Actuarieel Podium September 27, 2016 @ Jos Berkemeijer
Are you part of the future or the past? September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Classic view on Leadership Interactive Olympic Warming Up! Give it a try…
Vision, Goal Focus
Strategy Sail …the wind
Keep your head above water
Structure Responsibility Firmly in the saddle September 27, 2016
Timely Execution Help, Control Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Agenda 1. Classic view on leadership 2. Actuarial leadership, Key statements 3. Personal leadership experiences 4. The many faces of leadership 5. Actuarial leadership 6. Actuarial work field, Holistic view 7. Actuarial leadership, Future outlook
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
3
Actuarial leadership Key statement 1: Estimates Jane, Born in 2016 Pension year: 2091
1. I think it’s ethically and professionally responsible, to estimate Jane’s average investment return and mortality rate with a 95% confidence level for the next 70 years or more
ONLY IF … September 27, 2016
Actuarieel Podium ----
P(X | X1,X2,X3,..) Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership Key statement 2: Life expectancy
Š DW2
(2016) The Food and Drug Administration has approved human testing for what could be the world’s first anti-aging drug: metformin
2. Within the next 30 years new anti aging medicines will improve life expectancy with more than 10 years
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
5
Actuarial leadership Key statement 3: Manage your own life ending? 3. By 2050 most elderly will be able to manage their own life’s exit strategy (pro)actively
To provide a decent pension for my children, I’ve asked my hospice to keep me alive forever, as my pension is $ 300 per day and my nursing costs are only $ 150
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership Key statement 4: Robo actuaries 4. By 2030 most standard actuarial advice and reports will be handled by Robo Actuaries
Facts…… • Computerisation 35% of current UK-jobs are at risk • Actuaries 20Y-Likelihood of automation: 15%. • The future is for 1. Data scientists 2. Machine learning (predictive models) Robo Actuary (2030) September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Personal leadership experiences Get out of the box! When I applied for‌. I was asked: Aren’t you more Concern Actuary Insurance director Pension fund director Supervisory Board member Fintech Managing Partner
a department manager? an actuary? an insurance director? a director? a board member than a scrum team member?
Be(come) Who You Are Never put people into boxes!
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Personal leadership experiences Who am I? Actuarial
Family Interests
Husband
Father
Caregiver Ri
In , sk
tm s e v
t, n e
n ce a n r e v Go
Professional
Actuary
Board Member
Supervisory Board Member ce n cie S s, c i Friends at m he t Networks a M , hy Professionals, Volunteers p o s ilo h P
Strategic Advisor Software Developer Lector Student
Social
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
Hobbies --- Leadershp & Actuaries
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Personal leadership experiences Who are YOU? Actuarial
Family
Interests
Professional
YOU
Social September 27, 2016
Hobbies Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Personal leadership experiences Stephen Covey: ‘Green & Clean’
1. Set Target 2. Define responsibility 3. Offer help 4. Accept failure 5. Success September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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The many faces of leadership Leading by example | Leadership types
Obama
Mother Teresa
Einstein
Is there one type of leadership that fits the actuarial profession best?
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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The many faces of leadership Einstein as an actuary role model?
S=W+P+M Success = Work + Play + Keeping your mouth shut
Einstein’s leadership Principles 1. Try not to become a man of success. Rather become a man of value. 2. An expert is a person who has few new ideas A beginner is a person with many.
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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The many faces of leadership Misunderstanding: Leadership…
is not about YOU,
is NOT about • Management • Best expertise • Authority or power • Titles • Having followers September 27, 2016
Actuarieel Podium ----
but about OTHERS & YOU
is about social & personal change, ethics, attitude & principles, commitment, communication Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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The many faces of leadership What is Constructive Leadership?
JB View
1. Empathy Your consciousness and competence to recognize and identify social and peoples’ needs 2. Confidence Your conviction that by engaging your partners and network, these needs can be fulfilled 3. Social Capabilities Your power to connect and line up your and others’ strengths and deal with weaknesses 4. Professional Capabilities Your skill to translate expertise of combined disciplines into ‘breakthrough’ new solutions 5. Attitude Your strength to evaluate, learn from others and revise your thinking and approach 6. Stewardship Your Helpfulness, Unselfishness, Perseverance & Flexibility , Helicopter & Birds Eye View 7. Mastership Your power to convince, master principles, accept failure and anticipate the unforeseen September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
15
Actuarial leadership, Self-reflection Example: Valuing US Pension Liabilities I Topic
Valuing US public pension plan liabilities (2016) Current standard actuarial practice: ≈ 7.5% discount rate
Issue
What’s the right discount rate?
Framed question?
Action
Common Task Force: 1. American Academy of Actuaries (AAA) 2. Society of Actuaries (SOA)
Right Approach?
1. Task force planned discount rate advice: ‘default-free obligations’ or ‘risk free rate’ Result
2. Risk free rate impact: US$ 8.4 trillion underfunding 3. AAA/SOA - Disband task force - Suppress publication of the paper.
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
Leadership? Ethics? Decision Quality? 16
Actuarial leadership, Self-reflection Example: Projection rate variable annuities Topic
How to calculate Dutch variable annuities ?
Issue
What’s the right interest projection rate?
Framed question?
Action
1. Advice from Task Force New Pension System - Dutch Social and Economic Council (SER) - Dutch Royal Actuarial Association - Dutch Bureau for Economic Policy Analysis (CPB) 2. Advice from Dutch regulator (DNB)
Right Approach?
1. Advice Task Force: macro-stable discount rate Result
September 27, 2016
2. Advice DNB: risk free rate
Leadership? Ethics? Decision Quality?
3. Dutch Government & Parliament without further discussion decide: Projection rate = risk free rate Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
17
Actuarial leadership, Self-reflection Example: Customer Risk Information Regulation
US SEC
Past performance is not a guide to future performance
A fund's past performance does not necessarily predict future results
Dutch Authority for the Financial Markets (AFM) 2002 Past performance is not a guarantee of future results 2006 Risk Meter Key investor information provides insight into the nature and risks of the mutual fund offered
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
18
Actuarial leadership, Self-reflection Example: Customer Risk Information Regulation
What is more risky Bonds or S&P-500 ? Meanwhile… • Actuaries are practicing a popular song of Simon & Garfunkel • Or perhaps the song of the regulator? September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Self-reflection Example: Prudent Person Principle Topic
Issue
Action
Result
How to apply the prudent Person Principle (PPP) for Dutch Pension Funds? DC Pension funds are forced by law to decrease investment risk for their members as the pension date approaches (mandatory life cycle ). Lobby of individual actuaries and organizations. PPP should be an open norm. The risk attitude of the members should be leading.
1. Pension funds may use another principle than life cycle if they can underpin that. 2. Dutch regulator DNB has the last word‌.
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
Framed question?
Right Approach?
Leadership? Ethics? Decision Quality? 20
Actuarial leadership, Self-reflection The Long Term Investment Communication Dilemma Confident, but not Informative Inv X 41
Inv X 10 Inv X 2.5
Informative, but not confident
Inv X 14 Inv X 10 Inv X 0.7
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
21
Actuarial leadership, Self-reflection The Long Term Investment Communication Dilemma
Alternatives?
Skip estimates. Only communicate a range of constant fixed return outcomes
Informative, No risk framing
Inv X 10 Inv X 2.5
Inv X 11 Inv X 7 Inv X 4
Any other alternatives? September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
22
Actuarial leadership, Self-reflection Conclusion
Where are the actuaries?
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Opportunities The need for Strategic actuarial help
CEO
Sea of Risk
Anybody that can help with systemic risk?
CFO
Strategy Mountain
Meanwhile… in the actuarial rabbit hole One second…, and I’ll be able to estimate the mortality rate 150 year ahead and in 15 decimal places! September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
24
Actuarial leadership, Opportunities Example of where actuarial help is needed
Wireless Insurance Dongle Car Insurance: pay-how-you-drive Safe Driving
• Actuarial key question: is modest speeding a positive or negative risk factor? • Developing mature risk models: actuarial help is needed September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Opportunities Actuaries are the binding factor !?&%&@# New Solidarity
Big Data
Crowd/Community - Funding - Longevity Solidarity - Disease Solidarity - Investing
Robo Advice Gamification Medical Care - Efficiency - Waiting list reduction - Disease Management
Communication comprehensibility tests
Bitcoin Systemic risk
Model Risk
Behavior Risk Models
Parameter risk Regulatory Risk September 27, 2016
Actuarieel Podium ----
Cooperation Risk Presentation Jos Berkemeijer
Economic Risk Models
--- Leadershp & Actuaries
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Actuarial leadership, Opportunities Where do actuaries add value? Questions
September 27, 2016
Actuarieel Podium ----
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How to enlarge the scope of institutions that can benefit from actuarial expertise?
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Time for a CLO?
-
What do we need to qualify actuaries for C-level functions?
-
How to overcome being identified as bringers of bad news?
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Opportunities Push or pull strategy? Leadership space
Actuarial space
• • • •
Personal growth: a combined Push-Pull strategy C-Level ambitions are fine, but remember you have to be asked… When you give advice, it’s hard to ask for help! Who is your coach?
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Connecting the dots Classic lateral thinking for managers The Nine Dot problem Link all 9 dots using four straight lines or fewer, without lifting the pen and without tracing the same line more than once.
Solution: Think outside the box!
Question Whatâ&#x20AC;&#x2122;s the probability an actuary can link all dots? Answer: Bayesian approach, adding implicit conditions P(linking all 9 D | L<=4 & Straight |Keep pen on paper | No double lines | Actuary) = 1 September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Connecting the dots Conditional thinking for actuaries The Nine Dot problem Link all 9 dots using one straight line, without lifting the pen and without tracing the same line more than once.
Solution: Think outside the circle!
Solutions 1. Place the dots in a straight line and draw the line with your pen 2. Use an extreme fat pen Lesson
New solutions (innovation!) appear by studying and varying the implicit conditions September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
30
Actuarial leadership, Connecting the dots Big Data, Incomplete Data Modelling
Big Data Set Chaotic, Noise Pattern search
Filter irrelevant data Model assumptions Testing Connect the dots Related data dots? Check relevance Incomplete data?
Project, Estimate Add Scenarios Add Behavior Realistic Model?
Example
Result Optimal Model
N e w e c o n o m i c , behavio ral & s c e n a r i o m o d e l s
F a c i a l k e y p o i n t s d e t e c ti o n September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
31
Actuarial leadership, Connecting the dots Big Data, Incomplete Data Modelling
There are two kinds of actuaries: those who can extrapolate from incomplete data
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
32
Actuarial leadership, Shift & Focus Managing risks before the decimal point
Risk Management
1,000,000,000.001 Before the Decimal Point Systemic risk Behavioral models Economic scenarios Decision model September 27, 2016
Actuarieel Podium ----
After the Decimal Point Systematic risk Conditional risk
Presentation Jos Berkemeijer
Small, manageable risk Irrelevant risk
--- Leadershp & Actuaries
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Actuarial leadership, Shift & Focus Models: Mathematical or Economic & Behavioral? Adding Rabbits Math teacher asks six year old Johnny: "If you have 200 rabbits and you add another 100 rabbits, how many rabbits would you have?" Johnnyâ&#x20AC;Ś: "I think the answer is 337 Sir". Math teacher: "No, Johnny. That's the wrong answer. Try again. Johnny takes another five seconds: "Still probably 337 Sir" " "No Johnny, wrong again. You know nothing about mathematics!". Immediately Johnny answers: "And you know nothing about rabbits Sir"
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
34
Actuarial leadership, Shift & Focus Client or Self Centric Thinking & Communication Heliocentrism
Geocentrism
Client Centric Simple
Self Centric Complex
“If you can't explain it simply, you don't understand it well enough." - Albert Einstein September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
35
Actuarial leadership, Shift & Focus Product development from a clients perspective
Client view
Expert view
Globalization, Expectations, Social dynamics, Learning, Apps, Games, Speed of change, etc. September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Shift & Focus Product development from a clientâ&#x20AC;&#x2122;s perspective Youâ&#x20AC;&#x2DC;ve got to start with the customer experience and work backwards to the technology
Steve Jobs
September 27, 2016
Actuarieel Podium ----
If I had asked people what they wanted, they would have said faster horses
Henry Ford
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Shift & Focus Challenge for actuaries: Networking Actuarial Space
Company
Actuarial Association Permanent Education Research, Publications
Colleagues CEO/CFO Receptionist
Science Space
Politics
Government departments Project groups Face to face Cup of coffee
YOU
Regulators
Studies, Projects Research Cup of tea
Partnerships IT, Communication Accountants, econometrists Informal invitations
Social
Sports or Chess team Volunteer work, Friends Have a drink
H o w m u c h ti m e d o y o u s p e n d o n n e t w o r k i n g ? September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
38
Actuarial work field, Holistic view Discounted space of probable outcomes
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
39
Actuarial work field, Holistic view Focus from an actuarial leadership perspective
Where to focus? 1. Near future (t < 5, 10 years) 2. Conditions (Bayesian), assumptions, scenarios (e) 3. Strategy: = ’Recipes’ optimization strategy Keynes: ‘It is better to be roughly right than precisely wrong.’ September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
40
Actuarial work field, Holistic view Recipes instead of estimates. Recipes approach examples • Flexible strategies that manage risk g Lon
isk r y evit
w Cro
• Early warning indicators instead of trigger points • Self adapting profit sharing contracts
ng ti s ve d In
• Solidarity algorithms based on groups, communities and big data, instead of guarantees • Etc., Etc.
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
41
Actuarial leadership, Future outlook Challenging beliefs and principles. Examples. Technical • • •
What’s the impact and meaning of negative interest rates How risk free is the risk free rate? How to deal with long-term uncertainty?
Model • • •
What are the confidence level and (time)limitations of my models? Bubbles and Debt in my models? What is the relevance and value of a model - that excludes parameter, model risk and scenarios? - that does not include economic and behavioral effects? - that is only a prediction on basis of historical data?
Advice & Decision Model • • • • • • • •
How do Black Swans start?
Predicting the future, or a long-term advice based on scenarios? Do I clearly state and discuss the limitations of my advice? Is my report/advice really ‘discussed’ or only ‘accepted’? How does my advice fit in a board’s decision model? Are all stakeholders interests and believes discussed in my advice? Shouldn’t any advice have a section about the possible effects of premises? What are my boards believes and how can I underpin or challenge them? How near can we come to a ‘free of believe’ decision model?
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
42
Actuarial leadership, Future outlook Building a new generation of actuaries EMAS 1. State of the art! 2. Ahead? 2016
1951 September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Future outlook Summary of actuarial leadership focus points 1. Take more responsibility: Socially, Personally - Widen the area of influence - Grow and spend more time on your personal and professional network - Intensify cooperation with other disciplines 2. Strengthen ‘Soft Skills’ - Communication skills, power to convince, master principles, self-reflection 2016 - Empathy power: understanding social dynamics, stakeholders & clients 3. Innovation Build up new client-central products with new adequate regulation principles 4. Adjust professional methods and education - Develop new ‘board decision models’ - From ‘Believes’ to ‘What If, Given Conditions x|y|x’ - From ‘Long term uncertain estimates’ to ‘Short term recipes’ - Including systemic, parameter and model risk - Anticipating on economic and behavioral effects and scenarios - Based on early warning indicators instead of trigger points September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
44
Actuarial leadership, Future outlook Motivational wrap up! Self-Leadership 1. Make your own leadership plan Without vision and strategy every action or plan is pointless 2. Start networking, learn, generate ideas, evaluate every action 3. Find a boss, promotor and/or coach that makes you grow 4. Work from a stakeholder & client perspective 5. Key values: Responsibility, Respect & Ethics 6. Cooperate and learn from other disciplines 7. Manage the regulatory setting 8. Break with things that stop you 9. Define simple but disruptive goals My next report/advice will look likeâ&#x20AC;Ś 10. Use common sense, KISS, accept failure and success will follow September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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Actuarial leadership, Future outlook Shape your future!
September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
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