Actuarial Post April 2020

ACTUARIAL POST FOR THE MODERN ACTUARY APRIL 2020

TPR GUIDANCE ON COVID-19 PENSION RISKS

SEE EXCLUSIVE ROLES WITH STAR ACTUARIAL ON PAGE 2 page 1

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

PENSIONS

SENIOR ACTUARY

INVESTMENT

SENIOR LIFE ACTUARY

Qualified

Market Leader

LIFE LONDON

STAR6166

SENIOR ACTUARY - LIFE & RISK

Qualified

Major Reinsurer

LIFE VARIOUS / WORK-FROM-HOME

STAR6189

Qualified

Market Leader

LIFE RISK LONDON

STAR6190

Use your strong understanding of financial regulations, well-honed influencing and communication skills, and your ability to deliver to tight timescales, in this key role managing and enriching a variety of projects.

A diverse and highly-visible position, helping to deliver an effective Financial Planning & Analysis function. Your experience of planning processes, and detailed knowledge of reporting and solvency will be crucial.

Use your specialist risk experience to lead on proportionate risk-based assessments and oversight (e.g. Solvency II reviews and Part VII transfers). You must be able to deal with multiple stakeholders effectively.

INTERACTIVE RISK

RISK PRICING ANALYST

SENIOR ACTUARIAL ANALYST

Part-Qualified / Qualified

Market Leader

LIFE RISK LONDON

STAR6191

Part-Qualified LIFE SOUTH COAST / AGILE WORKING

Large Insurer

Part-Qualified

Global Reinsurer

STAR6201

LIFE LONDON

STAR6048

Use your strong technical experience and understanding of financial risk to gain a broader perspective and enjoy extended stakeholder interaction. Solvency II experience is essential.

Interpret the results of experience investigations to develop and refine the pricing and best estimate bases, employing data analysis and modelling techniques. You will also assist in the delivery of new projects and initiatives.

In this key role, you will manage existing and new protection treaties throughout their lifecycle, and contribute to the development of reinsurance solutions and services, considering risk appetite and client needs.

LIFE ANALYST

SYSTEMS ACTUARY

RISK CAPITAL ACTUARY

Part-Qualified / Entry Level

Market Leader

LIFE SOUTH EAST

STAR6199

Qualified

Retirement Specialist

LIFE PENSIONS LONDON

STAR6198

Qualified

Large Insurer

LIFE PENSIONS MIDLANDS

STAR6178

Develop your career, supporting a diverse rage of workstreams, including Valuation & Regulatory Reporting and Capital & Risk Management. An understanding of FoxPro and Excel software is required.

A fantastic opportunity to use your development background to lead the development and maintenance of actuarial systems, models and tools and lead on change project implementation.

Seeking a confident communicator, with experience of leading small projects and influencing decisions, to design, validate and interpret models, and make proposals to stakeholders. Pensions crossovers considered.

SENIOR CORPORATE ACTUARIES

CONSULTANT CORPORATE ACTUARY

PENSIONS ACTUARIAL CONSULTANT

Qualified

Qualified

Leading Services Group

Part-Qualified / Qualified

Leading Consultancy

PENSIONS LONDON / FLEXIBLE / TRAVEL STAR6159

PENSIONS SOUTH WEST

STAR6185

Seeking multiple pensions actuaries to drive the growth of our client’s corporate pensions business during a significant transformation.

You will lead on a selection of clients and have a network of senior business contacts.

Use your detailed and up-to-date knowledge to advise corporate clients on technical and legislative issues in pensions. You will demonstrate excellent interpersonal and networking skills to develop your profile within the industry.

In this exciting career development opportunity, you will perform complex individual member calculations and support a number of diverse workstreams, whilst working towards becoming a Scheme or Corporate Actuary.

IN-HOUSE PENSION RISK ANALYST

IN-HOUSE PENSIONS ACTUARY

INVESTMENT EXPERT

Part-Qualified / Qualified

Leading-Edge Firm

Part-Qualified / Qualified

Global Leader

STAR6156

PENSIONS SOUTH EAST

STAR6014

Leading Business

PENSIONS VARIOUS LOCATIONS

STAR5980

PENSIONS RISK LONDON

Support global projects to manage pension risk and resulting capital requirments, becoming a key contact for colleagues across regions and functions, including HR, Finance and Risk.

An exciting opportunity to join a specialist in-house pensions team. Longevity swap experience would be beneficial. Our client offers excellent benefits and flexible working arrangements will be considered.

Qualified

Growing Consultancy

INVESTMENT SOUTH WEST

STAR6187

Develop bespoke, end-to-end investment strategies for a wide range of clients. You will be responsible for running and interpreting asset liability models, and undertaking portfolio performance and risk assessment.

Peter Baker

Jan Sparks FIA

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

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

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

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

Jo Frankham

Adam Goodwin

Clare Roberts

Sarah O’Brien

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

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

ASSOCIATE DIRECTOR +44 7714 490 922 clare.roberts@staractuarial.com

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

Irene Paterson FFA

Lance Randles MBA

Antony Buxton FIA

Louis Manson

Joanne O’Connor

MANAGING DIRECTOR +44 7766 414 560 antony.buxton@staractuarial.com

MANAGING DIRECTOR +44 7595 023 983 louis.manson@staractuarial.com

OPERATIONS DIRECTOR +44 7739 345 946 joanne.oconnor@staractuarial.com

P L EA S E CONTACT US AT ANY T IM E TO DIS CUS S YOUR RE C RUI TME N T N EED S

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LIFE

Actuarial Post Team EDITOR Jennifer Redwood jennifer@actuarialpost.co.uk SUB EDITOR Jennifer Stone article@actuarialpost.co.uk ADVERTISING MANAGER Alan Burns alan@actuarialpost.co.uk

www.actuarialpost.co.uk @actuarialpost @APjobs Head Office 13 Vale Rise Tonbridge Kent, TN9 1TB 01732 359488

EDITOR’S NOTE I would like to take this opportunity to wish that all of our readers will stay safe and stay well during this pandemic. We hope that the content within our magazine goes some way to provide some distraction whilst we are in lockdown and we would also like to echo the message from Bolton Associates in applauding the heroes at the NHS and hope by staying home and abiding by the lockdown rules we can alleviate some of the burden being placed upon them by this virus.

We hope you all stay well and we will welcome you back for next month’s magazine.

Jennifer Redwood

Legal Notice All rights reserved. No part of this publication may be reproduced or transmitted without the prior permission of the publisher in writing.

Whilst every care has been taken to ensure the accuracy, Actuarial Post cannot accept responsibility for loss of business to those referred to in this magazine as a result of errors.

page 3

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page 4

CONTENTS 12

18

20

22

News

6

Movers & Shakers

8

City Dealings

9

TPR Guidance on Covid-19

10

Penion Risk Retirement Puzzle

12

Tait’s Modern Pensions

14

Sustainable Infrastructure

17

Antidote to the Scropion’s Sting

18

Life Pricing - Profitability and Trust

20

Inner Workings

22

GDPR and Cyber Risk

24

Information Exchange

26

Bolton Associates Thank You

28

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NEWS APRIL Key Pension Issues on Coronavirus Furlough Scheme On Thursday 27 March, the UK Government released fuller details of the new Coronavirus Job Retention Scheme (or “Furlough Scheme”) first announced on Friday 20 March, with guidance being published for both employers and employees.

Under the Furlough Scheme, employers who

opt to keep staff on payroll but away from work (‘furloughed’) rather than making them redundant will be able to reclaim 80% of their wage costs from HMRC, up to a monthly cap of £2,500 per employee.

The key pensions issues for employers to note are:

By Sarah Swift, Partner at Eversheds Sutherland

If employers want to make the Furlough Scheme costneutral for them, this is

PASA launches COVID19 Guidance for Administrators The Pensions Administration Standards Association (PASA), the independent body dedicated to driving up standards in pensions administration, today announced new guidance to support administrators during the Covid-19 crisis.

Kim Gubler, PASA Chair, commented: “In the space of a few weeks the world has changed for us all, the COVID-19 pandemic represents a once in a generation global shift. For us in the world of pensions, business resilience and READ MORE

Employers are unlikely to be able to recoup the full pension costs associated with keeping furloughed staff on the books under the Furlough Scheme.

How does now compare to the 2008 global financial crisis The Coronavirus crisis is a global crisis affecting almost all of humanity, but what has been the impact on the UK pension funds sector? We thought that it might be useful to look back at 2008 at the global financial crisis (GFC) just to see what happened to pension funds and see if we could draw any parallels and learn any lessons from that for today.

By Kerrin Rosenberg, CEO of Cardano UK The PPF published an index called the PPF 7800. It’s an index that was originally made up of

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likely to require employee or union agreement to changes to pension terms The necessary changes are likely to be “listed changes”, which require a 60-day consultation period – in practice, a view may need to be taken on whether employee or union agreement to READ MORE

7800 UK pension funds and it tracked their funding ratio and deficit as far as the PPF measure was concerned. Today because many of those pension funds have either wound down or moved into the PPF itself, the index contains almost 5500 funds. It’s still a fairly accurate barometer of the health of the UK financial system and it is useful to take a look at what it is telling us.

So back in August of 2008, just before the GFC hit, the PPF index showed an overall deficit of about £30 billion and UK pension funds had a funding ratio on that measure of 95%. Six months later, well into the depths of the GFC, that deficit had risen to £200 billion and funding ratios had plummeted to 78%. Now as we all recall in 2009, there were extraordinary measures; quantitative easing was introduced READ MORE

NEWS Actuaries Covid19 Response Group issue first paper on virus A group of industry professionals have created a Covid-19 Actuaries’ Response Group to provide a forum for actuaries and others to learn how to respond to the current pandemic.

The group currently has 11 members and was launched earlier this month, as Italy’s Lombardy region was being shut down in response to the virus.

The group launched its charter setting out six principles, such as seeking science and data and “bringing an innovative approach in framing both the problems and solutions”.

The group’s plan is to put out materials that will be of benefit to actuaries and their employers and clients.

This might include a discussion on the virus itself, how it can be modelled, a forecast impact on mortality READ MORE

The impact of Coronavirus on Life Insurers DBRS Morningstar have released a commentary entitled “Coronavirus Disease (COVID-19) Impact on Life Insurers More Likely to Result from Adverse Market Movements than Increased Claims” that discusses the major ways DBRS Morningstar expects coronavirus to affect the life insurance industry.

The key highlights include: (1) The impact on insurance claims is expected to be manageable, given the relatively low mortality rate for infected individuals; (2) The adverse reaction of financial markets to the coronavirus outbreak may affect insurers’ profitability, including earnings generated from their investment portfolios; and (3) Insurers operating in higher-risk countries are seeing some disruption in their day-to-day operations, which will likely have an impact on

revenues.

The Coronavirus Disease (COVID-19) outbreak will likely affect life insurers in the following ways: (1) increased incurred claim costs, including death and disability claims, and drug costs, (2) adverse movements in the financial markets, including declines in bond yields, equity markets, and real estate, reducing profitability; and (3) business interruption and potential impact on revenues. As coronavirus continues to spread across the world, its effects are rippling across financial markets and the global economy.

The life insurance industry is no exception, particularly given the increasingly global nature of many insurers and their sizable investment portfolios.

Although most countries have had minimal reported coronavirus cases so far, and consequently the impact READ MORE

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Updated Covid 19 guidance from The Pensions Regulator The TPR have updated their guidance on their website for those they regulate in relation to the impact of Covid 19 (coronavirus). The guidance supports trustees and employers regarding Defined Benefit (DB) schemes and trustees of Defined Contribution (DC) schemes as they work to meet the challenges of Covid 19. It also sets out what people can expect from TPR. David Fairs, Executive Director of Policy at TPR, said: “The significant measures and clear guidance we are announcing reflect the unprecedented and challenging situation trustees and employers find themselves in. The current scheme funding regime is flexible enough to cope with the impact of a severe economic downturn. However, we are actively considering what additional support and guidance we need READ MORE

MOVERS & SHAKERS The latest moves and appointments from the actuarial marketplace The PPF announces appointment of Sara Protheroe to the Board

Interview with incoming President Elect of the IFoA

PTL has announced the third new client director appointment since the beginning of the year with Ramona Tipnis joining its Birmingham office.

The Pension Protection Fund (PPF) has today announced the appointment of Sara Protheroe, Chief Customer Officer, to its Board with immediate effect.

Sara played a pivotal role in establishing the fund whilst working at the Department for Work and Pensions. Over the past 15 years, Sara has continued to play a vital role in the evolution of the PPF’s strategy which has seen the fund grow into one of the largest asset managers in the UK. She has also been instrumental in developing its customer service offering to provide award-winning service to more than 400,000 members.

PPF Chairman, Arnold Wagner, said: “I am delighted that Sara has today joined the PPF Board as an Executive Director. Throughout her 15 year tenure at the PPF, Sara has been committed to delivering exceptional service to members of defined READ MORE

Smarterly appoint former NOW Pensions CEO as MD

PTL announces third new Client Director appointment

Amy Sutherland and Raluca Stanescu interview Louise Pryor, who is a sustainability actuary and incoming President Elect of the Institute and Faculty of Actuaries (IFoA). We’ve asked Louise a few questions about her work, and were also keen to find out her views of the actuarial profession and how it links to sustainability.

By Amy Sutherland, Actuarial Trainee Consultant and Raluca Stanescu, Actuarial Trainee Consultant from Hymans Robertson

Richard Butcher, Managing Director at PTL, commented: “We announced at the end of last year that we were recruiting four new client directors, to achieve our ambitious growth plans and meet the increasing demand for experienced professional trustees. Ramona is the third of these appointments at Client Director level, and we are very pleased to welcome her on board.

“We pride ourselves on our diverse team with varied pensions backgrounds. Ramona’s combined experience of investment...

READ MORE

What does a typical working day look like for you?

READ MORE

Smarterly has appointed Troy Clutterbuck as Managing Director. He was previously CFO and then CEO at Now:Pensions and prior to this was CFO at JLT Employee Benefits where he worked alongside

Duncan Howorth who is employees save into now Chairman at Smarterly. workplace ISAs with the convenience of payroll Focused on the workplace, deduction. Over 100 large Smarterly supports UK corporates promote companies with their Smarterly to their employees financial wellbeing as a more engaging way to programmes and helps READ MORE

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

Aon to combine with Willis Towers Watson in USD30bn deal Aon and Willis Towers Watson have announced a definitive agreement to combine in an all-stock transaction with an implied combined equity value of approximately $80 billion.

Strategic Rationale Combines two highly complementary businesses into a technology-enabled global platform that is more relevant and responsive to client needs. The transaction unites firms that share a belief in the power of data-driven insights to create new sources of client value.

Willis Towers Watson CEO John Haley said “The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital.

This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”

READ MORE

COVID19 and Smart Pension the current acquires market volatility Welplan Pensions Master As the FTSE 100 and financial markets across the World continue Trust to plunge, Associate Consultant for

FCA STATEMENT ON UK MARKETS READ MORE

Quantum Advisory, Suraj Gandecha, looks into the reasons and what the future might hold.

Suraj said: “There are a number of things contributing to the fall in markets, including the big decrease in the oil price that has been driven by a fall in demand and increase in supply, but the main talking point is COVID-19. Alongside this, in the UK, the Bank of England announced on 11 March that it would be cutting interest rates back to the lowest recorded level of 0.25% and supporting banks to free up extra lending for businesses. Last week’s READ MORE

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Welplan Pensions has announced that the Smart Pension Master Trust has been confirmed as its default receiving scheme following the decision in 2019 to close Welplan Pensions.

The move follows a strategic review

by Welplan Pensions’ Scheme Funder, Welplan Ltd, and its decision not to seek master trust authorisation.

The Trustee’s decision will see the transfer of existing employers and members from Welplan Pensions into the Smart Pension Master Trust.

Welplan Pensions currently has READ MORE

PENSIONS REGULATOR GIVES GUIDANCE ON MANAGING COVID-19 PENSION RISKS

by Wayne Segers, Head of Oesions Solutions, XPS Pensions Group

ongoing running of their pension scheme and ultimately their ability to continue to pay pensions.

TPR expects employers to continue paying contributions to their scheme but has set out guidance for those who cannot. If an employer is looking to reduce or suspend employer contributions to the pension The guidance directs those involved with scheme, they should follow the principles running pension schemes to focus activities set out in the guidance for distressed employers. on key risks to pension savers arising from the virus outbreak. TPR expects trustees TPR also expects trustees to urge to be alive to the risks that can impact their extreme caution to members looking to pension scheme and its members. They transfer their pension. Scams are on the should activate and assess their scheme’s rise and members should be directed to business continuity plan to ensure that it the ScamSmart website and the Money is robust and effective. and Pensions Service for guidance.

The Pensions Regulator (TPR) has set up a dedicated web page to provide guidance on the impact of COVID-19 on the pension system. It will update the page as circumstances develop and trustees and employers are encouraged to read the guidance set out thoroughly.

Trustees need to ensure they can keep running their pension scheme, it is paramount to ensure pensions can be paid and they must contact TPR immediately if they are in a position where they are not able to pay their members pensions.

Where necessary, trustees should report to TPR if they are concerned about the

Trustees should review their scam protection for members looking to transfer, following TPR’s request to direct members to online help and determine if more robust protection might need to be put in place with current circumstances heightening the risk of potential scam activities.

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Key risks set out on TPR’s COVID-19 direct them to ScamSmart and the Money web page and Pensions Service.

• Service provider disruption – Defined Guidance for administrators: benefit (DB) pension benefits need to be paid • Prioritise payment of benefits,retirement processing and bereavement services.

• Opportunistic scammers – The risk of Focus on services linked to these. scams needs to be minimised • TPR understands that some non-critical • Companies at risk – Employers need to services may be impacted be contributing Guidance for employers: • Investment market volatility – Savers • TPR recognises the strain employers need support to make good decisions in face. TPR will be proportionate and aims current challenging times to help employers get back on track. It directs employers to business support • Disruption in non-critical areas – TPR information published by the Government. will be fair and proportionate in cases of Further guidance on corporate distress is administrative breaches also provided.

The finer detail

Principles to take into account when considering a delay in employer TPR sets out expectations for trustees, contributions administrators and employers. Additional detailed guidance is included for distressed Trustees should understand current cash employers. It also provides an update on flow and reasons for the need to reduce business as usual regulatory activity stating contributions. Trustees should check no regulatory initiatives are temporarily payments will be made to shareholders suspended. or related entities.

Trustees must understand what role Guidance for trustees: other stakeholders are playing. Are they also being supportive? Ensure scheme • Assess plans to determine if adequate. is being provided with security if other Contact service providers to check what stakeholders are. Any suspension of plans they have in place to continue to payments should have an end date and operate. ability to restart sooner if trading returns to normal.

• Clearly establish priorities, such as payments to pensioners, and confirm this Trustees should recognise that the current with administrators. In the event your situation is fast-moving. Timescales are sponsoring employer is at risk, read the very short so pragmatic concessions guidance on corporate distress. can be made but should be short term.

Detailed information may only be made • Be aware that opportunistic scams are available later for a more considered on the rise. Urge caution to members and decision. page 11

RETIREMENT PUZZLE

CORONAVIRUS, MARKETS, AND THE VALUE PREMIUM

by Alex White, Head of ALM Research, Redington Markets are currently extremely turbulent in response to coronavirus. The MSCI World lost around 30% in early March alone, and the speed of losses has been somewhat extreme.

This will no doubt feel daunting for investors, but the first thing to remember is that epidemics and pandemics are not new. There are several high-profile examples throughout history we can take from - the plague of Justinian and the Black Death, as well as outbreaks of diseases such as cholera, smallpox, tuberculosis and flu.

Based on data, the most viable comparator to coronavirus is probably Spanish Flu. This pandemic sadly claimed around 50-100 million lives, around 5% of the global population.Yet from December 1918 to December 1920, excess returns on stock markets were -7% for the UK and -13% for the US .

But this may be understating the impact. With the end of World War One, stock prices were arguably depressed, and the recent onset of peace could have offset some of the effects.

Market reaction was less dramatic however.

For most of history it would have been difficult to diagnose a new disease unless symptoms were sufficiently differentiated, or mortality rates significantly high. In addition to meaning multiple pandemics have probably passed us by, this unfortunately means we may experience more in future.

Similarly, it is not obvious what effect HIV has had on markets, but it has been responsible for over 30 million deaths, with 770,000 last year, and fatalities peaked in 2004 during bull markets.

The 2009 flu strain killed around 400,000 people, yet coincided with one of the highestreturning years for markets.

In uncertain times such as these, reflecting on past events can help us unpick what’s happening in markets.

As brutal as it sounds, markets appear to have been quite resilient to pandemics.

How did past events impact markets?

Of course, things have potential to get worse before they get better. The virus has not been more fatal in part because people who have

page 12

needed ventilators have generally had access to them - but that might not hold.

A realistic downside scenario might see 80% being infected, with 20% of those needing hospitalisation and 5% of those needing ventilation in an ICU. Without adequate containment measures, the spread could be too fast and healthcare systems could become overloaded. On these estimates that might mean an overall mortality rate in the region of 0.5% or around 40 million people worldwide, not including indirect effects. My estimates are extremely rough, but they aren’t miles out of whack with the CDC’s original estimates of up to 1.7m US deaths in a “no-response” scenario.

Is this new?

This virus spreads fast, which is largely why we have had such stringent containment measures.

Whilst containment measures are of course the right thing, we have a new combination of a pandemic with a global slowdown, which is at best pausing parts of the economy such as airlines, hotels, sports, cafes, museums, and theatres.

Especially if we expect similar policy responses to any similar threats, we could be seeing a fundamental shift in the economy.

What should investors do?

It may be tempting to see stocks as cheap, and they are certainly cheaper - but there are reasons to be cautious. The rationale for any value premium, whether for markets broadly or for individual stocks, is that it compensates you for regime change.

If we are in the midst of a regime change, we should be more cautious of our measures of what’s cheap, as opposed to what’s just less viable in the new world. This isn’t a case for dismissing all the previous evidence- just for sizing any position. It’s also a reason for pairing value signals with momentum or trend signals, and using both in conjunction.

As mundane a conclusion as it may seem, the best investors can do is remain unemotional, access a diversified source of risk premia, and follow a disciplined process that manages risks and sizes views appropriately.

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TAIT’S

MODERN

PENSIONS

DB transfers – the COVID effect The impact of COVID-19 is being felt everywhere, from the immediate and lifethreatening suffering of those with the illness, to the long-term consequences for those who may lose their livelihood as a result of the economic fall-out.

Pensions are not exempt, and one response has been the Pensions Regulator (tPR)’s introduction of a 3-month moratorium during which trustees can suspend pension transfer activity.

Transfer values •

Trustees should give greater attention to the heightened risk of members being targeted by scammers and unscrupulous financial advisers.

•

Trustees may decide to suspend cash equivalent transfer value (CETV) quotations and payments to give themselves time to review CETV terms and/ or to assess the administrative impact of any increase in demand for CETV quotes.

•

This may mean a breach of disclosure requirements. We cannot waive an obligation to report the breach to us, but we won’t take regulatory action in the next three months against trustees who suspend CETV activity.

•

After three months, trustees may decide to continue with the CETV suspension or delayed quotation if this is still in the best interests of their members. However, they should be clear on the reasons to do so and they should notify us.

The reasons given for this action are: 1. To give trustees the time to review CETV terms and/or to assess the administrative impact of any increase in demand for CETVs. 2. If a suspension is in the best interests of their members.

Certainly, it should make life easier for trustees and administrators but is it really in the interests of the normal scheme member?

Financial advice Even though this suspension will impact the income stream of financial advice firms, there are other factors at play which mean we might be glad to see the back of them for a while.

Increased regulatory focus means the time spent on each individual case, coupled with the exorbitant cost and lack of availability of Professional Indemnity Insurance, has already reduced profitability in this area of business to potentially unsupportable levels.

The coronavirus effect has only added to the practical difficulties and time required to advise on and implement pension transfers. Unfortunately, the result is unlikely to page 15

improve access to advice for the majority to get a report and recommendation out in time even when we can rely on first of members. class post. We would never recommend Needs and objectives a client to transfer just because the Clients have many reasons why they valuation is high, but if a transfer is in the think a pension transfer might be in their client’s interests then we want to effect it interest, some of which are very justified. at a time when the client is getting good value.

On top of these we now have people who are in financial difficulty because At the time of writing it is unclear their income stream has dried up during whether trustees can suspend payment the current crisis. Using pension assets on existing CETVs where the paperwork is, and should be, a last resort but there is submitted ahead of the Guaranteed are some circumstances where this may Retirement Date. It would seem most not be possible. The suspension could unfair if a client who has waited over 2 therefore mean the removal of a lifeline months to obtain their report suddenly finds they are unable to proceed or have for some. to wait and begin all over again with the Other clients may be worried about the possibility of a reduced transfer value. solvency of their employer. Although we would not generally consider this to be Vulnerability a good reason to give up a guaranteed Added to all of this,we also have to consider income stream, it does mean spending that significantly more clients could be more time on informing them about the classed as vulnerable. If they are financially availability of the Pension Protection stressed, they are much more likely to Fund, how it works and the security it can prioritise a short-term fix over long-term provide. security and be inclined towards making poor financial decisions, not just about Attitude to risk (AtR) transferring to a defined contribution Assessing AtR is not easy at the best of scheme but also very much which assets times but it would be a rare client who they transfer into. Conditions like these is unaffected by recent market turmoil. are unfortunately ideal for scammers who Capacity for loss is mathematical and will be doing their best to promote their should not change however, an individual’s highly suspect solutions. personal loss tolerance may well do.

Crash tests are also problematic – we are Scams are one of the reasons given to effectively illustrating a 30% loss on top of support the suspension however, the a fall in equity markets during 2020 that is issue here is more about the nature of the investments than the structure of benefits. almost of that order already.

It is unfortunate therefore that recent This may not be a bad thing; if clients activity from tPR’s sister organisation has are nervous about risk then a transfer is led to a huge reduction in the availability much less likely to be suitable for them of financial advice and even though we lost but what we are seeing is more “I do want some of the bad guys, we almost certainly to transfer but want to keep it in cash for lost some of the good guys too. now” rather than “I don’t want to transfer at all”. Once again, we need to take time In summary, it’s a very difficult environment. to explain that pensions are a long-term Ultimately, though it should be about what will help scheme members to manage investment. their finances most effectively and not Fair value what makes it easier for the industry.

Another timing issue is the fact that CETVs

by Fiona Tait have a finite lifespan, and it is challenging page 16

Technical Director Intelligent Pensions

SUSTAINABLE INFRASTRUCTURE: AN OPPORTUNITY FOR INSURANCE

by Eugene Dimitriou, Head of Insurance Solutions and Ingrid Edmund, Senior Portfolio Manager, Infrastructure Investments at Columbia Threadneedle Investments Policymakers, financial regulators, NGOs and professional bodies all have Environmental, Social and Governance (ESG) benefits and risks firmly in their sights. A plethora of recommendations, directives and guidance has been issued recently with the aim of strengthening ESG integration in the investment processes of all asset owners – and for good reason. Well-governed companies with strong ESG risk management credentials should deliver more sustainable returns by not being so materially exposed to operational, regulatory and reputational risk.

Infrastructure may be best known for stable long-term returns, low volatility and inflation protection, but the most lasting impact from investing in this asset class could yet come from its huge potential to generate environmental and social benefits which can also help protect returns in the long term. It therefore represents an interesting investment opportunity for insurers looking to not only generate stable, long-term returns but also help to create a more sustainable future.

Infrastructure assets have tremendous potential to mitigate greenhouse gas emissions. Clean energy immediately springs to mind and no one doubts the pressing need to redirect capital to activities that can significantly contribute to the transition to a net-zero economy. But clean power alone is not going to swing the dial. If climate risks are recognised as investment risks and factored into all infrastructure investment decisions, cleaner transport and buildings, more efficient water systems, and smarter, more resilient infrastructure will become a key element of the climate change agenda.

For example, Europe, buildings account for approximately 40% of all carbon dioxide emissions[1]. Globally, fossil fuel-based equipment makes up more than 50%[2] of sales related to heating and cooling buildings, while less-efficient and more conventional electric heating equipment adds another 30%[3]. Energy efficient devices such as heat pumps and more sustainable building practices are promising to transform this.

Transport is another vital sustainable infrastructure investment. Perhaps counter-intuitively, some of the biggest available impacts for transport lie not in the zeitgeist applications such as self-driving electric cars, but in the traditional spheres of airports (including aviation generally) and ports. Aviation currently contributes between 2% and 2.5%[4] of total global CO2 emissions and 12%[5] of the total from the entire transport

sector. Developing airports will have a crucial impact on reducing greenhouse gas emissions through the use of tariffs to promote more efficient jet combustion.

Reducing airports’ environmental impacts elsewhere provides additional financial and social benefits. Examples include electric transport to and from the airport, energy efficiency improvements such as LED lighting replacements or better metering.

European insurers’ choice of investment assets is heavily influenced by regulation and the above are some of the reasons why they are increasingly interested in the infrastructure theme. For example, the pan-European regulator EIOPA tacitly encourages insurers to invest in both equity and debt infrastructure assets due to their lower capital requirements. The regulator also doesn’t penalise for a lack of liquidity in investments and many of these infrastructure projects would qualify under Solvency II for lower capital charges.

In addition, insurers are also particularly starved for yield.

Life insurers for example often have meaningful legacy minimum return guarantees which now appear unrealistic.

Therefore, alternative sources of ongoing yield become a key priority and infrastructure, with its reputation of delivering predictable and stable returns, could be one of the solutions.

Finally, many insurers look to support their communities by building projects that are sustainable and ecologically responsible – infrastructure is a clear and visible investment which meets these criteria. Estimates say that for every pound invested in infrastructure, 20p is produced in socioeconomic benefits. In large-scale infrastructure projects, investing also means working closely with local governments and communities to maximise the social dimension of an investment such as job creation.

Many infrastructure assets have a lifespan of 50 or more years, so any investment decisions made today will have lasting repercussions. Insurers seem to be increasingly embracing infrastructure not only as a way to generate stable and long-term returns, but also to do good for the environment and society. While a focus on clean energy is important, insurers should consider the vast amount of opportunities that lie in decarbonising infrastructure assets. Even a small share of the approximately €10 trillion of infrastructure assets around the world today could have meaningful impact and insurers have a role to play.

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SEARCHING FOR THE ANTIDOTE TO THE SCORPION’S STING

By Ben Fairhead, Partner at Pinsent Masons and a member of the Pension Scams Industry Group

Seven years on from the Valentine’s Day launch of the Pensions Regulator’s scorpion campaign, the scorpion has technically disappeared and been replaced by a jet skier – but its memory lives on.

I look back in this, my seventh annual piece for Actuarial Post, at developments in the world of pension scams over the past year, particularly on a heightened focus on the harm suffered by victims of pension scams to date and what prospects they have of achieving redress.

Complaints against ceding schemes One of the most obvious potential sources of redress is the scheme that enabled the transfer into the scam to go ahead.

There were initial shockwaves in 2018 from the Pensions Ombudsman’s determination against the Northumbria Police Authority (Mr N, PO-12763) – the first significant finding of maladministration on the part of a ceding scheme trustee where an individual’s pension had been transferred to a scam. However, there have been limited signs so far of the floodgates opening to similar claims.

The determination in Mr T/Prudential (PO16475) has clarified that a three month timeframe from 14 February 2013 was deemed reasonable to allow trustees sufficient time to implement changes arising from the Regulator’s scorpion campaign. Transfers post May 2013 are likely to be subject to much great scrutiny though, with expectation of red flags not being missed and appropriate warnings being given.

We saw this put into effect in the case of Mrs H and Hampshire County Council (PO21489) involving a transfer made in November 2013. Unlike with Mr N, Mrs H had at least been sent a copy of the Regulator’s scorpion leaflet prior to transferring – and she had even signed a declaration confirming she had read and understood it. Nonetheless, in making a maladministration finding, the Ombudsman attached weight to Mrs H’s location being several hundred miles away from the “employer” for the receiving scheme, as well as her apparent lack of financial awareness.

Admittedly there was a quirk in this case of no statutory right to a transfer being considered to exist, meaning the Council had to apply its own discretion, but the determination points towards an expectation of much higher

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standards, come late 2013 and beyond, than mere provision of the scorpion leaflet.

against the sort of pension liberation schemes that proliferated in the early 2010’s. A more compassionate approach is needed, especially in the difficult times facing us in the coming months.

We have yet to see more determinations like this, but it would be surprising if there were not others in the pipeline. With PPI claims concluding, claims management companies are seizing the opportunity to pursue complaints.

Some will be misconceived, but there will no doubt be others that raise serious questions.

More action to prevent current and future scams The past year has not all been about looking back.

Recovery via the scammers Equally, there is a degree of hope for members with signs of more criminal action being taken by the Pensions Regulator against pension scammers – and with a view to securing confiscation orders where possible. In fact, action has been taken in the past year against the trustee of the Focusplay Scheme into which Mrs H herself transferred her pension.

Alas, the threshold for pursuing such action is very high, and, in any event, pension scammers rarely have the means to compensate their victims in full.

Greater victim support needed

My concern here though is that we are playing catch-up with the scammers again – primary focus is likely to be on bringing in a “genuine employment link” between a transferring member and the employer of an occupational pension scheme, a fall-back to the legislative loophole identified in the Donna-Marie Hughes v Royal London case four years ago.

The intended changes do not look likely to do anything though to address present concern about what have been termed “international SIPPs”. What we need is wider scope for the statutory right to be restricted, for example when certain red flags exist.

There are many individuals for whom recompense from ceding schemes or from the scammers is not viable. The Pension Scams Industry Group is encouraging more support for pension scam victims.

One particular step that has also been advocated is an amnesty on tax charges for those individuals who received payments from their pensions prior to any significant public awareness of the risks with pension liberation schemes. Provided individuals were genuinely not aware of the tax implications, there are likely to be a finite number who transferred into early pension liberation vehicles and have paid the price both in terms of losing a large part of their pensions as well as incurring tax charges of up to 55% of the cash received.

HMRC have their concerns about precedents and deterrence but there are sufficient checks and balances in the system now to guard

On the horizon are changes to the statutory right to a transfer, foreshadowed by reference to regulations that will be brought in once the current Pension Schemes Bill eventually reaches the statute books.

This need to stay one step ahead of the scammers is underscored by the fast developing situation with coronavirus. Already there are fears that fraudsters will prey on individuals in need of urgent cash - effectively a rebirth of pension liberation - as well as on the unpredictability of financial markets, with no doubt false promises of a better return if pension monies are transferred or withdrawn.

We have uncertain times ahead. Those grappling with transfer requests will need to take extra care and vigilance in the current climate if we are to avoid, by the eighth anniversary of the Regulator’s scorpion campaign, a fresh wave of individuals falling victim to pension scams.

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LIFE PRICING THE BALANCE BETWEEN PROFITABILITY AND TRUST

Matthew Edwards, Head of Mortality and Longevity, Willis Towers Watson’s UK Life Insurance Practice.

Why trust matters more than ever

Life insurers have been continuing the journey towards automated pricing and underwriting, influenced by the growth of InsurTech and the desire to make more use of data.

However, greater use of data raises questions about trust. Are policyholders willing to give more data? Would they do so only if it could result in lower premiums? If so, what will be the penalty for other policyholders, as average premiums must – all other things being equal – remain constant?

The ideal for insurers would be to have access to the Electronic Health Records of policyholders, which would allow much more precise risk rating according to reliable medical information, as well as lifestyle aspects. More precise risk rating obviously does not mean generally higher premiums, although that is part of the communication challenge insurers would face.

Clearly, insurers would be able to rate business according to a more precise risk assessment, hence premiums should, in aggregate, reduce owing to slightly lower margins in respect of uncertainty. The availability of such data would also facilitate market entry, increasing competitive pressure in the market, putting further downward pressure on premiums.

However, there are huge issues in trust. Insurers are fundamentally not trusted nearly as much as they would like to be, with mis-selling scandals in particular laying bare how insurers have not acted in the public interest (although the issue there bears no direct relation to the question of data). The lack of trust may relate to concerns about higher premiums or even to outright unavailability of cover for policyholders with severe medical histories.

A recent report published by the Chartered Insurance Institute, ‘Shaping the Future of Medical Records and Protection Insurance’, considered the issues around use of medical data and trust. The report quotes research by Ipsos MORI, conducted in 2016, that showed 59% of the public do not trust insurers, in addition to providing further interview-derived examples of trust issues.

At the moment, the scale of public concern around data privacy in conjunction with this lack of trust makes the idea of any imminent revolution in the availability of health data seem ‘pie in the sky’.

However, what other ways are there to rate risks better, whilst ideally also providing a smoother ride for policyholders?

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Other routes to richer data

many novel rating factors. An interesting example is ‘number of vehicles used in your household’, which is surprisingly predictive of mortality.

One of the more tangible routes to richer data is the ‘FitBit’ approach – collecting large amounts of data from policyholders’ fitness/ lifestyle wearables (or equivalent apps), with the incentive of reduced premiums for those policyholders who ‘hit their targets’.

A two-step approach to rebuilding trust Is it possible for an insurer to collect data and, at the same time, increase policyholders’ trust in the company? There is great potential in products such as those launched recently in the UK aimed at diabetics. With these, policyholders provide data as a way to show what progress they are making conforming with diabetes treatment guidelines; adherence to targets then affects premium levels.

However, although such data would be an analyst’s dream in 10 to 20 years when a sizeable amount of health-related events have been recorded (deaths, in particular, which will tend to be very low frequency in such populations and so require a long period to monitor), using the data in rating new risks ‘now’ is a major challenge.

Quantifying ‘FitBit mortality’ can be difficult.

Research has been done into the impact of steps and their relationship between morbidity and mortality, but the amount of steps done is less predictive than the intensity of the exercise.

One Canadian InsurTech firm has access to a relatively small data set of over 15,000 people over 20 years and claims that some of the exercise-related figures are more relevant to mortality than even smoking.

What other ways are there to use data to improve underwriting? Larger insurers (in particular, banking groups or composites) may already have information about the potential policyholder in a different part of the group, making the underwriting process quicker and more predictive. An extreme example of this is a new approach by a UK insurer to home insurance on the P&C side, aiming to ask no questions at all – with ‘get a quote not a quiz’ being an appropriate catchphrase that sums up this philosophy.

This type of policy, rather like insurance covers involving fitbits and gym attendance, can create more of a ‘relationship’ between the insurer and the insureds, whereby the perception of the insurer moves from being an abstract monolith that people pay money to, to a firm that engages with you in a positive way to improve your health (while reducing premiums or some equivalent tangible benefit).

This philosophy of helping policyholders become more healthy is the cornerstone of the recent launch of a life insurance venture in the UK which rewards smokers who convert to lower-risk alternatives to traditional tobacco with a discount on their life insurance premiums.

Conclusion Significant developments are evident within the InsurTech space, with much of that work being aimed at helping clients improve their data and, in turn, improve their profitability.

If you do need to ask underwriting questions, there is growing research into the risk impact of some ‘easy to answer’ questions where the potential policyholder would find it hard to know what answer would lead to a lower premium, thus ideal for obtaining more honest responses! For instance, research done on the UK Biobank data, comprising around 500,000 lives with detailed data, has given rise to the ‘UK Biobank Longevity Explorer’ which provides

While obtaining rich medical data may never happen, there are alternatives that can allow insurers to improve their risk rating and ease the process from the policyholder’s perspective.

Some of these alternatives also have the potential to help reshape the public’s perception of insurers, hopefully away from ‘money takers’ towards an image of ‘health helpers’.

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INNER WORKINGS

THE VALUE OF ANNUITIES IN TIMES OF CRISIS

The death of annuities as the primary deliverer of pension income was announced by George Osborne when, as Chancellor of the Exchequer, he introduced his “pensions freedoms� budget in 2014. By no longer mandating annuities as the primary form of income-generating product for pensioners, he opened the floodgates for people to move to other products that were directly invested in the market and therefore seemed far more attractive than annuities, whose rates were weighed down by a global low-interest environment.

However, the perils of allowing the elderly to manage their investment income themselves in drawdown products as they moved into their eighties were always a danger, albeit few could have prophesied the collapse of the markets to the extent that has been seen in recent weeks.

Whilst long term investors can ride out the storm, pensioners who need to draw on their investments to fund their everyday life have no such luxury and perforce many are having to draw down on their capital as well as the returns. This will mean that many pensioners will not be in a position to benefit when

the markets eventually rebound, a problem compounded by the fact that they are no longer of an age where earning new capital is a feasible proposition.

Central Banks across the world are making major moves to prop up the markets and prevent total collapse. It does beg the question as to why these kinds of moves couldn’t have been made earlier to provide better investment opportunities for pension funds to guarantee higher annuity rates, thereby making annuities a more attractive proposition for retirees at retirement.

Better returns on annuities would encourage people to start re-investing their pension lump sums into this product, thereby ensuring a more stable income flow throughout their retirement years.

This would have meant that those of pensionable age, already living in fear due to being part of the most-at-risk group of the population when it comes to the coronavirus, would not be simultaneously facing a collapse in their investments and an increased risk of

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impoverishment in their old age. IFAs would feel happier recommending annuities and would not be risking the wrath of those who were happy with their drawdown products when investment returns were rising but who are now looking for someone to blame as the value of their drawdown products are collapsing fast.

The government in the UK is pledging to embark on a huge investment spree to upgrade the country’s infrastructure and to help restore the economy after the financial hit of the epidemic. Maybe it’s time to look at how this huge investment could be opened to the pension funds and structured to give government-guaranteed returns across the lengthy lifetime of these projects.

Such a guaranteed income stream could enable the government to achieve far more with the funds they have, whilst allowing the pension companies to offer decent guaranteed returns to pensioners with confidence.

Finding ways of improving annuities to make them the first choice of retirees should be a priority for the government. The current crisis is very dangerous for this particular section of the population and the last thing the Government needs is to have to grapple with a large group of suddenly impoverished pensioners whilst trying to rebuild the economy once this crisis is over.

Pooling risk remains the best way to provide long-term protection for pensioners, a group that has a defined amount of cash available to support themselves across a period of time that is unknown at the individual level but can be actuarially calculated for the group as a whole. The sudden and wholesale collapse of the market shows clearly the danger of leaving those dependent upon their investment income individually exposed to the vagaries of the marketplace.

Directing some of the Government efforts into supporting the returns available for annuities would be a more efficient way to maximise the ability of pensioners to support themselves.

It would be a far better and more controlled spend of taxpayer’s money than the harder to quantify approach of leaving investment to the individuals concerned and then having to provide support to those who end up in trouble.

There will be many lessons to be learned from this epidemic and changes will be required on how our society is structured. Across the globe, large investments will be required to get economies going again. The government should look to do this as efficiently as possible; devising schemes which both increase investment in the economy whilst delivering decent levels of income to the elderly should be high on the agenda as it seeks to future-proof the economy against further shocks of this nature.

by Tom Murray Head of Product Strategy LifePlus Solution, Majesco page 23

GDPR AND CYBER RISK INSURANCE: HOW CAN INSURERS IMPROVE THEIR CYBER RISK PRODUCTS Now approaching its second anniversary, GDPR is seen by companies of every size as a necessary part of doing business. Its requirements, such as data security, have led prudent managers to appreciate the value of cyber risk insurance.

However, specialist cyber insurance products still routinely fall short of what businesses need. One lesson from the Covid-19 crisis is just how much technology enables them to keep operating, even if home working is not always as effective.

To realise its full potential, cyber security must be taken seriously while insurers need help in creating bespoke products that reassure businesses.

to enhance their data security. According to Article 32 of the GDPR, the insured must, in their capacity as controller or processor, “implement appropriate technical and organisational measures to ensure a level of security appropriate to the risk”.

But actuaries need information regarding quantifiable losses to do their calculations.When an insured makes a policy claim, the insurer’s experts will quantify the damage to determine whether it is covered. Actuaries collate this information to quantify potential risks and improve their models. Once information is compiled, insurers can determine which risk is insurable and for what amounts, allowing Cyber risk insurance exists, but more data for better guarantees in reflecting adequate is needed to improve insurance products insurance premiums.

Most cyber risk policies aimed at SMEs are standardised, but insurers should tailor them specifically to address cyber risks. To do this, large datasets, such as information related to data breaches, are required to calculate the loss/ experience ratio. Once actuaries establish this, insurance carriers can draft protection provisions and bring them to market.

Cyber risk policies typically offer three major guarantees: civil liability coverage, damage protection and support guarantees. In most contracts, the support also includes crisis management, covering the fees associated with notification requirements, third-party and operating losses.

GDPR’s notification requirements provide useful information, but more data must be made available Under Article 33 of the GDPR, data controllers and processors must notify the supervisory authority within 72 hours of a data breach and provide the following: the nature of the breach, i.e. whether the confidentiality, integrity and/or availability of the personal data is concerned; the categories and approximate number of affected data subjects; the categories and approximate number of affected categories of personal data; the number of records breached; the likely consequences of the breach; the measures taken to remedy it and, where appropriate, to limit its negative consequences.

Such policies can provide invaluable support to the insured before a data breach occurs. They During a four-month period in 2018, France’s may also offer invaluable insight for the insured Data Protection Authority (CNIL) recorded 742 page 24

data breach notifications. The minimal publicly available information about them is probably insufficient in helping insurers to tailor their products and provide sufficient guarantees.

It is an invaluable actuarial tool, but tension exists between AI and GDPR

The European Commission recently confirmed that data is the lifeblood of AI when announcing Problematically, information contained in such its new EU data strategy with the publication notifications may be considered as personal of two papers, admitting that “the availability of data under GDPR, which defines it as: “Any data is essential for training artificial intelligence information relating to an identified or identifiable systems […] without data, there is no AI.” natural person (‘data subject’); an identifiable However, GDPR restricts the uses of personal natural person is one who can be identified, data, which hampers the EU’s development of AI directly or indirectly, in particular by reference by creating friction with machine learning. For to an identifier such as a name, an identification example, several of its core principles, including number, location data, an online identifier or purpose limitation and data minimisation, restrict to one or more factors specific to the physical, the creation of large datasets. So even though physiological, genetic, mental, economic, cultural the GDPR contains special exemptions on data or social identity of that natural person.” usage for statistical purposes, their definitions This is one reason why CNIL’s data breach are ambiguous. notification database, provided in open source The Commission should clarify how GDPR’s mode, lacks detail. Uncertainty exists regarding personal data processing for statistical purposes what constitutes personal data under GDPR, can facilitate innovation in machine learning. such as whether anonymised datasets are Since statistics are fundamental to actuarial personal data. work, they would benefit from an innovationAlso, due to the negative publicity surrounding friendly interpretation of the GDPR’s provisions. data breaches and the large potential sums AI, particularly algorithms trained on the basis of involved, businesses are reluctant to share data large datasets, may help actuaries develop more breach information with their insurance carriers. accurate models and create bespoke policies that the insurance market needs.

Although CNIL’s information sharing efforts are laudable, better ways must exist that allow Conclusion insurers to access the necessary data. For Recent events show that major changes can example, CNIL makes data protection officers’ happen at great speed creating a fallout that is names available and is increasingly public very difficult to manage if we are unprepared. concerning sanctions and public warnings about Being proactive with cyber insurance appears misuse of data subjects’ personal data. to fall into this category. An invaluable safeguard, Providing more information about the technical insurance also delivers peace of mind. Offering aspects of a data breach, while completely cyber risk policies is therefore an excellent anonymising the data subject’s personal data, starting point to help meet data security would create a balanced approach that could lead challenges. As emerging threats become more to better cyber risk insurance and data security prevalent, cyber risk insurance needs to adapt. practices.

By Emmanuèle Lutfalla, Partner, Mathilde Gérot, Senior Associate and Simon Fitzpatrick, trainee, at Signature Litigation. page 25

INFORMATION EXCHANGE TACKLING THE BLIND SPOTS IN NAMED DRIVER RISKS

by Sam Marsh, Head of Product Management LexisNexis Risk Solutions, UK & Ireland Around half of all motor insurance policies have at least one additional driver , yet understanding the risk of named drivers at point of quote has been a blind spot for the insurance sector. Despite advances in the use of data to determine the risk of the proposer, a comprehensive view of the named driver has, until relatively recently, remained a vital gap in knowledge.

Named Drivers - additional risks hidden in plain sight

including any records of CCJ’s or insolvency history in addition to understanding, for example, how long they have been associated with the proposer’s address; • Behavioural insights on the named driver as a previous or current policyholder on another policy; • Quoting behaviour to highlight, for example, if a named driver has been associated with multiple proposers on previous quotes or attempted fronting;

Demonstrating the scale of the issue, we analysed 220 million quotes that passed through our data hub on a single day. Of the 400,000 unique quotes, around 180,000 or 45% had at least one named driver on the policy.

• Previous claims experience throughout the named driver’s driving history;

Of these 180,000 quotes it is now possible to uniquely identify 90% of those named drivers using data enrichment, including address validation at point of quote to give insurance providers an understanding of the additional risk they may pose to the policy.

• Checks against an insurance provider’s own customer database to identify any past relationship in a potentially different context for example loyalty schemes or other products.

A named driver’s risk can be identified using a combination of data sources including: • In-depth insights on the named drivers

• Named driver checks against known-fraud databases;

75% of named drivers linked to proposer’s address Drilling down, 75% of named drivers can be validated as having lived at the policyholders’ page 26

address using the LexisNexis® Risk Insights data.

A further 15% of named drivers can be uniquely identified using all available data along with linking and matching technology which resolves, manages and matches information to create one consolidated view.

Once the blind spots are partially eliminated, it becomes possible to look at the potential claims risk enabling insurance providers to gain a more precise view of the risk of the policy based on both the proposer and the named driver.

Loss cost relativity increases to 66% If we consider the increase in risk related solely to the presence of a CCJ. Where a CCJ is present for the main driver or the named driver, the total loss cost relativity increases from 36% for the proposer only to 66% where the named driver is present.

And looking through another lens, when we analysed policies with no named driver but the proposer had two or more cancellations, the potential loss cost to an insurance provider increased 23%. That’s significant in itself.

However, when you add a named driver that loss cost rises from 23% to 38%.

Furthermore, the likelihood of the policy being cancelled rises from 99% for the proposer only to 115% where there is also a named driver.

Rise in ID fraud and false claims With 30% of consumers having confessed to fronting to obtain a cheaper quote, and 41% of

I. II. III. IV.

parents with children that are driving admitting that they would consider fronting to save their child money, the knowledge gap around named drivers is leaving the sector prone to fraud and customers at risk of their policy being voided.

In addition to the so called ‘soft fraud’ of fronting, there has been a 15% increase in ID fraud in insurance and 27% increase in false claims .

Fraudsters are capitalising on traditional gaps in understanding and validation on named drivers, fronting a proposer who will pass the necessary checks in order to get a higher risk named driver on cover. This is leaving innocent motorists who have had their ID compromised and their insurance provider exposed when an accident occurs and there is a claim.

It has become imperative for motor insurance providers to gain a more complete view of the risk where named drivers have been added to a quote, to help prevent fronting in order to gain a more affordable price and help prevent more serious fraud. Our analysis shows how a better understanding of the risk of a named driver would enable the sector to price based on a much clearer understanding of the full potential for loss, given that a named driver could be driving the vehicle up to 50% of the time.

Tackling identity management is another topic for another day, but in the meantime, data enrichment at point of quote can now deliver fresh insights to help put insurance providers on guard, price more accurately and to ask the right questions before putting the customer on cover.

Informed Quotes platform, via research from Quote Intelligence LexisNexis Risk Solutions research LexisNexis Risk Solutions research https://www.cifas.org.uk/secure/contentPORT/uploads/documents/Cifas%20Fraudscape%202019%20Full%20Digital%20Report%20.pdf

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Wishing our Clients and Candidates and Contacts and your families all the best in these uncertain times All the Bolton Associates consultants are working from home, staying in touch with the actuarial insurance market We are around for any conversations – give us a call!

And a huge Thank You to all of our incredible NHS workers who are putting themselves on the line We look forward to hearing the two bells ringing at Lloyd’s of London very soon

We are good at what we do, because we enjoy what we do

www.bolton-associates.co.uk 0207 250 4718 page 29

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search & selection Pricing Analyst

Reserving Analyst

General Insurance £60,000 Per Annum City of London

General Insurance £50,000 Per Annum London

Lloyd’s Syndicate is looking for a part qualified Pricing Analyst to join its growing insurance team. You will gain diverse experience across multiple lines of business.

Significant exposure to Senior Management as well as close working with Underwriters. Ideally 2-3 years pricing experience (reserving considered) from Lloyd’s/London market. .

Exciting opportunity to join a highly regarded Lloyd’s insurer in a reserving role to cover all lines of business.

Ideally, you will have 2/3 years of London Market/Lloyds reserving experience. Experience from a consultancy is advantageous and those from personal lines will be considered. Strong communication skills are imperative accompanied with excellent analytical skills.

REF: ZB 001287 SC

REF: ZB 001388 HT

Reinsurance Pricing Actuary

Analytics Actuary

General Insurance £80,000 Per Annum London

General Insurance Up to £80,000 Per Annum London

A Lloyd’s/London market (re)insurance business is looking for a qualified actuary to join the pricing team. To be considered you must have strong communication skills and have demonstrable experience gained from another London Market reinsurer in a pricing capacity.

Leading insurance business has an opening for a Nearly / newly qualified GI actuary with an interest in analytics.

This is a newly created team which will work with the business to provide insightful analytics across all lines written. You will have excellent project management and programming skills. You must be able to understand the business needs and come up with practical solutions.

.

REF: ZB 001362 MM

REF: ZB 001379 CC

Technical Pricing Manager

Nearly/Newly Qualified Capital Actuary

General Insurance £80,000 Per Annum Yorkshire

General Insurance to £75,000 Per Annum City of London

International re/insurer is looking for a Technical Pricing Manager to join their team. Excellent communication skills required as you will be building relationships with underwriters to add value to the decision making. Knowledge and experience in pricing specialty insurance products including professional and management risks would be ideal. .

Lloyd’s insurer is seeking an experienced Capital modeller. This is a varied role including enhancing, testing and validation of the Internal Model, analysis of capital outputs, documentation, parameterisation and working closely with other internal stakeholders to ensure the model is embedded and fully utilised throughout the business. Igloo, Remetrica or Tyche experience.

REF: ZB 001371 OG

REF: ZB 001380 PW

www.bolton-associates.co.uk page 31 +44 (0)207 250 4718 Bolton Associates, 5 St. John’s Lane, London, EC1M 4BH

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You will implement new techniques to improve risk pricing. Advanced knowledge of relevant software is essential.

A number of opportunities to plan, manage and deliver reserving projects, researching and building models that are effective, efficient, documented and verifiable. Previous exposure to IFRS17 is desirable. Term: 18 months.

Our client is seeking a part-qualified non-life actuary with strong technical and communication skills to provide actuarial support on reserving, capital and M&A projects.

LONDON MARKET RESERVING

SENIOR COMMERCIAL PRICING ANALYST

MARKET PRICING ANALYST

Part-Qualified

Lloyd’s Insurer

NON-LIFE LONDON

STAR6175

Large Insurer

Part-Qualified NON-LIFE LONDON / SOUTH WEST

STAR6177

Part-Qualified

Leading Insurer

NON-LIFE LONDON / FLEXIBLE

STAR6167

In this key role, you will assist with production of Solvency II and GAAP technical provisions, the quarterly reserving process, and the production of reserve risk and other reserving parameters within the internal model.

Design and lead innovative pricing analytics projects to improve the profitability of our client’s commercial lines business. You will also support the development of the pricing strategy by providing robust insight into market trends.

An excellent opportunity to update and develop pricing models to enable the business to both price and manage the portfolio mix effectively.

Excellent programming and modelling skills (Emblem, Radar) are required.

SENIOR PRICING ANALYST

LONDON MARKET ANALYST

SENIOR RISK PRICING ANALYST

Part-Qualified

Managing Agency

NON-LIFE LONDON / SOUTH EAST

STAR6180

Deliver pricing decisions which manage the performance and competitiveness of personal lines products. You will lead on pricing reviews and key projects whilst utilising a variety of software tools and data sources.

Part-Qualified

Rapidly-Growing Business

NON-LIFE LONDON

STAR6161

Develop and maintain pricing models to assist underwriters and actuaries. This is an exciting opportunity to develop your strong problemsolving, communication and creative skills.

Part-Qualified

Major Insurer

NON-LIFE SOUTH COAST

STAR6173

Develop your career in this key role, managing the performance and profitable development of products through technical pricing. You will develop your knowledge of data manipulation and statistical modelling tools.

Lance Randles MBA

Jan Sparks FIA

Paul Cook

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

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

ASSOCIATE DIRECTOR +44 7740 285 139 paul.cook@staractuarial.com

Satpal Johri

Clare Roberts

Diane Anderson

ASSOCIATE DIRECTOR +44 7808 507 600 satpal.johri@staractuarial.com

ASSOCIATE DIRECTOR +44 7714 490 922 clare.roberts@staractuarial.com

SENIOR CONSULTANT +44 7492 060 219 diane.anderson@staractuarial.com

Antony Buxton FIA

Louis Manson

Joanne O’Connor

MANAGING DIRECTOR +44 7766 414 560 antony.buxton@staractuarial.com

MANAGING DIRECTOR +44 7595 023 983 louis.manson@staractuarial.com

OPERATIONS DIRECTOR +44 7739 345 946 joanne.oconnor@staractuarial.com

PLEASE CONTACT US AT ANY TIME TO DISCUSS YOUR REC RUITMENT NEEDS

+44 20 7868 1900

staractuarial.com

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