Actuarial Post | March 2021

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A unique position driving digital change and innovation, collaborating across a sizeable team of specialists. A rare opportunity to contribute to fundamental market changes and see the impact of your work.

In this highly-visible role, you will lead the production of insightful claims cost projections, providing outputs that influence and drive appropriate business actions and good risk-based decisions.

A fantastic career opportunity, overseeing the methodology, design and development of the GI actuarial models that enable the business to achieve its strategic objectives, and driving the on-going capital monitoring processes.




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Take up this unique opportunity to deliver endto-end cyber solutions to the global insurance and reinsurance market, working within a strong team. Commercial lines experience and ART/ILS knowledge would be advantageous.

We are working with a number of consultancies looking to strengthen their teams with talented candidates who bring a track record of delivery in transformation and process improvement projects.

Move into an exciting and varied role, focusing on developing and optimising our client’s pricing capabilities. Strong pricing and project management skills are required, and reserving and capital experience would be an advantage.





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An incredible opportunity for a high-quality reserving actuary to work on a wide range of business lines, in a team which is also involved in business planning, portfolio analysis and collaboration with pricing and capital actuaries.

Join a close-knit team in a business offering cutting-edge solutions across a broad range of technical areas. Develop your stakeholder management skills in this client-facing role, as you collaborate with a variety of professionals.

Deliver financial reporting and operational risk control assessments across our client’s UK-based finance function, whilst also delivering Model Risk and Solvency II basis reviews.





Major Retirement Group




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Perform the modelling required to assess potential transactions to improve our client’s capital position, exploring how these transactions can be structured to provide additional benefits.

Take up a key role, covering many non-actuarial aspects (e.g. Big Data), alongside pricing for individual annuities, modelling analyses (using GLMs and Machine Learning), and projects such as reinsurance strategy implementation.

Support our client’s Asset Management team and With-Profits Actuary. You will monitor the ALM position to ensure matching and consider the asset strategies for the With-Profits Fund. 12-month duration.




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A key role, requiring a solid understanding of current and upcoming Responsible Investment (RI) regulation and its impact on DC schemes. You will develop RI reporting, whilst supporting ongoing DC climate strategy modelling.

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In this key role, you will use your strong understanding of DB and DC pension schemes to design and implement new arrangements whilst advising on funding, valuations, governance, de-risking and investment.


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Take your career to the next level with a growing consultancy. Building on your existing skills and experience, you will work closely with a Director to deliver a wide-range of bespoke solutions.

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Lance Randles MBA PARTNER

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Actuarial Post Team EDITOR Jennifer Redwood SUB EDITOR Jennifer Stone ADVERTISING MANAGER Alan Burns @actuarialpost @APjobs Head Office 13 Vale Rise Tonbridge Kent, TN9 1TB 01732 359488

EDITOR’S NOTE With this lockdown coming to a partial close, with outdoor activity, combining with better spring weather (as I look through rain lashed windows), means we can at least look forward to a first step toward something resembling a normal way of life. After the Chancellors Budget we now have his Special Tax Day to look forward to on the 23rd March, we wait with bated breath to see the impact this may have on our industry. Our cover story this month comes from Helene Galy at Willis Research Network entitled Covid-19 is no Black Swan, which looks at a better way to deal with uncertainty. As ever our regular authors contribute more interesting and insightful articles for you to peruse including I get drawn down but I get back up again by Alex White from Redington whilst Fiona Tait enjoys using DBAAT. Fingers crossed on the weather front and we trust you enjoy the magazine and as usual we look forward to welcoming you back again next month.

Jennifer Redwood

Legal Notice All rights reserved. No part of this publication may be reproduced or transmitted without the prior permission of the publisher in writing. Whilst every care has been taken to ensure the accuracy, Actuarial Post cannot accept responsibility for loss of business to those referred to in this magazine as a result of errors.




Movers & Shakers


City Dealings


No Black Swan


Tait’s Modern Pensions


Inner Workings


Retirement Puzzle


Pension Pillar


Solvency II & Beyond


Information Exchange


Lights, Camera, Actuary


NEWS MARCH PASA launches pension dashboards guidance The Pensions Administration Standards Association (PASA), the independent body dedicated to driving up standards in pensions administration, today unveiled their dashboard guidance for UK pension schemes, trustees and providers on how to start getting ready for pensions dashboards.

Chris Connelly, Chair of the PASA Dashboard Working Group commented: “The main message with this guidance is a very clear one.You should start preparing now! Pensions dashboards have been on the horizon for some time, but now the Pension Schemes Act 2021 has received Royal Assent we can expect The

Gen Xers retirement plans hit as Covid adds to pension woes Many Gen Xers (those born between 1965 and 1980) are ill-prepared for later life argues a new report, which calls for urgent action to support saving and help people work longer. The new report “Slipping between the cracks”, published today by the International Longevity Centre-UK (ILC) with the support of Phoenix Group, calls for urgent support to help this group set to retire over the next 10-27 years. With many Gen Xers having joined the job market too. READ MORE

Department for Work and Pensions (DWP) to consult on detailed dashboards regulations and Regulators to begin supporting pension providers and schemes comply with their dashboards compulsion duties. We would also expect the Pensions Dashboards Programme (PDP), to publish further READ MORE

Special Tax Day announced for 3 weeks after the Budget Steven Cameron, Pensions Director at Aegon, comments on the special ‘tax day’ scheduled three weeks after the Budget. Announcement of ‘tax day’ gives chancellor two bites of the tax cherry Last week, Financial Secretary to the Treasury Jesse Norman announced that to allow for more transparency and scrutiny, some documents and consultations that

would traditionally be published at a Budget will instead be published on March 23. Announcements that require legislation in the next Finance Bill or have an impact on the government’s finances will be part of the Budget. But others such as those concerning the future administration of tax will be held back with consultations launched three weeks after the READ MORE

NEWS Future of longevity not necessarily worsened by pandemic Aon has cautioned against over-stating the negative impact of the pandemic and its aftermath on the longevity assumptions of UK pension schemes. Tim Gordon, head of Demographic Horizons in Aon’s Risk Settlement Group, said: “The UK suffered around 73,000 excess deaths in 2020 and the vicious tail end of the second wave in January and February this year has so far resulted in a further 35,000 excess deaths. With this grim toll fresh in our minds, it is all too easy to leap to the conclusion that the outlook for longevity must be overwhelmingly negative. “But this is not necessarily the case. In a poll at a recent Aon webinar for insurers and reinsurers, around 40% READ MORE

Global insurers unite to tackle climate risk The Geneva Association’s new report, Climate Risk Assessment for the Insurance Industry, finds that, for both P&C and life re/insurers, climate change poses different levels of physical and transition risks to both sides of the balance sheet, liabilities and assets. Climate risk assessment requires qualitative and quantitative approaches over short- and longterm time horizons and must account for uncertainties associated with transitioning. Knowledge sharing across companies and with other stakeholders is critical to raising risk awareness and leveraging all available expertise. Jad Ariss, Geneva Association Managing Director, said: “In

2020 alone, the world witnessed massive wildfires in California and Australia, historic floods in China and a record hurricane season in the Atlantic. The societal impacts of climate change have become ubiquitous, and individuals and institutions must fully commit now to confronting the climate crisis. Insurers are obvious, strong leaders on global climate action, given their core functions – managing risk and investing – and our industry-led initiative demonstrates that they are proactively rising to the occasion.” Maryam Golnaraghi, Director Climate Change and Emerging Environmental Topics and project leader, said: READ MORE

Government announces mind numbing 3bn repayment to women Alongside the Budget, the OBR has published its “economic and fiscal outlook” which includes the following updates on under-paid state pensions going back nearly two decades: “DWP has also identified underpayments of state pension relating to entitlements for certain married people, widows and over-80s back to 1992. Our forecast reflects an initial estimate that it will cost around £3 billion over the six years to 2025-26 to address these underpayments, with costs peaking at £0.7 billion in 2021-22” (p135) And “State pension underpayment correction: an administration error READ MORE

MOVERS & SHAKERS The latest moves and appointments from the actuarial marketplace Renowned scheme actuary joins Barnett Waddingham

Spence further strengthens its actuarial team with new hires Spence & Partners (Spence), one of the leading providers of pensions advisory and data services to pensions schemes in the UK, has today announced two new actuarial appointments within the team: Graham Newman joins as Scheme Actuary within Spence’s London office, while David Lucas joins the Belfast office as Consulting Actuary. “Graham brings over 20 years’ actuarial experience working across a range of firms. He joins Spence from Capita, where latterly he was an Actuarial Practice Leader for London, Reading and Whitstable with responsibility for the regional team and for the development and implementation of the business strategy. Prior to working at Capita, Graham held a senior actuarial role at Broadstone Corporate Benefits Limited and also worked as a consultant at Mercer. David joins Spence from Lane Clark & Peacock where he spent more than five years working in a range READ MORE

Phoenix appoints Chief Data Scientist

A renowned actuarial specialist, Ali Tayyebi has joined Barnett Waddingham as Partner to further enhance the team advising the firm’s growing number of large pension scheme clients. Ali Tayyebi will be advising defined benefit (DB) schemes across the UK, with a particular focus on large schemes. Ali brings extensive knowledge and experience giving actuarial advice to complex clients. Ali has been scheme actuary to a number of large, high profile clients - including a significant number of FTSE100 sponsored pension schemes. In this role he supported READ MORE

Phoenix Group announces the appointment of Diane Berry to the newly created role of Chief Data Scientist. The appointment will consolidate existing data and analytics teams under Diane’s leadership and underpins

Hymans Robertson name Head of Non Traditional Risk Transfer Hymans Robertson, the leading pensions and financial services consultancy, has promoted Kieran Mistry to Head of Non-Traditional Risk Transfer. In this new role Kieran will lead the firm’s advisory service supporting DB pension scheme trustees and sponsors considering new and emerging risk transfer options, including superfunds, capital backed solutions and alternative insurance products. Since joining Hymans in 2014, Kieran has advised many pension funds ranging in size from under £10m to over £5bn on their risk transfer and endgame strategies. In recent years, Kieran has increasingly focused on supporting schemes considering READ MORE

the firm’s continuing commitment to improve customer outcomes based on superior consumer insights and engagement, which will be the foundation for future growth.

Diane, with over 25 years of expertise in analytics and technology, will lead a newly formed Data function with responsibility for the development and delivery of Phoenix’s Customer AI and Data READ MORE

CITY DEALINGS Keeping up to date on acquisitions, mergers and the dealings of companies in the city

L and G complete buy in with Deutsche Bank pension scheme Legal & General Assurance Society Limited (“Legal & General”) today announces that it has agreed a £570 million pensioner buy-in transaction with the DB (UK) Pension Scheme (“the Scheme”). The Scheme is sponsored by a subsidiary of Deutsche Bank AG (“the Bank”), has assets of c. £4.5bn and has a funding surplus. The buy-in represents the first step on the Scheme’s de-risking strategy of reaching full insurance over the medium term with the objective to increase the security of members’ benefits and reduce risks for the Scheme and the READ MORE


Aysha Patel, Director, Legal & General Retirement Institutional:

“We’re very pleased to have completed this initial transaction with the Trustee of the DB (UK) Pension Scheme. The appointment of Legal & General Investment Management as the Scheme’s LDI manager and this subsequent buy-in highlights our expertise in assisting schemes at all stages of their de-risking journey.”

Aviva approves sale of French Business for over 3bn Euros

MetLife in 5bn longevity reinsurance deal with Rothesay

Aviva’s strategic transformation to focus on its strongest businesses in the UK, Ireland and Canada has taken a major step forward with the sale of Aviva France to Aéma Groupe for €3.2bn in cash.

MetLife, Inc. announced today that its subsidiary, Metropolitan Tower Life Insurance Company, has closed its second and third longevity reinsurance transactions with Rothesay Life Plc, reinsuring approximately $5 billion of pension liabilities associated with two U.K. bulk annuity transactions completed in the fourth quarter of 2020.

Key highlights: Significantly strengthens Aviva’s capital and liquidity with an increase in excess capital3 of c. £2.1bn and centre cash of c. £2.8bn Realises significant value for shareholders: all cash consideration at 0.8x Solvency II own funds Provides security to employees and continuity of service to customers READ MORE

“We are pleased to expand our relationship with Rothesay and build on our previous success to execute the latest two transactions very quickly and efficiently,” said Jay Wang, senior vice president and head of Risk Solutions for MetLife’s Retirement & Income Solutions READ MORE


by Hélène Galy Director of the Willis Research Network Rather than focusing on hindsight and a fatalistic approach to risk, pursuing a more forward-looking, proactive strategy will improve resilience when, not if, the next crisis strikes. In the midst of the Covid-19 crisis, many claimed to have spotted a “black swan”. But was it really the right animal metaphor to use in this case? Aesop often used animal characters in his fables, fictitious stories picturing a truths about human folly. Our fascination with animals continued with the medieval bestiaries, and today analysts continue to describe market behaviour using animal metaphors: bull, bear markets or the lesser known bunny market. In one of Aesop’s fables, the boy who cried wolf had a dreadful fate: a brutal lesson on risk communication. The boy lost his credibility by creating false alarms, whether intentionally or not, and so wasn’t listened to when the real event happened. In the case of the Covid-19 pandemic, we actually had evidence that the wolf was already in the herd, if

only the shepherd had taken a closer look. Warnings from a range of credible institutions should have been listened to. Without going through an extensive review of predictions and threat analysis reports, three examples stand out, showing that the crisis should not have come as a complete surprise. Epidemiologists had warned in the 2019 Global Preparedness Monitoring Board report the chances of a global pandemic were growing and the world was unprepared for a fast-moving, virulent respiratory pathogen pandemic. The latest UK National Risk register identified pandemic influenza as a top high impact, high likelihood event. Then, in October 2019, the US-based Centre for Health Security organised an eerily prophetic pandemic simulation involving a coronavirus similar to COVID-19. With these pre-existing expert scenarios, can we still call COVID-19 a black swan and why were those warnings missed?

Knowing your swans: Black, white or grey? Nassim Taleb popularised the expression, defining the event as impossible to predict; having a major effect; and seems obvious in hindsight. A typical example would be the attacks on the Twin Towers on 11 September, 2001. This pure definition is problematic, as the prediction impossibility sets the bar really high. Either we relax his definition and re-write his first condition as ‘an event that is difficult to predict’, to allow a stretch of imagination to spot some very low probability, very high impact risks. This watered-down definition recognises the difficulty to differentiate between the improbable and the impossible; and in estimating probabilities in general; and our natural propensity to dismiss events with a very low probability. Or we accept that most black swans spotted by people nowadays are actually “grey swans”… renowned climate modellers Lin and Emmanuel (2015) define grey swan tropical cyclones as highimpact storms that would not be predicted based on history , but obviously by now, especially in a world affected by climate change, we know better than look at history to predict the future. Those grey swan tropical cyclones may be foreseeable using sophisticated climate models. If COVID-19 is no black swan Another animal you may encounter more and more is the ‘grey rhino’, coined by Michele Wucker, which is a cross between black swans and elephants in the room. Contrary to the low-probability black swan, the grey rhino is a high-impact, high-probability event usually ignored for various reasons. Climate change is a typical example, which until recently was discounted by investors, policy makers, corporates and wider society. The grey rhino theory has many attractions. Rather than focusing on hindsight, it asks whether we will do something about it. This embraces the fact that many things that go wrong in business, policy and our personal lives are avoidable, if only we had paid enough attention. It recognises that it is generally not a case of if but when. Your black swan may be someone else’s white swan Having diverse, multi-disciplinary boards can ensure a less blinkered review of risks, especially if the organisational culture values the input of the ‘Tenth Man’ (or Devil’s Advocate).

‘Group think’ allows statements such as “impossible to predict”, so a risk register review by external advisors is a good idea, bringing fresh perspectives. Wargaming and red-teaming are also useful techniques successfully imported from battlefield to boardroom. The past informs our predictions of the future An extensive historical review, going back to 1000 AD underpins the taxonomy of threats behind the work of the Cambridge Centre for Risk Studies and their established Lloyd’s City Risk Index. Obviously, new threats (such as drones) need to be factored in. Modelling allows us to go beyond the historical record. For climate change, General Circulation Models, in particular, are used to model the whole of the atmosphere and ocean system, and are key in understanding how global warming is impacting and could further impact the scale, intensity and frequency of extreme events like floods or tropical cyclones. Scenario planning is another useful technique to communicate the results of complex models to the public and decision makers. The real black swans - the “unknown unknowns” The best strategy to plan for these may be to maintain a constant state of preparedness, irrespective of the specific nature of the threat. Increasing our ‘threat-agnostic’ resilience could be a good investment, allowing citizens, corporates and governments to prepare for a national crisis without knowing exactly what the contingencies will be. Recognising that crises should be expected rather than the exception, robust business continuity plans are a sure way of improving resilience – designed properly, tested and updated regularly, they could prove versatile and may be your best insurance against the next ‘black swan’. Learn to better spot grey rhinos Grey rhinos are more common than black swans. Focusing on spotting them would promote a proactive rather than a fatalist approach to risk. A holistic approach to risk management and resilience is a good way of turning ‘grey rhino’ risks into opportunities, and corporates can ask their Chief Risk Officers to coordinate a cross-departmental approach. It should be cause for concern that most governments still do not have a national Chief Risk Officer, alongside their Chief Medical Officer and Chief Scientific Officer.




Using the DB Advice Assessment Tool (DBAAT) Even as a non-actuary I have to admit that I am rather fond of Excel. In fact, it’s probably even more satisfying for the numerically challenged among us to be able to input data and get immediate and meaningful results. I am therefore rather pleased to have the new Defined Benefits Advice Assessment Tool (DBAAT) to play with.

that would be ideal, and the DBAAT could then act as a quick and simple checklist for advisers and paraplanners. 2. Pre-population Once the data is input the system automatically greys out the sections in the following tabs which are irrelevant, and this is followed throughout the rest of the tabs.

What is DBAAT?

3. Advice assessment

The aim of DBAAT is to assess DB transfer advice given before October 2020 but perhaps has an added benefit of highlighting regulatory expectations for any new advice being given, whether DB or not. DBAAT is split into 7 sections (including summary) which are designed to answer whether the adviser has:

The tool provides automatic ratings dependent on the data input – any gaps remain highlighted in blue, making it obvious that the information is insufficient (it also explains why the regulator has started talking about Material Information Gaps - MIGs – basically these are the blue bits).

• collected sufficient information to deliver the advice

Where the information is deemed insufficient, the tool automatically rates the file as ‘not compliant - unclear’, however the assessor does have the discretion to input a different outcome if they think that there was enough information, despite the MIGs, to make a suitable recommendation.

• provided suitable advice on the pension transfer • provided suitable investment advice and • whether the client proceeded to transfer against the advice given (insistent client) • whether they were given adequate disclosure of the costs and potential disadvantages of a transfer • whether any unsuitable advice was the cause of client loss How does it do it The tool uses a combination of approaches. A large part of the assessment is based on data analysis however the assessor is also required to make a judgement on whether the data is accurate and sufficient for the purpose. For example, it’s not enough to record that the client wants to access flexible benefits, the assessor also has to confirm that there is sufficient evidence on file as to why this is in the client’s best interests. The FCA is being clear that what the client wants to do, is not enough to justify a transfer, the advice must also consider whether it is good for them. In other words, we cannot simply act as order takers. Good and bad points 1. The information sheet The hugely positive thing about this section lays out in full what the FCA expect to see on a client’s file. Alongside GC20/1 this clears up some of the ambiguity that previously existed, particularly during the 3 years immediately following pension freedoms when very little guidance was forthcoming. The downside is that there is a lot of information required and it has to be manually input into the tool. My first attempt took 3 hours to complete! If we can find a way to link the spreadsheet directly to our client data,

The same override applies to the 2 advice tabs. A list of potentially unsuitable outcomes is provided and if the assessor believes any apply, this will lead to a ‘potentially unsuitable’ rating. The assessor then decides if the factor(s) outweigh the other drivers of the transfer. For example, a client might be heavily reliant on the pension income but also have a particularly pressing need for PCLS without wanting to take any income. This discretion is very helpful as it takes into account the wider facts, however, the ‘causation section’ is less forgiving. The assessor is asked if the unsuitable advice led to the client following a particular course of action, but it doesn’t allow the assessor to state that there may have been other reasons which meant the client would have done it anyway. Summary Overall, this has the potential to be a very useful tool, particularly if the issue of data input can be resolved. Ultimately however the assessment still depends quite heavily on the judgement of the person using it. What they consider sufficient may not always tie in with the regulators view. I would suggest therefore that while the first section may be used by advisers as a checklist prior to the delivery of advice, any post-advice checking should be carried out by a peer or third party. Lastly, although the tool states that it is specifically designed for DB transfer advice, it does also demonstrate the sort of information the FCA is likely to include into their next Assessing Suitability report so you can get ahead with this now.

by Fiona Tait Technical Director Intelligent Pensions


by Tom Murray Head of Product Strategy LifePlus Solution, Majesco A recent survey by the FCA revealed that less than 10% of UK adults had received financial advice in the last year. This is a truly shocking statistic and brings home the extreme nature of the advice gap – not so much a gap as a chasm. Clearly the push by governments worldwide and particularly here in the UK to make people more self-reliant financially is going to flounder unless we can find ways to resolve this. Reaching the 90% who haven’t accessed financial advice lately- many of whom have never received advice - is key to rolling back the necessity for sate involvement in supporting people, particularly in their old age. This is a vital factor for society as populations age and governments struggle to contain the cost of social support. To reach out to this huge section of the market, we need to understand what has created such a substantial gap in the first place. Firstly, there is definitely a supply problem. Given that most financial advisers report themselves as very busy, there is clearly nowhere near enough spare capacity in the system to cover a gap that size. And the industry is not flush with new wannabe recruits – certainly not the scale needed to solve this problem.

Of course, there is a bit of a Catch-22 situation here; so few people use financial advisers regularly means that awareness of the profession is low in general, inhibiting recruitment. In addition, many would-be consumers are put off by the cost of the service. Given the rise in professional standards mandated by the regulator, financial advisers now are very qualified, but with this level of qualification comes dearer per hour costs. Thus many believe that the price of financial advice is disproportionate to the amount of money they have to invest. Finally, there is the problem that without exposure to the financial services sector, lots of people don’t appreciate the number of products that are available and how they would benefit from them. As a result, they are not aware that they are missing out. This is a another Catch-22 situation, as without advice, how can they understand the benefits that advice brings. Technology is the key that can unlock the wonders of financial services to the masses. Whilst training an individual adviser is expensive, it is cheaper than the process required to automate it. However, time is a restricting factor in one-to-one scenarios and

limits the number of people who can receive the service directly from an adviser, putting a ceiling on the return that comes from training new advisers. Here technology has two important roles to play.

leaving the advisers free to deal with the trickier cases or those where the customer wants a final session with an adviser to review and tailor the recommendations.

In the first place, digital advisers can be used to ensure that financial advice is available to the masses at an affordable price. Areas that are tightly regulated are very suitable for digital solutions and few areas are more tightly regulated than the financial services sector. Deploying digital advisers extends the reach of the company and scales its capacity to deliver financial advice rapidly. In the medium-term, digital advice is the only way to reduce the per-unit cost of delivering advice in order to reach the masses.

The adoption of digital advisers to provide D2C and hybrid channels opens up the possibility of delivering advice at a much lower cost, thereby opening the company up to a completely new market, consisting of those currently not served by the financial advice sector. As shown by the FCA report, there is a huge untapped market out there of people who could benefit from regular financial advice but who could never be served by the traditional industry.

Secondly, when it comes to traditional advice versus digital advice, it is not an either / or scenario. Digital advisers can be used by the more traditional advisers to increase their productivity, carrying out parts of the process that are time-consuming and

Digital advisers are core to any strategy to reach this market, by providing a completely new affordable channel for those comfortable with operating totally digitally and by increasing the efficiency of traditional IFAs to enable them to deliver advice at a lower cost to more people.



As more and more of us retire without DB pensions, approaches to managing drawdowns will become increasingly important. And the stakes are high - for most of us who aren’t athletes or on oil rigs, if our pot doesn’t grow as much as we’d hoped, we can probably just retire a year or two later. But if you’ve been retired for 15 years and find yourself running out of money, that’s a harder problem. For all the complexity of the issue, drawdown investors typically only have two levers they can pull. They can change strategy, or they can change how much they drawdown. All the analysis and projections we create are ultimately to drive those two decisions - beyond that, we are on the receiving end of reality. Varying income is not always possible, but where it is an option it can help mitigate tail risk- effectively, it’s reducing the size of the problem. In the chart below you can see, reasonably intuitively, that if you can afford to cut spending when investments underperform, you can reduce the uncertainty around your pot size. The example is marginal, as

most investors will not have that much leeway to reduce drawdowns, but it can meaningfully reduce the probability of exhausting the pot and give it more chance to recover in the tails. Moreover, by spending more when investments perform well, the expected overall income can be essentially unchanged. Changing strategy can make a much larger difference than refining the withdrawals. As an extreme example to highlight this, I’ve included the central case for a 100% cash strategy on the same chart. Generally speaking, most strategy changes will either increase both risk and return, or decrease both. Visually, changing strategy tends to mean either increasing the central outcome and widening the cone of outcomes, or lowering and narrowing it. However, there is a small refinement you can make by changing strategy dynamically, which has a different type of effect. Suppose you decide that, when investments do well, and you can afford larger drawdowns, you’ll make the investments a bit safer; and when you cannot afford the drawdowns as large,

you’ll move to a higher return strategy and accept the extra risk. What happens? In the positive tail, the strategy will tend to be de-risked, so you’ll lose some of the upside. In the negative tail, the strategy will tend to be risked up, so you’ll lose more at both extremes. In more typical scenarios though, where assets go up a bit and down a bit, you’ll tend to be positioned the right way round, de-risking after rises and before falls, and vice versa (this is actually survivorship bias as, if it turns out you were positioned the wrong way round, that means you were in a more extreme scenario). De-risking in downsides would have the opposite effect. So rather than trading off between

higher expected returns and a narrower spread of outcomes, you can trade off between doing well in more extreme long-term scenarios or in more typical ones. This is not a magic bullet, and it risks gaming any metric you use to measure the risk of possible strategies. However, adding this dynamism can be useful where investor preferences are not simple, or have binary cut-offs (for example, if the goal is to have enough to do something, then hitting it or missing it can make more difference than the size of any surplus or deficit). And modelling it allows investors to understand their options just a little bit more thoroughly.

by Alex White Head of ALM Research Redington

PENSION PILLAR WILL THE PENSION SCHEMES BILL STOP FRUAD IN ITS TRACKS? by Dale Critchley Policy Manager Aviva Pension and investment scams have soared throughout the pandemic and it is vulnerable people and those of retirement age who are the hardest hit. A report published by the Financial Conduct Authority (FCA) last month found the pandemic has left one in four Britons with “low financial resilience”. This could spell disaster for people who have saved their whole lives for the retirement they have dreamed about. Insurance, savings, pension, and investment fraud is not new, of course. The industry has been working to tackle it for more than a decade. Almost ten years ago, we started a journey which led to Aviva spear-heading the call for an end to Britain’s compensation culture and groundbreaking whiplash reforms.

We know the problem exists but what can be done about it? It’s disappointing that the Online Harms Bill, announced in December, currently excludes scams and other online financial harms from the legislation. The legislation presents an opportunity to protect our customers at every stage of their online journey by helping to tackle financial scams and misleading financial promotions and adverts. It would mean the online publisher would have a responsibility to ensure that any financial promotion which they communicate has first been approved by an authorised person.

Right now, the fraudsters are exploiting the situation which the coronavirus pandemic has brought about, taking advantage of people who are spending more time at home, often in isolation and using the internet to search for financial services and products.

However, there was good news for fraud prevention last month with The Pension Schemes Bill receiving royal assent. The act paves the way to introduce restrictions on transfer rights. We expect these will allow schemes to place transfers on pause where they see suspicious activity and require members to seek independent guidance before they can proceed. This should help to ensure that fewer people fall victim to pension scams.

These types of pensions, investment or ‘clone’ scams are unbelievably convincing and pretending to be a well-known brand name is fundamental in persuading consumers to part with their cash and, sadly, their life savings.

We’re also eagerly awaiting the report on pension scams which is due soon and was the first part of the Work & Pensions Committee inquiry into Pension Freedoms. The second part of the inquiry will look at how consumers access retirement advice.

Action Fraud data, published by the FCA last month, showed that consumers reported losses of more than £78 million between January-December 2020. In July last year, the Investment Association (IA) reported several firms across the industry had been targeted and affected by investment bond scams.

Ultimately though, the key to tackling fraud is better intelligence and information sharing across our industry and with the banks and fraud enforcement authorities. While there is money to be made, fraudsters will find a way to get their hands on it. We need to shout it from the rooftops that we will never stop trying to stop them.

The problem is that fraud is like water – you plug one hole and it moves to the next weakest point.

SOLVENCY II & BEYOND PRICING FOR HOME AND MOTOR INSURANCE MAY FALL AS CHANGES TO REGULATION TAKE EFFECT The cost of home and motor insurance may fall in 2021 as changing regulation, plus the ongoing pandemic, impacts on the cost of general insurance, causing significant downward pressure on premium rates across both personal and commercial lines. For 2021, due to the economic impact of the pandemic and competition in the home and motor market, we are forecasting insurance premiums to drop by 5% - 10% for those who shop around for motor insurance and 4% - 8% for those who shop around for home insurance. Conversely, there may be greater reductions in renewal premiums for customers who have stayed with an insurer for a number of years. However, these estimates exclude the impact of the FCA reforms which may not be introduced in 2021. New regulation from the Financial Conduct Authority (FCA) is expected to be introduced in late 2021 or early 2022. The new rules will require motor and home insurance prices to be the same for both new customers and those renewing.Traditionally, discounts on new business have been funded by increased pricing on renewal. As a result, under the new regulations, those that already shop around may see price increases,

whilst those that have remained with an insurer for a number of years may see price drops. If the reforms on market pricing are introduced in 2021, the cost of the reduction in renewal premiums for customers who have stayed with an insurer for a number of years may be borne by those customers who use price comparison websites. This is because the renewal reduction will be funded by the abolition of discounts that are currently available to drivers who shop around each year. For example, some young drivers who try to take advantage of the discounts offered by taking out a new insurance policy, could see their premiums rise steeply by more than £200. As we go deeper into 2021, the economic impact due to the pandemic, especially on smaller businesses, who may have been relying on furlough payments and government loans, will force SMEs to decide whether insurance is necessary. This will then no doubt have a significant impact on commercial insurers targeting this sector and the price rises they are able to achieve. For example, commercial insurers targeting the very small end of the commercial lines market may only achieve price rises of 0% - 10% in the latter half of 2021.

by Mohammed Khan, General Insurance Leader, PwC UK



The factors that go into understanding insurance risk are growing. New data insights are emerging to provide a much clearer, multi-dimensional-like view of each risk to help price fairly and appropriately and support customers based on a fuller understanding of their needs. Thanks to these developments, the broad assumption that an individual is a higher risk because they have had a prior claim may no longer stand.

overall picture of risk. One of the areas in which this multi-dimensional data approach is well-advanced is in private motor. Insurance providers can now understand at the point of quote an individual’s No Claims Discount (NCD) entitlement, the risk of policy cancellation and their predicted claims cost relative to how they have managed their motor insurance policies in the past.

Insurance providers today have access to data attributes about an individual, an asset such as a vehicle, a business or property – all from one access point - that offer a much deeper understanding of risk, allow enhanced personalisation, expedite the quote process and improve pricing accuracy. The growth of insurance specific data attributes has only happened relatively recently, over the past five or six years. This is thanks in large part to the growth of market-wide contributory databases where insurance providers share policy history, quote and soon historical claims data.

Motor insurance providers can also identify potential named driver fraud, such as fronting for a younger driver in the household, and the risk of ID fraud via email address intelligence. Bringing in data about the vehicle build, providers are also now starting to understand the Advanced Driver Assistance System features (ADAS) fitted to an individual vehicle – both standard and those chosen as optional extras - and then how they correlate to claims.

The sharing of this data is just the start. By applying data analytics skills, it then becomes possible to uncover correlations between policy, quote and claims behaviour with claims losses, adding to the

These insights are far from being ‘happy accidents’. They all solve specific pain points for the market and were uncovered by data analysts for that specific reason. Cancellations are costly for the market; named driver fraud can leave unwitting motorists exposed; NCD proof on paper was inconvenient

for the customer and an admin headache for the insurance provider; and ADAS is described in many different ways making it a blind spot for insurance rating. In a post-pandemic world, the emergence of these new insights takes on new relevance. It is only by virtue of the fact that the market shares data that it has become possible to understand policy, quote and claim behaviour directly related to lockdown periods. This, for example, is enabling insurance providers to view a cancellation in lockdown distinct from a cancellation outside of that time. So, finding the next big data insight starts by understanding the pain point then working back to understand how and when data could be used as a solution. At LexisNexis Risk Solutions, the process of validating an idea for a new data attribute starts with the data science team building an analytical prototype with the appropriate data sources and outcomes. Once the concept is proven and we feel the market opportunity exists, we create the final specs for technology to implement. A crucial part of any new data attribute is testing with insurance providers to demonstrate the value of the new data attribute on the insurance provider’s own data. This process can take different

forms - we may create actionable insight studies to benchmark performance or perform retro validation tests as part of a batch process. As that work reaches completion and we are confident the new data solution will deliver what the market needs, we look at any required regulatory documents on the solution inputs, outputs and overall performance. Once the product starts to roll out, the process of validation continues for new insurance providers interested in testing the data solution for themselves. Crucially, the data attributes are monitored on an ongoing basis to help ensure they continue to perform as expected. Contributory databases have created some of the biggest insights coming into the UK insurance market in recent years. However, there is a constant process of evaluating new potential data sources for product development as well as to enrich existing solutions. The key is to deliver data to the market in a way that is useable and actionable, whether that’s at application, point of quote, renewal or claim. Fundamentally, with the growth in data sources and new data attributes, the better insurance providers are able to understand, segment and price their customers, to ensure the fairest treatment possible, which can give them a leg up on the competition. Understanding risk has become so much more than claims history.

by Eleanor Brodie, Manager, Data Science, at LexisNexis Risk Solutions, UK & Ireland

search & selection


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 a leading actuary within one of the market’s actuarial technology providers. As the world, including the Lloyd’s and London Market, look to use AI techniques, and automated modelling in our data-rich world, both self-starters and larger corporations have turned their gaze and interest to using technology and modelling to automate systems, generate prices and break boundaries. These providers to the insurance markets, know what both underwriters and brokers need, and how the actuaries within them can benefit from the tools and software they can provide. For the next few months Zoe Bolton will be talking to the senior actuaries in these firms, getting a brief insight into their career paths and visions for the future.This month Zoe talks to Charlie Stone, Principal in LCP’s Insurance Consulting Team. What is your current role, and how did you end up in it? I’m a Principal in LCP’s Insurance Consulting team. A big part of my role is helping design and develop LCP InsurSight, LCP’s insurance analytics platform. I have been involved in all stages of InsurSight’s development from developing the first prototypes through to leading the development team and onboarding clients. We launched InsurSight in April last year, and it is already being used to assess over £70bn of reserves. In my current role I work with the development team responding to user requests and developing the next version of InsurSight.

What is the defining moment of your career to date? It’s a bit counter-intuitive, but taking a career break in 2018. I took six months out to go travelling and develop my data science and programming skills. It gave me a fresh perspective on my career and gave me clarity on what I wanted to focus on next.

In your opinion, what prepared you best to take on your current role? Being a consultant at LCP! It’s crucial to understand the needs and perspectives of current and potential users of InsurSight. So having experience working on a wide range of projects for a variety of insurers has been extremely valuable. The research project I did during my masters in astrophysics has also really helped, where I used neural networks to estimate the redshift of quasars from their photometry. This gave me hands-on experience solving challenging technical problems.

What is the biggest challenge you face in your role within this market? There are almost limitless things we could do with InsurSight. This is incredibly exciting, but presents a big challenge: deciding what to focus on next and what not to do – just yet.

How does your actuarial training and background assist in your dayto-day role now? Working as an actuary has developed my ability to consider both the bigger picture and the detail at the same time. This is essential in my current role where I need to take a high-level problem like ‘How do we help actuaries identify which areas to focus on in a reserving exercise?’ into a set of smaller more specific problems to be solved.

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 joined the IFoA in 2012. My main advice would be to keep learning new things and work with people who will support and encourage you to apply new ideas in your work. I feel very fortunate to have had this support and encouragement at LCP. Also, don’t spend too long deliberating about whether to learn R or Python - they’re both great. Pick one and get good at it – you can always learn the other one later on.

If you had your time again, what would you do, career-wise? If I hadn’t become an actuary, continuing the research work I did using neural networks at university. Although I am really happy to be applying similar skills to real-world problems as an actuary!

Please share your favourite piece of trivia with our readers! Heathcoat’s factory in Tiverton, Devon (where I grew up – the town not the factory) made the parachute which helped land Perseverance on Mars.





search & selection Senior Portfolio Analyst

Speciality Pricing Actuary

General Insurance Circa £70,000 + Benefits London

General Insurance Circa £100,000 + Benefits London

A growing London Market Syndicate is looking to expand their Portfolio team by bringing in a new senior hire. The candidate is expected to have strong technical skills, hands-on experience with Python and to act as a bridge between qualified actuaries and data analysts. An actuarial or underwriting background alongside a keen interest in technology would be preferred.

Leading global insurance company has an opening for a deputy head of global marine pricing. You will be qualified and have had exposure to marine / speciality business. The role involves managing a small team of analysts. You will be responsible for transactional pricing analysis, pricing tool development and enhancements, rate monitoring and strategic pricing.

REF: ZB 001647 JC

REF: ZB 001623 CC

Reserving Actuary

Capital Model Development Manager

General Insurance £90,000 Per Annum London

General Insurance Circa £80,000 + Benefits London/Leeds/Bristol

Exciting opportunity to join a leading insurer seeking a dynamic and commercially minded Actuary. Reporting directly into the Head of Reserving, you will play a key role in reserving tasks of the Marine, Aviation and Energy syndicate.

Personal Lines insurer with an exciting opportunity to step up and be part of change and new process. The purpose of the role is to manage the maintenance and development of the internal economic capital (‘IECM’) model. Looking for someone with 5+ years’ experience with a minimum of 2 years working in Capital.

REF: ZB 001620 MM

REF: ZB 001634 OG

Senior Actuary – Advisory Lead

Pricing Analyst

General Insurance Circa £300,000 Per Annum London

General Insurance Circa £60,000 + Benefits London

**Exclusive** Reinsurance broking firm seeks a senior qualified actuary to join the team, focusing on developing an advisory arm to the business. You will have significant market experience, be well versed in all areas of actuarial – pricing, capital and reserving, and possess the commercial acumen to deploy these skills, in varying scenarios across the market. This is an exciting opportunity which requires further discussion.

A Lloyd’s syndicate which writes a diverse portfolio operating over multiple territories and lines of business is seeking a part qualified pricing analyst. You will be working closely with underwriters and key stakeholders within the business so excellent communication skills are imperative. Considering candidates with 1-3 years actuarial pricing experience and excellent study package provided.

REF: ZB 001650 ZB

REF: ZB 001642 HT page 24 +44 (0)207 250 4718 Bolton Associates, 5 St. John’s Lane, London, EC1M 4BH