other firms will be doing it; those that fail to do so will send a clear signal that they don’t care about cyber security (or their clients’ data!). Few companies would even consider not taking out business insurance. Now, it’s time that firms start thinking of good cyber governance as another insurance policy — one which is vital to doing business in the modern world.
by Bruce Penson, MD of ProDrive page 25
TEMPORARY JOBS • LIFE • GRADUATE • CONSULTANTS • TEMPORARY JOBS • LIF OBS • £100K+ • CONSULTANTS • TEMPOR IMMEDIATE JOBS • £100K+ • CONSULTAN ATE • PENSION • IMMEDIATE JOBS • £100K LIFE • GRADUATE • PENSION • IMMEDIAT PORARY JOBS • LIFE • GRADUATE • PENS SULTANTS • TEMPORARY JOBS • LIFE • G £100K+ • CONSULTANTS • TEMPORARY MEDIATE JOBS • £100K+ • CONSULTANTS ENSION • IMMEDIATE JOBS • £100K+ • CO RADUATE • PENSION • IMMEDIATE JOBS JOBS • LIFE • GRADUATE • PENSION • IMM • TEMPORARY JOBS • LIFE • GRADUATE • CONSULTANTS • TEMPORARY JOBS • LIF OBS • £100K+ • CONSULTANTS • TEMPOR IMMEDIATE JOBS • £100K+ • CONSULTAN
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search & selection Reserving Analyst / Actuary
General Insurance £50,000-£70,000 Per Annum London
General Insurance Circa £100,000 Per Annum London
Innovative London Market Syndicate are seeking a motivated GI actuary to join their Reserving team. Welcomes applicants from commercial and personal lines and/or those who can demonstrate interaction with Solvency II and IFRS17 projects. Operating a flexible working from home/office environment.
Commercially minded Reserving Actuary required for Lloyd's specialty (re)insurer. Involved in the full remit of reserving responsibilities, alongside attending relevant committees and presenting analysis. The role has a direct report. A nearly/ newly qualified actuary, with a proven track record of London Market reserving and a good working knowledge of Excel, VBA and ResQ is essential.
REF: ZB 001737 JC
REF: ZB 001732 HT
Senior Capital Actuary
Nearly / Newly Actuary
General Insurance Circa £160,000 Per Annum London
General Insurance Up to £80,000 Per Annum London
Reinsurance broking firm seeks a senior qualified actuary to aid the expansion of their capital and advisory remit across the business. You will have significant market experience, be capable of running the capital modelling process and building capital models. This role does not entail regulatory reporting and will require commercial acumen to deploy these skills, in varying scenarios across the market.
Top 5 Lloyd's syndicate is seeking a business facing actuary. Ideally you will have pricing experience or have worked across casualty / financial lines in a pricing capacity. The role will involve working closely senior actuaries, covering case pricing and analytics work, supporting the underwriters and contributing to strategy.
REF: ZB 001783 HT
REF: ZB 001774 MM
Technical Provisions Manager
Pricing Analyst / Actuary
General Insurance Circa £90,000 Per Annum London
General Insurance £65,000 - £100,000 Per Annum London
Leading Syndicate seeks Technical Provisions Manger to join London team. Hybrid opportunity working across functions, closely with Chief Actuary and Finance Director. Nearly/newly qualified actuary, strong understanding and experience of producing SII Technical Provisions. Lloyd’s/London Market Reserving required. Expert VBA, Excel and SQL.
Global re/insurance company has an opening for an actuarial analyst / nearly qualified to join their pricing team. The role will cover multi lines and will support the underwriters across both company and syndicate business. Ideally you will be working in pricing and have an interest in developing your programming skills in R / Python. Strong interpersonal skills are essential.
REF: ZB 001758 SC
REF: ZB 001747 CC
www.bolton-associates.co.uk page 24 28 +44 (0)207 250 4718 Bolton Associates, 5 St. John’s Lane, London, EC1M 4BH