The magazine of the Institute and Faculty of Actuaries
If we’re ever going to get there, actuaries are the astronauts on this mission
CAREERS
The need-to-know for actuary non-executive directors
The global life and health M&A landscape is changing. You need research that helps you keep up.
Get Milliman’s 2024 Life and Health Insurance M&A Report Scan here
Up Front
4 Editorial
Yiannis Parizas highlights the need for actuaries to grow – both collectively and individually
5 President and CEO comment Kalpana Shah looks back on her year as president, while Ben Kemp salutes the IFoA’s band of volunteers
6 IFoA news
The latest IFoA updates and events
There’s more…
Exclusive feature published online: the rise of private credit in insurance portfolios. Find this and more at actuary.com ps There’s no issue of The Actuary this August, ahead of a relaunch with a brand new look – coming in September!
10 Interview: Pietro Parodi
The academic and pricing expert on taking the path less trodden
13 Health: World’s better
Southeast Asia’s health has come a long way, says Simon Brimblecombe, but challenges lie ahead
18 History: Blitzed
Kenneth Bogle marks 80 years since Staple Inn was hit by a wartime bomb
20 Regulation: A long time coming
The Insurance Capital Standard is due to arrive soon; Natika Reddock and Kenny Cheng explain all
16 Taking the helm
David Rochester, Hugh Kenyon and Rudi Van Delm outline four key ways actuaries have sway
23 Whose job is it anyway?
It’s more likely to be a case of ‘not zero’ without more input from actuaries, says Sandy Trust
26 Careers: The board game
Thinking about taking on a non-exec directorship? Seamus Creedon shares some sage advice
28 Data science:
Under the inference
Patrick Moehrke and Yongchao Huang walk us through a Bayesian neural networking mortality model
32 Careers: M-power
Past IFoA president and business coach Marjorie Ngwenya on her first personal growth book
34 Qualifying: Through the pages
Alex Martin traces the evolution of the IFoA’s life-table exam books
36 Investment: Ready for risk
Saiyan Raja shows that risk has returned, with insurers increasingly backing private assets
At the Back
39 Extra-curricular
How Lily Hallett got hooked on the hottest new sport: pickleball
40 Soft skills: Zzzoom o’clock
Bogged down by virtual meetings? Jenny Segal gives her top tips
42 Student
Payal Saria on how the US can reverse its downgraded credit rating
Peter Tompkins (chairman), Chika Aghadiuno, Nico Aspinall, Naomi Burger, Matthew Edwards, Jessica Elkin, Richard Purcell, Sonal Shah, Nick Silver
Subscriptions from outside the actuarial profession, per annum: UK: £125, Europe: £160, rest of world: £195. To subscribe, email: editor@theactuary.com
Changes of address, email: membership@actuaries.org.uk
Published by the Institute and Faculty of Actuaries (IFoA), Staple Inn Hall, High Holborn, London WC1V 7QJ.
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. While every effort is made to ensure accuracy of the content, the publisher and its contributors accept no responsibility for any material herein. The editorial content of this magazine is intended for your personal information only and all views expressed are the author’s/authors’ own. No part of the editorial content shall constitute legal, financial, professional, corporate or career advice, and should not be relied upon as such, regardless of location, circumstance and jurisdiction; nor is it intended to solicit business.
We often think of D-Day on 6 June 1944 as the end of the second world war – but it was just the beginning of the end. The bombs kept falling and, next month, it’s 80 years since the IFoA’s foundations were literally rocked when Staple Inn in London was largely destroyed (p18). Destruction of our wider home, Earth, is an ever-present issue and the sheer enormity of achieving net zero is becoming apparent. Reflecting this month’s cover, two features put net zero in perspective, both stressing the need for much greater actuarial input. On page 16 is the first in a new series of articles on net zero for insurers; on page 23 is a strong call to action by sustainability actuary Sandy Trust.
As the global role for actuaries expands, so must that of individuals in the profession. Career development is crucial for many reasons, and this is something former IFoA president and business coach Marjorie Ngwenya understands. We ask her about her new self-improvement book (p32). That you can carve your own path to success is the takeaway from our interview with pricing academic Pietro Parodi (p10), who describes his own winding route to career contentment. Perhaps you’re thinking of becoming a non-executive director for the first time? Seamus Creedon shares his experienced advice (p26).
A decade coming, the Insurance Capital Standard is, finally, poised for international implementation next year. Natika Reddock and Kenny Cheng explain how it aligns with Solvency II (p20). Private assets are drawing increasing interest from insurers, despite ongoing market volatility. Saiyan Raja explores this trend (p36).
You won’t be getting an August issue – we’re back next in September with a new-look, bigger and better Actuary, full of exciting changes. See you then.
YIANNIS PARIZAS EDITOR editor@theactuary.com
Collective power Impact players
his will be my final column as I prepare to hand over to Kartina Tahir Thomson at this year’s AGM.
TA
Reflecting on my tenure, I am acutely aware of the constraints that have shaped my time in office. These challenges, including the imperative for cultural transformation and the rollout of governance reform, have profoundly influenced my journey.
Central to my approach has been a commitment to fostering a culture of collaboration and innovation. Meaningful change can only occur when individuals unite with a common purpose and shared values; to this end, we launched the largest member engagement programme in the IFoA’s history, and Council has been listening.
We have added conferences in the Middle East and India to our events programme. I have met thousands of members around the world, at conferences, webinars, networking events, new-qualifier ceremonies, numerous meetings. This has been the most rewarding part of my presidency, offering me invaluable insights.
Institutional memory allows us to learn from history, and I have relaunched the President Emeriti Group to include presidents from before the 2010 merger. It is also important to celebrate our milestones, successes and actuarial heroes. To this end, we celebrated 100 years of women actuaries with an event at Staple Inn.
This year’s Council has worked tirelessly to meet our goals. We are collaborating with the Lord Mayor of London’s office and the Chartered Institute for Securities & Investment to explore ethical AI tools to support our members, amplifying our efforts as a learned society, and collaborating more closely with universities.
While there is much work ahead, our achievements underscore the power of collective effort and the importance of resilient, transparent governance. This year, we have laid a formidable foundation for the future prosperity of our organisation.
KALPANA SHAH is the president of the Institute and Faculty of Actuaries
Thank you to Council and to you, the membership, for this incredible opportunity.
s we reach the end of another Council and presidential year, it’s a good moment for reflection –as well as an opportunity to look forward. My profound thanks to Kalpana for her tireless dedication to the IFoA and profession throughout her presidency. It has been one marked by significant change as we look to deliver on our commitment to provide the very best service and experience for our members. On which note, our AGM on 24 July is a great place to take stock of our progress and mark our commitment and accountability to our membership. Join us either at the event itself, taking place at our Asia Conference in Guanghzou, China, or via livestream – and bring your questions!
Our 2023/24 annual report is out this week and I would encourage you to read it and see how we’re working to improve your experience of your professional body. This year’s theme is ‘Working Together to Make an Impact’. Volunteers are the lifeblood of the IFoA. Everything we achieve – in education, qualifications, thought leadership, policy and public affairs, The Actuary magazine and beyond – happens because we have incredible leadership, input and support from committed volunteers.
More than 3,000 of you volunteer in a wide range of roles, from thought leadership and research to setting and maintaining standards and painstakingly marking exam scripts for the benefit of the next generation. This is both truly remarkable and deeply humbling. One of our priorities over the coming months is to make the volunteering experience as positive and rewarding as possible, to maximise your experience of working for your professional body. Please do look at the volunteering page on our website.
BEN KEMP is interim chief executive of the Institute and Faculty of Actuaries
As well as serving the profession, volunteers benefit from diverse developmental and networking opportunities, and the time commitment can vary widely to suit your circumstances. Do get in touch and share your thoughts: email ben.kemp@actuaries.org.uk
KALPANA SHAH
BEN KEMP
Cyber risk thematic review –seeking submissions
The IFoA wants to support actuaries in mitigating cyber risk, which presents significant challenges to business around the world. It is seeking input to a thematic review from individuals and organisations to help it understand actuarial involvement in both operational cyber risk and cyber risk insurance. The review will be open to submissions until 13 September. Use the QR code for more information, or email reviews@actuaries.org.uk
MAGAZINE
New helpdesk is live
The IFoA has now launched its new Professional and Regulatory Support Helpdesk, replacing the Professional Support Service. It offers members free, confidential guidance from experts on regulatory, professional and ethical issues – make it your primary resource for professional support. Use the QR code for more about the new helpdesk
Academic accreditation
All change at The Actuary
uary
Coming soon, an exciting upgrade to The Actuary! You’ll receive a new-look, weightier magazine six times a year, with a wider variety of article formats.
In addition, we’re launching a regular series of podcasts, where you can hear directly from the people behind the features, broadening out the issues and giving you more context. And you’ll be able to take a deeper dive into the topics discussed in the magazine through a regular series of videos bringing the articles to life.
We’re also redesigning the website, providing more enhanced features to help you find the content that is most relevant to you and your interests.
w-look, mats. u can e per es ures erests
We’ll be taking a break in August to prepare for the improvements, so you won’t receive an issue next month. Look out for the brand new product in September.
OUTREACH
New workshops programme for would-be young actuaries
This summer, the IFoA is partnering with the EY Foundation on an initiative for young people.
‘Actuaries: Data Driven Futures’ is designed to open doors to the profession, showcasing the opportunities it offers and giving insight into what it takes to succeed.
Over two weeks this August, 23 young people will take part in free workshops in London with some of the industry’s leading employers, including Legal &
General, Isio, Just Group and Barnett Waddingham. Lynne Peabody, EY Foundation CEO, said: “Through employability training, paid work experience, and mentor support, this relationship will help ensure young people from low-income backgrounds are supported to access opportunities and succeed in the actuarial sector.”
Use the QR code to find out more
The Masters programme at Patkar Varde College, in affiliation with the University of Mumbai, has won IFoA accreditation – the first Masters course to do so in India. Patkar Varde is the only college in the country to have two IFoA-accredited courses. The agreement will provide successful students with seven exemptions from the IFoA qualification and support the profession’s development in India.
Use the QR code for more
Join the ‘400 Club’
The IFoA is encouraging members from around the world to join its 400 Club feedback group and shape the future of the profession. If you join, you’ll receive approximately six online surveys a year to complete; your responses are invaluable, and strictly confidential. Email engagement.team @actuaries.org.uk
SCHOLARSHIPS
Call for more Actuaries of Tomorrow
The hunt is on for talented actuarial undergraduates to win the second wave of the IFoA Foundation’s Actuaries of Tomorrow scholarships, a scheme launched with the Worshipful Company of Actuaries Charity (WCAC) last year to empower gifted aspiring actuaries from diverse backgrounds to excel at their studies.
The scholarships are for second-year students who are on IFoA-accredited courses at UK and Irish universities. The winners will receive financial support and the chance to connect with qualified actuaries, providing them with career insights and valuable networking opportunities.
The first two winners, in 2023, were Heriot-Watt University students Tegan Banks and Jenna Kane (pictured).
“As a commuting student, the scholarship has been fantastic, helping me fund my travel costs,” said Tegan. “Engaging with senior
actuaries has also boosted my confidence.”
Jenna, meanwhile, commented: “Coming from Northern Ireland, the funding allows me to travel home to visit family. This is beneficial when faced with the challenges of studying away from home. It is empowering for me to
be valued and nurtured by the profession at this early stage.”
This year, the Staple Inn Actuarial Society (SIAS) joins the IFoA Foundation and the WCAC as a funding partner for the scholarships. This will enable a greater number to be offered.
“We’re thrilled that SIAS has chosen to deepen its partnership with the IFoA Foundation and align with WCAC in supporting these amazing scholarships,” said IFoA Foundation chair Masimba Zata. “Together, we can uplift tomorrow’s actuaries with a financial boost and unique networking and development opportunities.”
Students who are completing their first year on IFoA-accredited courses in the UK and Ireland are invited to apply by 15 July.
Use the QR code to find out more and apply
24-25 July, Guangzhou Yuexiu International Congress Centre (GYICC)
Join global thought leaders from insurance, wider finance sectors, academia, and professional associations in person or online, to explore tomorrow’s actuarial science: emerging trends and technologies.
Sundeep Raichura wins Finlaison Medal
On 16 May, IFoA president Kalpana Shah (above right) awarded the institute’s Finlaison Medal to Sundeep Raichura (above left) at the IFoA’s Middle East Conference in Dubai. Sundeep is group CEO of Zamara Holdings and for many years led The Actuarial Society of Kenya.
The Finlaison Medal recognises outstanding contributions to the actuarial profession. It was given to Sundeep in recognition of the significant role he has played in developing the profession in Kenya – there are currently more than 50 actuaries and actuarial students practising in the country.
IFoA Middle East Conference: review
More than 300 industry leaders, professionals and experts attended the IFoA’s first-ever Middle East Conference, held in May in Riyadh and Dubai. Conference highlights included engaging student events, insightful workshops on AI and technology, and discussions about the challenges facing the industry. Attendees from around the world praised the diverse panels and
workshops, facilitating networking and knowledge exchange.
The event’s success was made possible by the support of the sponsors, which included The Financial Academy, Milliman, Lux Actuaries & Consultants, Nitaq, SHMA Consulting, Munich Re and RGA.
Use the QR code to read a full report
EVENT
Are you ready for this year’s AGM?
This year’s IFoA AGM will take place on Wednesday 24 July in Guangzhou, China, as part of the IFoA’s Asia Conference, starting at 16.45 CST (9.45 BST).
IFoA president Kalpana Shah will be there, along with interim CEO Ben Kemp and president-elect Kartina Tahir Thomson, who will be formally installed as the next president at this meeting.
A livestream of the AGM will be available to watch online, with a broadcast also taking place at Staple Inn Hall.
Submit questions in advance by emailing IFoA corporate secretary James Harrigan at james.harrigan@actuaries.org.uk
A week later, from 11 to 12am BST on Wednesday 31 July, Tahir Thomson will give her inaugural presidential address at Staple Inn Hall.
To book your place for the AGM visit actuaries.org.uk/AGM2024
Use the QR code to book your place for the presidential address
PUBLICATION
Out now:
annual report
This week, the IFoA has launched its 2023/24 annual report, with the theme ‘Working Together to Make an Impact’. Acting in the public interest is at the heart of the IFoA’s Royal Charter, and ensuring members are heard is central to its work.
If you can, please do read the report before the AGM to find out what the IFoA has done over the past year to make a positive impact for members, stakeholders and the wider public.
Use the QR code to read the annual report
VOLUNTEER SPOTLIGHT
Q+A: William Diffey
LIFE PANEL, PRACTISING CERTIFICATES COMMITTEE
The Practising Certificates Committee supports the IFoA in considering Practising Certificate (PC) applications and administering the PC Scheme. It: Considers and advises the Regulatory Board on matters relating to PCs Implements agreed measures arising from PC Scheme reviews Administers and communicates the PC Scheme according to its objectives. The committee is looking for new members to join its Life Panel. William Diffey, an experienced IFoA volunteer who has had a broad career in general insurance and life insurance, is a panel member. Here, he tells us what’s involved – and what he gets out of it. Could it inspire you to sign up?
What’s your panel role?
identifying what they need to do to obtain a Chief Actuary PC.
Have you gained new skills? When reviewing applications, it is important to be able to read between the lines and get a feel for what is missing or not said in an application. These inference skills are important. The role also gives me an insight into how board interaction affects leading actuarial professionals.
Has the work informed your day job at all?
I mostly review PC applications. The workload depends on the demand – it has peaks and troughs. I also attend full committee meetings, and take part in consultations and calls with other committee members to review specific applications.
Why do you volunteer?
I like to give back to the profession, and volunteering provides an opportunity to see actuaries outside my corporate role, which gives me a broader view overall. I have volunteered since qualifying, having been a member of various life working parties and the Periodical Payment Orders Working Party. More recently, I chaired the Towards the Optimal Reserving Process Working Party.
What’s the most interesting part of your role?
Reviewing borderline candidates and
It has helped me to maintain a wide-ranging CV, keeping me involved with a broad mix of actuarial professionals throughout my career.
How do you find the time?
I usually find that I can plan my job and volunteer commitments to avoid clashes. I have typically been able to avoid taking on a heavy volunteer workload in Q1, which is when I am most committed at work.
Would you recommend it to others?
Yes! It’s a great opportunity to interact with other actuaries and learn together outside the day job. You gain skills that you might not otherwise develop, or develop them faster than would otherwise be the case.
Most rewarding moments?
Seeing the challenges faced by chief actuaries shows that the role is worth doing, and the public good that results from it.
Could you volunteer on the Life Panel? Use the QR code for more and to apply
ELECTIONS
Cast your vote for Council
The election is open for the IFoA Council’s nine vacant General constituency seats, with 24 members standing. There is no election in the Scottish constituency this year. Eligible members of both the General and Scottish constituencies are also asked to vote on a proposal to award Honorary Fellowship to Nicola Draper. For more information about her and why Council is proposing her, visit b.link/Nicola_Draper_honorary
The election results will be announced at the AGM in China on Wednesday 24 July.
Members will also be asked to vote on the appointment and remuneration of the IFoA’s external auditors – a standing item of business at the AGM.
Eligible members will receive an email from Civica Election Services with a bespoke link through which they can vote. Voting closes at 14:00 BST on Monday 22 July.
Use the QR code to find out more about who is standing for election
CONSULTATION
Streamlining the PC process for QAS organisations
Respond to the IFoA’s consultation on a proposed Quality Assurance Scheme (QAS) Practising Certificates Scheme, which would streamline the process for QAS accredited organisations that opt in to the scheme, while ensuring that robust quality standards are upheld.
The consultation runs through to 30 August. Use the QR code to have your say
ALL ROADS LEAD TO HOME
Pricing pro Pietro Parodi steered clear of the usual route to qualification, preferring to chart his own course to finding his niche – via philosophy, physics, post-docs, and applying for the wrong posts. The academic and AI guru talks to Yiannis Parizas
A
series of twists and turns led Pietro Parodi to actuarial science, and to where he is today: head of pricing and modelling operations and actuarial methodology at SCOR, and a part-time lecturer in actuarial science at Bayes Business School in London. That is where I first encountered him, as one of his students.
Originally from Genoa, Parodi thought he was destined for a job in electronics, but his academic interests took a radical shift in his late teens. “After spending too long in the library flipping through tomes that I didn’t quite understand but that fascinated me, I decided I wanted to go to university to study philosophy,” he says. This decision was met with resistance from his mentors. “A number of teachers ganged up on me and talked me out of it, and convinced me I should study something with maths in it.”
His curiosity in the maths behind electronics – specifically control theory –had clearly been noticed. “I had developed an obsession with Laplace transforms and had decided that the point of control theory was to allow me to prove Nyquist’s stability criterion on my own, which took a while…” he explains. “Eventually, I picked physics and got everyone off my case.”
Serendipitous slip-up
After a physics PhD at the University of Genoa, with a thesis on the computational complexity of certain problems in machine vision, Parodi continued his studies as a post-doc, taking more literal twists and turns: travelling around the globe – from Schenectady, New York to Toronto, and then back to Italy when he moved to Trieste. There, he worked on mathematical models for neuroscience.
He sees significant overlap between the methods used in physics and those used in actuarial science. “Physics gives you a solid foundation in probability, statistics and applied mathematics. I recently learned that Enrico Fermi came up with a rudimentary version of Monte Carlo simulation back in the 1930s, just with pen and paper. In physics, you are trained to build models that are simplified yet relevant to reality, and to think critically about the uncertainties and
limitations of them – skills used in the actuarial field.”
Onwards again, along his winding career path; it was a misleading job advert that directed Parodi towards actuarial science. Having applied for what he thought was a software development job at an insurance broker in Italy, he found himself in an IT systems role. “Being a network administrator was exciting at first but it proved tedious after a few years,” he recalls. “I missed doing maths and the easiest route back into it was an actuarial career, so I started spending my spare time preparing for actuarial exams.”
Interacting with brokers, he seized every opportunity to show his aptitude. “I was helping them with their laptop issues and, between one reboot and another, I tried to convince anyone who would listen that I could perform some actuarial analysis if only they would give me some loss data,” he says. Eventually, a broker in the financial risks
‘The sweet spot always lies at the intersection of the labour market needs, your skills and your interests’
team handed Parodi a book on extreme value theory and asked him to help her team build an operational risk model for a major bank. “This opened a lot of doors for me and led, about a year later, to a full-time pricing job in London at a large reinsurance broker.”
Alternative qualification
Time for another twist. Parodi opted for the more unusual SA0 Research Route to qualifying as an actuary, submitting a thesis instead of sitting some of the later exams. He made this decision after failing the SA3 exam twice: “I concluded, perhaps a bit dramatically, that I was never going to pass it because my work experience was too narrow.” For his thesis, he leveraged his background in AI and his connections at the University of Genoa, and, taking a brief interlude from his job, returned there to kick-start his research.
“I saw an opportunity to bypass some exams and explore how machine learning
and AI in general could be applied to general insurance,” he explains. “It was 2008 and AI fever still hadn’t infected the insurance industry. It was the best ‘study leave’ ever –I was given my own office and I spent my time chatting with the machine learning team about state-of-the-art areas, giving talks about what actuaries do, and spending the evenings out on the Ligurian Riviera.”
Parodi’s research explored the shift from traditional statistics to the use of AI in understanding risk, emphasising how the latter introduces profound concepts such as optimal model complexity and Markov decision processes. “AI teaches you strategies to navigate uncertain environments and to interact with other agents, which are typical problems in robotics,” he notes.
Natural calling
Back to London… Parodi spent around four years in his reinsurance pricing job – “it gave me essential exposure to state-of-the-art pricing techniques” – before moving to a newly formed actuarial consultancy team at another large broker, this time on the direct insurance side. “I had corporate clients across all industries, with insurance products ranging from financial lines to trade credit to weather derivatives. Almost every new project required a tailored approach: it was a modelling feast!”
Realising he only knew pricing from a broker’s perspective, he took a risk management role at a reinsurer. This didn’t last long: “while I learned a lot, that role was too qualitative for me and I felt I didn’t have anything special to offer, except in the pricing model validation area.” This prompted a switch to his current employer, the reinsurer SCOR, where he’s been for eight years, transitioning from a pricing actuary to a central role focusing on methodology. He describes this as his natural calling.
Textbook teaching
Another calling was deciding to write an actuarial textbook. In 2014, motivated by his part-time job as a visiting lecturer at Bayes Business School, he produced Pricing in General Insurance, a textbook that has become an essential resource in the field. Interestingly, its style is inspired by historical Italian maths textbooks, which he says “appeal to your intuition more than modern texts, which seem designed to hide the
thought processes behind particular concepts. However,” he adds, “the tone of my book is much lighter, as the topic is more practical and this is a different century.”
Pricing in General Insurance is part of the IFoA’s suggested reading for SP8 and SA3, and Parodi hopes it is a practical guide for both students and practitioners, providing a clear understanding of foundational and advanced pricing techniques. It covers the basics of experience and exposure rating, credibility, capital modelling and pricing for specific lines of business, as well as advanced topics such as insurance optimisation – always with an eye on the limitations of each technique.
The book’s second edition (published last year) expands on these topics significantly, and adds chapters on rate change and pricing models. “It’s gratifying to hear that readers refer to it in their daily practice and find it engaging,” says Parodi. “Recently, a reader contacted me to say that he enjoyed the style of the book and that he liked to read it when going to sleep. I suppose it was intended as a compliment.”
Parodi finds challenges and synergies in balancing his Bayes and SCOR roles. “Term time is intense, but interacting with motivated and active students is energising. Both my teaching and practising focus on pricing, and the two help to sustain each other. I don’t need to change heads, just hats. However, marking exams can be gruelling, I still haven’t found an efficient way of doing that.”
Spurious accuracy
What challenges does Parodi see for actuarial science, particularly in general insurance (GI) pricing? “The greatest challenge is always the evolving nature of risk,” he says. “The risk you price today is different from the risk on which you have data. And there is always less relevant data than you need.”
He highlights the field’s tendency to focus on familiar unknowns, such as process and parameter uncertainty, while neglecting harder-to-quantify aspects such as model and data uncertainty. To combat this, he advocates for “epistemic humility” and keeping models simple and transparent, noting that unnecessary complexity can lead to obfuscation and loss of control.
Discussing AI in pricing, Parodi remains pragmatic. “Techniques like neural networks
and other machine learning methods are essentially algorithms for regression problems,” he notes, suggesting that while they help to automate model-finding, they don’t necessarily enhance pricing accuracy in a significant way, except in scenarios with large data streams. Their impact in datascarce environments such as the London market remains limited.
One of the main lessons of machine learning, he says, is that models should never be more complex than the data allows, to avoid “spurious accuracy” –a principle he frequently reiterates. “My colleagues tell me that ‘spurious accuracy’ is my favourite phrase, perhaps the only one I use in meetings!”
Parodi is reluctant to make predictions about future GI pricing trends other than to point out the significant impact of technology – particularly the use of AI in personal lines insurance and platforms that enable actuaries to use programming languages such as Python for modelling in professional IT environments.
Looking ahead, he expects technological advances and data analytics to drive a more dynamic role for actuaries: “As technology and automation advance, actuaries are increasingly called upon to provide more detailed answers to more questions, so we’ll be busy.” This underscores the growing importance of technological fluency, alongside traditional actuarial skills.
Further passions
It was 2005 when Parodi moved to London with his wife and children, of which he has four, now aged between 12 and 24. He describes their heritage as “mixed-culture”, although “the Italian influence wins hands down” when it comes to food.
He enjoys hobbies that he calls “lowadrenaline, verging on the contemplative”. Music is one: “I like the sacred minimalism of Arvo Pärt, the medieval chants of Hildegard von Bingen, and Brazilian music; and I’ve remained loyal to my teenage passion for Stevie Wonder.” He also likes playing bossa nova songs on his guitar and taking long walks through the English countryside, or visiting towns and villages (“the quainter the better”) with family and friends.
In his late twenties, he experienced an epiphany, revisiting his religious roots. “I had become an atheist early in my teenage years, but a series of talks to which I was invited upended my stereotyped view of Christianity,” he explains. “It revealed itself as untamed, liberating and intellectually coherent. I’ve been on a quest to metabolise the consequences of that insight ever since.”
Despite being an author and academic, he has a complex relationship with reading, confessing: “I read out of necessity and hunger rather than for pleasure.”
Pearls of wisdom
What guidance does he have for those venturing into the profession, particularly GI pricing? “First, some ‘meta-advice’: listen to all advice – especially the unsolicited variety – and try to discern the good from the bad,” he says. He credits many of his successful career decisions, such as studying physics, selecting his PhD supervisor, leaving academia and becoming an actuary, to the insights gained from others who offered him their experienced, unique perspectives.
He also underscores the significance of aligning your career with your talents and passions: “The sweet spot always lies at the intersection of the labour market needs, your skills and your interests.” This not only facilitates learning and reduces stress, but also boosts your chances of professional success.
Parodi continues: “The lowest points in my career have been those when I took jobs just for the financial reward or the prestige. Paul Feyerabend, the late Austrian philosopher of science, once said, ‘I never spent a single day doing a job I didn’t like.’ Not many will be able to say the same at the end of their career – but it’s not a bad ideal to aim for.”
Use the code for more on the IFoA’s SA0 Research Route
WORLD’S BETTER
Health prospects and outcomes for many in southeast Asia have been radically improved, largely down to universal health coverage. How can actuaries ensure the trajectory continues? Simon Brimblecombe gives his diagnosis
The health improvements in southeast Asia over recent decades have been nothing short of extraordinary. Infant mortality rates have fallen dramatically, life expectancy at all ages has increased and effective programmes to address communicable diseases have been put in place. Since 1950, life expectancy at birth has risen by more than 30 years, from 43 then to 75 now.
Universal health coverage in a number of southeast Asian countries (for example, in Thailand) has significantly contributed to this. Coupled with better education, improved women’s rights, effective communication and political will, hundreds of millions now live in better health.
In some ways, though, the easy part has been done. Targeting reductions in infant mortality and communicable diseases has led to significant improvements in health outcomes, but these positive effects must continue. Populations in the region are ageing rapidly – more quickly than in Europe – and a productive and healthy workforce will be essential for future economic development and social cohesion.
However, health costs continue to increase for reasons including medical inflation, higher demand and the changing nature of healthcare challenges.
The financing and quality of services is also an issue.
At the same time, coverage remains patchy in some countries, with those most vulnerable often outside the system or only able to access basic health care – even for those who in theory have the right to benefits. Those not covered tend to be the poorest, and often already suffer from health problems. Typically, in the region’s universal schemes, access to healthcare is 100% among the wealthiest quintile, 75% among the poorest quintile.
The challenge is therefore to ensure that coverage continues to increase, financing mechanisms are appropriate, and health provision, including staffing resources, remains of sufficient quality.
The role of actuaries
On this politically sensitive issue, actuaries are essential in providing evidence-based policy recommendations.
As an actuary at the International Labour Organization (a specialised agency of the UN), I work with ILO health experts, as well as providers, governments and social security institutions, to provide the analysis and framework for long-term and durable policy, delivery and financing decisions that are in society’s broader interests.
The actuarial valuation, which projects a health system’s future costs and income, provides results, recommendations and reform options, including:
THE ILO IN THE REGION
There are challenges ahead where health, societal, environmental, economic and urbanisation collide. If these are not considered, current systems will not cope
Input into financing approaches (for example, direct payment, fee-for-service or a capitation approach to providers)
Recommendations for improving coverage and service provision
Analysis of prevention measures’ effectiveness
Assessments of a health system’s distributional impacts and recommended reforms to improve them. Actuaries also assess the impact of different financing options, such as increases in provider payment rates, the effect of co-payment increases (out-of-pocket costs are typically regressive, falling disproportionately on the poorest), and the extension of coverage (new groups tend to have worse health outcomes).
Future challenges
Health policy must consider the future, rather than assuming that the past will repeat itself. There are challenges ahead where health, societal, environmental, economic and urbanisation impacts collide. Current systems are not fit to cope unless these are taken into account. Four key challenges for southeast Asia are:
CHALLENGE 1: Unhealthy ageing
Globally, for every year of life expectancy gained from age 50, only nine months is lived in good health. Asia and the Pacific is no exception. As the proportion of health costs accounted for by the over 60s increases, family structures are changing, with children and grandchildren often no longer living near elderly relatives. According to market research firm Euromonitor, the number of single-person households in the region will increase by 78% between 2022 and 2040, compared with a 26% increase for households consisting of couples with children.
CHALLENGE 2: Health inequality
The International Labour Organization (ILO) provides technical support to governments, social security institutions and social partners on the design, financing and implementation of social health protection in several countries in Asia, including Cambodia, Laos and Vietnam. These efforts have led to significant progress towards universal health coverage.
For example, in Laos, the ILO-Luxembourg project ‘Building social protection floors for all: support to the extension of social health protection in Asia’ works with the country’s ministry of health to formulate and implement policy reforms that have extended population coverage and improved benefits. This work also involves strengthening administration and governance, including through systems development and capacity building. Additionally, the project provides evidence-based recommendations for strengthening social health protection schemes’ financial sustainability, particularly through actuarial analysis.
Unequal access and fragmented systems may exacerbate inequality. For example, in Thailand, different levels and quality of provision exist for civil servants, social security scheme members and the rest of the population. Southeast Asia’s growing income inequality is also leading to poorer health outcomes for those who are worse off
CHALLENGE 3: Financing and resources
Health costs increase as populations age, and informal care provision is already an issue as families get smaller. Not only does this mean higher future contributions – there is also a question of whether countries will have enough health staff. Richer countries will continue to recruit health professionals from southeast Asia (more than half of all Filipino health professionals work outside
the country, according to the Philippine Health Ministry), and for those who stay, pay is often low. This is reflected in the region’s low doctor-per-population ratios.
CHALLENGE
4: Non-communicable diseases
Non-communicable diseases account for two-thirds of deaths globally, and have increased significantly more quickly in southeast Asia than in Europe. They include: Air pollution-related illness – in Thailand, 10 million people sought treatment for such illnesses in 2023, according to the country’s Office of the National Economic and Social Development Council, and the situation worsens every year
Obesity and diabetes – According to an analysis published in The Lancet, ‘Global, regional, and national burden of diabetes from 1990 to 2021, with projections of prevalence to 2050’, more than four million people in the Philippines have diabetes – the highest rate in the region. Worryingly, the increase in cases is higher than in Europe and North America, and half of those who have diabetes are not even aware of it
Mental health – The number of suicides in the region increased significantly during Covid, when several countries had severe lockdown policies, and ongoing mental health issues remain
Traffic accidents – Around 20,000 people die on the roads in Thailand every year, while a million are injured. These are often young people, leaving families in difficulties and causing an estimated economic cost of
SIMON BRIMBLECOMBE
is head of the Regional Actuarial Services Unit at the International Labour Organization. He is based in Bangkok, Thailand
The countries of southeast Asia
Life expectancy at birth in the region has risen by more than 30 years, from 43 in 1950 to 75 now
about $14bn – about 2.5% of GDP, according to the World Health Organization.
Possible approaches
The role of actuaries is to address and analyse these issues and propose appropriate solutions. Experience shows that we have a significant role to play in these new areas. So, what are the possible approaches?
1 Universal coverage. The more people in a health system, the more robust a society is, and the better its health status. Actuaries must continue advocating extension, providing clear recommendations on financing, and working with others to design appropriate systems.
2 Prevention. Prevention-spending is less than it should be, and often directed into areas with a low return on investment. Actuaries can help to cost prevention programmes’ implications for health spending.
3 Focus on inequality and policy consistency. Both provision and financing must ensure that systems meet national policies to reduce poverty and inequality.
4 Develop consensus. Develop consensus around the importance of health spending as an investment, not a cost.
If we can find solutions to the four key challenges faced by southeast Asian health systems, we can ensure the huge gains of the past few decades can continue into the future.
East Timor
In 2019, the UK was the world’s first country to declare a climate emergency, committing to reach net zero by 2050, in line with the Paris Agreement. There was broad political consensus for this.
But during the past few months, there has been notable backsliding from the government. It pushed back the date by which all new vehicles must be fully electric from 2030 to 2035, and plans for the phase-out of gas and oilpowered home boilers have also been thrown far into the future.
TAKING THE HELM
In the first in a series on net zero for insurers, David Rochester, Hugh Kenyon and Rudi Van Delm liken the work needed to turning a supertanker. To help with the massive manoeuvre, there are big levers actuaries can pull
The government’s advisers on the UK’s Climate Change Committee have warned of “worryingly slow” progress, saying their confidence has “markedly declined” from just a year ago.
While leaders in the UK have remained committed to meeting net zero by 2050, this will be a formidable challenge. The UK will have little over a decade (in the late 2030s and 2040s) to rewire its entire infrastructure.
All this is set against a backdrop of global warming that is ever more alarming and urgent. September 2023 breached the Paris Agreement’s targeted 1.5°C rise above pre-industrial temperatures for the first time, and 2023 was the warmest year on record. Huge amounts of UK farmland and housing flooded repeatedly during the winter of 2023-24.
Unique role for actuaries
The actuarial community has a unique and influential role to play. Our profession’s strapline is ‘making financial sense of the future’. Climate risk will flip our financial future on its head: physical risks, transition risks, and our understanding of what we are exposed to will all change fundamentally. Climate models themselves are inherently uncertain, and do not always highlight the distribution around their mean result.
The IFoA’s recent Climate Scorpion report (b.link/ Climate_scorpion) is an excellent step forward. It highlights that “climate risks are complex, interconnected and could threaten the basis of our society and economy”, and forecasts a 5% chance of annual insured losses of more than $200bn in the next decade. Actuaries ought to be skilled at communicating this tail risk – but are we telling that story?
As well as voicing the risk, actuaries can be part of the solution. Investment teams are already focused on climate risk and opportunities (Deloitte, for example, recently reported that 80% of global investors have sustainability policies). However, the underwriting side seems to be behind the curve.
Insurers hold huge influence, as what gets underwritten is what gets done. Real change can happen when underwriters recognise the need to improve; there are some great examples of this within the realms of flooding (the establishment of Flood Re), whiplash (Thatcham’s recommendations on headrests) and cyber threats (the current iterative development of cyber wordings). The lever could be pulled harder on climate risk.
Insurers hold huge influence, as what gets underwritten is what gets done
So, how can forward-thinking actuaries make things happen?
HUGH KENYON recently retired from his role as pricing director at Allianz Personal, after a 35-year career
LEVER 1: Adaptation and mitigation
Adaptation involves actions taken to adjust for the impacts of climate change – especially more frequent and severe weather events. Insurers are already leading here by increasing investment in catastrophe modelling, weather-peril risk assessment and accumulation management. There has been less focus on how insurance can help to mitigate climate change – in other words, reduce greenhouse gas emissions. The more we mitigate, the less adaptation we need.
LEVER 2: Regulation
UK regulation focuses on reporting and managing Scope 1 and 2 emissions, under the Energy Savings Opportunity Scheme and the Streamlined Energy and Carbon Reporting Scheme (SECR). Disclosing Scope 3 emissions is only ‘recommended’. Large and publicly listed companies must provide further reporting on their risk management, strategy and governance regarding climate change, including relevant metrics, but guidance is loose. However, stricter requirements for Scope 3 reporting seem to be coming. In the EU, they’re already on the way for the 50,000 companies that fall under the Corporate Sustainability Reporting Directive. In the UK, the Department for Energy Security and Net Zero is
reviewing whether to include Scope 3 reporting as mandatory under the SECR, with an answer due soon.
Insurers may successfully be managing their Scope 1 and Scope 2 emissions but it is in Scope 3 where they can really make a difference, and most of all in claims fulfilment and underwriting. The regulators look to be catching up, so there’s a strong case for getting on the front foot now.
Some insurers have already started reporting interim targets for 2030. Moving a portfolio is a large, difficult task, like turning a supertanker, and it is best to start early. The later insurers start, the more difficult it will be to achieve published targets.
LEVER 3: Corporate strategy
It is essential to start by formulating a clear long-term strategy that includes clear short-term steps to the goal. Good capital management should also align with this.
The second task is to translate risks into opportunities. Climate change is a risk to insurers, but those insurers that understand the risk and manage to combine it with new technology will be able to turn it into opportunities. Actuaries are well-placed to help identify these risks and opportunities.
DAVID ROCHESTER has worked in general insurance for more than 30 years, specialising in home insurance, including as sustainable finance director
RUDI VAN DELM has worked in general insurance for more than 35 years, including as a chief actuary, board member and NED, across many countries
We are starting to see how insurance knowledge can come together with technology (AI, satellite imagery, infrared pixelated images and real-time technology), sustainability expertise and finance expertise to create innovative yet robust solutions, for example in the area of carbon credit insurance.
LEVER 4: Governance
Once the strategy has been defined, appropriate governance must be set up, with the tone set from the top. Our research has found that clear board responsibility, combined with a powerful executive sponsor, is key –but not enough. A sustainability steering group to drive action, and a sustainability network to share experience, are also needed.
All policies and guidelines will need to be reviewed with net zero in mind. This should include review by the pricing and/or underwriting committee and the policy wording committee.
Important and urgent
Climate risk has always been put into the ‘important but not urgent’ box, but it doesn’t belong there at all. Like turning a supertanker, if we wait until we’re close to the rocks we’ll be far too late.
Net-zero underwriting is about making successful commercial choices and seizing opportunities by understanding our financial future. The rocks are on the horizon, and we must act now to steer to a better place. Actuaries can tell that story. Let’s start today.
For more on actuaries’ role in net zero, see page 23
War is a risky business – and, as if to stress the point, the very ‘home’ of risk mitigators in London was flattened by a German bomb 80 years ago. It rose again. Kenneth Bogle tells the Staple Inn story
L
ondon’s Staple Inn has a long and eventful history that dates back to medieval times. Actuaries have used parts of the buildings since 1887, when the Institute of Actuaries was first based there. Today, many actuaries around the world consider it the spiritual home of their profession.
For almost 150 years, its beautiful hall has been used as a venue for actuarial events, such as sessional meetings and award ceremonies. First built in the 1580s, it is an architectural masterpiece – but all is not what it seems. In fact, the current building is largely a reconstruction, after the original was destroyed by a bomb during the Second World War, in August 1944.
Staple Inn had twice been damaged by incendiary bombs earlier in the war, and distant bomb explosions had repeatedly smashed windows. During air raids, occupants sought shelter in its basement. The nearby Chancery Lane underground station, which opened in 1943, was used as a refuge for off-duty military personnel.
However, disaster truly struck at about 7.30pm on Thursday 24 August 1944, when a German V-1 ‘flying bomb’ exploded in the garden at the rear of the hall.
The late Londonborn Frank Guaschi was an eyewitness, aged 13, on that memorable day. He, strangely enough, was later to become a Fellow of the IFoA. In 1994, on the 50th anniversary of the bombing, he recorded some of his memories in The Actuary
DR KENNETH BOGLE is knowledge and publications assistant at the IFoA Library in Edinburgh
BLITZED
Guaschi recalled that it had been a warm, hazy day, and he had been playing football with his friends in the evening when they heard a flying bomb approaching. He wrote: “I looked up to see it coming from the general direction of Clerkenwell, and prepared to take cover if the engine cut out. All at once it stopped, and we all threw ourselves to the ground. There was an enormous explosion, which sounded very close, and we leapt up and rushed down Gray’s Inn Road to see a cloud of dust rising from behind the old Tudor buildings in front of Staple Inn.
“I must have been one of the first on the scene and, behind a huge pile of rubble, with the roof barely recognisable sitting on top of it, Staple Inn was no more.”
A similar story was told by the Inn’s porter in a witness statement. He was standing at the main gate when he heard the bomb approach, and managed to reach the porter’s lodge before it exploded. He reported “a terrific crumbling of falling brick and glass… and
‘I must have been one of the first on the scene and, behind a huge pile of rubble, with the roof barely recognisable sitting on top of it, Staple Inn was no more’ Frank Guaschi
could see nothing for a few minutes. To get to the garden was like climbing up a mountain.”
His wife and son were in the hall’s basement and said that the explosion was “terrific”.
The aftermath
Photographs taken soon after the bombing show the extent of the damage. The hall and
Clockwise from bottom left: the bomb damage; Staple Inn’s Tudor frontage; some original parts stayed intact; the hall after the restoration
several surrounding buildings were destroyed, and others badly hit. The hall’s roof had a sturdy internal steel frame and, when the walls were blown away, it collapsed onto the rubble almost in one piece. Little furniture could be salvaged from the ruins, but a carpet (then an expensive consumer item) and some of the institute’s treasures, such as marble busts and memorial plaques, were rescued later; ironically, one of the plaques was commemorating the First World War. Fortunately, the beautiful stained glass windows survived intact; at the beginning of the war, the precaution had been taken to store them in a cellar.
Tragically, there was one fatality: Jessie Hollingshead was making for shelter in the basement when the bomb hit, and was killed instantly. Aged 70, she had worked at Staple Inn for 40 years. Unwittingly, she had predicted that she would end her days there, although she could never have known the manner in which it would happen.
The restoration of the Staple Inn buildings was undertaken in the 1950s, with a team of expert craftspeople meticulously reconstructing the hall as closely as possible to the original design. Several original old beams and trusses, and other wood and stonework, were salvaged from the wreckage.
In September 1955, the Institute of Actuaries held a special ‘coming home’ ceremony, moving back into the restored hall and neighbouring offices. The terrible events of August 1944 and subsequent restoration are noted today by a plaque on the hall’s north wall.
There is finally light at the end of the tunnel for the Insurance Capital Standard, due to arrive internationally next year. Inside-trackers Natika Reddock and Kenny Cheng explain it, and its relation to Solvency II
F
ollowing the 2008 global financial crisis, the International Association of Insurance Supervisors (IAIS) received a mandate from the Financial Stability Board and G20 leaders to develop a Common Framework for the supervision of Internationally Active Insurance Groups (IAIGs). IAIGs are designated by their groupwide supervisors based on size and level of activity; they are essentially large international insurance groups. Currently, 57 IAIGs have been publicly disclosed by their group-wide supervisors.
The IAIS adopted the Common Framework in November 2019. Its purpose is to promote effective and globally consistent supervision of the insurance industry to support policyholder protection and financial stability, specifying both qualitative and quantitative supervisory requirements.
The Insurance Capital Standard (ICS) is a risk-based capital framework developed as part of the Common Framework, and applies to IAIGs at a group consolidated level only. It is not intended to replace existing arrangements or capital standards for solo entity supervision in any jurisdiction.
What has happened so far?
To develop the ICS, the IAIS has conducted annual data collection exercises since 2014. It has also issued four public consultations, most recently in 2023.
The standard is scheduled to be finalised in two phases: a five-year monitoring period from 2020-24, during which it has been confidentially reported to group-wide supervisors, followed by implementation in 2025 as a prescribed capital requirement – in other words, a capital basis that could trigger supervisory intervention. The IAIS is expected to finalise the ICS framework and integrate the text into the Common Framework by the end of 2024.
Developing the ICS framework has involved significant industry resource and time. Participation began with 34 insurers in 2014 and grew to 40 to 50 insurers per year. Each exercise has required significant input to complete. Initially, each one had to be completed on a best-efforts basis, but the quality of submissions has increased over time, particularly among long-time participants.
Most firms complete the exercise on a streamlined basis (for example by conducting it at group level, leveraging readily available information and applying simplifications or approximations for calculations, where appropriate). Some complete it on a more granular basis (for example requiring local business units or entities to provide ICS results before aggregating at group level).
Reasons for participating vary between firms, with one key driver being their relationship with their group-wide supervisor. Some see the ICS as an important reference
point for the evolving regulatory landscape and are participating or advocating for changes to it in order to influence the development of other local solvency regimes. We have observed that the ICS has influenced and driven some convergence between local solvency regimes in different jurisdictions.
During this development period, the ICS framework has evolved significantly, with the IAIS showing a willingness to consider stakeholder feedback.
There has also been a shift in how the standard is viewed – it began as a capital framework for large international insurance groups but is now positioned as a minimum global standard with which local solvency regimes must comply.
Different jurisdictions
As we approach the end of the five-year monitoring period, there has been more focus on implementation. The IAIS has said it will be up to regulators to determine how the ICS is applied in their jurisdictions, as it is a standard-setting body and has no implementation powers.
It is expected that jurisdictions will be given some time from 1 January 2025 to implement the ICS, given the need to assess how it should be put in place. Different jurisdictions will also have different starting points, depending on how their local solvency regimes compare with the standard.
There is some clarity over the direction of travel in certain jurisdictions:
In the UK and the EU, the Prudential Regulation Authority and the European Insurance and Occupational Pensions Authority have indicated that they do not expect IAIGs to report under both the ICS and Solvency II. They have also indicated their expectation that the UK and EU versions of Solvency II will comply with the ICS as a minimum requirement, but would make necessary adjustments if not fully compliant
In Asia, the ICS has influenced several jurisdictions, with regulators in numerous countries planning to implement updated solvency regimes that are broadly in line with the standard. For example, Japan’s regulator is developing a new solvency regime that will apply to all insurance entities in the country. This is mostly consistent with the ICS, with some adjustments to reflect specifics of the Japanese market
In the US, the National Association of Insurance Commissioners, state regulators and the Federal Reserve have co-operated to develop a group capital calculation based on an aggregation method. US stakeholders have advocated for this method to be their local implementation of the ICS. It is a different capital framework from the ICS, and the IAIS agreed to collect data on it during the five-year monitoring period. This data collection exercise is separate from the ICS exercise but is run concurrently by the IAIS. By the end of 2024,
the IAIS is expected to complete its assessment on whether the aggregation method is an outcomeequivalent approach for implementation of the ICS as a prescribed capital requirement. Participation in the data collection exercise has involved mostly US groups, with some Asian groups.
Key features
The ICS framework is similar to the Solvency II framework, although there are some differences in the detail. Based on the 2024 ICS specifications, it has the following key features:
Balance sheet
The balance sheet is based on a market-adjusted valuation approach, using jurisdictional Generally Accepted Accounting Principles as a starting point and applying adjustments for certain items
The best-estimate liabilities are referred to as the “current estimate” under the ICS. This is determined using best-estimate cashflows and a three-bucket discounting approach. Under this approach, insurance liabilities are allocated to the top, middle or general buckets (depending on the level of asset-liability matching), with the spread above the risk-free rate varying for each bucket. The top bucket is conceptually similar to the Solvency II matching adjustment and the general bucket to the Solvency II volatility adjustment; the middle bucket is a hybrid based on the IAIS’s prescribed spreads and a firm’s own asset mix. A key difference is that all ICS liabilities allow for a spread above risk-free rates, whereas some liabilities are discounted at risk-free rates only under Solvency II
A margin over current estimate is included to reflect the inherent uncertainty in future cashflows arising from fulfilling insurance obligations. This is conceptually similar to the risk margin under Solvency II but is calibrated using a percentile approach, rather than Solvency II’s cost-of-capital approach.
Capital resources
Qualifying capital resources are split into three tiers depending on the level of subordination, loss absorbing capacity, permanence, availability and mandatory payments or encumbrances. Capital composition limits and minimum levels of capital are imposed, with various adjustments or deductions also applied. The requirements are broadly similar to Solvency II
The key differences between the ICS and Solvency II are:
The ICS does not include the concept of ringfenced fund restrictions, which can lead to higher available capital for firms that have ringfenced funds under Solvency II
Structural subordinated senior debt is allowed as available capital under the ICS
Non-paid up capital resources are recognised as available capital for mutual insurers only.
What began as a capital framework for large international insurance groups is now positioned as a minimum global standard with which local solvency regimes must comply
Capital requirements
The ICS specifies a standard method for calculating capital requirements, with the Value at Risk over one year as the risk measure based on a 1-in-200 confidence interval. The overall structure and calibration of the ICS standard method is broadly similar to the Solvency II standard formula
The use of internal models is recognised as a method for calculating the ICS capital requirement. This has been an area of significant focus for several firms to reflect the complex risks that IAIGs face (rather than under a standard method). Recent ICS exercises have requested that firms provide data on internal model capital requirements
Under the ICS standard method:
A factor-based approach is applied for credit risk, non-life premium and claims reserve risk, asset concentration risk and operational risk
NATIKA REDDOCK
is a senior manager in EY’s Actuarial and Risk services team and has been supporting firms on ICS since 2014
is a senior manager in EY’s Actuarial and Risk services team and has been supporting firms on ICS since 2014
A stressed balance sheet approach is proposed for other market risks (interest rate, non-default spread, equity, real estate and currency) and non-market risks (mortality, longevity, lapse, expense, catastrophe)
A simple variance or co-variance approach is applied for aggregation or diversification through multiple sub-matrices
Key differences between the ICS standard method and Solvency II standard formula include:
The ICS interest rate risk calibration includes a “mean reversion” stress (in addition to interest rate up and down stresses)
Internally rated assets are treated as unrated under the ICS, so generally attract a high capital requirement
The ICS’s calibrations of mortality, longevity and expenses are weaker.
Final thoughts
ICS reporting has been a significant exercise for IAIGs to complete each year for the past decade. As we approach the end of the monitoring period, it remains to be seen how the IAIS and local regulators will implement the standard. However, it has played a role in influencing capital regimes across many jurisdictions and, to some extent, driven convergence in the global regulatory landscape.
KENNY CHENG
Net zero is looking increasingly ambitious and increasingly necessary. Yet who is leading the charge? What’s needed, says Sandy Trust, is more light shed on it from the probability experts: actuaries
I
n financial services we have rules, regulations, even a conduct authority to prevent Ponzi schemes and fraud. Actuaries must derive assumptions with rigour, test the sensitivity of our models and keep a close eye on financial solvency. Material assumptions are crawled over by auditors. But, although everyone has a stake in climate change and the net zero goal, the same standards do not exist. It looks increasingly unlikely that net-zero carbon budgets will limit Earth’s temperature rise to 1.5°C above pre-industrial levels and we may already be committed to more warming than is assumed. Could actuarial principles play a valuable role here?
Equilibrium climate sensitivity
The basics of climate change are well understood. Greenhouse gases (GHGs) in the atmosphere cause the planet to retain heat; increase the levels of GHGs and the temperature rises, with the Earth retaining more heat than it radiates out into space.
If the temperature rises too much, humanity – and much of the rest of life on Earth – won’t be able to adapt. It’ll be a mass extinction event.
The $100trn dollar question is: how much and how quickly will we warm? If we know how much we can safely emit before we breach dangerous temperature limits, we can define our so-called carbon budgets. To assess this, scientists invented the concept of equilibrium climate sensitivity (ECS) in 1979, defining it as “the temperature the planet would eventually reach (thermal equilibrium) if we were to double greenhouse gases”.
So what is that ECS? The answer is 3°C. If we were to double GHGs, the planet would eventually reach 3°C of warming above pre-industrial levels. To put that in context, we’re currently at 1.5°C, and it’s getting bumpy. In fact, 1.5°C is what we might think of as a solvency limit, due to the risk from climate tipping points if we go above it. Tipping points are the points at which non-linear sub-systems of the global climate will shift into a different state. For example, think of the Greenland ice sheet melting –this would be very hard to reverse.
Warming of 3°C would push the Earth into a state we have never experienced, significantly disrupting many of the systems on which we rely – such as the major ocean currents. And a stable climate is essential for a global civilisation that relies on farming to feed itself.
Here’s the catch – 3°C isn’t a precise answer. The Earth’s climate is a complex adaptive system that is hard to
There is a higher chance of failure than in Russian roulette; one that’s 36 times higher than what we accept for insurers
model, with lots of feedback loops and non-linear sub-systems (tipping points). There’s also no historical precedent for what we have done to the atmosphere. In actuarial terms, the data on which we can validate our model is limited, while model risk is high.
In the IFoA’s recent climate change paper, produced with the University of Exeter, Climate Scorpion – The Sting is in the Tail, my co-authors and I explore ECS uncertainty, some of the factors that influence it, and the implications.
Figure 1 shows estimates of climate sensitivity from 31 models. The best estimate ranges from 1.8°C to 5.6°C. There is a significant fat tail on many of the modelled outputs. We have marked up a recent estimate of ECS at 4.8°C from the respected American climate scientist James Hansen. If he is right, this would have a stunning impact on carbon budgets; they would already be negative, and we would have to remove GHGs from the atmosphere to limit warming to 1.5°C.
The job for actuaries
Of course, we won’t know the answer until the planet has finished reacting to the changed GHG levels. But from an actuarial perspective, we can lean into this. What is the chance that ECS is higher than we think? Shouldn’t we be deriving this assumption with actuarial rigour, managing our climate solvency in the same way we manage insurance or pension solvency? Shouldn’t we be reducing the probability of failure (exceeding a target temperature threshold) to a reasonable figure?
We might suggest the probability of failure is set to be low, given the magnitude of the risk if we fail.
Even if the Intergovernmental Panel on Climate Change (IPCC) central estimate of ECS is correct at 3°C, there is still an 18% chance of ECS being greater than 4.5°C. This is a higher chance of failure than in the game of Russian roulette, or 36 times higher than the 0.5% chance of failure that we accept for insurance companies.
What about experience analysis? How quickly is the planet actually warming? Surely we can validate our assumptions – it must be someone’s job to keep an eye on this, adjust carbon budgets and so on.
Curiously, it is both everyone’s job and no one’s job. Scientists monitor many aspects of the planet,
producing comprehensive (and terrifying) collaborative analyses such as The 2023 State of the Climate Report: Entering Uncharted Territory, or global temperature updates on the Copernicus Climate Pulse app. But it seems to be no one’s job to analyse this experience, revisit our climate mitigation approach and adjust carbon budgets.
Other considerations
While GHGs increase warming, there are other material factors. Loss of albedo from melting ice also increases warming, via the loss of reflectivity from white ice and the dark seawater’s absorption of energy. And aerosol cooling reduces warming: particles in the atmosphere reflect energy out to space and act as a brake. Some analyses show that we have effectively already more than doubled GHGs when you add up these effects. And if ECS is higher than we think…
sensitivity. Many commonly used carbon budgets derived in 2018 give a low probability of limiting temperature to a certain level, say 66%, 50% or lower – eyecatching when compared with insurance solvency.
Some scientists think we have undercooked both ECS and aerosol cooling; that both are bigger than our central estimates but have been offsetting each other. There is fierce debate but a credible cohort of climate scientists believe that the increased rate of warming observed in 2023 is partially driven by a reduction in aerosol cooling, as a consequence of removing sulphur from shipping fuel and China’s reduction of air pollution. We find ourselves in a catch-22: as we reduce emissions to reduce warming, we also reduce aerosol cooling, which will increase the rate of warming. Gulp.
Figure 2 shows sea surface temperature progression over the last 45 years. What stands out is the temperature increase that began in last March and has continued since; for more than a year, the temperature record has been broken every day. These variations are striking, at times exceeding nine standard deviations above the 1940-1989 baseline. As we state in the Climate Scorpion report, the rate of warming accelerated in 2023 and there is an indication that this is not temporary. Emissions continue, fossil fuel investment continues and so…
Updating our net-zero basis
In 2018, the IPCC published a special report on 1.5°C of warming, showing that climate risk increased significantly above 1.5°C. This led to the concept of net zero: if we could reduce emissions to net zero by 2050, we could limit the temperature increase to a safe 1.5°C. Decarbonisation pathways were developed, showing how humanity could achieve this; from these, carbon budgets were derived. Less well understood is that these carbon budgets are probabilistic, reflecting the high uncertainty in climate
SANDY
works in financial services on climate change and sustainability
However, it is no one’s job to update our approach to net zero, considering our experience to date and some of the uncertainties, and to adjust these carbon budgets. As global temperatures are now above the 1.5°C limit on a 12-month rolling average, it is clear that net-zero carbon budgets will not limit warming to 1.5°C – they are already negative.
Politically, there is high appetite for keeping the 1.5°C limit alive but we have already breached the barrier. Depending on the rate of warming we experience going forwards, we may breach 2°C by 2050. The level of risk increases with every fraction of a degree past 1.5°C, potentially triggering many climate tipping points.
There are multiple elements here: misdirection from certain actors, complex consensus science, poor communication and a need for more education. We need to address these shortcomings.
Actuaries are well placed to assess future risk and advocate for long-term policymaking to accelerate the energy transition and mitigate climate risks. Actuarial approaches could be used to provide an updated climate basis; informed by experience, developed with actuarial rigour, data driven and dispassionate. In Climate Scorpion we call for a realistic risk assessment of climate change, including structured experience analysis. We can then help scientists to communicate clearly to politicians the need to do better, to scan more distant horizons, to prepare for both probabilities and possibilities, and to do so based on evidence, not wishful thinking.
For more about the role of actuaries in net zero, see page 16. Use the QR code to read the IFoA’s Climate Scorpion report
FIGURE 2: Global sea surface temperatures to June 2024
Source: Copernicus Climate Pulse
TRUST
Thinking of applying for your first non-executive directorship?
Experienced boardroom actuary
Seamus Creedon offers his advice
I
n his BBC days, before becoming chair of Ofcom, Michael Grade compared the role of non-executive directors (NEDs) to the bidet in his bathroom: “Nobody knows exactly what it’s for but it does add a touch of class.”
Despite many such jokes, it’s estimated that at least 500 IFoA members act as NEDs – mainly in the UK and Ireland but also around the world. The number of actuary NEDs is growing steadily, with encouragement from regulators, particularly in (re)insurance and asset management.
The job
The function of NEDs on a board is to give an independent view on the running of a business. The first thing to be aware of is corporate governance: as much an art as a science, and certainly a team game. Different countries have different approaches, and each believes its approach is the best. In the UK, corporate governance has its roots in a series of Companies Acts, supplemented by the Corporate Governance Code issued by the
Financial Reporting Council. The fiduciary character of most financial services generates additional regulation from the Prudential Regulation Authority and the Financial Conduct Authority. The most memorable and useful element of all this guidance is section 172 of the Companies Act 2006 (seebox-out, opposite).
The powers of a company under its constitution are initially vested in the board, which delegates most of these to the executive, subject to active oversight. The Companies Act does not distinguish between executive directors and NEDs – and, usually, neither do politicians or the media when something goes wrong!
A good NED will take a keen interest in the company’s culture and behaviours as well as the quantitative and qualitative information shared by the executive. A useful analogy is the relationship between the monarch and the prime minister, which 19th century commentator Walter Bagehot defined as “to be
consulted, to encourage and to warn”. On occasion, the NEDs may have to go further and insist on changes to the executive.
Building your portfolio
I advise building a portfolio of at least two, preferably more, NED roles, as a single role is not conducive to seeing issues in the right perspective. Going beyond four should be done with caution as it may become impossible to do justice to them all, especially if a crisis arises. It may depend on whether some of the roles are in subsidiary companies. In my experience, subsidiaries require about half the time needed for ‘sovereign’ boards.
Be wary of conflicts – for example, being a NED at one life insurer may make it impossible to hold a similar role at a competing firm, depending on the scales of the firms. Whether there is a conflict depends on the views of the firms themselves.
CREEDON has been a NED for more than 16 years and was a founder of the IFoA NED member interest group
Boards tend to have their own ‘personalities’, so do ‘due diligence’ on compatibility. I concentrate on the ‘three Cs’ – chair, CEO and culture – and do my best to assess the levels of competence and transparency. It is simply not worth joining a context where transparency is poor.
Relevant experience is not essential. The executive will always know more about the detail than
THE BOARD GAME
SEAMUS
the NEDs, but a sensible executive will share its knowledge and experience so as to enable NEDs to contribute effectively. The NED who is willing to contribute at least some naïve comments and questions will not be valued any the less.
There are sometimes misperceptions about the contribution that an actuary NED can, and should, make. What is important is not that I understand what the actuaries or other quantitative analysts are sharing with the board; rather, I use my understanding to make sure my NED colleagues have a sufficient grasp of the technical judgments.
First NED role
Being an actuary is often a necessary but rarely a sufficient condition for being offered an NED role. Most NED recruitment now is done by advertisement and/or professional search, which is a positive development. Searches will prefer candidates who happen to be actuaries but who are capable of making a broad contribution as a director. C-suite or executive director experience is almost essential to this. You can improve your odds by doing a course (such as with the Institute of Directors) or by seeking governance experience in a noncommercial context, such as a school or charity, or as an IFoA volunteer.
generally is likely to be useful, including with any NEDs of your acquaintance. Individuals usually serve a maximum of six or nine years in any context, so fresh talent is often needed.
Fortune favours
the vigilant
Not very many years ago, there was a string of financial-services governance disasters – Equitable Life, Co-operative Bank, Halifax Bank of Scotland and Royal Bank of Scotland in the UK, matched by similar cases around the world. Intensive media criticism of those boards has been echoed in more recent company collapses in other sectors, such as in retail (BHS, Thomas Cook, Patisserie Valerie) and construction (Carillion). I have known NEDs who have had to devote extensive time in their later years to resolving governance deficiencies. Friends of mine, including some actuaries, believe the risk is not worth it.
There are sometimes misperceptions about the contribution an actuary NED can, and should, make
A well-prepared CV, with relevant achievements and experience clearly outlined, is important. However, there are lots of CVs in circulation, so it is best followed up by direct personal contact with recruiters –especially those with which you have engaged during your career. Active networking more
Standing on open ground in a storm, you may not avoid being struck by lightning – but it is more sensible than sheltering under a tree! You must do your best in terms of due diligence and constructively challenging the executive – but your best may not always be enough to avoid hindsight-fuelled criticism.
The Carillion case, in particular, stimulated a series of reports that led to active government plans to strengthen laws on audit and corporate governance. For ambiguous reasons, these plans have been only partially progressed. It remains
SECTION 172, COMPANIES ACT 2006
A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (among other matters) to:
(a) the likely consequences of any decision in the long term
(b) the interests of the company’s employees
(c) the need to foster the company’s business relationships with suppliers, customers and others
(d) the impact of the company’s operations on the community and the environment
(e) the desirability of the company maintaining a reputation for high standards of business conduct
(f) the need to act fairly as between members of the company.
to be seen whether further corporate stress owing to the weak economy will revive the prospect of legislation.
Corporate governance always will be stretched between taking risks and protecting stakeholders. Actuaries understand this tension well, both in the short and the long term, so can play a valuable role as NEDs.
For anyone interested in becoming a NED, there’s a LinkedIn group for practising and aspiring IFoA NEDs. It embraces a significant proportion of actuary NEDs and includes recruiters with a bona fide interest in finding potential actuary NEDs.
Find the IFoA LinkedIn NED group by using the QR code
Patrick
take us
PATRICK MOEHRKE
is an with-profits product specialist at Momentum Corporate in South Africa, and a technical member of the Actuarial Society of South Africa
DR YONGCHAO HUANG
is a senior researcher at Aberdeen, Westminster and Cambridge, and a former senior data scientist in insurance pricing and fraud detection
UNDER THE INFERENCE
through
a
Moehrke and Yongchao Huang
less data-intensive approach to mortality modelling using Bayesian neural networks
eural networks (NNs) are gaining traction in mortality modelling, and much work has been done showing their advantages over traditional methods, such as Lee-Carter. Numerous articles and papers have demonstrated their usefulness in wider domains such as pricing and reserving, too.
However, conventional NNs typically require a lot of data to learn an underlying pattern and give deterministic predictions. You can address this is by incorporating a less data-hungry Bayesian framework when training the network: a Bayesian neural network (BNN). It enables prior assumptions to be principally incorporated, and yields a stochastic NN that allows for uncertainty quantification. Bayesian inference works by assigning a prior belief about the parameters of concern (in the form of a probability distribution), combining evidence from data (which contributes to the likelihood), to produce an updated belief about the parameters – the ‘posterior distribution’. The workings are described by the Bayes theorem:
where θ is the parameter(s) to be inferred and (X,y) are data pairs. p(θ) is the prior distribution, p(y|X,θ) the likelihood model and p(y|X) the normalising constant (also called ‘marginal distribution’ or ‘evidence’).
BNNs use Bayesian inference to estimate the posterior distributions of their parameters, such as weights. (NN parameters typically refer to their weights and biases; they may also include some hyperparameters, such as those in activation functions or even hypotheses about the architecture.)
Here, we fit a BNN on a small South African mortality dataset (Figure 1) compiled by the World Health Organization, reporting aggregated male and female mortality rates across five-year age intervals (20-24, 25-29, ..., 80-84, 85+) for the years 2000, 2005, 2010, 2015 and 2019. Our aim is to interpolate and forecast log-mortality rates, log(μ), at each age interval.
Bayesian neural networks
We build a BNN model based on Bayes’ theorem and train it using Bayesian inference (unless otherwise stated, we are referring to feed-forward NNs). Essentially, parameters in
the NN are assigned prior distributions, and we want to find their posterior distribution, given the data and NN architecture. For simplicity, we fix the model architecture M; there is flexibility to perform neural architecture searches (in other words, the architecture can be made as a hypothesis).
The key differences between BNNs and conventional NNs are:
1 BNNs yield distributional estimations for their parameters and predictions; NNs give point estimates
2 BNNs allow incorporation of prior knowledge
3 BNNs perform inference of the posterior; NNs optimise certain loss functions –although some Bayesian paradigms also optimise some loss function, such as maximum a posteriori
4 In training methods, BNNs employ approximate inference techniques, such as sampling; NNs are trained via optimisation, such as gradient descent with back-propagation.
Training a BNN
BNNs are handled differently from NNs.
STEP 1: The prior
We assign a prior p(θ|M) to each parameter (θ) given model (M) – for example θ|M ~ Normal(0,τ), where τ is a pre-assumed constant based on prior knowledge.
We can also give a hyperprior on τ, if necessary. Hyperpriors are parameters that form part of the prior’s distribution, like a
variance term. Hyperpriors for variance need to be strictly positive, so inverse gamma, half normal and log normal are commonly used distributions. This hierarchical structure leads to a hierarchical Bayesian model.
STEP 2: The likelihood
We then assign a likelihood model, p(y|θ,X,M), for the NN’s output (y) – for example, y|θ,X,M ~ Normal(NN(X|θ,M),Σ) states that observed label y centres around the network’s outputs, with some volatility specified by covariance matrix Σ.
Variance matrix Σ may be heteroscedastic (non-constant variance), have dependencies between outputs (non-zero covariance), and/ or have its own set of hyperpriors.
Our aim is to infer the posterior. In most cases, the formula derived from the Bayes theorem is not tractable – we cannot obtain an analytical form of it due to, for instance, the high-dimensional integral involved in calculating the normalising constant. We therefore need to approximate it using approximate inference techniques such as Markov chain Monte Carlo (MCMC) or variational inference.
MCMC sampling repeatedly draws samples, as per some proposals and acceptance criteria, from the probabilistic model until convergence, avoiding the computational intractability of evaluating the complex integrals in the Bayesian posterior.
STEP 3: Training
Training mainly involves using Bayesian
inference methods to approximate the posterior. MCMC is a family of sampling methods used to find samples of parameters whose convergent distribution stabilises to the posterior distribution; variational inference formulates the inference problem as an optimisation problem.
1 In general, the algorithm works by taking random samples from a prior and a proposal and accepting or rejecting them based on a certain criterion
2 It isn’t always feasible to reach full stationarity, so there are diagnostics we can use to see if we are close enough
3 The initial samples, not yet convergent, are usually excluded and referred to as ‘burn-in’ samples
4 We will be using an MCMC algorithm called the No-U-Turn Sampler (NUTS) –a variation of Hamiltonian Monte Carlo, based on Hamiltonian mechanics.
Hamiltonian Monte Carlo is widely used for BNNs
5 MCMC is not the only method that can be used to estimate parameters. For large NNs, exploring the large parameters space poses challenges for MCMC; alternative techniques such as variational inference can instead be used to accelerate inference. Remember that both MCMC and variational inference may still, more or less, suffer from the curse of dimensionality.
STEP 4: Posteriors
Once posteriors are estimated, we can reconstruct the NN and produce predictions by using these stationary samples. This means both the NN model and its predictions are stochastic: for each parameter configuration, it outputs a corresponding set of predictions. There are also Bayesian paradigms for producing point estimates for the parameters. One way is to maximise the posterior distribution (find the modes of the Bayesian posterior), referred to as maximum a posteriori estimation. This is the equivalent to maximum likelihood estimation if a vague prior is used. In effect, we get a ‘traditional’ NN out by using point estimates.
NN architectures can also be included as part of the prior hypothesis, so this framework can be extended to condition on the model choice and data (for example missing or incomplete data). For instance, you could assign a Dirichlet distribution to the set of possible models.
FIGURE 1: South African mortality data
Process overview
The rationale behind using a BNN to model mortality rates is that we do not know the exact expression for our mortality data (a good reason for using complex models such as NNs), the dataset has few observations (good for Bayesian modelling), and we want to add confidence to our estimations and predictions.
While a typical NN may be able to estimate the relation between inputs and outputs, it may over-fit, given the small dataset. A BNN has less chance of over-fitting: predictions are weighted averages based on a range of parameter configurations, and the prior serves a similar role as regularisation. There are ways to prevent over-fitting in NNs, such as by regularising the loss function and using drop-out, but BNNs require neither, as they self-regularise during training.
While much focus has been on feedforward NNs, BNNs can be used for recurrent NNs, convolutional NNs and other architectures that have been used in mortality modelling in recent years.
South African mortality example
Much like defining a Lee-Carter model, we apply a log-transformation to the output. The relation we are modelling is log(μ (X))=f(X), where log (μ (X)) is the log mortality as a function of the variate(s) X (for example, the year). Here, we use a single variable year as input – we are modelling mortality rates over time, creating a time series modelling and forecasting problem.
As a baseline, we fit a Lee-Carter model using singular value decomposition. This produces estimates at discrete time points, so the expression cannot interpolate without external means (such as plotting).
We define our BNN as a function that takes in the observation year and outputs log mortality rates for ages. We use a shallow BNN with three hidden layers (eight neurons each) and Swish activation functions in the hidden layer. The output layer has a linear activation function.
The BNN can be described as a regression model with one input variable (year) and the log mortality values for 14 output classes (age bands), per Figure 2. The NN is specified using Lux.jl.
As a pre-processing step, we standardise the observation years and output. Standardising inputs is common practice
layer: Year
in training networks, helping to stabilise the training process. We retain the mean and variance to rescale the results in post-sampling.
We assign each parameter a normal prior with a mean of zero and a variance of 1.25. The likelihood is assumed to be a multivariate normal, where the variance per output class (age band) is assigned a half normal prior with a mean of zero and a variance of one. This means that while variance is assumed constant between years, each age band has its own variation.
Using NUTS, 12,500 samples are drawn, with an acceptance threshold of 0.9. We use Turing.jl to sample the BNN and Tracker.jl as the automatic differentiation (AD) back-end for estimating the gradients of the posterior used in the NUTs sampler. AD libraries are used internally when performing MCMC approximation. Turing.jl, with its in-house AD back-end and external plug-in flexibility, allows users to select an appropriate AD back-end for their use case.
Based on Figure 3, the parameters appear to fluctuate around their mean and the correlation between sequential samples is minimal, although some correlations are observed. Further diagnostics can be used, such as analysing R-hat convergence as well as the effective sample size. If parameters don’t converge towards a stationary distribution, remedies include increasing the number of samples, carefully tuning the MCMC algorithm’s hyperparameters, thinning the samples and re-designing the probabilistic model.
Results
After sampling, we pass in inputs from 1990-2030 to see how well the BNN
Input
Hidden layer 1Hidden layer 2Hidden layer 3
FIGURE 2: The NN architecture used. Yellow represents input; dark blue, part of the hidden layers; red, the output neurons
FIGURE 3: Sample trajectories (left) and approximate marginal posterior distributions (right) for selected BNN parameters. The title ‘parameter[i]’ refers to the posterior of the ith parameter in the NN (default order as set by Lux.jl). Samples are said to be stationary when the sample trajectories stabilise and variation appears random around the mean
700080009000100001100012000
FIGURE 4: Results for age bands 20-24, 40-44, 60-64 and 85+
interpolates, forecasts and backcasts. We take 100,000 posterior samples (each representing a parameter configuration, and thus an NN) and reconstruct the NNs to yield the predictions in Figure 4 (each sub-figure gives the predictions of the log mortality rate for a class of age band). Lee-Carter results are included for comparison.
The BNN does fairly well across observation years with a small degree of variance, and ‘fantails’ during unseen years as we get further from the observation period and results become more uncertain. Since we have the credible intervals for predictions, we can apply suitable discretion when using the results. The Lee-Carter model fails to capture some trends and doesn’t fit the data well.
What next?
The BNN results seem favourable compared with classic mortality models in terms of yielding robust predictions, but more could be done to explore relatively high uncertainty in ages 20-24 and skewness in forecasts at later ages. Bayesian active learning (as used in Bayesian optimisation) could also be used to suggest which age band data should be collected, to reduce uncertainties and maximise efficiency. The approach could be tested for robustness by analysing different countries, data sizes and model architectures.
There are still barriers to adopting BNNs – namely run-time when performing MCMC sampling, even for small datasets. Techniques that may speed up the inference process, such as variational inference, were not tested here. If you have more informative priors – say, if parts of the underlying formula are known –this informed structure could be embedded into the probabilistic model and improve predictive accuracy. Other NN architectures could also be explored and supplementary variables exploited, such as neighbouring countries’ mortality rates. This example was designed as a toy demonstration to explore BNNs’ capacity with low data volumes.
The authors would like to thank Valerie du Preez, managing director of Dupro Advisory, and Jan Blomerus, senior lecturer at the University of the Free State, for their input. Parameters(1)
Use this QR code to access the full modelling code
For former IFoA president
Marjorie Ngwenya, success is always a work in progress. She recently set herself a new goal: writing a personal growth book, spurred on by her experiences as an actuary and coach, and her challenges in her own career
M-POWER
What inspired you? I’ve always loved to write. Throughout my life, I’ve learned valuable lessons about belief systems and self-improvement, which I felt compelled to share. The motivation was to offer guidance and support to others navigating their personal and professional lives, using insights drawn from my own experiences. Each section draws on personal anecdotes and practical advice.
Marjorie Ngwenya is an actuarial consultant and coach: aboutmarjorie.com
What’s the thrust of it?
The main takeaway is that life is not formulaic – design a bespoke way to navigate it and pay attention to your own voice. It delves into personal development by exploring ‘mindset, meaning and momentum’. This framework guides readers in cultivating empowering mindsets, defining what is meaningful to them and building momentum to achieve sustainable success.
Did writing it feel risky?
I had to recognise that risk is a growth opportunity, not just something to be managed. My fear was whether I could translate complex ideas into something engaging and accessible. I reminded myself that what was important was being able to share my ideas; if even one person has benefited, my work is done.
How was the process?
Rigorous and rewarding. I wrote early in the mornings, late at night, and in hotels or Airbnbs – I travel a lot! I outlined the chapters first, then broke each topic into key points and expanded on them systematically. I tackled writer’s block by going for walks or engaging in creative activities to refresh my perspective.
Did the time you spent as editor of TheActuary help?
It significantly contributed to my writing and editorial skills. I learned about publishing, from brainstorming and content curation to editing for clarity and impact. It also sharpened my ability to communicate in an accessible, engaging manner. I could experiment with different writing styles and formats, deepening my understanding of what makes content resonate.
Many actuaries shy away from writing – what’s your advice?
Writing helps us to communicate complex ideas and clarifies our understanding. Our profession needs those who bridge the gap between technical expertise and communication – view it as part of your professional toolkit. Start small and practise regularly. Write about topics you’re passionate about or familiar with, and expand.
Engage with different types of writing and read widely to improve your style.
Have you ever suffered from imposter syndrome?
It’s been a recurring challenge, peaking whenever I’m about to step into the unknown. Writing the book, I questioned whether my insights were valuable or would resonate. I reached out to mentors, sought peer feedback, and reminded myself of my unique perspective. I’ve learned to see imposter syndrome as a sign that I’m pushing out of my comfort zone, which is where growth happens.
You’re a development coach – how did you get into that?
I was drawn to the mentoring aspects of my job and wanted to have an impact beyond the actuarial community, using my experience to help others. I did certified training programmes, which gave me the tools to help professionals develop their careers and to expand into personal development coaching.
Is business coaching very different from an actuarial job?
Coaching is rewarding and complex in ways that are different from actuarial work. It’s dynamic and unpredictable, focusing on emotions, perceptions and behaviours. You need to tailor approaches and solutions to clients, which requires compassion and communication skills. Success can be subjective and takes time. You must also foster a relationship built on trust and confidentiality, requiring emotional investment and commitment. It challenges me to use not just my analytical skills but also empathy, intuition and listening skills.
What issues do you tend to hear about from actuaries?
Career progression, particularly moving from technical roles into management and leadership. That requires leadership skills such as emotional intelligence and conflict resolution – not typically emphasised in actuarial training. Work-life balance is another theme: people seek strategies to manage their time while maintaining performance and fulfilling personal commitments. We
develop strategies to enhance communication skills, leadership development and time management.
What has your experience been as a non-executive director?
Boardrooms can be intimidating, given the level of decision-making involved. However, it is an opportunity to bring a diverse perspective and challenge the status quo. Preparation is key – being well-versed in the agenda and knowing about key business issues have helped me contribute effectively and with confidence. I’ve been fortunate to have had supportive board colleagues. Boards work well when they benefit from diverse voices and ways of thinking.
Do you plan to write more?
I always have a book idea – planning them keeps my creative juices flowing. I’m exploring a collection of short stories. Writing is not just about sharing knowledge but also challenging myself to think differently and address topics that can have a profound impact. Each idea is a journey, and whether or not they get published, they contribute to my growth.
What’s your take on books written by AI?
They raise questions about creativity and authorship. AI processes vast amounts of data and generates content at a speed and volume beyond human capability, but lacks genuine insights and emotional depth. Writing is tied to human experiences, emotions and perspectives; it conveys a voice, a tone, the author’s soul. There’s potential for an approach where AI and humans work together, pushing the boundaries of storytelling and information sharing. AI can be a powerful tool, but the essence and heart of storytelling are quintessentially human.
Could you, like Marjorie, edit The Actuary? If interested, email editor@theactuary.com
Empowered Evolution: Shape Your Mindset, Discover Your Meaning, and Thrive with Momentum by Marjorie Ngwenya is out now
THROUGH THE PAGES
To Alex Martin,
old
exam life-table books are far from dull and dusty relics. Savouring them in the IFoA archives, he finds himself on an evocative trip back in actuarial time
Every actuary who has sat an exam will remember trying to find the right page in a formula book, looking for a specific number in a life table and hoping they haven’t read the wrong line and looked up annuity rates for a 36-year-old instead of a 35-year-old. Actuaries sitting exams pre-2002 did this in the green book, while those sitting exams since then have used the orange book.
Assuming that exams are sat when someone is about 25, most practising actuaries will be either ‘green-book actuaries’ (over 47) or ‘orange-book actuaries’ (under 47). But did you know about ‘navy-book actuaries’? The green book, published in 1982, replaced the 1952 navy book – so those over the age of 67 likely used a navy book with a fetching light blue dustjacket.
Readers aged 97 or more may consider themselves ‘black-book actuaries’, if they used the 1945 reprint of the 1930 black book. No longer with us are the ‘brown floralembossed-book actuaries’, who had the pleasure of using the 1912 book, or the ‘black and blue leatherbook actuaries’, who used the first of these books: 1898’s A Short Collection of Actuarial Tables
Even though the black and blue leather book was published 126 years ago, you could use it to sit CM1 today
Finally, those with great-grandparents in the profession may have heard of ‘brown-card actuaries’: young men who walked into their exams armed with a stiff piece of card, published in 1877.
I had the pleasure of spending an afternoon at Staple Inn with all these vintage books, assisted by longstanding IFoA librarian David Raymont. Let’s look at how things have changed over the years…
1877
THE BROWN CARD
The oldest document in the IFoA’s collection of exam guides is a stiff, well-worn piece of brown card. It was originally published by the Institute of Actuaries (IoA) of Great Britain and Ireland and printed by C & E Layton in 1877, although the archive copy is marked 1898 –presumably a later reprint.
The face of the card shows logarithms, the reverse anti-logarithms, both calculated to four decimal places. Like any good actuary, I spot checked a few of the numbers and found each one correct, although the mean differences were occasionally rounded in the wrong direction at the fourth decimal place.
Long before calculators were commonplace, this would have been an invaluable tool for students. Professionals would have used similar cards, alongside much larger logarithm books (of which a number are in the IFoA archives).
1898
THE BLACK AND BLUE BOOK
This was the IoA’s first ‘proper’ book of life tables, “for use in examination to classes of Associate and Fellow”. It is much more like the modern-day green and orange books than the brown card, with its life tables, logarithm tables and compound interest tables. Embossed in gold is the title A Short Collection of Actuarial Tables, and each page is rough to the touch, with the imprint of the printing press. The inside cover holds the disclaimer – still used today – that these books are for exam purposes only, not professional work.
The book has four sections. The first is the compound interest table, calculating the value of (1+i)n and similar formulae for cases where i = 2.5%, 3%, 3.5%, 4%, 4.5% and 5%. The second is the life table HM Experience –text-book gradation. This is a hypothetical select mortality table, though details of its construction are not included in the book. Section Three contains annuity rates using the Carlisle Experience, again with no more details than the name. Section Four is logarithm tables and conversion factors for single to annual premiums. Amazingly, even though the book was published 126 years ago, you could use it to sit CM1 today – although, while the layout of the tables is similar to the modern books and the information is (almost) sufficient for the syllabus, you’d get very different answers. Looking at the expected life of a 30-year-old (e 30), the HM Experience would be 34.7 years, whereas a modern ELT15 from the orange book would be 44.9 years – a full decade longer.
1952 THE NAVY BOOK
This is significantly bigger, rising from 75 to 104 pages.The pages themselves are also bigger, and the title has now changed to Actuarial Tables for Examination Purposes
The life tables and sickness tables are here updated and, making my research more interesting, include references to the academic papers in which they were originally proposed. Pension fund tables are added, including data such as salary scales, and statistics tables included for the first time. This suggests that the content of exams had started changing, involving a wider range of topics and creating actuaries with a broader knowledge base.
An interesting nod to wider political history is the inclusion of Pakistan in the list of locations published, following the partition of India in 1947.
1982
GREEN BOOK
Many readers will remember this book
The green cover and pages were a fun style choice made by the newly appointed Alden Press – a Witney-based, family-run publisher.
A further 21 pages are added, a lot of these coming from formula tables listed on pale green paper at the beginning. More interest rates are included, and the life tables updated – the H[M] Select mortality tables swapped out for A1967-70.
1930/45 THE BLACK BOOK/REPRINT
The 1930 black book is rather dull looking – perhaps a result of the publisher switching to Cambridge University Press, or an indicator of the troubled economic climate of the time. However, while it may have lost its attractive cover, it gains a global audience – it is now being printed and distributed in New York, Bombay, Calcutta, Madras, Toronto and Tokyo (although the latter was dropped for the 1945 edition).
The black book builds on its predecessor with an increased range of interest rates and additional life tables – namely the English Life Table No 8: Males and the Manchester Unity Experience for calculating sickness rates.
There is an error in the 1930 edition, called out in the preface of the 1945 edition in explaining the republication, but I could not see it in my comparison of the two books.
2002 THE ORANGE BOOK
The 2002 book stands at 190 pages, with a bright orange cover and orange pages for the opening formulae section. It is here that we lose our last link to the 1877 brown card: logarithms are removed. Given that it now takes just three quick button presses on a calculator, there is no longer any need to look up logarithms in a book.
The formula section is vastly increased, reflecting a widening of the syllabus. However, the sickness tables still use the same approach as the 1893-1897 Manchester Unity methodology first included in the 1930 black book – a nice historic echo.
What colour is the future?
1912 THE BROWN EMBOSSED BOOK
The most beautiful of the books, this has a floral embossed pattern which comes to life when it catches the light. Perhaps to highlight this detail, there is no lettering on the front, with the title saved for the spine and inner pages. This was the first book used by women when they were admitted to the profession in 1919. Additions doubled its size, from 39 pages in 1898 to 78 in 1912. There are more interest rates, with i extending down to 1% and including a series of quarter-percentage steps. The same mortality tables are repeated, but there is also an additional life table, O[NM] Experience. Little to no detail is given on this – if anyone has any insight, do get in touch (editor@theactuary.com).
Actuaries have been taking exams since 1850. Those 25-year-olds walking into their exams back then would have worn different clothes from the young people of today, but I expect they had the same feeling of anticipation going in – and the same discussions about the paper coming out.
The formula book is a tangible link to the past, something physical that represents the breadth of knowledge an actuary must grasp. We can clearly see how it has changed over the years, in both in scope and content – just like our profession. With exams moving online, who knows what the next edition will look like? We are now 22 years into the orange book; I look forward to seeing what colour we will assign to the next generation of actuaries. Perhaps something similarly bright, or suitably rosy, for the future.
ALEX MARTIN is sustainability features editor for The Actuary
Many thanks to David Raymont and the IFoA for facilitating this research
READY FOR RISK
Where are insurers investing? Research reveals that braver, private opportunities are pricking their interest – despite the constant liquidity and markets concerns. Saiyan Raja investigates the trend
It’s been a tough landscape for private assets in recent years, thanks to rising interest rates and an uncertain macroeconomic environment that has impacted liquidity and fundraising capability. Despite this, findings from Ortec Finance’s recent survey of global insurers suggest that the outlook is now more optimistic than it has been for a while.
The poll gathered insight on the current challenges faced by investment management professionals at life and London-markets insurers, reinsurers and insurance asset managers, in the US, UK, Europe and Asia. It found that 70% of respondents are seeking higher-risk alternatives, despite 42% having continuing concerns around inflation.
A significant proportion of respondents expect to increase their private assets exposure in the medium term, with 54% expecting a moderate increase and 16% a dramatic one. Of these, 41% expect to increase their direct real estate exposure,
while 33% expect to explore infrastructure projects. And 4% are specifically considering farmland and timberland, due to its inflation hedging properties and low correlation with other asset classes.
What’s driving this?
Respondents were asked to select the top three factors influencing their future asset allocation decisions, with 56% citing attractive risk-return opportunities in their top three. Overall, investors do not seem put off by the prospect of another liquidity crunch; rather, they are, to quote Yale endowment model pioneer David Swensen, “willing to accept illiquidity to achieve a significant edge in seeking high risk-adjusted returns. Because market players routinely overpay for liquidity, serious investors benefit by avoiding overpriced liquid securities and by embracing less-liquid alternatives.” Limited partners with liquidity on the sidelines can take advantage of high quality opportunities as general partners ramp up their fundraising efforts.
The quest for income-generating assets is a prominent theme among responses, with assets such as infrastructure debt and direct real estate debt standing out for their liability-backing characteristics. Similarly, the prospect of hedging inflation risk is also an important driver. Amid geopolitical tensions, deglobalisation, and inflationary pressures arising from the cost of the low-carbon transition, investors are preparing for an era of persistent inflation that is materially above central bank targets. Infrastructure is a natural choice, with its ability to generate long-term, inflationadjusted cashflows that are less correlated with economic cycles.
Indeed, this asset class is poised to take advantage of the opportunities stemming from the low-carbon transition, with respondents citing environmental, social and governance considerations as another important challenge. There are opportunities to be had in financing sustainable projects that provide alternative clean energy sources and help the private sector to achieve climate transition goals, and these are further
encouraged by tighter regulations and government policies.
The insurance industry is undergoing a regulatory shift, with the Prudential Regulation Authority’s (PRA) intentions to adapt the Solvency II framework for the UK market. Of note, its consultation on matching adjustment reform (which, at the time of going to press, is
Proceed with prudence
Nevertheless, there are negatives that require careful consideration. For instance, while opportunities are created in the private debt sector when companies stay private for longer, this also leads to reduced demand in the private equity market. Exit activity has decelerated, potentially prompting insurers to seek buyers in the secondary market at unattractive levels.
expected to come into effect on 30 June) is considering an expanded asset eligibility to include assets that have highly predictable cashflows. This is in line with the UK government’s desire to “support insurance firms to provide long-term capital to support growth including investment in infrastructure… and other long-term productive assets, as well as investment consistent with the government’s climate change objectives” (stated in the call for evidence on its Solvency II review).
Comparing public and private markets, survey respondents showed a preference for the latter when it comes to short-to-medium term investment. Moreover, an overwhelming majority expressed confidence that private markets will continue to outperform their public counterparts in the long term. This trend, coupled with companies’ inclination to remain private for longer, presents value opportunities in the private debt sector. The benefits to insurers are appealing: greater diversification, a stable source of income, and customisability, all of which contribute to a compelling risk-adjusted return with a favourable regulatory capital treatment.
It’s not all rosy in private credit either, with ratings agencies reducing their outlook for some prominent funds owing to non-accruals considering the higher interest rate environment. It is not unimaginable that we may see ratings downgrades in the future, and possibly worse. Direct investments in infrastructure and real estate present specific risks, of which investors should be mindful. As sustainability gains importance, due to regulations or other factors, the risk of greenwashing increases. Investing in private assets requires a robust governance framework that incorporates effective risk management principles. Most survey respondents felt this aspect of the private asset governance framework has improved markedly.
Risk is back
The survey’s findings suggest that, despite ongoing global uncertainty and market volatility, insurers are embracing a risk-on approach for the next 12 months – and private assets are positioned uniquely to support this shift. We anticipate a notable improvement in return expectations compared with last year. Despite their associated risks, asset classes such as direct real estate, infrastructure and private debt present compelling investment opportunities.
By exercising prudent risk management and weighing benefits against costs, private assets can play a pivotal role in a robust strategic asset allocation, allowing insurers to seize attractive risk-return prospects amid evolving macroeconomic conditions.
SAIYAN RAJA is investment solutions director at Ortec Finance
FIGURE 1: Competing drivers for private asset investment choices
equity, hedge funds
Lily Hallett, a pricing actuary at Monument Re in Bermuda, explains why the world’s fastestgrowing sport is such a hit
How did you hear about pickleball?
It was through word of mouth, here in Bermuda. One of my friends suggested I give it a go and I’ve not looked back since. I initially went to a mixer event for beginners – it’s a great way for people to be introduced to the sport. As I got better at playing, I joined a local club and now mostly play there with a regular group, alongside mixers and tournaments.
What do you enjoy about it?
It’s just so much fun, alongside being an incredibly social sport and a great way to keep fit. I play quite often so I don’t have time for any other racket sports – and the good thing is, you don’t need to have played any in order to play pickleball.
Describe what it is…
It’s a cross between table tennis, tennis and badminton. It’s played on a badminton-sized court but with a lower net (more akin to tennis), with a perforated, hollow plastic ball and a solid bat called a paddle. It can be played doubles or singles. Each point is rather like tennis but there are certain rules, such as you can’t volley when up close to the net (the non-volley zone, or ‘kitchen’) and you can’t hit a service return without letting the ball bounce. Serves are underarm. You can play indoors or out.
I’M AN ACTUARY AND... PICKLEBALL PLAYER
How do you score it?
The scoring can be quite confusing at first. Each game is played to 11 points. You can only win a point when your side is serving. You keep on serving until you lose a point, and then then other team serves. If playing doubles, both players on a side each get the chance to serve before the service goes to the other side. When you keep score, you say three numbers: your number of points won, the other side’s number of points won, and either 1 or 2, to indicate which person on the serving side is doing the serving. For example, if you have 5 points, your opponents have 3 points and it’s your team’s second serve, the score is 5-3-2. If you then lose that point, the other team has their first serve and the score is 3-5-1. You get “pickled” when you score 0 in a game.
I couldn’t recommend it enough – you hear ‘one more game!’ a lot, as it’s hard to step off the court once you’re on it
becomes dangerously slippery. It can also get quite windy here. In the winter, I’d be fairly lucky to play four or five times in a week. Summer tends to be much better, although, here in Bermuda, it requires copious amounts of sunscreen and water.
Do you play matches?
Recreational games can sometimes get quite competitive, depending on who you are playing. There are occasional tournaments you can sign up for, which are much more competitive. I’ve played in a couple to date and have done reasonably well, but definitely prefer recreational play.
How often do you play?
I try to play three to four times on week nights after work, and then three to four times over the course of a weekend, mostly at my local club. The courts we have are all outside (at the moment) and sometimes the weather conditions can make it unplayable, particularly in the winter. It’s almost impossible to play in the rain as the ball doesn’t bounce properly, not to mention it
Why do you think it’s catching on?
It’s hard to explain until you give it a go, but playing is very enjoyable. It’s fast, fun and incredibly addictive. It’s also easier to get started than other sports and has the benefit of appealing to people of all ages and abilities. It appears to be becoming increasingly popular across the US, which is where the pro tour is also played. It’s also spread around the rest of the world and I hope it continues to do so – I couldn’t recommend it enough! “One more game” is a common saying, as it’s hard to step off the court once you’re on it!
At the back Soft skills
H
ave you looked up the Urban Dictionary definition of “Zoomitis”?
A 2021 entry by ‘The Tankboy’ calls it: “the brain numb you get after too many Zoom conferences at work.” I would redefine it as: “an epidemic of unnecessary meetings arising as a result of lockdown.”
The old Bing Crosby song ‘Busy Doing Nothing’ includes the lyrics: “We’re busy doin’ nothin’, workin’ the whole day through, tryin’ to find lots of things not to do.” For so many of us, this has become our reality as we spend our working days overwhelmed by back-to-back meetings. We desperately try to maintain concentration as we flit from one meeting to the next with barely a moment to come up for air, let alone prepare.
All the while, our inboxes are filling up and our to-do lists are expanding. Our stress levels rise, our exhaustion builds and our health suffers. And our businesses suffer too: the mindlessly urgent has trumped the unimagined important, as our space to think, to dream, to innovate is squeezed. Zoomitis is indeed a post-Covid workplace epidemic.
Meeting mayhem
Pre-lockdown, there was discipline around meeting attendance. First of all, there were the economics of time and money. Time spent travelling to the meeting, the price of the journey, the people-cost of attending the meeting. And there was the very real limitation of room size: how many seats could you fit round the table? The upshot was that if you were attending a meeting, you had to have a role – preferably a speaking one, so you didn’t look like an extravagant spare part.
But with the advent of liberating digital technologies such as Zoom and Teams, that has all changed. Now anyone with a link can join a meeting. I am reminded of Jeff Goldblum’s line in the film Jurassic Park, marvelling at the arrogance of the scientists who brought back the dinosaurs: “So preoccupied with whether they could, they didn’t stop to think if they should.”
If you and I are having a conversation, we will take a view on how much information we share. We might be very candid if we know, like and trust each other. But as soon as
Zzzoom o’clock
What time is it? Time for yet another virtual meeting… Jenny Segal gives tips on how to make sure these new work fixtures don’t take over your day, or your mind
another person joins in, we become a little more guarded, sharing in accordance with the person we least trust. As more and more people join our conversation, the less we share, until we reach a tipping point where we stop saying anything of value at all. At that moment, the meeting doesn’t simply become a waste of time for the person who’s just joined – it becomes a waste of time for everyone. The optimal size for a meeting is actually pretty small. It varies depending on the purpose but the generally accepted view is that, for effective decision-making, it’s about six attendees.
The antidote?
How can we combat Zoomitis? Quite simply, by adopting three simple rules. First of all, attend fewer meetings. Before you accept a meeting invitation, check whether it passes this test:
1 Why? What’s the purpose of the meeting?
2 Why me? Does it need to be me who goes?
3 Why now? Can the meeting be put off until another time?
Then, make your meetings shorter. Have a clear agenda and finish when you’re done. Don’t fall into the trap of setting the length as the default slot in your calendar and then
expanding the chat to fill the time available. If there is genuinely a lot to discuss, why not split the meeting into two shorter ones? Humans have short attention spans; school lessons are divided into 40-minute chunks with breaks in between for good reason. A coffee-andbiscuits interlude is a great idea for boosting energy levels, refocusing the mind and encouraging serendipitous offshoot conversations.
And third, run meetings better. The meeting will only ever be as good as its chair, so make sure you have an effective lead who sticks to the agenda, invites participation from everyone and expresses their opinion last. Then, get the format right. Virtual meetings are fantastic for task-based, technical matters or rapid decision-making, but they are rife with “tech-stractions” and are only as strong as the weakest link in the tech chain –
The mindlessly urgent has trumped the unimagined important, as our space to think, to innovate, is squeezed
whether that’s people who are on mute, unstable internet connections, or the ping of notifications from local devices. And they are no substitute for in-person meetings, which are crucial in situations where being able to read body language is key: ie, anything that requires opinion, interaction and nuance, and for making difficult decisions in general. Finally, remember the universal truth when choosing your format: everybody hates hybrid, the mix of in-person and remote. These situations are very difficult to chair, and when you join remotely you do not have an equal footing in the meeting. If you have an important point to convey, you need to be there in person.
The reading matter
To make a meeting really effective, get the pre-reading right. While few are brave enough to admit it, most people don’t bother reading the meeting papers. Where does it all go wrong? Too much, too late. Papers are often delivered last minute as a brain dump, showcasing the detailed work put in by their presenter, rather than being carefully designed to equip their intended audience with the things they need to know. This leads to very real problems for meeting preparation: the reader can’t see the wood for the trees as the important points drown in detail. And, worse still, an overly long paper implicitly grants permission for it not to be read: after all, it’s just not reasonable to expect someone to wade through a dry 300-page document in just a few days.
The good news is that there is a simple –if not easy – solution to this, although it takes time and effort on the part of the paper’s author. There is a common view of what the perfect meeting paper looks like: a bit like an
onion. You can see what it’s about at first glance, and then you can peel back the layers to find out more if you want to. It needs to be written in straightforward, clear language, with a cover sheet that makes its purpose crystal clear. It may take the author a few hours to write a really good document. But this is a massive win for the business as a whole, because it does not waste the time of dutiful recipients who try to make sense of an in-the-weeds paper, and means that the meeting itself will be so much more efficient and effective because its attendees will be better briefed.
Yet even with a brilliantly crafted paper, perhaps it is wise for the meeting’s chair to assume, as Jeff Bezos always does, that no one has read it in advance and to earmark the first part of the meeting to make sure everyone is, quite literally, on the same page.
Management 2.0
Curing Zoomitis is yet another challenge for the post-Covid manager and an important part of their Management 2.0 toolkit. It forms a part of what I’ve come to think of as mindful working: being intentional about what we do – allocating time between home and office and deciding in advance what to do where; and thinking about the ‘urgent versus important’ dynamic, freeing up time in our diaries to allow us to think.
So, I encourage you to set yourself (and your team, if you have one) this ambitious goal: halve the time you spend in internal meetings by attending half as many, making them half as long, or a combination of the two. Question the frequency of your regular meetings. If it’s weekly, can it be fortnightly? If it’s monthly, can it be quarterly? If it is to report on a particular business activity, don’t hold it more frequently than the pace at which the business activity develops. And let the time you’ve saved count.
JENNY SEGAL (jennysegal.co.uk) is an actuary, investment professional, non-executive director and motivational speaker. Her most recent book, her third, is Board Effectiveness & Culture
Fall from grace
Last year, the US saw its credit rating downgraded by one of the Big Three agencies. What can it do to get back its sure-thing status, asks Payal Saria?
Last August, Fitch Ratings made headlines by downgrading the credit rating of the US from AAA to AA+, a move not seen in more than a decade. While Moody’s and S&P held their ratings steady, they didn’t shy away from expressing concerns, highlighting the nation’s ballooning debt and political gridlock as potential threats to its fiscal health.
The US bond market – the world’s largest, at more than $51trn – felt the impact of this decision. The downgrade was a stark reflection of the country’s escalating debt, which now stands at more than $31trn, far exceeding the benchmarks for both AAA and AA ratings. Fitch pointed to the nation’s debt trajectory and political brinkmanship over the debt ceiling as key factors that were eroding confidence in its fiscal governance.
The downgrade should serve as a wake-up call, signalling the need for serious financial and political reforms to safeguard the American economy’s stability.
Other major contributing factors to the downgrade were the lack of a credible medium-term fiscal framework, a complex budgeting process to tackle the rising costs of programmes such as social security and
The rising political polarisation in the US has made it nearly impossible to pass legislation that redistributes money or power in any way
Medicare, and the government’s inability to reach compromises that would address long-term fiscal challenges, due to sharp political polarisation.
A high debt ratio usually indicates a doom and gloom cycle, where rising debt costs lead to economic downturns, reduced government spending in key areas, and banking sector instability, all of which feed back into higher debt levels and economic distress. When the debt ratio exceeds a certain threshold, it can trigger a rise in the risk premium. This leads to higher borrowing costs for the government, which can further exacerbate the debt situation.
The downgrade’s impact on the US economy was actually minimal, with many
experts maintaining that the economy is strong – the country’s unique structural advantages mitigate the typical consequences seen in other highly indebted nations.
Economists such as Lawrence H Summers, Mohamed El-Erian and Paul Krugman expressed confusion over the downgrade, labelling it “bizarre” and “strange”.
The US government’s ability to pay its debts is not in question, as it can print money and has a track record of always making good on its financial obligations. US Treasuries will likely remain one of the safest and most reliable investments globally, given the country’s economic strength and the dollar’s status as the world’s reserve currency.
Nevertheless, the US government must not downplay the seriousness of the downgrade, and needs to take the necessary steps to revive its AAA rating. The main thing to address is the high debt-to-GDP ratio, which could be tackled by cutting spending. This would stabilise and eventually reduce the ratio, easing the pressure on interest rates. The primary way to do so is by tackling the structural factors behind the high debt ratio.
First, an ageing population and rising healthcare costs place a significant burden on
the system. The government should streamline healthcare costs and reform social security by introducing means testing, raising retirement ages, increasing payroll tax, setting price caps on pharmaceuticals and reforming healthcare insurance.
Second, it should bring in more sustainable tax policies, for example by introducing significantly higher effective tax rates for the extremely wealthy and plugging tax loopholes, ensuring sufficient, consistent revenue streams.
Other steps could include implementing fiscal policies to further stimulate economic growth, such as investing in infrastructure, education and technology and making strategic tax policy adjustments. The Infrastructure and CHIPS Acts are good first steps towards that goal. Labour market reforms, deregulation and trade policy adjustments could enhance economic efficiency; and making the budget process more streamlined, transparent and accountable could help in managing the nation’s fiscal health more effectively.
All of these measures, however, would be significantly hindered by the rising political polarisation in the US, which has made it nearly impossible to pass legislation that redistributes money or power in any way. And the budget process itself needs to be reformed, as the two parties often use it as a political tool to get concessions from one another.
The downgrade by Fitch reflects significant concerns about US fiscal health and political governance, with substantial implications for the country’s economy and for investors. While Moody’s and S&P have held their ratings steady for now, the US government faces the challenge of implementing effective fiscal and economic strategies to restore and maintain its creditworthiness in the eyes of all rating agencies.
PAYAL SARIA, 27, is a finance analyst at Phoenix Group and hopes to go into investments
At the back People and society
COMMUNITY
New wave
Bermuda is burgeoning with business and actuaries –and a new society for the profession recently launched on the island
BY CIARA IZUCHUKWU, SENIOR CONSULTANT AT HUDSON STRUCTURED CAPITAL MANAGEMENT, BERMUDA
As vice-president and a founding member of the Actuaries of Bermuda society, it is incredibly gratifying to see our hard work come to life. Following a successful soft launch in 2023, we officially kicked off on 11 June with a celebratory event at the Royal Bermuda Yacht Club, generously sponsored by Milliman.
Actuaries of Bermuda is a new platform through which the territory’s actuarial professionals can network, collaborate and develop their expertise. It has four main goals: offering professional development, maintaining a comprehensive actuarial database, supporting student actuaries, and fostering a vibrant actuarial community through events and social gatherings. The logo features Bermuda’s national colours, blue and pink, and a boat as a nod to the island’s nautical heritage. The motto is ‘navigating risks, charting futures’.
A global risk hub
Actuaries are integral to Bermuda’s financial landscape, having helped shape its reputation as a global risk management and (re)insurance hub. Their contributions span many sectors, from guiding strategic financial decisions to ensuring regulatory compliance and economic stability. Bermuda’s reinsurance history spans more than seven decades. The inception of the American International company, now AIG, in 1947 marked the beginning of the island’s journey in this sector, focusing on non-life business. The following year, International Reinsurance became Bermuda’s pioneering reinsurance company. Over the past half-century, the territory has built a reputation as the foremost jurisdiction in the
establishment and regulation of captive insurers, earning it the title ‘the world’s risk capital’. Additionally, it is the preferred destination for insurance-linked securities transactions, commanding more than half the global alternative capital market share.
The territory’s property and casualty reinsurance industry also holds significant relevance, particularly in its partnership with the UK. Reinsurers based here supply nearly half (42%) of the capacity for Lloyd’s of London syndicates, contribute 13% to the aggregate global reinsurance premium, and represent 15 of the world’s top 50 reinsurers. With their comprehensive involvement –
We hope that the commitment to excellence, collaboration and community engagement will inspire actuaries across Bermuda, and beyond
including providing 40% of the UK brokerplaced property catastrophe reinsurance market – Bermuda’s reinsurers are essential in managing and safeguarding against risks around the world.
Life insurance is the dominant force within the island’s insurance industry, with more than $500bn in assets under management. In recent years, the sector has witnessed a surge in new entity registrations, indicating robust growth and a good market presence. Bermuda’s attainment of Solvency II equivalence underscores the strength and integrity of its regulatory framework for commercial insurers, validating the Bermuda
Monetary Authority as a reputable regulator. It makes it simple for European groups to (re)insure risks into the territory, eliminating punitive capital charges and collateral requirements, and enhancing Bermuda’s attractiveness as a premier jurisdiction for insurance operations.
Lasting impact
Actuaries of Bermuda is committed to offering a spectrum of educational opportunities and networking events, tailored to members’ diverse needs. Through workshops, seminars and social gatherings, it aims to facilitate knowledge exchange, skill enhancement and professional development. By fostering a culture of continuous learning and collaboration, it hopes to empower members to keep up with industry trends and best practice.
One priority is to inspire the next generation of homegrown actuaries. Through participation in career fairs, study and tutor support, and workplace shadow programmes, the desire is to ignite a passion for actuarial science among the Bermudian youth and cultivate a pipeline of future industry leaders. The society is also developing new ways to support future actuaries through innovative initiatives and strategic partnerships.
Actuaries of Bermuda is poised to make a lasting impact on the island’s actuarial landscape. The hope is that the commitment to excellence, collaboration and community engagement will inspire actuaries across Bermuda, and beyond. We are excited to embark on this journey and invite all actuarial professionals to join us as we chart a course toward a brighter future for the profession in Bermuda.
Use the QR code to follow the society on Linkedin
OBITUARY
Peter Bell
Peter Brittain Bell died on 12 May after a short illness, aged 100. An active Fellow since 1952 (when he won the Sir Joseph Burn Prize for examination excellence), he served on the Board of Examiners during the 1960s and as an Education Service tutor from 1987.
Born in Barnstaple, Peter boarded at West Buckland School, winning its highest accolade for all-round achievement in his final year. In 1942 he was conscripted into a Royal Artillery field gun regiment (accounting for his deafness in his later years), and in 1945 was among the Allied forces besieging German troops in Dunkirk.
In 1947 Peter joined Legal & General at its Fleet Street head office, moving to its investment department a year later. In 1969 he was appointed assistant general manager in charge of Stock Exchange investments. He remained with the company until retiring in 1983, aged 60.
Later that year, Peter was ordered to Bombay (now Mumbai) to help with Indian independence preparations. Lighter moments included an officers’ bullock cart race, during which his steed took fright and overtook the opposition, upsetting the judges’ table. He later wrote drily: “I won by several lengths but was disqualified, by some pedant, on a technicality.”
On retiring in 2021, actuary John P Wilson joined Reigate School of Art on a part-time heraldry, illumination and calligraphy course. Told he needed to choose a sample coat of arms to paint, he turned to the IFoA’s. IFoA librarian David Raymont provided him with a heraldic description of the current formal coat of arms. Pictured is the result of John’s artistic endeavour.
Outside his day job, in 1974 Peter was appointed chair of the British Insurance Association’s Investment Protection Committee, a post he held for two years. This also involved representing the insurance industry on the Panel on Takeovers and Mergers and the Institutional Shareholders’ Committee. From 1977 to 1979 he served on the City Capital Markets Committee.
As well as being a director of Legal & General’s Investment Management Company, Peter also held directorships with, among others, TSB Trust Company, Lovat Enterprise Fund, London Indemnity and General Insurance Company, and The Hospital Savings Association.
Peter and his wife Gwyneth raised their family in Hertfordshire before retiring to
DEATHS
It is with great regret that we announce the death of the following members. We offer our condolences to their families, friends and colleagues.
Peter John Clarke, a Fellow who joined in 1952, died 7 May, aged 95 Nils-Anders Ainslie, a Fellow who joined in 2008, died in May, aged 46 Peter Milburn-Pyle, a Fellow who joined in 1959, died 3 September 2023, aged 90
Call for your news… If you have any items for this page, email social@theactuary.com
Wiltshire, where Peter continued to live independently following Gwyneth’s death in 2015.
A lover of language, poetry, family, dogs and nature, Peter is remembered by his three children, his granddaughter, and his wider family and friends as a generous, clever, quietly witty, unfailingly decent man.
SOCIETY
Gosset
gossip
A group of actuaries in Ireland have formed an actuarial dining club, ‘Gossets t Club’ – named after 19th century statistics pioneer William Sealy Gosset (pictured), who discovered the t-distribution (and was head brewer at Guinness). Membership is open to qualified actuaries who are or who have been an Honorary Fellow, a Fellow or an Associate Member of the Society of Actuaries in Ireland. Email gossetstclub @gmail.com
WCA
Gordon Sharp to take reins as Master
On 11 July, Worshipful Company of Actuaries (WCA) senior warden Gordon Sharp (above) will be installed as the 45th Master of the WCA, taking over from Rodney Jagelman. The ceremony will take place at Merchant Taylors’ Hall, London, followed by a drinks reception and the Company’s Summer Livery Dinner. Gordon is a keen archer –use the QR code to read our March interview with him
At the back Puzzles
1923
Member puzzle 40
Courtesy of Prime Across
40 ARE YOU A MATHS MAESTRO OR LOGIC LOVER?
If you have a mind for maths, logical reasoning, cryptic clues and other conundrums, send your challenges to us and we will publish the most difficult here.
1 DC building using other side of Uber terminal for 1923 event (5,5,5)
9 Some water perhaps surrounding European ship once (7)
10 Boris’s lark, horribly bad (7)
11 A quiet break outside Luxembourg gets positive response (8)
13 Selection of food in batter (6)
16 Dumb team wisely rebuilt football ground (7,7)
Down
19 Use hoofs to gallop around green, green seats (5,2,7)
23 Famous people mostly choose to return empty boxes (6)
24 Not down to participate in the French sport (8)
27 Jack got to run, adjusting gait (3,4)
29 Games area needing six balls for rally (7)
31 Winners of 1a were not bland or so unusual (6,9)
1 Tent’s rug put on middle of swamp (6)
2 Rough idea, initially 50:50 (3)
3 Female sheep and black ram, perhaps, we raised (3,4)
4 Grunts love unopened golf course (5)
5 Reportedly search for believer (4)
6 Recipe for short Disney movie (7)
7 One cast in Matrix role (3)
Health kick Mensa puzzle 872
On their healthy eating plans, Meg lost 5 pounds over 7 months and Jed lost 5 pounds over 4 months. Kim lost 9 pounds over 13 months and Eve lost 22 pounds over 5 months.
How much weight did Joy lose and over what time period?
8 Description of ISA in two sentences (8)
12 Queer fiddling in P&L for Phantom Menace? (7)
14 Supporters of fast food surrounding North Dakota (7)
15 City in Czechoslovakia (4)
17 Alternative FTSE investments (4)
18 Idiot hit the post! (5,3)
20 Ban e.g. Rambo broadcast (7)
21 Mystery vehicle reversed in distance (7)
22 Card game in Edinburgh club (6)
25 Ridiculous brand? (5)
26 Son rejected weak casserole (4)
28 Rolling pin set (3)
30 Almost look for challenge (3)
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