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APRIL 2014

Interview: Roelof Botha

The magazine of the actuarial profession

An actuary and venture capitalist

Regulation The emergence and signiďŹ cance of C-ROSS in China

Pensions Lessons to be learnt from US public sector plans

Modelling The Actuary

A smoother ride when changing platforms

How to gain competitive advantage in the digital age

THE April 2014


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THE ACTUARY • May 2013

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APRIL 2014

Contents “Insurers – and their actuarial advisers – have work to do to embed code halos into the way they do business”

22 30




10 IFoA news

18 Interview: Roelof Botha

34 Puzzles

14 People/society news 16 General insurance news 17 Industry news

Roelof Botha, an actuary and venture capitalist, talks to Marjorie Ngwenya about driving innovation across the globe

22 Social media: The age of me Ben Pring believes that code halos are about to revolutionise insurance


Editorial Kelvin Chamunorwa looks at the impact of advancing technology and how this will transform the role of actuaries


Letters Readers’ views on regulation, risk and mathematical observations


President’s comment David Hare praises the many achievements of volunteers and the executive


Soapbox Shyam Mehta takes an unconventional stance on the effects of politics on the economy

MORE CONTENT ONLINE Additional content can be found at


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25 ERM: Proxy models Brian Robinson and Martin Elliott look at some of the practical issues associated with proxy techniques

28 GI: A moving platform Andrew Cox and Cameron Heath show how to have a smooth ride through changing your modelling platform

30 Pensions: Dire states Charles Cowling asks what lessons the UK can learn from problems in the US public sector

32 Regulation: Winds of change Dr Yulong Zhao talked to Haijing Wang and Wen Li on the progress and significance of China’s Risk Oriented Solvency System (C-ROSS)

Try the latest cryptic crossword and Mensa puzzles for a chance to win Amazon vouchers

37 Student An Easter renewal of resolutions is the answer to those impending examinations, advises Jessica Elkin

38 Actuary of the future Joseph Mudenge of Rwanda Social Security Board

38 Appointments and moves

ONLINE Roelof Botha In the unabridged version, Marjorie Ngwenya talks at length with the leading innovator

Obituary: Stephen Yeo A tribute to an actuary with a varied and unusual career. By Helen James

WRITER OF THE MONTH Ben Pring wins a £50 book token for his feature on code halos, courtesy of SIAS

April 2014 • THE ACTUARY 3

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© 2014 Moody’s Analytics, Inc. and/or its licensors and affiliates. All rights reserved.


Automate your Solvency II Production Framework B&H Proxy Generator Learn more at


THE ACTUARY • May 2013

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Essential insight serving global financial markets

25/03/2014 11:12

Opinion Editorial

Publisher Redactive Media Group 17-18 Britton Street, London EC1M 5TP +44 (0)20 7880 6200 Editor, Redactive finance division Mike Thatcher Publishing director Joanna Marsh Sub-editors Kathryn Manning Caroline Taylor News editor Vivienne Russell +44 (0)20 7324 2788 News reporter Judith Ugwumadu +44 (0)20 7324 2794 Editorial assistant Tania Forrester Sales manager Chris Dooley +44 (0)20 7880 8545 Divisional director of digital and recruitment sales John Seaman +44 (0)20 7880 8541 Senior designer Gene Cornelius Picture editor Akin Falope Production executive Rachel Young +44 (0)20 7880 6209 Internet The Actuary: Staple Inn Actuarial Society: Institute and Faculty of Actuaries: Managing editor Sharon Maguire +44 (0)20 7880 6246 Editor Kelvin Chamunorwa Features editors Jeremy Lee, pensions, investment, ERM, banking Richard Purcell Richard Schneider, life, Solvency II, mortality/longevity, modelling and software Sonal Shah, GI, reinsurance, environment, careers (UK) Helen Lau, GI, reinsurance, environment, careers Contact: People/society news editor Yvonne Wan Student page editor Jessica Elkin Arts page Profession news editor Catherine Murray +44 (0)20 7632 2198 SIAS representative Titas Bakanauskas Editorial advisory panel Peter Tompkins (chairman), David Campbell, Matthew Edwards, Martin Lunnon, Sherdin Omar, Richard Purcell, Nick Silver, Andrew Smith

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Circulation 24,028 (July 2012 to June 2013)

Subscriptions For subscriptions from outside the actuarial profession, UK: £90 per annum/£8.50 per copy. Europe: £110 per annum, rest of the world: £130 per annum. Contact: Catherine Murray, The Institute and Faculty of Actuaries, Staple Inn, High Holborn, London WC1V 7QT. T +44 (0)20 7632 2100 E Students on actuarial science courses may join and they will receive The Actuary as part of their membership. Apply to: Membership Department, The Institute and Faculty of Actuaries, Maclaurin House, 18 Dublin Street, Edinburgh EH1 3PP. T +44 (0)131 240 1325 E Changes of address should inform the membership department as above. For delivery queries, contact: Rachel Young E Published by the Staple Inn Actuarial Society The editor, The Institute and Faculty of Actuaries and Staple Inn Actuarial Society 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, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the copyright owners. While every effort is made to ensure the accuracy of the content, the publisher and its contributors accept no responsibility for any material contained herein. Important information for contributors to The Actuary By submitting content for publication you confirm that: (a) You (and/or other named contributors) are the sole author(s) of the content submitted; (b) The content you submit is original and has not previously been published (unless you specifically advise us to the contrary); (c) You haven’t previously licensed the use of the content you submit; (d) So far as you are aware, the content submitted will not infringe any third-party rights, be defamatory or in any way illegal. © SIAS April 2014 All rights reserved ISSN 0960-457X

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Trending now Kelvin Chamunorwa looks at the impact of advancing technology and how this will transform the role of actuaries Last month there was wide media coverage of the Oscars – both the film awards in California and the trial of the athlete Pistorius in South Africa. Live updates were available at your fingertips. Apparently the host at the awards arranged an ‘impromptu’ selfie with a dozen film stars during the live event. The photo was shared on Twitter over two million times by the end of the ceremony, causing it to crash briefly. It made headlines in the papers, but hours later. Social media generates the news content now – it’s no wonder business is embracing it. In this month’s issue we include an engaging interview with Roelof Botha, an actuary and venture capitalist, whose career journey led him from South Africa to California. Botha works at the forefront of innovation in Silicon Valley and demonstrates how his actuarial training has been useful to technology companies that impact the lives of millions globally (pg 18). The advancement of technology affects actuaries’ work directly too. Telematics data is already being used to assess risk for motor insurance. In our lead feature, Ben Pring suggests that ‘code halos’ – the digital trail left by consumers online, including social media – could be used more widely in the insurance industry for more sophisticated pricing of risk (pg 22). For pension schemes, real-time online valuation tools allow more nimble risk management. In the UK, the national statistician has recognised technology trends and last month added video ondemand subscriptions such as Netflix to the basket of goods used to measure inflation. With an increasing amount of automation and vast amounts of data readily available, the key question is what to do with it. Actuaries’ expertise will be crucial for informed business decisions. John Reeve wrote in as he believes excessive regulation for actuaries could ultimately drive clients away from the profession (pg 6), and Jessica Elkin finds a simple solution for any actuarial students panicking about the exams this month (pg 37). What’s your view? Send me an email. Or a tweet.

“With increasing automation and data, actuaries’ expertise will be crucial for informed business decisions”

Kelvin Chamunorwa Editor

FOLLOW US ON TWITTER @TheActuaryMag @ActuaryEditor


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Opinion Letters to the editor

Costly risk

Have your say online

More comments are posted online about news stories published on

Regulatory burden I would like to thank Simon Carne for his article Is Regulation Still Good for us? (The Actuary, March 2014), putting more eloquently and succinctly than I could ever have done what I have feared for some time. Carne has cleverly sidestepped any accusations of ‘self-interest’ to highlight what should be a real concern to the profession. It is interesting that the article appears in the same issue as Nick Hewer’s excellent interview and other items considering how the profession can improve its public image and influence. Generally, I think that regulation is good and much of the new regime is excellent. However, through over-regulation and what I fear is a knee-jerk reaction to press criticism (mainly in the pensions industry) we are in danger of regulating ourselves out of a job. As someone who now works on the fringes of actuarial work I see this on a day-to-day basis. We are now very close to a situation whereby advice that could be given by me or a colleague, who’s not an actuary, is more easily provided by my colleague since he does not have to comply with the profession’s regulations. Not only does this make the advice cheaper (there is less compliance work to do) but it is also, paradoxically, easier for the client to understand (fewer caveats and warnings) and quicker for our employer to supply. The client may lose some actuarial insight but they don’t know what they are missing. Carne points out the difference between the approach being taken for actuaries and other professions and this is important to bear in mind. In many areas now we face competition from other professionals. One only needs to look at the area of pension scheme funding to see how the influence of accountants is driving behaviours more than actuarial advice. If we continue to constrain actuaries in this way then we will inevitably fall further behind in promoting our services through traditional and wider areas. The fifth principle underlying the IFoA’s regulatory strategy is: “Targeted: regulatory action should be focused on identified problem(s), such as to minimise side effects.” I fear that we are regulating to address a problem that does not exist. I see no evidence of a lack of trust in the profession and Nick Hewer’s interview supports this view. Rather than “minimise side effects” I fear that, if it continues to increase, regulation will have its own side effect of further sidelining the profession. We all need to take some responsibility to ensure that this does not happen. John Reeve 12 March

MORE LETTERS ONLINE More letters are available online at


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I wanted to pick up on a couple of themes highlighted by Peter Shellswell’s letter (The Actuary, March 2014). An economic valuation is the best way for companies to understand the value and sustainability of promised benefits – you cannot reduce this cost by increasing risk. The substantial deficits of US public sector pensions (and in particular the plight of bankrupt Detroit) shows the impact of assuming that optimistic future investment returns will come to the rescue of poorly funded schemes, albeit that the private sector commercial considerations are compounded by legal restrictions, unions and political denial. The debt burden acquired before the credit bust will cast a long shadow over the pace of recovery and the Bank of England has commented that future equilibrium interest rates are likely to be lower than in the past as elements of unconventional monetary policy perhaps become part of the ‘new normal’. Future growth is also likely to be limited by the lack of political will to carry out liberalising structural reforms and the ageing of the population in developed economies. For those that believe in Larry Summers’ ‘secular stagnation’, it would be wise not to expect too much from future stock market returns in the developed world. Neil Speight 11 March

Further maths Actuaries are known to be mathematicians – professionals who apply mathematical skills to solve problems in business, finance and insurance. So how much of the actuarial curriculum contains mathematical content? If you look at the exams after the Core Technical (CT) series, they are of an essay-type, requiring lengthy written responses to practical situations. It is observable that many great mathematicians who speed past the CT series struggle with the Specialist Technical and Specialist Applications exams, never qualifying though possessing superior mathematical ability. It’s time the actuarial curriculum was revised to be more mathematically oriented with mathematical responses required to given situations so that actuaries are truly mathematicians, and capable mathematicians qualify as actuaries. Rizwan Majeed Khan 21 February

The editor welcomes readers’ letters but reserves the right to edit them for publication. Please email The deadline for receiving letters for the May issue is 19 May 2014.


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Opinion President’s comment

David Hare is the president of the Institute and Faculty of Actuaries

David Hare

Credit where credit’s due “What you measure is what you get”, or so they say. I think the same goes for what you recognise and celebrate, particularly in a work context. There’s nothing like appreciation and praise to bring the best out in people – whether they be colleagues, family, or even yourself! I have seen a number of achievements by volunteers and the executive during my presidency that deserve recognition. In February, I had the pleasure of chairing the inaugural IFoA Awards Dinner. It was a lovely event at which family and friends, and a good number of Council members and the IFoA senior executives, came together with a large number of prize winners – including best student performance in various exam papers; best papers at certain events; and a Finlaison medal-winner – to celebrate their achievements. I do hope the next immediatepast president gets invited to the next one! In March, Martin Potter, the IFoA Scottish Board Leader, and Nick O’Hara, of the IFoA Public Affairs team, took the lead in organising a debate in Edinburgh on the impact of the Scottish referendum on financial services. By the time you read this, the event will have taken place. Whatever the outcome of the referendum it seems there will be an impact on Scottish financial services. Martin and Nick secured an illustrious panel of speakers, which included Bill Jamieson of The Scotsman, Liam McArthur MSP and Greg McClymont, Shadow Pensions Minister. Debates such as this are lively occasions, well-attended, good for raising our public profile and demonstrate how actuaries can provide practical answers for the challenges and opportunities ahead. I’m keen to congratulate Martin and Nick and all the others who helped make this such a success. A great deal happens behind the scenes, thanks to the hard work of volunteers and the executive, to make our education processes run smoothly and effectively. In 2013 we saw a record 26,864 exam entries - including more members than ever before studying for the CERA qualification. In order to improve efficiency and speed up the evaluation process, the availability of online assessments was increased, a new membership database was initiated and an on-screen marking project for three subjects was piloted. Later this year, the new Certified

David Hare praises the achievements of volunteers and the executive and says recognition often goes a long way Actuarial Analyst qualification exams will be launched and an international student forum developed that will bring together student representatives from all corners of the globe. Operational failings in these areas could have significant reputational damage for the IFoA – hence the importance of the high quality work that is done on our behalf. Member support has also been busy updating and improving IFoA services. In the past year you may have noticed the IFoA’s new brand roll out across the organisation, reinforcing our identity and values to the wider world. The new Resource and Environment Board was launched, and the development of risk management was supported further to encourage members to explore non-traditional areas of work. New careers material and a volunteer induction pack were introduced. End of year reviews for the Practice Boards were brought in, enabling them to publicise their achievements to the wider membership. The accessibility of volunteering roles was also improved and as a result there have been more opportunities, and more people stepping forward to join the pool of talented volunteers. Improved communications played a key role in this, and

over the next year there are plans to build on the success of the digital strategy with more online networks and tools for exchanging ideas and creative thoughts. None of this could have been achieved without the work of our marvellous volunteers. I recently spoke about what the future holds for actuaries at the Global Conference of Actuaries (GCA) in Mumbai, organised by the Institute of Actuaries of India. I was fortunate enough to have the honour of presenting prizes to young school students who had excelled in mathematics and statistics. These children hailed from the slums of Mumbai but their mathematical talents had been spotted at an early age, with the help of the Institute of Actuaries of India and they were given extra tuition. Thanks to this program, they now have opportunities far beyond the reach of their early expectations. It was really memorable to be given a chance to speak to them, see their enthusiasm, and perhaps encourage them to make the most of the opportunity they had been given. This is the thought that I would like to leave you with – that we all have the ability to achieve and that a little recognition can work wonders in motivating us to get there. a

“A great deal happens behind the scenes, thanks to the hard work of volunteers and the executive”

April 2014 • The actuary 7

Opinion Soapbox


Boom and bust – just politics? The business cycle is obviously just a political cycle. In a free market economy, there is no reason whatsoever for crises to happen every six or seven years, the length of a typical 1.5 term government. They cause a mess and then leave it for the next government to sort out – five years of boom and two years of bust; bust at the beginning of a term, boom at the end so as to get re-elected. No economist has noticed the connection, despite thousands of analyses of the causes of boom and bust.

Land of the free In the USA, a free market with limited government prevailed until 1838, and in this period there was not much unemployment. This is illustrated in the diagram below. There was one crisis year, 1820, in anticipation of James Monroe being elected fifth US president. After that, the economy picked up quickly as it does even today. From 1838 there were booms and busts, tragedy and so forth, as with any essentially ‘socialist’ (as opposed to pure free market) society. Under socialism, unemployment rates have more than doubled, and there are long 10-year spells of truly appalling tragedy for large proportions of the population. The reason for the doubling of unemployment rates in the USA compared with its free economy in the past is youth unemployment – youngsters churned out of socialist schools with no useful skills.

Monarchs and wars Consider the UK. Prior to 1900, there was a fledgling market economy. A monarch – another socialist institution of Western civilisation (having power in state hands is the best definition of socialism) – would decide they wanted to build up an army to fight some foreign war, and needed funds to do so. They United States - Estimated unemployment rate (1800 -1890) 25% 20% 15% 10% 5% 0% 1800




Decade averages


Crisis years






What really causes business cycles? Shyam Mehta takes an unconventional view of politics’ effect on the economy borrowed the money and thereby inflated the money supply. He borrowed from rich people – socialists called knights and so forth who had state control over their own fiefdoms – who were just hoarding the money or gold otherwise. So, boom for typically 10 years. He spent the money and then did not have any to give back, and so beheaded his benefactors or some such thing. The money supply crashed. The army he recruited lost their jobs and were unemployed for typically two years, did not spend money anymore, and so the local economy went into deep recession. But, it was not as deep as economists would have you believe, because most people were tilling the land, for example, and did not participate much in the market economy. The causes of the boom and bust have not changed. Some state authority (king or politician) decides that they want to spend money, either on wars or to buy votes from electors so that they will be re-elected. Spending means that people who are otherwise idle or not fully occupied enter the labour force, and there is for this reason also a boom in spending. Higher money supply translates into higher inflation rates one month later. Real interest rates decline and bond prices decline too. This leads to a flight of money out of the country. The money supply crashes on

this account, and often the socialists lose their jobs because people do not like unemployment and inflation. So a new government comes in with an austerity package for two years in order to restore confidence, and then starts reflating again to buy votes or fight a war.

Bleak future Up to recently, things have been good under socialism in the UK and USA, but unemployment rates are set to skyrocket in both socialist regimes. If you think the 1930s were bad, the indefinite period from the latter part of 2014 will be worse. Other economists have posited a wide variety of causes of the business cycle. These include changes in interest rates, changes in house prices, changes in consumer and business confidence, a multiplier effect, an accelerator effect, a cycle in the purchases of luxury goods, a credit crunch effect, volatile stock markets, fluctuations in tax rates and spending, and exchange rates, to name a few, but these are unsatisfactory explanations. More focus should be given to understanding the business cycle for what it is – pure politics.

“A new government comes in with an austerity package for two years and then starts reflating again to buy votes”

Shyam Mehta is a former investment banker and insurance risk practitioner



THE ACTUARY • April 2014

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Liquidity risk Michael Ashcroft, KPMG and Graeme Wilson, LBG Staple Inn Hall High Holborn London WC1V 7QJ 5.30pm start THURSDAY 22 MAY

Treasure hunt Location (TBC) 6.30pm start


Traditionally, liquidity risk has not required close management by life offices. This is changing, with regulators giving the issue greater attention, and historically low interest rates and commoditisation of liquidity driving companies to less liquid asset strategies. We will discuss some of the fundamental principles of good liquidity risk management and practical challenges faced. Refreshments will be served from 5.30pm and the talk will start promptly at 6.00pm. There is no need to register in advance for this meeting. Non-members are also welcome. SOCIAL EVENT

This year’s mystery event will be a fun packed and energetic treasure hunt to be held in a well-known London location for teams of up to five. Ticket prices SIAS member: £12 Non-SIAS member: £16 Details and tickets will be available from 28 April.


Tue 6 May Thu 22 May Tue 3 Jun Thu 19 Jun


Programme talk (above) Treasure hunt (above) Programme talk Programme talk

Fri 25 Jul

Boat party

Tue 5 Aug

Programme talk Sports tournament

Tue 2 Sep

Programme talk

Mon 13 Oct

Welcome drinks

Tue 21 Oct Tu

Jubilee lecture

Thu 23 Oct Th

Pool tournament

Fri 21 Nov F

Calling all speakers

Bowling night

Thu 3 Jul

Sat 30 Aug


Annual dinner

Tue 25 Nov Tu

Programme talk

Tue 16 Dec Tu

Programme talk

The Staple Inn Actuarial Society (SIAS) holds a series of talks throughout the year on a range of topics of interest and relevance to the actuarial community. Talks can cover traditional areas such as pensions, life assurance, general insurance, healthcare or investment. They can also cover more broad subjects, non-technical subjects and ideas from outside the profession. This provides an opportunity for members to share ideas and discuss the ‘hot topics’ of the day. We particularly encourage younger members to consider writing a paper and presenting their ideas. If you are interested in speaking at an event in 2014, please email, with a brief summary of the subject on which you wish to speak.

Good luck from SIAS to everyone taking exams! MORE EVENTS ONLINE For details of events, visit

SIAS IS ON TWITTER! Follow us on @SIAScommittee for latest news on meetings, socials and more!

SIAS IS ON FACEBOOK! Check out the SIAS Facebook page for photos from the latest social events

April 2014 • THE ACTUARY 9

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Upfront Opinion CEO’s comment Derek Cribb outlines the benefits that members will see as the IFoA’s new website is phased in

Digital developments Derek Cribb is the chief executive of the Institute and Faculty of Actuaries

In last month’s column, I wrote about some of the improvements that you would see from the IFoA this year. This month, I want to focus on one that I believe will make a significant difference, which our members have championed – the IFoA’s new website. The plan is for phase one to go live in the summer. As it is being introduced in stages, it will not be all-singing all-dancing from day one, but it will be a big step forward from what we have now. Users of the website will notice an improved structure, with more intuitive grouping of content, meaning that it will be quicker and easier to find what you’re looking for. Accessibility will be improved through a responsive design that will adapt to tablet and mobile devices as well as desktops. More specifically, this will include a clearer home page with dedicated areas for IFoA events, news and member notices and the removal of the extra click currently required to download PDF documents. In addition, later in the year we will be developing a Chinese micro-site to help continue raising the profession’s profile in the region and we will also be working to significantly improve the main website’s search engine. The website is just one aspect of the IFoA’s digital strategy, which will ensure that we develop a full range of services to meet our members’ varied needs. This will include a new virtual learning environment, launching this autumn, which will enable our members to access on-demand online learning via the website and make it easier to update their continuing professional development (CPD) record online. The digital strategy and ongoing development of the website are based on user research, and overseen by a joint executive and volunteer project board. The website will be subject to user testing before launch – we want to get this right – and your feedback will play a crucial role. Overall, we want to make it easier for our members to collaborate and share information, as a community, and the changes to the website over the coming year and beyond will be the catalyst that makes this a reality. If you have any questions or comments, please email Stephen Little, head of digital services at



IFoA refutes Telegraph’s NHS data story On 24 February, the lead headline on the front page of the Daily Telegraph was ‘Hospital records of all NHS patients sold to insurers’ ( The original article referenced the purchase of NHS data by SIAS as a “major insurance organisation” for commercial purposes. It referred to research that was actually undertaken by the Critical Illness Definitions and Geographical Var Variations Working Par Party, which was pre presented to SIAS me members in De December 2013. The story was foc focused on the ca health in information system an and concerns re regarding access to N NHS data and how that data cou could be used, rather than on the IFoA or SIAS. However, anyone who read the original news article will be aware that it contained a number of factual inaccuracies regarding the status and objectives of the research, SIAS and the IFoA. Moreover, these inaccuracies were picked up and replicated by other media outlets. The IFoA published a rebuttal (, issued to all media, and requested corrections to factual inaccuracies for online versions of news stories. A number of members contacted the IFoA, concerned by the inaccurate representation of the IFoA and SIAS in the media. We understand that these concerns are shared by many members. We have taken this matter very seriously and will continue to do so. We continue to monitor media coverage of this story and to request corrections if they are required. We have also contacted MPs who have expressed an interest in, to provide them with the facts about the IFoA and the research that we undertake.

THE ACTUARY • April 2014

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25/03/2014 10:15

M’s the word at awards dinner The former head of MI5, Baroness Eliza Manningham-Buller, joined the cream of actuarial talent at our awards dinner in February. Lady Manningham-Buller shared some of her experiences of leading MI5 and responded to questions from guests, although she couldn’t be prevailed upon to reveal her favourite James Bond. The dinner celebrates success and excellence in academic achievement and leading research, with prizes, awards and medals overseen by the awards committee. Chair of the committee Peter Tompkins believes that the awards are an indication of the highest professional and academic achievement: “We award medals to distinguished actuaries. This year, two actuaries were awarded our Finlaison medals: Brian Wilson, for his work on pensions and longevity, and David Hart, for his work in general insurance, in particular for the annual GIRO conference. “The top prizes in examination performance on qualifying, the Sir Joseph Burn Prize and the Charles M Stern Award, are marks of excellence in the profession,” he adds. “This year, the Burn Prize was awarded to Duncan Morris and James Wilson. The Stern award (for overseas students) will be awarded to Annemii Wolmarans and Jinn Jiau Spenser Chen in the coming months.” The IFoA has a number of prizes available to award deserving actuaries. Many of these are

Considering social care This month, the Pensions and Long Term Care Working Party will be publishing research into the application and likely effect of the care cap. The research considers the context in which the care cap is being introduced in England, the effect that it could have and ways in which people could be encouraged to save for possible care needs in retirement. Data suggests that one in three women and one in five men will need to go into care at some point from age 65 and that the expected lifetime costs of care (at age 65) are estimated to be 75% higher for females than males. This clearly represents a considerable social, cultural and financial challenge, which is why it is so important for the government and the financial services industry to work together to meet that challenge. The research offers new insights, considers products that could help people to finance long-term care and how best to encourage that


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thanks to the generosity of past and present members. For example, the Sir Edward Johnston prize is a new award, offering prizes to students from five top universities in the Far East and is available owing to the generosity of Christine Ottewill, widow of former UK Government Actuary Sir Edward Johnston, who donated a fund that will be used to support these prizes.

Other awards are similarly the result of the generosity of members and the broader actuarial community. These include prizes from the Worshipful Company of Actuaries, SIAS, Towers Watson and the International Underwriting Association supporting top examination results. The Awards Committee also rewards the outstanding work of actuaries from other professional bodies and leading non-actuaries by putting forward recommendations for members to elect them to join as Honorary Fellows of the IFoA. This year, the committee has recommended six outstanding individuals: Professor Carol Jagger, Professor Karel Van Hulle, Sir Philip Mawer, Professor Wai Sum Chan, Professor Hailiang Yang and Dr Peter England. Tompkins hopes eligible members will vote when they receive their electronic voting forms shortly. “When our committee and Council consider the Honorary Fellowship, our standards are very high. We believe we have put forward six truly deserving candidates and we hope that they have members’ full support. “I also hope that members may themselves put others forward for consideration by our awards committee and help us to reward excellence in our global professional community. We really do like to hear from members at large.”

saving. Members will have an opportunity to hear from authors of the research at an event in London later this month. For more details, please go to the events page at

Are you being informed? Providing members with opportunities for volunteering is part of our strategy. In 2012, the Management Board took a decision that all volunteer opportunities should be advertised on the ‘Volunteer Vacancies’ section of our website. Take the opportunity to sign up for the RSS feed and receive automatic updates as new opportunities arise. This will allow you to watch out for something which matches your skills and experience, or for a topic or activity that might have strategic relevance for you. For many members, volunteering represents an opportunity to give something back to the profession, for others it is a chance to raise their profile in an area of expertise; and for yet others

it is a chance to network and to contribute to our research and thought leadership. Alastair Clarkson, chairman of the Life Board, shares his experience of volunteering and the benefits he feels he and his colleagues have acquired as a result in a short film clip, which you can view on our website. To find out more, go to or email

April 2014 • THE ACTUARY 11

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Adjudication Panel hearing At a hearing of the IFoA’s Adjudication Panel on 11 December 2013, the respondent, Mr Colin Parnell FIA, faced allegations of misconduct relating to his acceptance of an appointment as actuary to a funeral plan trust without the requisite experience and to the manner in which he conducted an interim valuation of the trust. The panel determined that the respondent’s failures amounted to a prima facie case of misconduct in respect of three of the allegations against the respondent. Accordingly, the panel invited him to accept that there had been misconduct and the following sanctions: ● a reprimand. The allegations where the panel found a prima facie case of misconduct related to the respondent’s failure to have regard to the trust deed and errors made when conducting an interim valuation. A further four allegations, including the allegation of failure to have the requisite experience, were dismissed by the panel. A copy of the panel’s full determination, including the reasons for their decision, can be found on the IFoA’s website at

Joker in the pack Donald Macleod, a member of the IFoA Council and of the Scottish Board, has broken the Guinness world record for the most jokes told in an hour. Macleod, who is head actuary at Scottish Friendly, told 580 gags to beat the 549 record set by Australian comic Anthony Lehmann in 2005. He said his favourite joke was: “Where’s the best place in South Africa to get a Batman outfit? Cape Town.” The proceeds from the event – along with the profits from the joke books that Macleod has written – will be going to four charities.


Meet the team: general counsel The IFoA is an independent, royal chartered, not-for-profit, professional body. To assure public confidence in the profession, and to benefit society as a whole, we have a regulatory responsibility to uphold professional standards, in the public interest. We aim to discharge that responsibility by working in partnership with our members across the globe. At an executive level, the IFoA regulatory function is served by the General Counsel Directorate, headed by Ben Kemp (above), and supports, in particular, the work of the Regulation and Disciplinary Boards. The directorate is three- pronged: regulation, discipline and corporate legal affairs. These three areas work closely together to serve the IFoA and its members. You should receive our regulatory newsletter, which highlights areas of importance and interest. We encourage you to read these newsletters and to get to know the regulatory team: Christine McConnell, Fiona Goddard, Emma Gilpin, Stephanie Farrell, Shaun Moran, Mairi Macintyre, Janette Deans, Karen Cross and Helen Ireland. Any regulatory intervention should be proportionate, accountable, consistent and transparent. The regulatory team supports the work of the Regulation Board on professional standards and guidance, and works with the Financial Reporting Council, the IFoA’s regulatory oversight body, with the aim of ensuring a coherent integrated and holistic approach to the overall regulatory framework. Upholding professional standards in a fast-

changing environment requires us to be alert to issues as they arise, and to adapt our approach appropriately. This year, the directorate is working closely with firms that employ actuaries, with the introduction of a new Quality Assurance Scheme for organisations. Look out for more details about this significant new initiative soon. The disciplinary investigations team – Michael Scott, Sarah Borthwick, Fiona Burrough and Catherine Mouat – investigate allegations of professional misconduct made against members. Mark Walters, as secretary to the Judicial Panels, with assistance from Helen Ireland, provides support to the decisionmaking process – undertaken by independent tribunal panels – in accordance with the IFoA’s disciplinary scheme. As befits a modern profession, the IFoA aims to discharge its operational functions with efficiency and transparency, and to secure the best value, commensurate with its objectives, for its members. The corporate legal affairs team – Ilona Turnbull and Kimberley Russell – provides legal advice on contractual and corporate matters, ensuring that the assets and good name of the IFoA are protected, on behalf of its membership. Details of the General Counsel Directorate, and of the Regulation and Disciplinary Boards which it supports, can be found on the regulation section of our website. We encourage members to regularly visit the website for details of existing requirements and new developments:

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EVENTS AND CONFERENCES CILA 2014 1 May London 16.30 to 19.00 For more information, visit:

Current Issues in Pensions seminars 10 April Edinburgh For more information, visit:

Health and Care Conference 2014 Bookings now open 21-23 May Radisson Blu Edwardian Heathrow Hotel The Health and Care Conference 2014 offers a wide-ranging programme designed to cover all

of the areas required by insurance industry professionals. Owing to its size and scope, the conference has additional focus on areas that drive the development of our key products, such as product design, pricing, underwriting/claims and distribution. You can expect plenaries from: ● Norman Lamb MP, minister of state for care and support; ● Jules Constantinou, Gen Re’s regional manager for the UK and Ireland; ● David Smith, economics editor of the Sunday Times; ● Phil Smalley, senior vice-president and chief medical officer EMEA/Asia for RGA International Corporation. There will also be an after-dinner talk from the BBC’s business editor, Robert Peston. For further information and to book your place, visit

Risk and Investment Conference 2014 1-3 June 2014 Glasgow Hilton, Glasgow The Risk and Investment Conference is the premier conference for actuaries with an interest in risk and investment management. This year the conference will be taking place on 1-3 June at the Hilton Hotel in Glasgow, host city of the Commonwealth Games. The conference, which now attracts over 200 actuaries from the risk management and finance and investment communities, aims to bring together the most up-to-date thinking and relevant speakers over three days. The theme of this year’s conference is ‘the new normal’ and plenary speakers will include Richard Werner, University of Southampton, and Nick Leeson, former trader at Barings Bank. Register for the conference and view the programme for the event on the conference website at

The Pensions Conference is the premier event for pensions actuaries or all those who work in, or have an interest in, the pensions sector. This year’s event will see leading experts both from within and outside of the pensions industry come together to share cutting edge ideas, encourage debate and deepen delegates’

Pensions Conference 2014 18-20 June Radisson Blu Edwardian Heathrow Hotel

industry. The conference will include a wide range of sessions focusing on technical, professional and business skills relevant to all pensions professionals, including, new for 2014, a DC-focused session in each workshop group. 18-20 June, Radisson Blu Edwardian Heathrow Hotel

Plenary speakers include: Sharon Bowles, MEP Sally Bridgeland, BP Pension Trustees Limited Gordon Clark, Oxford University

Steve Vernon, Stanford Center on Longevity Marcus Hurd, Buck Consultants Iain Clacher, University of Leeds

For more information and to book your place, visit:

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If you have any newsworthy items for these pagess please email

News People & Society

Triumph at Inter -Livery skiing By Richard Hawkes Members of the Worshipful Company of Actuaries have been prominent in the social aspects of the Inter-Livery skiing competition, attended this year by 90 people from London livery companies and run by the Ironmongers’ Company in Morzine, France. They have even presented a cup run on actuarial principles, with a fiendishly complicated handicapping system based on age and sex. Also, for the last two years actuaries have administered the results, this year under the eagle eyes of liveryman Tony Leandro and assistant Nick Salter. But never a sniff of a prize, until now, when three court members, senior warden Martin

Miles, Nick Salter and trustee George Yoxall skied their socks off and brought home the Shipwrights’ Trophy. They beat the court team of the Shipwrights, donors of the Trophy, by just 0.27 seconds in an aggregate time of 235.42 seconds. The Shipwrights gained their revenge, however, by winning The Actuaries’ Handicap Cup, so honours were even. To put a further gloss on it, Tony came third in the over-60s competition! The Actuaries’ team was made up of captain Fiona Morrison, Tony, George, Nick, Martin and past master Richard Hawkes and cheered on by Sarah Miles, Susie Salter and Juliet Hawkes. All team members safely completed a floodlit

TAAU holds pensions seminar

Second on front right: Andrew Kasirye, board chairman of URBRA

The Actuarial Association of Uganda (TAAU) recently held a pensions seminar for young aspiring actuaries working in the pensions sector in Uganda. The objective of the seminar was to provide a basic education on the fundamentals of types of social security systems, the design of private pension schemes, the role of regulations in pensions, financing of public and private schemes and to discuss the importance of professionalism in working with and handling pensions. The seminar was a rare opportunity to

learn from a qualified pensions actuary and was attended by 40 delegates from across the insurance and pensions industry in Uganda, and final year students of the BSc Actuarial Science degree at Makerere University. The seminar was closed by Andrew Kasirye, the board chairman of the Uganda Retirement Benefits Regulatory Authority (URBRA). TAAU hopes to transform the insurance and pensions industry by promoting the actuarial profession in Uganda. For more information, visit

Obituary: Stephen Yeo (died 23 February 2014, aged 56) Stephen pursued a varied and unusual career for an actuary after spending his initial years in a more conventional manner. He was educated at Whitgift School in Croydon, a school that produced many future actuaries. His eldest brother trained to be an actuary and on leaving school he knew he wanted to do the same. So instead of going to university, he started the actuarial exams while working for an insurance company. He joined Clay & Partners some 18 months later and progressed there for 15 years. As a partner of the firm he was respected for his practical and professional approach. He supported more junior colleagues,


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to help them achieve their full potential. His contribution was summed up by Alan Fishman, senior partner: “Stephen was such a charismatic character and a source of inspiration to our junior actuarial staff ”. He was active in the profession. He served on the SIAS Committee for several years and was involved in promoting the actuarial profession. Stephen would have gone even further in the actuarial world had he not chosen to take time out to pursue a long-term ambition to go sailing. He was pleased to have been able to spend five years sailing around the world, at a relatively young age, with his wife

Alison. They encouraged friends and colleagues to join them aboard and gave visitors the opportunity to crew while providing generous hospitality and memorable experiences. After his return in 2001 Stephen became pensions policy adviser to the Conservative party. With the Rtt Hon David Willetts MP he wrotee the pamphlet A Fair Deal for Everyone on Pensions which pledged the Conservative Partyy to reverse the spread of meanss gs testing by restoring the earnings link on the basic state pension.. He was proud that the coalitionn y. government adopted this policy.


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Members of the Worshipful Company of Actuaries enjoying their skiing challenge in France

slalom course on the Friday evening and a grand slalom in good conditions on the Saturday morning, and all nine enjoyed a typical French reception on Friday and a prize-giving dinner on Saturday. A seventh actuary, past master Adrian Waddingham, added lustre to the event, being a leading member of the team of those who had been Masters of Livery Companies in 2010, known as the The Power of Ten, and the first Sheriff to ski competitively in his year of office. The Vintners’ Company brought along some real youngsters and keen skiers and won overall convincingly, and therein lies the actuaries’ weakness, in that our team was more ‘mature’ than theirs. So, come along the younger members of the company, let’s show what we can do to really count on the ski slopes – please put 23 and 24 January in your diaries for the 2015 event – we need you! Guests may also compete on the courses with prizes for fastest male and female guest. So take part to enjoy what really is a fun weekend.

Grant Thornton team hold Sway By Darren Murch Thirty-nine teams, combining to over 200 people, turned up at the Sway bar on 23 January with the hopes of being crowned pub quiz champions. Competition was high and all teams were ready and raring to go. As usual there was a variety of effort put in to choosing a quiz name. ‘Love Actuary’ won the best named team prize for being short and sweet. This quiz was very challenging – full of varied sport, music and general knowledge questions. A picture round including photos of film stars left people racking their brains for the real actor

In 2004 he joined Watson Wyatt in a senior role with responsibilities for communicating to the press. During these years pensions were much in the news and Stephen was probably the most quoted actuary in the UK. In 2008 Stephen decided to leave Watson Wyatt to spend time on many other interests including sailing and travelling. Sadly, he was diagnosed with bladder cancer in May 2013 and bore the following months with characteristic pragmatism, fortitude, openness and bravery while being concerned for Alison. His family and wide circle of friends and colleagues will remember Stephen for his determination, his interest in life, his entertaining conversation and his strength of character.

name of Mr Miyagi from the Karate Kid! The sound round got people dancing to Hakuna Matata from the Lion King. The winners were, not for the first time, ‘Joy Hoover Division’ from Grant Thornton. Second, for another year running, were ‘We Put The Anal Into Actuarial Anal-ysis’ from the Bank of England and third place was grabbed by ‘Return of the Human Quiz-epede’ from Partnership. Afterwards, partygoers made full use of the retro dance floor. Many thanks to the quiz masters, Sway bar and all entrants for making the quiz such a huge success.

Birth Adam Freeman (NFU Mutual) and wife Sarah are pleased to announce the birth of their son Ben on 25 October 2013. Ben is a little brother for Ava.

Boogie on blades On Thursday 20 February about 70 SIAS members took themselves to the Renaissance Rooms in Vauxhall for the SIAS Roller Disco. Everyone had a chance to mingle, eat and learn how to skate with instructors. The venue had two roller rinks, one for the faster skaters and one for those who liked a slower pace and the crowd was a big mix from complete novices, to super experts. The most entertaining part of the evening was the conga line, where people seemed to fall over like dominos. A big thank you to everyone who came and to those of you who dressed up in 80s and neon-themed outfits!


Paralympics spirit in motion By Michael Tripp More than 80 senior city figures packed into Staple Inn for the annual Worshipful Company of Actuaries lecture on 13 November 2013. City liverymen from accountants and barbers to wheelwrights and woolmen came to listen to Sir Philip Craven MBE, President of the International Paralympic Committee. He focused on the 2012 London Games, reflecting on how it advanced their vision of enabling Paralympic athletes to achieve excellence and inspire and excite the world. The games had been a clear success, exuding the values of determination, courage, inspiration and equality; with 4,237 athletes taking part in over 500 medal events, the games had been a real demonstration of their motto, ‘spirit in motion’. Sir Philip said the energy and commitment of all involved had been a true inspiration to the collective athletes. More than this though had been the impact they had on everyone in terms of changing attitudes to the impaired – opening minds to the wonder within everyone no matter what their physical body suggested. He was keen to emphasise the movement was not just focused on supreme athletes but on ordinary people striving for their best – being aware of what they can achieve as opposed to what they can’t. Another major thrust was the importance of consistently articulated vision and values creating a legacy for future generations through superhuman efforts. He quoted a child as an illustration: “Long John Silver didn’t have an arm, and had a wooden leg – he must have been an athlete!” In thanking Sir Philip, the Master, Charles Cowling, said his theme of making a difference in the lives of others had been visibly enacted and the lesson was to look beyond what we see at first impression to the ability that is within everyone. If you’d like to know more about the livery company visit

We would be delighted to hear from you if you have any newsworthy items for these pages. Please contact Yvonne Wan at

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FCA proposes reforms to add-on insurance market

Budget brings another £140m for flood defences Chancellor George Osborne announced a £140m investment for UK flood defences in his Budget, but risk experts warned this would not be enough to plug gaps. The funding boost was a response to the “exceptionally poor weather this winter” he said. This was to be on top of funds already provided, “for immediate repair and maintenance to damaged flood defences across Britain”. However, the chancellor was accused of not doing enough. Jon Williams, a partner in PricewaterhouseCoopers’ sustainability and climate change practice, said the £140m would not “plug the gap needed to ensure the UK is resilient to flooding in the medium term”. “Even after this additional funding,” Williams argued, “there is still an estimated £500m shortfall if we are to maintain flood defences to avoid in future the estimated £1bn of insured losses and further uninsured economic costs incurred as a result of this winter’s floods.” But Deloitte insurance partner James Rakow said: “Increased spending on flood defences can’t come soon enough for 200,000 households in Britain whose homes are at very high risk of flooding and will help keep premiums affordable.” See more at:

Insurers’ attitudes ‘out of line with FCA’ There is a mismatch in expectations between insurers and the Financial Conduct Authority, according to a Chartered Insurance Institute-backed survey. A joint study from the CII and management consultants Oliver Wyman revealed there was some “anxiety” amongst insurers about both the workload caused by ongoing FCA market studies and the regulator’s thematic reviews of insurance products and operations. The views of 22 insurance chiefs and other senior executives were captured for the Conduct risk for insurers study. It highlighted that, while some firms welcomed a shift to a more transparent and competitive market, there was a mismatch in expectation between insurers and the FCA in three key areas. These were: the level of regulatory intervention imposed to fix any deficiencies in the market; the practical implications of the new regulatory regime for firms and the extent of change required; and the progress made by firms in adapting to the FCA’s new regime. An FCA spokeswoman told The Actuary it “welcomed the report and would be studying its contents closely”. See more at:


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The Financial Conduct Authority is set to intervene in the £1bn general insurance add-on market after finding consumers were being denied value for money. Add-ons are insurance products sold alongside goods or services such as cars or holidays or other principal insurance products such as home insurance. The FCA carried out a market review of add-ons in July 2013. Published in March, this found poor competition, low levels of claims and potential overcharging. Under the planned shake-up, the watchdog will ban pre-ticked boxes, force firms to publish claims ratios and break the point of sale advantage for guaranteed asset protection insurance, usually offered alongside car sales. “There’s a clear case for us to intervene,” said Christopher Woolard, director of policy, risk and research at the FCA. “Firms must start putting consumers first and stop seeing them as pound signs. We believe our proposals will address these issues and prevent consumers paying for poor-value insurance products they may not need or use.” But Hugh Savill, director of regulation at the Association of British Insurers, called the report “surprisingly generic”. Add-ons offer different products to meet differing needs, through different distribution chains, he said. “Distinct markets call for bespoke regulatory approaches, not a ‘one size fits all’ approach covering everything from GAP insurance to travel insurance. We hope and expect that the FCA will take a more market specific approach to this as their work on this develops.” The FCA is asking for comments on its report and the proposals by 8 April. See more at:



Severe winter weather to cost UK insurers £1.1bn, says ABI

Storms, UK Insurers will be hit with a £1.1bn bill following the floods and storms that hit over the winter, the Association of British Insurers (ABI) has said. The ABI said its members had received flood claims equivalent to £6.7m a day between December 23 and February 28 this year. Insurers have already received 17,500 flood claims: 9,000 from homeowners; 5,400 from vehicle owners; and 3,100 from businesses. Of the £446m of claims received, an estimated £27m is expected to be paid to homeowners, £149m to business owners and £22m to vehicle owners. ABI’s director general Otto Thoresen said: “The flood waters

may have mostly receded, but for many the distress of being flooded remains raw. A badly flooded property can take months to become habitable again, so insurers continue working around the clock to ensure the drying out process is completed as quickly and as safely as possible.” Meanwhile, insurers have received 421,500 storm claims: 361,600 from homeowners, 15,200 for storm-damaged vehicles and 44,700 from businesses. But costs arising from this year’s extreme weather events were down, compared to 2007 when a series of destructive floods battered parts of the UK during the summer. See more at:

MORE GI NEWS ONLINE For further GI news, visit


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News Industry

Osborne delivers blow to annuities with ‘radical’ pension changes Insurance annuity purchases will no longer be the default option for pensioners retiring with defined contribution pension pots, Chancellor George Osborne announced. His budget included a host of what Osborne called ‘radical’ reforms to help pensioners and savers who have been hit by low interest rates. Claiming the government was “backing a Britain that saves”, the chancellor said he wanted to put pensioners in charge of their own finances and bring the tax treatment of DC pensions “in line with the modern world”. He said: “Instead of the punitive 55% tax that exists now if you try to take the rest, anything else you take out of your pension will simply be taxed at normal marginal tax rates – as with any other income. So not a 55% tax but a 20% tax for most pensioners.” Pensioners will also have much more flexibility over income drawdown and lump sum entitlements. With no caps and no drawdown limits, no one would have to buy an annuity, Osborne said. But for those who still wanted annuities there is a new guarantee of free, impartial, face-to-face advice. The chancellor said he would provide £20m over the next two years to work with consumer groups and industry to develop this new right to advice. Responding to the announcement, the Institute and Faculty of Actuaries welcomed the chancellor’s changes as “useful immediate steps” to create a new flexible retirement landscape for DC savers. But president David Hare said it was important the same opportunities were available for members of defined benefit schemes as well. He said: “Undertaking this will not be easy. There are a number of issues that need to be addressed by any proposal to extend the flexibility to those in DB, including making sure that DB members realise what they could be giving up (for example longevity protection) in exchange for increased flexibility.” For more on this story, visit

GAD public pension valuation expected to show contribution shortfall Near-final valuations from the Government Actuary’s Department are expected to show that current contribution rates are insufficient to meet the future costs of public sector pensions, the Treasury said. It warned public sector employers across the civil service, NHS and education that they would need to increase their contributions. Without a change, there would be a nearly £1bn-a-year shortfall across teaching, civil service and NHS pension schemes. Final results from the GAD’s valuation exercise will be published in the coming months and changes to employer contribution rates will come into force in 2015. Chief secretary to the treasury Danny Alexander also published details of a new cost cap mechanism for reformed public service pension schemes. This has been designed to ensure long-term costs are controlled, providing protection for the taxpayer and ensuring the risks of changes in costs are shared equitably with scheme members and employers. For more on this story, visit

MORE BREAKING NEWS ONLINE Visit for up-to-date news and to register for weekly news alerts

Martin Clarke appointed next government actuary Martin Clarke, executive director of financial risk at the Pension Protection Fund, is to be the next government actuary. He will take up the £185,000 post later this year and serve for five years, succeeding Trevor Llanwarne, who has been in the role since 2008.

Pensions Bill to place transparency requirement on funds Pension funds will be forced by the government to disclose all hidden costs in defined contribution workplace schemes, pensions minister Steve Webb has announced. The amendment to the Pensions Bill would enable those running DC schemes to see exactly how much they were paying for asset management services.

New TPR chair is Mark Boyle Mark Boyle, a former director in the government’s Shareholder Executive, has been appointed as the new chair of The Pensions Regulator. Boyle, who is currently chair of the Land Registry, will take up the post on 1 April and serve a four-year term. He succeeds Michael O’Higgins, who held the post from 2011.

No PPF protection in independent Scotland Scottish defined benefit schemes would no longer be protected through the Pension Protection Fund in the event of a ‘Yes’ vote in September’s independence referendum, the Treasury has warned. In a speech at a National Association of Pension Funds Investment conference in Edinburgh, Chief secretary to the treasury Danny Alexander said the government of an independent Scotland would have to set up its own protection fund. “In fact, if Scotland were part of the European Union, they would have to set up such a fund,” he added. The UK-based PPF would no longer protect Scotland-based members of DB schemes that have become insolvent and are unable to meet their obligation, he said. “But unlike now where the risks are spread across the UK, and across a large number of DB schemes, the number of providers in an independent Scottish state would be much lower... As the NAPF themselves have said this would be likely to create much higher costs. And I quote... ‘[Those] costs may have to be passed onto pension scheme members, eroding the value of their pension savings’.” For more on this story, visit

European Parliament passes Omnibus II directive The European Parliament has passed the Omnibus II directive giving the European Union the authority to finalise the draft rules of Solvency II on insurance regulation and supervision. This means the European Insurance and Occupational Pensions Authority can now consult on the detailed implementing measures. The Omnibus II directive, the legislation underpinning Solvency II, will introduce ‘long-term guarantees’ (LTG), which will adjust the current Solvency II framework to cope with ‘artificial’ volatility and the lowinterest rate environment. It also contains enhanced requirements for risk management, the supervisory review process, public disclosure and the possibility to review LTG in order to ensure prudence and transparency. Michel Barnier, European Commissioner for internal market and services, said the European Parliament had taken a “very important step”. He added: “This long-awaited and vital reform will finally become a reality.” For more on this story, visit

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On my agenda


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Roelof Botha, an actuary and venture capitalist based in Silicon Valley, is driving innovation affecting the public globally. He talks to Marjorie Ngwenya

Leading at the cuttingedge Roelof Botha graduated from the University of Cape Town (UCT) with a bachelor of business science degree in actuarial science, economics and statistics – he achieved the highest grades in the history of that programme. In 1996, Botha qualified as a Fellow of the Faculty of Actuaries – the youngest to do so in South Africa at the time. He later went on to complete an MBA at Stanford University, where he was valedictorian of his class. In Silicon Valley, Botha’s roles have included being CFO of PayPal at a young age and director of YouTube, Tumblr and a range of other companies whose products affect hundreds of millions of people today. For the past 10 years, he has been partner at Sequoia Capital, a venture capital firm in the Valley, focusing on internet services and software investments. He led Sequoia Capital’s investment in Instagram and currently serves on the boards of companies including Eventbrite, Evernote, and Square. I spoke to Botha about his motivations for training as an actuary and how this complements his current role. I sought his views on leadership and the direction of future technological innovations. I found him to be sharp, visionary and highly engaging in equal measure. What led you to pursue an actuarial career? In South Africa I grew up in the shadow of a well-known father and grandfather. I had the top results in the province when I finished high school. “Botha’s grandson is

number 1” was the headline carried in the local newspaper. Psychologically, I was driven to make my grandfather proud and accomplish something in my own right. I wanted to keep my options open and studying actuarial science meant that I had a passport that allowed me to work internationally and to compete on a global scale. There is a subtle benefit of actuarial science that I didn’t appreciate when I joined the profession. Professor Robert Dorrington at UCT once quipped, “Actuaries are trained to think 30 years into the future and accountants to think a year in arrears.” Part of what actuarial science enforces is long-term thinking and that frame of mind influences the work that I do today. We invest in companies that employ three people and we have to imagine what the company might turn out to be in 10 or 15 years.

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On my agenda

What motivated you to pursue an MBA? My first role after graduation from UCT was at McKinsey in Johannesburg. One of my colleagues there was a Stanford graduate and he convinced me that I should at least apply for a post-graduate programme in the US. Having done my undergraduate degree and qualified as an actuary, an MBA seemed a bit wasteful having already covered some basic business training. He convinced me nonetheless. A further factor was I had once overheard someone at UCT accrediting my academic success to my grandfather’s influence. Part of my drive at Stanford was to make a name for myself in a place where no one knew of my family or background. If you think back to the late 90s, we were starting to see the rise of technology. There was a lot of enthusiasm around Silicon Valley and the pervading sentiment that software was going to change the world. There was excitement about opportunities to build new companies that would take on the established guard, in an environment of enormous wealth creation, disruption and change.

How well do you think your MBA has complemented your actuarial training for your career toolkit? The real value in the MBA from an academic viewpoint was learning about non-quantitative subjects such as organisational behaviour, negotiations, leadership and

interpersonal dynamics – affectionately known at Stanford as “touchy-feely”. Functional competence and technical skills are important as a foundation but interpersonal and leadership skills are key differentiators later on – understanding how to influence and motivate people.

What one skill would you advise trainee actuaries to hone early in their career? Empathy – the ability to put yourself in someone else’s shoes is an underappreciated skill.

Please share some anecdotes from your time at PayPal. What did you learn from holding such an influential role? My involvement with PayPal was a true case of necessity being the mother of invention. I had run out of money, due to the emerging markets currency crisis in 1998 when Long-Term Capital Management blew up. I also couldn’t take money out of South Africa prior to leaving the country because of exchange control. So I watched the dollar value of my rand savings plummet. When the third offer from PayPal came around, I accepted so that I could work part-time for three months before graduating. Soon after joining, I built a bottom-up financial model to help understand the drivers of the business. It turned out to be a good model that was very representative repr of the company’s situation and gave us visib visibility in being able to forecast. As I was building the model I was trying to reconcile actual results compared to expectations. I discovered that one piece of the mo model, which worked out fraud losses, was divergent. Identity theft t was rife at the time and we were losing millions of d dollars a month from this activity. The view taken by the accountants mismatched the losses and the exposure to which they related. I applied the chain ladder technique to our fraud llosses to try to understand their cumulative distribu distribution function. I was trying to work out how long it takes o on average for fraud to be notified. I realised that our losses were w much larger than we had believed. I quantified the th size of the problem and spurred engineers to build frame frameworks for fraud control. We caught the problem early and saved the company from bankruptcy. It was an interesting experience to apply actuarial techniq techniques in a very different context. In a fast-paced internet start-up, w when your predictions turn out to be robust, you build credi credibility in the organisation. You can start to see the impact of changes to business models and use scenario an analysis to aid business decisions – it is of enormous value to a company.

Technology is advancing at such a fa fast pace, reducing distances, as this virtual interview pr proves. Tell me about your and Sequoia Capital’s role in thi this. Sequoia invests in very early stage companies co and helps them blossom. Take for example You YouTube, where the three

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founders are friends from PayPal. Sequoia was their first investor – I took a board seat and helped grow the business and it was acquired 12 months later. I acted as an advisor helping the founders to navigate business-building and assisted with strategy, negotiations and the eventual sale to Google. Part of our involvement is providing financing but being a business building partner is a strong area of focus. We meet regularly with entrepreneurs at board meetings and act as a sounding board. I get a thrill from watching companies thriving in the long-term in the way that PayPal and YouTube have. I am inspired by the impact they have on the lives of hundreds of millions of people across the globe.

Silicon Valley, California: a leading hub for high-tech innovation and development that accounts for onethird of all venture capital investment in the US

able to innovate with a team of 55 people and serve so many people around the planet with a wonderful software application that leverages cellular technology and smartphone capability. There is a whole class of that sort of innovation that is very interesting and has a ripple effect on infrastructure such as database technology. There is an explosion of data science making its way to other industries such as biology. I am on the board of a company started by a South African I met at a Science Olympiad in 1990. The founder is a PhD in electrical engineering but applying techniques to biology to make sense of genetic information to help parents make choices about the health of their children. They are using data science and Bayesian techniques to make informed decisions by combining completely different disciplines.

What future innovations do you foresee? The least sexy and basic innovation to note is that software is infiltrating so many parts of the world. In the same manner that decades ago maths was a foundational subject, computer science is becoming that way. There are tens of millions of people applying computer science in their jobs every day to help them be more productive. This includes modern actuaries. The recognition of the role of computer software in any discipline is something we should be aware of and harness. If you want to stand out in tomorrow’s world you need to leverage computers as much as you can. There is an abundance of consumer service innovation taking place today because of the accumulation of technology and the ubiquity of computing devices in consumers’ hands. When I joined PayPal there were some 250m people in the world with an internet connection. Just 13 years later, that number is tenfold – a third of the population of the planet. Smartphones are truly the personal computer and open up a range of services that can be made available. We were the original investor in Whatsapp, recently acquired by Facebook. It has half a billion users of its messaging service saving lots of money as a result. It is fascinating to be

How would you describe your leadership style? Supportive but demanding. I help entrepreneurs and founders be the best they can be, and their companies in turn. This relies on the brilliance and determination of founders but we play the role of setting high standards to help them realise their potential.

“I get a thrill from watching companies thriving in the longterm, in the way that PayPal and YouTube have. I am inspired by the impact they have on the lives of hundreds of millions of people”


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If you were beginning a three-week break tomorrow, how would you spend the time? I would spend it with my family. I am married with two young children and it’s always fun to spend time with them. I also have a number of interesting books that I’d like to read. My biggest frustration is I buy books faster than I can read them! I remember being at my grandparents’ house when I was four or five, looking at a huge stack of encyclopaedias and fantasising about absorbing all the knowledge within them. A little bit of that curious child has remained with me.

Do you find time to read The Actuary? Yes! I have it delivered to the office. My colleagues walk by my desk and marvel at me. I am accustomed to it though – I suffered enough actuarial jokes as an undergraduate. a

April 2014 • THE ACTUARY


25/03/2014 10:24

Insurance Social media


‘AGE OF ME’ It’s time for insurance to come out of the dark ages and take advantage of ‘code halos’, the technology trail that each one of us creates around ourselves, writes Ben Pring


Actuaries have long been ‘datavores’, vacuuming up ever-increasing reams of information about ancestry and health and lifestyle and location to make optimal quote decisions. Technology has made an incredible contribution, helping the insatiable actuarial appetite by broadening the ability to collect and analyse relevant information and process it at speeds unimaginable even a decade ago. Yet with all the data science strides insurers have made over recent years, consumers still appear in pretty coarse grain to them. I look exactly the same to my insurance company as my neighbour does. In fact, comparing notes, we discovered we were both paying almost exactly the same for our homeowners’ insurance. Admittedly we do ‘look’ the same. We’re both white, middle-aged, middle-class men, both making the same sort of money. Both married, with two kids. But if you knew us you’d know our profiles were wildly dissimilar. He keeps going for a couple more glasses of wine after I’ve admitted defeat; he sleeps in while I hit the gym. His sweating the small stuff isn’t, in my humble opinion, going to end well. He – from my perspective – is a much worse insurance risk than I am. And yet we’re paying the same premium. Fair? Probably not. Understandable? I guess so; that’s just the way it is. Currently. This has been the world since insurance was invented (thanks, James Dodson) – a world in which information was scarce, hard to come by, and frequently wrong. A world in which guessing was standard operating procedure and customers segmented into broad crude ‘demos’, which said something about an individual, but frankly, not much. A world where I belong – as far as my insurer is concerned – in the market of middle-aged white guys. But I’m ‘me’, not ‘him’ or ‘them’. If our insurer

knew us, it would make adjustments to our premiums that would make at least one of us very happy. ‘Knowing’ me? Impossible, right? Wrong. Increasingly, lots of companies do know me. Amazon, Netflix, Apple, know me. Pandora knows me. LinkedIn knows me. How does YouTube know the music I like to listen to? The answer? Because it can see my ‘code halo’. A ‘halo’ of information that swirls all around me created by every digital interaction I have. Each one of us is creating a code halo with every click or swipe of our phone, tablet, laptop, Glass, Nest, FuelBand, dashboard or other smart device. Every transaction we make, every ‘like’ we record, every preference we note, creates a trail of information that composes a digital fingerprint of who we are and what makes us tick. Code halos allow switched-on companies to know us, to read our minds, to turn the sales process from something harsh into something painless and seductive, to move beyond seeing us as a part of a socio-economic demographic to seeing the ‘market of me’. Code halos are shaking up what and how things are sold. They have seen companies like Amazon and Netflix become the new titans of our digital age. They’re largely responsible for the demise of companies like Blockbuster and Kodak – that didn’t understand how digitisation and mass personalisation were playing out under their very noses. And now code halo thinking is spreading fast into a broader range of industries and markets where smart leaders are seeing that a new game is being played. Google’s $3.2 billion acquisition of the smart thermostat maker, Nest; Disney’s $1 billion development of smart wristbands that visitors can wear at its theme parks; Monsanto’s $930 million purchase of Climate Corp, a

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“Each one of us is creating a code halo with every click or swipe of our phone, tablet, laptop, Glass, Nest, FuelBand, dashboard, or other smart device”


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April 2014 • THE ACTUARY


25/03/2014 10:25

Insurance Social media

BEN PRING is the coauthor of Code Halos and the accompanying app Code Halos

weather-data-mining company that helps farmers increase yields by 30%, are just a few recent examples of how code halos are impacting everything from design, to production, to selling, to talent management. Some insurance providers are making similar moves. Flo’s Snapshot is a great example – an on-board telematics device that allows Progressive to see their customer’s driving patterns in an unprecedented way. The code halo concept is catching on like wildfire. (If you could see the frequent flyer field in my code halo you’d see proof enough). And yet it has only really scratched the surface. Insurers – and their actuarial advisors – have work to do to really embed code halos into the way they do business. Is your organisation really thinking – deeply and broadly and at a strategic level – about questions like these? ● Do we have the right to make quote decisions based on insights about an individual’s health by distilling peripheral

aspects of their code halo attributes, or a family member’s code halo? ● If we can see from a prospect’s social media postings that she indulges in skydiving most weekends, can we act on that? Should we act on that? Do we have the right to act on it? Would it be commercially smart to do so? ● What should we do if (and presumably when) we can access data from 23andMe (the ancestral DNA testing company) to understand health destinies? If data is an asset – which in this brave new world it surely is – how should we account for it? Do customers own their data (including their metadata – their nontransactional browsing history) or do we? Code halos allow us to see people, things and organisations in greater detail than before. Seeing, though, will not be enough alone to guarantee commercial victory. Leaders in all sorts of business – including insurance – will avail themselves of more powerful new data sources.

Code halo thinking will introduce a datavore’s field day. But making meaning in a world of data abundance – more importantly, making smart business decisions – will continue to be an non-trivial undertaking. As famed business author Geoffrey Moore puts it, “before data’s an asset, it’s a liability”. Many fascinating and tough questions are being raised as new social, mobile, analytics and cloud (SMAC) technologies re-shape various aspects of society, business and our daily lives. Understanding code halos is key to understanding how to take advantage of the once-in-a-generation opportunities in front of you (and your competitors) today. Building and leveraging ‘markets of me’ by using code halos is set to be the new competitive battlefield on which insurers will be fighting it out over the next few years. I look forward to you getting to know me through my code halo very soon. And to the mutual benefits that are sure to arise for us all. a

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THE ACTUARY • April 2014

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25/03/2014 10:25

Enterprise risk management Modelling



Proxy techniques have grown in popularity in recent years, with insurers increasingly using them to model the full distribution of their balance sheet assets and liabilities to support capital calculations. So why use them? The advent of these techniques has been partly due to changes in the regulatory landscape (for example, Solvency II in Europe) but also a greater desire by senior management to better understand their risk exposure and feed this into their decision-making processes. Asset liability management (ALM) systems are designed to calculate accurate balance sheet values and as such are granular and complex. As a result, they were not originally designed for real-world stochastic modelling, particularly for complex liabilities with options and guarantees which require a nested stochastic approach. The large computational requirement and long run times that would be required to support such calculations mean that many insurers have turned to proxy techniques, which aim to emulate the results from the ALM system without the associated run times. Proxy techniques have developed rapidly in recent years. Initially firms developed replicating portfolios to model their liabilities. However, for more complex liabilities it can prove difficult to find assets with the same risk characteristics and typically they don’t deal with non-market risks, limiting the usefulness of the technique. As a result, curve fitting and, more recently,


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the Least Squares Monte Carlo (LSMC) technique, originally developed by Longstaff and Schwartz as a method for valuing American options, have gained in popularity. These techniques use more general mathematical functions rather than a replicating portfolio-to-model liabilities (or assets). The process for generating these functions is to: ● Identify risk factors to be modelled for the business ● Generate real-world ‘outer’ fitting points ● Value the liability (or asset) at the fitting points using the ALM system ● Use linear regression techniques to fit a function to the results for the fitting points.

Brian Robinson and Martin Elliott look at some of the practical issues associated with proxy techniques and further business applications beyond capital calculations

These proxy techniques have the advantage that they provide significant runtime reductions over the ALM systems, in particular where a nested stochastic approach would be required. By their very nature, care needs to be taken with proxy techniques, and we now look at some of the practical considerations.

Which risks are important? A key part of the curve fitting or LSMC approach is deciding which risk factors (market and non-market) to include in the proxy function. It is easy to overlook this stage of the process but the choice of risk factors can have a significant impact on the effectiveness of the fit and there can be considerable expert judgment required.

April 2014 • THE ACTUARY


25/03/2014 10:26

“With Solvency II back on track, many internal model firms will be focusing on embedding proxy techniques within their business-as-usual operation” Figure 1: Curve fitting process (Source: Moody’s) Scenario Generation Real World Scenarios

Function Fitting Market Consistent Scenarios

Accurate valuation for a selection of points on curve means interpolation required

The asset or liability value being modelled will be a function of a large number of variables and including them all in the proxy function is not usually practical, so an exercise to reduce the dimensionality of these risks will usually be required (for example, using principal components to represent the term structure of a nominal yield curve). A pitfall to be avoided is the inclusion of highly correlated risk factors that can cause problems with the fit.

Choosing the fitting points However, limited set of fitting points may result in poor fit for certain areas of the function



Figure 2: Least Squares Monte Carlo process (Source: Moody’s) Scenario Generation Real World Scenarios

Function Fitting Market Consistent Scenarios

Inaccurate value for every fitting point. However least squares regression captures the overall shape of the curve




A lot of focus can be on the regression process for fitting the proxy function but generation of fitting points is a critical part of the fitting process and can be split into two areas: ● Generating real-world ‘outer’ fitting points ● Generating associated market consistent ‘inner’ scenarios. The real-world ‘outer’ fitting points can either be user defined (for example user defines 100 points for curve fitting) or automated using algorithms to generate fitting points within a multi-dimensional space for a given set of parameters. Liabilities with options or guarantees are typically valued using Monte Carlo simulation. Therefore, for each real-world ‘outer’ fitting point there is also a requirement to generate an associated set of market consistent ‘inner’ scenarios, and herein lies the key difference between curve fitting and LSMC approaches. Curve fitting uses a small set of ‘accurate’ fitting points whereas LSMC uses a large number of ‘inaccurate’ fitting points. For example, let us consider a firm with a fitting scenario budget of 200,000 scenarios: ● For curve fitting the firm might typically choose 100 ‘outer’ fitting points ‘accurately’ valued using 2,000 inner scenarios (Figure 1). ● For LSMC the firm could choose 100,000 ‘outer’ fitting points but they are ‘inaccurately’ valued using only two corresponding inner scenarios (Figure 2). LSMC requires less expert judgment than curve fitting for generating fitting points and can often generate better fits for a given scenario budget due to the larger number of fitting points spanning the multi-dimensional space. One practical issue with LSMC relates to modelling non-market risks in the ALM models. While the use of economic scenario generators (ESGs) has meant that it is common for the value of economic inputs to

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25/03/2014 10:27

BRIAN ROBINSON is a director

in the enterprise risk solutions insurance practice at Moody’s Analytics, and MARTIN ELLIOTT is an assistant director in the practice

Fitting the proxy function The most common approach to function fitting is least squares regression with polynomial basis functions. The process can be split into two key stages: ● Identifying the functional form ● Solving the coefficients for the terms of the functional form. In the early days of curve fitting and LSMC, the identification of the functional form was a very manual and iterative process as users tried to identify which terms (combinations of risk factors) in the polynomial were important to the fit. This is an extremely time-consuming process and does not guarantee an optimal fit. These days there are specific software solutions available with algorithms that can automate the process of identifying the optimal functional form and solving for the coefficients using matrix mathematics. This does not mean there is no need for manual intervention as, even with the use of software, the fitting process can still be an iterative process, particularly the first time. Practically, there may be some constraints on the goodness of fit. For example, if the scenario budget for generating fitting points is relatively small then it may be difficult to achieve a good fit. Also, if a large number of risk factors are being used for an individual proxy function, the regression and optimisation problem can become computationally very complex.

Are they fit for purpose? Proxy functions can provide very good fits for assets and liabilities, but firms need to be able

to validate that they are fit for purpose. The simplest way to assess the accuracy of the proxy function is to generate a set of independent validation scenarios and check the proxy function values against ‘accurate’ ALM values (Figure 3). The results can be used to assess accuracy using analysis of the min/max errors and error distribution. In addition, it can be useful to include confidence intervals in this analysis to provide insight into the sampling error associated with the fitting points. Other outputs and metrics can be used to assess the fit and robustness of the regression process. The R-squared metric gives insight into the relative fit of different proxy functions for the same data. For LSMC it can be useful to analyse the residuals associated with the fitting points. Analysing the distribution of the residuals can highlight whether there may be issues such as bias or heteroscedasticity.

It’s not just a one-off exercise Over the past few years insurers have been getting to grips with proxy techniques and fine-tuning their approaches. However, with Solvency II back on track, many internal model firms will be focusing on embedding proxy techniques within their business-as-usual (BAU) operation. As a result, automation through the use of technology will be a key enabler to support these BAU requirements. Managing scenario generation and function fitting across multiple portfolios of assets and liabilities involves significant data manipulation and the running of complex processes. In addition, there may

Figure 3: Examples of proxy function validation (Source: Moody’s Analytics B&H Proxy Generator) Fitting scenarios 0.40

Linear (Proxy = Cashflow)

Validation scenario (including confidence intervals)

0.32 Proxy model value

vary between scenarios, insurance risks have usually been constant across all scenarios included in a model run. One solution is a hybrid approach of LSMC and curve fitting, whereby the market risk factors span the multi-dimensional space (for example, LSMC) but are divided into a small number of tranches, with each tranche taking a different value for each of the non-market risk factors (for example, curve fitting). A key requirement for LSMC is being able to recalibrate the market consistent ESG for each real world fitting point. Ideally, the market consistent ‘inner’ scenarios should be recalibrated, by either stressing the ESG parameters or recalibrating to stressed economic variables.




0.00 0.00


0.16 0.24 Cashflow model value



be a range of stakeholders/users across different functional areas (for example Group vs Business Unit), geographies etc. Thus, robust enterprise technology is increasingly being used to meet the demands of BAU to manage these processes more efficiently, maintain appropriate audit trails and help to reduce operational risk.

Other business applications As proxy techniques have become more embedded as a risk-based tool a broader range of business applications has come to light. The proxy functions used for capital modelling (if calibrated at t=0) can also be used for continuous solvency monitoring and stress/ sensitivity testing. These techniques can also be extended to project key metrics over time (e.g. for ORSA). Projecting capital is a challenge given the difficulties encountered for t=0 capital calculations. However, it is not just projecting capital that is difficult – allowing for path dependency when projecting a market consistent balance sheet can also be complex. Path dependency can have a significant impact on the projected balance sheet and should not be underestimated. Proxy functions can be used to capture this path dependency and help better inform management regarding the impact, especially under stress and scenario testing. Hedging is also becoming an area where management is beginning to see the power of proxy techniques. Proxy techniques can be used to assess the effectiveness of hedging strategies, calculating the hedging gain/loss over the projected run-off of liabilities. Insurers are increasingly looking to proxy techniques as a way of helping them to understand their risks and improve their decision-making processes. The theory behind them is becoming better understood, but implementing them in a robust and integrated way as part of BAU still involves challenges. Validation is important in assessing whether the proxy functions are fit for purpose, while technology will be a key enabler to meet the demands of a BAU environment. More broadly, as the methods continue to evolve and the requirement for rapid riskbased modelling increases, the power of these proxy techniques is becoming clear, as is the value to insurers of investing resources in finding ways to resolve the implementation challenges. a

April 2014 • THE ACTUARY

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25/03/2014 10:27

General Insurance Modelling

A MOVING PLATFORM The prospect of changing your modelling platform is seen as a significant task by most capital modellers. Andrew Cox and Cameron Heath show how to have a smooth ride through the process Be it as a result of a merger, acquisition, the software no longer being supported or simply a result of sheer frustration with your current solution, change is sometimes necessary. The thought of what’s involved can send even the most seasoned actuary into the kind of spin Strictly’s Len Goodman would be purring over. Changing your capital model platform doesn’t have to be as daunting as it seems. Let us explain why.

All is not lost The first point to remember is that changing model doesn’t mean you’re starting again from scratch. A great deal of the experience, understanding and insight that you gained while building the original model will be retained and used with the new model. To demonstrate this point, it is worth distinguishing between the model – the


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ANDREW COX is head of

advisory, international, at Guy Carpenter. CAMERON HEATH is an actuary in the insurance actuarial practice at Barnett Waddingham

mathematical representation of the entity being modelled – and the implementation of that model. The latter is the piece of software used to crunch the numbers. Often changing one of these does not involve changing the other. An example might be turning a spreadsheet into code. However, it is often the case that the change of implementation is made for issues around the flexibility, clarity or speed of modelling. In such cases it is likely that the switch of modelling platform will involve some changes in the underlying mathematical model. In our experience, this is often the case around dependency modelling, which is approached differently in different pieces of software. Although this should not be seen as a bad thing – it forces you to think about the underlying assumptions that may have been made relatively quickly a long time ago. Indeed, changing model is also an opportunity to put right all those quick fixes you’ve learnt to live with but that secretly bug the living daylights out of you. This could also be seen as improving the governance of the model which can help to satisfy Solvency II requirements. Whatever the reason for changing the platform, the parameters that you used are still as valid in your new model as they are in the old one. So all the analysis that you did, all those discussions with underwriters, all those (expert judgment) picks that you made where you didn’t have enough data can all be used again. As an aside, changing model is a great opportunity to review all those parameters and assumptions to make sure they are still valid (see figure 1). Likewise, you’ll know what the new model should look like – how it should be structured, which classes (and sub-classes) to split the business into, how the reinsurance programme functions, the format of the output reports needed and so on.

the class; we picked one that contained attritional, large and cat losses (from a vendor model), which had stand-alone reinsurance and old years. This way we could check underwriting and reserve risk at gross and net levels. Having built the basic structure in the new platform we then selected the existing distributions and input the parameters. It’s worth remembering that many distributions have variations, or different parameterisations, and it’s just as well to check you’re using the same one as your old model or at least something that is going to give a comparable answer. Likewise, if there are quick fixes or peculiarities of how your old model deals with different situations, you’ll either need to replicate them or have an understanding of how you expect the results to change. For example, conversion from underwriting to accident years can be done before or after the losses have been generated; if the parameters are split before modelling the aggregate variability will be lower unless there is a 100% correlation between accident years. Talking of variability, you’ll need to decide which metrics you’re interested in comparing, as we did. Clearly, you’ll start with the mean, and you’ll no doubt be interested in the 99.5%, but you may also want to focus on other points on the curve for internal reporting purposes – we also looked at 1-in-5 or 1-in-10. Having run our new model and made sure the results were in the same ballpark (made sure we hadn’t fundamentally messed something up), we reconciled the differences and understood what was driving them. This can be any number of reasons – the way the parameters are used, the distribution (many of them have numerous variations), different approaches to inflation and the like. All models will come up with different results but the key is whether the difference is significant. If you

Figure 1 Build on original parameters for your new model

A journey of a thousand miles begins with a single step


p28_29_apr_capital_models_FINAL•CT.indd 29



Only this part needs to change


When we – Barnett Waddingham and Guy Carpenter – were asked to look at the feasibility of switching models for a London Market insurer, we started by carrying out a proof of concept on one typical class of business. Our first task was to understand the current model (hopefully, but not certainly, a straightforward task if it’s your own). Then we had to choose

have taken the opportunity to change the mathematical model, you will be expecting there to be differences. Indeed, it may be necessary to replicate some of your quick fixes, in order to show that it’s these changes – driven by the maths – and not the software that is driving the difference. Whatever you do, it is important to keep in mind that results do not need to be exactly the same to be considered statistically equivalent – all outputs of models are estimators with an associated error.

Buy one get one free The proof of concept process is similar to another trend we are observing: companies supporting multiple platforms. This can be to leverage the relative strengths of different pieces of software. For example, using one or more platform(s) to analyse catastrophe risk, the results of which are fed into another where other risks are modelled; alternatively, using a second model as a validation of the primary one. Clearly, this is only part of the full validation process, but it can certainly increase users’ confidence in the model. This validation approach is especially useful when it covers areas that the two platforms approach differently – as mentioned above, dependency modelling is a common example of this. Different platforms approach interactions in different ways – some using correlation matrices and others using underlying drivers. So by reconciling the results of multiple classes separately and together you’re also able to understand better the impact of hidden assumptions you have been forced to make by your choice of software platform, and which it is impossible to stress from within that modelling paradigm.

A final thought As you can see, there’s plenty to do in order to change your modelling platform, but the challenge is not insurmountable and there are additional benefits of going through the process. We couldn’t talk about capital models without mentioning Solvency II. It may have taken a backseat of late, but it will soon be back, 1 January 2016 to be precise. If you are not ready by then, it will be more frightening than a Halloween episode of The Simpsons, repeated on Friday 13th. So it’s worth thinking about this thorny issue sooner rather than later. a

April 2014 • THE ACTUARY


25/03/2014 10:28

Pensions US

DIRE STATES Charles Cowling asks what lessons can be learnt by the UK from problems in the US, following a number of high-profile municipal failures there


There is considerable concern in the US, most recently in Detroit, about the sustainability of public sector pension plans. With the Pensions Regulator (TPR) concluding its latest consultation process on the UK’s funding regime, there are lessons it can draw from this. The problems of US public sector pensions were brought to widespread attention on 14 December 2010 when a Wall Street analyst, Meredith Whitney, was interviewed on the US television programme, 60 Minutes. Whitney highlighted the huge indebtedness of US local governments to their pension programmes and suggested the debts were so great, many would have to default. She predicted “50 to 100 sizeable defaults” or more and, asked when the crisis would hit, said “it’ll be something to worry about within the next 12 months”. Whitney’s words turned out to be immediately prophetic. The day after the TV show was aired the US municipal bond market tumbled. People now knew there was a crisis. Of course, the real problems had been around much longer. Between 2002 and 2008, US state spending spiralled and their debts almost doubled. At the same time, pension plans were systematically underfunded and, to make matters worse, pension plans’ exposure to risky investment assets had risen from 23% in 1980 to 73% by 2010. The state of US local government pensions was compellingly described in a Vanity Fair article “California and Bust” by Michael Lewis in November 2011. Things are now so bad in the US that this issue regularly makes headlines in the UK. Sadly too, there have been a number of high-profile bankruptcies. Vallejo, California, is a city of 115,000 near San Francisco which crashed into bankruptcy in 2008, unable to sustain its pension obligations to police and firefighters. Three years of insolvency saw massive cuts, including to the number of police and firefighter jobs. But the city did not touch its payments to the $280bn California Public Employees Retirement System (CalPERS). It would soon rue this decision. When Vallejo entered bankruptcy in 2008, its annual employer payments to Calpers were $8.8m. When it exited bankruptcy in 2011, annual payments to Calpers were just over $11m. By last year these payments had risen to $15m, largely due to changes in actuarial methodology and Calpers’ decision to lower its annual projected investment return rate from 7.75% to 7.5%. Vallejo is now staring at a second bankruptcy. The only way it can meet its still

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is a director at JLT Employee Benefits

growing pension costs is to get more concessions from unions and cut services further. But they don’t have much left to cut – other than pensions. Stephanie Gomes, the city’s vice mayor, has said of Calpers, “It’s the biggest part of my city’s problem. I don’t know any city that can afford it.” Vallejo is not alone. Stockton, California, a city of 290,000, filed for bankruptcy in June 2012 after a 70% decline in its tax base. Officials were forced to make huge spending cuts to solve a $26m budget deficit. The city cut a quarter of its police officers, a third of the fire department staff and 40% of all other employees. It also cut wages and medical benefits. But Stockton’s largest debt is owed to Calpers. The city has kept up with pension payments at the expense of other spending, arguing it needs a strong pension plan to retain its workforce. Stockton’s unemployment and violent crime rates now rank among the worst in the US. San Bernardino, a city of 212,000, lies 65 miles east of Los Angeles. Its biggest creditor is also Calpers. Unlike Stockton and Vallejo, San Bernardino has attempted to limit its obligations to Calpers. It stopped paying Calpers its $1.2m bimonthly employer’s contribution after it declared bankruptcy in August 2012. The attorney for Calpers was reported by Reuters as saying: “Calpers can’t have cities financing their bankruptcy cases by just stopping making payments. You can’t make not paying Calpers cheap and easy, because then it creates this tremendous incentive for other cities to file for bankruptcy and stop meeting their obligations.” Last month, the US Court of Appeal ruled Calpers can try to persuade the appeals court to overturn a lower court decision finding that San Bernardino was eligible for bankruptcy protection. The problems are not limited to California. The state of Illinois faces crippling pension debts and Chicago in particular has had to impose savage spending cuts – 50 elementary schools were forced to close in Chicago last year. Then last year we also saw the giant Motown city of Detroit file for bankruptcy. In the plans filed last month, police and firefighters will take a 10% cut to their pensions. The pensions of all other city employees and retirees will be cut by 34%. Neither group will receive future inflation increases. Bondholders can expect to receive about 20 cents in the dollar. The picture is varied across the US. There are strong states and weak states. But as Michael


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Lewis notes in his Vanity Fair article this can exacerbate the problem. Companies are more likely to flourish in the stronger states; individuals will go to where the jobs are, creating a spiral of decline in the weaker towns and cities. In the 2010 census, Detroit had a population of 713 777, down 60% from its 1.8 million peak in 1950. An alarming factor in all these bankruptcies is how low the levels of funding in public sector schemes have been allowed to fall. Indeed there is a lengthy list of pension schemes with funding ratios below 60%. The Chicago teachers’ pension fund is roughly 54% funded. But it is better off than the city’s municipal workers, police and firefighters’ pension funds, which are estimated to be collectively 33% funded. This situation has arisen for many reasons other than simply market conditions: ● Sponsors failing to make recommended contributions when due ● Pension improvements awarded ● Future service benefits are protected ● Aggressive actuarial practices that result in deferral of costs/contributions. Against this alarming backdrop, the US Society of Actuaries commissioned an independent report, which was published in February and made recommendations: ● Pension obligations should be funded in a rational and sustainable manner by funding benefits for employees over their public service career, following key principles of adequacy, intergenerational equity and cost stability and predictability ● The risk management practices of public

pension plans should be strengthened to provide stakeholders with the information they need to make more informed and effective decisions about plan funding, including more comprehensive information about the current and future financial position of the trust and of the nature and extent of risks facing public pension plans. Specifically this includes disclosure of: ● Trends in financial and demographic measures ● Measures of risk to the plan’s financial position ● Stress testing ● Undiscounted cash flows. There are also recommendations on actuarial methods, including discount rates, amortisation periods, asset and discount rate smoothing methods and a number of recommendations on plan governance.

Lessons for the UK The problems in the US are way beyond actuarial. In any rational system one would expect the stakeholders to adjust things to put the system back on track. But key stakeholders – politicians, plan administrators, trustees, professional advisers and unions – all benefit from the status quo and so are anti-reform. Even the voters are unempowered. Moreover there is little or no regulatory control. At a time when it needs the actuaries to stand up for what is “right”, sadly they are unable to do so. In the UK, we can point to technical actuarial standards and TPR’s funding standards and maybe smugly claim that it could not get so bad here. However, there are still many important lessons we should take from the US experience: ● Simply telling clients what they want to hear risks being unprofessional. Actuaries have insight and understanding that they must share openly with their clients, particularly when that client is conflicted ● Actuarial methodologies that smooth or hide ‘bad news’ or simply push problems into the future have to be used with great care and many caveats ● Downside risks and bad future scenarios must be carefully explained to clients. A financial institution as important as a pension scheme cannot be run simply on a basis that relies on a future continuing benign environment. I am proud to be an actuary and proud that as professionals we strive always to do ‘the right thing’. But there will be times when this is very hard and I hope we are all strong enough to make the right judgment calls when it really matters. a

April 2014 • THE ACTUARY


25/03/2014 11:03

On my agenda


change Dr Yulong Zhao talked to Haijing Wang and Wen Li on the background, progress and far-reaching significance of China’s Risk Oriented Solvency System (C-ROSS) on the Chinese insurance industry

Dr Yulong Zhao is the deputy director of the Finance and Solvency Regulation Department of the China Insurance Regulatory Commission (CIRC). He started his working life as a bridge designer. Twenty years on he continues to design, but now it is regulation rather than bridges. It’s been almost two years since China launched its insurance regulation reformation and he is one of the leading architects of the second generation of the Chinese insurance industry’s regulatory regime. Here, he discusses how China’s Risk Oriented Solvency System (C-ROSS) will benefit the insurance market as a whole and why it would bring regulation in the country to the next level.

Why did you choose to work in insurance regulation? I grew up in a traditional Chinese family and my Mum always taught me that I should work to serve the public interest. I was also heavily influenced by the educational thoughts of Confucius – ‘he who excels in study can follow an official career’. In the meantime, I was looking for a role with a strong technical element. Working for the insurance regulator offered me all of these things.

What is the background to the reformation of Chinese insurance regulation? China’s insurance market has enjoyed a decade of high growth. In 2012, annual premiums increased to £155 billion and China became the fourth largest insurance market in the world. With fast growth in premiums, the Chinese market is becoming more open and is gradually


maturing. The current insurance regulation regime is strict and overly regulated. It controls product terms and conditions, premium rates and investment channels. In light of the overall plan for market-orientated reformation for the financial industry in China, this is no longer suitable. The CIRC recognises the shortcomings of the current regime, for example, it is volume rather than risk-based. It does not differentiate companies from a risk management perspective and does not have a mechanism to encourage a better risk management system in firms. Globally, we see the move to risk-orientated regulation. Basel III in the banking sector, the International Association of Insurance Supervisor’s new Insurance Core Principles, the EU’s Solvency II, and the Solvency Modernization Initiative in the US. Against this background, the CIRC is keen to develop a new regulatory regime to meet local market needs and offer useful experience to other emerging markets.

Tell us more about the infrastructure and the timeframe of C-ROSS? The CIRC launched the C-ROSS project in April 2012 and planned the new regime to be in force within three to five years. Based on current progress, we hope it will be in place by 2015 at the earliest. We have finished the design of the top-level framework, which complies with IAIS requirements and is also used in both Solvency II and the Basel system. However, the contents of the three pillars have many elements of localisation, reflecting China’s character as an

THE ACTUARY • April 2014

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emerging market and a large economy. C-ROSS has three institutional characteristics throughout the framework to accommodate China’s situation – supervision, emerging markets and riskorientation with value consideration. Under Pillar II, CIRC introduced two supervisory conducts – an Integrated Risk Rating (IRR) and Solvency Aligned Risk Management Requirements and Assessment (SARMRA). IRR will be used to evaluate an insurer’s overall solvency based on both a quantitative and qualitative basis. SARMRA ensures that the companies’ own risk management plays an important role under the C-ROSS regime.

What are the implications of the new regulation to other stakeholders like consumers, industry and society? We have designed the new regulation in the hope of benefiting all stakeholders. At the very least it will be a ‘Pareto improvement’. The new system can recognise ‘good’ and ‘bad’ companies and regulate them differently. Introducing a ‘survival of the fittest’ element will help customers and the regulator to select companies and motivate them to improve their risk management framework. After the launch of C-ROSS, we also hope that capital efficiency in insurance companies can be increased. Therefore insurance companies in China can be more competitive with better risk and capital management. Under Pillar III, a more transparent public disclosure is required, which will protect policyholders, investors and the industry. Through C-ROSS we hope to make the Chinese insurance sector better managed and more sophisticated.

Where do you believe the new regulation stands internationally? Before launching the C-ROSS project we studied the solvency regulation framework of developed markets in Europe and North America. We soon realised that these systems are suitable for mature markets, but China, as one of the largest emerging markets, has its own characteristics and we should therefore develop a system that suits our market. In July 2013 the CIRC hosted an international conference on ‘reformation and collaboration of solvency regulation’. The aim was to initiate discussion and collaboration between emerging markets. Top insurance regulation officials from Golden BRIC and the

IAIS were in attendance, with the C-ROSS project highly regarded by the delegates. We also maintain close communications with insurance regulation officials in developed countries. In February 2012 the chairman of European Insurance and Occupational Pensions Authority (EIOPA), Gabriel Bernardino, officially invited us to participate in the equivalent assessment. Since then we have submitted five rounds of questionnaires to EIOPA and we invited EIOPA experts to China for an on-site inspection. EIOPA appraised the C-ROSS project and submitted their assessment report to the EU Committee in December 2013. Overall, we hope C-ROSS is a bridge that will better connect China with the global insurance markets and that it could potentially be a valuable example of solvency regulation to other emerging markets.

If you were not working for a regulator what would you be doing? I would most likely be a university lecturer. Teaching is another good way to serve the public interest. I am a visiting professor at four universities and an anonymous referee for two top academic journals in China. A Confucian sage, Mencius, once said there are three things

a gentleman delights in, and he who has the good fortune of having the most talented students has the third delight in life. I fully agree and enjoy working with my students.

What do you like to do when you are not working? I enjoy reading, and my reading list is wide-ranging covering the Analects of Confucius, the Taoist ‘I Ching: Book of Changes’ and Buddhism. I find different cultures interesting. I am not a Christian or Catholic, but I sometimes go to church, and have made many friends there. I like to learn about different cultures and nations and believe this helps me understand the world. I have a 10-year-old son and we do lots of father-son activities. We go swimming, hiking and making handcrafts. I teach him Taiji, a traditional Chinese shadow boxing. I also teach him other aspects of Chinese culture and hope he will inherit our traditions. a For further information, please email Dr Zhao at

April 2014 • THE ACTUARY

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25/03/2014 11:04

At the back Coffee break

Nylfia is an actuary who solves and sets cryptic crosswords created especially for The Actuary



For a chance to win a £25 Amazon voucher, please email your crossword solution to: by Tuesday 22 April

ALPHABETICAL ABSORPTION This is a puzzle for 1 April. Clues are in alphabetical order of the solutions, which are to be entered into the grid where they fit. There are many correct ways of completing the grid, any of which will be deemed as correct

With thanks to Araucaria, of the Guardian, who had the original idea for this puzzle.

■ Phoenician deity crosses Rubicon finally –

■ A fish twice stored in jelly (4,4)

■ Fruit and nuts if more than one (6)

■ Foreign prince comes back somewhat open

■ A candy Ada chewed on occasion of

■ ■ ■ ■

(4) Sadly, a girl came short (4) A painter with substantial Palestinian presence? (6) Cameron blockbuster accepted a tax on Annual Report (6) AA shambles the French excused by arrangement on Atlantic Islands (7)

not very interesting (5)

National celebration (6,3) ■ Bird from Scottish Island leads State

Academy (8) ■ Mass of adult bear assumed (5) ■ Two vehicles surround a third (7) ■ Boat seen in a river in Canada (9) ■ Physicist at a distance apart from week

when Penny stood in (7) ■ Capital – the big smoke to some (6) ■ Expelled in eruption by Conservative when

removed from toilet (4) ■ Hard surface found when nut detailed? (7) ■ Scotsman escorting a wide bird (5) ■ Eastern language printed either way (9) ■ Indian prince backing open part of fence

with maiden (9) ■ It explores space cut through the nose? (4) ■ Heathen with utensil collecting silver (5) ■ Provides better coverage than a map with

a misprint (6,3) ■ Capital where Arab beheaded by a

Toureg leader (5) ■ Either way, it’s theatrical to take Romeo’s

sensory system (5) ■ Greens where carefree days spent? (5)

© Nylfia

■ Content hints at Anti-Christ? (5)


■ State of meat placed in front of a feline

located backwards in balsam poplar(9)

THE ACTUARY • April 2014

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25/03/2014 10:29

HAVE YOU GOT WHAT IT TAKES? For information on IQ testing in your area, visit


Movie musings Mensa puzzle 580 Rearrange the letters of ‘AWFUL AND DANGEROUS FRIEND’ to give the title of a well-known film. What is it? And rearrange the letters of ‘HIGHLY VALID TESTING’ to give the title of a wellknown film. What is it?

Racing to a conclusion Mensa puzzle 579 Two cars set off from the same point, at the same time, to travel the same 165 mile journey. If car A travels at 55 mph and car B travels at 40 mph.

For a chance to win a £25 Amazon voucher, email your solution to puzzle 571 to: by Tuesday 22 April TERMS AND CONDITIONS The prize will be awarded for the first correct entry drawn at random from those received before the closing date. The winner’s name will be announced in the next edition. Please note, the puzzle editor’s decision is final and no correspondence will be entered into. We reserve the right to feature the winner’s name in The Actuary. Your details will not be passed to any third party in connection with this draw.

How long will it take car B to catch up?

One direction Mensa puzzle 582

Bridge puzzle 41 Are you in control?

In which direction should the missing arrow point?

The Bidding S N 1♥ 2♣ 2♥ 4♥

♠4 ♥Q72 ♦A943 ♣AQJ98

N W You, as South, playing Rubber Bridge, end up in 4♥. West leads K♠.

Correct to the letter Mensa puzzle 581 What letter should replace the question mark?






p34_35_apr_crossword_puzzles_FINAL•CT.indd 35


How do you approach this hand?


♠A753 ♥KJ1083 ♦5 ♣K105

Bridge puzzle provided by David Lampert

April 2014 • THE ACTUARY


25/03/2014 10:29


SOLUTIONS FOR MARCH 2014 Congratulations to this month’s winner – Lynne Davis

Bridge puzzle 40 The Puppeteer A useful convention, when Partner opens 2NT, is 5-card ‘Puppet’ Stayman. You bid 3♣. You need to be holding at least one 4-card major to bid this, and enough points for Game. Partner bids 3♥/3♠ with 5 cards in the suit. With 4 cards in one or both majors, Partner bids 3♦. With no 4 or 5-card major, Partner bids 3NT. When Partner bids 3♦, you bid the major you HAVEN’T got. The idea is that the very strong hand is not exposed and therefore always plays the contract. On each of these hands, the bidding goes: Partner You 1NT




1. Should you have bid 3♣? 2. What do you bid next? Hand 1: Yes, bid 3♣. Over 3♦, bid 3♥, showing spades. If Partner’s 4-card suit is hearts, Partner will bid 3NT. If it is spades, he will bid 3♠ and you will raise to 4♠. Hand 2: No. With a 4-3-3-3 hand, there is no advantage in playing in a suit so with 6 points, facing at least 20, bid 3NT. Hand 3: Yes, bid 3♣. Over 3♦, bid 3♠, showing hearts. If Partner has spades, he will bid 3NT. If he has hearts, he will bid 4♥. After 3NT, you bid 6NT (33-35 points between you). After 4♥, bid 4NT (whatever version of Blackwood you and your partner have agreed). A small slam is virtually certain and a grand slam is possible. Hand 4: Yes, bid 3♣. Over 3♦, you are happy to play in either suit. One method is to bid one of the suits and if Partner bids 3NT, you bid the other one. However, in the latter case, it means the strong hand becomes Dummy. A better solution is to bid 4♦. Partner now bids his 4-card major. Hand 5: No. With such a weak, shapeless hand, pass – and hope for the best. 1



♠KJ65 ♠7

♠KJ65 ♠7632



♥QJ75 ♥9432



♣QJ942 ♣1065




♦KJ642 ♦74





Bridge puzzle provided by David Lampert


THE ACTUARY • April 2014

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T Y M I E Y A Y R A C K E R O L S N T A G O N E U R U R G E I A R N A T E N E T A H I T I A O A R U L N A E S U S T E R S —

Sector dissector Mensa puzzle 575


Pair the sectors to find four associated names. What are they? Answer: Missouri, Colorado, Oklahoma and Maryland can be read when alternate sectors are paired. Congratulations to this month’s winner – Mark Pocock

Bird with brains Mensa puzzle 576

On the hands below:




© Nylfia

At the back Coffee break

On each row place a five letter word that will link the two given words (i.e. LUNCH – BREAK – THROUGH). When completed the centre letters of the added words will give a type of bird reading downwards. What is it? Answer: Penguin. The words are PAPER, BREAD, PANEL, NIGHT, MOUTH, CHILD and BENCH


_ _ _ _ _ _ _

_ _ _ _ _ _ _

_ _ _ _ _ _ _

_ _ _ _ _ _ _

_ _ _ _ _ _ _


Name that number Mensa puzzle 577 What number should replace the question mark in the grid? Answer: Two. In each column the first number multiplied by the second number gives the third number, minus the fourth number gives the fifth number.






2 6 4 2

8 8 5 3

1 7 3 4

3 9 8 1

2 8 6 ?

Coining it in Mensa puzzle 578 In your pocket you have £13.77. It is made up of four different denominations of coins and the largest denomination is £1. There is exactly the same number of each coin in your pocket. How many of each coin is there and what are their values? Answer: Nine of each of £1, 50p, 2p and 1p.


25/03/2014 10:34

At the back Student

Student Renewing good resolutions can help with impending exams, and also inject a healthy lack of guilt, advises Jessica Elkin

EXAMINING YOUR CONSCIENCE What’s that ringing sound in the distance? That’s right, it’s the bells of doom tolling once again. For those who have been through several exam sittings, it’s a bit like having tinnitus. For family, friends and partners it is the time when you become boring and moody. For yours truly, there is the added difficulty of writing something that does not get everyone down about exams or culminate in PANIC! PANIC! PANIC! Or rehash old material (much). Still, lest we forget, this is a significant time of year for other reasons as well. We are a quarter of the way through 2014; we are starting a new financial year; and spring has finally arrived with its rabbits, daffodils, chicks and Easter. The New Year might be the official time of resolutions, but spring is the time Mother Nature has officially designated for new beginnings and rebirths. This being the case, it’s perhaps a good time to have an epiphany that New Year was only a warm-up and that your resolutions don’t really start until now.

Eggsplanation I confess to being somewhat ambitious with mine. Self-improvement was a common theme. I listed a bunch of them to a friend back in January and his reaction was to remark, “So you’re going to become a completely different person”. It was a fair point, but luckily this was not something anyone actually needed to worry about, because naturally I failed most


p37_apr_student_FINAL•CT.indd 37

with aplomb. This is a long-held tradition of mine and, I’m sure, of many others. Interestingly, the most successful resolution I came up with – perhaps my most successful resolution ever – was also the most selfish and indulgent that I have ever tried. It seems obvious now that this is the secret to keeping resolutions: to make ones from which you directly and immediately benefit, and which do not require any kind of virtuous behaviour. Self-denial and effort are heavy burdens to carry through the year. The successful resolution to which I refer

was a simple one: to give up guilt. By this I don’t mean that I now remorselessly steal kids’ lunch money or refuse to recycle or put horrible pictures of my friends on Facebook (well… maybe the latter) but that the sort of self-bullying that usually accompanies eating too much/wasting time/spending money I don’t have is now simply shrugged off. It’s much easier than I thought. I just think, “Wait! No guilt,” and any self-loathing disappears. No muss, no fuss. It also makes studying that little bit less stressful. When you’ve been all too tempted to catch up with old friends (I wonder what Mike is doing, haven’t seen him in 15 years. I’ll just look at his Facebook profile) or read the news (It’s really important what’s happening in the world. Oh, and there’s something about cats) or watch important educational documentaries (Beauty pageants! For children!), you can shrug off any unease and get on with your day.

Is looking back just sabotaging your revision? You’d think it would make you more likely to waste time doing the above if you didn’t feel remorse about it afterwards – but that’s not what I’ve found. I realised that feeling guilty about things doesn’t actually result in higher productivity or improved future behaviour. So I urge you to try the same tactic. Drop the guilt and instead focus on your next move. While you’re dwelling on the past you’re more likely to turn to comforting behaviour, and the vicious cycle continues. This tactic will be particularly useful at Easter if you are a fan of chocolate, especially if coming out of Lent and rehabilitating yourself back into gluttonous society. Assuming you made it all the way of course. But if you didn’t – still no guilt! Marvellous. You deserved a treat while studying anyway. It’s a laborious business. So without further ado, I will allow you to study in whichever way works best for you – and hopefully with a bit less self-flagellation than you might otherwise subject yourself to. Unless that’s what you’re into, of course. Disclaimer: none of this lack of worry affects my attitude towards things happening in the future, including examinations – which essentially boils down to an overwhelming feeling of PANIC! PANIC! PANIC! a

April 2014 • THE ACTUARY


25/03/2014 10:34

At the back Appointments


Moves Martin Clarke has been chosen by the Treasury as the next government actuary. Clarke, a fellow of the Institute and Faculty of Actuaries, will take up the post later this year and serve for five years. He succeeds Trevor Llanwarne, who has been in the role since 2008. Clarke is currently executive director of financial risk at the Pension Protection Fund (PPF), a post he has held since 2006. As an executive member of

the Board, he has led the investment, actuarial, risk and recoveries teams of PPF. Prior to working at the PPF, Clarke was at the Co-operative Financial Services for 28 years in a variety of senior positions in their life and insurance business. JLT Employee Benefits has appointed John Breedon (below) as head of investment consulting, a role he has fulfilled in an acting capacity since January. Breedon

was previously head of corporate consulting. Hymans Robertson has appointed John Taylor (right) as head of delivery for its Guided Outcomes (GO) proposition. Taylor joins the firm from NEST, where he was managing director of customer and proposition. He previously held marketing director roles with Lloyds Banking Group and Standard Life. He will be responsible for leading the delivery of GO’s technology platform and

the ongoing operation of the proposition. Pitmans Trustees announced the appointment of Colin Richardson (middle) as client director. Richardson has 25 years of pensions and consultancy experience. He joins from Buck

JOSEPH MUDENGE Employer and area of work Rwanda Social Security Board – planning, research and risk management.

How would your best friend describe you?

Favourite Excel function? VLookup – our paths

What motivates you? The fact that there is

How do you relax away from the office?

always room at the top.

Slacklining, table tennis and watching soccer – Arsenal in particular.

abit? What’s your most ‘actuarial’ habit? Quantifying everything and spending far too long at the office – due to the exams.


If you could learn one random skill, what would it be? Wind surfing.


Name five dream companions to be stuck on a desert island with? Russell Peters (a Canadian comedian) – just for laughs; baller) – for Thierry Henry (French footballer) onversation; a bit of soccer and French conversation; on in Nelson Mandela – for a lesson andan humility; Paul Kagame (Rwandan nd president) – for his vision and discipline; and Will Smith – just because he is Will.

Towers Watson has appointed Jo Kite (above, right) as the

head of its pensions and benefits practice in Scotland, based in Edinburgh. Kite, a qualified actuary, has 20 years’ experience in the pensions and insurance industry at Aviva, Delta Lloyd and Standard Life, where she was director of its workplace proposition.


crossed a few years ago and no Excel function has been as exciting since.

What is your personal motto? Do it now.

Consultants, where he was senior corporate actuary. Prior to this, Richardson was divisional director at JLT and has held positions at KPMG, Barnett Waddingham and Watson Wyatt.

If you could go back in history, who would you like to meet? Jesus – that would help answer a lot of questions and clear confusion for me.

What’s your most treasured possession?

Alternative career choice? Nursery school lo children. teacher because I love

Tell us something unusual about y you rself When I was seven a classyourself mate accidental accidentally pierced my left pupil with a p pencil. It healed without tr treatment and I can clearl now. see clearly

Greates Greatest risk you have ever taken? Rock climbing at the E Eiger (Switzerland) – the ‘what if’ thought still bothers me.

My Rubik’s cube – it always feels good when am asked “How did you do that?”.

What are the top three things you would like to achieve in your lifetime? Be a successful qualified actuary; have a house on a beach; and watch my baby son grow into a successful young man with good character.

If you ruled the world, what would you change first? First, I would introduce and enforce one official language; everything else would then be a little easier.

Do you know an actuary destined for greatness? You can nominate an Actuary of the Future by emailing

THE ACTUARY • April 2014

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25/03/2014 10:35


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£70k - £100k Basic, London

Large UK Life insurer seeks a Longevity Actuary to support the growth of the mortality assumptions and the subsequent approval process. The role requires a strong understanding of modelling techniques used for mortality calculations and an appreciation of how the results will affect other business units. A good understanding of Reporting and Capital Management processes is desirable.

A bespoke consultancy requires a qualified Life Actuary with annuities experience to join their growing team. This role will give you access to a variety of senior professionals in the industry, assisting them with key decisions going forward. If you have worked with annuities and are seeking a highly visible role with real input to the industry, this is for

Business Development Actuary

Risk and Capital Actuary £55k - £80k Basic, London

£60k - £90k Basic, London This is a chance to work for a market leading reinsurer who is recruiting a qualified actuary to grow their business development team. This role is a great opportunity to gain managerial experience and mentor students whilst working alongside high calibre individuals and with the Chief Actuary. An outgoing personality is key along with a good technical understanding.

A multinational life insurer is looking for a nearly/newly qualified actuary to strengthen their risk function. You will work closely with the finance team to asses the risk and capital requirements and liaise with senior stakeholders. This is a great opportunity if you are looking for a more commercial role to develop your actuarial skills.

Life Insurance Consultant

Product Development Actuarial Analyst £35k - £75k Basic, South

Interested in Consultancy? A growing Life Insurance Consultancy team is looking for Actuarial Analysts through to recently qualified Actuaries to cater for the increased workload in their Solvency II, Economic Capital, Modelling and Reporting projects. This is a fantastic opportunity to gain experience within a great team, with a strong chance of developing through the Consultancy quickly.

£30k - £45k Basic, London A niche life insurer with a strong presence in the market is looking for an ambitious actuarial analyst to help with their product development. Within this small team you will gain great exposure to a variety of products and work closely with the wider actuarial team to help consult on projects. You should have good exam progress and a consultative personality.

Contract Roles Capital Contractor

Solvency II Actuaries

£700 - £1,000 per day, 6 months, London

£750 - £1200 per day, 6 months, London

This leading niche insurer is looking for a contractor to help with project based work. Reporting to the chief actuary, you will assist with the internal model development, standard formula calculation as well working on Lloyd’s submissions. In order to be successful you must have strong capital modelling experience.

This leading Insurer is looking to recruit a Solvency II Actuary with Internal Model and regulatory interpretation experience. To be successful you must have up to date Solvency II knowledge and know how to apply it practically to the business as well as experience in reviewing and challenging the model.

Reserving Contractor

Solvency II Contractor

£700 - £900 per day, 6 months, London This leading insurer is looking for a contractor, for an initial 6 month period subject to extension with reserving experience. You will be required to help backfill the day to day reserving work as well as help the quarterly GAAP/technical provisions under Solvency II and reserve risk parameters. In order to be successful you must have relevant GI Reserving and ResQ experience.

£700 - £900 per day, 6 months, South East A Solvency II expert is sought by an International Composite Insurer to provide technical expertise and advice throughout their Solvency II Programme. You will be significantly involved in the development and implementation of the Group Risk and Capital Model to be compliant with Solvency II and TAS requirements. Risk Modelling and Solvency II experience is imperative, a qualified individual is preferred.

Risk Roles Risk analyst

Senior Financial Risk Manager

£30k - £40k Basic, London

£90k - £125k Basic, London A well known Life Insurance firm is looking to appoint an experienced Actuary in to their Financial Risk Management team. The role has come about due to an internal promotion and the successful candidate will work underneath the Head of Financial Risk in covering group wide issues and themes. You will develop the existing oversight framework and provide regular assurance reports to the Group Board Risk Committee on the adequacy of systems and controls.





Life Insurance

Life Insurance

Risk Management

Risk Management

+44 (0) 207 337 1202

+44 (0) 207 337 1207

+44 (0) 207 337 1202

+44 (0) 207 337 1202

0207 337 8800 p43_ACT.04.14.indd 43

Our client, a successful Lloyd's syndicate, is currently seeking an ambitious Risk Analyst to join their risk management team. You will have already gained risk experience working in insurance and be looking for a role with clear progression. Working alongside the risk managers you will concentrate on risk assessment and reporting, as well as reviewing the ORSA and calculating risk exposures.

September 2013 • THE ACTUARY 43

25/03/2014 11:22


Client Solutions Strategist London The role sits within the client strategy team of one of the UK’s leading institutional asset management groups and is broadly focused on developing and enhancing client strategy across both multi-asset and LDI investment solutions. The role will be centred on helping to de¿ne the ¿rm’s overall client strategy. The group are ultimately looking to be a holistic end-to-end retirement solutions provider for their clients. Part of this will be strategically reviewing the current approaches as well as developing new ideas about how best to structure their overall proposition. For the largest clients this will involve developing highly tailored, bespoke solutions, for the smaller clients, it may involve looking at how best to offer pooled LDI and multiasset funds.

Contact Rob Bulpitt

Rupert Rickard Ian Povey

Director Actuarial, Pensions Head of of Actuarial, Insurance & Insurance RiskManagement Management Pensions Risk 020 7092 3237

Actuarial,of Pensions Insurance Risk Manager Actuarial&Non-Life and Management Insurance Risk Management 020 7092 3219 3265

Office Number

For current opportunities please visit

+44 (0)20 7092 3200


Deputy Chief Actuary – Singapore

Modelling Architect – Hong Kong

To SG200,000

Up to HKD 1.4m package

Highly successful General Insurance business is seeking to hire a talented Actuary with broad technical and commercial skills to act as Deputy Chief Actuary in a regional capacity across the Asia business units. Your CV will demonstrate strong commercial lines pricing experience as well as solid reserving knowledge. Willingness to travel is essential.

An instrumental role has arisen at this globally recognised firm to lead the model redevelopment of their entities in Asia. This is a high profile position engaging with stakeholders throughout the Group to build a sustainable and adjustable model framework that can be flexed to different country needs. If you are a Prophet expert interested in Asia please apply.

Special Projects Actuary – Hong Kong

Manager Actuarial Analysis – Hong Kong

Up to HKD 1.2m + Benefits

Up to HKD 1m package

As the internal specialist you will provide technical support to in-house Actuarial teams across Asia Pac. Working independently you will liaise extensively with key stakeholders and be at the heart of business critical operations. This role requires an experienced Actuary with string project management skills and a breadth of expertise in Life Insurance.

Our multinational client in Asia is looking to attract a career minded Actuary with advanced analytical skills across Methodology, Assumption Review, Experience Studies and Stress Testing to join this newly created team. A proven track record and managerial experience is preferred for this Manager level role. International candidates are welcomed.

Risk Manager – China

Senior Analyst – Hong Kong Up to RMB 1m package

Market Rate

One of the top ten insurers in China requires a strong candidate with either Solvency II/ERM/Credit Risk/Operational Risk/Market Risk experience to join their Group Office as a Risk Manager. This role will help shape the risk management framework and influence China’s risk based capital regulations from the outset.

Our high growth Hong Kong based client is looking for a hungry part-qualified general insurance Actuary to join its analytical function in this new role. Interacting with the Heads of all business functions, you will combine traditional Actuarial work with front office. VBA, MS Access and SQL, complimented by interpersonal skills are desirable.

HFG Singapore Office: Jason Sykes Clare Bethell Graeme Braidwood 44

Managing Director Director Senior Consultant

Hallie Chin Merri Knox Tong Yu

Consultant Consultant Consultant

THE ACTUARY • April 2014

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25/03/2014 11:51


Darwin Rhodes Welcomes..... Clinton Poore We are excited to welcome Clinton Poore, who joins the Actuarial Team as a Senior Consultant. Clinton is a highly successful and respected Actuarial recruitment agent who has been working across both UK and European Life and Non-Life markets for over 10 years and has joined Darwin Rhodes to work alongside Adam Goodwin in the Life Insurance Actuarial market

Solvency II Part II... The recent announcement has seen an increase in companies re-engaging in the market for Solvency II ƌĞůĂƚĞĚĐŽŶƚƌĂĐƚŽƌƐĂƐĂƌĞƐƵůƚŽĨƚŚĞĞŶĚĚĂƚĞĂŶŶŽƵŶĐĞŵĞŶƚ͘dŚĞĚĞŵĂŶĚĨŽƌŬĞLJŚŝƌĞƐǁŝƚŚƐƉĞĐŝĮĐƌĞůĂƚĞĚ ƐŬŝůůƐĂŶĚĞdžƉĞƌŝĞŶĐĞŝƐƚƌĞŶĚŝŶŐ͘tĞĂƌĞĞdžƉĞƌŝĞŶĐŝŶŐĂŶƵƉƐƵƌŐĞŝŶ^ŽůǀĞŶĐLJ//ƌĞůĂƚĞĚŽƉƉŽƌƚƵŶŝƟĞƐͲĨƌŽŵ 3 months to 12 months with extensions likely to trip into 2015. Register your interest now at: ůŝĞŶƚƐͲ&ŽƌĂĐŽŶĮĚĞŶƟĂůĚŝƐĐƵƐƐŝŽŶŽĨLJŽƵƌƌĞƋƵŝƌĞŵĞŶƚƐƉůĞĂƐĞĐĂůůĚĂŵ'ŽŽĚǁŝŶ͕,ĞĂĚŽĨĂƌǁŝŶ ZŚŽĚĞƐͲ>ŝĨĞΘWĞŶƐŝŽŶƐͬ/ŶǀĞƐƚŵĞŶƚƐŽŶϬϮϬϳϵϮϵϳϲϲϳŽƌĞŵĂŝů͘'ŽŽĚǁŝŶΛĚĂƌǁŝŶƌŚŽĚĞƐ͘ĐŽŵ

COMPETITION! tŝŶtĞŵďůĞLJdŝĐŬĞƚƐĨŽƌƚǁŽ Gavin’s garden is in the shape of a triangle. It is dividedinto four vegetable patches by hedges which run in straight lines from two of the corners as shown here: ?

The areas of the three triangular veg patches are 8, 5 and 10 hectares. What is the area of the fourth veg patch? ŵĂŝůLJŽƵƌĂŶƐǁĞƌƚŽůŽŶĚŽŶΛĚĂƌǁŝŶƌŚŽĚĞƐ͘ĐŽŵ͘ůůĐŽƌƌĞĐƚĂŶƐǁĞƌƐǁŝůů ďĞĐŽůůĂƚĞĚĂŶĚŽŶĞůƵĐŬLJǁŝŶŶĞƌǁŝůůǁŝŶϮƟĐŬĞƚƐƚŽĂĐŚŽŝĐĞŽĨƵƉĐŽŵŝŶŐ ĞǀĞŶƚƐĂƚtĞŵďůĞLJ^ƚĂĚŝƵŵ͘


5 ϭϬ


p45_ACT.04.14.indd 45

April 2014 • THE ACTUARY 45

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Fresh Thinking For the latest news and views, visit With high quality content, useful tools and easy navigation, you will find a wealth of actuarial resources at your fingertips. Register for weekly email newsletters Read the latest features and opinion and add your comments Read about actuaries stepping into new frontiers Browse, the official jobs board of the UK actuarial profession

Visit 46

THE ACTUARY • September 2013

p46_ACT.04.14.indd 46

25/03/2014 11:58

Celebrating 10 years of actuarial recruitment – will your 2014 be bright?

January/February 2014 • THE ACTUARY 47

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Appointments NON-LIFE RISK ACTUARIAL LEAD up to £110k + bonus + benefits NON-LIFE SOUTH EAST




£ excellent + bonus + benefits

£ excellent package





We are currently working on an exciting opportunity for a qualified non-life actuary to provide commercial insight and thought leadership in relation to Solvency II, ORSA, stress-testing, risk policies and risk appetite.

Market leader seeks actuary with strong interpersonal skills and experience of traditional reinsurance pricing for casualty business, including exposure rating and experience rating.

Specialist (re)insurance Group seeks a pricing expert to be responsible for pricing all lines of business. You will develop actuarial assumptions, and assist the Syndicate Actuary in developing business modelling and reporting processes.




£ excellent + bonus + benefits

£ excellent package

£ excellent + bonus + benefits







Our client is seeking a qualified actuary to develop its capital and reserving capability. A natural and gifted communicator, you will have hands-on experience of building and coding capital models.

Our client has an exciting opportunity for a qualified non-life actuary with commercial lines experience to provide technical pricing advice to the business to influence the group's underwriting strategy.

Seeking a qualified actuary to deliver on all aspects of household pricing for a major insurance group. Develop yourself and become a key player as you shape the direction of the group's technical pricing strategy.




up to £80k + bonus + benefits

£ excellent package

£ excellent + bonus + benefits






STAR1725 & STAR1786

Seeking a qualified non-life actuary to take the lead on a range of Personal and Commercial lines projects for the Underwriting team. Excellent communication and people-management skills with strong technical knowledge essential.

We have an exciting opportunity for a high-calibre qualified or part-qualified non-life actuary with pricing experience and strong stakeholder management skills to join a leading London Market insurer.

Seeking qualified and part-qualified non-life actuaries with proven pricing ability to contribute to the Commercial Lines pricing strategy, developing and presenting pricing recommendations to senior management.




ZAR excellent + bonus + benefits

£ excellent + bonus + benefits

£ excellent + bonus + benefits







This is a great opportunity for a qualified non-life actuary with strong client management skills and knowledge of modelling platforms to lead consultancy services including Solvency II and risk.

Our client seeks a part qualified non-life actuary to take responsibility for reinsurance optimisation and design. This is an excellent opportunity for a highly driven, detail focused, and self-motivated actuary.

Join this leading consultancy to apply your capital, reserving or pricing skills on a wide range of exciting projects. A fantastic role for a part-qualified or qualified actuary wanting to go beyond traditional actuarial boundaries.




up to £65k + bonus + benefits

up to £60k + bonus + benefits

£ competitive + bonus + benefits







Our fast-growing and ambitious client is seeking a non-life actuary with pricing experience and statistical modelling skills to develop its pricing strategy, support the team, and advise the Retention team.

We are working on a wide range of personal lines pricing roles. Opportunities exist for part-qualified pricing actuaries within household, motor (including telematics), healthcare, pet and travel.




€ excellent + bonus + benefits

£ excellent + bonus + benefits

£ excellent + bonus + benefits

Seeking a talented individual with a solid understanding of actuarial processes to lead as a “subject matter” technical expert and deliver continuous technical improvements to actuarial data feeds, systems and processes.



Our client seeks a qualified non-life actuary to lead the provision of consultancy services for Solvency II Model Assurance and governance. Experience with modelling platforms is essential.



This is a fantastic opportunity for a modelling expert to take up a key role with a leading insurer. Set the direction of all technical pricing developments and help the business realise its targets.



Global management consulting firm is seeking exceptional actuaries from the insurance sector to join in its success. You will benefit from greater and faster exposure to tougher challenges.

Antony Buxton FIA Anton

Lance Randles MBA La

Paul C Cook

Joanne Young Joa





THE ACTUARY • September 2013 M +44 7766 414 560 E

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M +44 7889 007 861 E

M +44 7740 285 139 E

M +44 7739 345 946 E

25/03/2014 13:51




£ excellent package

£ excellent + bonus + benefits STAR1835


£ very attractive package STAR1818



Our client is seeking superstar part-qualified or qualified actuaries with life and investment experience and exceptional modelling and programming skills for a once-in-a-lifetime opportunity.

World leader in reinsurance is seeking a qualified life actuary with reinsurance pricing experience and strong interpersonal skills to make a difference within its London-based team.

Our client has an exciting opportunity for a qualified life actuary to be responsible for leading and managing its asset modelling activity for both regulatory and economic capital purposes.




£ excellent + bonus + benefits LIFE SOUTH COAST

£ excellent package

up to £85k + bonus + benefits STAR1756





Opportunity for an actuarial leader to leverage their technical and management skills in a growing and successful business. An excellent chance to take on a management role within a growing provider.

Our client has an exciting opportunity for a qualified life actuary to take on a senior role within its audit function, where you will develop an audit plan that provides appropriate risk based coverage of key financial risks.

Leading insurer seeks qualified life actuary with strong risk experience and excellent communication skills. This is a fantastic opportunity to build your profile in a key role reporting to the CRO.




£ excellent package

£ excellent + bonus + benefits

£ excellent + bonus + benefits







Leading insurer is seeking a qualified life actuary to support senior management by providing specialist actuarial technical expertise and advice in relation to the implementation of Solvency II.

Leading insurer has an unrivalled opportunity for a talented individual with a strong understanding of the key drivers of risk and capital to develop and deliver its Internal Model validation framework.

Leading consultancy is seeking a part-qualified or qualified actuary to develop and support a range of pension scheme asset, liability and risk models.




£ excellent + bonus + benefits

£ competitive package

£ excellent + bonus + benefits







Leading life company is seeking a qualified actuary with Prophet developing experience to take responsibility for the gate-keeping and control environment for its actuarial models.

A fantastic opportunity for a part-qualified or qualified actuary within this niche insurer. Our client is ideally looking for a personable candidate with health industry experience and good knowledge of Prophet.

Seeking a part-qualified modelling actuary to test a range of pension scheme asset, liability and risk models, to ensure that the model output is accurate and products are high quality and usable.




£ very attractive package

£ to attract the best

£ to attract the best



Our client seeks an innovative investment analyst to implement the manager research process and ensure efficient portfolio construction through management of the risk budget, return target and manager selection/weights.



Leading consultancy seeks high-quality pensions actuary with experience of business development in the corporate pensions sector. This is a fantastic opportunity to work closely with the practice leadership of a major firm.



Our client seeks an exceptional part-qualified or qualified pensions actuary to join its growing midlands based practice. This is a great opportunity to accelerate your development within a market leader.

Star Actuarial Futures Ltd is an employment agency and employment business





£ excellent package

£ to attract the best

£ depends on experience



A leading consultancy seeks a scheme actuary with a strong commercial focus and excellent business development experience to lead its trustee practice.


We are working on a variety of Senior Manager, Director and Partner level consulting roles with a wide range of clients. Please contact us for more details of these fantastic opportunities for high-flying pensions actuaries.



Our client has a number of exciting opportunities for qualified pensions actuaries to strengthen the practice's actuarial and consulting capability within the London Office through involvement in marketing and new business activity.

Louis Manson Lou

Irene Paterson FFA Ire

Peter Baker

Clare Roberts





M +44 7595 023 983 E

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M +44 7545 424 206 E

M +44 7860 602 586 E

September 2013 • THE ACTUARY 49 M +44 7714 490 922 E

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Appointments GENERAL INSURANCE - UK Global Deputy Head of Reserving London Paul Francis £150,000 + Bonus + Benefits

Reinsurance Pricing Actuary London Paul Francis £130,000 + Bonus + Benefits

My client, a leading London market insurer, is seeking a commercially mature reserving Actuary. You will work with a geographically dispersed team in a dynamic, large risk carrying (re)insurance environment. Senior management accountability!

I have a mandate seeking a (re)insurance pricing Actuary to work across a broad portfolio of risks from specialty lines through to large commercial P&C risks. You must be technically strong. Reinsurance is NOT a prerequisite - direct pricing experience also welcomed.

G.I. Head of Modelling Sarah Robins

Head of Pricing Sarah Robins

South East London £120,000 + Bonus + Benefits

South West England £120,000 + Bonus + Benefits

A large international retail insurer is looking for a Head of Modelling to join either their home or motor part of their business. You will be a qualified Actuary and will act as a key technical liaison for pricing and underwriting, both internally and externally.

My client is looking for an experienced Pricing Manager to lead and be accountable for all major UK commercial and personal lines of business. You must be a qualified Actuary with extensive pricing experience.

Actuarial Lead Rob Bentham

South London Up to £110,000

Personal Lines in the London Market London Rachel Kelly Up to £65,000 + Bonus + Benefits

A genuinely unique opportunity to be involved in a start-up style role with $billion backing. You will be a commercially minded Actuary with broad actuarial knowledge, who wants to work directly with customers to develop consultancy business propositions.

**EXCLUSIVE ROLE** A dynamic, growing Lloyd’s business is looking to employ their first in house Actuary to build and head up a team focusing on pricing optimisation for their household business. Excellent career progression. Personal lines and Emblem needed.


London £800 - 900/day

Our client, an industry renowned insurer, is seeking an Actuary on a contract basis to lead the delivery of their 2014 ORSA reporting along with stress and scenario testing. Experience and knowledge of Solvency II requirements are beneficial.

Pricing Actuary Elise Salter

London £750 - 900/day

A London market client is seeking a Pricing Actuary to join their team on an interim basis. The work will mainly be pricing with some reserving and capital. The main focus will be internal model parameterisation, in particular underwriting parameters.

LIFE INSURANCE - UK Enhanced Annuities London (City) Clare Nash £110,000 + Car Allowance + Package

Investment Strategy Actuary London (City) David Parker £100,000 + Car Allowance + Package

EXCLUSIVE APPOINTMENT: Experienced Actuary sought to grow an ambitious team. You will have substantial pricing experience gained from either a longevity/protection environment. An entrepreneurial appointment which will fast track your career.

A leading UK insurance group is looking to appoint a senior life or investment Actuary for their group finance team. Liaising across Asset Managers and investment banks you must be an excellent communicator with relevant ALM experience.

Pricing Actuary Clare Nash

Capital Modelling Actuary David Parker

London (City) £90,000 + Car Allowance + Package

North £70,000 + Package

My client seeks a qualified Actuary with solid protection experience to join a growing team. You will have a background in pricing and product development. Highly visible position with clear career progression in a top tier organisation.

An emerging UK life business has a requirement for a nearly/newly qualified Capital Modelling Actuary for a recently created operational risk role. You will have had exposure to ERM framework development and/or risk appetite previously.

Risk Actuary Richard Howard

Actuarial Analyst Richard Howard

London £65,000 - 75,000 + Bonus + Benefits

Exceptional opportunity for a nearly/newly qualified Actuary to join the risk oversight function of this leading global insurer. You will work closely with the senior team to help influence strategic decision making from a risk perspective.

London £30,000 - 45,000 + Bonus + Benefits

We have a number of live requirements in London for Actuarial Analysts within some of the leading teams in the life insurance market. I am interested in speaking to aspiring actuaries with relevant experience in product development, pricing and capital.

CONTRACTS - LIFE INSURANCE - UK Enhanced Annuities Actuary Benjamin Moses

London £500 - 600/day

My client seeks to recruit an experienced actuarial professional with an in-depth knowledge of enhanced annuities in order to assist in the creation of a new team. The role will be a long term contract which is highly likely to extend further.


Solvency II Actuaries Benjamin Moses

London £800 - 1,000/day

My client, a highly regarded life insurer, seeks several qualified actuaries with risk, capital and regulation knowledge. Several positions are available in their Solvency II teams in order to prepare for the upcoming deadline.

THE ACTUARY • September 2013

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25/03/2014 13:52 ASIA Head of Valuations Hamza Mush

Indonesia £££Competitive

General Insurance – UK

A top-tier insurer with global presence and no.1 brand recognition is seeking a Head of Valuations to support, develop, and enhance the capability of local actuarial teams. You will have a minimum of 10 years of experience and excellent communication skills.

Paul Francis

0207 649 9469

Rob Bentham

0207 649 9351

Regional Pricing Actuary Gary Rushton

Sarah Robins

0207 310 8552

Rachel Kelly

0207 310 8579

Hong Kong £££Competitive

This is an exceptional role to provide overall pricing support and oversight to my clients operations across Asia. Successful candidates will have a minimum of five years PQE with previous relevant technical and leadership experience.

Portfolio Management Actuary Gary Rushton

Contracts - G.I. - UK Elise Salter

Hong Kong £££Competitive

0207 649 9355

Life Insurance - UK

Required- experienced Actuary to work within an intimate team focusing on the technical aspects of managing the in-force portfolio of the life & health business across Asia. Stakeholder management required and deep technical reporting experience.

Clare Nash

0207 649 9350

David Parker

0207 310 8649

Senior Pricing Manager Hamza Mush

Richard Howard

0207 649 9356

Singapore £££Competitive

Well-renowned insurer is seeking an experienced Actuary to drive all pricing initiatives and mentor a team of young actuaries. You will gain excellent exposure throughout the APAC region and have the opportunity to take your career to the next level.

Senior Pricing Actuary Toby Weston

Hong Kong £££Competitive

Contracts - Life Insurance - UK/Europe Benjamin Moses

0207 310 8793

Asia Jonny Plews

+852 5804 9200

Our client is a P&C insurer who is experiencing rapid growth within their Asia division, particularly within Greater China. They are seeking a qualified Actuary to join their team in HK pricing property, casualty and specialty business. Mandarin essential.

Gary Rushton

+852 5804 9223

Toby Weston

+852 5804 9042

APAC Pricing Actuary Toby Weston

Philip Chau

+852 5804 9287

Hamza Mush

+852 6086 9879

Singapore £££Competitive

Our client is a global P&C giant, due to premium growth and a product refresh they are seeking NNQ Actuary with strong commercial lines pricing experience. The APAC wide role will involve you taking the business through an exciting period of change.

EUROPE Life Pricing Actuary Manuel Lovell

Germany Up to €95,000 + Bonus

France Emérique Opou

+33 1 76 77 46 30

Agathe Ibazizen

+33 1 76 77 46 31

Ireland Patrick McMahon

+353 1 437 0625

My client is looking for a Life Actuary with good experience in pricing longevity risk, annuities and related products. You would be expected to determine the frameworks in which these products can be implemented across the company in regards to Solvency II.

Benelux Niels van Nieuwkerk

+31 20 716 8327

ALM/SAA German Speaking Analyst Alessio Montaruli

Julien Fabius

+31 20 716 8450

A leading German insurance group is recruiting for an ALM analyst to develop strategic asset allocation for the life and P+C portfolios on the South European perimeter. The candidate should have a minimum of three years’ experience and be fluent in German.

Laurence Baken

+32 24 012 249

Cat Risk Actuary - Paris Paris, France Agathe Ibazizen €€€Competitive Package My client, an international consulting firm, is looking for a specialist Cat Modelling Actuary to join their non-life actuarial team. You will also be involved in internal model review, review of reserves and Solvency II. French language skills required.

Manuel Lovell

+49 89 2109 3362

Emina Biscevic

+49 89 3803 8965

Alessio Montaruli

+49 89 2109 3339

Nearly/Newly Qualified Life Actuaries Patrick McMahon

Milan (Italy) €80,000

Dublin - Ireland Up to €75,000 + Bonus + Benefits

I am currently working on some excellent opportunities within life insurance for nearly/ newly qualified actuaries. The roles vary from reporting to product development and pricing with the opportunity to get exposure to risk, solvency II and senior management.

Actuary - Solvency II - Life Emérique Opou

Paris, France Up to €60,000


Switzerland Audrey Dresen

+41 43 508 0444

Katharina Wein

+41 43 508 0509

Please contact one of the team for further information on any of the opportunities above or visit

Two life experts are needed to join a top actuarial consulting firm. You will work on Pillar I related subjects (modelling, internal model, MCEV calculation, economic capital etc.). Ideal candidates will have experience modelling with MoSes or Prophet type software.

General Contact Details:

Pricing Analyst G.I. Niels van Nieuwkerk


Rotterdam €€€Competitive Package

This is an exciting opportunity to join an international insurance group. You will join a growing team based in The Netherlands and will have pricing responsibities for all products both in commerical and personal lines.

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September 2013 • THE ACTUARY 51


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The Actuarial Recruitment Company

A fresh approach

Casualty RI Pricing Actuary London

General Insurance To £90K

Company & Consulting Actuaries General Insurance Sydney Aus$ Competitive

A new role exists for a reinsurance pricing actuary at an established London based firm. The role will involve reinsurance pricing, account analysis, reinsurance program optimisation and various ad hoc projects. The role is focused on Casualty lines and a particular requirement is for US Professional Liability experience. The successful candidate will have some prior (re)insurance pricing experience with strong IT and technical skills. Excellent interpersonal and relationship development skills will be required. Ref: ARC26252

Interested in working in Australia ? We have a number of corporate

Capital Actuaries London

Reinsurance Broking London

General Insurance £Excellent benefits

We have a couple of consultancies seeking candidates with capital modelling and Solvency II backgrounds. They are looking at the recently qualified level and upwards in terms of experience. They will consider candidates from companies, other consultancies or who have been contracting and are looking for a permanent role. Strong technical, communication and project managements skills are a must have. Excellent career progression possible. Ref: ARC_Consultancy

and consulting roles available where the clients will actively consider UK nationals for interview. You will have at least 3 years’ experience in pricing or reserving and we also have roles open to more senior candidates. High quality communication skills are needed as well as an ability to engage with stakeholders and work to deadlines. A clear desire to live and work in Australia must be evident. Ref: ARC_Sydney

General Insurance Circa £60K

Supporting the casualty lines team of this major reinsurance broker this role will suit an individual with a strong personality, excellent communication skills and a proactive approach. The work will involve reinsurance pricing using cutting edge modelling techniques, involvement in the design and pricing of non-traditional reinsurance solutions, reinsurance optimisation work, support for reinsurance renewals as well as tenders for new business. Interaction with broking clients will be expected from an early stage. Ref: ARC20120

Call us anytime including evenings and weekends on 020 7717 9705 or email Andy Clark BSc FIA Roger Massey BSc MBA FIA

0781 333 7891 0781 398 9016 The Actuarial Recruitment Company is an employment agency


THE ACTUARY • September 2013

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