APRIL 2013 theactuary.com
Interview: John Kay
The magazine of the actuarial profession
The mild-mannered prophet of doom
Underwritten annuities A compilation of articles on planning for retirement
Pensions Long-term end game or living in the moment?
Arts The Actuary
Alan Turing: beyond the enigma
April 2013
FIT FOR PURPOSE
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What’s underneath? We look below the surface to spot trends early and show you what is really happening. Whether your need relates to risk management, capital, or strategy, our cutting-edge analysis techniques can help you see deeper than the competition.
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APRIL 2013
Contents
26 28
19
15
“Our assessment of mortality could include positive factors that sustain life and make individuals resilient. Depending on these, the lifespan of two similar individuals may vary significantly.”
CHRIS DUNN
UP FRONT
FEATURES
AT THE BACK
10 Profession news
19 Interview: John Kay
40 Arts
14 Industry news 16 People/society news 18 SIAS events
OPINION 5
Editorial Deepak Jobanputra sees a glimmer of hope amid ongoing financial volatility
6
Letters History lessons and the perils of lessthan-critical critiques
7
President’s comment Philip Scott reviews the cross-practice initiatives put forward by the enterprise risk management committee
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Soapbox Michaela Koller reviews the measures that insurers across Europe are taking in tackling insurance fraud
42 Book review Managing Fraud Risk: A Practical Guide For Directors And Managers by Steve Giles
MORE CONTENT ONLINE Additional content can be found at www.theactuary.com
Nick Silver discovers why the author of the Kay Review of UK equity markets believes the current system is fated
24 Pensions: Living in the moment Celene Lee and William Zimmern ask if pension schemes get better results by focusing on the present
Underwritten annuities 26 Healthy choice?
Sharon Maguire explores the life and work of Alan Turing
43 Puzzles Win a £50 Amazon voucher
44 Actuary of the future Alex White of Redington
45 Student Jessica Elkin prepares for the end of the world – or of her exams, at least
Billy Burrows offers an adviser’s perspective on enhanced annuities
28 Of wealth and health Dr Gordon Woo on human resilience
30 Outsmarting mortality Daniel Ryan welcomes the integration of medical and demographic knowledge
33 The gender angle Jules Charrington looks at the effect of the Test-Achats gender ruling on rating
34 Steering through the rapids Peter Banthorpe discusses pricing challenges for actuaries and underwriters
38 The forum Five leading practitioners debate the underwritten annuity market
ONLINE Underwritten annuities: Back to the future Stephen Lowe on the history and growth of annuities, and potential opportunities for the market
Staple Inn sundial marks centenary Sharon Maguire reports on the ceremony to celebrate the 100-year anniversary of SIAS
MORE CONTENT ONLINE Additional content can be found at www.theactuary.com
WRITER OF THE MONTH Nick Silver wins a £50 book token for his interview with John Kay, courtesy of the Staple Inn Actuarial Society
April 2013 • THE ACTUARY www.theactuary.com
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Editorial DEEPAK JOBANPUTRA Redactive Media Group 17-18 Britton Street, London EC1M 5TP +44 (0)20 7880 6200 Editor, Redactive finance division Mike Thatcher Publishing director Joanna Marsh Chief sub-editor Caroline Taylor News editor Nick Mann +44 (0)20 7324 2794 nick.mann@theactuary.com Recruitment and display manager Katy Eggleton +44 (0)20 7324 2762 katy.eggleton@redactive.co.uk Recruitment sales Gill Rock +44 (0)20 7880 6234 gill.rock@redactive.co.uk Digital sales Leila Serlin +44 (0)20 7324 2787 leila.serlin@redactive.co.uk
Managing editor Sharon Maguire +44 (0)20 7880 6246 sharon.maguire@redactive.co.uk
Opinion
Editor Deepak Jobanputra editor@theactuary.com Editorial team Sarah Bennett health, international Jeremy Lee pensions, investment, ERM, banking
Deepak Jobanputra believes the ongoing financial volatility we are seeing holds its own opportunities
Richard Purcell Richard Schneider, life, Solvency II, mortality/longevity, modelling and software
A glimmer of hope
Helen Lau, GI, reinsurance, environment, careers (UK) Aoife Martin, GI, reinsurance, ERM, Solvency II
Art editor Gene Cornelius Picture editor Akin Falope Production manager Jane Easterman +44 (0)20 7880 6248 jane.easterman@redactive.co.uk Print Southernprint Ltd Internet The Actuary website: www.theactuary.com
Profession news editor Alison Jiggins +44 (0)20 7632 2172 alison.jiggins@actuaries.org.uk People/society news editor Yvonne Wan social@theactuary.com Student page editor Jessica Elkin student@theactuary.com Arts page editor arts@theactuary.com
SIAS website: www.sias.org.uk
SIAS representative Alvin Kissoon
Actuarial Profession website: www.actuaries.org.uk
Editorial advisory panel Peter Tompkins (chairman), David Campbell, Matthew Edwards, Martin Lunnon, Marjorie Ngwenya, Sherdin Omar, Richard Purcell, Andrew Smith, Nick Silver
Circulation 22,733 (July 2011 to June 2012)
Subscriptions For subscriptions from outside the actuarial profession: UK, Eire and Europe: £55 a year/£5 a copy. For the rest of the world: £80 a year/£7.50 a copy. Please contact: Alison Jiggins, The Actuarial Profession, Staple Inn, High Holborn, London WC1V 7QT T +44 (0)20 7632 2100 E alison.jiggins@actuaries.org.uk Students on actuarial science courses at universities may join the Staple Inn Actuarial Society for £6 a year. They will receive The Actuary as part of their membership. Apply to: Membership Department, The Actuarial Profession, Maclaurin House, 18 Dublin Street, Edinburgh EH1 3PP. T +44 (0)131 240 1325 E membership@actuaries.org.uk Changes of address should be made known to the membership department as above. For delivery queries, please contact: Jane Easterman E jane.easterman@ redactive.co.uk Published by the Staple Inn Actuarial Society The editor, The Institute and Faculty of Actuaries and Staple Inn Actuarial Society are not responsible for the opinions put forward in The Actuary. No part of this publication may be reproduced, stored or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the copyright owners. While every effort is made to ensure the accuracy of the content, the publisher and its contributors accept no responsibility for any material contained herein. Important information for contributors to The Actuary By submitting content for publication you confirm that: (a) You (and/or other named contributors) are the sole author(s) of the content submitted; (b) The content you submit is original and has not previously been published (unless you specifically advise us to the contrary); (c) You haven’t previously licensed the use of the content you submit; (d) So far as you are aware, the content submitted will not infringe any third-party rights, be defamatory or in any way illegal.
Recent years have proved a rollercoaster ride for global markets. The initial phase encompassed shock, headlines and punditry, and society took an active interest in following the views of what was to come next. More recently, however, we have become desensitised to new developments. It seems we almost expect ‘shock’ events to be the norm and just shrug our shoulders. Is this a good or bad thing? At the time of writing, the news of a tax on savings in Cyprus has the potential to send jitters across the globe, yet equity markets in some regions have been soaring. Clearly, a vast range of factors is at play and there is good reason for this to be the case. Consumers will, however, wish to seek out more stable outcomes and overall certainty for their financial planning. The current volatility makes this difficult, although it is balanced to some degree by government and regulatory attempts to ensure stability. These changes will hopefully bring about greater confidence among consumers, allowing insurers to provide valuable financial solutions to drive social good across the world. An interesting insight from our interview with John Kay was that actuaries should challenge their complex financial models and provide more narrative solutions, using their skills to express subjective opinions. This, I’m sure, will drive positive debate as it raises a number of complex questions. Coming back to consumer solutions, we have a range of features this month looking at the developing underwritten annuity market, where growth has been strong. Although the market is still in its infancy, there is tremendous opportunity for insurers to innovate and provide customers with effective solutions, reaching into areas such as long-term care, which is a key issue facing ageing populations. I do believe we are yet to see the full effects of the demographic shift. This is definitely an area where actuaries have a leading role to play in shaping future outcomes.
‘Although the underwritten annuity market is in its infancy, there is tremendous opportunity to innovate.’
Deepak Jobanputra editor@theactuary.com
© SIAS April 2013 All rights reserved ISSN 0960-457X
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April 2013 • THE ACTUARY www.theactuary.com
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letters@theactuary.com
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Opinion Letters
LETTER OF THE MONTH
— ER RIT THE WLETTER E OF TH E MONTH OF TH EIVES A REC AZON M £25 A CHER VOU —
Earth is Room Enough Earth is Room Enough is the title of a book by Isaac Asimov, a collection of short science fiction stories published in 1960. It also seems an appropriate title for a response to the shallow logic of the Malthusian article ‘The World is Not Enough’ (p28, January/February). The article asks us to believe that it is reasonable to estimate that, without heavy government intervention, the number of years the world’s supply of minerals will last can be calculated by dividing current reserves by the annual level of consumption. This ignores many market factors that influence consumption: market price, further discovery, substitution and particularly the ingenuity of humans for developing greater efficiencies in the use of resources, and their capacity for research and invention to improve quality of life. In forecasting doom and gloom, the article also ignores the ready ability of humans to adapt to changing conditions. However, it is not the purpose of this letter to critique the article or the paper on which it is based. My concern is with the failure of the Resource and Environment Group (REG) to do so. The actuarial profession has traditionally been proud of its aim to base projections of outcomes on sound analysis of all relevant and available data and statistics, producing logical assumptions clearly stated and accompanied by comment regarding their limitations. The REG’s input to the paper, which has been written largely by non-actuaries, appears to be little more than some generalised comments on factors influencing actuarial assumptions. While I would expect that they were involved in the choices made under the different scenarios presented, the assumptions are not stated and not qualified in the normal actuarial way. Projections for up to 100 years must be subject to major uncertainties, even without the inevitable need to make subjective assumptions regarding the consequences of government interventions. I have always been enthusiastic about the profession moving into ‘wider fields’, with actuaries using their skills to assist the current participants in those fields. However, in this case, the underlying paper appears to reflect more a group of actuaries simply climbing on the back of experts in another field, accepting their philosophies and methods without question. Indeed, the whole tenor of the paper is that of a political polemic rather than a realistic analysis of the limits to economic growth. Certainly, the suggestion that the only way world order, such as it is, can be preserved over the next century is by the development of a global consensus government process for distribution of resources appears to represent the narrow desire of the authors rather than the result of an objective assessment of possible outcomes. I would challenge the REG to provide a proper actuarial critique of the paper, analysing assumptions and reasons for their adoption, and focusing on the uncertainties in arriving at the model outcomes – particularly in relation to the questionable success of governments in market manipulation. Geoff Dunsford 15 March
MORE LETTERS ONLINE More letters are available online at www.theactuary.com/opinion
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Power of long memory was a long time in the making Faisal Zai’s article (‘The Power of Long Memory’, p23, January/February) was excellent. It was, however, slightly marred by his crediting Mandelbrot with being the man who persuaded people “that stock returns are not normally distributed and that stock markets and most asset return processes are not memoryless”. If he did it took a long time. Almost all financial economists either ignored or derided Mandelbrot’s work throughout the 1960s, 1970s, 1980s and 1990s. Similarly, nearly all younger (now late middle-aged) actuaries derided or ignored the work of Plymen, Clarkson, Fitzherbert, Arthur and those of us with real investment experience, who had been expounding similar doubts about higgledy-piggledy growth, as it was then called, even before Mandelbrot. A study of Clarkson’s contributions to sessional papers will note that he was referring to the Hurst component, at least by the 1970s. But when some 20 years later, as a member of the profession’s finance and CPD working party, I tried to introduce two of Hurst’s original papers as additional reading none of my much younger colleagues on that committee could see their relevance to investment. I hope that a newer generation of actuaries will be encouraged by your choice of Faisal Zai’s article to read beyond the profession’s present inadequate courses on finance and investment in an attempt to gain real understanding of how stock markets work. S. J. Green 1 March
Look back before you look forward This year is the 400th anniversary of a landmark book, Richard Witt’s Arithmeticall Questions, published in 1613. It provided a pioneering and very practical insight into one of the foundations of actuarial science – compound interest. The subject is clearly explained and the author takes great care to ensure accuracy, probably thinking in much the same way as modern actuaries. The book contains interest tables and 124 worked examples on the valuation of leases and annuities. One of the simpler examples describes calculation of annual payments on a debt due in two years’ time, which is now to be paid off in instalments over the next five years. Richard Witt was a 44-year-old mathematical practitioner from London, who was consulted on a variety of commercial and property matters. The profession is fortunate to own a copy of his important book, which is on display in the library at Staple Inn this year. The library’s holdings of historical material have been considerably strengthened in recent years. I hope that all members will take pride in this unique resource – and that some may even use it occasionally as a source of inspiration when dealing with today’s issues. We can often benefit by looking back before looking forward. Chris Lewin 3 March
The editorial team welcomes readers’ letters but reserves the right to edit them for publication. Please email letters@theactuary.com. The deadline for receiving letters for the May issue is 16 April 2013.
THE ACTUARY • April 2013 www.theactuary.com
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Opinion President’s comment
Philip Scott is the president of the Institute and Faculty of Actuaries
PHILIP SCOTT
Stand and deliver This month, I am reporting on the Enterprise Risk Management Practice Executive Committee (PEC) and its aims for the coming year. Risk management, in its myriad forms, is becoming more important in all our daily lives. The Prudential Regulation Authority (PRA) is taking shape with the appointment of Andrew Bailey, and the proposals for new supervision under the Financial Conduct Authority are being published. This ‘twin peaks’ regulatory structure should greatly enhance the regulators’ approach to tackling systemic risk and will consider supervision from a macro-prudential perspective. However, there will still be great reliance on internal risk management strategies, and the profession can do much to influence the discussions on such risks. For those who work in the enterprise risk management (ERM) arena, the PEC is aiming to develop more thought-leadership events that will provide opportunities for debate of current issues and enable those interested to gain continuing professional development (CPD) accreditation. A number of excellent speakers have already been booked for the Risk and Investment Conference, being held in Brighton in June. These include Julian Adams, director of insurance, PRA; Tim Harford, economist, author and the columnist behind the FT’s ‘Undercover Economist’; and professor Karel Van Hulle, former head of insurance and pensions at the European Commission. One area that is being looked at closely is the greater understanding of drivers from regulation and rating agencies that might affect future risk management practice for actuaries. As risk management extends into all aspects of financial work, and following the Institute and Faculty of Actuaries’ desired strategy in this area, the ERM PEC is intending to set up a number of cross-practice initiatives, which will assist actuaries who predominantly work in more traditional areas. Each of these initiatives will be tailored to the needs of each of the different collaborating PECs. Jules Constantinou believes success will be measured by the extent to which links are established between the ERM group and the other PECs and the integration of risk management resources and material in the other PECs’ research and CPD programmes.
Philip Scott reviews the cross-practice initiatives put forward by the enterprise risk management committee The ERM research and thought leadership committee intends to develop and deliver key member-led research that influences not only the profession but other risk groups. Its priorities are to develop: ● research topics for actuaries working in ERM; ● risk management topics as part of the crosspractice initiatives; and ● broader research topics that enhance the actuarial profession’s reputation in this area. Also important is developing links with other like-minded UK and international societies. It is hoped in the near future to plan joint events and undertake research with the Institute of Risk Management and the Professional Risk Managers’ International Association. By forging links with overseas actuarial associations, such as the Society of Actuaries and the Casualty Actuarial Society, as well as other groups in the international risk management community, we can identify any special needs of overseas members in the areas of risk management. This will also enable us to identify areas that could be useful in the work undertaken in the UK. The more we can do this, the greater our chance of exposing actuaries to disciplines and thinking from other risk professionals, while at the same time broadening our influence.
The Chartered Enterprise Risk Actuary (CERA) qualification continues to expand, and over 1,400 students have completed the exams. One aspect of feedback that particularly stands out is that the course teaches people to speak the language of the board. Only by being able to do this can we hope to have more influence and authority in the future. Following the award last year of the CERA designation to 10 actuaries who are considered thought leaders in the field, applications are being accepted for ‘very experienced practitioner’ designation. Senior risk professionals are invited to apply for CERA status by virtue of their work and experience in the field instead of taking the exam. The PEC also aims to work with other practice areas to help members transfer into chief risk officer (CRO) and other senior riskrelated roles. We have established an actuarial CRO group to provide a forum for the most senior risk actuaries in each firm to share their understanding and knowledge of ERM for the benefit of the profession as a whole. The year ahead will be challenging for the ERM PEC as it drives forward its strategy, but I am convinced that it will make much progress with its thoughtful initiatives and that we can rely on it to deliver solutions to meet the future challenges of risk management. a
“An actuarial CRO group provides a forum for the most senior risk actuaries to share their understanding and knowledge of ERM.”
April 2013 • THE ACTUARY www.theactuary.com
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Opinion Soapbox
MICHAELA KOLLER
Cooperation is the key to cracking fraud A study of 1,000 adults conducted by the Federation of Finnish Financial Services in 2012 found that 27% of respondents knew a person who had ‘deceived his/her insurance company’. This only begins to highlight the scale of insurance fraud across Europe. Insurance fraud undermines the principle of mutual benefit on which insurance is based, since the vast majority of honest customers end up paying for the dishonesty of the few. It affects every type of insurance and ranges from opportunistic claims to highly organised crime rings. It has an impact on society as a whole, as research shows that insurance fraud can be used to fund criminal activity. Across Europe, it has been estimated that detected and undetected fraud represents up to 10% of insurers’ total claims expenditure. National insurance associations collect data on fraud levels in their countries. The Association of British Insurers, for example, estimates that around £1.9bn of fraud goes undetected each year in the UK. This is despite insurers detecting more fraudulent claims every year – up 7% year-on-year in 2011 to £983m. Across the Channel, figures from the French Federation of Insurance Companies, the FFSA, reveal that over 35 000 fraudulent claims were detected in 2011, leading to savings of €168m. Pan-European statistics are, unfortunately difficult to compile, as countries collect different data and measure fraud in different ways. Nevertheless, national statistics demonstrate what a major issue fraud is. This is why insurers invest significant resources in their fight against fraud and why Insurance Europe recently published a booklet entitled The Impact of Insurance Fraud to raise awareness of the issue. Insurers use a variety of methods to tackle fraud. Initiatives vary between countries and are constantly evolving to keep pace with changes in fraudulent behaviour. Information is exchanged across Europe, within the limits of data protection and privacy requirements. In the Nordic countries, regular meetings are held to discuss
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Michaela Koller takes a look at the measures insurers are taking across Europe to tackle the spiralling rate of insurance fraud
developments, since fraud trends in one country have been seen to spread. Formalised groups to investigate fraud also exist in many states. The UK’s Insurance Fraud Bureau (IFB) was set up in July 2006 to detect and prevent organised and cross-industry fraud, working closely with law enforcement agencies. The impact of the IFB has been hugely positive, leading to numerous arrests and savings of tens of millions of pounds for insurers and their customers. In France, a national body, the Agence Pour la Lutte Contre La Fraude à l’Assurance, ALFA, was set up in 1989 to investigate suspicious claims and promote counter-fraud activities. It trains and certifies fraud investigators, advises on cases targeting multiple insurers and on managing relations with law enforcement agencies. Cooperation with law enforcement agencies is, of course, vital. In Denmark, the insurance association F&P organises exercises at the Danish Police Academy on how to combat insurance fraud. Former police officers are also often employed by the industry. ‘Cheat-lines’ have proved successful in a number of countries, including Ireland,
Sweden and the UK. These allow members of the public to report suspected or known fraud. Technology can also be harnessed to fight fraud. Methods include electronic devices to detect document authenticity and the use of publicly available information from social media. One claim in the UK for back injuries was rejected when Facebook images showed the claimant doing gymnastics and training for a charity run. Insurance fraud is not a victimless or insignificant crime. Serious consequences, including custodial sentences, await those found guilty of it. The industry is constantly strengthening its systems to ensure that all types of fraud are detected and prevented, but it also needs the support of governments, law enforcement agencies and the general public.
“The impact of the UK’s Insurance Fraud Bureau has been hugely positive, savings of tens of millions of pounds for insurers and their customers”
Michaela Koller is director-general of Insurance Europe, the European insurance and reinsurance federation. She also chairs the insurance and reinsurance stakeholder group of the European Insurance and Occupational Pensions Authority and testifies regularly at EU hearings. ‘The Impact of Insurance Fraud” is free to download at www.insuranceeurope.eu
THE ACTUARY • April 2013 www.theactuary.com
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News Profession NEWS UPDATES FROM THE ACTUARIAL PROFESSION
Upfront Opinion CEO’s comment
Mortality update: a stronger CMI
Derek Cribb explains why the quality agenda should be ‘at the heart of everything we do’
Gordon Sharp, chairman, CMI In November, we announced changes to the funding structure and publications of the Continuous Mortality Investigation (CMI); these changes are now in effect. Registration and subscription details may be found at
A virtuous circle
bit.ly/Zvq70M
Derek Cribb is the chief executive of the Institute and Faculty of Actuaries
I was recently discussing strategy implementation with a past president of the Institute and Faculty of Actuaries. He asked me how we would know if we had successfully delivered on our strategy – what would success would look like? I’d like to share with you the answer I gave him. In my opinion, success goes hand in hand with quality, and I strongly believe in the quality of our qualification above all else. We can only deliver the professional body the membership deserves if we maintain our high standards, which is the hallmark of our exams, continuing professional development and regulation. This gives us the reputation required to attract the best possible students. On reputation, you may have seen the Institute and Faculty of Actuaries quoted in the media more often than previously in the past few months. As part of our public affairs strategy, we are increasingly looking to give the profession a strong voice, which speaks out in the public interest in areas where we can add value. However, there is no point in having a strong voice without the reputation to back it up – which brings me back to quality. It’s a virtuous circle: quality breeds quality. Having a strong reputation creates demand from employers for FFAs and FIAs, meaning that we are able to attract the best prospective students, whose skills further cement the reputation of the Institute and Faculty of Actuaries. An inevitable consequence of this will be an increase in both influence and membership numbers across the globe, which will help us to serve our public interest role. By delivering our services to the highest standard, we will ensure that our members are fully supported throughout their careers. Therefore, when it comes to measuring how successful we are in implementing our strategy, it all comes back to delivering a quality service. Ultimately, if we have a strong reputation based on the high quality of our activities, we will attract the best members, who will gain the best jobs across the world. I truly believe that this is within our grasp, providing we place the quality agenda at the heart of everything we do. This is our promise to you as your professional body a
DEREK CRIBB
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ACCESS THE PROFESSION’S ANNUAL REPORT
All our existing publications, including the recently released CMI 2012 mortality projections model, remain on the open-access area of www.actuaries.org.uk However, new publications will be for registered users only. Watch out for S2 pensions mortality tables from the selfadministered pension schemes (SAPS) investigation and the latest results from the life office mortality investigation, both of which are coming soon. The CMI has been incorporated into a limited company of the same name, wholly owned by the profession. This is to provide clarity from the previously unincorporated structure. It does not affect the day-to-day operation of the CMI or its not-for-profit status.
Join the mergers and acquisitions group We are looking to reinvigorate the mergers and acquisitions (M&A) member interest group and would like all interested members to be involved. This group would be useful for actuaries working on corporate and private equity mergers and acquisitions, either full time or as part of their work. The group will: share ideas and engage in discussions on issues surrounding corporate transactions; promote the value actuaries can add to the M&A process; raise the bar in terms of quality of advice given by the profession in M&A situations; and, where appropriate, act as an informal representative body for members. We plan to organise a kick-off meeting for April/May to discuss future activity/priority issues etc, and would love to see you there. If you are interested in joining and/or would like to attend the meeting, please notify Craig Ajimuda at craig.ajimuda@actuaries.org.uk For general information about member interest groups, visit bit.ly/YYYxcf
THE ACTUARY • April 2013 www.theactuary.com
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Q. Where are the regional societies and what do they do? In addition to the activities in Edinburgh and London and the burgeoning student network, there are currently 10 regional societies operating around the UK. They cover the regions of: Birmingham; the north-west of England; Bristol; Northern Ireland; the Channel Islands; Norwich; Kent; Wessex; the Isle of Man; and Yorkshire. All of these societies are run by committees of volunteers, who create and facilitate a series of professional and social events for members in their local area throughout the year.
Beth Montgomery: all members can access excellent opportunities for CPD and networking, regardless of location
First port of call for networking and more Regions leader Beth Montgomery takes us on a whistle-stop tour of the profession’s regional actuarial societies in the UK Q. As regions leader, how do you engage and support members? Members are supported in a number of ways. This year we have created a regional actuarial activity area (bit.ly/XpmCqa) on the members’ section of our website. This provides information and contact details for each regional society, plus a programme of events. If members are moving or travelling to different regions for business, this gives them access to an instant networking point with colleagues.
Through regular contact with these societies and by working closely with colleagues internally, I am able to develop opportunities for joint working and future events. This means all members can access excellent opportunities for continuing professional development (CPD) and networking, regardless of location. Q. Are there many actuaries based outside Edinburgh and London? There are currently over 12,000 members across the UK, including actuarial students. Of these, around 45% are based outside London and Edinburgh and many of them also belong to their local regional actuarial society.
Q. Can you highlight examples of key developments for members in the regions? The success of the recent regional roadshow, ‘DWP calls for evidence’, which visited seven UK locations to gather member feedback for the Institute and Faculty of Actuaries’ consultation response, as well as the ongoing ‘Conflicts of interest’ sessions, which are being delivered in over 10 different locations, have given us a great template for the future. Support from the regional societies in hosting these sessions has been invaluable, and member feedback has shown that there is certainly a demand for future topics to be delivered in this way. Working with the Scottish Board, we have launched a new event format called Knowledge Sharing Scotland. The first event will be held in April 2013 and will allow volunteer members to create and host small, debate-style sessions in local offices. The group will focus on generating activity for members based in Glasgow and Stirling as well as Edinburgh and we are hopeful that this will provide a platform for networking and information sharing among the actuarial community in an informal environment. Further information on Knowledge Sharing Scotland can be found at bit.ly/YYF6wR If you have any ideas that you would like to share with Beth, please contact her on +44 (0)131 240 1323 or email her at
beth.montgomery@actuaries.org.uk
Sloan Prize winner praises inclusive debate The Sloan Prize for the best contribution from the floor at the sessional meeting ‘Unintended Consequences of Basel III and Solvency II’ has been awarded to Dr Garry Smith. A pensions-turned-banking actuary, on secondment from Hymans Robertson to RBS,
Smith is currently applying actuarial techniques to banking problems. He said of his award: “I was delighted to hear that I had been selected to receive the Sloan Prize following the January sessional meeting. The establishment of the Sloan Prize
showed great insight into the sort of practical measures that really do make a great contribution to what the profession ought to be about in terms of open and inclusive debate and discussion.” This award continues to be supported by founder Ronnie
Sloan, who said: “I was glad to hear how pleased Garry was at the recognition bestowed by his award, which he hoped would encourage others to participate at meetings.” The sessional meeting took place on 21 January in Edinburgh.
April 2013 • THE ACTUARY www.theactuary.com
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News Profession NEWS UPDATES FROM THE ACTUARIAL PROFESSION
Changes to Actuaries’ Code : your opinion counts Members have received an email to let them know about a consultation we issued on 5 March in relation to proposed changes to the Actuaries’ Code. The code has now been in existence for over three years and we want to make sure that it is achieving what it set out to do – to provide a set of high-level ethical principles that members are expected to observe in the public
interest in order to build and promote confidence in the work of actuaries and in the actuarial profession. Given the importance of the code in our regulatory framework, we encourage you to read the proposals and give us your views if you haven’t already done so. We would be pleased to receive any general comments on the recommendations, in
addition to the completed questionnaire. Please note that the deadline for responses is 30 April 2013. A link to an online version of the proposals, Exposure Draft 29 – The Actuaries’ Code, and the questionnaire can be found on the Institute and Faculty of Actuaries’ website at http://bit.ly/Yqqsyq or by going directly to
http://svy.mk/10CMn97
Solvency II transition: focus on what is clear
NEWS IN B RIE F Sir Joseph Burn prize presentation Philip Scott, president of the Institute and Faculty of Actuaries, presented Katie Watkin (pictured above left) with the Sir Joseph Burn prize for her overall performance in the examination process.
Member opportunity: chairman of management board The management board has oversight responsibility for the operational management of the Institute and Faculty of Actuaries. The board chairman receives a fee of £24,700 pa for this role, which has arisen as part of the normal governance cycle. Members who feel they may have the appropriate skills can find out more at bit.ly/Zd2iYh
Towers Watson prize presentation Professor Paul Sweeting, Fellow of the Institute and Faculty of Actuaries, presented James Keates (below right) with the Towers Watson Prize for Financial Economics for his performance in the CT8 examination.
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As the mist of delay and the fog of uncertainty obscures the view of eventual Solvency II implementation for a UK actuary, it is easy to forget that much of the legislative landscape is clear. The provisions of the Solvency II regime may take a variety of forms, but we are far closer to understanding whose rulebook will be the main regulatory driver, affecting the future work of an actuary. The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) handbooks, Financial Reporting Council (FRC) guidelines, European-level technical and implementing standards, and the Groupe Consultatif Actuariel Européen or International Actuarial Association (IAA) standards are all relevant. The Life Practice Executive Committee of the profession set up a working party to understand better the coverage – and gaps – in the legislation and standards that will apply to actuaries working on UK regulatory reporting. The working party is in the process of finalising its conclusions, which will be published on the profession’s website. In this article, we touch on who will be writing the rules, how they will be interpreted and the potential for disagreements and gaps. The main source of future Solvency II legislation is the raft of provisions coming through the EU procedures as what are termed level 2 and level 3 texts. These are on subjects as diverse as acceptable documentation of management actions for a with-profits fund, when contracts should be unbundled and valued separately, and, of course, the discount rate that should be used in assessing liabilities. Rules deriving from this source are expected to include the level 2 texts, but also parts of level 3. Consultation on these texts has hitherto been private, and directed at certain key industry groupings. In the future,
the EU protocols talk of “extensive consultation” at the EU level. The interpretation of rules is another source of change. The ECJ interprets legislation in the context of its structure and purpose, whereas the UK courts have looked not to purpose but to a literal interpretation of the words of the legislation. However, although our background and court system still favours literal interpretation, the FSA handbook calls for a purposive interpretation in GEN 2.2.1 and 2.2.2. In future, the ECJ and UK courts will have to consider purpose. The sources of guidance are set to expand. The UK technical actuarial standards (TASs) will continue to apply to a UK actuary in a UK company. For a UK actuary working for a French or German firm there will be a set of rules overarching local requirements. The EU will issue guidance through the European Insurance and Occupational Pensions Authority (EIOPA), based heavily on the level 3 texts. And the Groupe Consultatif is currently consulting on some of its proposals, hopeful for widespread EU adoption. Back in the UK, the PRA/FCA will have their own guidance that may impinge. One area of concern is the potential for disagreements or gaps between UK and EU texts. For example, the bulk of the current INSPRU texts will disappear under Solvency II, to be replaced in the main by direct EU standards (old level 2 and some level 3). However, in a recent consultation paper, the FSA deliberately imported some of the current realistic balance sheet terminology into the conduct of business handbook (COBS) texts, which may be misaligned with the final Solvency II requirements for with-profits liabilities. Conversely, UK specific issues are unlikely to be covered well, yet the scope for more ‘local’ interpretive guidance may be limited.
THE ACTUARY • April 2013 www.theactuary.com
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22/03/2013 08:38
Year of change: the story of pensions reform continues
Pensions minister Steve Webb: provoking debate about future UK pension provision
The first quarter of 2013 has been a period of significant activity in pension reform, with changes suggested for both the state and occupational pensions systems. This follows the commencement of automatic enrolment towards the end of 2012. On 14 January, the government launched its long-awaited white paper, ‘The Single-Tier Pension: A Simple Foundation For Saving’. This aims to “...provide the right foundation to allow people to plan and save for their retirement with confidence”. It proposes an extension of the state retirement age to 67 by 2028 and a single-tier state pension of £144 per week, subject to qualifying. The introduction of a single tier would mean the abolition of the State Second Pension. Consequently, the White Paper also proposes the cessation of contracting-out. Employers that operate contracted-out schemes will experience an increase in national insurance (NI) contributions, as will employees who are members of those schemes. Some commentators have suggested this will kill off remaining unprotected defined benefit schemes in the private sector. The Department for Work and Pensions has issued a call for evidence to address pensions and growth. This posed two questions: 1. Whether to introduce a new statutory objective for the Pensions Regulator and; 2. Whether to smooth assets and liabilities in scheme funding valuations. The Institute and Faculty of Actuaries held a series of meetings with regional actuarial societies to discuss the call for evidence. Its responses are online at bit.ly/LCkwSr. Pensions minister Steve Webb opened public debate about pension provision in the UK with the publication of the strategy document ‘Reinvigorating Workplace Pensions’ in December. As debate continues, there will be many opportunities for pensions actuaries to influence the future.
LOOKING FORWARD TO 2013 Health and care conference 15-17 May Celtic Manor, Newport Book your place by 15 April to receive the early bird booking fee. Speakers include: ● Tim Harford, behavioural
economist and award-winning Financial Times columnist; ● Roy Chappell, SCOR UK
and Darren Spriggs, Ageas; ● Jamil Qureshi, performance-
enhancing psychologist;
PA
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● Guy Shone, head of customer
and market insight, Money Advice Service. For further information visit http://bit.ly/10ztfgb Join the Health and Care LinkedIn group at http://linkd.in/YTNzDQ Sponsorship opportunities are available at http://bit.ly/WGS1UP or contact hannah.watson@ actuaries.org.uk
Events 2013 Conflicts of Interest Interactive Session (Pensions) Wednesday 10 April Mercer, Belfast http://bit.ly/14pdggQ
Conflicts of Interest Interactive Session (Pensions) Tuesday 16 April Maclaurin House, Edinburgh http://bit.ly/10admw3
Highlights of the Life Conference 2012 17 April Hilton Metropole, Birmingham http://bit.ly/XQOcje
CILA 1 May Royal College of Physicians, London http://bit.ly/VAvQ6l
CIGI 2 May Royal College of Physicians, London http://bit.ly/WsUWpk
April 2013 • THE ACTUARY www.theactuary.com
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22/03/2013 11:27
News Industry news@theactuary.com
Plans to smooth gilt yields ‘detrimental’ for most pension schemes, warns NAPF Answer is to ensure full flexibility of the existing discount rate regime, says director of policy Government plans to allow pension schemes to ‘smooth’ the value of their assets and liabilities over a number of years could do “more harm than good” the National Association of Pension Funds has claimed. Responding to a call from the Department for Work and Pensions for evidence on whether smoothing should be applied, the NAPF said smoothing gilt yields over a two- to three-year period would have a “detrimental impact on the funding position for the majority of schemes”. This is because it would lock schemes undergoing a valuation in 2013 into last year’s very low gilt yields, weakening their overall funding positions so that the companies running them could face even bigger deficits. Government should drop any plans to introduce smoothing in the near future and instead ensure that the full flexibility of the existing discount rate regime is used, the NAPF said. Darren Philp, director of policy at the NAPF, said: “Smoothing is not the right answer. If it goes ahead, not only will it be too little, too late but it might do more harm than good. It risks making matters worse for pension funds once interest rates start picking up, and could cause greater confusion for trustees, actuaries and employers when agreeing a discount rate.” Instead, he concluded, pension funds need “greater reassurance from the government and The Pensions Regulator that they can adjust the discount rates they use where they have been pegged to gilt yields”. For more on this story, visit bit.ly/10fVFYe
Scottish independence would rock pension industry across the UK Actuarial consultancy warns of increased costs for employers and need for state support If the 2014 referendum on Scottish independence results in a ‘yes’ vote, it will require the establishment of a new institutional framework to supervise and deliver pensions, according to consultancy Xafinity. It will also involve the development of different tax and national insurance regimes, which will lead to an increase in costs – initially at least – for payroll systems and treasury functions. A revised tax regime will create still more costs, Xafinity said. Donald Campbell, the company’s principal consultant, said: “A ‘yes’ to Scottish independence would make huge waves across the pension industry, both in Scotland and the remainder of the UK. “Corporate advisers would be the obvious winners in the short term, but additional costs would arise for many employers, who would almost certainly be pressing for the new government to provide support in one form or another.” Further issues would also be created by the need to either replicate or complement The Pensions Regulator and possibly the Pension Protection Fund, Xafinity said. There could also be a requirement for separate professional advisers and different exam regimes. For more on this story, visit bit.ly/16b36Ex
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Variable annuity sales set record Sales of annuities that offer variable levels of payout depending on how they are invested reached a record £1.42bn in the UK last year, Towers Watson has revealed. The consultancy’s figures show that, in 2012, the value of variable annuity sales increased by 30% on the £1.09bn recorded in 2011. The final quarter of 2012 saw quarterly sales of the products exceed £400m for the first time. bit.ly/16oBADF
Annuity code to simplify choice The Association of British Insurers has formally launched a new code of conduct to make it easier for retirees to make the right choices when they use their pension pot to buy an annuity. The mandatory code, which came into effect on 1 March, requires the ABI’s members to provide clear and timely information to help people approaching retirement to understand what their options are. bit.ly/13ehFaB
Surplus a rarity for DB schemes The number of leading UK companies whose defined benefit (DB) pension scheme is in surplus is continuing to fall, JLT Pension Capital Strategies has said. According to the firm’s latest quarterly research, only 13 of the FTSE 100 companies would have disclosed a surplus if they’d had a year-end of 31 December 2012, compared with 16 that reported a surplus in their most recent annual report and accounts. bit.ly/YW6TxV
EIOPA urges co-ordinated action on interest rates The European Union’s insurance regulator has called on member states to take a coordinated approach to address the damage that persistently low interest rates are causing to the insurance industry. The European Insurance and Occupational Pensions Authority (EIOPA) also committed to taking steps itself to alleviate the impact of low rates, which it said were already affecting the industry in several member states. In an opinion note, EIOPA explained that both the life and non-life insurance sectors were affected by the issue, which hits asset and liability values. In terms of liabilities, persistent low rates mean life insurers’ long-term obligations to their policyholders become more expensive in today’s terms. On the assets side, they have a negative effect on insurers’ investment results and increase the re-investment risk of assets. EIOPA noted that low rates and resulting lower investment returns also reduce the margin for short-term insurers that use returns to compensate for weak underwriting results. Gabriel Bernardino, chair of EIOPA, said: “The economic environment shows us that joint actions against long-lasting low interest rates environment are crucial. By co-ordinating these actions, EIOPA is committed to ensure a consistent supervisory approach and a fair and equitable treatment to policyholders.” For more on this story, visit bit.ly/108yXVI
DC systems must be refined to produce good outcomes The UK is making good progress towards developing a sustainable defined contribution (DC) pension system, but it must focus on providing adequate outcomes for savers, the Organisation for Economic Co-operation and Development (OECD) has said. DC pension schemes are expected to provide a “major source” of retirement funds in many of the 34 countries that are members of the OECD. However, a number of factors mean these systems might not produce adequate incomes, it explained in a report entitled DC Design and Delivery. However, the OECD’s research also found that, where workers save for 30-40 years, it is possible for DC systems to produce “attractive” returns within a low volatility environment, in turn delivering adequate retirement incomes. It detailed 10 optimal design and delivery features for a DC pension system. For more on this story, visit bit.ly/XpS3UH
THE ACTUARY • April 2013 www.theactuary.com
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› GENERAL INSURANCE
NEWS ROUND-UP
Esure sets share issue pricing Esure, the UK personal lines insurer, has announced the price range for a planned initial public offering (IPO) in 2013. The company owns the Esure brand, made famous by the late Michael Winner’s ‘Calm down, dear’ television adverts, as well as Sheila’s Wheels, the insurance group ‘designed with women in mind’. The company was founded in 1999 by its chairman Peter Wood, the insurance pioneer who also founded Direct Line in 1985. Lloyds Banking Group sold its 70% stake for £200m in 2010 to a consortium led by Wood. Esure insures around 5% of the UK’s motorists. At the end of 2012, it had 1.25 million in-force motor policies and 500,000 home policies, helping the Surrey-based company to more than double pre-tax profits to £115m last year. The company’s conservative approach to underwriting means 87 per cent of its motor policy holders are over 30 years of age, while 98 per cent of in-force home policies are located in areas considered to have a low risk of flooding. Stock in the IPO will be offered at between 240p and 310p, giving a mid-point valuation of £1.15bn, indicating a place in the FTSE 250.
Insurers announce dividend cuts Several insurers have recently announced changes to their dividend policies. On 20 February, UK-based insurer RSA announced that it would be cutting its final dividend for 2012 from 5.82p per share to 3.9p per share. CEO Simon Lee said that the dividend was being cut to a level “appropriate to the business today”. RSA’s shares fell 16% following the announcement. Lee said: “We were clearly over-distributing profits. You need to retain some earnings to grow the business and that’s what we’re doing.” He also blamed prolonged low bond yields. QBE’s final dividend was reduced from AUD0.25 per share in 2011 to AUD0.1 per share in 2012. QBE said that it had reconsidered its dividend policy. For 2013, it has adopted a payout ratio of 50% of cash profit. Following a “transitional year”, Aviva announced a reduction in its final dividend from 16p per share to 9p per share, with the full year dividend falling from 26p to 19p. Aviva said that it expected the 2013 dividend to be rebased in line with the cut in the final dividend. Aviva CEO Mark Wilson said that, although Aviva had enough liquidity to pay the dividend in the short term, “cash flows from the business are too tight to sustain the historic level”.
that customers get the best insurance deal. That is why the industry has successfully lobbied government to introduce reforms to streamline the compensation system and drive down inflated legal costs.” At the same time, the ABI estimated that young drivers could pay 15% to 20% less for their car insurance if the government introduced, in full, ABI proposals to improve driver safety. The association’s proposals for young drivers include: ● a one-year minimum learning period; ● limiting the number of young passengers and restricting night-time driving after passing the driving test; ● zero blood alcohol limit for an initial period after passing the test.
Portal scheme extension delayed Following representations from, among others, the Association of Personal Injury Lawyers, the UK Ministry of Justice has delayed the implementation date for extending the road traffic accident (RTA) portal scheme to personal injury claims worth up to £25,000. Currently, the portal applies to RTA claims valued between £1,000 and £10,000. As well as this rise in the maximum claim value, it had been planned that from 1 April 2013, the scheme would include for the first time classes such as employers’ liability and public liability, also capped at £25,000. The development of the hardware and legal rules was not seen to be sufficiently advanced, and the government’s costs adviser, Paul Fenn, had also called for a delay. The delay will not affect the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which is due to come into force on 1 April 2013. This means that Lord Justice Jackson’s package of reforms to rein in the costs of civil justice will not be affected.
LARGE LOSSES
Call to make Flood Re compulsory The Association of British Insurers (ABI) suggested that all insurers who write property insurance in the UK should be compelled to participate in the new Flood Re scheme. Otto Thoresen, director-general of the ABI, told a parliamentary committee that one of the failings of the current five-year ‘statement of principles’ was that, due to its voluntary nature, some insurers were able to operate only in low-risk areas. The ABI is proposing a levy on the insurance industry to give Flood Re enough start-up capital. Flood Re would be not-for-profit and would be overseen by the government.
Driving down cost of car insurance At the start of March, the Association of British Insurers (ABI) issued a new report, Lifting The Bonnet On Car Insurance, What Are The Real Costs?. The association estimates the following breakdown of motor insurance premiums: ● 29% paid out in repair and replacement costs; ● 20% paid out in whiplash claims; ● 14% paid out for non-whiplash personal injury claims less than £0.5m; ● 9% paid out for personal injury claims greater than £0.5m. Nick Starling, ABI’s director of general insurance, said “despite rising costs linked to excessive legal fees, and whiplash, insurers are determined
GETTY
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economic losses from the winter storms that hit US$100m Estimated the United States in February
Winter storms in US – 8-27 February At least four separate winter storms affected the United States during February. This was highlighted by a powerful nor’easter, which prompted states of emergency to be declared in
six states. Heavy snows accumulated to nearly 40 inches in Connecticut, and coastal flooding was recorded in the city of Boston. Economic damage from the storms was estimated at US$100m (£67m) , much lower than originally anticipated.
MORE GI NEWS ONLINE For further GI news, visit www.theactuary.com/news/
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News People & Society
If you have any newsworthy items for these pages please email social@theactuary.com
Coast to Later this year, Master-elect of the Worshipful Company of Actuaries, Charles Cowling, will lead some 30 actuaries and friends on one of the UK’s most challenging long-distance walks to raise money for charity. Walking from Robin Hood’s Bay in North Yorkshire to St Bees on the Cumbrian coast, the group will cover approximately 200 miles in two weeks and climb the equivalent height of Mount Everest. They are looking to raise money for the Company of Actuaries Charitable Trust (CACT) in its support of mathematics education, and also the work of the Udaan School in Mumbai and the children’s charity Kidz2gether, which specialises in
Dosey doe and don’t let go! By Chris Marsh The SIAS 2012 Dance Night was held in London on 21 February at Revolution, America Square. It was the perfect setting for the evening’s events, with exposed brickwork, wooden floors and Clint Eastwood classic The Good, the Bad and the Ugly showing on the flat screens to get everyone in a cowboy mood. Not that they needed much encouragement – everyone certainly looked the part. Following the welcome drinks, the band played an extended introduction to break the ice with some easy dance moves such as ‘Swing your partner’ and ‘Promenade’. Surprisingly energetic, it had everyone topping up their cocktails to quench their thirst! Following an intense hour and a quarter of dancing to increasingly complex routines, the arrival of food
provided a welcome break so everyone could catch their breath. Throughout the night, the band commented on how surprisingly good the group was. With that in mind, they launched into a particularly complicated routine called the ‘Cumberland Square Eight’, where the room split into groups of eight, each subdivided into two pairs
Keep up your good works
Sadly...
The Actuary, in conjunction with the Worshipful Company of Actuaries, has been running a campaign to target £1m through the fundraising activities of actuaries and we would be delighted to hear about your charitable work or activities. Please email Yvonne Wan at social@theactuary.com or Charles Cowling at charles_cowling@jltpcs.com
Deaths John Edward AGER died recently, aged 81. He became a Fellow of the Institute in 1958. Norman Joseph Deryck AMES died recently, aged 68. He became an Associate of the Institute in 1979. Derek Glanvile MILLARD died on 15 February 2013, aged 75. He became a Fellow of the Institute in 1964. David WILSON died on 2 March 2013, aged 67. He became a Fellow of the Institute in 1968 before transferring to Affiliate membership in 2011.
Don’t forget the Staple Inn Actuarial Society will match 25% of monies raised by individuals and 50% of monies raised by teams from more than one employer, up to a maximum of £300. Full terms and conditions and an application form, can be found at www.sias.org.uk/aboutsias/Charity
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of four. There were several moves in this routine, the first being a ‘Right/ left arm star’ and the finale being the ‘Basket’, which sounds easier than it was! This comprised two couples, with the guys facing one another, placing their hands around the girls’ waists and the girls placing their hands over the guys’ shoulders, spinning fast enough so the girls’ feet left the ground. Not one for the faint hearted! But it didn’t end there – later routines included my personal favourite, ‘Dipping and diving’. And everyone got into the spirit of the night so well that I’m sure I even heard a Yee-haw or two! Thanks to the brilliant Nellie Belles band, Revolution, and all those who came along. We hope to see you at the next SIAS dance night on a dance floor near you!
THE ACTUARY • April 2013 www.theactuary.com
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coast challenge support for children with autism and autistic spectrum disorders. Charles is pictured with some of the children from the Udaan School, most of whom come from families who have never received any formal education. The Udaan School provides these children an education that is unavailable elsewhere. Without this, the children would end up on the streets, in very low-paid hard manual work or married by the age of 13 or 14. Charles says: “The school and the people at Udaan are an inspiration. In the face of huge challenges and some real hardship, the teachers and pupils alike are bright, charming and delightful. This is a chance to make a huge difference to peoples’ lives.”
Also pictured are teachers Malkawa Bomidi and Divya Dubey, both of whom, as previous students at the Udaan School, exemplify what the school is able to achieve in giving these children a chance to realise their dreams and aspire to jobs and career opportunities, such as teaching, that would otherwise not be possible. The team has set the very ambitious target of raising £30,000 for these hugely important causes and your support would be very much appreciated. Best of all, JLT has agreed to match all donations pound for pound, up to the first £5,000, ensuring that your charity goes even further. For more information or to donate, go to
uk.virginmoneygiving.com/team/wca
Giving and receiving Alix Frost is running the Virgin London Marathon on 21 April 2013 to raise funds for the Primrose Hospice Centre of Care. The hospice provides care to adults living with life-threatening illnesses in Redditch, Bromsgrove and was a huge support to Alix. They offered her a lifeline during her recent treatment for invasive cancer, when she was at her lowest point, enabling her to complete the treatment and give herself the best chance of survival. Alix is fortunately now in a position to be able to give back to the hospice. She has returned to work and to recreational running. Despite having never run even a half marathon, Alix is training hard and is determined to do her best. We wish her the very best of luck. If you would like to sponsor Alix, please visit www.justgiving.com/alixfrost Find out more about Primrose Hospice at
www.primrosehospice.org/home
Hit the slopes Philip Scott, president of the Institute and Faculty of Actuaries, addresses the gathering at Staple Inn
Staple Inn sundial marks centenary Despite bitterly cold temperatures, the sun un emerged briefly on 28 February for the unveiling of the Staple Inn sundial, commissioned and presented by the Staple le Inn Actuarial Society (SIAS) to Philip Scott, tt, president of the Institute and Faculty of Actuaries, to celebrate the SIAS centenary. y. On presenting the sundial, SIAS chairman Martin Pike commented: “It also recognises time as something that’s important to actuaries. We help our clients ts deal with liabilities that become payable many years in the future.” For the full report, visit www.theactuary.com ry.com com
The fourth annual Livery Company Skiing Competition took place in Morzine in France in January. With over 100 skiers from 17 livery companies, this was one of the largest competitions to date. The Actuaries put forward a team of five, consisting of Jerry Staffurth, Tony Leandro, George Yoxall, Richard Hawkes and Fiona Morrison. Unfortunately, they missed out on the Actuaries Cup, which was won by the Leathersellers. The next competition will be held in Morzine on 24 and 25 January 2014. All levels of skiing ability are welcome. For entry details, please contact Fiona Morrison fiona.morrison@lcp.uk.com
We would be delighted to hear from you if you have any newsworthy items for these pages. Please contact Yvonne Wan at social@theactuary.com
April 2013 • THE ACTUARY www.theactuary.com
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SIAS Events
TUESDAY 30 APRIL
Solving solvency: insurance capital management in a changing regulatory landscape Dr Matt Modisett & Christopher Hursey Staple Inn, High Holborn, London WC1V 7QJ 5.30pm
PROGRAMME EVENT
Whether lowering capital requirements or increasing earnings on capital, risk management is the way to reach your goal. Solvency II and the current Individual Capital Assessment both equated risk and capital requirements. So, what are some methods for managing capital? This presentation will discuss both basic and innovative ways to reduce capital requirements and to raise capital earnings. It will also present how different capital projects can be managed and prioritised for optimum effect. The first half of the discussion will give an overview of capital requirement calculations, and an introductory, conceptual explanation to capital management strategies. The second half will discuss practical considerations, drawing on some of the concepts and ideas introduced in the first half to devise a basic blueprint for implementation. The event is appropriate for younger members, as it discusses high-level strategic issues without requiring in-depth technical knowledge. Topics covered include: ● the two goals of capital management; ● lean is not lite; ● spiral of capital savings; ● materially large vs materially manageable; ● sample savings; ● diversification; ● true-risk strategies; ● systems, assumptions and incentives. Refreshments will be served from 5.30pm and the talk will start promptly at 6pm. There is no need to register in advance for this meeting.
MONDAY 13 MAY
Assumption-setting process for estimating annuity liabilities
PROGRAMME EVENT
Stochastic mortality models, such as the Lee-Carter and Cairns-Blake-Dowd models, are commonly used to model future mortality rates and the evolution of these under ‘run-off ’. However, we are increasingly seeing firms attempt to model longevity risk over a one-year horizon.
John Kingdom, FSA Staple Inn, High Holborn, London WC1V 7QJ 5.30pm
This presentation discusses a high-level view of the assumption-setting process for estimating annuity liabilities and the range of risks that need to be considered when modelling longevity risk under a one-year value-at-risk (VaR) framework. We also compare this approach with using a standard run-off approach, and illustrate, via a simplified numerical simulation, why simple ‘0.995^n’-type approaches used to approximate a one-year stress from a standard run-off approach are not necessarily appropriate. This presentation will help younger members understand the assumption-setting process for estimating annuity liabilities, and the risks that are related to this process in a one-year VaR context. Refreshments will be served from 5.30pm and the talk will start promptly at 6pm. There is no need to register in advance for this meeting.
— SAVE THE ! DATE —
THURSDAY 23 MAY
SOCIAL EVENT
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Save the date for our mystery event!
7pm
MORE EVENTS ONLINE For details of events, visit www.sias.org.uk
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More information on this event will be available on the SIAS website (www.sias.org.uk).
SIAS IS ON TWITTER! Follow us on @SIAScommittee for latest news on meetings, socials and more!
SIAS IS ON FACEBOOK! Check out the SIAS Facebook page for photos from the latest social events
THE ACTUARY • April 2013 www.theactuary.com
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On my agenda features@theactuary.com
THE
MILD-MANNERED PROPHET OF DOOM Nick Silver finds out why John Kay, author of the 2012 review on equity markets, believes that, although the current system is fated, everything will be alright in the end
SAM KESTEVEN
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A small terraced house in the hinterland between London’s Marble Arch and the Edgware Road does not seem like the sort of place where you might expect to find a leading economist. But professor John Kay is not a typical economist: he has been a fellow of St John’s College, Oxford, since he was 22; a director of the Institute for Fiscal Studies; he was the first director of Oxford University’s Saïd Business School; and he has also set up a successful economic consultancy firm. Alongside that, he has written weekly columns for the Financial Times for 17 years. More recently, he has been in the public eye having been commissioned by the government to carry out an independent review of the effects of UK equity markets on the competitiveness of the economy, published as the Kay Review in July 2012. If I didn’t know that the slight, genial gentleman settled down opposite me was a professor of economics, I would imagine him as a specialist physician, detailing why a patient had only six months to live with comforting assuredness. During our conversation, he gently and politely dissects the state of the equity markets and financial services, the UK economy and the economics profession in his soft Scottish accent – and offers his thoughts on actuaries.
Kay on Kay When asked what had first attracted him to economics, Kay explains that he started out studying for a maths degree at Edinburgh University. Having worked for a summer in the school holidays at Scottish Widows, calculating surrender values, his assumption was that he would become an actuary. However, on taking a subsidiary course in economics, he decided he was more interested in practical affairs and ended up studying economics at Oxford. Asked why he had opted for such a varied career, rather than sticking to being an academic economist, his response is simple. “The idea of doing the same thing all of my life was a bit daunting,” he says. His particular skill, he continues, is “the popular exposition of complicated ideas”. Throughout the conversation, I form the view that is a two-way street – rather than being stuck in a hermetically sealed world of academia, Kay has much practical exposure to the real world. This feeds back into his academic work, potentially changing his views on how the economy works. Although he professes to not having any other major passions in life “besides my work and walking, where I do my best thinking”, I have the impression that Kay’s work is so wide-ranging that this encompasses multiple interests.
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Kay on banking My opening salvo is to ask him about his most recent FT column, in which he wrote that ‘the reputation of finance has been degraded by the actions of a few. But the few have been running the show, and have imposed inappropriate values on once respected institutions.’ He explains that, during the big bang, retail banks took over firms engaged in wholesale financial activities. “But the retail banks couldn’t control the investment bankers, who were richer and smarter, and so they ended up running the show,” he says. The only way to stop this, he continues, would be to have “a politically driven restructuring of the financial service sector” – a surprising answer, as the Kay Review was pretty limited on government intervention. Instead, we are seeing “the
proliferation of a style of regulation that has plainly failed”. Although he has seen change in the past year – among politicians and with public realisation that what went wrong resulted from the ethos and structure of the industry – he says there is an endemic culture in financial services that makes it incapable of learning from other disciplines. Sciences that study systems – for example, engineering or biological systems – have developed a sophisticated understanding of how systems actually work. In an ecosystem, monocultures are the most vulnerable and this is exactly what we have in banking, made worse by the current style of regulation, which “freezes the evolution of the system”, preserving the dinosaurs.
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On my agenda features@theactuary.com
“The current style of regulation freezes the evolution of the system, preserving the dinosaurs”
It turns out that Kay’s optimism is predicated on the inevitability of another crisis, as the current banking business model is a proven failure, which will basically wipe out the financial system so we can start again.
Kay on economics I read another column by Kay a while ago in which he wrote that he used to teach modern portfolio theory, but that he no longer believed in it. Asked what changed his mind, he takes us back to the early 1990s, when he was involved with the restructuring of the Lloyds Insurance market, following the London market excess of loss (LMX) spiral. “What had been going on was not the spreading of risk to reduce the cost of risk bearing, but the dumping of risk by people
SAM KESTEVEN
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who understood a bit about it on people who understood less,” he says. This typified much of the financial services sector. So when he observed the credit instruments between 2003 and 2007, “it was with a sense of déjà vu, knowing how this would end”. His conclusion was that most financial market trading was the product of information asymmetry rather than different risk preference and risk attitudes – as assumed by the capital asset pricing model and the efficient market hypothesis. Financial markets are currently explained using models that cannot conceivably account for the volume of trading that takes place in them. The other experience that led to his change of mind was carrying out some research on London casinos. He found that the typical gambler was a successful, entrepreneurial businessman. Far from being there for the thrill of winning, or losing, money, “these people actually believed that they could win”. He realised he was observing the upper tail of a distribution of people who were aggressive risk takers, yet naïve about the risks they were taking – the businessmen one sees in the casinos are the ones successful enough to have enough money to lose. These same people provide the underlying dynamics of capitalism. They are not rational, they do not understand risk and are therefore prepared to take risks that a rational agent would not take. And it is these people who drive the growth of the economy. Again, this entirely contradicts economic theory in which agents are assumed to be rational; it is the irrational agents that drive the markets. Kay is not the only critic of mainstream economists, and it would seem patently obvious that economics has failed as a predictive and explanatory tool. Was the profession changing? Could there be an Einstein moment approaching, where the mainstream realises that the cranks were right? No, says Kay. Unlike subjects such as physics, you cannot definitively prove economics wrong. “The rewards structure of the economics profession is basically a common value system,” he says. Small marginal improvements are rewarded, critics are considered cranks and ignored.
But surely economists would become increasingly irrelevant as there would be decreasing demand for models that just do not work? Once again, Kay thinks not. “People are continuing the use of value at risk models,” he says, “although these plainly failed, because extreme observations come from off-model events, not from improbable events within models.” He cites the Goldman Sachs executive who said they were “seeing things that were 25-deviation events, several days in a row”. This was obviously not the case, says Kay. They were seeing events that were not in Goldman Sachs’ model. What interests Kay as a result is “exploring the limits of probabilistic reasoning” – something that has been discussed since the 1920s but has still not been taken on board.
Kay on equity markets The subject of the Kay Review was how equity markets affected the economy as a whole. One of the findings was that companies rarely raise money in the stock market. But part of the purpose of savings, according to economic theory, is also to provide investment capital, which allows the economy to grow. Kay thought that this was no longer the case, as companies no longer needed to raise large amounts of capital. “Companies such as Facebook or Google are capital-light and generate their own cash, which they can invest themselves,” he says. The main capital allocation decision in the economy is therefore taken within companies by company management, not by the capital markets. Most of the large-scale investment of the modern economy is required by government, for areas such as health, education and infrastructure. The main economic function of the equity markets is not, therefore, to allocate capital efficiently, but to ensure that company management makes the correct capital allocation decisions. Kay champions the concept of ‘stewardship’ asset owners that have a close relationship with the management of companies they own, overseeing the allocation of capital in a manner that will
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On my agenda features@theactuary.com
result in the long-term growth of the company. This is the only way in which the investment management industry can add value. “Competing with each other on relative short-term performance is a zero-sum game,” says Kay, which is of no social value or value to their clients as a whole. At present, asset managers either do not focus on long-term growth or, worse, they actively encourage companies to behave in a more short-term fashion, undermining long-term value. By and large, therefore, the asset management industry has not been doing its job. Doesn’t that make the Kay Review an indictment of modern capitalism, I ask? After all, economics teaches us that people’s earnings are based on how much they are ‘worth’ to society, yet the head teacher of my daughter’s school earns a small fraction of what most people working in the equity markets earn, despite her obviously socially important job. The Kay Review argues that what people working in the equity markets do is mostly useless, sometimes positively harmful, with most workers either not doing their jobs properly or not doing them at all. Kay’s answer is that capitalism is working, but not necessarily perfectly; the most successful economies are obviously based, to a large extent, on free markets. But the UK’s financial services system is currently not serving the rest of the UK economy very well. As a result, the UK has become a global centre that is “quite good at manufacturing a particular set of products, which are of doubtful value, but which are mostly bought by foreigners”. This is the modern moral dilemma of our society.
“Develop narratives of what might happen rather than relying on spuriously accurate mathematical projections”
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Kay on actuaries Before this interview, I searched the Kay Review and found no mention of the word ‘actuary’ and only one of ‘actuarial’. From our subsequent discussion, I can conclude that he lets us off lightly. When Kay had his first interaction with the profession over 20 years ago, he felt that actuaries were “blissfully unaware” of financial economics. But, since then, he says, we have adopted them wholesale in a particularly naive and uncritical way. He believes that people best deal with uncertainty, as opposed to risk, through narratives rather than probability distributions. For instance, the legal profession uses terms such as ‘balance of probability’ and ‘beyond reasonable doubt’. “We might surmise,” says Kay, “that these could be translated into probabilities – the former greater than 50%, the latter greater than, say, 99%.” But this is not the case at all, he continues. Legal reasoning places the onus on ‘the ability to tell a consistent and convincing story’, and the judgment is based on what degree of confidence the judge or jury has in the story. ‘On balance of probability’ means which story is the most convincing. ‘Beyond reasonable doubt’ means the story is a clear and convincing narrative of events. What Kay would like to see from actuaries is for them to exercise judgment and frame these in convincing narratives. Another example he uses is taken from Malcolm Gladwell’s book Blink: The Power Of Thinking Without Thinking. A Greek statue in California’s J. Paul Getty Museum was easily recognised by experts as a fake, but it was very difficult for them to explain why they thought
this – they just knew. Because of uncertainty, there cannot be an objective truth; expertise is exercising a subjective judgment based on experience, not the ability to run a model.
Kay on the way forward For investment consultants and asset managers, the Kay Review is little short of devastating. So what does he suggest? To start with, he says, the methods for picking asset managers and the mandates that they are set are a long way from perfect. First, the theoretical underpinning of current practice – for example, investing against a benchmark and defining ‘risk’ as deviation from that benchmark – follows the efficient market hypothesis and the capital asset pricing model, both of which Kay thinks are nonsense. Second, mandates should be based on “styles and strategies that look compelling”. In Kay’s view, pension funds should invest in a smaller selection of companies, with whom they should be in close contact, either directly or indirectly via the asset managers, the key concept being ‘stewardship’. He believes that asset managers should be selected for their convincing ‘narrative’. “They should not be reporting or judged upon quarterly returns against other managers, as this is not in beneficiaries’ interests,” Kay says. Instead, he continues, they should be judged over, say, three years – on whether they are investing in line with their stated narrative and how this is evolving through time. The investment consultant should exercise professional judgment on which narrative is the most convincing. Asked whether this was something actuaries could do, Kay suggests we do not, at present, have the right skills set. Instead, the work should be undertaken by asset managers who understand the “competitive advantages and evolution of companies”. Kay’s message for actuaries is that we should distrust our models – what is not in our models is often more important than what is. And we should develop narratives of what might happen rather than relying on spuriously accurate mathematical projections based on past experience. Equally, we should not blindly follow methodologies implied by financial economics. In conclusion, the Kay Review has been described as good on diagnosing problems but not on solutions. This impression is strengthened by our conversation, as Kay’s ultimate solution seems to be based on little more than the inevitability of another crisis, after which everything will be fine. Not a very comforting message, perhaps, but I think we should listen carefully to the diagnosis of this most mild-mannered of Cassandras. a
THE ACTUARY • April 2013 www.theactuary.com
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Going the distance in Capital Modelling As Solvency II faces further delay to 2016 or even later, firms are looking to reap the benefits from their significant investments in capital modelling.
Calculation Kernel
This trend is changing the game for capital modeling actuaries: before, it was like a 200m steeplechase with companies investing to meet a series of deadlines; now, it is more similar to a 5,000m distance run. Capital modellers still need to cover the distance but must become leaner and more efficient as management expects more reporting on a continuous basis with less resource. A few years ago companies produced results four times a year. Now companies are running up to 500 capital calculations a year. This increase in throughput has, up until now, been achievable with the extra resource made available from Solvency II programme streams. Today, one of the key challenges facing capital modellers is how to maintain the same level of analysis throughput when operating as business as usual.
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Business Critical As a self-respecting actuarial professional, you’ll no doubt want to keep up with the latest industry developments, people and society updates and professional news. But you’re also busy being an actuarial professional. Right? That’s why The Actuary’s weekly email alert brings you a handy round-up of only the most relevant news stories and comment, straight to your inbox, every Thursday.
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Pensions Long-term strategy features@theactuary.com
Anyone approaching retirement age should be planning their future. But can pension schemes get better results by focusing on the present, ask Celene Lee and William Zimmern In the past decade, many defined benefit pension schemes have been pondering ‘journey planning’ and ‘de-risking flight paths’ as they plan for a long-term end game, often based on a buy-out or self-sufficiency. The time frame could stretch out to 20 years-plus. However, while people may well be living longer, we are most certainly not staying in our jobs for as long as our parents. The average tenure of a FTSE 100 chief financial officer (CFO) in the UK is around five years [1] and for a chief executive is 4.9 years [2]. Even member-nominated pension scheme trustees often have a defined term of office of not more than five years without re-election. Given that the key decision-makers in pension schemes have a term of office of around five years, why do we insist on talking about a strategy stretching over 20 years? Is there a different angle from which we can look at this to better align the interests of these decision-makers with a successful outcome for the pension scheme? If you were taking charge of a company as a CFO, the first things you might consider are likely to hinge on the macro-economic environment you might face in the next five
Living in the
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CELENE LEE is a pension
risk and investment actuary in PwC’s pensions team. WILLIAM ZIMMERN is a macro-economist in PwC’s economics team
years and how you can make the most of your tenure against this economic backdrop. Right now, one of the key factors that will affect defined benefit pension schemes is the aftermath of quantitative easing (QE). As a country, we have not been here before, so we have little idea how QE will unfold in practice. As we can see from Figure 1, gilt yields have fallen significantly while QE has been in place. Although the equity market has picked up over the same period, this has not been enough to compensate for the impact that declining gilt yields have had in increasing the values placed on pension liabilities. As a result, a sample scheme invested in a 60% equity/40% bond allocation is still almost 20% below its pre-crisis funding level. The first tranche of QE was implemented in early 2009, with the second phase between 2011 and 2012. In total, the programme has injected £375bn into the UK economy, with the Bank of England (BoE) now holding about a third of the total UK gilts in issuance, leading to a distortion in the gilt curve. Many organisations such as the National Association of Pension Funds (NAPF) continue to lobby that QE has resulted in an unprecedented increase in the value of pension liabilities in the region of £270bn [3]. Many people are expecting some level of reversal to the gilt curve, as, according to the law of common sense, what goes down must come up. But the unwinding of QE may not be as straightforward as a reversal of the gilt curve. To begin with, we could look at three key considerations as to how QE might unfold: the macroeconomic environment in which QE might be reversed; the actions the BoE will take to implement the reversal; and at what speed might the reversal take place. A number of scenarios would support the case for withdrawing monetary stimulus, including the return of sustainable growth in the economy with some acceptable level of inflationary threats, given that the BoE’s primary aim is to control inflation. However, there are potential stumbling blocks. First, signs of the beginning of a triple dip can be disguised by early green shoots. Any misinterpretation of the early signals could lead to the Bank raising interest rates too soon. If there is a genuine triple dip and we are in a prolonged recession, the Bank may be forced to react once again. But how? With interest rates close to rock bottom and rounds of QE already implemented, the Bank may have no choice but to attempt to implement further rounds of QE. However,
the extent of the existing programme means that the Bank would risk losing its credibility, if it has not done so already. Some might question the effectiveness of QE and the damage it will continue to cause to the underlying long-term health of the economy. Second, how will the Bank unwind QE? One possibility is that the government could simply cancel the bonds held by the Bank and there has already been some speculation appearing in the financial press and blogs [4]. The government would then not need to pay interest on those gilts, but the Bank would be left with a £375bn hole with no assets to back it. The consequence could be vast, not least because there will be a no-confidence vote in the system as the Bank would be seen to have financed the government’s debt by creating money. And, third, what about timing? If the risk of triple dip subsides, the sudden reversal of interest rates to pre-crisis levels could cause serious issues for the private sector or households with variable mortgage rates, pushing the economy back into recession. We experienced this to some extent in the UK when interest rates were raised from 8% to 15% between 1988 and 1990, which was followed by GDP growth falling from 5% to -1.4% in 1991. An unclear strategy from the Bank as to how monetary stimulus will be withdrawn will hinder both pension schemes and businesses in planning for the next few years. While the lack of action will mean that the short end of the curve will run its course, the long-end gilt curve may continue to stay low
for some years while the Bank ponders the right action. As Andrew Sentance, senior economic adviser at PwC and a former member of the BoE’s Monetary Policy Committee, has suggested, an announcement by the BoE of an orderly intention to raise rates would go a long way to help the country adjust to this ‘new normal’, but the Bank may be reluctant to do this. Further, for pension schemes it could be a double whammy. Low interest rates have already led to the pound weakening, which could lead to high inflation for the UK rather than increasing exports, due to the inelasticity of UK exports. A combination of continued low gilt yields and high inflation could be very damaging. Combining macroeconomic insights with traditional asset-liability modelling offers a powerful way to carry out a reality check between what might be achievable in the medium term against our long-term target. It takes us away from the unquestioning mindset of long-term returns without having a view about the shorter-term and sometimes brutal reality we try so hard to ignore. a
REFERENCES [1] According to the Curzon Partnership’s analysis in 2012 [2] According to data from Manchester Square Partners between 2002 and 2007 [3] Exceptional Times, Exceptional Measures?, NAPF, March 2012 [4] See debate at bit.ly/cancelgilts
Figure 1: Gilt yields and UK equity performance since the financial crisis and a sample scheme’s funding level assuming a 60:40 asset allocation of equities and bonds 110%
5.00% FTSE all share (LH scale) Funding level (LH scale) Over 15 yr gilt (RH scale)
100%
4.00%
90% 3.00% 80% 2.00% 70% 1.00%
60% 50%
0% 01/05/2007
01/05/2008
01/05/2009
01/05/2010
01/05/2011
01/05/2012
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Underwritten annuities Enhanced annuities features@theactuary.com
An enhanced annuity pays a higher income to individuals who have a medical condition that might reduce their life expectancy. Generally, individuals will qualify for an enhanced annuity if they can answer ‘yes’ to one of the following questions: Do they smoke cigarettes? Do they take prescription medication? Have they been to hospital recently for a medical condition? There are three categories of enhanced annuities: lifestyle, enhanced and impaired life. Table 1 explains these differences and notes the common medical conditions for each type. As the market for enhanced annuities increases, a number of key issues and trends can be identified that will influence its future.
Increased market share About £14bn of pension funds are invested in annuities every year, with an average fund size less than £30,000. In 2012, sales of enhanced annuities represented about 40% of the total market, with sales totalling £5.5bn – a significant increase from a 10% market share in 2004, arising from increased supply and marketing activity. However, the increase in sales has affected the pricing of standard or good health annuities. While difficult to quantify, as enhanced annuities have attracted unhealthy lives, the mortality cross-subsidy element of a standard healthy annuity has fallen. This has had a dual impact on the market. First, it can be viewed that value is being transferred away from people in good health to those in poorer health. In time, this may affect individual behaviour and the advice they receive. People with above-average funds and in good health may be advised to consider annuitising funds at an older age or to invest in drawdown products when they first retire. The move towards later annuitisation is also being influenced by the current low levels of bond yields, resulting in the lowest annuity incomes in living memory. Second, we are fast reaching a point when the majority of annuities will be underwritten in some way. Insurance companies are clear that they cannot use medical underwriting to overcome the ban on gender-specific pricing, but they will be looking at more ways to differentiate between future annuitants on the basis of health, accelerating the amount of underwritten annuities. As the enhanced market grows, the distinction between lifestyle and standard
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HEALTHY CHOICE? Billy Burrows offers an adviser’s perspective on the value of enhanced annuities for customers and examines what the future holds
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“Most 60-year-olds have some type of medical complaint that will meet the ever-widening range of qualifying medical conditions” annuities will become more blurred. Most 60-year-olds have some type of medical complaint that will meet the ever-widening range of qualifying medical conditions for an enhanced annuity.
TABLE 1
Lifestyle annuity
Enhanced annuity
Impaired life annuity
Description
Takes into account certain behavioural and environmental factors that may reduce life expectancy
For those with medical conditions that may reduce life expectancy and where the information can be obtained directly from the client
Similar to enhanced, but where the medical conditions are more serious and a doctor’s report has to be obtained
Medical conditions
• Smoking – higher frequency and longer history • Overweight / heavy drinking • High blood pressure • High cholesterol
• History of heart attacks, angina or heart surgery • Chronic asthma • Digestive or bowel complaint • Bladder or liver complaint
• Life-threatening cancers • Major organ diseases, eg liver or kidney • Other life threatening illnesses such as Parkinson's, multiple sclerosis and strokes
Better use of technology As the number of annuities arranged using the open market option increases, a number of different annuity broking models are emerging, including scheme-specific broking services, web-based annuity supermarkets and direct-to-customer propositions. All of these models have used technology to cut transaction costs and improve client communications. The most obvious use of technology is in customer-facing annuity quotation systems, often referred to as annuity supermarkets, that allow clients to enter their own medical data. However, many clients do not understand annuity options sufficiently well to have the confidence to purchase online. Therefore these systems work better as an education tool than a business tool. In addition, current annuity quotation systems take account of only a limited number of medical conditions and cannot be relied on to produce the highest annuity income for a particular range of medical conditions. Those that capture more in-depth medical information often do not have systems sophisticated enough to produce competitive quotations. This second point is being addressed by the next generation of annuity quotation systems. These will capture comprehensive medical information and transmit it directly to the insurance companies to underwrite. Another challenge to these ‘supermarkets’ is to widen the limited range of products on their virtual shelves to include products such as investment-linked and fixed-term annuities.
Graph 1: Single life level annuity purchased with £100,000 for 65-year-old man. Annuity income for a range of medical conditions
£5,688
£0
High blood pressure (180/100)
£5,688
£368
Cancer (lymph nodes)
£5,688
£676
Angina only
£5,688
Type 2 diabetes
£5,688
Smoker (20 a day)
£5,688
Angina and smoking
£5,688
Chronic pulmonary disease
£5,688
SOURCE WWW.BRGL.CO.UK FEBRUARY 2013
£3,000
£4,000
interviewing should improve the quality and consistency of medical information. For example, a nurse will be able to help applicants explain their medical conditions and will be familiar with their medication. Collection of medical data And many applicants may be able to explain Traditionally, medical information has been the state of their health more accurately with obtained from individuals by completion of a quotation request form. But paper forms take a the help of a nurse compared with what they good deal of the applicant’s time and effort and would write on a paper application. act as a barrier to the growth of enhanced annuities. In order to make the process easier, Future of enhanced annuities applicants have been offered the opportunity of It is tempting to see the future as being linked a telephone interview. to the development of more sophisticated There are three types of telephone interview: online solutions. Although technology has an 1. Those provided by insurance companies, important role to play, many people will not where a qualified underwriter will interview buy an annuity without first speaking to an the individual applicant. adviser. If this is the case, the earlier they 2. Those offered by specialist companies, which speak to an adviser, the better the chances of use nurses to interview applicants. the most favourable outcome. Technology 3. Those offered by advisory firms, which use will have more impact in the back office. medically trained interviewers or train their Enhanced annuities will continue to own staff to conduct the interviews. increase in market share until almost all As well as the obvious advantage of avoiding annuities will have an element of medical completion of a paper form, telephone underwriting. But with annuity income at an
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Healthy annuity Medical enhancement
Best good health annuity
£783 £1,035 £1,072 £1,448 £2,357 £5,000
£6,000
£7,000
£8,000
£9,000
all-time low, more commentators are asking if annuities are the most appropriate policy for converting pensions into income. Annuities will probably remain the product of choice for most people at retirement, but people with above-average pension pots may be better off considering other options. The advantages of the extra income from an enhanced annuity will quickly disappear if the annuity was the wrong policy in the first place. While it is very important to shop around and to get the highest income, it is also important to make sure that people know what they are shopping for. a
BILLY BURROWS is a director of the Better Retirement Group and the Retirement Academy
April 2013 • THE ACTUARY www.theactuary.com
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Underwritten annuities Positive health features@theactuary.com
Gordon Woo looks at annuity pricing of human resilience Actuarial assessment of impaired or enhanced annuities focuses on specific medical conditions or lifestyle factors that reduce life expectancy. The assessment of negative health conditions that hasten death offers an important but still rather narrow perspective on mortality. This assessment could be broadened to include positive human factors that sustain and extend life, and help to make individuals resilient. Depending on these positive human factors, the lifespan of two relatively similar individuals may vary significantly. With engineering systems, safety analysis traditionally focuses on the risk of things going wrong. But a modern supplementary approach focuses instead on what keeps systems functional. This is resilience engineering [1]. A tenet of resilience engineering is that a system is safe if it can adjust its functioning prior to, during, or following changes and disturbances, so that the required operations are sustained under both expected and unexpected conditions. Air safety is not just about what can cause a plane to crash; it is also about the capability of the pilot to keep a plane airborne. Similarly, human longevity is not just about pathology and frailty, but is driven also by cognitive, psychological and social factors that keep people advancing purposefully through life. These basic human resilience factors supplement the physical health factors that have been elucidated over the past half-century, starting with the classic longitudinal Framingham heart study in the US. Yet health-related information from prospective underwritten annuitants rarely extends to gauging their state of cognitive and social functioning or positive well-being.
OF WE ALTH 28
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DR GORDON WOO
is a catastrophist at RMS LifeRisks.
Fortunately, a number of longitudinal studies of cognitive, psychological and social factors have recently been published. For example, in 2011, a University of St Andrews paper quantified the ‘widowhood effect’ on mortality risk. Using mortality statistics from the Scottish Longitudinal Study of 58,000 married couples, the paper found that the risk is highest shortly after widowhood, but remains raised for at least 10 years.
Mental health or no health Preservation of cognitive functioning is critical to successful ageing. Rapid loss of cognitive faculties often signifies medical decline and heightened mortality risk. Many activities that influence longevity are very cognitively demanding. New medical treatments may require self-monitoring and complicated self-medication. Chronic disease patients must make many choices daily that have major implications for their health. Mental stimulation, such as reading and conversation, is important for maintaining cognitive function. Brain training studies show that the cognitive biological age of an individual can be lowered in relation to chronological age. Keeping psychologically fit through mental activities leads to improved cognitive health in old age. Brain plasticity research by Californian neuroscientist Michael Merzenich has demonstrated that cognitive age reduction is achievable even for older people with mild cognitive impairment.
It pays to stay positive Positive psychology is the study of human flourishing, and focuses on personal traits such as well-being and happiness, rather than on problems, which is what people tend to think psychology is all about. Like a resilience engineer, a positive psychologist concentrates more on what is going right than wrong. Positive psychology was founded by Martin Seligman just 15 years ago. Researchers of positive psychology have demonstrated that positive characteristics or feelings, and purpose in life, help people to live longer.
Positive feelings are especially beneficial for the longevity of pensioners, and it is hardly surprising that the will to live is a strong predictor of survival among older people. While it is clear that happiness is a good predictor of longevity, research to explain the causal biological connection that links well-being with longevity is still ongoing. Significant cardiovascular protection seems to be achieved by satisfaction with life. Evidence connects major stressful events to physiological changes: stress induces cellular resistance to cortisol, reducing the body’s ability to regulate inflammation. Laboratory studies by Elizabeth Blackburn, the 2009 Nobel laureate, have advanced the hypothesis that stress affects health by modulating the rate of cellular ageing.
Social networking for survival Isolation is a powerful risk factor for poor health. In the US, a MacArthur Foundation study of successful ageing showed that friendship is a key factor in keeping older people active and emotionally secure, even in advanced old age. The mortality of any older individual is contingent to some extent on the survival of at least one peer. This implies that a single life annuity has some characteristics of a joint life annuity. Members of communities that are noted for their longevity both work and socialise together in a close-knit fashion that helps to reinforce good habits and behaviour. Sustained engagement in social and productive activities is central to healthy ageing, and is ingrained in the most long-lived ‘Blue Zone’ communities around the world, which are celebrated for their number of centenarians. Social support can buffer some healthrelated effects of ageing. There are two main kinds: emotional social support and hands-on care. The latter can be essential for basic survival. Emotional support encourages a sense of being cared for, esteemed and valued by others. It is especially needed to get through serious illness and difficult treatments, just as a financial reserve may be.
Measuring resilience Using methods developed in insurance risk modelling for property and casualty insurers, a grade index scale can be defined for each of the three resilience variables: cognitive, social functioning and well-being. From a metaanalysis of the published longitudinal studies, index values can be associated with hazard ratios. Collectively, the three resilience variables define a vector resilience metric that can elucidate key aspects of mortality for annuity underwriting. Mortality convergence, for example, is partially attributable to compositional effects: time selects out a resilient sub-population, with a levelling in the observed mortality at higher ages. Surviving resilient annuitants will tend to be functioning well cognitively and socially, have a purpose in life and a positive sense of well-being. Accordingly, the mortality rate observed among surviving annuitants at advanced age should exhibit significantly greater degrees of convergence. The older people become, the more their survival depends on resilience. Demographer James Vaupel first introduced the concept of a population frailty distribution to represent the tendency of frailer people to die younger. There is a strong correlation of frailty between generations, reflecting its core genetic basis. Focusing on survival rather than death, and data-mining the domain of social psychology, we can now define a resilience distribution to reflect the marked population variability in cognitive and social functioning and well-being. Annuity underwriters may have intuitively appreciated the significance of these human factors. However, lack of evidence would have inhibited efforts to incorporate them into pricing algorithms. Now, in conjunction with available experience data, these factors can be taken into practical consideration to refine the pricing of underwritten annuities. a [1] Hollnagel E, Woods DD, Leveson N (2006) Resilience Engineering: Concepts And Precepts. Ashgate Publishing, Farnham, Surrey
AND HEALTH CHRIS DUNN
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Underwritten annui annuities itie Medical research features@theactuary.com
Outsmarting
mortality Daniel Ryan attributes the success of underwritten annuities to the integration of medical and demographic knowledge within the actuarial profession
Underwritten annuities have revolutionised the insurance industry in the UK by extracting the most out of available information by combining existing life underwriting manuals and the underlying experience, disease-specific cohort studies, patient medical records and the expert knowledge of our chief medical officers. We have even been able to splice together experience in a common calendar year from diagnoses that occurred in different years in the past to produce the most up-to-date assessment of the additional mortality associated with different conditions. However, the journey is not yet complete. Our expectations for underwritten annuities are still based on assumptions of aggregate mortality improvement, such as those developed from the CMI Mortality Projection Tool. Perhaps this could be viewed as a reasonable approximation, particularly as the proportion of people receiving underwritten annuities increases, but it is not making the best use of the information available to us. For example, patient medical databases, such as the General Practice Research Database, can give us an insight into specific conditions. In the case of heart conditions, we can know the percentage of individuals with a prior history of heart attack who are currently being prescribed ACE inhibitors and statins to manage their blood pressure and lipid balance and how this changes over time from diagnosis. At the same time, we have guidance from the National Institute of Health and Clinical Excellence (NICE) and other bodies on what patients should receive.
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We have insights through global clinical trials as to the progress of new treatments that could further enhance our ability to treat cardiovascular and other diseases. We also can learn from those treatments that have fallen by the wayside, either because they proved less effective than existing treatments or because of unexpected side effects.
Global ageing challenge We all know that the future is uncertain. The temptation is to step back and to take refuge in aggregate projections of the future. I would argue that we should do exactly the opposite. In 2012 the World Economic Forum produced a treatise into the challenges and opportunities that we are faced with because of global ageing populations [1]. One of the chapters on medical education that I co-authored with John Wilden, CEO of Global Health Futures, highlighted that the focus on elderly populations – and particularly on clinical management of those with multiple co-morbidities – was insufficient and even neglected in many countries. New strategies are needed to train the doctors of tomorrow. The future will be different to the past. Those of us who are interested in predictions of life expectancy need to understand the many different possibilities where further enhancements in healthy life expectancy could occur. This is going to take an enormous collective effort. However, there are efforts under way. Dr Cathy Prescott, chief scientific officer at the Till Group and director of Biolatris, is a strong advocate of the potential for regenerative medicine to extend
healthy life expectancy, and brought together a group of interested individuals from Cambridge Econometrics, Club Vita, Munich Re, SCOR and Swiss Re to better understand the interest of the insurance industry and to model the potential impact on future mortality experience. This has now led to a working party at the Institute and Faculty of Actuaries with a primary focus on developing a predictive multi-state model of diabetes and resulting complications that can quantify the potential benefits of regenerative medicine. Diabetes is also a key condition for underwritten annuities. In a series of presentations to actuarial groups in 2012 and 2013, John Wilden and I used diabetes to exemplify how future innovations should enable us to move from a remedial state of medicine, where we manage the disease and its complications, to the possibility of curative medicine, where we treat before symptoms are apparent. This is precisely the information that we need to understand if we are going to develop appropriate predictions as to how future mortality will change. Diabetes is a rapidly developing global problem with huge implications for healthcare costs. The number of people with diabetes across China, India and the US alone is expected to increase from 70 million to 150 million between 2000 and 2030. Type 1 diabetes is characterised by a lack of insulin production and is an autoimmune disease that is first seen in children or young adults. Treatment might be possible if this immune response could be suppressed. However, widespread suppression can lead to
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infection and other complications. A study [2] that is expected to be completed in September 2014, is investigating whether the particular T cells that are responsible for the immune response in type 1 diabetes could be removed using a stem cell educator. This targeted modulation of the immune response could have applications for other autoimmune diseases, such as preventing the demyelination of nerve fibres that is seen in multiple sclerosis. There are two types of cells in the pancreas that are relevant to treating diabetes. The beta-islet cells produce insulin that promotes the uptake of glucose. With type 1 diabetes, these islet cells are destroyed by the immune system. The other type, the alpha-islet cell, produces glucagon that promotes the release of glucose from cells, and particularly from the liver. Our modern eating patterns as compared to those that shaped our evolutionary biology mean that we effectively have an oversufficiency of alpha islet cells.
Regenerative medicine There is therefore an interesting possibility for the replacement of beta-islet cells that have been destroyed by the immune system. In a mouse where all the beta-islet cells had been destroyed [3], alpha-islet cells showed an unexpected increase in replication and also conversion to beta-islet cells. We now have an increased understanding of the variety of methods by which one adult cell can be converted into another, and these could include viruses and the effects of inflammation. The precise signals that lead to conversion from alpha-islet to beta-islet cells
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are not known, nor whether these would have an identical impact in humans. But this could represent a valuable method for restoring insulin production. Another treatment possibility would be to produce an artificial pancreas that could boost insulin production but was somehow protected from the immune response. Viacyte has developed a capsule that develops its own blood supply after being implanted. This creates a safe environment for cells to differentiate and produce an additional source of beta-islet cells that will produce insulin in response to changes in blood glucose. This technology, Enceptra, will be evaluated in a phase 1 trial in the near future. So far, the strategies that we have focused on to treat diabetes restore insulin production. Many individuals with type 2 diabetes successfully manage their condition through dietary control. Two separate research streams from Harvard Medical School have suggested that there may also be ways to increase our metabolic rate and to burn off excess calories [4] [5]. The first stream is concerned with the discovery that a significant proportion of adult humans do not lose their brown fat, and that these cells are activated by small drops in temperature and use fat as a fuel to maintain body temperature. The second stream builds on the recent discovery of the hormone irisin, which is produced by muscles in response to exercise, and demonstrates the link between bursts of activity in young athletes, concentrations of irisin in the blood and the production of ATP to fuel further activity.
The above is by no means an exhaustive list of diabetes research. I have not delved into the world of nucleic or mitochondrial DNA manipulation and expression. The key point is that we should move away from aggregate mortality improvements to those that focus on developments that will apply to a group of policyholders with a particular disease. Such an approach will leave us with two questions. First, to what extent will policyholders embrace new recommendations from doctors regarding healthy living and treatment that moves away from the classical pharmaceutical model? Second, what are the drivers to improvements in mortality experience in the ‘healthy’ population? I would suggest that the answers to all these questions can only be resolved through research collaboration within and outside the insurance industry, and even then it will be a long road. For those actuaries that join, be prepared for a thrilling rollercoaster ride. a
REFERENCES Full references for this article can be found online at www.theactuary.com
DANIEL RYAN is head of life and health research and development at Swiss Re and a member of the World Economic Forum Global Agenda Council on Ageing
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ADVERTISEMENT FEATURE FOR PROFESSIONAL CLIENTS ONLY. NOT TO BE DISTRIBUTED TO RETAIL CLIENTS.
TAPPING OPPORTUNITIES IN ILLIQUID CREDIT CREDIT MARKETS PROVIDED INVESTORS WITH REMARKABLE PERFORMANCE LAST YEAR. ONLY 2003 AND 2009, YEARS MARKED BY ECONOMIC RECOVERY, DELIVERED STRONGER RETURNS. BUT WITH CREDIT MARKETS TESTING THEIR HIGHS, NOW IS THE RIGHT TIME FOR INVESTORS TO CONSIDER WHAT THEMES SHOULD SHAPE THEIR PORTFOLIOS IN THE YEAR AHEAD.
However, we believe total returns from conventional corporate bond markets over 2013 are unlikely to be as high as those seen last year. Credit spreads were significantly wider at the end of 2011 than they are today (see Chart) so the scope for further price increases is more limited. Investors looking to maintain relatively high returns are faced with a choice. They can reduce credit quality and increase the risk of default, or explore more niche areas of credit markets where they can expect to be paid for accepting lower levels of liquidity. In our view, going down the route of accepting lower liquidity currently offers a better balance of risk and reward.
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Accessing illiquid credit opportunities requires specialist asset management skills. Often these instruments do not have public ratings. Managers have to make an in-depth credit assessment themselves and understand their structure and documentation. Two areas of illiquid credit we currently believe are worth considering are secured corporate loans and commercial real estate loans. The first area is a well-established part of the credit market and a good example of an asset where investors are well rewarded for giving up some liquidity. The absolute yields of secured corporate loans are now more attractive than those from high yield corporate bonds. Loans 32 55in the capital structure, which means investors are also senior
Chart : European corporate bond spreads over government bonds 500 400 bps
In today’s low-growth, income-starved world, the search for yield across investment markets is likely to remain a significant driver of investor behaviour. With nominal government bond yields By Alex Veroude Head of Credit, at such low levels, the additional pick-up Insight Investment offered by the spread on credit is likely to continue to attract investors. Credit markets are likely to remain a significant beneficiary of this hunt for yield, especially given the greater certainty of return that they offer relative to equity markets.
300 200 100 Feb 08
Feb 09
Feb 10
Feb 11
Feb 12
Feb 13
Source: Bloomberg.
are given a higher priority claim on a borrower’s assets than a bondholder. Because of the secured nature of the asset class, recoveries are generally higher in the event of a default. Another interesting characteristic of loans is that they typically pay a floating rate coupon that is reset in line with market interest rates. This provides a natural interest rate hedge. We also believe lending to commercial real estate projects is particularly attractive on a risk/reward basis. It is an area of the market that has opened to institutional investors partly as a result of the financial crisis. Many banks are being forced by regulation to shore up their capital ratios and shrink their balance sheets, including the size of their loan books. Our research suggests 2013 offers a window of opportunity to enter this part of the loan market on very attractive terms. The value of investments and any income from them will fluctuate and is not guaranteed (this may be partly due to exchange rate fluctuations). Investors may not get back the full amount invested.
For further information, please contact: Institutional Business Development businessdevelopment@insightinvestment.com 020 7321 1547 www.insightinvestment.com 22887
MARCH 2013 This document may not be used for the purposes of an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Issued by Insight Investment Management (Global) Limited. Registered in England and Wales. Registered office 160 Queen Victoria Street, London EC4V 4LA; registered number 00827982. Authorised and regulated by the Financial Services Authority. 09186-03-13
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Underwritten annuities Rating factors
JULES CHARRINGTON
is chief underwriter at MGM Advantage
features@theactuary.com
On 21 December 2012, the Test-Achats ruling came into effect meaning that pricing of insurance products is now bound by the Equality Act. It has long been understood that male and female life expectancies differ and this has been a major factor in pricing annuities. Medically underwritten annuities look at the whole person, their lifestyle and medical conditions included, pricing each client individually without relying on the cross-mortality subsidy used in standard-rate annuities. This would suggest that pricing could be different if gender was an actual marker in the progression of a disease. To accommodate that, a change would be required in traditional pricing structures, where medical risk factors are ‘added’ to average life expectancy tables. The question is whether this is really necessary. Current statistics are pointing to the imminent merging of male and female life expectancies, probably as a result of recent cultural shifts, such as the increase in smoking and drinking among women. It may be more productive to look at potential new rating factors as there are many. For example, although we may consider medical advances to lead to increases in life expectancy without detriment, there are treatments that hold their own risks. Methotrexate, a drug widely prescribed for rheumatoid arthritis, is one. We need to consider the combination of the mortality risks, and this is difficult and complex, especially as it would not be ethical to withhold treatment from one group in order to calculate the different death rates for treated and untreated patients. First, though, there is a definite opportunity to add rating factors by medicines, as the data is easy to obtain, being a question in each condition area on the common quotation form. Interestingly, it would appear that treatments will also have different effects depending on gender. Sometimes the risks may present in the opposite direction to the disease progression, and research into the potential longevity risk calculation factors allowable with gender-specific pricing Table 1: Low socioeconomic status linked to five-year all-cause mortality Age-adjusted mortality risk
Hazard ratio
95% confidence interval
Breast cancer Prostate cancer
1.59 1.33
1.35 – 1.87 1.13 – 1.57
THE
GENDER ANGLE
Jules Charrington looks at the effect of the Test-Achats gender ruling on rating factors Rising male life expectancy Life expectancy at 30* 90 Projected convergence in 2030 85 80 Women 75 Men 70 65 60 1950 ’60 Source: Les Mayhew
’70
’80
’90 2000
’10
’20 ’30 * England and Wales
resulting is showing where this would potentially be appropriate. In fact, the rates offered for women should be better than for men, as there are conditions that progress more rapidly towards death in women. Another area that has been extensively studied is the effect of poverty on mortality. Dr Sheryl Gabram of Emory University School of Medicine and Grady Memorial Hospital in Atlanta, Georgia, conducted a study in 2008. Using men and women from differing socioeconomic groups with breast, prostate
and colorectal cancers, she showed a meaningful difference in survival by status. We already look at wealth as a factor in the pricing of annuity rates, but low socioeconomic status has many other factors that could be used and the data is often available to underwriters and actuaries. Ideas being considered include the use of the plethora of personal data related to our everyday lives that is out there. Predictive underwriting is already being debated by protection product underwriters, and much of this information could also be useful to annuity underwriters. Potential factors include gym membership, food shopping trends and online computer gaming hours. We need to keep reviewing the statistics used, as society is no longer the stable, unmoving thing it once was. People move house and change job more often than ever before, rendering the traditional postcode and occupation factors as determinants for socioeconomic status less and less relevant. Recreational drug use is becoming more widespread across all classes and may overtake smoking as a relevant lifestyle risk factor. Gathering information on this, however, is going to be difficult. Medical advances are continuing apace. No longer are stem cell treatments and bionic body parts the stuff of science fiction. It is an unassailable fact that the world is changing faster than the insurance industry. If we are to maintain acceptable risks on our books, we must adapt in order to survive. a
April 2013 • THE ACTUARY www.theactuary.com
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Underwritten annuities Pricing products features@theactuary.com
The UK underwritten annuity market is growing rapidly, challenging actuaries and underwriters to constantly review their pricing decisions. Peter Banthorpe discusses how the underlying drivers will shape the market’s future
Steering through
the rapids
Today’s underwritten annuity market is highly competitive: each life is individually underwritten, and up to 10 companies are likely to be competing for each risk. As a result, we have the paradox of a product that is bespoke but is also now commoditised. This means good-quality pricing and risk management practices are essential and that underwriters and actuaries must work very closely together. As the volume of sales has grown, so has the volume of data. Although that’s good news, the number of deaths for holders of these products is still relatively small and, as with all lines of actuarial work, the skill is interpreting that data in the context of the evolving marketplace. The rapid growth in sales of underwritten annuities, especially in recent years, is well documented. From 2005 to 2010, UK sales of underwritten annuities more than quadrupled, and growth since then has been around 30% per annum [1]. Although it is unlikely to continue to grow at 30% per annum indefinitely, we believe it will continue to grow – and quickly – in the foreseeable future. This is because the whole at-retirement marketplace will continue to grow, and because market developments will mean a larger proportion of retirees will apply for an underwritten annuity product. The market’s rapid expansion has attracted many insurers and reinsurers. Each will most likely have different pricing and underwriting structures, which will select against current players that do not refine their rating structures to the same degree of granularity.
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We have seen this in the market already, with many companies adopting an approach to underwriting these annuities that is reminiscent of how life insurance is rated: relatively detailed mortality loadings, customised for individual conditions and severities. This approach – in theory, at least – will attract more severely impaired lives than the traditional approach in the market of using a relatively small number of mortality tables, each reflecting a group of diseases from which an annuitant might suffer.
Granular rating As you might expect, companies are also seeking to offer enhancements to impairments not currently covered, especially for applicants with minor risk factors. Taken in total, this suggests that to create risk pools by condition, which are stable over time and suitable for analysis, requires considerable insight and adjustment to successive cohorts of business. A granular rating basis for this product will consist of several hundred impairment codes. Commonly, a life will have a number of impairments, and so will also be assigned multiple impairment codes. It would not be unreasonable to expect well over a thousand different combinations of impairments in a
live portfolio. Clearly, analysing such a varied risk pool in detail has its challenges. Even with a huge number of deaths, statistical credibility will exist for only a small number of the very common combinations of impairments. As a result, the market will always need to rely on interpretations of medical studies and data by medics and underwriters to provide rating information. Relating the results of that work accurately to the base mortality cost derived by actuaries is a complex problem. Unlike other life and health insurance marketplaces, the underwritten annuity market has had a standardised application form for all participants for many years [2]. It enables advisers to efficiently obtain multiple illustrations and quotes from providers, speeding product recommendation. The quality of the standardised application’s approach has been much improved by the recently implemented ORIGO 3.7 project. This is the new data exchange protocol for the pension annuity marketplace. It has increased the number of questions being asked, as well as the underwriting details the questions elicit, resulting in higher acceptance rates and a better understanding of each individual risk. That better comprehension of risk should
“Better comprehension of risk should allow sharper pricing. However, how to adjust past data for those changes is a key challenge”
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allow sharper pricing than previously. However, understanding how to adjust past data for those changes is a key challenge.
One product or two? We believe that ‘underwritten’ and ‘nonunderwritten’ annuities will increasingly be seen not as two products but as one, just as there is no such distinction in the life assurance market. Every applicant will undergo the same underwriting process and receive the same product. The only difference will be the size of the mortality loading applied to the price for a healthy life. A single process to access the full range of offerings is efficient for the consumer and the insurer and will be encouraged by a number of factors. For instance, the Association of British Insurers’ code of conduct on retirement choices, issued in March 2012, encourages shopping around by customers at retirement by ensuring that pre-retirees use the open market option (OMO). And, more recently, the Financial Services Authority announced that it was undertaking a “thematic review” [3] of the underwritten annuity market to determine whether older individuals were losing out by not shopping around for the best annuity solution to their retirement income needs. These initiatives will lead to more retirees being exposed to the underwritten annuity market and will undoubtedly reveal more impaired lives. Another factor is anticipated growth in annuities being sold directly through insurers’ websites, aggregators, or ‘direct’ sites sponsored by independent
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financial advisers. This will be a consequence of the UK Retail Distribution Review (RDR), which became effective on 1 January 2013, for many annuity customers may choose to buy directly rather than pay the explicit fee for advice. With over 40% of pension funds being less than £20,000 [4] at retirement, the cost of advice will appear prohibitive in many cases. One market element that might change is the risk of over-disclosure by applicants. As the benefits of impairment-driven enhancements to annuity payouts become better known, potential buyers might exaggerate ailments to obtain the highest possible payouts. Most applicants are remarkably honest when applying for annuities, and insurers have good monitoring processes in place. But this could change and, if it does, it will have to be managed.
Future pricing improvements Mortality trends are driven by a wide range of factors. Thinking specifically about individual diseases, we can look at medical improvements to prevent onset of the disease, earlier detection, improvements in treatment and also better post-treatment care. Of course, those buying an underwritten annuity have already developed a medical problem, so primary prevention, detection and initial treatment of that disease are no longer going to benefit our cohort of lives. And since the lives are older, they will frequently have multiple conditions. Also, people with medical condition X may later also develop medical condition Y. We need to look at mortality improvements
by medical condition, as drivers of mortality improvement that have only a small impact on a population as a whole may have a significant impact on specific conditions. For example, consider a cure for a rare form of cancer: over the whole population, the impact on mortality is tiny, but for the cancer patients the impact is significant. When analysing past data, we need to be aware of factors that may have had a significant effect. The underwritten annuity market is a sizeable and growing portion of the annuity market. Accurate pricing of these products will be critical to its long-term success, and requires a blend of input from actuaries, underwriters and medical practitioners. Analysing past data can provide insights into the impact of disease and the behaviour of consumers, but the ability to interpret these insights in the context of the evolving market is the key challenge for actuaries in this field. a
REFERENCES [1] ABI market size statistics [2] www.commonquotation.co.uk/ [3] www.bbc.co.uk/news/business-21273593 [4] ABI market statistics
PETER BANTHORPE
is head of mortality research at RGA UK
April 2013 • THE ACTUARY www.theactuary.com
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It’s not about us.
,WpV DERXW DOZD\V SXWWLQJ RXU FOLHQWV DQG WKHLU FXVWRPHUV ÞUVW RGA celebrates 40 years of using underwriting and mortality pricing excellence as the foundation to build commercially focused, innovate products and services. From idea to product to success, we are with you every step of the way.
The security of experience. The power of innovation.
ACT.04.13.036_37.indd 36
www.rgare.com
22/03/2013 08:58
Advertisement Feature
RGA Supports Underwritten Annuities
Jason Hurley
FIA
Head of Sales and Marketing RGA UK and Ireland
How long has RGA been involved in the underwritten annuity market? We made the strategic decision to enter the market in summer 2006. We spent the next year working on essentially two parallel projects: one researching mortality and underwriting, the other building a consumer-friendly sales and application process. Our ÞUVW FOLHQW ZHQW OLYH GXULQJ WKH VXPPHU RI
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Have you been successful to date? Yes, and we expect this to continue into the future.
What has driven this success? ,Q D QXWVKHOO ZH SURYLGH WKH VHUYLFHV RXU FOLHQWV QHHG WR successfully grow their underwritten annuity business. 7KHVH VHUYLFHV GLUHFWO\ FRPSOHPHQW WKH FOLHQWVp VNLOOV ,W sounds a bit glib, but this is a product line where there is genuine synergy between insurer and reinsurer. 7R EH PRUH VSHFLÞF RXU XQGHUZULWLQJ PDQXDO FRQWDLQV detailed medical information and customised calculators, and our AURA e-underwriting solution enables a high percentage of applications to be automatically underwritten. In addition, our knowledge of this product DQG WKH PDUNHW SODFH DOORZV XV WR SURYLGH FOLHQWV ZLWK H[SHUW DGYLFH RQ D EURDG UDQJH RI UHODWHG LVVXHV IURP
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pricing and underwriting to selling, the applications, disclosure-checking, and capital management. Finally, we WDNH D SRUWLRQ RI WKH ULVN ZLWK W\SLFDOO\ D PRUH DJJUHVVLYH YLHZ WKDQ LQVXUHUV ZKLFK DOORZV WKHP WR XOWLPDWHO\ ZULWH PRUH EXVLQHVV RU LQFUHDVH WKHLU SURÞWDELOLW\
:KDW ULVNV PLJKW GDPDJH WKH SURÞWDELOLW\ RI the portfolio? ,JQRULQJ LQYHVWPHQW ULVN ZKLFK LV FOHDUO\ PDWHULDO ZLWKLQ the mortality element there are three key factors: base mortality, underwriting loadings, and future mortality LPSURYHPHQWV :LWK WKRURXJK GHWDLOHG UHVHDUFK mortality and underwriting can be assessed accurately. 7KH ELJ XQNQRZQ LV IXWXUH LPSURYHPHQWV LQ ORQJHYLW\ These risks can be mitigated by the use of reinsurance and by hedging across other mortality lines.
We provide the services our clients need to successfully grow their underwritten annuity business. Where do you see the market going from here? The market has been growing at approximately 30% SHU DQQXP DQG ZKLOH WKLV UDWH ZLOO LQHYLWDEO\ VORZ LQ WKH long term, we foresee continued growth in the short WHUP 'ULYHUV RI WKLV JURZWK LQFOXGH EDE\ ERRPHUV ZKR DUH QRZ PRYLQJ TXLFNO\ LQWR UHWLUHPHQW WKH $VVRFLDWLRQ of British Insurers (ABI) and other regulatory codes pushing open-market options, and the continued growth LQ GHÞQHG FRQWULEXWLRQ VFKHPHV 7KH FKDOOHQJH IRU XV as insurers and reinsurers, is the large number of small pension pots. While it is absolutely right to encourage FXVWRPHUV WR VKRS DURXQG LW LV DOVR GLIÞFXOW ZKHQ WKH DPRXQW RI PRQH\ LV VPDOO , EHOLHYH YHU\ VWURQJO\ WKDW insurers and reinsurers should be designing processes to make life as easy as possible for customers and DGYLVHUV , DOVR EHOLHYH WKDW WKH WHFKQRORJ\ LV WKHUH WR allow this without increased risk to the insurers. The product is a genuine win-win-win for customers, DGYLVHUV DQG LQVXUHUV /RQJ PD\ WKLV FRQWLQXH
22/03/2013 08:59
Welcome to The Actuary magazine’s first underwritten annuities forum with leading industry providers, facilitated by Sarah Bennett
To kick off with a simple question, what exactly does a personal underwritten annuity mean? CB: This is literally as simple as it sounds; we scrutinise each person’s lifestyle and medical history and offer those individuals with reduced life expectancy better annuity terms. At Aviva, we believe that all annuities should be fully underwritten to ensure that customers receive the correct level of benefits in retirement.
A NNUITIES
U F T E URE H T
EN
O
R E W D R N I U T T F
squeezing out as much retirement income as possible, making enhanced annuities worth consideration. When it comes to internal sales, some companies simply don’t offer an enhanced annuity product to their maturing pension customers. Also, low awareness of annuity options, smaller pot sizes and a lack of advice makes it easy for many in this group to end up with a poor outcome, including missing out on enhanced terms.
Looking at the growth in sales, are enhanced underwritten annuities becoming the standard?
How can we encourage consumers to shop around?
TG: A personal underwritten annuity means taking into account
will bring about consistency in the communications that pensions companies have with their customers in the run-up to retirement. The objective is to get consumers to make more informed choices about their retirement income and that includes the decision to shop around. CB: The adoption of common quote forms and the recommendations made in the ABI code of conduct on retirement choices are already helping. In addition, although the internet is undoubtedly a useful resource, we believe that all retirees should make sure they have a face-to-face conversation about their retirement needs. VO: Online aggregators are driving awareness, with research tools such as online calculators providing the opportunity for annuitants to shop around and compare incomes instantly. Inertia is also a challenge – it’s still ‘easier’ to accept an offer from an existing provider than to shop around for what may seem a modest difference to many with smaller pots. This has led to calls for all annuities to be underwritten.
factors such as health and lifestyle to determine life expectancy and we believe that, at some point, disclosing this information will become the norm. However, the fact you can be better off through being in poor health is a difficult concept for consumers to understand. Customers need and deserve a conversation to explain the benefits. VO: In the UK, according to the ABI’s quarterly statistics Q3 2012, 80% of retirees annuitise and, in the 12 months to September 2012, over 30% of the funds annuitised were underwritten. TG: Last year, of the 200,000 annuity contacts sold externally, where consumers shop around and buy their annuity from another provider, around 46% were enhanced annuities. On the other hand, of the 220,000 contacts sold internally, where customers buy their annuity straight from their pension provider, less than 5% were enhanced annuities. Estimates are that 50% to 60% of consumers could qualify for an enhanced rate and so there are still a lot of people potentially missing out on extra income.
TG: From 1 March, the new ABI code of conduct on retirement choices
Could customers lose out by shopping around? Why is take-up in the internal market slower? TG: Externally, many consumers get financial advice and it seems that checking for qualification for an enhanced rate is fast becoming part of many advisers’ routine process. As well as severe illnesses, enhanced annuities now cover lifestyle-type health risks, including blood pressure, cholesterol and body mass, which means qualification for extra income is much wider than it used to be. Many financial advisers therefore ask all their customers to complete a lifestyle/ medical questionnaire just to be sure they don’t miss out. Poor market conditions and falling annuity rates have also focused minds on
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CB: Providing additional information around personal health and lifestyle choices doesn’t ever decrease a standard annuity rate – if the conditions are very mild, they may have no effect on the rate; however, if more severe, they can and do increase annuity rates.
What role should financial advisers play? SL: New rules on financial advice that came into force this year put more pressure on intermediaries to justify their costs, and taking a more detailed interest in clients who may be about to commit many tens of thousands of pounds is one way of doing this.
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Underwritten annuities Industry forum features@theactuary.com
CB: Financial advisers play a key role in getting the right annuity for customers. This may increase the cost of service for advisers, but we believe that they need to be able to charge an appropriate amount for the service and anticipate that the cost will reflect this. VO: Independent financial advisers (IFAs) are best placed to guide the customer through the decision process. But, for most IFAs, it may only be financially viable to offer advice on larger pots, where the choice isn’t whether to select an underwritten annuity but whether to buy an annuity at all. The success of aggregators offering non-advised comparison services was well established pre-Retail Distribution Review (RDR) and is expected to continue. This may mean, post-RDR, we could see a steady shift of consumers choosing non-advised routes.
Will we see a trend towards streamlined or detailed underwriting going forward?
Is ‘portalisation’ a good or bad thing?
CB: We don’t believe that asking customers to provide a full set of information, which could increase their income in retirement but never decrease it, can be bad for customers in any way.
AT: ‘Portalisation’ is a bit of a double-edged sword. It will open up underwritten annuities to a wider audience as portals move towards direct-to-client offers, and annuity providers move their propositions onto various consumer comparison websites. However, automating quotes will always restrict the underwriting philosophies to the same data set. There are moves to develop more sophisticated messaging to flag condition areas and/or combinations of risk that would be better reviewed by a human underwriter, but these involve quite significant system development and industry ‘will’. Underwriters would welcome these referrals, especially as the most accurate disclosures come from the clients rather than from their advisers. TG: ‘Portalisation’ is a good thing as it facilitates a speedy and efficient service for intermediaries and enables consumers to complete an online medical form if they want. The person best placed to complete the medical form is the consumer or a medical professional on their behalf, and so all portals should facilitate this and ensure the question set is comparable with the industry common quote request. For more complex medical conditions, a paper form is probably the best option.
How will distribution of underwritten annuities evolve in future? VO: The evolution of online non-advised channels has been rapid. Now we are seeing increasing discounting between non-advised services as competition increases. Of equal importance, we see workplace distribution as critical to overcoming inertia at the point of retirement. This is where, over the long term, we see the value from auto-enrolment driving up the size of retirees’ pension pots, thereby increasing the potential for market growth.
TIMOTHY GOSDEN (TG), STEPHEN LOWE (SL), group head of annuity product external affairs and customer development and marketing, L&G insight director, Just Retirement
SL: About six years ago, key players in the industry worked together to replace medical questionnaires with the more detailed industrystandard common quotation form. Effectively, shallow underwriting was considered obsolete and all of us who knew its limitations were keen to replace it with something better. Its re-emergence is on the basis that streamlining the process by basing decisions on a few broad factors rather than many detailed ones could cut costs. But that’s not great for customers, who may miss out on income.
Will additional layers of underwriting further complicate the purchase of an annuity?
What is wrong with the existing system? CB: The existing system can be confusing. All customers deserve a conversation about their retirement needs, regardless of the size of their pension pot. Such conversations can lead to retirees considering options they would not have thought about. For example, some may assume an ‘enhanced’ annuity from one provider will always pay a higher income than a standard annuity from another. This isn’t always the case. Some competitive standard annuities may offer a higher rate than an ‘enhanced’ personally underwritten quote from a less competitive provider. But some enhanced annuities may include a narrower range of underwriting factors than another standard annuity, which may be priced to include factors such as postcode or smoking.
What would be your idea of Utopia in this market? TG: For everyone to understand the benefits of enhanced annuities and to be willing to complete a lifestyle/medical questionnaire. Also for companies to be forced to offer an enhanced annuity to internal customers, either themselves or through another provider.
What does the future hold? SL: Technology is allowing us to gather more information, more cheaply than ever before and to understand what those numbers mean in finer and finer detail. That will define the marketplace as insurers fight to create the intellectual property that gives them a sustainable competitive advantage. a
ANDREW TULLY (AT), pensions technical director, MGM Advantage
CLIVE BOLTON (CB), managing director of Aviva’s At Retirement business
VANESSA OWEN (VO),
head of annuities and equity release, LV=
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At the back Arts arts@theactuary.com
Sharon Maguire explores the life and work of one of Britain’s greatest 20th-century thinkers Aside from the film Enigma (2001) and the Robert Harris book of the same name, I’d paid scant attention to codebreakers and Bletchley Park. Even though both book and aforementioned film are highly fictionalised accounts of a young mathematician trying to break the Germans’ ‘Enigma’ ciphers during the second world war, there is little reference to a man called Alan Turing. Ironically, his story is one that is equally compelling, mysterious and, above all, sad. With that in mind, I set off for the Science Museum in London to see Codebreaker: Alan Turing’s Life and Legacy – a special exhibition to mark the centenary of his birth. Alan Mathison Turing was born in London on 23 June 1912. His formative years were spent in Dorset at Sherborne School, where he became friends with fellow pupil Christopher Morcom – the first in a line of male companions that Turing would become involved with. Their friendship would inspire Turing’s lifelong endeavours. However, it was cut short by Morcom’s sudden death in February 1930, aged 18, from tuberculosis. Turing went on to win an open scholarship in mathematics to King’s College, Cambridge, matriculating in 1931. He graduated in 1934 with distinction, and was awarded a fellowship in 1935. In 1936, Turing went to Princeton University in the United States, before returning to King’s in 1938. At school, Turing was described as being popular with the boys, but never quite one of them. He was considered an eccentric character, a very reserved sort, although he generally got on well with everybody.
Cryptology comes of age When war broke out, he joined the Government Code and Cypher School at Bletchley Park. Along with another Cambridge mathematician, Gordon Welchman, he designed a new machine, the Bombe; used to decipher Enigma-enciphered messages. It was the work done by Turing and his colleagues during this time that brought cryptology into the modern world. In 1946, he was awarded an OBE for his work there. Set amid the spectacle of astronauts, rockets, and all things scientific, analytic and mechanically artistic, the exhibition is unassuming. A haunting, melancholy face at
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ALAN TURING: B E YO N D T H E ENIGMA
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Unrivalled: Pilot ACE was, in its day, the world’s fastest computer
the bottom of the staircase beckons you upstairs to a large balcony set aside for this pioneering British figure. Despite being best-known as a genius mathematician and codebreaker, the exhibition covers many other facets of Turing’s life. The area is arranged into six themes: Computing before computers; Turing’s war, and his work at Bletchley Park; Pilot ACE – the automatic computing engine; Can machines think?; A matter of life and death; and Programming computers today. According to David Rooney, curator of the exhibition, the star of the show is the Pilot ACE computer, which, in its day, was the world’s fastest computer. It is the most significant Turing artefact in existence and Rooney says it wouldn’t be too fanciful to suggest that Pilot ACE was “Alan Turing’s mind made into metal and glass valves”. Showcased alongside this is a moving set of archives made available by the family of Christopher Morcom. During their time at Sherborne, it was clear that Turing was besotted with Morcom, and the intensity of the relationship was such that Turing would eulogise his feelings of love and loss in a series of heartfelt letters sent to Morcom’s mother in 1930, following her son’s untimely death. It seemed their great bond stemmed from the fact that Morcom was someone who took scientific ideas seriously – he may well also have been the first person to take Turing seriously. During this intense period of grieving, Turing began to contemplate a spiritual existence beyond the body, and he turned his attention to whether machines could learn to think like humans. This idea would stay with him for the rest of his life. On show at the exhibition is a charming short film, charting the creation by Turing’s contemporary, Dr William Grey Walter, of Toby, a mechanical tortoise with an electronic brain that functions like the human mind. His ‘magic-eye’ head is a photo-electric cell that revolves to find the strongest source of light, to which it is then drawn, negotiating obstacles along the way. Turing knew Grey Walter well, and would later visit the Science Museum to see a demonstration of a pair of Grey Walter’s tortoises that reportedly captivated him. In 1948, Turing began working on a groundbreaking new project, developing mathematical
GETTY / SCIENCE & SOCIETY PICTURE LIBRARY
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theories of morphogenesis – the development of form and structure in an organism. But only four years later, following a relationship with a local man, Turing was arrested under antihomosexuality legislation and convicted of gross indecency. Doctors then were experimenting with ways to ‘treat’ homosexuality, and Turing was given the option of either imprisonment or chemical castration. He opted for the latter. During this time, he had continued with his research on morphogenesis, as well as advising the government on secret codebreaking projects. However, his security clearance was suddenly revoked and he was put under surveillance. In 1954, aged just 41, he was found dead as a result of cyanide poisoning. The official verdict was suicide, with the coroner adding “his mind had become unbalanced”. Alan Turing is most widely known for his critical work at Bletchley Park during the Second World War. But he was also a philosopher and computing pioneer who questioned and contemplated the fundamental problems of life itself. His ideas have touched so many aspects of science and technology, including the early days of computer programming, and planted the seeds of artificial intelligence. A great many things we use in our daily life exist as a result of such pioneering work. It is perhaps ironic then that the Science Museum, with all its celebration of the advances of human endeavour, and its gizmos and gadgets laid out for purchase in the museum shop, owes much to the quiet, unassuming man whose mournful image gazes zes down from a quiet corner of the balcony.
“During an intense period of grieving, Turing began to contemplate a spiritual existence beyond the body, and he turned his attention to whether machines could learn to think like humans”
Early artificial intelligence: the light in Toby the Tortoise’s hutch never fails to bring him home
In a letter to the Telegraph, Stephen Hawking and other er scientific luminaries have called on prime minister David Cameron to formally pardon Alan Turing. Despite a posthumous apology in 2009 by then prime minister Gordon Brown, no official pardon was as given. A later appeal was turned down by the coalition on government. With a private members’ bill drafting new ew legislation later this year, it may well be that one of the he most brilliant mathematicians of the modern era can an at last be celebrated without reserve.
Codebreaker – Alan Turing’s life and legacy y runs until Sunday 30 June at the Science Museum, Exhibition Road, London SW7 2DD. Admission is free. ee.
April 2013 • THE ACTUARY www.theactuary.com
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BOOK REVIEW
Managing Fraud Risk – A Practical Guide For Directors And Managers by Steve Giles PUBLISHER John Wiley & Sons ISBN-10: 0470979453 RRP £34.99
“As more actuaries consider themselves risk management professionals and as demand for these skills increases, both students and qualified actuaries will benefit from reading it ” There are two important things you would not guess from the title of this book. First, it is a very good read: not quite The Girl With The Dragon Tattoo, but it flows well and keeps the reader involved. Second, while its core subject is fraud risk, it could easily be used as a more general introduction to risk management. Perhaps because fraud itself can produce some fascinating stories, and certainly because the author is able to draw on examples from a career built on consultancy and teaching, this book provides a very practical perspective on its subject matter. The book comprises 10 chapters, each covering a discrete aspect of fraud – from softer elements, such as behaviour and responsibility, to elements of a risk management framework: controls, prevention and detection. The 10 chapters are linked without too much contrivance to 10 questions in a fraud awareness quiz
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that the author uses when teaching. Actively stopping to consider each question before reading the content of the associated chapter prepares the reader to challenge their own views. It also helps to embed the five key messages at the end of the chapter. The book does deliver some very useful textbook content. There is factual content – largely built around introductions to relevant frameworks that have developed over the years: legislation such as Sarbanes-Oxley and anti-bribery laws, risk management frameworks such as the Committee of Sponsoring Organizations (COSO) ERM model, control frameworks and corporate governance approaches. The treatment of these frameworks in the book is superficial – enough to bring out the essence of their purpose, but leaving the reader to investigate further by following references. This content is complemented by
the author’s personal insights as a practitioner, so the whole book suggests a theoretical framework that underpins the practical advice it contains. The author uses two further teaching aids. The first involves case studies drawn either from personal experience (the author was a key player in the team investigating the Polly Peck collapse) or from the study of other highly public cases. The second quotes insights drawn from a select group of other practitioners whose approach to fraud risk management has quite clearly impressed the author. Rather than using these illustrations to reinforce his own position, the author appears to want to give the reader a broader palette of viewpoints. Considering this book’s usefulness to actuaries, I would point to three things. First, this is as good a risk management primer as any other text. As more actuaries like to consider themselves risk management professionals and as the demand for these skills increases, students and experienced actuaries alike would benefit from reading it. Second, for actuaries who are directors or senior managers of organisations, the book is a useful reminder of the threat of fraud risk, directors’ and officers’ accountability for protecting stakeholders from fraud and the resources available to them to discharge that accountability. Lastly – although it is only a small section – the discussion of statistical techniques used in the detection of fraud will be familiar territory for actuaries whose core role involves the analysis of large volumes of data. A final thought, inspired by the subject matter, relates to the role that actuaries should continue to play in comparing long-term benefits with short-term costs. Fraud prevention is only one example of the conflict between businesses’ increasing exposure to risk and the pressure to reduce the cost of controls, taking resilience out of individual businesses and therefore the economy and society. While practitioners such as Steve Giles continue to improve the effectiveness and efficiency of controls, actuaries do have a role to play in highlighting the financial benefits of maintaining those controls. ● Tony Brooke-Taylor is an audit director, general insurance, at Aviva
MORE ONLINE Latest reviews at www.theactuary.com/ opinion
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At the back Coffee break
HAVE YOU GOT WHAT IT TAKES? Membership of Mensa is open to anyone who can demonstrate an IQ in the top 2% of the population. For information on IQ testing in your area, visit www.mensa.org.uk or call 01902 772771, option 1
puzzles@theactuary.com
Puzzles —
ER BUMP E PRIZ E PUZZL
—
Pick up the pace Mensa puzzle 539
Swallow the dictionary Mensa puzzle 541
A cyclist is on a five-day expedition. On the first day, she covers a quarter of the total distance. The next day she covers a third of what is left. The following day she covers a quarter of the remainder and, on the fourth day, half of the remaining distance. The cyclist now has 16 miles left. How many miles has she travelled?
Move from square to touching square to find the longest possible word.
For a chance to win a £50 Amazon voucher, please email your solution to puzzle 539 to: puzzles@theactuary.com by Tuesday 16 April TERMS AND CONDITIONS The prize will be awarded for the first correct entry drawn at random from those received before the closing date. The winner’s name will be announced in the next edition. Please note, the puzzle editor’s decision is final and no correspondence will be entered into. We reserve the right to feature the winner’s name in The Actuary. Your details will not be passed to any third party in connection with this draw.
Mighty mileometer Mensa puzzle 540 How many miles should it be to Miami on this strange signpost?
Philadelphia 75
Miami ?
♠6534 ♥10 ♦432 ♣AK1096
S
I A S T
N O N I
♠A72 ♥42 E ♦8765 ♣Q832
♠♥AKJ987 ♦KQJ109 ♣54
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Bidding: Game All W N E 1♠ P 2♠ P P P
Cash in hand Mensa puzzle 542 A bank cashier transposed the pounds for pence and vice versa on a cheque, giving the customer far too much money. After the customer had spent £6.23 he still had exactly three times the amount of the original cheque.
Spadework Bridge puzzle 31
N
T C O R R P A
Indianapolis 66
Dallas 42
♠KQJ1098 ♥Q653 W ♦A ♣J7
What is it?
S 4♥
What was the amount of the original cheque?
Justifiably unwilling to defend, you punt 4 hearts. West could bid 4 spades but fancies his chances of beating 4 hearts. West leads K♠ . You ruff with 7♥ and draw 2 rounds of trumps, both defenders following. Plan the play. Whenever the defence wins a trick, they will continue to play spades. Bridge puzzle provided by David Lampert
April 2013 • THE ACTUARY 43 www.theactuary.com
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At the back Coffee break puzzles@theactuary.com
SOLUTIONS FOR FEBRUARY 2013 Recycling factory Mensa puzzle 535
ACTUARY OF THE FUTURE
Shakespearean shake-up Mensa puzzle 536
A factory recycles cups for use in its canteen. Eight used cups are required to make each new cup. If there are 351 used cups, how many cups can possibly be made?
Rearrange the letters of
ANSWER: 50. Carry on using and recycling the cups until you cannot make any more
ANSWER: The Taming of the Shrew
Congratulations to this month’s winner – Christopher Vanston-Rumney of Lloyds Banking Group
‘HER MATE WON THE FIGHTS’
Employer and area of work Redington. How would your best friend describe you?
to give the title of a Shakespearean comedy. What is it?
315
330
2 4 3 ?
7 8 5 6
9 6 7 4
What motivates you? Pride. Everything I output is in some sense an ambassador for me. I want everything of mine to be the best. What would be your personal motto? Whenever
Name five guests you would invite to a dinner party? Jesus Christ, to know how much of
?
what is attributed to him was his own; Leonardo Da Vinci, as someone with an incredible imagination; Alexander the Great, to see what motivates and enables someone to do what he did; Oscar Wilde and William Shakespeare, for sheer linguistic ability.
Pick a number… Mensa puzzle 537
3 8 5 9
Quick-witted, intelligent and imaginative. But nothing so generous if I were in the same room!
you do anything you value, imagine it going wrong, and someone asking you why you didn’t prevent it.
Mind over matter Mensa puzzle 538 355
ALEX WHITE
What number should replace the question mark in the grid?
What’s your most ‘actuarial’ habit? Use of the subjunctive mood.
ANSWER: Three. On each row multiply the two outer numbers to get the centre two.
What should be the value of the fourth column?
Favourite Excel function? If. How do you relax away from the office? Fujian White Crane Kung Fu. I also teach a weekly beginners’ class.
ANSWER: 335. Green is worth 70, jade is worth 85 and navy is worth 90.
Alternative career choice? Mathematician.
Multiple Choice Bridge puzzle 30
Tell us something unusual about yourself I’m an atheist, despite inviting Jesus to dinner.
1
2
3
4
5
♠AQ8
♠10986
♠AJ8
♠ 42
♠J86
♥ KJ74
♥64
♥K97
♥ K10752
♥K64
♦J652
♦AQ865
♦ 10942
♦ A6542
♦ 109865
♣64
♣ J4
♣ K73
♣3
♣ Q2
You are South and the bidding has gone:
N 1♥ 2NT
S 2♦ 3♥
Which of South’s hands above best fits South’s bidding, and what would your first bid be with the other four hands? ANSWER: 1 Not this. You would support hearts straight away. Bid 3♥. 2 Not this. You are not strong enough to bid at the 2-level. Bid 1♠. 3 This one. Much better to respond with a suit bid than making the poor bid of 2NT. If you bid 2NT and Partner has 5 hearts, you will miss a 5-3 fit and the NT contract is played from the wrong hand. 4 Not this. With a weak distributional hand, 7-losers and 5 trumps, bid 4♥. 5 Not this. You could bid 1NT but 2♥ is better, even with only 3 hearts. You may be able to ruff a club, it takes more bidding space away from the opposition and it enables Partner to compete more easily in hearts. Bid 2♥.
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What are your top three things to achieve in your lifetime? To marry and have children; run my own business; leave a mark on my industry.
If you ruled the world, what would you change? I’d make the Armenian Genocide officially recognised everywhere. It’s important to separate facts from politics, and any serious attempt to prevent genocide in the future must start with a study of where it has happened before, and how it comes about. That can only happen if facts are available.
Do you know an actuary destined for greatness? You can nominate an Actuary of the Future by emailing
aotf@theactuary.com
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At the back Student student@theactuary.com
Student Jessica Elkin prepares for the end of the world – well, of her actuary exams, anyway…
THE END IS NIGH It’s nearly here. Doomsday. Armageddon. Ragnarök. The examination period. Back in November, I wrote about developing good study habits. So, presumably, by now you are completely au fait with the material and have a healthy bundle of past exam papers under your belt. You eat nutritious meals and go to bed early. But if you’re not, take a chill pill, because these handy revision tips will help you to excel. Rest assured that they are practised expertly by yours truly. Make a thorough study timetable. Detail every day’s study in painstaking detail. Spend plenty of extra time making it look pretty – this will help you to follow it. Keep plenty of drinks on hand. If you finish one quickly it’s probably because you’re dehydrated and need another. Have lots of breaks. Get another drink and maybe a snack while you’re at it. Maybe see what’s on TV. Now that you’ve started watching something, you should see it through to the end, else you’ll be too distracted by the lack of closure to concentrate. When you sit down to study, make sure you lay everything out neatly – otherwise your mind will be as disordered as your desk. This includes putting tutorial notes in order and filing old bank statements. Is that your phone ringing? No, you imagined it. Maybe just double check. Open up to the start of a chapter. Read, understand. Start to make notes. This is studying! You’re so pleased with yourself. Probably time for a break.
ILLUSTRATION: PHIL WRIGGLESWORTH
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marking the exams to announcing successful candidates. It all makes quite a lot of sense, and also reveals that the pass mark is decided in advance and then adjusted depending on how everyone performs. Someone once said to me that you don’t need to beat the exam, so long as you beat ~60% of the other takers. So, on a completely unrelated topic, how about a riddle before you get down to revision? Just to warm up your brain. You can study later.
It’s all in the eyes
There are 100 people with blue eyes and 100 people with brown eyes who live on an island together. They are all perfectly logical and If that doesn’t work for you ... All right, I’m just as bad at them. The reality is, superbly intelligent people, but none of them is very happy because the island is boring and the most effective way to study is just to do it. Yes, make a schedule, and do have plenty of they all want to study to be actuaries on the breaks. But follow the schedule, and don’t relax mainland. No one knows the colour of his or her own eyes or what the numbers of people the break time. Turn off your internet so as to avoid Youtube. Get one of your scariest friends with each eye colour are. Every night at midnight, a boat stops at the island. Any to loom over you judgmentally every so islanders who have deduced the colour of often. But don’t be hard on yourself. Everyone their own eyes get on the boat and leave the messes up – the secret is to learn that staying up watching, say, Dexter leads not to joy but to island. Everyone can see everyone else at all times, but they cannot otherwise shame and regret. communicate. Everyone on the island knows There is a document, found on the profession’s website, that details how the exam and follows all the rules. The boat also brings along a wise old lady process works, from writing the papers to who, incidentally, has green eyes. Let’s call her the captain of the boat. She comes and looks over the island every night at midnight, and pities all these aspiring actuaries, but goes away with the boat each night. It turns out that the wise old lady can speak, and she says just one thing. From the edge of the island, just as the boat is leaving, she says the following: “I can see someone who has blue eyes.” Who leaves the island, and when? This isn’t a trick question, though it is tricky, and it does have an answer. It’s not one of those lame riddles, where the answer is ‘no one leaves’ or ‘the captain leaves’ or anything like that. It’s a matter of logic. If you’re systematic in your approach, you’ll find it easier to get the answer. A little like revision, perhaps. But you can think about that later. a
April 2013 • THE ACTUARY www.theactuary.com
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Up to £80k Basic, London
This global P+C insurer is looking to expand their ERM team in Bermuda with the appointment of two Actuarial professionals in to their Insurance Risk department. The successful candidate will report into the Head of Insurance Risk and will perform Capital validation and Enterprise Risk management tasks as well as looking at wider issues effecting the risk area including Catastrophe Modelling feeds. The ideal candidate will have UK or US market experience and be well trained in the quantitative aspect of ERM and will have been active in the market for three years or more. James@highfinancegroup.co.uk
A Lloyd’s of London Managing Agent is looking to build it’s actuarial team from grass roots level. The role will assist the Chief Actuary in bringing actuarial processes in house, starting with Reserving. The candidate will have the chance to gain exposure to both Pricing and Capital modelling in following years. The ideal candidate will come from the London market and have a solid Reserving background, they will be strong in person and be able to work autonomously. A fantastic chance to learn directly from a Chief Actuary and the role has unparalleled opportunity to diversify or carve out a niche down the line. James@highfinancegroup.co.uk
£40k - £55k Basic, London
Actuarial Consultant £45k - £65k Basic, London A rare opportunity for a student General Insurance Actuary to join this niche consultancy. With key clients across the Lloyd’s market, you will have the opportunity to develop business if desired. This is the chance to develop yourself in a fast-paced environment and take on early responsibility. First class communication skills and the ability to work on varied projects within tight deadlines is key to success. Chanelle@highfinancegroup.co.uk
Senior Pricing Analyst
This leading UK General Insurer is currently looking to add a talented and commercially minded senior actuarial student to their pricing team. Supporting the Pricing Manager, you will work closely with the Underwriters and play an integral role in the new business and the delivery of competitive pricing. To be successful, you will be part-qualified and looking to progress within a dynamic environment. Chanelle@highfinancegroup.co.uk
Head of Actuarial
JAMES KITT Consultant - GI
CHANELLE ROSENBAUM Consultant - GI
+44 (0) 207 337 8826 william@highfinancegroup.co.uk
+44 (0) 207 337 1202 james@highfinancegroup.co.uk
+44 (0) 207 337 8827 chanelle@highfinancegroup.co.uk
WILLIAM GALLIMORE
+44 (0) 207 337 8800 46
Head of Reserving
www.highfinancegroup.co.uk
THE ACTUARY • April 2013 www.theactuary.com
ACT.04.13.046.indd 46
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High Finance Group
www.theactuaryjobs.com
Breathe new life into your career Life Insurance Roles £80k - £120k Basic, London
With Profits Specialist
A unique team is seeking a consultative and market facing With-Profits Actuary. You will have extensive knowledge of large with-profits funds, previous senior stakeholder management experience and excellent communication skills. This is a fantastic opportunity to advance your career and diversify your knowledge within a innovative industry leading environment. Graeme@highfinancegroup.co.uk £50k - £90k Basic, South
Financial Reporting Manager
An International Life insurer requires a Financial Reporting manager to lead a team of up to 10 actuarial and technical professionals. The successful candidate will manage the production and analysis of actuarial results, ensuring they are compliant with Group and Regulatory requirements. You must be a Qualified Actuary with strong Financial Reporting experience and the ability to manage, develop and co-ordinate a team. The ability to communicate at a senior level is essential. Jack@highfinancegroup.co.uk £55k - £85k Basic, London
Management Consultant
This world leading management consultancy is looking for student or qualified Actuaries with a life insurance background. You will be travelling the world advising some of the biggest life insurers on their strategic output. Personality and ambition is key for this non-traditional role. Sophia@highfinancegroup.co.uk
Tailor Made Consultancy
£80k - £120k Basic, London
A truly fantastic opportunity working with a bespoke Management Consultancy specialising in Group level solutions. They are renowned for operating as an integral facilitator for delivery focused, in-house projects and are currently hiring within their Actuarial Risk division. The company is in its early stages, giving you the opportunity to develop and manage your own key client relationships and carve your own area of specialism. Graeme@highfinancegroup.co.uk
Prophet SME
£50k - £80k Basic, South
A Large UK life insurer is keen to recruit a Prophet Modeller to effectively become their subject-matter expert in all things Prophet. This role will sit directly below the Head of Actuarial Systems and involve liaising with the different business functions and providing technical support on all Prophet Models. Strong Prophet developing and modelling experience is essential and being a Qualified Actuary would be advantageous. Jack@highfinancegroup.co.uk
Life Actuary £55k - £80k Basic, London One of the biggest ratings agencies is looking for two Life Actuaries to join their team. This role will require you to have a sound understanding of technical work and relay the information into reports.This role will give you a unique insight into several life insurers worldwide as well as liaising with prominent figures in these companies. Sophia@highfinancegroup.co.uk
Contract Roles £750 - £1000 a day, London
Reserving Contractor
Leading Lloyd’s syndicate is looking for a qualified Actuary for 3 - 6 months to work closely with the Head of Reserving. The right person should have the ability to role up their sleeves and get involved in the technical work from day one. Start within a month. William@highfinancegroup.co.uk £700 - £1000 a day, London
Pricing Contractor
General Insurer is looking for a qualified Actuary with post qualification experience to lead a pricing division for 12 month maternity cover. The right person should have a strong pricing background and previous managerial experience. Either personal or commercial lines experience will be considered. William@highfinancegroup.co.uk
Moses Modeller
£600 - £850 a day, London
A niche Insurer is looking for a strong MoSes modeller to help modify and improve existing reporting and pricing models. An experience contractor is sought with a track record of MoSes modelling projects and the ability to communicate with various levels of stakeholders. Jack@highfinancegroup.co.uk
Risk Modelling Actuary
£700 - £1000 a day, South East
A Risk-Modelling expert is sought by an International composite Insurer to provide technical expertise and advice in risk modelling. You will be involved in the development and implementation of the Group Risk and Capital Model to be compliant with Solvency II and TAS requirements. A Qualified Actuary is desired but Risk Modelling and S2 experience is more important. Jack@highfinancegroup.co.uk
Pensions & Investments Roles Asset, Liability & Risk Actuary
Up to £75k Basic, London
Take your career forwards with a truly innovative firm, providing clients with cutting edge solutions to analyse their Pension scheme liabilities, assets and risk. The role will include technical modelling, client liaison at a senior level project management. Utilising your detailed knowledge of DB Pension valuations, this is an excellent chance to diversify your skillset gaining direct exposure to investments and risk. Miranda@highfinancegroup.co.uk
GRAEME BRAIDWOOD
SOPHIA CROSSMAN
Consultant - Life
Consultant - Life
+44 (0) 207 337 8820
+44 (0) 207 337 1207
graeme@highfinancegroup.co.uk
sophia@highfinancegroup.co.uk
Pensions Consultant
Up to £80k Basic, Nationwide
Accelerate your career with this highly regarded consultancy. Work across an impressive portfolio of trustee and Corporate clients and advise senior stakeholders on a range of issues including risk and liability management and funding strategy. You will be supported in developing your skills in less traditional areas of work including Business Development, broader Employee Benefits consultancy or technical development. Miranda@highfinancegroup.co.uk JACK SNAPE Consultant - Life Interim & Perm
MIRANDA WILKINSON Consultant - Pensions & Investments
+44 (0) 207 337 8810
+44 (0) 207 337 8815
jack@highfinancegroup.co.uk
miranda@highfinancegroup.co.u k
ACT.04.13.047.indd 47
April 2013 • THE ACTUARY 47 www.theactuary.com
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ACT.04.13.048.indd 48
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London : Chicago : Hong Kong : Singapore : Shanghai
www.theactuaryjobs.com
Senior Actuarial Analyst - London Senior Investment Advisory - London Competitive Package Top Quartile Salary, Bonus and Package This multinational insurance & reinsurance company is looking to enhance their team with a Senior Actuarial Pricing Analyst. The main remit is to provide actuarial pricing support for underwriters across all lines of business, e.g. d&o, e&o, medical malpractice, general casualty, large account property. Strong VBA and SAS skills are required. Relevant experience, especially in commercial property and casualty insurance or reinsurance is expected. The ideal candidate is FCAS or equivalent. Contact phu.ngoc@ipsgroup.co.uk +44 207 481 8686
A global consulting organisation is looking to expand its strategic investment advisory unit which advises a range of institutional investors LQFOXGLQJ GHÂżQHG EHQHÂżW DQG GHÂżQHG FRQWULEXWLRQ SHQVLRQ IXQGV FKDULWLHV DQG HQGRZPHQW IXQGV DQG VRYHUHLJQ ZHDOWK IXQGV 7KH ÂżUP DGYLVHV RQ asset allocation strategies, investment governance and pensions derisking strategies. Candidates will have provided advice to medium or larger pension funds or perhaps worked within a pension fund and have a desire WR PRYH LQWR WKH DGYLVRU\ DUHQD $FWXDULDO RU &)$ TXDOLÂżFDWLRQV DUH essential as well as strong communication and client development skills. Contact anthony.chitnis@ipsgroup.co.uk +44 207 481 8686
Actuarial Controller - London Corporate Pension Risk Specialists - Nationwide Competitive Package Competitive Packages This multinational insurance company is looking to enhance their team with the addition of an Actuarial Controller. The role reports directly into the Head of Reserving. Principal tasks will revolve around the quarterly reserving process. The person will be responsible for the delivery of actuarial output to the stakeholders (e.g. senior management, other departments, Lloydâ&#x20AC;&#x2122;s). 7KH LGHDO FDQGLGDWH ZLOO KDYH VLJQLÂżFDQW H[SHULHQFH LQ PDQDJLQJ ÂżQDQFLDO SURFHVVHV *RRG NQRZOHGJH RI *, 5HVHUYLQJ ZRXOG EH advantageous. This role offers high visibility and requires very good communication skills. Contact phu.ngoc@ipsgroup.co.uk +44 207 481 8686
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April 2013 â&#x20AC;˘ THE ACTUARY 49 www.theactuary.com
22/03/2013 11:47
Appointments
Overseas Opportunities Senior Actuarial Analyst, Consulting
Insurance Advisory, Start-up
THB 200k per month + bonus
Thailand
Dependent on Experience
South East Asia
This global consultancy is offering an opportunity to progress your career in an emerging market. You will be involved in multi-faceted projects, co-ordinating with teams across Asia, travelling, dealing with clients, gaining excellent internal and external training with full support towards your studies. You will be a nearly qualified Actuary with experience of financial reporting, capital management, solvency and ideally knowledge of local regulations. Fluency in Thai is essential.
A global consultancy presents an exceptional opportunity to a commercially astute Actuary with an Insurance Consulting background to establish their business in Indonesia. You will be working with the Senior Management developing new and existing clients in South East Asia. To be considered you will be a qualified Life Actuary with International experience ideally in Asia, looking to work on multinational projects and travel extensively as part of your role.
Health Actuary
Actuarial Systems Manager
Up to SGD 180k + bonus
Singapore
A newly created role in the Singapore office of this world renowned insurer. They are searching for an actuary with extensive group and health insurance experience to develop this market. You will work with Senior management to design and create products in this space. If you are innovative, are looking to influence and generate new business opportunities in Asia please apply today.
Head of Financial & Capital Management Up to MYR 25k per month + benefits
Up to HKD 1m Package
Hong Kong
Looking for a career where you will be respected as an individual and valued for the contributions you make? Reporting directly to the line manager, you will develop, maintain and provide technical support across global and country led projects, respond to new initiatives, deliver guidelines and enhance global processes as this international firm looks to advance its market share in Asia.
Assistant Manager – Actuarial Modelling Team Malaysia
Global insurer with a strong presence in Asia seeks a Head of Financial and Capital Management. You will have a wide range of actuarial skills (ideally including Prophet) and be able to galvanise the team to achieve key objectives in the reporting and analysis of IFRS, EEV, Solvency II, Risk-Based Capital results. This role will suit a nearly / newly qualified actuary looking to take a step up.
Clare Bethell, Senior Consultant - International Collette Edwards, Consultant - Asia
Up to HKD 800k Package
Hong Kong
Global financial services firm seeks a nearly qualified actuary with strong commercial acumen and extensive experience in Prophet to join their rapidly growing Corporate Actuarial function in Hong Kong. You will work across valuations (EV/MCEV), Financial reporting (IFRS), ALM, capital management and model development and maintenance.
clare@highfinancegroup.co.uk collette@highfinancegroup.co.uk
+44 (0) 207 337 8829 +44 (0) 207 220 0174
Actuarial, CAT Modelling & Risk Management The Actuarial division at Eames Consulting Group LLP is comprised of dedicated and experienced Consultants who are industry specialists and who appreciate the importance of understanding the market from a technical and commercial perspective. It is this level of knowledge and our consultative approach that differentiates us from our competitors within the market. We listen to our clients and candidates ensuring that we build a long term relationship based on mutual understanding and trust. The individuals within this division focus on the mid to senior level actuarial market with designated consultants specialising in the Non Life, Life & Health, and Pensions & Investments sectors. We are currently working on a number of retained and exclusive mandates as well as various contingent assignments. For further information regarding those opportunities mentioned here, or for a more informal discussion about your career aspirations, please do not hesitate to contact us. Insurance Solutions Asset Manager London
Senior M&A Manager Insurer London
Head of CAT International Carrier London
Pensions Consultant Consultancy Home Counties
Client Relationship Manager Asset Manager London
Director of Risk Consultancy London
Contact Rob Bulpitt
Rupert Rickard
Office Number
For current opportunities please visit
Head of Actuarial, Insurance & Pensions Risk Management 020 7092 3237
+44 (0)20 7092 3200
Manager of Actuarial Non-Life and Insurance Risk Management 020 7092 3219
www.eamesconsulting.com
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THE ACTUARY • April 2013 www.theactuary.com
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www.theactuaryjobs.com Actuarial Alternatives
Non-Life Capital Modelling Actuary Up to £150K + Bonus + BeneÀts
London
London Market Pricing Actuary £90- £140K Basic Salary + Bonus + BeneÀts
London
Leading global broker seeking an individual with capital modelling experience to join their diverse and dynamic team. The role will involve cutting edge work in a strategic, commercial and corporate context. You will be involved in a tremendous variety of assignments, helping clients improve the performance of their business through capital modelling; a commercial outlook and ability to devise workable and innovative solutions is essential. Extensive experience with at least one capital modelling package, as well as the implementation of a capital model in a hands-on business environment is required.In return for this experience, you will have the opportunity to become an integral part of a growing team with a fantastic career path ahead of you. Excellent communication skills; and experience of people, project and client management are a pre-requisite for this role.
Leading global broker seeking experienced London Market Pricing Actuary – large commercial risks.
Ref: 19924
Ref: 19923
ALM Structuring Role London £60-100K Basic Salary + Market Leading Bonus Package
Senior Pensions & Investment Actuaries UK wide £100-200K Basic Salary + Long Term Incentive Packages
Interesting role within team that structures, markets and implements ALM solutions for primarily European Institutional clients in the Insurance and Pensions sector.
Our client is an award winning multinational pensions and Investment consultancy, experiencing their record year for revenue in the UK DB Pensions sector. Given their track record of success, the organisation is now seeking to continue to invest in successful business lines, as well as develop into broader related sectors.
The role will involve the structuring of tailored derivatives and asset solutions for clients, with the opportunity to develop skills in the marketing and implementation of these solutions.
The role will include – but will not be limited too; • Development of pricing models. This includes research into pricing theory and benchmark data. • Large amounts of contact with internal and external stakeholders clients, brokers and external advisors. • Support other members of the actuarial team on pricing issues. This opportunity is suitable for an individual seeking to work in a “non-traditional” role, looking to open up a variety of different career paths.
Advice provided assimilates regulatory, actuarial and accounting knowledge, derivatives and capital market expertise and advanced stochastic modelling.
If you are an individual with an extensive client network seeking a progressive and growing environment, or an individual involved in leading and developing of new service lines within the DB and DC Pensions and Investments sphere, this could represent an interesting opportunity.
Ref: 19762
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To learn more about any of these roles / a conÀdential career discussion please contact Ben Whalley – Head of Actuarial. Telephone: 0207 332 5883 Mobile: 07887 457 655 Email: actuarial@mansionhouse.co.uk Website: http://www.mansionhouse.co.uk • THE ACTUARY London ofÀce: Mansion House Actuarial, Pellipar House, 9 Cloak Lane, London, EC4R 2RUApril 2013 www.theactuary.com
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Appointments
We can help you
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THE ACTUARY â&#x20AC;¢ April 2013 www.theactuary.com
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www.theactuaryjobs.com Research and Knowledge Team - Edinburgh With over 22,000 members around the world, the Institute and Faculty of Actuaries is committed to playing a proactive role in all sectors our members work in. A new Research and Knowledge Team will be established in Edinburgh to support this objective, bringing new and exciting challenges to the remit of this area. The key purpose of this team will be to provide a central point for research and thought leadership activities for the Institute and Faculty of Actuaries globally. This includes the management and dissemination of research through events, publications, the media and websites to name a few.
Research Programme Manager up to £42,000 + benefits
Research Relationship Manager up to £42,000 + benefits
You will be responsible for managing and driving the programme of research across the Profession and in line with the corporate plan. This will include, amongst others, management of knowledge transfer initiatives to ensure maximum value is obtained from all research initiatives, while meeting member needs.
You will build and maintain external relationships to maximise the opportunities for the Profession’s research agenda. Your responsibilities will be to liaise with and build strong relationships with universities, funding councils, trade bodies, think tanks and other third parties engaged in research.
Research Project Manager x 2 up to £32,000 + benefits You will be responsible for the day to day management of the research projects. You will also have responsibility for project management of journal production and of the research content of thought leadership events. To apply, or discuss these opportunities further, please contact Lindsey Boxall at lindsey.boxall@edenscott.com or 0131 550 1122. Closing date for applications is Friday 12 April 2013. Eden Scott Ltd is working in partnership with The Institute and Faculty of Actuaries for these roles. Any CVs sent directly will be forwarded to Eden Scott Ltd for review
Actuarial Business Leader PwC Bermuda are looking for an exceptional candidate to lead our Actuarial and Insurance Management Solutions team, providing actuarial services to our property and casualty (re)insurance clients. The successful candidate will continue to develop and grow the actuarial consulting practice, while also supporting our market leading audit practice. This Director - level position would suit an ambitious, goal - oriented Actuary, looking for challenges in an exciting and dynamic market. To fulfill this role, the Director will: • Lead sales by driving new business proposals and extending the range of services currently provided to our (re)insurance clients, with an emphasis on establishing long-term relationships. • Assist with the expansion of our existing client base by matching intellectual capital generated within the PwC network to the issues faced by (re)insurance groups based in or with significant operation in Bermuda. • Serve as lead consultant on new and existing clients, partnering with other PwC offices and lines of business to deliver high quality, client-focused solutions. • Provide audit support services to a range of (re)insurers, from SEC registrants to single parent captives. • Maintain knowledge of industry, market, and competition; anticipate external market trends, internal and client needs. • Lead the business unit, including setting and delivering against financial and operational objectives. • Act as a mentor and coach, motivating a team to deliver a high standard of work within given timeframes and budgets, thereby creating an environment that encourages both individual and team accomplishments.
The successful candidate will have the following skills and experience: • Credentialed Fellow of the Institute of Actuaries or Casualty Actuarial Society (or equivalent) with at least 12 – 15 years practicing experience. • Proven business development skills and excellence in building and maintaining senior client relationships. • Demonstrated track record delivering high quality consulting and actuarial audit support work to clients, leading to maintenance and growth of a client portfolio. • Knowledge of, experience in and access to a broad range of actuarial consulting services. • Understanding and, ideally, recent experience of US GAAP for (re)insurance companies. • Experience with leading teams and in people management, including coaching and developing staff. • Excellent verbal and written communication skills in English. • Reserving or pricing experience across a wide range of lines of business, with property catastrophe experience a significant advantage. • Experience with the Bermuda regulatory market, or with similar regulators in other jurisdictions would be an asset.
Please forward a detailed CV in confidence to: Johanna Elder, PricewaterhouseCoopers Human Capital Consulting Ltd Email: johanna.elder@bm.pwc.com Tel: +1441 298 9703 April 2013 • THE ACTUARY 53 www.theactuary.com
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THE ACTUARY â&#x20AC;˘ April 2013 www.theactuary.com
ACT.04.13.054.indd 54
ZZZ SXUHVHDUFK FRP
22/03/2013 09:14
www.theactuaryjobs.com
STARBERMUDAFUTURES
ACTUARIAL DIRECTOR
LEAD THE DIALOGUE
NON-LIFE BERMUDA BMD $ excellent + bonus + benefits
NON-LIFE BERMUDA BMD $ excellent + bonus + benefits
This represents a great opportunity for a non-life actuary with a proven history of business generation and of leading a team/practice to make their mark in Bermuda. Providing world class actuarial services to property and casualty (re)insurance clients you will act as a mentor and coach, motivating a team to deliver a high standard of work within given timeframes and budgets. Experience of working collaboratively with teams in other countries is desirable.
Global non-life consultancy is seeking a qualified actuary to manage the technical delivery and reporting of high profile projects. You will lead the dialogue with client project sponsors and fully manage expectations of delivery, content, timescales and cost as well as contribute significantly to major consultancy projects as a subject matter expert.
Ref: Star1449
Ref: Star1322
Star Actuarial is far and away the best recruitment consultancy I have ever used. You have been proactive and imaginative, bringing me lots of opportunities including those in areas that I hadn't previously thought of exploring. You take care over the details… I appreciated the high standards of customer care… and would recommend your services unreservedly.
HEAD OF INSURANCE RISK
MOVE TO RISK
INVESTMENT BERMUDA BMD $ excellent + bonus + benefits
LIFE/NON-LIFE BERMUDA BMD $ excellent + bonus + benefits
A fantastic opportunity for a qualified actuary to take a leading role in insurance risk management for a worldwide insurer. You will work directly with the local ERM team and drive strategic decision making. In this exciting and challenging role, you will have the chance to design and execute processes to identify, quantify, monitor and report on all aspects of insurance risk as well as steer the production of the Economic Capital Model (ECM).
Our client is offering an incredible opportunity to a part qualified life or non-life actuary with strong qualitative and quantitative skills to join its ERM team. Working as part of the Bermuda risk management and actuarial team, you will, in collaboration with multi-functional international groups, identify risks inherent in the business, collate key management information, and calculate risk exposure metrics to monitor and report on the Company’s risk profile.
Ref: Star1434
Ref: Star1435
Star Actuarial Futures Ltd is an employment agency and employment business
FIA 2001
www.staractuarial.com
Louis Manson
Antony Buxton FIA
Lance Randles MBA
MANAGING DIRECTOR
MANAGING DIRECTOR
ASSOCIATE DIRECTOR
M +44 7595 023 983 E louis.manson@staractuarial.com
ACT.04.13.055.indd 55
M +44 7766 414 560 E antony.buxton@staractuarial.com
M +44 7889 007 861 E lance.randles@staractuarial.com
Paul Cook SENIOR CONSULTANT April 2013 • THE ACTUARY 55 www.theactuary.com M +44 7740 285 139 E paul.cook@staractuarial.com
22/03/2013 10:09
Appointments
NON-LIFEFUTURES CUTTING EDGE TECHNIQUES SOUTH EAST
NON-LIFE up to £110k + bonus + benefits
LONDON
NON-LIFE up to £100k + bonus + benefits
Lead the development of the pricing and reserving processes for an innovative company with great ambition. An excellent opportunity for an outstanding candidate to develop your technical and softer skills. Ref: Star1312
Our client seeks a technically proficient part-qualified or qualified actuary to generate innovative solutions to complex risks for a variety of clients, including banks and insurers. Capital modelling experience desirable. Ref: Star1186
FROM THE GROUND UP
COMMERCIAL LINES PRICING, RESERVING & CAPITAL
LONDON
NON-LIFE £ excellent + bonus + benefits
LONDON
up to £80k + bonus + benefits
Our client is seeking a talented capital modelling actuary with strong communication skills to take up a high profile and challenging role with the opportunity to innovate and develop new models and processes. Ref: Star1376
A role offering great variety within the commercial lines business of a worldwide insurer. You will build technical pricing models, perform pricing and reserving analysis and review ICA results and outputs. Ref: Star1217
HELICOPTER VIEW
MOTOR LINES RESERVING MANAGER
SOUTH EAST
NON-LIFE up to £80k + bonus + benefits
SOUTH EAST
NON-LIFE
up to £80k + bonus + benefits
Our client has a new and challenging role in its actuarial audit function offering an unparalleled view of a market leading insurance company across multiple departments and business areas. Ref: Star1442
Leading insurer seeks a non-life actuarial expert to lead the reserving process for its motor business. The successful candidate will have the opportunity to get involved in a wide range of special projects. Ref: Star1263
BEYOND TRADITIONAL ACTUARIAL BOUNDARIES
RESERVING & CAPITAL ON THE COAST
LONDON
NON-LIFE
£ excellent + bonus + benefits
If you have a passion for applying your skills in projects reaching beyond traditional actuarial boundaries, then this role with a global consultancy will offer you just that. Projects include M&A, Solvency II & Business Analytics. Ref: Star1003
NON-LIFE
CAPITAL MODELLING ANALYST
Up to £60k + bonus + benefits
MIDLANDS
SOUTH COAST
NON-LIFE
up to £60k + bonus + benefits
Growing insurance business seeks actuaries to provide cutting-edge advice regarding its capital management and to take the lead in the development of new reserving systems Ref: Star1438 & Star1439 and procedures.
LONDON MARKET PRICING LONDON
NON-LIFE circa £50k + bonus + benefits
Contribute to all aspects of capital modelling whilst building your technical and soft skills within a high-performing team. Join a company that offers unparalleled personal Ref: Star1401 development opportunities.
Our client is seeking a talented, motivated part-qualified non-life actuary to take up a key role within its pricing team. Candidates from a reserving or capital modelling background will be considered. Ref: Star1394
ONCE IN A LIFETIME OPPORTUNITY
COMMERCIAL LINES PRICING CONTRACTOR
LONDON
NON-LIFE £ excellent basic + upside
A truly unique opportunity for a part-qualified actuary with reinsurance experience to join a dynamic organisation on an upward trajectory and work with some of the sharpest minds in the industry. Ref: Star1389
Louis Manson 56
RISK CONSULTING
MANAGING DIRECTOR THE ACTUARY • April 2013 www.theactuary.com M +44 7595 023 983 E louis.manson@staractuarial.com
ACT.04.13.056_057.indd 56
LONDON
NON-LIFE
up to £1,000 per day
Seeking an experienced commercial lines pricing contractor for 4-6 months. This London based role with an immediate start requires regular liaison with underwriting and ideally someone with management experience. Ref: Star1450
Antony Buxton FIA
Joanne Young
Irene Paterson FFA
MANAGING DIRECTOR
OPERATIONS DIRECTOR
PARTNER
M +44 7766 414 560 E antony.buxton@staractuarial.com
M +44 7739 345 946 E joanne.young@staractuarial.com
M +44 7545 424 206 E irene.paterson@staractuarial.com
22/03/2013 10:10
www.theactuaryjobs.com
LIFE PENSIONS INVESTMENTFUTURES HEAD OF INVESTMENT CONSULTING
INVESTMENT ACTUARY
LONDON
LONDON
£ excellent + bonus + benefits
Our client seeks a high calibre investment consultant with the knowledge and skills to take its successful practice to the next level. You will develop new and existing clients and grow the team and its capabilities. Ref: Star1368
Due to business growth our client seeks an investment actuary with a strong technical and modelling background. Good communication skills are required to present at client meetings. Banking experience desirable. Ref: Star1441
START-UP LIFE BUSINESS
HEAD OF ACTUARIAL MODELLING
LIFE
LOCATION UPON APPLICATION
up to £130k + benefits
BRISTOL
LIFE
up to £115k + bonus + benefits
Start-up life business is seeking a high calibre actuary to provide strategic support in the development of its business model. The successful candidate will play a key role in establishing pricing processes. Ref: Star1196
We have a diverse and exciting opportunity for a qualified actuary to lead, manage, motivate and develop an actuarial modelling team, creating and maintaining a strategic modelling platform to meet business needs. Ref: Star1433
REGIONAL NEW BUSINESS PROPOSITION
ASSET MANAGER
NATIONWIDE
PENSIONS
£ excellent + bonus + benefits
Looking for a new challenge? Our client is seeking commercial pensions actuaries with excellent business development skills to set up new offices under an established brand.
LONDON
INVESTMENT £ excellent + bonus + benefits
Leading asset management company has a unique opportunity for an actuary with ALM experience to join its cutting-edge team.
Ref: Star1348
CLIENT RELATIONS LONDON
INVESTMENT up to £100k + bonus + benefits
Ref: Star1440
ACTUARIAL REPORTING MANAGER BRISTOL
LIFE
up to £80k + bonus + benefits
Take this opportunity to develop cutting-edge pension scheme solutions. Specialist risk management consultancy seeks a driven candidate to join its growing team to lead and manage client relationships. Ref: Star1412
A unique and challenging role which sits within the Financial Reporting team. This role would suit someone who has highly developed technical capability and proven leadership and communication skills. Ref: Star1451
STRATEGIC CORPORATE ADVISOR
MODELLING EXPERTISE
BIRMINGHAM
PENSIONS
up to £75k + bonus + benefits
LIFE up to £65k + bonus + benefits
BRISTOL
Seeking a part-qualified or qualified actuary with excellent technical skills and a focused commercial attitude to provide strategic advice to corporates on all aspects of designing, operating & financing pension schemes. Ref: Star1410
Seeking a part qualified or qualified actuarial modeller to make recommendations for the specification, building, testing and implementation of systems with appropriate performance, controls and documentation. Ref: Star1432
REGULATORY REPORTING ACTUARY
ANALYSE LIFE BY THE SEA
SOUTH EAST
LIFE
up to £65k + bonus + benefits
A fantastic opportunity for a high calibre actuary to take the lead on regulatory reporting for its international business, establishing relationships with branch Appointed Actuaries and Regional Compliance Officers. Ref: Star1431
SOUTH COAST
LIFE up to £50k + bonus + benefits
If you are a part qualified actuary with a good understanding of the changing life insurance market and a thirst for providing technical expertise and advice in a specialist actuarial area, Ref: Star1445 then this is the perfect role for you.
Star Actuarial Futures Ltd is an employment agency and employment business
£ excellent + bonus + benefits
INVESTMENT
www.staractuarial.com
Lance Randles MBA
Paul Cook
Clare Roberts
ASSOCIATE DIRECTOR
SENIOR CONSULTANT
SENIOR CONSULTANT
M +44 7889 007 861 E lance.randles@staractuarial.com
ACT.04.13.056_057.indd 57
M +44 7740 285 139 E paul.cook@staractuarial.com
M +44 7714 490 922 E clare.roberts@staractuarial.com
Peter Baker SENIOR CONSULTANT April 2013 • THE ACTUARY 57 www.theactuary.com M +44 7860 602 586 E peter.baker@staractuarial.com
22/03/2013 10:10
Appointments
Fresh Thinking For the latest news and views, visit theactuary.com. With high quality content, useful tools and easy navigation, you will find a wealth of actuarial resources at your fingertips. Register for weekly email newsletters Read the latest features and opinion and add your comments Read about actuaries stepping into new frontiers Browse theactuaryjobs.com, the official jobs board of the UK actuarial profession
Visit www.theactuary.com 58
THE ACTUARY • April 2013 www.theactuary.com
ACT.04.13.058.indd 58
22/03/2013 09:16
www.theactuaryjobs.com Actuary and Senior Actuarial Student The Insurance and Pensions Authority is a Statutory Board responsible for regulating the Isle of Man’s insurance and pensions sector, a key contributor to the economic success and pro¿le of the Island. Over the next three years the Authority intends to signi¿cantly update its regulatory framework for the insurance sector, taking into account the revised standards set out by the International Association of Insurance Supervisors in its Insurance Core Principles. This work will also have regard to developments in relation to the EU’s Solvency II framework. This gives rise to the opportunity for two full time actuarial professionals to join the Authority’s team, reporting to the Authority’s Senior Actuary, to assist with the development and implementation of this framework, and ongoing supervision under the framework once it is in place. These roles will be varied and challenging and provide an excellent opportunity to broaden knowledge, acquire new skills and contribute to the further development of the Island’s insurance sector. Providing exciting opportunities for career development, salary will be commensurate with experience. Experience and attributes required: Responsibilities include: • Assisting with developing and drafting a revised regulatory • Personable, outgoing and discreet. • Relevant life assurance industry experience, particularly framework in the areas of the economic balance sheet, riskbased capital (standard formula and internal model in the areas of risk-based capital, ERM and Solvency II. Non-life experience would also be bene¿cial. approaches) and enterprise risk management. • Consulting with regulated entities on the development and • Ideally, the Actuary should be a recently quali¿ed actuary, and the Senior Actuarial Student should be close implementation of the framework. to quali¿cation. • Assisting in the design and review of quantitative impact • Excellent report writing and communication skills. studies. • Assisting with the review and approval of applications to • Well organised and able to deal with complex and use internal models. sensitive issues. • Able and willing to work in small multidisciplinary teams. • Input to the ongoing supervision of regulated entities, under the current and revised frameworks. This position is not a Civil Service appointment. Please apply by 30th April 2013, using the Authority’s standard application form available on our website at www.ipa.im/careers.xml and marked “Staf¿ng – in con¿dence” to Senior Actuary, Insurance and Pensions Authority, Ground Floor, Finch Hill House, Bucks Road, Douglas, Isle of Man, IM1 3DF or email neil.taverner@ipa.gov.im, from whom further information can be obtained.
Senior Client Relationship Executive Asset Management, London £40k to £60k + Bonus & Benefits
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This is a unique opportunity to work for a leading asset management firm, where you’ll be able to apply your excellent communication skills. Candidates will need to have a pensions or investment consultancy background, and those who have given up the actuarial exams or have taken the CFA exams will be considered. Principal accountabilities in this role include: • Provide an exceptional level of relationship and sales support service to internal and external clients, focusing on a portfolio of complex clients who would typically invest in Active Fixed Income and LDI strategies. • Understand and be able to discuss derivatives products and strategic modelling with key clients. • Own and co-ordinate the successful resolution of client enquiries from start to finish, liaising and utilising expertise from around the business in order to meet deadlines. • Provide high level technical support, demonstrating an understanding of a clients’ decision making process and long term objectives. Be able to answer complex queries as well as identify business opportunities and threats. • Demonstrate a high level of technical knowledge. Develop and maintain knowledge of the current investment market, economic issues, enabling you to discuss solutions with clients and consultants.
Parvinder Matharu Newton Recruitment t +44(0)1689 862937 e parvinder@newtonrecruitment.com w www.newtonrecruitment.com Contact
April 2013 • THE ACTUARY 59 www.theactuary.com
ACT.04.13.059.indd 59
22/03/2013 09:18
United Kingdom
General Insurance Head of Pricing & Reserving London (City) Paul Francis £150,000 + Bonus + Benefits A hugely innovative Lloyd’s syndicate are looking to hire a qualified Actuary to lead their Reserving & Pricing function. Reporting to the board, you will be responsible for overseeing the work of a team of part-qualified and recently qualified actuaries. You will also carry out complex pricing projects and work closely with all underwriting teams across the business. Requires excellent communication skills.
Head of Economic Capital South East Sarah Robins £150,000 + Bonus + Benefits I am recruiting for a Head of Capital position with a leading retail insurer. You will be the business lead for the capital function, ensuring the development, maintenance and governance of the capital model. It is desirable that you are a qualified Actuary with significant capital experience. This is a high profile role in a fast moving environment.
Reinsurance Actuary London (City) Rick Davis £100,000 + Bonus + Benefits A leading London Market insurance business requires an experienced GI Actuary to lead their Reinsurance actuarial team. You will manage a team of analysts and provide reserving, pricing and capital services to a highly successful team of underwriters. Experience in reinsurance is required along with the ability to manage a team of student actuaries and present at board level.
Pricing Actuary London (City) Rick Davis £75,000 + Bonus + Benefits A unique London Market pricing opportunity within a long-established Lloyd’s Syndicate. Working with the Group Head of Pricing, you will assist in developing new pricing techniques across all Reinsurance and direct insurance lines of business. You will also complete case pricing and rate review projects and manage a junior team member. Previous pricing experience is essential.
Pricing Manager Sarah Robins
South East £65,000 + Bonus + Benefits
London Market Reserving Analyst London Ben Pitt £55,000 + Bonus + Benefits
I am recruiting for a Pricing Manger for a leading insurer. You must demonstrate strong technical pricing skills preferably in the motor arena. This would suit someone looking to enhance their career in a fast moving & highly supportive organisation. You do not need to be an Actuary.
A leading London Market insurance business is looking for a part qualified Actuary to join their growing reserving team. You will be responsible for the continued development of the more junior team members as well as furthering your own skill set with excellent hands on training. No prior reserving experience is necessary.
London Actuarial Analyst - Capital Modelling £45,000 - £65,000 + Bonus + Benefits Richard Howard
Reinsurance Pricing - Actuarial Analyst London Richard Howard £35,000 - £55,000 + Bonus + Benefits
Exclusive mandate to recruit for this leading Lloyd’s syndicate and managing agent, within their capital modelling team. Reporting to the capital modelling manager you will be responsible for statistical analysis on capital modelling projects. They are looking for experience within capital modelling and ideally Remetrica and/or VBA.
We are working on behalf of a global speciality reinsurer to help them recruit an actuarial analyst to join their established team in London. They are looking for an excellent understanding of insurance products and markets, a numerate qualification and experience of working within insurance or reinsurance modelling.
Contracts - GI Senior Reserving Actuary London Stewart Cherry £800 - £1000/day - 3-6 Months A Lloyd’s syndicate is looking for an experienced qualified Reserving Actuary 3-6 month contract.
Igloo Actuary London Stewart Cherry £900/day - 6 Months A Lloyd’s syndicate is looking for a Capital Modelling Actuary, ideally with Igloo for a 6 month contract.
Senior Pricing London Stewart Cherry £800/day - 6 Months A Senior Pricing Actuary with London Market experience is required.
ReMetrica Modeller London (City) Rob Bentham Up to £800/day - 6 Months A Lloyd’s syndicate is looking for a ReMetrica Modeller to work on the next phase of their Solvency II programme.
Company Actuary London, South East Stewart Cherry £700/day - 4-6 Months A leading GI Retail business has a requirement for nearly/newly qualified Actuary for a 4-6 month contract.
Pricing Actuary London (City) Rob Bentham Up to £700/day - 6 Months A Lloyd’s syndicate is looking for an experienced Pricing Actuary to join their team for an initial 6 month role.
General Insurance - UK
Contracts - GI - UK
General Contact Details
Paul Francis Rick Davis Sarah Robins Ben Pitt Richard Howard
Rob Bentham Stewart Cherry
actuary@ojassociates.com
Web
www.ojassociates.com
0207 649 9469 0207 649 9353 0207 310 8552 0207 310 8719 0207 649 9356
0207 649 9351 0207 310 8651
Please contact one of the team for further information on any of the opportunities above.
Ben ACT.04.13.060_61.indd 60
22/03/2013 09:00
United Kingdom
Life Insurance Head of Actuarial Modelling South West Mehwish Raza £110,000 + Bonus + Benefits Senior Appointment: A high profile life insurance business is recruiting for a key role. The position is for a H/O Actuarial Modelling, managing a large team and providing strategic direction. The ideal candidate will have experience in a similar role with strong team building capability and excellent communication skills. Experience in Prophet or MoSes is required although the role is more managerial than hands on.
Senior Systems Actuary South East David Parker £100,000 + Bonus + Benefits Are you a senior Life Actuary with strong systems development and coding experience? I’m currently working with two businesses that are looking to recruit both technically strong and commercial specialists for in house projects, lead management roles and consulting opportunities. Prophet, MoSes or Algo experience is essential.
Research & Development Actuary London Clare Nash £95,000 + Market Leading Package Are you a pricing Actuary potentially considering new options? I am recruiting for an unusual appointment in the City. This is a varied role within a growing team. My client seeks a qualified individual (ideally with PMI experience) to lead a variety of different projects. The role requires the individual to have an innovative flair to their profile as well as the propensity to acquire new skills.
Risk Actuary London Clare Nash £90,000 + Market Leading Package A global player seeks a qualified actuary to join a successful team. You will enjoy working in a multi-disciplinary team and dealing with senior stakeholders on an international basis. The ideal candidate will have a varied background in terms of technical ability and will excel working in a “project” based environment.
Qualified Reporting Manager South David Parker Up to £80,000 + Bonus + Benefits A leading UK insurer requires a qualified actuary to take ownership of one of the reporting teams. Working alongside the Head of, you will have developed management/coaching experience previously and have a good understanding of current regulatory and capital reporting. Strong communication skills and technical capabilities are a must.
Capital Projects Actuary London (City) Mehwish Raza Up to £65,000 + Bonus + Benefits A prestigious insurance business is seeking a capital projects Actuary to join their international team. Candidates from a range of backgrounds will be considered including skills such as SII, Reporting, ICA, GLM, SAS, Data Warehousing and Modelling. If you are looking for a new challenge, this would be a great opportunity to explore.
Risk & Capital Modelling Rachel Kelly
Pricing Actuary Rachel Kelly
South East £70,000 + Bonus + Benefits
A well-known organisation requires nearly/newly qualified Actuaries to work on a variety of capital and risk modelling projects. The successful candidate will be technically strong with good communication skills and previous risk experience. Excellent career progression on offer.
South East Up to £70,000 + Bonus + Benefits
My client seeks a newly qualified actuary to join their successful pricing team. You will work on a range of pricing and experience analysis activities and enjoy the opportunity to influence key commercial decisions. Previous pricing experience is an advantage but not a pre-requisite.
Contracts - Life Senior Prophet Modeller - ALS North Kaylash Kukadia £800/day - £1300/day - 6-12 Months Senior Prophet ALS Modeller with significant experience of Valuations, Stresses and Projections.
MoSes Modeller London Rob Bentham Up to £900/day - 3-6 Months Our client, a market leading insurer, is looking to acquire an experienced MoSes modeller for an initial 3-6 months.
Midlands Solvency II Documentation Actuary Up to £900/day - 6 Months Rob Bentham Our client is looking for a Solvency II Documentation Actuary to join them for an initial 6 month project.
Reporting Actuary South West Kaylash Kukadia Up to £900/day - 6 Months A well respected insurer is looking for a qualified reporting actuary to join their team. The role will be MCEV focussed.
ICA Actuary South West Kaylash Kukadia Up to £800/day - 6 Months A well known insurer is looking to bring on a qualified Actuary for an initial 6 months to focus on their ICA work.
Pricing Actuary South West Rob Bentham Up to £800/day - 3 Months Our client is looking for a qualified Pricing Actuary to join them for an initial 3 month project.
Life Insurance - UK
Contracts - Life - UK
General Contact Details
Clare Nash David Parker Mehwish Raza Rachel Kelly
Rob Bentham Kaylash Kukadia
actuary@ojassociates.com
Web
www.ojassociates.com
ACT.04.13.060_61.indd 61
0207 649 9350 0207 310 8649 0207 117 6159 0207 310 8579
0207 649 9351 0207 310 8581
Please contact one of the team for further information on any of the opportunities above.
22/03/2013 09:01
dgsdfsfsdfsgsgsgsdgsdgsdgsdgsdgsd Asia Hong Kong Life - UK Actuary £££Competitive Jonny Plews European insurer seeks an FIA qualified/student to work in its APAC head office. Role is varied; SII, Capital & Market Risk. A perfect role for a UK resident to move to Asia as company culture and work content will be similar to home. You must be fluent in English to communicate regularly with group head office. Hong Kong Life - Investment Actuary £££Competitive Gary Rushton A global leader within the financial services sector is currently looking for an experienced investments Actuary to provide capital optimisation solutions and focus on developing their asset values and solvency margins. The successful candidate will have extensive post qualification experience working within investment management and/or ALM space. Strong communications skills a must. English speaking.
Thailand Life - Head of Reporting £££Competitive Alex Ince Multinational insurer is seeking a candidate to head up their embedded value reporting team in Bangkok. Great opportunity for a candidate to step up into a management position. Seeking newly qualified candidates with experience in a valuations team and ideally some supervisory experience. English language skills are all that is needed to work in the fastest growing market in Asia.
Life - ALM/Capital - Special Projects Hong Kong Alex Ince £££Competitive Hugely successful global insurer is seeking a candidate to work in a special projects role in the ALM/Capital team. Successful candidates will have experience of working with investments and managing risk. Only clear communicators will be considered as this is a regional role. Mandarin and Cantonese considered an advantage. This is a great opportunity to broaden your skillset into new areas.
Life - Country Manager - Life Head Office Hong Kong Jonny Plews £££Competitive European insurer seeks an experienced actuary (8-14 years) to work in the APAC HQ overseeing all actuarial duties. You will act as the point of contact to one of the countries across Asia, though your team will analyse the strategy of actuarial work across the entire APAC region. We require a European skilled actuary (culturally and technically). Only English required.
Hong Kong GI - Capital Modelling Actuary £££Competitive Toby Weston Our client is a leading multinational re-insurer who are looking for a technically strong Actuary to work as their in-house capital modelling expert. Reporting into the Chief Actuary and working extensively with senior management we are looking for someone with strong technical skills and excellent communication in English to join this fast growing organisation in a crucial role for their risk management function.
Hong Kong GI - RI Pricing Actuary £££Competitive Toby Weston Working across APAC from the Singapore regional office, we are looking for an Actuary with deep experience in pricing treaty casualty lines of business and a desire to move into a more commercial position. This role is working in a very client facing team structuring multi-line, multi-year products to assist clients in effective capital management strategies. Fellowship and an Asian language are strongly preferred.
Europe Zurich Reinsurance Pricing - Agriculture CHF120,000 - CHF150,000 Audrey Dresen Successful team of Agriculture Underwriters is looking for a Pricing Actuary to support their growing business. You have ideally gained a few years experience in Agricultural pricing in a Reinsurance environment. Exceptional communication skills and understanding of the business as well as sound IT skills and tool development experience are a definite advantage. Dublin, Ireland General Insurance Actuaries €60,000 - €120,000 + Bonus + Benefits Patrick McMahon I have a number of excellent opportunities in Dublin for actuaries with GI experience. The roles are across Reserving, Pricing, SII and Advisory work and range from P/Q to experienced hires. The roles offer the opportunity to progress your career and obtain new skills and experiences.
Southern Germany GI Pricing Actuary €60,000 - €75,000 + Bonus Manuel Lovell This well-regarded insurance name is looking for an Actuary to join their Pricing & Product Development team. Minimum of 4 years experience and a strong background in Non-Motor products across the European markets with the ability to work independently. Must be fluent in English and German.
Brussels SII Validation Officer €50,000 - €60,000 Laurence Baken An excellent opportunity for a validation expert to validate SII capital models and technical provisions of a global European Insurer on a group level, as well as presenting conclusions to the Model board level at Group and local.
Caribbean Consultant jnr/mid/sen €40,000 - €80,000 Niels van Nieuwkerk International consultancy is seeking to recruit consultants for their business in the Caribbean. The consultants will advise insurance companies and Pension funds on a broad range of actuarial topics. Dutch market knowledge required.
Non - Life Reserving Actuary Switzerland Ben Moses Up to CHF1250/day - 6-9 Months
Prophet/MoSes developers The Netherlands Helger Wiese Up to €1000/day - 3 Months plus extensions
Reserving of multiple business lines for international insurer. BAU and Solvency II experience desirable.
Demand for both MoSes and Prophet developers in Dutch market. Ideally Dutch speaking.
Asia Jonny Plews Alex Ince Gary Rushton
+852 5804 9200 +852 5804 9224 +852 5804 9223
Toby Weston Chris Lee Philip Chau
+852 5804 9042 +852 5804 9253 +852 5804 9287
Please contact one of the team for further information on any of the opportunities above.
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Key Contacts
What’s happening in the Life Market? Opportunities moving into Q2... By Clare Nash
As we move into the second quarter of the year, habitually we see more interest from the market in what businesses are looking to recruit for. Bonuses have been paid, reporting seasons end, students sit their exams and rotate into new teams, promotions occur… essentially we see a lot of movement in the market at this time.
Life - Clare Nash Clare joined OJ in 2007 and is now head of the Life & Investments Actuarial team. clare.nash@ojassociates.com +44 (0)207 649 9350
Quarter two is historically one of the busiest times of the year and 2013 is no exception! There have been several factors which have made the market a little more “considered” in their approach to recruitment in Q1, predominantly delays in Solvency II. Actuaries are still very much in demand, however! We have a wealth of new appointments on the horizon, quite often on an exclusive basis. The market is ever changing and if you are considering a new opportunity or if you want to understand what will set you aside from other individuals, we are more than happy to have a confidential discussion with you. Similarly, if you are a hiring manager and would like some intelligence on salaries or market trends, we can give you a comprehensive overview. If you would like a more general discussion, please contact any of the Life team: Clare Nash David Parker Rachel Kelly Mehwish Raza
Asia - Jonny Plews Jonny joined OJ in 2004 and is now responsible for our offering in Asia. jonny.plews@ojassociates.com +852 5804 9200
0207 649 9350 0207 310 8649 0207 310 8759 0207 117 6159
A more in-depth overview of our appointments can be found on our website: - www.ojassociates.com
Featured Job
Europe - Audrey Dresen
Commercial Development Actuary - Life
Audrey is our specialist recruiter for Switzerland covering Actuarial, Risk & Compliance.
David Parker London £90,000 + Bonus + Benefits
audrey.dresen@ojassociates.com +41 (0) 43 508 0444
Exclusive Appointment! One of the world’s prestigious insurance and investments groups is looking to continue their UK growth with the acquisition of a qualified actuary for their Head Office. This FTSE 100 company has created an opportunity for a commercial pricing or product development actuary to take a step up into an autonomous position where you will take ownership for new product development initiatives and drive them through to completion.
A key element to this role is the ability to interact with senior stakeholders as well as immediate team members, building long-term, mutually beneficial relationships. Bridging the gap between actuarial and underwriting you will have strong industry awareness and be able to communicate complex quantifications while retaining a commercially focused outlook.
Leading project work streams, this opportunity will best suit a careerminded individual looking for more control in an award winning business. Exceptional fast-track career progression for the right individual.
David Parker Consultant - Life & Investments Actuarial Tel: Email:
+44 (0)207 310 8649 david.parker@ojassociates.com
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Julien manages our Benelux team recruiting across Life, GI, Pensions and Investments. julien.fabius@ojassociates.com +32 (0)2 888 6051
David joined Oliver James Associates with six years senior sales experience working with some of the world’s leading financial organisations. Since joining the Life and Investments actuarial team over three years ago, his focus has been on protection and investment hires from part-qualified through to senior appointments with leading life insurers, reinsurers, consultancies and regulators.
Non-Life - Paul Francis
Europe Benjamin Moses Helger Wiese Emina Biscevic Laurence Baken Patrick McMahon
Europe - Julien Fabius
+49 (0)89 2206 1068 +31 (0)20 262 0280 +49 (0)89 3803 8965 +32 (0) 2 401 2249 +353 (0)1 685 2413
Audrey Dresen Julien Fabius
+41 (0) 43 508 0444 +31 (0)20 716 8450
Please contact one of the team for further information on any of the opportunities above.
Paul joined OJ in 2007 and now heads up GI Actuarial, Risk & Compliance. paul.francis@ojassociates.com +44 (0)207 649 9469
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www.the-arc.co.uk
The Actuarial Recruitment Company
A fresh approach
Capital Actuary London
General Insurance To £85K
Actuarial Analyst London
General Insurance Circa £50K
This role working for a specialist P&C (re)insurer will be involved in the development and running of the company’s internal capital model. Initially the role will involve the design and build of a new Remetrica model to replace the existing capital model. The client is looking for an individual with excellent technical skills as well as previous experience in capital work and a sound knowledge of Solvency II. A Remetrica background would be preferred for the role. Ref: ARC26211
This London Market operation is looking for a part qualified actuary to be involved with reserving, pricing support, involvement in the internal capital model and business planning. There will be alot of interaction with senior management and other areas of the business. Candidates with an excellent academic record and progressing well with the actuarial exams should apply. The ability to develop technical solutions for the business without extensive guidance from above will be important. Ref: ARC26212
Actuarial Analyst South
Pricing Actuary London
Life/GI £Attractive
This general insurer seeks an actuarial student making good progress with the exams to join the reserving and capital team. The work will be varied with plenty of interaction across other parts of the business covering non life commercial lines products. Candidates need at least 2 years experience and good candidates with actuarial experience who want to move to GI will also be considered. A combination of good technical and strong communication skills are required. Ref: ARC26213
Life Up to £80K
This well established life insurer is looking for a recently or more experienced qualified actuary to join their team. As part of an expansive role, the successful candidate will have prior pricing experience and will be involved in all aspects of the pricing cycle as well as providing direction to other pricing team members. Excellent communication skills will be required since the role involves significant interaction with non actuaries in other business areas. Ref: ARC26214
Call us anytime including evenings and weekends on 020 7717 9705 or email enquiries@the-arc.co.uk General Insurance Andy Clark BSc FIA General Insurance & Contracts Roger Massey BSc MBA FIA New Entrant (All) & Life/Pensions Chris Cannon BA CFI DAT
0781 333 7891 0781 398 9016 0771 122 8449
andy@the-arc.co.uk roger@the-arc.co.uk chris@the-arc.co.uk
The Actuarial Recruitment Company is an employment agency
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