APRIL 2023 theactuary.com
The magazine of the Institute and Faculty of Actuaries ANTHONY FINKELSTEIN The systems engineer and academic on spanning the business spectrum
In a spin or on a win – what’s at play this year for insurers?
SOCIAL CARE
ECONOMICS
REINSURANCE
When the reforms eventually come, will they do any good?
2,000 years of progress? How we’re still ‘Roman’ in our approach to money
The new take on risk, after this year’s unprecedented renewal
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Inside this issue April 2023
16 Environment: Stacking up the odds
44
We’re playing a wobbly game of ‘Earth Jenga’, says Sandy Trust
18 Reinsurance: Million dollar questions With unprecedented market times, Michael Hinz gives Yiannis Parizas his expert take on P&C
A Up Front
12
22 Data: Gathering the information Richard Steele shares the usefulness of density-based clustering
38 Pensions: Net gains Maria Nazarova-Doyle on the framework she hopes will galvanise climate action in investments
40 Soft skills: Red alert Lori Shook explains how to deal with workplace conflicts
24 Economics: Empire state
4 Editorial
What’s changed in economic terms since the Romans? Not as much as you may think, says actuary and classicist George Maher
Rocky times mean only a greater desire to anticipate what might come next, says editor Yiannis Parizas
At The Back 42 Extra-curricular
5 President and CEO comment
27 World view: Bermuda
Your networks and feedback are vital, say Matt Saker and Stephen Mann
Islander Mikaela O’Brien gives a taste of actuarial student life in this insurance hotspot
6 IFoA news The latest IFoA updates and events
28 Health: Who cares? Will the government’s long-delayed social care proposals really make a difference, asks Tom Kenny?
32 Insurance: Wheel of fortune
Features
With the world facing crises on multiple fronts, industry insiders speak to Ruolin Wang about the potential impacts for life and health
12 Interview: Anthony Finkelstein
COVER: SHUTTERSTOCK
The university president, systems engineer and former government adviser on how the interplay of insights between business, science aand technology is ‘like a Jacuzzi’
36 History: Free-spirited radical The remarkable legacy of Richard Price – considered ‘the first actuary’
Get the app Did you know you can read The Actuary magazine on any tablet or Android phone? Click through to read more online, download resources, or share on social s media via our links in the app. It’s an exclusive free benefit for our members. Download on the App Store at: www.theactuary.com/ipad Visit: V www.play.google.com
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Jashika Patel discusses her passion for wildlife photography
44 Student Why are insurance-linked securities on the rise? Darren Trott explains
46 People/society news The latest updates and events
47 Puzzles and appointments
Need-to-know Information is power… Find the results of the latest IFoA member survey on page 8. Want to join our magazine team? See page 10
See additional content, including actuarial news, at www.theactuary.com Sign up for our weekly email newsletter at bit.ly/1MN3bXK
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Upfront Welcome
The Actuary: theactuary.com IFoA: actuaries.org.uk
PUBLISHER Redactive Publishing Ltd 9 Dallington Street, London EC1V 0LN PUBLISHING DIRECTOR Anthony Moran MANAGING EDITOR Melissa Walton +44 (0)20 7880 6246 melissa.walton@redactive.co.uk SUB-EDITOR Kate Bennett D I S P L AY S A L E S theactuary-sales@redactive.co.uk +44 (0)20 7324 2753 RECRUITMENT SALES theactuaryjobs@redactive.co.uk +44 (0)20 7880 6234 ART EDITOR Sarah Auld PICTURE EDITOR Akin Falope SENIOR PRODUCTION EXECUTIVE Rachel Young +44 (0)20 7880 6209 rachel.young@redactive.co.uk
EDITOR Yiannis Parizas editor@theactuary.com F E AT U R E S E D I T O R S Travis Elsum: Environment and sustainability ● Alex Martin: Environment and sustainability ● Blessing Mbukude: Life ● Ruolin Wang: Life and health ● Rajeshwarie VS: General insurance ●
STUDENT EDITOR Adeetya Tantia student@theactuary.com IFOA EDITOR Kate Pearce +44 (0)207 632 2118 kate.pearce@actuaries.org.uk EDITORIAL A D V I S O R Y PA N E L Peter Tompkins (chairman), Chika Aghadiuno, Nico Aspinall, Naomi Burger, Matthew Edwards, Jessica Elkin, Richard Purcell, Sonal Shah, Nick Silver
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SUBSCRIPTIONS Subscriptions from outside the actuarial profession: UK: £110 per annum. Europe: £145 per annum. Rest of the world: £175 per annum. Contact: The Institute and Faculty of Actuaries, 7th floor, Holborn Gate, 326-330 High Holborn, London WC1V 7PP. +44 (0)20 7632 2100 kate.pearce@actuaries.org.uk. Changes of address: please notify the membership department. membership@actuaries.org.uk Delivery queries: contact Rachel Young rachel.young@redactive.co.uk Published by the Institute and Faculty of Actuaries (IFoA). The editor and the IFoA are not responsible for the opinions put forward in The Actuary. No part of this publication may be reproduced, stored or transmitted in any form, or by any means, without prior written permission of the copyright owners. While every effort is made to ensure the accuracy of the content, the publisher and its contributors accept no responsibility for any material contained herein. © Institute and Faculty of Actuaries, April 2023 All rights reserved ISSN 0960-457X
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All shook up Well, the rocky global economic sitution keeps delivering up surprise tremors. Layered on top of an apparent new-norm backdrop of high inflation and rising interest rates have been yet more crises: the collapse of Silicon Valley Bank and then, hot on its heels, the near-collapse of Credit Suisse. Naturally, these events have raised question marks about bank performance (not to say, triggered memories of 2008…), and made investors more cautious. This is being reflected in the market, of course. So where does that leave us actuaries? It’s hard to know – anything could be around the corner. But in our cover story this month, we try to pin down the main issues facing life and health insurers, which have even more obstacles to surmount: the knock-on effects of Covid in the NHS. Features editor Ruolin Wang sat down with four professionals to gather their thoughts (p32). And what about non-life reinsurance, after a market hardening and unprecedented renewal at the start of the year? On page 18, I ask tough questions of chief underwriter Michael Hinz, to get his expert P&C insights. With the numbers of natural disasters we’re seeing going in only one direction, there are complex considerations. Without travelling and contributing to climate change, we can offer you in this issue a guilt-free ‘trip’ to Rome: actuary and classicist George Maher draws economic parallels between today and the ancient regime (p24). Not all that much has changed, it seems… Fly to Bermuda on page 27, where Mikaela O’Brien describes life there as a student. And head to Wales (p36), the birthplace of YIANNIS PARIZAS ‘the first actuary’, the remarkable EDITOR Richard Price. Enjoy the read. editor@theactuary.com www.theactuary.com
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Upfront CEO
M AT T S A K E R
STEPHEN MANN
Community is crucial
Ploughing on with progress
I
T
n my presidential address, I talked about the challenges the IFoA has in engaging with its members. For example, I spoke about the fact that some sections of our membership feel their needs are not quite being met, or that they are undervalued by the IFoA. It’s essential we address these concerns and are clear on what we are offering to our diverse membership, ensuring it represents good value to all. One way we engage with our members is through the annual membership survey, in which all were invited to take part last year; it gives you the opportunity to say how it feels to be an IFoA member. I was delighted to see that 21% of you took part, a record response rate, which means that we have a solid, reliable body of data to work with. Thanks to all those who took the time to complete the survey, the results of which are summarised in this edition of The Actuary. With engagement in mind, I was delighted to see the launch in February of our new digital community platform, IFoA communities (actuaries.org.uk/about-us/ifoa-communities). This is an exciting opportunity for us to connect globally, discuss emerging topics, learn from experts, meet likeminded individuals and collaborate in an organic, easy-to-navigate online environment. This launch provides the perfect link into this month’s wellbeing theme. I often reflect on how lucky I feel to be part of a thriving profession; when I talk to friends who aren’t members of a profession, I feel they are missing out. This was pressed home to me at the Life and GIRO conferences last November, where it was great to see everyone reconnect with colleagues and friends. It is human nature to want to be part of a group, and this attachment is key for our wellbeing. Hopefully, you value being part of our great MATT SAKER profession – and IFoA communities offers a is the president of superb opportunity to take that a step further the Institute and and connect more closely with likeminded Faculty of colleagues. I’d encourage you to get stuck in. Actuaries www.theactuary.com
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hank you to everyone who took part in our recent member survey. Like Matt, I was encouraged to see the increase in the number of you who gave us your feedback – compared with other similar organisations, it was a large turnout for such a survey. This was coupled with a satisfaction score of 65%, which is a solid result and stacks up well against similar organisations, judging by the conversations I have with other CEOs. You can find out more about what you told us in the article on page 8, and I’m pleased to report that the overall picture is one of steady and continued progress. It goes without saying that I would like to see further, and perhaps faster, advancement. We have a clear picture of what members value. In many areas we have all the foundation blocks in place and delivered, and are seeing the benefits. We also know the importance of providing a smooth and frictionless service. We perhaps should have been more candid about the scale of the work required to upgrade all our systems so that we can offer everything we wish to provide for you. Over an 18-month period, since the launch of our new website (on a new platform) last May, we have been changing every part of our systems, including delivering new infrastructure, a new virtual learning environment, a new members’ area and the new digital community platform. Over the next year or so, these should knit together to give you an improved and integrated experience. Of course, meeting members’ needs is a moving target, as elements change from time to time. You have my assurance that we will be using this member survey data, along with information from the many other listening exercises that we undertake, STEPHEN MANN to put your wants and needs at the heart is the chief executive of everything that we do, to shape our of the Institute and member proposition and to improve your Faculty of IFoA experience. Actuaries AUTUMN APRIL 2022 2023 | THE ACTUARY | 5
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Upfront News
I F o A F O U N D AT I O N
VOLUNTEER
Supporters united ‘Actuaries Supporting Others’ was the theme of the IFoA Foundation’s first Celebration Event, held at the beginning of March at Staple Inn Hall. Supporters and colleagues from across the actuarial profession came together with some of the charity’s grant, scholarship and mentoring beneficiaries to celebrate its impact. Kartina Tahir Thomson, chair of the Foundation, gave a powerful speech in which she shared stories from young people around the world who have benefited from the charity’s support. She also revealed that she herself had once received educational grants and scholarships – showing that providing support to a young actuary at critical stages in their journey can make a huge difference to careers, lives and communities. Connections were made, friendships formed and support given. There was a strong
sense of community and common purpose, with guests giving warm, positive feedback: “I had an amazing time. It was nice to meet so many likeminded people, broaden my network and feel the passion for our work.” “The joy on beneficiaries’ faces, to be able to connect with senior actuaries, was priceless.” “Thank you for such a lovely event – it was fantastic to hear more about the impact of the Foundation’s work and meet the individuals involved.” As IFoA president Matt Saker remarked: “The future looks bright and the potential to grow the Foundation is huge.” Join the IFoA Foundation’s mailing list bit.ly/IFoA_Foundation_mailing to be notified of events and opportunities to support and volunteer with the Foundation, and to receive news of our growing beneficiary community of aspiring actuaries around the world.
Forces for good On 22 February, a reception was held at the Royal College of Physicians (RCP) in Edinburgh. This was the first such event in Scotland since the pandemic, and was held to thank our volunteers and acknowledge their contribution. Invitations were sent not only to volunteers based in Scotland but also to those in the north of England and Northern Ireland. The evening was held in the conducive setting of the RCP library, with attendees including three past presidents, several Scottish Board members, Council members and early-career volunteers. It was a great mix of people, representing our vibrant and thriving volunteer community. IFoA president Matt Saker and IFoA CEO Stephen Mann were on hand to thank the group for their work, and then joined Annette Spencer, director of public affairs and research, in mingling and meeting them as individuals. It was great to be back together, in person, and there was a real buzz in the room. The IFoA takes volunteer recognition seriously. Volunteers contribute in so many ways to so many activities – creating content for events, contributing to research and thought leadership, participating in committees and boards, answering surveys to shape the organisation’s direction, and contributing to the profession’s development. We look forward to meeting as many volunteers as possible at our in-person conferences later this year and welcome suggestions on how best to recognise their efforts. To share your thoughts, email Terri Myers at terri.myers@actuaries.org.uk
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www.theactuary.com
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Upfront News
PROFESSIONAL SUPPORT SERVICE
Interested in getting involved with the Professional Support Service? Looking for a way to give back to the profession in some form? Becoming a panel member with the Professional Support Service (PSS) can give you a platform to share your experience in a way that can help fellow actuaries navigate issues in their work, allow you to network with your peers and provide useful experience beyond your day job. The PSS is a free service for IFoA members. If a member has an ethical work dilemma, or a query on the Actuaries’ Code, Actuarial Profession Standards or the Technical Actuarial Standards published by the Financial Reporting Council, they can contact the PSS and receive the views of a panel of qualified, experienced peers. The process is anonymous to ensure confidentiality and avoid bias. Queries are varied, and have included topics such as: Whistleblowing within a company over what were seen as incorrect calculations Professional duties where an actuary was acting effectively as a trustee Work review and identifying a suitable person to undertake an independent peer review Responsibilities under the ‘Speaking Up’ principle in the Actuaries’ Code A possible conflict of interest in taking on a new role
Preparing a report and potentially appearing as an expert witness.
time spent on PSS matters counts towards your CPD requirement.”
A worthwhile experience Michael Field, a recently retired PSS volunteer of 12 years, said this about his time on the service: “It’s a very worthwhile and satisfying experience. Having been a proud member of the actuarial profession for more than 50 years, including more than 45 years’ experience of advising on the relatively new areas of self-invested personal pensions and small self-administered schemes, I decided to volunteer for the role. I felt I was well placed to give the benefit of my experience – of the many conflicts and problems that arise when advising pension scheme trustees, members and their employers. “All panel member discussions take place over email and need not interfere with your ‘day job’. An added bonus is that
To find out more, you can go to bit.ly/IFoA_Volunteer_PSS or contact engagement.team@actuaries.org.uk
‘A really useful reminder of the key aspects I needed to ensure I’d considered. Very much appreciated’ One PSS user
IFoA COMMUNITIES
IMAGES: SHUTTERSTOCK
Craft our content IFoA communities is our new digital community, created by members for members. It offers an exciting opportunity to connect globally and discuss emerging themes with likeminded individuals. If you have an interest in a particular actuarial topic, and experience or expertise in that area, you can help us to share the latest information and leading-edge developments with our global membership on this new platform. In becoming a digital content volunteer with IFoA communities, you would highlight
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developments in your field, lead discussions on hot topics and make the platform a destination for expert actuarial content. Is it right for you? Are you: Keen to curate and share content and initiate discussions based on your speciality and interests? Knowledgeable of and interested in existing and emerging topics of interest to actuaries in your field? Open to helping build a network of contributors to IFoA communities?
Willing to proactively engage in communityled discussions and forums? Interested in developing a new, engaging platform to support our global membership? Happy to be an advocate for IFoA communities? Interested in working with the IFoA to shape our community and our digital content development? Find out more and apply at bit.ly/IFoA_Volunteer_DCV
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Upfront News
MEMBER FEEDBACK
HOW DID WE DO? Your responses to the 2022 member survey were positive – but there’s always more that can be done At the end of last year, we asked you to complete our annual survey, which helps us to track progress against our promise to become a member-focused organisation. In 2018 and 2021, we conducted in-depth surveys to inform a programme of improvements that is still underway, transforming every aspect of IFoA membership. For the years 2019, 2020 and 2022, we carried out short-form surveys to help keep your voice central to our work, complementing a range of activities and listening exercises with our members and their employers.
i 66%
21%
RESPONSE RATE The 6,882 survey responses are a record for the IFoA, suggesting that you increasingly recognise our efforts to listen and react. Response rates are a good indicator of engagement, and the numbers of you taking the time to give us your feedback is much higher than is usual for these listening exercises.
USEFULNESS RATING Generally, you feel that IFoA membership contributes to your professional success. While this score rises to 68% for both Fellows and Associates, there is clearly scope for this to be higher.
65%
SATISFACTION RATING This is an improvement on the last short-form survey but there’s still more to do before all the things we are doing really resonate.
2018: 65%
2019: 65%
‘You have my commitment that we will continue to listen, learn and do more for our members’ IFoA CEO Stephen Mann
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2020: 64%
2021: 68%
What’s in the pipeline IFoA chief executive Stephen Mann said: “We’ve delivered a new website and a new virtual learning environment, improved online exams, a thought leadership programme and given members free access to online events, as well as providing a broad range of in-person events and conferences. Our thought leadership and policy work is widely recognised and you have my commitment that we will continue to listen, learn and do more for our members. “We know it will take time for some of this activity to land and be recognised. We have been making big investments in improving member service but much of this is only coming on stream now and over the next year or so, as we have had to fully upgrade our systems. “There are some major projects delivering over the next 12 months. IFoA communities launched in February, and further improvements to our website, including a new member portal, will be added later this year. “You have told us what is important to you and we are mapping what we do against those requests. In some areas the journey is nearly complete but in others we expect to complete over the next year. Over time I hope these efforts are acknowledged as meeting what members are seeking, and lead to a further uptick in what members are saying about their IFoA experience.” We offered to donate to the IFoA Foundation in return for your survey responses and you generated a total of £5,478. Our thanks to all who participated. www.theactuary.com
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Upfront News
HISTORY
IN BRIEF... Council nominations open If you are an IFoA Fellow or Associate and want to get involved in shaping the next stage of the IFoA’s strategic journey, put yourself forward to join the Council. Nominations opened on 5 April. To find out more about the process of standing for election, Council’s responsibilities and the role of a Council member, please check your inbox for a recent email from Civica Election Services. Nominations close at 12pm BST on 9 May 2023.
First actuary – tribute In February, BBC presenter Huw Edwards, supported by former IFoA president Louise Pryor and IFoA librarian David Raymont (pictured), unveiled a blue English Heritage plaque dedicated to Welsh preacher and mathematician Dr Richard Price, 300 years after his birth. Considered by many to be the very first actuary, Price lived at number 54 (originally number 43) Newington Green, north London, from 1758 to 1787. Read more about Richard Price in our feature on page 36
GAD/FRC survey: take part IMAGE: ALEX UPTON/ENGLISH HERITAGE
The Government Actuary’s Department is carrying out a survey to help the Financial Reporting Council understand how artificial intelligence and machine learning techniques are used and the associated risks, and would like to hear from you. The short online survey, which closes on 24 April 2023, takes about 15 minutes to complete, and participants will receive a summary of the findings. Follow the QR code or go to bit.ly/FRC_AIML_survey
Could you be a speaker at the Asia Conference? 12-13 September, Kuala Lumpur, Malaysia We’re currently looking for inspiring speakers across a range of subject areas, including: • Life Insurance
• Data
• Healthcare
• Technology and Risk Management
• General Insurance
• Resource and Environment
• ESG (particularly around climate)
• Takaful
If you’d like to share your expertise in these areas, please get in touch: bit.ly/AsiaSubmission23
We also have a range of sponsorship and exhibition opportunities available at the Asia Conference. To find out more, contact Hannah.Watson@actuaries.org.uk
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Upfront News
T H E M AT I C R E V I E W P R O G R A M M E
Corporate pensions review: webinar The IFoA’s thematic review on corporate pensions, which has been looking at the funding and strategy advice given to UK defined benefit pension scheme sponsors, is nearing completion. The IFoA Review Team now invites you to discuss the outcome in a webinar on 4 May. “Over recent months we have had the chance to review close to 50 pieces of corporate pensions advice submitted by members,”
said senior review actuary David Gordon. “Corporate advice can have a material impact on pension scheme financing, making this review of significant public interest, so we are extremely grateful to everyone who has submitted work for this review. We look forward to sharing the review findings in the coming weeks.” The IFoA Thematic Review Programme is part of the
An actuary and… a features editor The Actuary magazine is looking for two actuaries to join its team of enthusiastic volunteer features editors. This flexible role involves coming up with creative, topical ideas, commissioning writers, editing and writing copy, conducting interviews and liaising/meeting with other magazine staff. If you’re a qualified actuary with experience in general insurance or pensions and investments, we’d love to hear from you.
Need a creative outlet? tl t? A Apply l online li att www.actuaries.org.uk/get-involved/volunteering-ifoa
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Actuarial Monitoring Scheme, which is designed to improve the effectiveness of regulation in the public interest, provide meaningful, independent, credible feedback to members and their employers, and promote ongoing reinforcement and continuous improvement.
A report on the review will be published on the IFoA website later this month, and also feature in our newsletters. The webinar is at 8:30am BST on 4 May 2023. Sign up at actuaries.org.uk/corporatepensions-thematic-review
26 - 27 J U N E
REGISTER NOW We’re excited to announce that early-bird ticket registration for this year’s IFoA Conference is now open. Our two-day hybrid event will be packed with 35 workshops, five plenaries and a host of keynote speakers, covering a range of topics to expand your knowledge both within and beyond your practice area. Whether you’re established in your field or looking to develop your skills, the conference is designed to provide something for the whole actuarial community. Among confirmed events on the timetable so far: Greg Thwaites from the Resolution Foundation, speaking on ‘Navigating the permacrisis: The actuarial profession’s role in weathering the storm’. The panel will bring together experts from different fields to give their views Stuart McDonald MBE from LCP, on life after Covid A panel discussion on making the profession more diverse, equitable and inclusive, including Peter Hamilton, government disability and access ambassador for the insurance sector, Maz Bown from Aviva, Vincent Keaveny from Progress Together, and IFoA CEO Stephen Mann. We look forward to sharing further details of the full programme with you in the weeks to come – keep an eye out. We can’t wait for you to join us in June. Get your tickets now: actuaries.org.uk/ifoaconference23
www.theactuary.com
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