The Actuary- December 2020

DECEMBER 2020 theactuary.com

The magazine of the Institute and Faculty of Actuaries

C E L E B R AT I N G

Y E A R S INTERVIEW Matt Scott on the mainstreaming of climate risk

HEALTH How has the COVID-19 pandemic affected general insurance?

MODELLING Streamlining consumer segmentation through machine learning

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Contents December 2020

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Features 12 Interview: Matt Scott The mainstreaming of climate risk and green finance – and how actuaries can provide leadership in this area

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16 Risk: Strength in breadth Geoff Trickey shares the benefits of having a range of risk outlooks 18 Environment: The new knowledge frontier Actuaries must understand climate, say John Bayliss and Patrick Cleary

Up Front 4 Editorial Contributing to The Actuary is a great way to give back to the profession, says Dan Georgescu on the magazine’s 30th anniversary 5 President’s comment Tan Suee Chieh discusses how actuaries must adapt to stay relevant in a changing world 5 CEO’s comment Despite this year’s upheaval, the IFoA has been able to start building for the future, says Stephen Mann 6 IFoA news The latest IFoA news and events

20 General insurance: After the dust settles Hazel Beveridge and Harshitta Malakar on COVID-19’s GI impact 22 Modelling: A new domain We can look at time-series processes from a ‘frequency domain’ angle, explains Hens Steehouwer 26 Celebrate 30: An amateur joy David Raymont traces the history of The Actuary’s predecessor, Fiasco 28 Celebrate 30: A trip through time Six past editors of The Actuary look back on their tenures 32 Modelling: Who do we think you are?

AI can be used to segment consumer data, say Chantal Bond and Kai Zhu

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At The Back 35 Careers: Guiding lights Reflections and advice from three actuaries holding non-executive directorial positions 38 Probability: Tuesday’s child Kevin Olding asks what we can learn from the ‘Tuesday boy’ probability puzzle 40 Careers: From FIA to IFA What is the route from actuary to financial advisor? Darryl Boulton shares his story 41 School of thought Arpit Surana dispenses valuable job-seeking tips for graduates 42 Puzzles 43 People/society news The latest news, updates and events 44 Inside story Nick Spencer on connecting ideas and people

41 Additional content including daily news can be found at www.theactuary.com Weekly newsletter: for all the latest actuarial news, features and opinion direct to your inbox, sign up at bit.ly/1MN3bXK DECEMBER 2020 | THE ACTUARY | 3

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PUBLISHER Redactive Publishing Ltd Level 5, 78 Chamber Street, London, E1 8BL +44 (0)20 7880 6200 PUBLISHING DIRECTOR Anthony Moran MANAGING EDITOR Sharon Maguire +44 (0)20 7880 6246 sharon.maguire@redactive.co.uk A S S I S TA N T E D I T O R Kathryn Manning +44 (0)20 7324 2792 kathryn.manning@redactive.co.uk

EDITOR Dan Georgescu editor@theactuary.com F E AT U R E S E D I T O R S Sharad Bajla, general insurance Stephen Hyams, pensions Paul Malloy, reinsurance, life insurance VS Rajeshwarie, general insurance Thanuja Krishnaratna, life insurance Contact: features@theactuary.com PEOPLE/SOCIETY NEWS EDITOR social@theactuary.com Kathryn Manning kathryn.manning@redactive.co.uk

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Past, present and future Welcome to this celebratory edition of The Actuary, marking 30 years of the magazine’s publication. There were other magazines before The Actuary, and IFoA librarian David Raymont takes us down memory lane on p. 26. As one of our past editors says, few professions allow their members to spend a year or two as ‘amateur hacks’. The question is, why do it? Previous editors have been asking themselves this for more than 30 years, and you can read some of their thoughts on p. 28. For me, it is about contributing to something that brings actuaries together and inspires them to give something back to the profession.

We become more than merely a group of insurance company employees when we give time to the various volunteering roles available – whether it is researching, organising or, in this case, helping to distil and communicate ideas.

So, as you make your New Year’s resolutions, please consider contributing an article to the magazine. We are also on the lookout for new features editors to bolster the team and bring fresh ideas.

Alternatively, write a letter or an opinion piece about a topic that you are passionate about, and see if like-minded actuaries respond.

This will ensure that The Actuary of the future represents you.

Here’s to a great 2021 – and many more years for the magazine!

Published by the Institute and Faculty of Actuaries (IFoA) The editor and the IFoA are not responsible for the opinions put forward in The Actuary. No part of this publication may be reproduced, stored or transmitted in any form, or by any means, without prior written permission of the copyright owners.

While every effort is made to ensure the accuracy of the content, the publisher and its contributors accept no responsibility for any material contained herein. © Institute and Faculty of Actuaries, December 2020 All rights reserved ISSN 0960-457X

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DAN GEORGESCU EDITOR editor@theactuary.com

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TA N S U E E C H I E H

STEPHEN MANN

Reclaiming our soul

Strong foundations

O

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ur profession was brought forth from pondering the unknown, chance and the uncertainty of lifespan. Over time, it extended to the probabilities of morbidity, the expectation and risk of investment returns, and many other fields – always with a tilt towards the problems of the day. To peer into the unknown necessarily requires thought leadership – this is our soul.

The Vision, Skillsets, Mindsets and Domains (VSMD) strategy is about reclaiming our soul and giving it voice. We must create room for new values. To face the digital revolution, we will need curiosity, adaptability and a growth mindset. Meanwhile, COVID-19 has exposed the systemic risks that threaten society – erosion of institutions, planetary degradation, inequality, health security and Big Tech governance. To tackle these issues we will need courage, imagination and judgment.

Our profession’s values of accuracy, cautiousness, consistency and reticence held us in good stead when we worked within stable, linear and reliable systems, before the emergence of computer power. Compliance and linearity will shortly be the reserve of machines – but our role remains relevant, as this approach is inadequate for addressing today’s systemic risks. Uncertainty is the space in which actuaries’ imagination and judgment can shine.

We will be informed by machines, not replaced by them.

During the past two decades, we have been too immersed in fixed Gaussian models as the basis for problem solving and risk management. Today, Knightian uncertainty looms. In this world, it is time to reclaim our spirit: to think systemically, not just systematically; to adopt multiple framing, rather than fixed framing; to conceive of possibility, rather than just probability; to act courageously and imagine what is possible, rather than just predicting trends.

This is a great opportunity for the TAN SUEE CHIEH profession to return to the soul of our is the president of forefathers. We must ask, ‘What is going the Institute and on here?’ and find a response in the spirit Faculty of of enquiry, discovery and invention.

Actuaries www.theactuary.com

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n many ways, it seems much longer than the 10 or so months that have passed since we started writing up the IFoA’s new five-year strategy, which we launched earlier this year. A lot has happened since then, both expected and unexpected, but the key essence of what we have set out to achieve, and the big things we need to do, have remained unchanged – although in some cases they have been brought into sharper focus. We have begun, sometimes out of necessity or urgency, to lay many of the building blocks required – whether this is building stronger relationships with our key stakeholders, putting exams and events online, simplifying CPD or setting the organisation up to succeed in delivering new initiatives. These initiatives include a new lifelong learning offer, a new IT platform to improve our experience for our members, and building a stronger and more member-centric culture that supports the IFoA and our members to be more influential and valued for what they do.

We have often been good at delivering things without telling our members about them, or assuming they are obvious. We have not always been as clear as we might about what our members most value (both collectively and within different groups), or when making commitments to all our members on what we offer to them.

As we close out 2020, making these commitments clear and meeting them becomes our priority for next year. I want the IFoA to be the voice of the profession, and while this will require a lot, the essential starting point is for us to be highly valued for what we bring to our members and stakeholders.

On a personal level it is now very close to a full year since I joined the IFoA. I would like to thank all those I have been able to engage with for the support you STEPHEN MANN have given me. You have helped is the chief executive strengthen my belief in the of the Institute and importance of now delivering Faculty of against our new strategy.

Actuaries DECEMBER 2020 | THE ACTUARY | 5 AUTUMN 2017

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Upfront News AMS

Report on actuarial factors in pension schemes to be published December 2020 will see the publication of the first Actuarial Monitoring Scheme (AMS) Thematic Review report. The report will share the findings of our review on actuarial factors used to calculate benefits in UK pension schemes. It represents a significant milestone for the AMS, as the first time that the IFoA has been able to review independently, in a regulatory context, the standard of work being carried out in practice by

actuaries. The findings will allow us to share learning and good practice with members and employers. Recommendations will be used by the Regulation Board to ensure IFoA regulation is as effective and relevant as possible, helping it safeguard the profession’s reputation and serve the public interest.

David Gordon, who leads the AMS team, added, “We are particularly grateful to the scheme actuaries from 19

organisations who agreed to have their work scrutinised as part of this review, the findings of which will help members further improve the quality and clarity of their work.”

The report, which will be titled Pensions: actuarial factors used to calculate benefits in UK pension schemes, will be published at bit.ly/2Ug83vd

AAE

IMAGE: TWENTY TWENTY

IFoA to remain full member of AAE This year, in the light of our global expansion, our focus on delivering value to members and the UK’s decision to leave the EU, the IFoA has reviewed its membership of the Actuarial Association of Europe (AAE). After many fruitful discussions with the AAE Board, we can confirm that the IFoA will remain a full member of the AAE. As part of our discussions, the IFoA’s financial contribution was reconsidered. The AAE is now applying a 25% cap on subscription fees for any member association.

At October’s Annual General Meeting, AAE members voted unanimously on the IFoA’s continued membership and the revised fee arrangement.

Grahame Stott, chair of the IFoA’s Management Board, said: “We are delighted to have reached this joint agreement with the AAE. The IFoA is proud to be a founding member of the AAE and can attest to the value the 6 | THE ACTUARY | DECEMBER 2020

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AAE brings to all associations and members across Europe.

“In my dealings with the AAE, I have seen first-hand the crucial role it plays as a leading source of actuarial advice and counsel in Europe. It is through this collective voice that the profession is able to effect change, share ideas and advance actuarial science across the continent and beyond.

“Our focus will continue to be centered on our ongoing commitment to the promotion and collaboration of thought leadership and research.”

Stephen Mann, IFoA CEO, said: “The European actuarial community is strong and brings real value to the progress of the profession Our engagement with AAE has been very constructive and warm and bodes well for the future. This agreement means the IFoA can continue to support, contribute and play our part in promoting actuarial science alongside our counterparts across the continent.”

CAMPAIGN

Reinventing the profession In his presidential address, Tan Suee Chieh talked about the importance of Vision, Skillsets, Mindsets and Domains (VSMD). But what do these qualities mean in reality, and how can actuaries embody them in their work?

In this new campaign, Suee Chieh will explore these attributes and how the actuarial profession could change in the future. How can these qualities help actuaries as they deal with some of the most critical issues of the 21st century – from ageing populations to pandemics and climate-change?

And what does it mean to be an actuary in the 21st century?

“As a body we must seek solutions to society’s most pressing problems. We must chart a new path for our profession” For more information, visit www.actuaries. org.uk/about-us/reinventing-profession

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Upfront News DISCIPLINARY PROCESSES COVID-19

Pandemics Hub

Adjudication Panel meeting – Mr Dale Lee FIA

If you haven’t yet taken a look, we would encourage members to view our Pandemics Hub. It’s an excellent repository of information where you will find a wealth of resources – from blogs and The Actuary magazine articles to information from organisations and academia, as well as regular mortality updates from the CMI – all to help keep you informed and updated during this extraordinary time.

We’re continually adding new resources and blogs to the hub, so even if you’ve already taken a look, please remember to check back regularly to view the new content that’s been added – bit.ly/2IoD4KY

On 25, 27 and 28 August 2020 the Adjudication Panel considered an allegation of misconduct against Mr Dale Lee FIA. There were a number of detailed allegations and the panel found evidence to support approximately 20 of them.

The first part of the referral related to a Solvency II model (X) which was developed in preparation for the Solvency II Directive coming into force in January 2016. The respondent led the team that developed the first iteration of X and was involved in its development and marketing. The panel upheld five allegations relating to the quality of the information given for X, including marketing X as a Solvency Capital Requirement submission tool when it was not fit for purpose. The panel found a breach of the Compliance principle of the Code and that the allegation in relation to marketing was also a breach of the Communication principle.

The second part of the referral related to the quality of actuarial reports for five companies, all

of which were signed by the respondent as signing actuary and were alleged to be deficient in a number of respects. The Panel upheld eight allegations (in respect of one actuarial report), which included breaches of specific requirements of Technical Actuarial Standards R (Reporting Actuarial Information) and D (Data). The Panel found that these were in breach of the Reliability Objective and Actuarial Professional Standard (APS) X1. With the exception of the breach of APS X1 (a breach only of the Compliance principle of the Code), all remaining allegations were found to be a breach of the Code’s Competence and Care, Communication, and Compliance principles.

The Panel found that the allegations upheld constituted misconduct in terms of Rule 1.6 of the Disciplinary Scheme of the IFoA. The panel accepted that while there was no impact on clients, the work was below the standards expected, and a reprimand was applied.

A copy of the Panel’s determination, including reasons for its decision, can be found at bit.ly/3eNNi3j

Online learning resources

Video and audio Find a diverse range of valuable content relevant to your area of expertise:

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For the greater good Henry Thompson, head of public affairs, and Katy Little, policy and public affairs assistant, explain the work of the IFoA’s Public Affairs team and how they have maintained working relationships with policymakers during the pandemic Public affairs is a discipline that largely relies on building and maintaining close working relationships with policymakers across the political spectrum, usually through regular face-to-face engagement.

This can range from formal meetings with ministers or backbenchers to a coffee (or something stronger) with a special advisor at a party conference.

COVID-19’s arrival in the UK has closed off our access to these channels, meaning the IFoA’s Public Affairs team has had to rethink its approach to influencing.

Following a year of disruption, the team reflects on how the IFoA has adapted its engagement strategies in the wake of the global pandemic.

Government As the second wave of COVID-19 takes hold, the government continues to respond to the virus’s impact. The government has taken unprecedented fiscal action throughout 2020 to support individuals and businesses so they can cope

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with the pandemic. With the Budget postponed until 2021 and the Spending Review confirmed to run for just a year, it is unlikely that policymakers’ attention will be diverted away from the pandemic any time soon. During this period, the IFoA has sought to leverage its members’ expertise to show how actuaries can make a tangible contribution to the ongoing response.

In the summer, the IFoA wrote to the UK government’s Scientific Advisory Group for Emergencies (SAGE) to detail how the actuarial skillset could help support the government’s understanding and management of the virus. Subsequently, an IFoA representative has attended meetings of SAGE to provide expertise on excess deaths and our engagement continues to inform government thinking in this area.

We also wrote to the UK government to suggest a range of measures that would

enable the sector to respond more effectively on behalf of consumers. One such measure was a relaxation of the Lifetime ISA rules for a period that would allow consumers to access money from these vehicles without being penalised, thus providing breathing space for those most impacted.

The IFoA argued that this could be achieved by reducing the exit penalty from 25% to 20%, meaning the account holder would repay the government bonus and not the additional withdrawal charge of 5%. In line with the IFoA’s recommendation, the Treasury announced a temporary rule change, dropping the charge on unauthorised withdrawals to 20% for the period between 6 March 2020 and 5 April 2021.

Parliament Earlier in the year, the Public Affairs team blogged about how COVID-19 had transformed

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Upfront News

parliament, and subsequently the way in which organisations such as the IFoA engage with our elected representatives; this can be read at bit.ly/3eKSqp2. Notwithstanding inevitable technical glitches, parliament seems to have adjusted to the move to digital, and we are seeing normal levels of engagement return; it is now the norm to see MPs participate in debates or questions on both an in-person and virtual basis.

While our plans for two parliamentary receptions were swiftly shelved in March, our campaigns and policy priorities have benefitted from MPs’ increasing enthusiasm for digital meetings. Following the launch of the interim report on the Great Risk Transfer (bit.ly/35hWLga) we have held meetings with several MPs, including Stephen Timms, Chair of the Work and Pensions Select Committee, and Jonathan Reynolds, Shadow Secretary of State for Work and Pensions, to discuss our initial findings.

During the autumn period, the team’s main priority has been the passage of the Pension Schemes Bill, which is expected to become law before the end of the year.

The team has embarked on an engagement programme to raise awareness of the IFoA’s main areas of support and concerns. In October we submitted written evidence to the Bill Committee (bit.ly/35mumpv), and have also met with several of its member MPs, including Gareth Davies, Richard Thomson and Neil Gray – the latter of whom tabled two amendments to the Bill on our behalf. As it continues its path onto the statute books, we will be looking to work with policymakers across the political divide to seek clarity on issues within the legislation of concern to actuaries.

www.theactuary.com

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Party conference The IFoA has attended the party conferences since 2018, as they represent excellent opportunities to engage with policymakers and stakeholders on our key policy priorities (these are explained at bit.ly/3lkK4Xv). Party conference season is characterised by swarms of party members, politicians, think tanks and public affairs professionals cramming into packed conference centres to debate the policy issues of the day. Given the nature of these events, it’s no surprise that conference season also went virtual this year.

While we decided not to host our own virtual event at this year’s conference, members from the IFoA’s Public Affairs team did ‘attend’ the conferences and joined a number of virtual events of relevance to the IFoA and its members.

A summary of this can be read in our latest blog at bit.ly/3pkkhBa

Brexit Even the Brexit negotiations, widely expected to be the dominant story of 2020, fell victim to the pandemic. As we near the end of the transition period, attention has slowly shifted back to Brexit, but political bandwidth on both sides of the Channel continues to be consumed by the pandemic and its consequences – particularly with the advance of a second wave across Europe. In order to avoid a ‘no trade deal Brexit’, an agreement must enter into force by the end of 2020, when the current transition period expires. The IFoA continues to monitor developments to ensure members are kept up to date

with the negotiations and the potential implications of either outcome at the end of the year.

The Brexit Podcast Series provides members with insight into how securing a trade deal, or not, might impact particular practice areas – find the series at bit.ly/2Uj4Qep. A number of useful sources for members can be found on our Brexit Hub, at bit.ly/3ePUiNh

A peek into 2021…

Unfortunately, it does not look like 2021 will be any quieter. We are likely to find ourselves navigating an unstable political and economic landscape, with several significant events taking place during the coming months, both domestically and internationally. Events that come to mind include the continuing trajectory of COVID-19 and the state of the global economy, as well as the fallout from the US presidential election and the UK-EU trade negotiations. The latter could have implications for the future of the UK, including louder calls for a second referendum on Scottish independence.

The UK’s ongoing public health response to the virus and the fiscal approach adopted by the chancellor will have significant implications for the UK economy – both in the short and long term. Identifying solutions to mitigate rising unemployment, business failure and soaring public debt will be high on Rishi Sunak’s priorities, as well as ensuring public services receive adequate support.

While many of these events may not directly affect the IFoA or its members, they will have a bearing on our stakeholders and our ability to drive certain agendas.

There will be other factors to consider, as well as emerging issues, but the team will be closely monitoring events during the coming months to ensure the profession is ready to navigate the choppy waters ahead.

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Upfront News

Progress under pressure Jane Hamilton explains how the Scottish Board is tackling the challenges posed by the COVID-19 pandemic, and shares some of its current initiatives Under Regulation 15 of the IFoA, the purpose of the Scottish Board is “to foster the actuarial community in Scotland”.

The Board consists of seven Scottish Constituency Council members, a number of co-opted members, plus representatives from two Scottish student societies – the Faculty of Actuaries Students’ Society and Glasgow Actuarial Students’ Society. The Board’s current leader is Dermot Grenham, supported by IFoA head of engagement Debbie Atkins.

2020 progress Like everyone, members of the Board have had to adapt to ensure we could continue providing services to those in our geographic area of Scotland during the COVID-19 pandemic. Up until March 2020 we held quarterly meetings in the Edinburgh IFoA offices, but since the lockdown we have moved to holding more regular, shorter meetings online. This has allowed us to continue to serve our Scottish-based members. Some key deliverables include: Moving our KSS events online Knowledge Sharing Scotland (KSS) was set up by the Board in 2012 to offer locally accessible CPD opportunities across Scotland. These events are organised by a subgroup of the Board for members and others in Scotland. Members volunteer to organise, host and run these small, local, informal events in Glasgow, Stirling and Edinburgh. The discussion topics are wide-ranging – from new developments in actuarial science to legislative and policy changes – and the events promote open and active discussion.

After being quick to adopt Zoom, the Board was able to deliver these events online from April; as a result, our online sessions have seen record numbers for KSS events, with many reaching the 100 delegate maximum. Recent speakers have included Maggie Craig, the Financial Conduct Authority’s head of department for Scotland, and Benny Higgins, who is leading the Scottish Government’s Advisory Group on Economic Recovery – a consultation that the Board and the IFoA Public Affairs team contributed to earlier this year.

Learn 2 Leap programme 2020 also marked the 10th anniversary of the IFoA, and the Board saw this as a great opportunity to use some of the Endowment Fund 10 | THE ACTUARY | DECEMBER 2020

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Developing an online climate quiz for Maths Week The Board has supported Maths Week Scotland for a number of years. This year, initiated and driven forward by the Board with support from the IFoA Foundation, and in collaboration with the IFoA Sustainability Board and the IFoA Careers team, the Board is proud to have delivered an IFoA online climate quiz. This interactive quiz, targeted at 14-18-yearold pupils, featured two rounds of maths questions on the subject of the environment. This encouraged students who enjoy maths to see how their skills could benefit the environment. The Board hopes this quiz will now be used by the Careers team to promote maths to students in other locations.

to run an online six-month development programme for members.

The Learn 2 Leap programme supports participants in realising their professional potential by developing the necessary mindset, skills and awareness to succeed in a changing marketplace. More than 100 members are participating virtually during the next six months and the Board is delighted that IFoA President Tan Suee Chieh is joining one of the sessions.

In addition, the Board is also involved in promoting data science, public affairs and engagement with employers in Scotland, as well as many other activities that help maintain a vibrant actuarial community. Every quarter the Board issues a newsletter to highlight JANE HAMILTON important information, and we have recently leads the Scottish Board’s introduced vlogs to give a more personal Communications touch to our communications. We also Subgroup regularly post updates, news and articles on the Scottish Actuarial Community LinkedIn group. We encourage all members of the Scottish constituency around the globe, and members based in Scotland, to join this group at bit.ly/2UeQwDs and contribute to the conversation. www.theactuary.com

20/11/2020 16:28

AAS

Annals of Actuarial Science special issue: call for papers As COVID-19 spreads, financial institutions face medium-tolong-term consequences that will take time to understand.

Contributions are invited for a special issue of Annals of Actuarial Science (AAS) featuring research on managing the risk of mortality shocks.

Examples of areas of interest include, but are not limited to: Direct effects on liabilities linked to mortality and longevity risks Capital market and insurance innovations for pandemic risk management Impact on the provision of, and demand for, healthcare Changes in economic activity, commodity and asset prices Increase in government debt and the effect on bond markets

Changes in investor/ policyholder behaviour Changes in regulation Preparing for the next pandemic.

The issue will be guest edited by Michel Dacorogna (University of Zurich), Runhuan Feng (University of Illinois at Urbana-Champaign) and Annamaria Olivieri (University of Parma).

Papers may be submitted from 1 January 2021 to 31 July 2021. The issue will appear in 2022, but all papers accepted for publication will be published as FirstView articles when produced.

For more information and guidance about writing for AAS go to bit.ly/2JWWRSm

AAS

New editor-in-chief for Annals of Actuarial Science Andreas Tsanakas, professor of risk management at the Business School (formerly Cass), City, University of London, will take up the role of editor-inchief for Annals of Actuarial Science (AAS) from January 2021.

Outgoing editor Angus Macdonald, who has held the position since 2008, offered his congratulations: “The landscape for actuarial journals is evolving rapidly – open access, electronic publishing, software and machine learning. I am delighted that AAS is in such good hands to take it forward into a truly leading role.”

“I am honoured to take on the responsibility of leading AAS during such exciting times,” said Tsanakas. “I have learned a lot from Angus’s leadership and guidance over the last three years as an AAS editor.

The journal already enjoys an excellent reputation and is on an upward trajectory; I aim to keep building on those successes.”

IFRS 17 Preparedness Report The Actuary conducted a survey sponsored by Moody’s Analytics throughout the summer of 2020, seeking views of actuarial practitioners on IFRS 17 preparedness. Results indicate that workstreams related to implementation are mostly set in motion, with many firms making progress in areas including contract grouping and discount rates. Firms have much to do before progressing to other aspects of implementation, such as preparing a business plan based on IFRS 17. Most respondents have yet to recalibrate KPIs under IFRS 17. The survey explored several key areas: For many firms, decisions around the risk adjustment are not yet finalised. However, respondents offered insights on the Risk expected methodology, calculation, timings, and disclosures. adjustment A third of respondents had yet to confirm their methodology.

Of those that were further progressed, the cost of capital was most popular for general insurers – but the margins/provisions for adverse deviation were most popular for life insurers.

The risk adjustment process is complex, and most respondents plan to do the calculation off-cycle, sometimes with approximations. Combined with methodology choices, this suggests firms plan to take advantage of existing processes wherever possible.

Most firms appear to be targeting a risk adjustment at a similar level to the current IFRS 4 Provision for Adverse Deviations (PAD).

IFRS 17 allows for two different approaches to yield curve construction and discounting – the top-down approach and Discount the bottom-up approach. Results imply that the industry has rates not reached a consensus. There is likely to be a wide variation in discount rate methodology on the go-live date.

It is natural for companies to gravitate to whichever is closest to their existing approach, such as the one adopted for regulatory reporting. This may explain why the dominant approach to estimating the default allowance is to use historical default rates and transitions – the approach used to calculate the fundamental spread in Solvency II. The CSM is arguably the most complex part of the calculation under IFRS 17, and the survey results reflect this. While there Contractual service appears to be a consensus around the grouping approach for margin (CSM) the purpose of calculating the CSM, questions and concerns remain. The results suggest firms will need to choose approaches that are most appropriate for their businesses, and offer robust justification for their choices to auditors.

The challenges of implementing a full retrospective approach on transition were reflected in the results, with Transitional most respondents stating that they will use a combination of measures approaches.

1.0

2.0

3.0

4.0

To access the full IFRS 17 Preparedness Report, please visit bit.ly/3nysOPd Gavin Conn, Director-Research, Moody’s Analytics Cassandra Hannibal, Director-Research, Moody’s Analytics

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20/11/2020 16:28

A LEADING

LIGHT Matt Scott speaks to Dan Georgescu about his involvement in green finance, the crucial role of actuaries and the mainstreaming of climate risk

M

att Scott has played an integral role in the Bank of England’s climate team, helping to establish and lead its Climate Hub. He also led the development and launch of the UK government’s landmark Green Finance Strategy, published in 2019, and is now a senior director for Willis Towers Watson’s recently launched Climate and Resilience Hub. A curiosity to understand the world around him and a keen interest in problemsolving led Scott to study physics at university. He started his career working in science, joining the graduate scheme at AEA Technology – now part of Ricardo Energy & Environment. As well as deepening his understanding of topics such as climate change, the experience opened his eyes to the challenges of commercialising science – the need for ideas to be turned into viable and useful solutions that have scalable and tangible impact.

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20/11/2020 17:45

Features Interview

A few years later, Scott’s interest in learning how to take ideas to market led him to Silicon Valley, and he embarked on an MBA at Stanford University.

He describes his experience there as transformational, particularly as he was part of the first cohort to be offered a course on social entrepreneurship. “The aim of the course was to use business to solve big problems in the world, using the power of entrepreneurship to create positive change,” he says. “It was the beginning of a new wave of thinking about business not just in terms of making a billion pounds, but also positively impacting a billion people’s lives. How do you do that?”

Lightbulb moment The specific challenge presented to Scott’s cohort was the harmful effect of kerosene lighting, relied upon by many of the approximately 1.5 billion people in the world who lacked access to electricity.

“A child studying by the light of a kerosene lamp breathes in the equivalent of two packets of cigarettes every evening,” Scott explains. “We had designers, engineers, MBAs all working together to see how we could fix this problem at scale. That’s when

Identifying risk channels Scott returned to the UK and, following a few years in impact investing, accepted a role at the Financial Services Authority in early 2010 to help develop the regulator’s post-financial crisis approach to forwardlooking, judgment-based supervision.

Transferring with the Prudential Regulation Authority (PRA) to the Bank of England a few years later, Scott built on his work examining the sustainability of firms’ business models to explore how to better integrate climate change into the PRA’s emerging risk agenda. “The role provided the perfect platform to explore what could be done through the lens of financial risk rather than societal impact,” he says.

In 2013, an invitation under the UK’s Climate

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“Climate data, analytics and standards will be key to ensuring investors, banks and insurers can price risk and reallocate capital effectively”

we came up with our MightyLight product – a solar-rechargeable LED light. My role on the team was to figure out a business model.

We quickly decided this would require operating as a business, as opposed to a charity, to build a sustainable model for creating change.”

Scott and some of his classmates set about turning this vision into reality, co-founding a company to implement their solution. He describes his experience as an “entrepreneurial rollercoaster” – securing seed funding in Silicon Valley, moving to India and ultimately bringing solar lighting to thousands of off-grid customers in rural villages around the world. He also highlights the frustrations of raising capital for a company that is pursuing both purpose and profit: “On the one hand, we would speak to foundations who loved what we were doing in terms of impact, the environmental and social value that we were creating. But, at the time, the vast majority could only donate money to charities rather than invest into a business.

“On the other hand, we’d speak to mainstream investors, and the fact that we were creating environmental and social value was like a red flag – that we weren’t in it for the money. That whole experience sparked my curiosity about what more I could do, through the lens of social entrepreneurship and creating systemic change, to enable finance to flow to businesses like the one I had helped create.”

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20/11/2020 17:45

Features Interview

combination of physical and transition risks Change Act for the PRA to complete is going to crystallise in some form.” an ‘Adaptation Report’ provided an “Financial actors need to do more than opportunity to advance his ideas. just react to the changes under way,” he Working with actuaries, senior advisors adds, echoing IFoA president Tan Suee and other PRA colleagues, Scott led a Chieh’s recent call to arms. “They have a review of the impact of climate change really important role to shape the system on the UK insurance sector. Three channels going forward – to steward a whole economy of climate-related risk emerged: physical, transition. It has to be an active process of transition and liability. working collectively together to do this.”

“Physical risks are the financial risks Scott is absolutely clear that there are that can arise from weather-related opportunities as well as risks. “Achieving events, such as storms and floods,” a 2°C transition requires tens of Scott explains. “Transition risk trillions of dollars in investment includes the risk of stranded assets – into low-carbon sectors,” he says. essentially carbon-intensive assets “They’re some of the fastest-growing that can no longer be used as the sectors in the UK.” There are also world decarbonises, or which may pricing opportunities for investors otherwise be mispriced. Liability Achieving a willing to look through a climate risks can arise from those who lens, as well as developments in have suffered losses from physical the field of data and analytics: and transition risks seeking to transition will “In order to green the financial hold those who they view as require tens of responsible to account.” trillions of dollars of system and integrate these risks, there’s a revolution taking place in In 2015, the final report was investment into released alongside former Bank of low-carbon sectors climate-related data, models, methods and metrics.”

England governor Mark Carney’s From the Bank of England, Scott seconded seminal speech on climate change and into UK government to develop and launch financial stability, ‘Breaking the Tragedy the UK’s Green Finance Strategy, published of the Horizon’, which he delivered at in July 2019. Pointing out that “over time, Lloyd’s of London. all finance will need to be green finance”, That these ideas have become more Scott emphasises that many of the headline familiar in recent years is an indication that policies in the strategy, such as the climate risk is now a mainstream issue. As expectation for climate disclosure to be Scott states, climate disclosure is supported mainstream by 2022, are already being put by institutions representing US$150trn of assets, and more than 70 central banks and supervisors across five continents are now working together to integrate climate risk into mainstream finance through the Network for Greening the Financial System (NGFS). Scott is keen to highlight the important role that actuaries have already played in making this happen, not least in helping to deliver the PRA’s 2015 report.

2°C

“I see an important role for actuaries to help catalyse system-wide action”

The urgency of the present There is, of course, much more to be done.

Scott offers some thoughts on how the conversation now needs to develop: “The physical risks may not crystallise in full until decades into the future, but we need to find a way of managing them today. That’s one of the reasons why the narrative is moving on; climate is not only viewed as a financial risk, it’s also seen as far-reaching. It’s systemic.

It’s foreseeable. We know that some 14 | THE ACTUARY | DECEMBER 2020

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into place. While acknowledging the challenges presented by the current pandemic, he suggests that it serves to highlight exactly why it is important to tackle large-scale future risks now: “Perhaps it provides a lived experience for us all as to how significant and meaningful big global risks can be, and the importance of taking early action to address them.”

The role of actuaries So, what does early action need to look like, and what role can actuaries play?

“Climate data, analytics and standards will be key to ensuring investors, banks and insurers can price risk and reallocate capital effectively,” Scott explains. “For near-term physical risks, the insurance industry has developed the gearbox to translate climate science into financial risk, for example through catastrophe risk models. A similar gearbox is now needed for transition risks – to more effectively translate carbon into credit risk. And more needs to be done to fully appreciate and integrate the impact of the longer-term physical risks.

“As economic thinking and models evolve, there is a great opportunity for actuaries, given their focus around risk and uncertainty, to bring forward thought leadership in this area. For example, how do we account for risks over the longer term that could be nonlinear, that could be irreversible? I see an important role for actuaries to provide insight into these tail risk scenarios and help catalyse the system-wide action and stewardship required today.”

The value of teamwork and collaboration shines through during our conversation: Scott believes in welcoming expertise from all quarters and working with organisations rather than in conflict with them. This is coupled with his real passion for the issues at hand, and pride in some of the outcomes achieved so far.

“While understanding current risks facing individual firms is important, to manage the future we also need collective action to enhance the resilience of the system as a whole,” he says. “The idea of actively shaping our future is really important. We all have agency – we all have a role to play.” www.theactuary.com

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Features Risk

STRENGTH IN BREADTH Geoff Trickey explains why it is important for decision-making teams to include people with a variety of risk dispositions

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ou only have to have walked down your local high street during the past few months to see how different we all are in our perceptions of, reactions to and management of risk. In response to COVID-19, many see face masks as providing safety and protection, while for others they represent an affront to civil liberty. While some enthusiastically adhere to and enforce social distancing rules, others casually ignore them. Many have visited pubs and flocked to the beach while others have stayed at home. These different perspectives, in most cases, will reflect sincere beliefs and convictions. For this reason, they can breed serious antagonism, with people even occasionally coming to blows. What does this tell us?

Complementary risk dispositions The way we deal with risk and uncertainty is one of the most significant differences between individual people. Risk dispositions are ‘wired in’; some people are naturally apprehensive and cautious, while others are fearless and carefree. Our familiarity with this diversity is reflected in the richness of the vocabulary we use to describe and characterise ourselves and other people: ‘reckless’, ‘apprehensive’, ‘conforming’, ‘spontaneous’, ‘conservative’, ‘anxious’, ‘fearful’, ‘controlling’, ‘adventurous’, ‘intrepid’. We recognise these traits in ourselves and in other people; they are widely dispersed and deeply rooted.

These characteristics are significant because they impact all of our decisions and the gloriously individualistic ways in which we live our lives. Humanity’s diversity of risk dispositions has played a crucial part in our survival over hundreds of thousands of years. Decisionmaking is driven by our hopes, aspirations, fears and emotions, as well as our need to make sense of our experiences and our world.

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The Risk Type Compass (bit.ly/38sQvUV) enables us to measure these attributes, charting a 360° spectrum of risk dispositions based on permutations of these factors. This compass model is segmented into eight risk types, each of which sees life very differently.

Conflicting perspectives This leaves many of us surprised and confused by the seemingly improbable risk behaviours of people who see life through their own different but equally convincing lenses. These different perspectives on life are just another example of nature’s variability; this is the reality of the normal distribution. When it comes to reaction to risk and uncertainty, the variations between individuals are remarkable and may seem fascinatingly improbable to disparate risk types.

As it turns out, this a very good thing. Faced with the unpredictable opportunities and challenges of day-to-day survival, this diversity between extremes has equipped humanity with a highly effective repertoire of survival strategies. This is at the core of our nature.

We weigh things up, consider the pros and cons and make decisions.

Those who achieve the right balance between opportunities and risks succeed and survive. Those who fail to achieve this ‘sweet spot’ have a tough time. Aspiring and striving in the face of uncertainty has always been fundamental to the human condition.

Risk types in action We have seen these individual risk type differences playing out locally and on the global stage. The reactions of neighbours, colleagues, family members and friends are echoed across the world as different states and nations wrestle with policy decisions and adopt very different approaches to epidemic management. It would seem obvious that policy should be guided by science, but reactions to COVID-19 illustrate that certainty has not been a conspicuous

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20/11/2020 16:38

Features Risk part of the process. In its absence, professional reactions have varied dramatically, governments have reacted differently, and computermodelled predictions have been all over the place.

If anything, the vastly different ‘solutions’ adopted revealed more about the decision-makers and decision-making process than about the virus. Government decisions may be influenced by many things, including politics, managerialism, the need to ‘save face’, and public opinion. Throughout all of that confusion and uncertainty, the risk types of the people and teams making decisions will have been a persistent influence every step of the way.

Radical uncertainty In his 2017 book The End of Alchemy, former Bank of England governor Mervyn King said: “The fundamental point about radical uncertainty is that, if we don’t know what the future might hold, we don’t know, and there is no point in pretending otherwise.” His point is that some uncertainties simply cannot be resolved. In the book, he addresses some of the quandaries that characterise the boundaries of risk and uncertainty.

Referring to the presumption that statistical probabilities can be calculated to address every instance of our imperfect knowledge of the future, he quotes the economist John Maynard Keynes on the subject of ‘uncertain knowledge’: “About these matters there is no scientific basis on which to form any calculable probability whatever.

We simply do not know.”

King calls this ‘radical uncertainty’, and viruses take us into this territory. When you have nothing solid to go on, there is no point in persisting with complex but tenuous quantitative predictions. This has been demonstrated innumerable times in just about every realm of prediction – from engineering to financial forecasts to opinion polls to epidemics. Even the most sophisticated mathematics available, backed by massive programming power, cannot spin gold-plated certainty out of dubious and uncertain fragments.

In the current pandemic, experts established the identity of the pathogen very quickly – a virus called SARS-CoV-2 – yet the implications of COVID-19 remained unknown. We didn’t know how infectious it would be, we didn’t have a definitive list of symptoms, we didn’t know how long people would remain infectious, how damaging the virus might be, how it was transmitted, who would be most vulnerable, how much immunity already existed in the population, or the biochemistry of the antibodies and how much protection they would provide. On all of these points and more we had no alternative but to wait for the data to accumulate.

unknowable risk and more on the decisionmaking processes – and the decision-makers.

Decisions need to be made within a framework that recognises the nature of the instinctive bias arising from any individual’s natural risk dispositions.

Adventurous risk types and Wary risk types, for example, go about decision-making in profoundly different ways – as do we all.

Self awareness and group awareness are the key. Decisionmakers need insight into their own risk dispositions; teams need to be aware of over-representation or under-representation of particular risk types in the group. The aim must be to achieve balance: for example, ensuring that precedence and tradition are questioned while the status quo is also well represented; that challenge and innovation are championed while awareness of vulnerability or threat is heightened; that there is a willingness to think the unthinkable as well as to rein in eccentricity. These are all examples of creative group tensions that are an antidote to groupthink and risk polarisation.

In combination, these ‘process requirements’ for balance and diversity in the decision-making body have to be mirrored when communicating with the public at large. Message recipients, too, are varied in their risk dispositions. To be convincing and reassuring, the messaging of developments and conclusions must be effective across a very risk-diverse population that includes people with very different expectations. Success will be measured not only by what has been achieved, but also by the extent to which the divergent concerns of people with very different risk dispositions have successfully been addressed.

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“Decision-makers need insight into their own risk dispositions, and teams need to be aware of their balance of risk types”

Risk-aware decision-makers Of course, decisions have to be made even in cases of radical uncertainty. The emphasis here has to be less on the immediate

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GEOFF TRICKEY is founder and CEO of Psychological Consultancy Limited (PCL)

DECEMBER 2020 | THE ACTUARY | 17

20/11/2020 16:38

Features CEO Environment

The new knowledge frontier It’s important for actuaries to be knowledgeable about climate and sustainability issues, say John Bayliss and Patrick Cleary of the newly formed Sustainability Board

Making connections It is not sufficient to understand financial solutions as single actions.

The interconnectedness of regulatory and individual actions means we must consider how the system acts as a whole, magnifies systemic risks and threatens the actuarial premise of future forecasts.

Uncertainties are higher than might be suggested from analysing historic data, and global interconnectivity and leverage are making the impact of these uncertainties larger. Historically, the action of an individual agent was considered independently of others’ actions.

Now, mitigations must be based on systemic, collective terms.

To be successful, actuaries need to be versed in sustainability issues, and in the systemic impact that their proposals may have on long-term collective outcomes. They need to be able to advise where efforts to address systemic risks can create more resilient, navigable pathways – especially in relation to climate change.

Climate change demands actuaries understand the underpinnings of climate science, including the climate scenarios of the IPCC and other bodies, and shared socioeconomic pathways. These are as 2017 18 | THE ACTUARY | AUTUMN DECEMBER 2020

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fundamental as mortality changes. Actuaries need to be aware of the impact of different climate pathways on economic assumptionsetting, and should be able to build appropriate forecasting models and address regulator needs. This will involve building climate scenarios, carrying out stress tests and addressing data challenges.

Of course, actuaries will also need to be able to communicate all this to clients. In addition, they must have an awareness of broader sustainability issues and how they interconnect.

Actuaries’ academic frameworks need to expand to address the fundamental disconnect between traditional economic and finance theory and the implications that arise from imposing realistic resource constraints such as climate change. These frameworks must include a plurality of economic approaches, incorporating planetary and societal constraints and impact economic modelling.

This includes dynamic behaviours, debt, limits to growth, ecological economics, behavioural economics, and the use of alternative metrics to those such as GDP. The frameworks must also cover systems thinking, with a particular focus on the role of governance, incentives and the theory of change. Finally, they will need to include Universal Owner JOHN BAYLISS Theory, which deals with questions of is a senior actuary ownership and the potential to address at the Government systemic risks.

Actuary’s Department

The IFoA’s response The IFoA recognises the challenges and is working hard to respond to them, for example through the Climate-related Risk Taskforce’s action plan. You might have seen practical guides for actuaries working in various practice areas, changes to exam material, a curated library of sustainabilityrelated materials for qualified actuaries, a possible new standalone certificate on climate change for actuaries, and drop-in lunchtime sustainability webinars. A new web page under Lifelong Learning is coming soon, from which you will be able to access all this material in one place. However, these challenges are also for us to address at an individual level. What is your response?

PATRICK CLEARY is a senior actuary at the Prudential Regulation Authority

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umanity is facing a climate crisis, as well as other sustainability concerns, and actuaries will need new knowledge and skillsets if they are to deal with these challenges in their day-to-day roles. While these challenges present a huge risk in that they could potentially make our profession uncompetitive, they also provide an unprecedented opportunity for actuaries to take a leading role.

Do all actuaries need to know about climate and sustainability issues? Yes – for two key reasons. Firstly, there is the sea-change in society’s attitude: the public now expects policymakers and regulators to understand climate risk and the transition to a low-carbon economy. When you have this understanding, you quickly see the interconnectedness of all sustainability issues.

Secondly, and more fundamentally, actuaries use data to make financial judgments about the future. Traditional tools that do not allow for constraints and dynamic interactions do not adequately describe that future. Without significant overhaul, many of these tools will no longer be fit for purpose. They obscure the uncertainties that we must acknowledge if we are to make informed judgments about the future. If we are too narrow when it comes to considering risks, we could be overconfident in giving advice – and give too little consideration to uncertainties.

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23/11/2020 10:53

©2020 Conning Asset Management Limited. Conning Asset Management Limited is authorised and regulated by the United Kingdom’s Financial Conduct Authority (FCA#189316).

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North America

23/11/2020 11:47

Features General insurance

Hazel Beveridge and Harshitta Malakar take stock of the changes and challenges that COVID-19 caused in general insurance during the first lockdown

THE DUST SETTLES

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lthough the world has witnessed outbreaks of infectious diseases before, most were contained locally, and more quickly, than the current COVID-19 pandemic. As a result, they had smaller and more localised economic and social impacts. COVID-19 containment measures have forced business closures, event cancellations and a general dampening of economic activity, resulting in a substantial decrease in GDP and employment. In the Eurozone, the Q2 2020 seasonally adjusted GDP is down 12%, and employment in terms of number of persons employed and number of hours worked has fallen by 2.7% and 10.7% respectively. It is expected that the impact of COVID-19 on Lloyd’s of London will be greater than the impact of large losses witnessed post-2012.

What will the pandemic’s impact be for general insurance, particularly from the perspective of reserving?

Our ICAT workstream, studying claims inflation and development, circulated a survey in October 2020 to general insurance actuaries around the world. Most responses were from

FREQUENCY AND SEVERITY Figure 1 and Figure 2 depict the general view of respondents on frequency and severity impacts across various classes Proportion of respondents

FIGURE 1: Frequency changes for period impacted by COVID-19.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Motor

Health indemnity

Business interruption

Proportion of respondents

FIGURE 2: Severity changes for periods impacted by COVID-19.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Motor Health Business indemnity interruption Increase No change Decrease

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Financial lines

Financial lines

actuaries working in the India (37.5%), UK (20.8%) and US (10.4%) markets, with others including Africa, Singapore and other countries in south-east Asia. Of all respondents, 77% work in reserving. The survey addressed the following issues: Changes in claims frequency and severity that have been witnessed in various classes Impacts on reporting and settlement delays – we asked if these delays persisted post-easing of initial restrictions Changes to reserving assumptions, if any, that actuarial teams had made Challenges faced in reserving during the pandemic including in terms of data and definition of insured events.

Changes in claims experience Nationwide lockdowns and travel restrictions have had an immediate and direct impact on motor, event cancellation, travel, short-term health indemnity, financial lines, and credit and surety insurance. These restrictions may also be expected to have a further

90% of respondents reported that motor has seen a decline in frequency due to reduced exposure, while 47% indicated there had been increased severity. Severity increase is likely driven by supply-side shortages, such as fewer working garages, labourers and spare parts, cleaning/sanitisation costs and increased credit hires.

> 60%

of respondents indicated that they have seen increases in both frequency and severity in financial lines. Finpro casualty driven by D&O and financial institutions, trade credit, and credit and surety are highly correlated to global economic health. Increased job losses, and lawsuits against company directors alleging unpreparedness for a pandemic, have resulted in high claim volumes.

Health indemnity products that are typically one-year policies and cover hospitalisation expenses have seen an increase in frequency and severity. This would be because they have had COVID-19 claims included due to regulatory or government pressure, as well as the increased cost of healthcare due to severe shortages in facilities and personnel during the peak of the crisis.

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20/11/2020 16:39

Features General insurance

significant impact due to job losses and delays in economic recovery.

Business interruption is a more contentious area. Some policy wordings are ambiguous or do not explicitly exclude pandemics, which has led to some legal battles and political pressure for rulings in favour of the insureds. The impact on liability classes such as general liability and medical malpractice is expected to be medium to low. The impact on social inflation remains unclear and will need ongoing monitoring.

Reporting and settlement delays The general response was that reporting and settlement delays increased during the early lockdowns, but started to get back to normal levels as restrictions were eased. Across lines and geographies, about 27% indicated that reporting levels were nearing normal and 11% believed that the delays in reporting still persisted.

Likewise, 18% of respondents expressed that they were still seeing delays in settling claims, while 22% believed these were returning to normal levels. Reporting and settlement delays are expected to be large for business interruption claims that go to the courts.

Changes to reserving assumptions Of survey respondents, 57% said they had made changes to reserving assumptions. Although a number of reserving techniques have been used, the most commonly used seem to be the basic chain ladder with adjustments to abnormally large/small development factors, ignoring 2020 altogether for calculating factors, or adding a tail factor to allow for late reporting and settlement. The BornhuetterFerguson and expected loss ratio methods are also predictable favourite choices, with suitable revisions for loss ratios – for example downward for motor and upward for financial lines. Some other methods tried were frequency-severity and exposure-based models incorporating the trends observed during the past six months for

In business interruption policies that specifically exclude pandemic coverage, and those in countries where business interruption is triggered only by physical damage to property, there has been virtually no pandemic impact. In other cases, where it is explicitly covered, there has been an understandable increase in frequency and severity, as

70% of respondents indicated. Respondents from the UK, South Africa and Australia indicated that they have seen some court cases settling in favour of the insureds and expect to see more, while those from the US have pointed out that civil disruption is not covered during lockdowns.

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classes such as motor. Individual case reserving was reportedly used for unique large risks such as event cancellation. The most common adjustment has been adding COVID-19 specific margins above the reserve estimates for prudence.

Challenges in reserving during the pandemic With no clarity on how or when normality will return, reserving has been particularly challenging. There is also no way to know how the post-COVID-19 world will be, or whether we need to roll back assumption changes and to what extent. This makes it all the more difficult to understand and quantify long-term impacts. Lack of data on pandemics is top of the list of challenges, and there is also the possible emergence of latent claims; these may include increased workers’ compensation claims due to COVID-19-induced long-term disabilities, and cyber liability claims due to technological threats.

An immediate question is whether to recognise the benefits from this year’s lockdowns and, if so, to what extent. A further question is whether claims occurring during the second wave and resulting lockdowns are to be treated as separate from those that occurred during the first wave. There may be differences in the way companies are reporting COVID-19 data – for example, claims resulting from a chain of stores or hotels may be treated as one claim or handled separately.

Our research and survey show that COVID-19 is having an impact on the claim severity and frequency of many general insurance classes worldwide. Some actuaries are adjusting their assumptions and models to allow for the expected impacts on insurance company reserving and the added uncertainty that the pandemic continues to bring. This is a time when companies are revisiting their policy wordings, underwriting policies, and reassessing risk exposures and strategies for operational resilience in order to ensure we are more prepared for the future.

Nearly 60%

of those surveyed said they haven’t seen changes in frequency and severity for property (commercial and household), liability (general, employers’ and marine), and engineering and construction.

Marine and aviation are exposed to accumulation risks from weather exposures due to grounded fleets parked temporarily, and we will have to see how this develops.

Claims frequency will pick up post-lockdown, as businesses resuming operations will be exposed to the risk of more common and often-insured losses such as property damage, non-COVID-19-

HAZEL BEVERIDGE is chief actuary at Pioneer Underwriting

HARSHITTA MALAKAR is an assistant manager at KPMG

related business interruption, engineering (including start-up risks), employers’ liability and insolvency risk due to months of pause in operations and poor investment opportunities.

DECEMBER 2020 | THE ACTUARY | 21

20/11/2020 16:40

In-depth Modelling

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ctuaries have to deal with time-series processes in terms of how, for example, yield curves, investment returns, mortality rates, lapses or insurance claims develop over time. They have a toolkit of stochastic models at their disposal to analyse and model these processes for the applications at hand. Typically, these models look at time-series processes from a ‘time domain’ angle. However, it is also possible to look at time-series processes from a ‘frequency domain’ angle.

Actuaries are not typically familiar with this other toolkit and the additional insights and modelling benefits it can bring. All frequency domain techniques are founded on the Fourier transform. With the Fourier transform, any time-series {xt, t = 0,…,T-1} can be written as a sum of cosine functions.

The parameters {Rj, ɷj and ϕj, j = 0,…,T-1} represent the amplitudes, frequencies and phases of T cosine functions

that together offer an alternative representation of the time-series xt.

An important property of this frequency domain representation is

If we assume the time-series xt to have an average value of zero, then this relation tells us that the frequency domain representation decomposes the total variance of the time-series into the squared amplitudes of the set of cosine functions. The higher the Rj for a certain ɷj, the more this frequency contributes to the total variance of the time-series. This is visible in the so-called periodogram of a timeseries, which plots the variance per frequency as a function of the frequencies and thereby shows the relative importance of different frequencies for the total variance.

If you were to calculate the periodogram for different samples from a stochastic time-series process, you would produce different shapes of the periodogram. Doing

this for a great number of samples of sufficient length, and calculating the average periodogram on all these samples, results in the spectral density, or auto-spectrum, of the stochastic process. A spectral density describes the expected distribution of the variance of the process over periodic fluctuations with a continuous range of frequencies. The word ‘spectrum’ comes from the analogy of decomposing white light into colours with different wavelengths. The word ‘density’ comes from the analogy with a probability density function.

A probability density function describes the distribution of a probability mass of one over some domain, while a spectral density describes the distribution of a variance mass over a range of frequencies. The concept of spectral densities generalises into a multivariate setting. In the form of coherence and phase spectra, conventional correlations can be decomposed across frequencies into a phase shift (move forwards or

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backwards in time) and the maximum attainable correlation after such a phase shift.

A spectrum in the frequency domain and the autocovariances in the time domain contain the same information about the dynamics of a stochastic process.

Neither can give information that cannot be derived from the other. The difference is how the information is presented. Nevertheless, a key benefit of a frequency domain perspective is that its tools are very powerful for understanding the dynamic behaviour in historical time-series data, as well as for analysing the dynamic properties of stochastic models. If there is one thing we know about the behaviour of time-series that are relevant to actuaries, it is that they move up and down all the time.

Frequency domain techniques are the most natural way of analysing how they move up and down. What types of fluctuations dominate the behaviour of a variable, and what are the correlations and lead/lag relations with other variables at the various speeds of fluctuations?

The leakage effect Frequency domain techniques do not have widespread use within actuarial science. One reason is that conventional frequency domain techniques require large amounts of data if they are to work well, and in most nonexperimental sciences, such volumes of data are simply not available. If these conventional frequency domain techniques are applied on time-series of limited sample sizes, the spectral density estimates will be disturbed and less informative. Such disturbances are caused by the leakage effect.

The leakage effect can best be understood by thinking of the Fourier transform of a perfect cosine function of some frequency. Obviously, in the periodogram of this cosine function, 100% of the variance should be located at the specific frequency of the cosine function. However, if one only has a limited sample of the cosine function available, this turns out not to be the case. Instead, the periodogram will show that a part of the variance at the specific frequency has ‘leaked away’ to surrounding frequencies.

As the sample size increases, the leakage effect decreases and the periodogram gets better and better at revealing the identity of the time-series by locating a larger and

“A frequency domain perspective is very powerful for understanding the dynamic behaviour in historical time-series data”

larger portion of the variance at the specific frequency of the cosine function. Fortunately, if one looks carefully, there are special (parametric) versions of frequency domain techniques that are especially adapted to (also) work well on short sample time-series data. Key to these techniques is their use of smart algorithms that avoid the disturbing leakage effect.

An economic scenario generator example There are potential benefits to using frequency domain techniques in the context of economic scenario generators. For example, for economic capital, asset liability management or own risk and solvency assessment purposes, it is of essential importance that scenario generator models can capture correlation structures between economic and financial market variables in a realistic and robust way. Unfortunately, correlations are very complex because they have many dimensions. As a result, calibrating scenario generator models to realistic correlation structures can be difficult and time-consuming, especially as the dimensions of the models (for example the number of economies and asset classes) increase.

One dimension of correlations is the horizon dimension: correlations can be different depending on the investment horizon. We typically see that correlations tend to increase as the investment horizon extends.

More generally, we see a so-called ‘term structure of risk and return’, which means that not only correlations, but also expected returns, volatilities and distributional shapes can vary with the investment horizon. Scenario generator models are typically calibrated for a specific application and a specific investment horizon. If risk at multiple horizons matters across applications, as it does in many organisations, practitioners often have to resort to multiple model calibrations, each one targeted at the correlations at a particular investment horizon.

Although understandable, such a partial approach to correlation modelling is inefficient and inconsistent. It also increases the risk of inconsistent decisions being taken throughout an organisation.

If multiple models are used, each calibrated to different correlation targets, there is no unifying underlying model that aggregates these correlations structures in a consistent way.

Trend-cycle decompositions To see how frequency domain techniques can help solve this problem, we have to introduce the concept of trend-cycle decompositions into a scenario generator modelling framework.

An important application of the frequency domain toolkit is to perform such decompositions by filtering time-series into components that correspond to non-overlapping frequency bands in the spectral densities. A simple and well-known DECEMBER 2020 | THE ACTUARY | 23

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FIGURE 1: Trend-cycle decomposition of long-term UK government bond yield time-series.

18% 16% 14% 12% 10% 8% 6% 4% 2% Long-term UK government bond yield 0% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

18% 16% 14% 12% 10% 8% 6% 4% 2% Trend 0% 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

3% 2% 1% 0% -1% -2% Cycle

filter is the first-order differencing filter, which transforms a time-series xt into a time-series yt = xt – xt -1. To see what such a filter does to a spectral density, one can look at the frequency response function of the filter. This shows that a first-order differencing filter suppresses the variance of low-frequency fluctuations in a time-series (ie removes the trend) and strongly enhances the variance of high-frequency fluctuations. The first-order differencing filter also shifts these fluctuations back in time. With more sophisticated frequency domain-based filters, it is possible to decompose time-series into a trend, a cyclical and an irregular component that split up the total variance more accurately and without inducing shifts in time. Figure 1 shows such a decomposition, splitting a time-series of monthly observations of a long-term UK government bond yield since 1900 into three components: trend, cycle and irregular. An advantage of such decompositions in terms of stochastic modelling is that the (orthogonal) components as shown in Figure 1 are, by construction of the filter, uncorrelated.

Such trend, cycle and irregular components of interest rates can be shown to approximately generate returns of different frequencies of corresponding bond returns. More specifically, the returns generated by these components can approximately be interpreted as the decade (trend), annual (cycle) and monthly (irregular) returns of a corresponding bond index. By performing the same decomposition for all relevant economic and financial market variables, these components allow a scenario generator model to ‘anchor’ on the correlations for returns of different frequencies and horizons. To do so, for each variable, three time-series (rather than one) feed into a scenario generator model: a trend, a cycle and an irregular time-series. This robust way of capturing the ‘term structure of risk and return’ supports the use of a single multi-horizon calibration of a scenario generator model and thereby adds to the efficiency and consistency of enterprise wide risk management.

-3% 1970

1980

1990

2000

2010

2020

3% 2% 1% 0% -1% -2% Irregular -3% 1990

2000

Source: Bank of England, Bloomberg and Ortec Finance.

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2010

2020

Combining time and frequency domain techniques Frequency domain techniques can also be combined with more conventional time-series modelling techniques to produce a powerful combined toolkit. The correlations between components as in Figure 1 are zero – but per component, the correlations between economic and financial market variables are not zero. And in highdimensional cases of multi-economy, multi-asset class scenario generator models, it is challenging to capture these correlations and the corresponding dynamics without overfitting. A classical time-series modelling solution to this problem is to use dynamic factor models (DFMs). DFMs can be applied per component or frequency band equally well, and are suitable for conventional time-series. www.theactuary.com

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“There are special versions of frequency domain techniques that are especially adapted to work well on short sample time-series data”

FIGURE 2: First PCA factors from trend, cycle and irregular components. Source: Ortec Finance.

3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 Trend PCA 1 -2.0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 Cycle PCA 1 -4.0 1970

1980

1990

2000

2010

2020

4.0 1.0 0.0 -2.0 -4.0 -6.0

Figure 2 shows the first principal component analysis (PCA) factors from standardised trend, cycle and irregular components of hundreds of economic and financial market variables. In this two-step approach, one first filters every individual time-series into a trend, cycle and irregular component and then, as a second step, calculates PCA factors on the hundreds of trend, cycle and irregular component time-series separately.

In these PCA factors it is, for example, easy to recognise the dating of familiar business cycle troughs, as well as more short-term market crashes.

These and higher order (orthogonal) PCA factors can power dedicated HENS DFM specifications per frequency STEEHOUWER band to produce a robust, efficient is head of research and consistent scenario generator at Ortec Finance. modelling framework across investment horizons, economies and asset classes combined.

Irregular PCA1 -8.0 1990

2000

Source: Bloomberg and Ortec Finance.

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2010

2020

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Features History C E L E B R AT I N G

An

Y E A R S

amateur In 2020, The Actuary celebrates its 30th birthday.

IFoA librarian David Raymont digs into the archives to acknowledge its predecessor, Fiasco

T

his special anniversary gives us the opportunity to look back at earlier incarnations of The Actuary magazine and see how it has evolved.

It all began with Random Muse, produced by the Institute of Actuaries’ Student Society in the mid-1940s, which unfortunately ran for just 13 issues before folding due to a lack of contributions. By the 1970s a regular actuarial newsletter was clearly needed, and Fiasco was launched in February 1978. This magazine had a more successful record, producing 127 issues until its ‘Ω’ (Omega) issue in June 1990, when it was succeeded by The Actuary.

The driving force behind Fiasco was Jim Lagden, a qualified actuary and events organiser in local government. A popular man, he was assisted by Jackie Millar, deputy secretary at the Institute, who later became his wife. Lagden set a deliberate tone of humour and irreverence in the new magazine, but never

Random Muse, Autumn 1960 A specially revived Golden Jubilee edition

Fiasco, Issue 1, Feb 1978 First issue newsletter magazine of the Institute of Actuaries Students’ Society

forgot that it was intended to bring together a widely dispersed membership, engender a sense of an actuarial community, and encourage participation and lively debate. The first issue of Fiasco was a mere four pages and was issued to around 5,000 members of the Institute.

Subsequent editors of Fiasco were Peter Turvey, David Campbell, Peter Thompson, Stuart Southall and Eugene Smyth. The final editor was Peter Tompkins, who in July 1990 would become the first editor of The Actuary – a tenure that ran until February 1992.

Labour of love Fiasco had a cut-and-paste ethos, like a university ‘rag mag’. Previous editors, all volunteers, remember a primitive production system – literally gluing the content together and preparing issues at home in their spare time. Thanks to their hard work, Fiasco evolved into a well-respected and much-loved magazine that served the needs of its readers. Gradually the page count increased and the design improved, including a stylised masthead and colourful covers. From

Issue 62, Oct 1984 The second picture cover focuses on the profession’s contribution to pension reform debate

Issue 67, Mar 1985 A change in the cover style – and a coloured masthead

A selection of covers throughout the years

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the outset, the magazine attracted job advertisements, which brought in much-needed revenue that sustained the production and facilitated the move towards a more professional style.

The magazine’s title, Fiasco, was, of course, a clever play on the qualifying FIA post-nominals. Some felt that this title undermined the magazine’s credibility, but others enjoyed it, and later editions carried sections such as ‘FIAside Chat’, which reported job moves and appointments. Other regular features included reports from meetings and conferences, articles about research, and a popular puzzle page, contributed by the indefatigable Tim Sole for more than a decade.

Reading through past issues of Fiasco today provides a fascinating insight into the actuarial profession of the 1970s and 1980s. Recurring themes include actuarial education and changes in the examination syllabus, the growing impact of computerisation, a technical consideration of maturity guarantees and, in the 1980s, an intense debate about pension reforms.

Fiasco also ran an excellent historical series about the pioneers of actuarial science, written by Chris Lewin and Trevor Sibbett.

Spirited debate The editorials of Fiasco never shied away from the contentious, and always aimed to stimulate a balanced debate. The letters page, which was the true heart of the magazine, showed strong opinions and different points of view. When a new logo was revealed for the Staple Inn Students’ Society in November 1987, its designer Ross Russell explained that one curve represented the trajectory of drinking beer. Three irate correspondents wrote in to complain that the profession should not treat itself so frivolously.

Human interest was always prominent in Fiasco, and it didn’t operate in a political vacuum; in February 1980, it highlighted actuaries who were Labour Party councillors in local government, leading to letters from Conservatives and one Liberal pointing out their roles and calling for balance. The published run of Fiasco neatly bestrode the eventful Thatcher years, but the magazine always retained political neutrality, often thanks to its sense of humour.

Fiasco also liked to see actuaries in the media. In April 1980 it was reported that, since the magazine’s launch, no less than 17

actuaries had appeared on Radio 4’s financial programme Moneybox. Monica Allanach, the first woman to sit on the Institute’s Council, had appeared on two other BBC radio programmes to discuss life assurance, but the presenters were more interested in how to reduce the premiums on their car insurance or estimating the cost of insuring Marlene Dietrich’s legs!

While it originally reached a predominantly British audience, Fiasco needed to progress to cater for a growing international membership. Following a controversial editorial in April 1989 about HIV/AIDS, a Uganda-based member wrote to the editor about his first-hand experience of the impact of the disease in Africa, where millions of lives were at stake. The article, he said, reflected “… a narrow UK, not to say parochial view… I hope that future editorials will stimulate discussion and controversy, but display rather more sensitivity of the place of actuaries in the wider world. There are few enough of us in this part of it.”

From Fiasco to The Actuary A product of its time, Fiasco was an amateur production in a positive, pure sense of the concept, created by expert enthusiasts dedicated to the field and their community. It did its job well for 13 years, but by the early 1990s it was felt that the actuarial profession needed, as former editor Peter Thompson put it, a ‘proper grown-up magazine’ to raise standards and better demonstrate the profession’s image – “a huge leap forward in professionalism, prestige and credibility”. This would require the combination of actuarial expertise and oversight with the commercial publishing industry’s professional skills – editing, production, distribution, marketing and so on – and product focus.

Following its predecessor’s lead, the inaugural issue of The Actuary restated its aim of encouraging debate and bringing new ideas and research to its readers. Working with publishing professionals, the stage was set for the high standard of magazine that you enjoy today.

“The editorials of Fiasco never shied away from the contentious and always aimed to stimulate a balanced debate”

Issue 75, Dec 1985 The first and only cover in full colour, featuring two stained glass windows at Staple Inn Hall

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Issue 83, August 1986 A cover featuring the Summer Ball – a reminder of the Society’s social role

The author would like to thank the surviving editors of Fiasco for their help in compiling this article. Read the full version of this article at bit.ly/ActuaryFiasco

Issue 91, April 1987 The cartoon reflects a recurring theme: ‘No. of times I have been asked what I do’

Issue 126, May 1990 Institute president Roger Corley and the mayor of Oxford open a new Institute office

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The Actuary has been connecting the actuarial community since 1990.

In this 30th anniversary commemorative edition, some of our past editors tell us about their time at the helm

C E L E B R AT I N G

Y E A R S

PETER TOMPKINS Jull 19990––Jann 1992 & Juul 20000 To quote LP Hartley: “The past is a foreign country; they do things differently there.” Back in 1990, when we created The Actuary, we did not have email or the internet. The telephone and fax machine were our tools of communication, and the draft copy I would send back and forth peppered with printers’ marks was the form of mark-up used in newspaper production. The 10,000 readers we had then has risen to more than 30,000 today.

Our actuarial and business concerns were also very different. Pensions actuaries grappled with how to manage pension fund surpluses – in particular, how to avoid investment taxation if funding went beyond a government-stipulated maximum. The solvency of pension funds was hardly a matter for concern.

General insurance was a nascent industry for actuaries, with stalwarts pioneering the use of actuarial science in Lloyd’s and the London Market. Life insurance products still operated within a dominant ‘with profit’ culture, though many of us felt the public had a poor understanding of what this meant (other than it feeling better than ‘without profit’). Insured pension policies

often offered guaranteed rates to convert invested funds into annuities at laughably low rates of long-term interest – such as 4% when market rates stood at more than 11%. Life expectancy had yet to surge; in England, men retiring at 65 lived, on average, to 79. Those 14 years have risen to 19, putting a major burden on pension fund finances.

Across the world, life expectancy at birth has risen by 10-20 years in many countries. The most remarkable change has been the worldwide reduction in extreme poverty, which has fallen by two-thirds even as the population has risen by 40%.

Globalisation – an exciting or resented term – has been behind much of this.

In European politics, the economic tide was driven by the push for a European Single Market within the increasingly powerful European Union. This came to fruition on 1 January 1992, with its disposal of a raft of tariff and non-tariff barriers and the goal of free movement of goods, services, people and capital. Now I wonder what happened to all that – and where we will end up.

“The most remarkable change has been the worldwide reduction in extreme poverty”

Peter Tompkins July 1990–Jan 92

1989

1990

Jim Boyle Feb 92–Aug 93

1991

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1992

Jennifer Lang Sept 93–Mar 95

1993

Martin Lunnon Apr 95–Mar 97

1994

1995

Zaki Khorasanee Apr 97–Mar 99

1996

1997

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Features Volunteer

JENNIFER LANG

GUEST EDITORS

2000

Sept 1993–Mar 1995

10TH ANNIVERSARY YEAR

When I arrived in London in 1992, an Australian actuary in her 20s, I was looking for opportunities to get involved in the UK profession. However, in the UK in the mid-1990s, the actuarial volunteering opportunities for a young Australian woman seemed to only be for roles that needed a lot of work – which is how I became editor of The Actuary. It was a great way to get to know the wider profession and the UK market.

We had a series of interviews with relevant politicians, the most memorable being with William Hague, who was Parliamentary UnderSecretary of State for Social Security during my editorial tenure. He was impressively on top of his brief as he talked about pensions and social security policy.

We published the first article I had read looking at potential links between severe weather claims in general insurance and climate change; at the time, the conclusion was that the increase in claim amounts was mostly because of higher insured exposure in weather-exposed areas, but that didn’t rule out climate change causes.

The fallout from the Lloyd’s LMX spiral and the Lloyd’s Names was happening in the

Martin Pike Jan 2000 Derek Newton Mar 2000 Raj Mody Apr 2000 Lance Burbidge May 2000 and Sept 2000

“The breaking story at the time was the pensions misselling scandal”

Kathryn Morgan Jun 2000 Peter Tompkins Jul 2000 Frank Guaschi Aug 2000 Simon Grout Oct 2000 Paul Thornton Nov 2000 Martin Lunnon Dec 2000

Dave Bennett Apr 99–Dec 99

1998

1999

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background during this period, reminding actuaries of the importance of appropriate reserving for long tail business.

In retrospect, though, the breaking story at the time was the pensions mis-selling scandal, in which as many as two million people were wrongly advised to opt out of occupational schemes and take out personal pensions. It was an important lesson on what can go wrong if the longterm interest of customers isn’t properly considered.

Gradually, we have taken social licence and bestinterest duties much more seriously, but not without a number of subsequent scandals that led to poor outcomes for customers.

For me, editing The Actuary was the start of a love affair with writing – making sense of actuarial topics for the wider reader.

When I returned to Australia I edited our local actuarial magazine, and now write a blog called Actuarial Eye, which has been going for 15 years.

I’m very grateful to the UK profession for taking a chance on me as a 20-something editor – the experience substantially enriched my professional life.

Conor Dolan Jan 01–Dec 02

2000

2001

Matthew Edwards Jan–Dec 04

2002

2003

Timothy Bramham Jan 05–Dec 06

2004

2005

2006

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MARTIN LUNNON Aprr 19995–Maar 19997 & Decc 20000 Looking back on copies of The Actuary from when I was editor, there were many issues covered. Some, such as changes to insurance regulations and accounting standards, were outside my area of expertise, and I had to trust the authors of the articles. Others covered the new and developing areas in which actuaries could work – whether this was new areas of business, or countries where our expertise could be useful (there were several articles on opportunities in Poland and, as a lover of that country, I’m pleased to see how it has developed economically since).

Most of my working life was spent in social security, on which there were few articles, and in pensions. The biggest issue in pensions in the mid to late-1990s was the introduction of the minimum funding requirement (MFR), which represented a major challenge for defined benefit pension funds and their sponsoring employers – and therefore also for their advisors. Was it, in retrospect, worth it?

The short answer seems to be ‘no’. The MFR was abolished after less than a decade, having been shown to be ineffective at protecting pension fund members – most obviously when people

who had been made redundant from insolvent employers and lost large proportions of their pension rights protested naked outside political parties’ annual conferences.

However, the MFR can be seen as a stepping-stone on the way to the present structure, with the Pension Protection Fund (PPF) offering assurance of some pension to members of defined benefit pension funds whose sponsoring employers become insolvent with insufficient funds to secure full benefits. This system has already lasted about twice as long as the MFR, and PPF finances appear to be strong.

The MFR’s replacement by scheme-specific funding, the PPF and The Pensions Regulator seem an example of things done well. There’s always criticism of organisations that do badly; perhaps we should spend as much effort on looking at things that have lasted and performed satisfactorily, with a view to understanding what made them resilient.

I wish The Actuary all the best on its 30th anniversary, and hope it continues in whatever forms are most suitable.

“The biggest issue in pensions was the minimum funding requirement”

MATTHEW EDWARDS Jan 20003–Dec 20004 Of the ways in which actuaries can help the profession, being editor of The Actuary must be one of the best, even giving the CMI a run for its money! Before becoming editor, I had worked as a features editor, another fascinating role, helping commission articles on particular themes, negotiate any issues with authors, and improve clarity. Being the editor was an incredible opportunity to improve communication in the profession, promote new ideas, and influence actuaries in what I hoped were positive ways.

The issues back then don’t seem much different from those of today. SARS was watched with alarm, but was ‘managed away’ before it struck Europe badly. New regulations from the Financial Services Authority were in the offing. Data science and novel forms of pricing were becoming a big thing in property and casualty insurance.

Longevity projections were ‘fickle’, and the resulting life expectancies disobedient. Capital modelling kept cynics amused.

One of my duties was contributing a meaty editorial on some of the themes of the day, and it was surprisingly hard trying to add value and originality to these debates. That duty was what the Italians call ‘croce

e delizia’ – a cross and a delight. There are many editorials I look back on with fondness (twinned with regret for a sometimes self-indulgent writing style) where the themes are still of interest. Such themes as ethics (‘On the ethical actuary’, following the FSA’s discussion paper on an ethical framework for financial services); fair value – at the time a novel concept (‘On the catallactic actuary’, noting Thomas Aquinas’s distinction between value and price); non-parametric methods for tail modelling (‘On the philoparametric actuary’); and modelling fundamentals (‘On the analogical actuary’, which grew to become a SIAS paper on the philosophy of modelling). All are long gone from the magazine’s website, but they linger on elsewhere on the web (www.lulu.com, the burial place of vain authors!).

The profession depends on enthuasiastic volunteers to help enthuse the rest of us: I greatly recommend helping with The Actuary as one of the best such opportunities. Few professions allow their members to spend a year or two as ‘amateur hacks’!

“SARS was watched with alarm, but was ‘managed away’ before it struck Europe badly”

Margaret De Valois Jan 07–Dec 08

2005

2006

2007

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Marjorie Ngwenya Jan 09–Dec 11

2008

2009

Deepak Jobanputra Jan 12–Dec 13

2010

2011

2012

2013

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Features Volunteer

MARJORIE NGWENYA Jan 20009–Dec 20111 I started my journey with The Actuary as a features editor, sourcing articles from contributors around the world. I was a few months away from qualifying and wanted to give back to the profession in a way that played to my strengths. Three years later, I became editor and broadened the role I was playing on the team.

Much of my time was spent engaging stakeholders with varied objectives, including the publishers, the IFoA, the Staple Inn Actuarial Society, readers, and volunteers who not only contributed quality content but also comprised the team that brought the magazine to life. This opened up my perspective on the profession from a practice area point of view, as well as geographically. The team was determined to produce content that was relevant to technicians and generalists alike, and had broad geographic applicability.

My tenure began amid the global financial crisis, when all flavours of risk management were in vogue. The IFoA was also launching the ST9 examination, and the Chartered Enterprise Risk Actuary qualification with the US’s Society of Actuaries. It’s hard to believe that’s now more than a decade ago!

Environmental matters were increasingly prominent. The question of publishing an electronic-only version of the magazine arose and was never concluded, with split views among readers. Perhaps we are now living through the time for these changes.

Solvency II consultations were under way and we received several contributions on the implications for European insurers. Those blueprints paved the way for many global insurance supervisory regimes.

My time as editor was hugely beneficial to my career and personal development. I broadened my professional horizons, expanded my networks and engaged with delightful people. One of my favourite conversations was with Roger Bootle, an honorary IFoA fellow. His view was that economists and actuaries needed to collaborate more: “I’ve always thought that there’s potential for a lot of cross-fertilisation, if only the economists would climb down from their ivory tower and confront the structure of real-world problems.”

Since then I’ve seen a number of collaborative efforts in the domain of behavioural economics that have inspired me.

“My tenure began amid the financial crisis, when risk management was in vogue”

DEEPAK JOBANPUTRA Jann 20012–DDecc 200133 I recall being ‘encouraged’ to get involved with the actuarial profession by colleagues, but there was always a voice in my head saying I was too busy. Looking back, it was a highly rewarding experience and, although it made me busier still, it made me grow in a number of different ways, and has made me an even greater debtor to our profession.

The role provided a great opportunity to experience a wide range of topics, beyond traditional areas of life insurance, general insurance, pensions and investments. There was a drive to explore wider fields and seek out interviews from fields where actuarial skills could apply. Today we often come across actuaries applying their skills in a much broader way than in the past, which I hope will continue.

At the time there was a shift in the IFoA’s membership base, which moved from being very UK-centric to being truly international, bringing great diversity and enhancing our profession. Nostalgia reminds me of the international supplement, which included success stories of actuaries around the world sharing their experiences.

It seems a long time ago that I was editor and it has benefitted me greatly, especially in dealing with deadlines when the press is ready to roll. I vividly recall times when we had literally minutes to review and approve specific articles. Editorial meetings were also great fun, due in large part to the fantastic team of volunteers and staff, and often we would spend an inordinate amount of time debating what picture should go on the front cover – it’s amazing how animated we all became about this. One particular editorial that lives with me is one I wrote about time, and it seems quite fitting in some ways in relation to our current experience with COVID-19. I was trying to convey the message that we lead such busy lives that we dare not ‘waste’ time, but ‘wasting’ time can actually be just what we need to unwind and reflect.

I shall forever be grateful for the opportunity of being the editor and how it helped me connect with our profession. I would urge all members to volunteer in any way they can.

“There was a shift in the IFoA’s membership base, which became truly international”

Kelvin Chamunorwa Jan 14–Dec 15

2014

Richard Purcell Jan 16–Dec 17

2015

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2016

Francisco Sebastian Jan 18–Dec 19

2017

2018

Dan Georgescu Jan 20–present

2019

2020

2021

2022

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Features Modelling

Chantal Bond and Kai Zhu discuss how machine learning techniques can be used in consumer segmentation analysis

CHANTAL BOND is head of Actuarial, APAC at SCOR Global Life and chair of the IFoA Life Asia Sub-committee

IMAGE: SHUTTERSTOCK

KAI ZHU is a manager at KPMG Advisory (Hong Kong) Limited and a member of the IFoA Life Asia Sub-committee

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Features Modelling

A practical three-step approach to consumer segmentation analysis Consumer survey results are a typical example of unlabelled data sources, and it can be resource-intensive to derive insights from the large resulting datasets. Here we use the data from an independently commissioned consumer needs survey across three Asia markets (Mainland China, Hong Kong and Singapore) that had more than 1,000 participants, to show that if there is a quantitative framework and process in place, consumer insights can be obtained www.theactuary.com

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STEP 1: Segment your data When given an unlabelled dataset, the first step of our process is to segment it using k-mean clustering, a common unsupervised machine learning method used to understand data structure. The k-mean clustering will group unlabelled data points into a pre-specified number of segments such that the data points within each segment are as homogeneous as possible.

Before we apply the k-mean clustering, we need to determine the number of segments we should divide the data into. We use the elbow method to determine the appropriate number of distinct segments. This method examines the amount of variance explained by the segment analysis as a function of the

“Future financial priorities were more important than country, age, income or education level in predicting which segment the consumer belonged to”

FIGURE 1: Elbow method result for Hong Kong.

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arriage and birth rates continue to decline worldwide, and home ownership rates have plummeted in a number of developed economies.

A traditional life insurance consumer segmentation approach, which seeks to focus on the socioeconomic and demographic drivers for life events that lead to insurance purchases, will begin to lose its relevance in this context.

At the same time, insurers have access to a rapidly growing pool of data about consumers – but few have managed to really get to grips with it. How can this data be used to enhance understanding of consumer needs and therefore gain insights that lead to better outcomes for insurers and customers?

We will demonstrate a data analytics approach to consumer segmentation that uses machine learning techniques such as k-mean clustering and random forest classification, which can be applied to a variety of data sources. In this example, we will use data from a consumer needs survey commissioned by the IFoA Life Asia Sub-committee to identify and describe three distinct consumer segments based on their responses to the survey questions.

quickly and reliably from a non-traditional high-dimensional dataset such as this.

In this example we outline a practical three-step approach that could be automated to significantly reduce the turnaround time from analysing data to generating actionable insights.

In some ways, this process is the reverse of the traditional approach to consumer segmentation – rather than first defining some demographic or socioeconomic buckets and then segmenting consumers into them, we first segment the consumers into homogeneous groups based on their survey responses (step 1), then look at what variable connects the consumers in each group (step 2), and finally describe the groups based on this variable (step 3).

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number of distinct segments used. The segment number used in the k-mean clustering exercise is chosen such that any additional segments used would yield a decreasing marginal gain in reducing the variance explained in the segment analysis.

Based on interviewees’ responses to the IFoA Asia consumer needs survey, we found for each market that k-mean clustering yields decreasing marginal gain when the number of segments used to divide the data is more than three.

STEP 2: Identify the key independent variables that define the segments After the data is segmented we convert the unlabelled dataset into a ‘labelled’ dataset, as each data point has been labelled by the distinct segment to which it belongs based on the k-mean clustering results in step 1.

The random forest classifier is a regression model that uses a large number of decision trees built from the top-down approach based on the order of independent variables in terms of their influences, measured by information gain, in predicting the outcome of the dataset. The random forest classifier is trained using the labelled dataset to predict which data point would belong to which segment, and the impact of each independent variable on the accuracy of the model is measured by the information gained in order to identify the most influential independent variables in predicting the segment that data point belongs to.

We used Python’s sklearn library to train the random forest classifier based on the already segmented dataset from step 1. After DECEMBER 2020 | THE ACTUARY | 33

20/11/2020 16:45

Features Modelling

“While it’s clear that the life stage model is still useful, its relevance is waning”

as the most important determinant of predicting the segment the interviewee belongs to, the future financial priority profiles were generated for the three consumer segments. Figure 2 shows how we characterised the three consumer segments identified in the Asia consumer markets.

Differences between markets the model was trained, we used the random forest feature selection method in the sklearn library to rank the variables in order of the information gained from each of them. It was found that the most important variable, accounting for more than twothirds of the total information gain, was how an interviewee ranked their future financial priorities. This was more important than country, age, income or education level in predicting which segment the consumer belonged to – showing some of the limitations of a traditional demographicsbased segmentation approach.

STEP 3: Profile the segments’ characteristics based on key independent variables As the last step, we generate characteristic profiles for all the segments based on the most influential variables identified in step 2.

As ‘future financial priorities’ was identified

Generally, the segmentation results for the three markets (Mainland China, Hong Kong and Singapore) were remarkably similar, demonstrating the wide applicability of a financial priorities-based segmentation.

Nonetheless, there were a few key differences, reflecting different economic contexts, for instance: • The consumers in Hong Kong tend to move into each of the segments at a later age. This may be linked to Hong Kong’s housing market, which is one of the least affordable globally.

• Singapore has fewer individuals in the ‘managing competing needs’ segment (39%) than the other two markets (around 50%). This may be because of affordable public housing and accessible high-quality public education, which reduces some of the financial needs for working families.

• Singapore respondents in all segments ranked buying a car as a low priority (Singapore’s car ownership rate is very

FIGURE 2: Characterising the three consumer segments identified in the Asia consumer markets.

Savers and budgeters

Apart from a high future financial priority in saving and budgeting, which is prevalent for all three consumer segments and across all three markets, this segment has no other notable future financial priorities.

This segment contains a relatively higher proportion of the younger age group (18-25), single respondents and those with no dependents.

Managing competing needs

This segment has multiple future financial priorities to fulfil simultaneously, including family-related financial priorities (eg marriage, buying a house, children’s education) and managing debt/mortgages.

This segment also rates saving for retirement and having an emergency fund higher than the other segments.

This segment has a higher proportion of those aged 26-35.

It also has a higher proportion of married individuals with no dependents.

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Supporting the next generation

This segment places less priority on family-related needs, but gives higher financial priority to saving for the next generation and for retirement.

This consumer segment has a higher proportion of individuals aged 36-50, and a higher proportion of individuals whose family status is both married with children and divorced.

low), whereas Mainland China respondents gave greater priority to paying taxes (the top income tax rate is 45% in China, vs 22% in Singapore and 17% in Hong Kong).

What are the uses of this technique for the life insurance industry?

A data analytical approach to segmentation can yield results that are more relevant to today’s consumer landscape, and can make better use of a wider range of data sources.

These could include any labelled or unlabelled consumer data already available to insurers, including consumer interactions and feedback on social media, purchasing patterns and web browsing data, call centre transcripts, postcode/location insights, and commercially available data. It could also include emerging sources of consumer data such as connected devices. Setting up an enterprise-level analytical framework and processes to derive consumer insights in real time from the ever-growing pool of data can, for example, improve sales conversion rates and facilitate cross-selling by creating a richer understanding of financial needs.

This, of course, has implications for marketing and sales strategies for both insurers and distributors, as they seek to identify the most relevant markets for different products. There are also opportunities for improved product design.

For example, one of the key findings of our survey was a strong desire for more flexibility in insurance products. Hence, the ability to design products which can grow with consumers or be adapted for different customer segments would be likely to be well received by policyholders while also having persistency benefits for insurers.

While machine learning techniques are already used in predictive underwriting and may also be used for analysing insurers’ claims and persistency experience, they are rarely applied to the more qualitative data sources discussed here – but the real value is in looking at these data sets together.

Once we have a richer understanding of, say, the lapse behaviour of a particular consumer segment, we can use these insights in a predictive context, which in turn can create more proactive opportunities for engagement, communication, sales and retention. www.theactuary.com

20/11/2020 16:45

At the back Careers

GUIDING LIGHTS In the concluding feature of this series, Bradley Shearer talks with three more actuaries who are non-executive directors about their career journeys, reflections, and advice for those considering a NED role

Health and wealth management Sheelagh Malin is based in Dublin, and during her executive career was managing director of St James’s Place International, an Irish subsidiary of the UK wealth management group.

Those years coincided with an overall strengthening of governance requirements for Irish insurers and Solvency II preparations. As the company relied extensively on outsourcing, both within the group and to a third-party provider, Sheelagh’s oversight gave her very broad experience. Prior to this, she’d been finance director and appointed actuary, and her experience at other companies covered marketing and product development, business planning, with-profits reporting and unit-pricing controls. www.theactuary.com

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“Preparation for board meetings is vital – there can be a lot of papers to read!”

“Preparation for board meetings is vital – there can be a lot of papers to read!” she advises. “See the big picture and understand the key issues, including those absent from the board pack. Within meetings, have a constructive and collaborative approach, while being prepared to offer a minority viewpoint or challenge management.

Overall, be organised in your approach, develop good relationships with management and your fellow directors, and be responsive to issues requiring attention outside scheduled meetings.”

Sheelagh explains that her actuarial training is of great benefit in understanding the dynamics of financial services businesses. She also has a coaching diploma, and her voluntary work for the Society of Actuaries in Ireland has included developing its competency framework and presenting on gender balance and mentoring. She is currently vice president of the society.

SHEELAGH’S SUGGESTIONS: Develop your interpersonal skills, particularly relationship management and your effectiveness at meetings Think about how you might get useful board experience while you’re still an executive, and consider a governance qualification Professional volunteering can help develop both your industry knowledge and your interpersonal skills, and expand your network – leading to more opportunities.

IMAGE: ISTOCK

Sheelagh Malin

Sheelagh’s first NED role was with the Health Insurance Authority, which regulates the Irish health insurance market.

Approached by Ireland’s Department of Health for a board role in 2010, she became chair in 2016, and still performs the role.

This gave her the credibility and confidence to leave her executive role in 2016 without other NED appointments lined up. She approached headhunters, ensured her LinkedIn profile clearly indicated her availability, and networked at industry and professional events.

Sheelagh chairs several risk committees and one audit committee for companies in Ireland and the Isle of Man. These are all subsidiaries of Bermuda-based reinsurer and consolidator Monument Re and UK-listed wealth manager Quilter plc. A chair’s role, she says, is to ensure a committee is fulfilling its terms of reference. This includes “setting the forward agenda with management and ensuring adequate time for discussion and resolution of contentious issues.”

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23/11/2020 11:50

Jose Ribeiro

Unit-linked life insurance and general insurance/property and casualty Jose Ribeiro has been an executive board member in international jurisdictions such as the UK, Europe, Hong Kong, China, Brazil, Bermuda and Singapore. He’s currently developing a NED portfolio in the (re)insurance industry while working at Imperial College London as insurance lead for its business school, lecturing on topics such as risk management and cybersecurity.

Jose’s career covered various regional CEO roles, including as Willis Towers Watson’s CEO for Latin America and the Caribbean, head of international for Lloyd’s of London, CEO of Generali Brazil, and most recently managing director of AM Best Asia-Pacific. This last role allowed Jose to enhance his knowledge of big data and 36 | THE ACTUARY | DECEMBER 2020

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artificial intelligence through proximity to Asia and Australia’s leading insurers.

Skills development is important to Jose, who has a masters in applied maths and actuarial science, as well as an MBA. In his view, NEDs have to be more than generalists, while CEOs are generalists – ie NEDs must have specialist expertise that their companies can benefit from.

Jose’s current NED roles are with Hansard, an Isle of Man based unitlinked insurer listed on the London Stock Exchange, and Starr Insurance Companies, offering general and speciality insurance. The first role came through an online recruitment platform, and the second through relationships developed during his career. Jose feels that speaking at global conferences also helps to build your profile – it contributed to his work at Imperial College. It’s important, too, to be seen as a NED and not an executive, so have active conversations about your new direction.

“NEDs must have specialist expertise their companies can benefit from”

Jose notes that his main focus is his NED work, and he has more capacity available. He enjoys sharing his experience with boards and helping steer them away from mistakes he has made himself. The oversight role means that you have time to think and identify where you can add value to the executive team. Due to his background, he tends to be a member of the board, risk committee and remuneration committee.

His actuarial training is especially relevant to his risk committee role in a Solvency II world, and his original pension and life background is useful for the remuneration committee, too. One low of boardroom life, he notes, is the need to carefully read too many pages of papers ahead of meetings: “Few companies work hard to condense papers to an optimal size.”

JOSE’S ADVICE FOR US: Brush up on your technical knowledge and learn as much as possible about how technology is disrupting our industries Work on building expert knowledge in fields such as risk management, data modelling, emerging risks, artificial intelligence, big data, underwriting, consumer preferences, executive compensation etc – your value is the expertise you can bring (and how you complement others already on the board) Become a guest lecturer where your knowledge and experience is in demand. www.theactuary.com

23/11/2020 11:50

At the back Careers

Karabo Morule Banking/fintech Karabo Morule is based in Johannesburg, South Africa, and earlier this year was appointed an independent NED at digital bank TymeBank. Her career to date has been spent at JP Morgan, including in London, and at Old Mutual, where her concluding role was as managing director of personal finance. Previous NED roles include company-appointed ones (such as trustee on Old Mutual’s umbrella retirement funds) and an external one at a medical aid fund administrator.

A member of the Forum of Young Global Leaders in 2018, Karabo is also a NED at a South African think tank on the role of financial services. For that role, she was approached by someone she knows who sits on the board, as they were looking for senior female executives in financial services –

particularly in insurance. For her most recent appointment, she chatted with friends and mentors about her desire to find a NED role, and they notified her of opportunities. In general, she says, networking is key.

Karabo feels that NED roles allow her to maintain a link to the financial services industry. She’s also open to expanding her knowledge and applying her skills to other industries. She points to the regulatory requirements on NEDs to apply business knowledge and act with due skill, care and diligence. Her diversity of work experience, combined with her interactions with boards at a very senior executive level, support her belief that she can contribute to organisations as a NED. A board role “requires one to maintain the values of the organisation, contribute to its strategy and long-term sustainability, and deliver value to its stakeholders”. In addition to sitting on the main board, Karabo is on three subcommittees and finds the work enjoyable – “especially given the innovative and dynamic work the company is doing, and its focus on innovation and financial inclusion.”

Karabo highlights the control cycle and enterprise risk management as key elements of actuarial training that are applicable in any business sense. Professionalism and communication are also key.

“Maintain values, contribute to strategy and deliver value” She encourages boards to consider young executives, as they can bring a different perspective and diversity of thought that can positively challenge the status quo. “The tendency for boards to want and value experience means most boards don’t have any members in their 30s or 40s… it is sad, too, that many boards don’t have sufficient gender diversity, either.”

KARABO’S RECOMMENDATIONS: Invest in a director certification or attend introductory courses to understand your corporate governance responsibilities – attendees can often be great referrals for boards looking for new members A certificate course on company law can also be insightful for your role as a NED Gain different career experiences to make you a well-rounded board member, as there is space for specialists and generalists on boards Read the profiles of the members of a few boards to get a sense of the type of experience you might need.

The keys to success This series has showcased the career experiences and insights of a number of actuaries who perform NED roles in their portfolio careers. They cover a diverse spread of specialisms and jurisdictions and represent different levels of NED experience, from those in their first few roles to seasoned board chairs. The flexibility of NED roles was mentioned regularly – the ability to combine them with other pursuits such as travelling, consulting, volunteering, family, entrepreneurship and even executive roles. Common threads

in our interviewees’ reflections and recommendations include: Attending governance courses offered in your jurisdictions, both for the knowledge and to meet other attendees Understanding and respecting the difference between governance and executive management – ie being clear on your role as a NED Knowing yourself, what roles you’d enjoy, and which boards you’d add value to Building your credibility, profile and relationships, starting during your executive career, joining professional committees,

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networking and/or presenting at industry events Preparing thoroughly for board and committee meetings Recognising that both broad management abilities and specific skills are necessary Developing through lifelong learning, such as knowledge of technology, cyber risk, data and consumer preferences/behaviour.

BRADLEY SHEARER is executive director of Protagion Active Career Management, actuary and CFA charterholder

Actuaries performing or aspiring to NED roles should consider joining the NED Member Interest Group (bit.ly/2TtGXQQ), including its LinkedIn presence.

DECEMBER 2020 | THE ACTUARY | 37

23/11/2020 11:51

At the back Probability

he so-called ‘Tuesday boy’ probability puzzle gives insight into both conditional probability and the nature of mathematical modelling around uncertainty. It is a problem that is able to shock, frustrate and delight – and can lead to continued disagreement even among those who clearly understand its mathematical solution.

As such, it is an essential education for anyone in the business of explaining risk modelling to general audiences.

Tuesday’s Kevin Olding peels apart a perplexing puzzle in probability

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KEVIN OLDING is the creator of the Mathsaurus website (mathsaurus.com) and YouTube channel, and a PhD student in the SAMBa Doctoral Training Centre at the University of Bath

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20/11/2020 16:46

At the back Probability

A simpler version of the puzzle has long been a feature of introductory probability classes: Two boys: You meet a new colleague who tells you “I have two children, one of whom is a boy.” What is the probability that both your colleague’s children are boys?

Many respond that the answer is ‘obviously’ ½, only for the puzzle setter to reveal the ‘true’ answer of ⅓, along with the following reasoning. Suppose each child is either a boy (B) or girl (G) with equal probability, and the genders of the two children are independent. There are then four possibilities for pairs of children {BB, BG, GB, GG}, each occurring with equal probability. Conditional on one of these children being a boy, three equally likely outcomes remain {BB, BG, GB}, and so the probability that both children are boys is ⅓.

The logic is irrefutable, but somehow unconvincing for many, and indeed there is a much less discussed hidden layer to this problem that several variants help to reveal.

1

The ‘Tuesday boy’ variant of the problem, first showed to me by a colleague while I was teaching at Dulwich College in London, left me in an initial state of disbelief: Tuesday boy: You meet a new colleague who tells you “I have two children, one of whom is a boy who was born on a Tuesday.” What is the probability that both your colleague’s children are boys?

How can knowing the boy was born on a Tuesday have any bearing on this problem?

Surely this is independent of, and irrelevant to, the original problem? However, careful analysis shows us that the additional information does indeed change the correct answer to a value much closer to ½.

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To see why, subdivide each of the four cases {BB, BG, GB, GG} into 49 possibilities of pairs of days on which each child could have been born. There are now 196 possibilities in total, each equally likely.

There are 27 combinations that include a boy born on a Tuesday; of these, 13 have two boys, both born on Tuesday. Therefore, the probability of two boys is now 13/27 – quite close to ½ (Figure 1).

Consider a further seasonal variant for emphasis: Christmas boy: You meet a new colleague who tells you “I have two children, one of whom is a boy who was born on Christmas Day.” What is the probability that both your colleague’s children are boys?

If we assume 365 days in the year, with births independent and equally likely on each day, then a similar argument yields an answer of 729/1,459 – even closer to ½.

3

Again, these mathematically irrefutable answers leave us searching for intuition, and a final variant is helpful to understand what is going on: This boy: You meet a new colleague; he is sitting with a boy, who he introduces as one of his two children. What is the probability that both your colleague’s children are boys?

This is the simplest case of all, and the answer is ½ – though if you have thought too much about the previous puzzles, you would be forgiven for any doubt! In this variant, there is a particular child in front of you. A second child is somewhere else, and is equally likely to be a boy or a girl.

Similarly, if you know the eldest child is a boy, the probability that the other is a boy is also ½. Writing the births in order, there

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FIGURE 1: Solving the ‘Tuesday boy’ puzzle.

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are two of the four cases remaining {BG, BB} and the probability of two boys is clearly ½.

Applied probability In each of these four problems, the answer depends on how specifically the information you are given identifies a particular child. If it is unlikely you would have two children satisfying the condition – for example being born on Christmas Day – then the answer is very close to ½. In the case of the particular child being in front of you, it is impossible that both children are that child, so the answer is ½. If the information is more generic, the probability will be closer to ⅓.

Even with this intuition, we may be left questioning whether this problem really makes sense as an applied probability question. In the initial ‘two boys’ problem, why do we accept the inference that the probabilities of each of the four outcomes are equally likely, and that the information you are given is conditioning these to {BB, BG, GB}? If someone said in conversation “I have two children, one of whom is a boy”, common experience tells us that, a very high proportion of the time, the speaker would have one boy and one girl, unless they are a probability puzzle setter.

There is something special about how the ‘Tuesday boy’ problem provokes debate. As well as being an interesting conditional probability puzzle, it helps us reflect on the nature of applied probability. The correct meaning of probability in this context, and perhaps in all applied probability problems, is that it represents uncertainty about the information we hold, rather than some inherent randomness of nature. As such, valid solutions to these problems are as much about the initial modelling assumptions as the technicalities of the pure probability. This makes them a particularly useful part of any education about modelling uncertainty in a professional context.

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I leave you with a variant of my own creation – please tweet your answers to @mathsaurus and @TheActuaryMag. Actuary boy: Your colleague passes you the latest edition of The Actuary magazine containing an article stating that 35% of actuaries are female and tells you “I have two children, one of whom is an actuary.”

What is the probability that both your colleague’s children are boys?

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20/11/2020 16:46

At the back Careers

How to transition

From FIA to IFA What is an independent financial advisor, how do you become one, and why is this relevant to actuaries? Darryl Boulton explains

A common route to the basic qualification required is passing five exams featuring multiple-choice questions covering regulation, investment, personal tax, pensions and protection, followed by a three-hour general paper based on case studies. If you wish to give advice in some specialist areas, such as pension transfers or equity release, then you will also need to pass further exams.

Are the exams easy? Relative to actuarial exams I would say yes, but they are certainly no pushover. I was pleasantly surprised at how well-designed multiple-choice questions can provide a fair and thorough test, even with numerical-based subjects.

Best of all, with the multiple-choice question-based exams, you do not wait two months for your results. Approximately 30 terrifying seconds after submitting your answers, you will get an onscreen message that hopefully begins with ‘congratulations’.

Downsides?

What an IFA does Contrary to popular belief, an IFA does not advise on the buying and selling of individual shares. What you will do is check individuals have the right insurances in 40 | THE ACTUARY | DECEMBER 2020

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place, and source the best product for them where necessary.

Other common advice areas are ensuring assets are suitably diversified and, above all else, increasing awareness of the tax breaks and reliefs available. Did you know, for example, that you can pay £240 per month into a pension for your child or grandchild and the government will chip in £60 each month too?

Skills needed The best IFAs have not only good technical ability but also, and just as importantly, people skills. The latter is not always associated with actuaries, but we are not all the same!

If you have the technical skills to be an actuary, you are more than equipped to qualify as an IFA. However, you will not be an effective advisor unless you also have the ability to sell yourself and gain people’s trust so that they will share information about their personal finances with you. Equally, you must not be a pushover – while giving free advice makes you popular, it does not feed the family.

Money and lifestyle A competent and well-organised advisor can earn as well as an actuary. However, if you do make the switch, you will need to be able to support yourself for the first couple of years or more as you build up your client base.

I work from home most of the time, at hours that suit me. I sometimes pop a shirt on and visit clients, although many are happy with a Zoom call. I can do the school run, will not DARRYL BOULTON miss Sports Day (if it is an independent happens), and often financial advisor. listen to the radio as I work.

And I make a positive difference to my client’s finances. What’s not to like?

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any actuaries will get asked by friends and family for some form of financial advice. While you are probably very capable, you do need to ensure you are not inadvertently transgressing into areas that are regulated (such as investment advice). But what about going the whole hog and becoming an independent financial advisor (IFA)?

Following a chance conversation at a networking event three years ago, that is what I decided to do. I was aware of the considerable paperwork that must back up every piece of advice given, and that had deterred me from making the move previously. However, I was assured that modern software takes much of that pain away, and I am pleased to report that this is so.

IFAs are, rightly, highly regulated. It is essential to cover your back and ensure that you have done a thorough and clearly documented fact-find in all circumstances.

It is not good enough that the advice given is correct – you need to ensure that all aspects of the process are captured as evidence.

Disappointingly, a handful of insurers still insist on snail mail for many processes.

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20/11/2020 16:46

At the back School of thought

Student

ILLUSTRATION: SIMON SCARSBROOK

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etting that first break is always hard – and actuarial jobs are no exception. When you’ve sent out dozens of CVs and not heard back from a company, it’s hard not to become discouraged, especially in times of COVID-19 or recession when many people are losing their jobs and unable to find new ones.

A study conducted by Glassdoor found that, on average, each corporate job offer attracts 250 CVs. Of those candidates, four to six will get called for an interview, and only one will get the job. Another study by Ladders found that it takes a recruiter just six seconds to review and evaluate a CV. We all know there is a gap between supply and demand when it comes to graduatelevel actuarial jobs. However, despite this, numerous vacancies are filled each year and many graduates are still getting hired.

Most of the time the problem is not with the jobseeker’s abilities, but with the way

they are looking for a job. Many people spend too much energy on traditional methods, overlooking some of the most effective, more unconventional ways.

Hiring is a tedious process and, most of the time, hiring managers are overwhelmed by the amount of CVs they receive. It’s always a good idea to send a follow-up email to the hiring manager. A recent study found that 73% of the hiring managers prefer jobseekers to follow up with them within one to two weeks – and yet almost nobody does it. Remember, though, that while it’s important to remind the hiring manager of your interest and qualifications, it is also crucial not to make them feel hounded.

Ensure the follow-up email is positive, friendly and brief. Re-attaching your CV is also a good idea. The last thing you want to do is be pushy and risk being removed from consideration. Also, don’t follow up more than twice. If you never hear back from the employer, it’s time to move on.

Widening the net Arpit Surana shares tips for graduate jobseekers looking to gain that first actuarial role

A study has shown that 33% of email recipients open emails based on the subject line alone. Most candidates either write a generic email without highlighting their skills and achievements, or write a long email that mentions everything about themselves, which no one has time to read.

The best strategy is to write a short and direct email that highlights your key strengths and achievements.

The actuarial profession is a small world and most jobs are never published on job portals. To get those hidden vacancies, it’s important to build connections – and what better way than through LinkedIn? I have seen many students get job offers even before they have graduated, all because of their social presence on LinkedIn. Staying active on the platform has a number of advantages: It helps you to stay up to date with industry trends It allows you to connect with more professionals and build a valuable network It increases your exposure to vacancies.

Writing frequent posts and articles is the best way to build connections. It not only helps you increase your knowledge, but also showcases your knowledge and skills to potential employers.

If there is a vacancy you are interested in, ask a current employee of that company on LinkedIn to refer you before you apply directly. This can increase the chances of getting selected, since the person might be directly sharing your CV with the hiring manager.

Application Tracking System (ATS) is a software system used by various companies to automate the recruitment process, enabling them to automatically select or reject CVs that do not qualify for the job.

There are numerous free ATS checking websites that provide scores for CVs. There’s nothing more frustrating than an unsuccessful job hunt, but giving up altogether isn’t the answer.

ARPIT SURANA is a guest student editor www.theactuary.com

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A MATHS ARE YOU ESTRO? A & LOGIC M hs, logical

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Courtesy of Andrew MacLeod

The list of words below can be placed into five groups of five, but one word has been omitted from the list.

The words within each group can be ordered based on their shared feature.

What is the missing word represented by question marks in the table below?

DECIMATE, SHOE, AID, NANOTUBE, CABBAGE, CAUSTIC, COLUMN, DOOR, XEROX, ESTATE, FLY, HAND, HEN, JAY, LEGAL, MICROSCOPE, STRAIGHT MILLIWAYS, PAGES, TIP, VAV, WORLD, CENTIPEDE, ISTHMI GROUP 1

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GROUP 5

CABBAGE VAV ?????

MICROSCOPE COLUMN Four of the words have been placed in their correct groups and positions within those groups.

www.mensa.org.uk

A train covers an outward journey at 110mph. It returns, over exactly the same distance, at only 73.3333 mph.

What is the average speed of the train over the entire journey?

42 | THE ACTUARY | DECEMBER 2020

42 puzzles_The Actuary December_The Actuary.indd 42

On track Mensa puzzle 798

Member puzzle 08 answers – Courtesy of Andrew MacLeod:Group 1 Words that can be prefixed by an ordinal number: First AID, Second HAND, Third WORLD, Fourth ESTATE, Fifth COLUMN. Group 2 Words that can be prefixed by the colours of the rainbow: Red CABBAGE, Orange-TIP, Yellow PAGES, Green FLY, Blue JAY. Group 3 Words contain SI prefixes (in decreasing order of magnitude): DECIMATE, CENTIPEDE, MILLIWAYS, MICROSCOPE, NANOTUBE. Group 4 These have the same letters at the start as at the end. These letters are the first five Roman numerals. ISTHMI, VAV,XEROX, LEGAL, CAUSTIC. Group 5 This group appear at the end of each line of the nursery rhyme – one, two, buckle my SHOE, three, four, knock at the DOOR, five, six, pick up STICKS, seven, eight, lay them STRAIGHT, nine, ten, a big fat HEN, the missing word represented by the question marks is therefore STICKS. Mensa answers: 798: 88 mph.

At the back Puzzles

www.theactuary.com

20/11/2020 16:47

At the back Society news

CHARITY

Actuaries supporting others

WCA

Lessons from COVID-19

BY LYNDON JONES

As a member of our global community of actuaries, you are part of a profession that has always given back. If this is one of the reasons why you chose a career as an actuary, please read on.

The IFoA Foundation is creating more opportunities for actuaries to support others, opening doors for the next generation and helping to solve some of the biggest societal challenges. The Foundation has three objectives: rewarding excellence in education and research at the cutting edge of our profession; supporting our community of tomorrow’s actuaries, including those facing financial hardship and in developing nations; and addressing future challenges and critical global issues in support of our public interest responsibilities.

Aligned with the IFoA’s firm belief that diversity makes us stronger, the Foundation’s trustees have identified opportunities to enhance the actuarial profession worldwide, such as through teaching actuarial science in East Africa, where more actuaries are needed. International projects will sit alongside grassroots projects such as the recent Maths Week Scotland quiz, which engaged school pupils in actuarial science and its role in tackling big societal issues.

The Foundation is reliant on the support of donors and partners to meet its objectives, and hopes to attract the generosity of our members worldwide who are passionate about actuarial science. The trustees are immensely grateful for any donations you feel able to make, big or small, that will enable them to fund more projects – and you to make a positive difference.

Please visit bit.ly/ifoafoundation to find out more, or email our general manager Belinda Dee at gmfoundation@actuaries.org.uk. Thank you for your support.

BOOK RELEASE

THE BOOGIE WOOGIE MONSTER FIA qualified investment consultant Shyam Gharial found an unusual project when he went on a year’s break in 2015-16. His love of jungle music and being a radio MC led him to explore the idea of writing a children’s story using some of the rhyming patterns (if not all the vocabulary!) that he uses in his music. He set out the ideas for illustrating the story with references to hip hop landmarks, human rights events and 1990s culture. The result was a 34-page rhyming story for five-to-seven-year-olds, with multi-ethnic representation, telling the story of a young boy and the boogie monster that lives in his room. The book is illustrated by Dan Mynard, who used to be a graffiti writer, and is due for publication on 1 December by ShookBop, which describes the offering as: “A strong and positive message about misperceptions, pre-judgment, and acceptance… a rapper’s delight.”

For details, go to: bit.ly/BoogieMon www.theactuary.com

43 people_The Actuary December_The Actuary.indd 43

Every autumn the Worshipful Company of Actuaries holds a lecture in Staple Inn Hall for Masters of other livery companies. We were unable to do that this year, but were delighted to host a Zoom lecture by Chris Hopson, CEO of NHS Providers, on 26 October.

NHS Providers is an organisation representing the 217 NHS hospital, ambulance, mental health and community trusts that have been at the forefront of dealing with the pandemic. Chris has been a frequent media commentator throughout the last six months, appearing on programmes from Question Time and Any Questions to major news bulletins and the Today programme.

Chris’s lecture, ‘What lessons should we learn, as a nation, from COVID-19?’, was extremely interesting and informative. He focused on five questions: Do we need to do more, as a nation, to manage the big way life is changing?

Should we establish an international infrastructure to manage supranational risks?

How are we going tackle the inequalities that COVID-19 has highlighted?

Do we need to rebalance our state machinery and devolve more power to local government?

What is the future of our public finances, given the size of public borrowing?

The presentation resulted in a very busy Q&A session that was thoroughly enjoyed by all. Well over 100 people attended, representing around 60 livery companies and some of the IFoA’s top team.

Call for your news…

We would be delighted to hear from you.

If you have any newsworthy items for these pages, please contact us at: social@theactuary.com DECEMBER 2020 | THE ACTUARY | 43

20/11/2020 16:48

At the back Volunteer

Inside story

NICK SPENCER Founder of Gordian Advice, which helps large UK pension funds integrate responsible investment into their investment strategy and portfolios.

Where are you based?

Greenwich, London.

What volunteer role(s) do you do for the IFoA? Chair, Sustainability Board; co-chair, ClimateRelated Risk Taskforce (CRRT); member, Biodiversity Working Party and Actuaries for Transformational Change; past chair, Argonauts Dining Club.

How long have you been volunteering?

Five years (and Argonauts’ member for 20-plus years).

What’s involved in your role(s)?

The Sustainability Board seeks to help actuaries understand and address the economic and financial risks and uncertainties that arise from sustainability issues. I help co-ordinate the Board’s activities, and I have personally set three themes for my tenure: 1) Implement the CRRT report, 2) increase focus on biodiversity, human rights, and diversity and inclusion, and 3) reinvigorate the IFoA’s thought-leadership.

IMAGES: SHUTTERSTOCK, ALAMY

What motivates you to volunteer for the IFoA? Learning, self-development and helping the profession to make a difference all count. But it’s also the freedom to roam in areas of interest and work with people who share my passions. I am fortunate to be taught and mentored through these interactions – and hope I can pass that support on to others.

44 | THE ACTUARY | DECEMBER 2020

44 volunteer_The Actuary December_The Actuary.indd 44

“I was interested in using creative maths skills from my early teens” What new skills or knowledge do you think you have developed?

That actuaries are fascinating – the talents and experiences I discovered in one-to-ones with board members was eye-opening! The simpler skills are those addressing knowledge gaps, but the real benefit is from interactions with those of different disciplines. This gives practical insights that aren’t found in textbooks. The other skills are soft skills – leading groups and teams with little hierarchy.

Has this assisted your lifelong learning?

Volunteering is the Harrier jump jet of lifelong learning – straight up and away.

Do you think volunteering has helped you in your day job?

Totally. The stream of knowledge, different perspectives and working with regulators are invaluable and sit alongside the softer skills of working within a board.

Have there been any memorable moments?

At the moment, the pinnacle is Council’s reaction to, and support of, the CRRT report, and their desire to take it forward.

What would you say to others considering a volunteer role?

Just do it. You get out what you put in.

Working party groups expand your knowledge and support others.

What was your earliest dream job?

Discounting early desires to be an astronaut or Sherlock Holmes, I heard how actuaries solved innovative problems, such as using disinformation to disrupt the targeting of London Blitz bombs, so I was interested in using creative maths skills to be an actuary from my early teens.

What word best describes you?

‘Bricolagist’: I seek to create a collage of different skills, perspectives and approaches to generate solutions. I enjoy networking and connecting different ideas and people together.

If you were locked in a famous place or building for one night...which would it be and why?

An orangutan nest in the Kinabatangan Forest, Borneo. Orangutans are one of our closest relatives but it’s potentially our last chance to see them. If we don’t address deforestation, there’ll soon be none left.

To share your volunteer involvement or find out about volunteering for the IFoA, contact: debbie.atkins@actuaries.org.uk www.theactuary.com

24/11/2020 10:36

At the back Appointments

actuarial@ipsgroup.co.uk / 020 7481 8111 / www.ipsgroup.co.uk

SYNDICATE PRICING ACTUARY – Up to £120,000 – City of London

PRICING ACTUARY, CASUALTY & SPECIALITY REINSURANCE Up to £120,000 / City of London Our client, a specialist P&C reinsurer is looking for an experienced Pricing Actuary to help support/develop the existing portfolio across Casualty, Marine, Energy, PRI, Aviation, Cyber. You will need a good track record of reinsurance pricing and useful to have good experience in pricing specialty/M&E across the London/International markets. (depending on level of experience there is the possibility to take over ownership of Specialty pricing in the future) Gary.Ahern@ipsgroup.co.uk +44 (0)20 7481 8111 Ref: 143095

DIGITAL PRODUCT OWNER - US HOMEOWNERS Up to £85,000 / City of London Our client, a leading Global Specialty (Re)Insurer, are seeking a technical Catastrophe Specialist with ambitions to take that expertise into a data-driven Underwriting function within their Digital Products team The successful candidate will have a strong understanding of Cat & Actuarial techniques and will join a hugely successful & innovative team with plans to continue expansion beyond this hire.

Josh.Trainor@ipsgroup.co.uk +44 (0)20 7481 8111 Ref: 143314

I am working closely with the Head of Pricing at a leading Lloyd’s Syndicate who is searching for an experienced Pricing individual to join his team and be a key figure in helping to take the company to the next level. This role will suit an ambitious individual who has extensive London Market Pricing experience across multiple lines of business. They are looking for someone who can bring new ideas to the table and add value to the team from day one.

Gary.Ahern@ipsgroup.co.uk +44 (0)20 7481 8111 Ref: 143321

CYBER ACTUARY Salary to attract the best talent / City of London Are you looking to take a step into the fast paced world of Cyber? I am currently working with a Global Reinsurance Broker who are looking to hire there first Actuarial individual within their Cyber team. I am keen to speak to individuals with an interest or knowledge of Cyber Insurance. This role will be part of a team that is going to be growing at a rapid rate and has the full backing from the CEO to grow and develop the function.

Gary.Ahern@ipsgroup.co.uk +44 (0)20 7481 8111

Ref: 143016

SENIOR CATASTROPHE ANALYST Up to £75,000 / London Are you an experienced & confident Catastrophe Analyst / Modeler on the Reinsurance side looking to take their next step?

I am working with a Global Reinsurance Broker on an exclusive basis who require a Senior Cat Analyst to provide overall project management and reviews for complex Catastrophe analyses in a client facing role.

Josh.Trainor@ipsgroup.co.uk +44 (0)20 7481 8111

Ref: 142973

DECEMBER 2020 | THE ACTUARY | 45 LONDON - CHICAGO - HONG KONG - SHANGHAI - ZURICH

ACT recr Dec20.indd 45

23/11/2020 14:11

At the back Appointments

We wish all our Clients and Candidates a very happy Christmas and a prosperous and safe 2021. A note to thank you all for your support in 2020.

If you are looking for a new role in Ireland in 2021 then get in touch. We are always happy to help.

With every best wish from us all.

Jacqui, Carina, Susan, and Rebecca

For further information on opportunities in Ireland please contact us at jobs@raretec.ie If you are a company looking for permanent or contract actuarial resources then call us on +35315311400 We look forward to hearing from you. www.raretec.ie

46 | THE ACTUARY | DECEMBER 2020

ACT recrFP.indd Dec20.indd 46 Raretec 1

23/11/2020 16:55 14:11 20/11/2020

20 16:55

At the back Appointments

We are looking for top quality mid to senior students Join our growing team of over 50 actuaries and students Opportunity to gain experience on both client secondments and consulting projects Salary £40-55k depending on experience Roles in London, Edinburgh and Dublin You may have come across APR working in the industry and thought of us as an actuarial recruitment company. Well – in fact we’re something quite different.

We now have a staff team of over 50 qualified and student actuaries and provide secondment and consulting solutions to a large proportion of the UK life sector, as well as a growing presence in non-life.

Our combination of outstanding talent and reputation for excellent training and development has supported our growth over recent years, and we are now looking to increase our team again, in particular at the mid to senior student level.

We can offer you: • A great opportunity to complete your qualification in an environment that has an enviable track record of success.

• A wide variety of project roles, both secondments to client teams and delivering projects within APR teams, including the chance to span both life and non-life work.

• The opportunity to develop wider skills crucial for your post-qualification career, by getting involved in the recruitment, training, and management of actuarial staff as well as technical and business development.

If you are looking to start a new chapter in your career, and you believe you have the combination of great technical skills, strong communication and an ambition to make a difference in a dynamic and thriving business, please contact us for a role profile.

For more information, and to apply, please visit aprllp.com/working-for-apr/actuarial-associate-roles

KEEPING YOU IN THE LOOP As a professional, you’ll no doubt want to keep up with the latest industry developments, people and news?

That’s why The Actuary’s weekly email alert brings you a handy round-up of only the most relevant news stories and comment, straight to your inbox every Thursday.

Register for weekly email newsletters at www.theactuary.com Browse www.theactuaryjobs.com and www.theactuaryjobsasia.com the official jobsites of the actuarial profession.

www.theactuaryjobs.com

The magazine of the Institute and Faculty of Actuaries

DECEMBER 2020 | THE ACTUARY | 47

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23/11/2020 14:11

PRICING ACTUARY - LONDON MARKET

London, At the£110,000 back Appointments A London Market Syndicate is looking for a Pricing

Actuary to join their team and focus on a range of different lines of business including Property, Crisis Management, Marine, Energy, Casualty, Liability and Energy. The role will initially focus on their Crisis Management Portfolio for the first 6-12 months, and then incorporate all the other products. As such, good technical skills, experience with building models and working with large data sets is essential. Key responsibilities will include individual pricing assessment of large or unique risk, communicating the impact of results to the underwriters and analysis of data from pricing models. Assistance of the building, review and maintenance of pricing models and business planning will also be within the candidates remit. The ideal candidate will be nearly/newly qualified with around 5 years of experience in London Market Pricing.

SYNDICATE CAPITAL ACTUARY London, £75,000

A growing Lloyd's syndicate is looking to hire a Nearly/Newly Qualified Actuary to join their team.

This is an excellent opportunity for those who want to join a small actuarial team that has the potential to offer exposure to pricing and reserving work. You will be assisting with the production of regulatory returns and you will be expected to liaise with key internal and external stakeholders. You will also be involved with supporting regulatory compliance and SII initiatives such as ORSA. I am keen to speak to individuals who have a Capital background and who have Lloyd's experience. I would be most interested in speaking to those with ReMetrica experience, however this isn't mandatory.

Contact: hannah.turner@eamesconsulting.com | 0207 092 3249

Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909

PRICING & ANALYTICS MANAGER

SENIOR RESERVING ANALYST

London, £95,000

London, £75,000

A Lloyd's insurer is looking to bring an Actuarial Pricing & Analytics Manager to joint their Syndicate.

The candidate will support the Head of Pricing to develop rating models and methods communicating the output from pricing tools and reviewing the pricing. This team is currently ongoing a few exciting changes due to a large project, and there is huge scope for development and progression. You will be managing a small team so mentoring experience would be a bonus. The ideal candidate will have 5+ years' experience in pricing, ideally in the London Market. If you are interested in this role, please apply below or contact me for more information.

A leading Lloyd's Syndicate is looking to bring on board a Senior Reserving Analyst to undertake a unique reserving role. The role will focus on their Syndicate book of business, whilst extending to the reinsurance book of business. You will be responsible for delivering the technical provisions of Solvency II and reporting for regulatory submission. The ideal candidate is a part to nearly qualified actuary with reserving experience, looking to take a step up.

Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909

Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909

SENIOR MANAGER - GLOBAL CONSULTING FIRM London, up to £130,000 + bonus

A globally renowned consulting form is looking to add a senior actuary into their growing practice. You will report into a Director and be expected to manage a team internally. This is for someone that is looking for more front-facing exposure to the market.

You can expect to be networking with Chief Actuaries, CRO’s and ‘Heads of ’ across the market, and lead teams with a view to helping clients with reserving and capital projects. The ideal candidate will be qualified with extensive experience in reserving, and/or capital/risk. This role is hugely visible across the market, so an exceptional level of communication skills is needed.

Contact: curtis.browning@eamesconsulting.com | 0207 092 3242

CAPITAL ACTUARY - LONDON MARKET London, up to £90,000 + bonus

A mid-sized Lloyd’s syndicate is seeking to hire a nearly/newly qualified actuary to join their growing Capital Modelling function. This will report into the Head of Capital directly. You will focus on supporting their internal capital model with model changes/calibration, validation, reporting and parameterisation. You will also have the opportunity to mentor a junior analyst. The ideal candidate will be nearly/newly qualified with demonstrable exam progress. Prior experience in Capital Modeling is essential, but this does not need to be in London Market. Any previous exposure to Tyche, Igloo, Remetrica or an equivalent platform would be massively advantageous.

Contact: curtis.browning@eamesconsulting.com | 0207 092 3242

ACTUARY - RESERVING & CAPITAL MODELLING - LONDON MARKET

PROPERTY AND ENERGY PRICING ACTUARY - LONDON MARKET

London, £80,000 + bonus + benefits

London, up to £75,000 + bonus

A leading London Market insurer is looking to hire a nearly/newly qualified actuary to focus on reserving and capital modelling. You will work on an even spread of both and cover multiple lines of business.

The role reports into the Chief Actuary directly. You will be joining a team with exceptional talent at both a junior and senior level and enjoy the benefits of working with people who really see the value of what actuaries can offer. The business has enjoyed an excellent retention rate which is reflective of their great reputation for working culture. The ideal candidate will be nearly or newly qualified and have prior experience in either capital modelling or reserving. Previous exposure to London Market business would be advantageous, but not essential.

A leading London Market insurer is urgently looking to add a Pricing Actuary to their team. This will report into the Head of Pricing. You will work on a blend of portfolio management, case pricing, and technical work to improve model accuracy. This team is very UW driven, so you can expect to build strong relationships with property & energy underwriters.

The team is one of the best in the market, and they have recently hired talented actuaries across pricing reserving and data science. The ideal candidate will be nearly qualified with demonstrable exam progress. Pricing experience is essential to the role with a strong preference towards commercial or Lloyd’s business.

Contact: curtis.browning@eamesconsulting.com | 0207 092 3242

Contact: curtis.browning@eamesconsulting.com | 0207 092 3242

48 | THE ACTUARY | DECEMBER 2020

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23/11/2020 14:12

At the back Appointments

SENIOR CAPITAL MODELLING ANALYST

REINSURANCE RESERVING ANALYST

London, £85,000

London, £50,000

A well known London Market insurer is looking to hire a nearly/newly qualified actuary to join their team in Central London. This is a great opportunity for those who want to get involved with using (and learning) Tyche whilst joining a household name within insurance. You will be involved with running the internal model to produce insightful capital outputs for regulatory and internal reporting. You will also be involved with validation work, and there is the opportunity to assist with the review of junior members work. You must have over 3 years' of actuarial experience, preferably in capital, and you must also be highly analytical.

A leading London Market insurer is looking to source a part-qualified Analyst to join their Reinsurance Reserving team. You will be involved with supporting the quarterly reserving exercise which includes projecting classes of business, reporting on reserving themes and presenting findings. You will be liaising with the Pricing team on a regular basis. This is a great opportunity to be in a supportive team that offers a good platform for learning & development. I am keen to speak to actuarial students who are making good exam progress and who have at least 1 year of GI actuarial experience. Reserving experience is advantageous but not necessary.

Contact: hannah.turner@eamesconsulting.com | 0207 092 3249

Contact: hannah.turner@eamesconsulting.com | 0207 092 3249

PRICING ANALYST

BROKERAGE PRICING ACTUARY

London, £55,000

London, £120,000

A global reinsurer is seeking an experienced pricing analyst to support all lines of business. This is a great opportunity to gain wider exposure, supporting both syndicate and reinsurance pricing. You will focus on case pricing, working closely with the underwriting team on numerous unique risks. You will also support model development, enhancing pricing capabilities in R/Python. The ideal candidate is a part qualified actuary with strong Lloyd’s/Commercial pricing experience, and outstanding communication.

A fantastic opportunity has come up in small brokerage for an experienced FIA Reinsurance Pricing Actuary. This is an excellent opportunity for candidates who like being business facing and engaging with clients on a regular basis. You will be reporting directly into the Head of department and you will be helping the brokers grow existing business and secure new business. I am looking to speak to individuals who can deliver high quality and complex work, and who can solve complex problems. A Reinsurance Pricing background is of preference but will also speak with candidates who have a strong London Market Pricing background.

Contact: sam.baker@eamesconsulting.com | 0207 092 3230

Contact: hannah.turner@eamesconsulting.com | 0207 092 3249

REINSURANCE RESERVING ANALYST

SENIOR RISK ANALYST

London, up to £50,000

London, £55,000

A leading reinsurer is seeking a part qualified actuary to join its reserving team, supporting all lines of business. This position will provide a wide range of responsibilities, from the delivery of Solvency II technical provisions, to loss adjusting in tandem with the pricing team. The ideal candidate has at least 1 year of reserving experience and is keen to progress through the actuarial exams.

A leading Lloyd’s insurer is looking to expand its risk intelligence team, seeking a driven ERM Analyst. You will be responsible for liaising with the actuarial and underwriting teams, aiming to understand and mitigate any emerging risks within the market. You will also support the capital modelling team in the validation of the internal model The ideal candidate has 2+ years of risk experience within an insurer, validation experience is desirable but not a necessity.

Contact: sam.baker@eamesconsulting.com | 0207 092 3230

Contact: sam.baker@eamesconsulting.com | 0207 092 3230

ACTUARIAL DATA LEAD

VALIDATION AND PRICING OFFICER

London, £110,000

London, £70,000

A Lloyd's insurer is looking to bring an Actuarial Pricing & Analytics Manager to joint their Syndicate.

The candidate will support the Head of Pricing to develop rating models and methods communicating the output from pricing tools and reviewing the pricing. This team is currently ongoing a few exciting changes due to a large project, and there is huge scope for development and progression. You will be managing a small team so mentoring experience would be a bonus. The ideal candidate will have 5+ years' experience in pricing, ideally in the London Market. If you are interested in this role, please apply below or contact me for more information.

A growing Lloyd's syndicate is seeking a nearly qualified actuary with validation or pricing experience. You will undertake a seasonal role, splitting your time evenly between the two functions.

Regarding pricing, you will be responsible for case pricing and model development across marine, energy, property, and casualty. In supporting validation, you will focus on the risk parameterisation of the internal model, monitoring market trends and emerging risks. The ideal candidate has 2-4 years of experience in pricing or validation, preferably within a Lloyd’s/London market insurer.

Contact: sam.baker@eamesconsulting.com | 0207 092 3230

Contact: rafaela.fakhre@eamesconsulting.com | 0203 846 5909

DECEMBER 2020 | THE ACTUARY | 49

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23/11/2020 14:12

At the back Appointments

Rothesay is home to original thinkers, constantly looking for better ways to secure the future – with meritocracy, excellence and creativity at our heart.

For more information visit Rothesay.com/about-us/careers

RISK MANAGEMENT PROVIDER OF THE YEAR

50 | THE ACTUARY | DECEMBER 2020

ACT recr Dec20.indd Rothesay FP.indd 1 50

14:12 23/11/2020 13:03

20 13:03

We know now more than ever you need more than just a recruiter. You need a partner, someone who inspires you and listens, someone who can bring you together with more than just a new employer.

At the back Appointments

We are Oliver James and we bring people together.

Jessie & the cottage of her dreams Brought together by Oliver James

View our latest jobs at & Jessie (Capital Modelling Actuary)

ACT recr Dec20.indd 51

DECEMBER 2020 | THE ACTUARY | 51

23/11/2020 14:12

At the back PLEASE CONTACT US TO DISCUSS OUR CURRENT VACANCIES OR Appointments

FOR EXPERT ADVICE TO HELP YOU ACHIEVE YOUR CAREER GOALS

CORPORATE RESERVING LEAD

NON-LIFE LEADERSHIP OPPORTUNITIES

NON-LIFE RISK SPECIALIST

Qualified

Qualified

Qualified

NON-LIFE LONDON

STAR6442

Large Consultancies

NON-LIFE VARIOUS / FLEXIBLE

STAR6463

Market Leader

NON-LIFE RISK LONDON

STAR6438

Take the lead in this highly-visible role, requiring regular interaction with colleagues in claims and underwriting. You will contribute to reserving, business planning and portfolio management, as well as capital, pricing and reinsurance matters.

We have multiple opportunities for senior actuaries to build new non-life practices within successful life businesses. Contact us now for more information about these exciting roles, which offer high levels of visibility and autonomy.

Seeking an insurance specialist, with experience across a breadth of disciplines and in a variety of roles, to contribute to thought leadership and research efforts within a sizeable team with extensive stakeholder interaction.

SENIOR CAPITAL ANALYST / ACTUARY

MARITIME RESERVING

SPECIALTY REINSURANCE ANALYTICS

Part-Qualified / Qualified

Major Insurer

NON-LIFE HOME-BASED / AGILE

STAR6464

Qualified

Niche Insurer

NON-LIFE LONDON

STAR6437

Part-Qualified / Qualified

Global Player

NON-LIFE LONDON

STAR6452

Use your analytical skills and knowledge of modelling concepts to support the delivery of capital requirement calculations at both group and solo-entity levels, using the standard formula and internal model.

Seeking an experienced reserving candidate for a small, London-based team within a niche, international organisation. You must be able to hit the ground running, and bring best practice and cutting-edge reserving techniques.

Bring an analytical background and passion for modelling into a team that builds cutting-edge solutions and tools. You will develop your technical and client-facing skills working on a wide range of specialty classes.

SPECIALTY LINES PRICING ACTUARY

CLAIMS & UNDERWRITING RISK

PROCESS IMPROVEMENT ACTUARY - FTC

Part-Qualified

Qualified

Qualified

Global Insurer

NON-LIFE LONDON

STAR6449

Financial Services Group

LIFE RISK SOUTH EAST / AGILE

STAR6436

Major Insurer

LIFE RISK FLEXIBLE / HOME-BASED

STAR6446

Our client is seeking a commercial lines pricing expert with a proactive approach, sound actuarial judgement and strong analytical and IT skills to join its growing team.

In this exciting role, you will analyse and report on the implications of emerging experience for pricing, underwriting, claims management, reserving and capital.

A fantastic opportunity to work closely with our client’s new business pricing team to identify current processes which can be improved. You will also develop and maintain an appropriate test pack for tool releases.

CORPORATE PENSIONS

IN-HOUSE PENSIONS ACTUARY

ASSISTANT MANAGER

Qualified

Leading Consultancy

Part-Qualified / Qualified

PENSIONS LONDON

PStar023/PStar024

PENSIONS LEEDS

Retirement Solutions STAR6455

Part-Qualified / Qualified

Leading-Edge Consultancy

PENSIONS MIDLANDS

STAR6456

This cutting-edge, global consultancy has exciting opportunities to join its corporate team.

You will be involved in a diverse range of workstreams, including de-risking, member options, funding, end-game planning, and consolidation.

Join this in-house pensions team, working with technical experts to develop internal models for scheme funding, investment strategies and a wide range of other projects. Experience working with Skyval or PFaroe is desirable.

Use your excellent communication skills and deep market understanding to support the provision of advice to corporate and trustee clients. You will be technically strong, with a commercial and entrepreneurial outlook.

ASSET PRICING MANAGER

INVESTMENTS & MARKET RISK

SENIOR INVESTMENT CONSULTANT

Qualified

Qualified

Qualified

Major Insurer

INVESTMENT LIFE FLEXIBLE LOCATION

STAR6451

Seeking an investment specialist to be our client’s subject matter expert for direct investment and real asset modelling. You will own the asset pricing models, ensuring they are accurate and complete.

Leading Insurer

Major Consultancy

INVESTMENT LIFE RISK SOUTH EAST / AGILE STAR6435

INVESTMENT LONDON

STAR6459

Seeking a Senior Manager with investment and risk experience to be responsible for ALM analysis of our client’s UK portfolio and balance sheet. You will also maintain the Liquidity Plan and monitor the cash position.

Seeking an investment specilaist (FIA/CFA) to join a diverse financial services provider and deliver high-quality advice to a wide range of clients, employing innovative strategic solutions.

Antony Buxton FIA

Louis Manson

JJoanne O’Connor

Irene Paterson FFA Ir

MANAGING DIRECTOR

MANAGING DIRECTOR

OPERATIONS DIRECTOR O

PARTNER P

Lance Randles MBA PARTNER

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+ 7739 345 946 +44 jjoanne.oconnor@staractuarial.com

+ 7545 424 206 +44 ir irene.paterson@staractuarial.com

+44 7889 007 861 lance.randles@staractuarial.com

Peter Baker

Jan Sparks FIA Ja

Paul Cook P

Jo Frankham

Adam Goodwin

PARTNER

PARTNER PA

ASSOCIATE DIRECTOR A

ASSOCIATE DIRECTOR

ASSOCIATE DIRECTOR

+44 7860 602 586 peter.baker@staractuarial.com

+44 7477 757 151 jan.sparks@staractuarial.com ja jan

+4 7740 285 139 +44 paul.cook@staractuarial.com pa

+44 7950 419 115 jo.frankham@staractuarial.com

+44 7584 357 590 adam.goodwin@staractuarial.com

Clare Roberts

Satpal Johri

Diane Anderson D

Sarah O’Brien

ASSOCIATE DIRECTOR

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SSENIOR CONSULTANT

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+ 7492 060 219 +44 ddiane.anderson@staractuarial.com

+44 7841 025 393 sarah.obrien@staractuarial.com

52 | THE ACTUARY | DECEMBER 2020

ACTUARIAL POST RECRUITER OF THE YEAR 2012 . 2013 . 2014 . 2015 . 2016 . 2017 . 2018

ACT recr Dec20.indd 52

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