Act Sept14
of 52
-
Upload
ankitag612 -
Category
Documents
-
view
229 -
download
0
Transcript of Act Sept14
-
8/10/2019 Act Sept14
1/52
The magazine of the actuarial profession
SEPTEMBER 2014
theactuary.com
Interview:Lord RobertWinstonThe diffi culties ofprediction
GeneraI
insuranceDealing with the riskof inflation
InternationalNew strategies forAfricas growingeconomies
SoapboxEnvironmentalimpact of fracking
o the actuarial profession
MONEY INTHE PIPELINEFinancing renewable energy assets
-
8/10/2019 Act Sept14
2/52
2
Appointments
THE ACTUARY May 2013www.theactuary.com
The next big thing.
For more than 60 years, Milliman has helped clients identify the next trendand how it might affect them. With consultants in Europe, North America,and Asia, we can help you spot emerging events before they unfold and
ready your business to face them.
Prepare for the future at uk.milliman.com.
-
8/10/2019 Act Sept14
3/52
www.theactuary.com
SEPTEMBER 2014
MORE CONTENT ONLINE
Additional content can befound at www.theactuary.com
WRITERS OF THE MONTHChris Lewin wins a 50 book token forhis feature on risk initiatives,courtesy of SIAS
AT THE BACK
33 BooksColin Czapiewski on Leo GoughsThe Con Men: A History of Financial
Crime and the Lessons that you
can Learn
34 Puzzles
Try the latest cryptic crossword andMensa puzzles
37 StudentJessica Elkin spots the light at the endof the tunnel following the exams and
explains what to expect when you
reach that point
38 Actuary of the futureFelix Mantz of Towers Watson
ONLINE Investment: Volatile markets
in India
Chinnaraja Chendur Pandian discusses a
copula approach to Indias volatility index
Review: R in Insurance
Markus Gesmann and Andreas Tsanakas
report on the recent 2014 conference.
Visit:www.theactuary.com
FEATURES
18 Interview: Robert Winston Angus Macdonald and Sharon Maguire
find out if the world-renownedscientist, Labour party peer and TVpresenter deserves his reputation forbeing provocative in his views
22 Environment: Money inthe pipeline
Theresa Ruhayel looks at financingrenewable energy assets
25 Careers: Salary surveyJonny Plews reports on the results of arecent salary survey of actuaries in Asiaand how IFoA Fellows compare
28 Risk: Bridging the divideChris Lewin looks at the risk initiativebetween the actuarial and civilengineering professions
30 GI: The hidden risk of inflation
Graham Fulcher asks if building anallowance for inflation into projectionsbased on historical data is an overlyrelaxed approach
32 International: Africa risingTavaziva Madzinga reports on Africasfast-growing economies and what thismeans for savings and insurance onthe continent
UP FRONT
9 SIAS events
10 IFoA news
14 People/society news
16 General insurance news
17 Industry news
OPINION
5 Editorial
Kelvin Chamunorwa reflects on the
current spate of global conflict and
considers its cost
6 Letters
Solvency II fears, value for money
and communication woes
7 Presidents comment
Diversity in research is key to
professional survival, says
Nick Salter
8 Soapbox
Francis Lobo outlines the
environmental impact of fracking
18
With returns of more than 8% in the
post-construction phase, lower-bracketrisk-takers are entering the market
22
September 2014 T HE ACT UA RY 3
Contents
COVER: NEIL WEBB
28
-
8/10/2019 Act Sept14
4/52
4
Appointments
THE ACTUARY May 2013www.theactuary.com
www.hannover-re.com
* million civil aviation flights take place every
flight every second
30.5*
We know our markets.
-
8/10/2019 Act Sept14
5/52
September 2014 T HE ACT UA RY 5www.theactuary.com
OpinionEditorial
The other daymy colleague asked in earnest: What is happening to this world?
It was an acknowledgment of the number and scale of current conflicts. Lately,
mainstream media has made for depressing consumption at best, horrifying at worst.Amidst the onslaught of bad news, it is easy to become desensitised to the plight
of fellow human beings the 300 passengers and crew who lost their lives when
Malaysia Airlines flight MH17 was shot down over Ukraine in July; and those living
in constant fear for their lives in other troubled areas, many of whom are our peers
in the profession.
Some are drawing parallels between Europe and Russias tension over Ukraine,
the civil war in Syria and turmoil elsewhere in the Middle East with the onset of the
First World War 100 years ago.
Conflict has an economic cost. In the recent Global Peace Index report, it was
estimated that the economic impact of violence was $9.8trn over the past year
11.3% of global GDP. Had there been 25% more peace on that measure, the global
economy could have achieved the annual amount
required to mitigate the effects of climate change.
The cost of the Millennium Development Goals to
improve health and education and alleviate poverty
would also have been met.
Owing to recent flight disasters, the war risk
insurance industry hasnt
been spared in what is
expected to be the most expensive year in the market
since 9/11. Claims will take years to settle, exposing the
ultimate loss to future inflation.
This month, Graham Fulcher highlights inflation
in the Western world as an emerging risk to insurers
(p30) and Tavaziva Madzinga shines a spotlight on the
insurance market in Africa, a region which has had its
challenges with stability and is now growing rapidly on
many measures (p32).
Im optimistic that globalisation makes anotherworld war unlikely, while fully aware that the
causes of current strife are complex. We can estimate
the financial impact of war, but its ultimate
price the loss of human life is one that we
cannot quantify.
Publisher
Redactive Media Group17-18 Britton Street,London EC1M 5TP+44 (0)20 7880 6200
Publishing directorJoanna Marsh
Sub-editorsKathryn ManningCaroline Taylor
News editorVivienne Russell+44 (0)20 7324 [email protected]
News reporterJudith Ugwumadu+44 (0)20 7324 2794
judith@reda ctive.co.uk
Editorial assistantTania [email protected]
Sales managerChris Dooley+44 (0)20 7880 [email protected]
Display sales executiveVlad Harmanescu+44 (0)20 7324 [email protected]
Senior recruitment salesexecutiveEmmanuel Nettey+44 (0)20 7880 [email protected]
Senior designerGene Cornelius
Picture editorAkin Falope
Production executiveRachel Young+44 (0)20 7880 [email protected]
Print Polestar Colchester
Published by the Staple Inn Actuarial SocietyThe editor, The Institute and Faculty of Actuaries and Staple Inn Actuarial Societyare not responsible for the opinions put forward in The Actuary. No part of thispublication may be reproduced, stored or transmitted in any form or by any means,electronic, mechanical, photocopying, recording or otherwise, without prior writtenpermission of the copyright owners. While every effort is made to ensure theaccuracy of the content, the publisher and its contributors accept no responsibilityfor any material contained herein.Important information for contributors to The ActuaryBy submitting content for publication you confirm that: (a) You (and/or other namedcontributors) 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 havent previously licensed the use of the content you submit;(d) So far as you are aware, the content submitted will not infringe any third-partyrights, be defamatory or in any way illegal.
SIAS September 2014 All rights reserved ISSN 0960-457X
Beyond thenumbers
SubscriptionsFor subscriptions from outside the actuarial profession, UK: 90 per annum/8.50per copy. Europe: 110 per annum, rest of the world: 130 per annum. Contact:Alison Jiggens, The Institute and Faculty of Actuaries, Staple Inn, High Holborn,London WC1V 7QT. T +44 (0)20 7632 2100 E [email protected] on actuarial science courses may join and they will receive The Actuaryas part of their mem bership. Apply to: Membership Department, The Institute andFaculty of Actuaries, Maclaurin House, 18 Dublin Street, Edinburgh EH1 3PP. T +44(0)131 240 1325 E [email protected] of address should inform the membership department as above.For delivery queries, contact: Rachel Young E [email protected]
Circulation 25,331(July 2013 to June 2014)
Kelvin Chamunorwa reflects on the current spate ofglobal conflict and considers its cost
The economic impactof violence was $9.8trnover the past year 11.3%of global GDP.
LIKE US ON FACEBOOK
www.facebook.com/TheActuaryMagazine
JOIN US ON LINKEDIN
www.linkedin.com/groups/Actuary-magazine-UK-Group-3751335
FOLLOW US ON TWITTER
@TheActuaryMag@ActuaryEditor
theactuary.com
Kelvin Chamunorwa
Editor
g to recent g t disasters, the war risk
ce in ustry asn t
are in w at is
in t e mar et
le, exposing the
hts inflation
to insurers
potlight on the
ich has had its
wing rapi y on
es anotherat the
can estimate
ate
at we
InternetThe Actuary:www.theactuary.comStaple Inn Actuarial Society:www.sias.org.ukInstitute and Faculty of Actuaries:
www.actuaries.org.uk
Managing editorSharon Maguire+44 (0)20 7880 [email protected]
EditorKelvin [email protected]
Features editorsJeremy Lee, pensions,investment, ERM, banking
Richard Purcell, life,health and care
Richard Schneider,life,Solvency II, mortality/longevity,modelling and software
Helen Lau,GI, reinsurance,environment, careers
Contact:[email protected]
People/society news editorYvonne [email protected]
Student page editorJessica [email protected]
Arts [email protected]
Profession news editorAlison Jiggens+44 (0)20 7632 [email protected]
SIAS representativeTitas Bakanauskas
Editorial advisory panelPeter Tompkins (chairman),Naomi Burger, David Campbell,Matthew Edwards, Martin Lunnon,Sherdin Omar, Richard Purcell,Nick Silver, Andrew Smith
-
8/10/2019 Act Sept14
6/52
THE ACTUARY September 20146www.theactuary.com
MORE LETTERS ONLINEMore letters are available online at
www.theactuary.com/opinion
OpinionLetters to the editor
The editor welcomes readers letters but reserves the right to editthem for publication. Please email [email protected].
The deadline for receiving letters for the October issue is17 September 2014.
There were some excellent points
raised in the article on CA3 (TheActuary, August 2014), with
which I wholeheartedly agree.
I am on my third attempt and,
although Ive attended the
expensive exam counselling, Im
still not clear on why Im failing.
Id really like to know why it
takes three months to mark this
exam. Effectively this means that
failing CA3 delays qualification
for six months, as you then needto wait another three months to
find a space on another sitting.
If I worked for the IFoA, Id
keep the pass rate as low as
possible in order to keep forcing
people to cough up the
extortionate exam fee.
Andrew Wilson 15 August 2014
See article on CA3 on page 11
In response to the letter from
Mr Rashbrooke on subscription
rates (August 2014).
The IFoA aims to deliver value
for money in all its activities.
Membership subscriptions not
only pay for the core
membership of the IFoA, but also
provide a wide range of other
services and benefits including
regular newsletters, an
increasing range of free events,
continuing professional
development (CPD) courses,forums and discussion groups,
the International Actuarial
Careers Network and
The Actuarymagazine.
Our goal is to deliver an
equivalence of service to all our
members wherever they are
located, by means such as
technology and support for
regional volunteer groups. We
have made many strides towards
this goal, but recognise that there
is more to do.
Council reviews the level of
subscriptions every year taking
into account our financial
forecasts, changes in the services
provided such as the recent
changes to the CPD scheme
and the blend of our membership
categories.
We have not increased the
Fellow subscription rate since
2007, a reduction in real terms of
152, thereby providing
increased value for money. The
reduced rate subscription has
also remained static at 69 for
that period.
The changes that are being
introduced to the reduced rate
subscription from 1 October 2014
are twofold. First, we have
introduced a new retired
category that is linked to the
2014/2015 CPD Scheme.
Members can be classified as
retired if they are not in paidwork that relies on their actuarial
training and experience, or on
their membership of the IFoA.
Second, members may also
apply for a reduced rate
subscription if their total income
from all sources, now including
pensions, alongside paid work
and income from investments,
is less than 30 times the full
subscription rate applicable to
them. The key principle about
the income-based reduced rate
subscription, is to help those
members least able to afford the
full subscription rate.
The previous exclusion of
pensions from the assessment
of income gave rise to
inconsistencies and this has now
been corrected.
Derek Cribb,
IFoA chief executive
15 August 2014
Learners and learned
In times of change learners inherit the earth while the
learned find themselves beautifully equipped to deal with
a world that no longer exists Eric Hoffer.
That could be the epitaph to both the life assurance
industry and defined benefit pension schemes. In the
1990s the former was caught out by the conflation of two
events that its management had no experience of: the
death of inflation and the transfer of power from the
providers and professions to the consumers.
The industry would have been better run by a set ofwise men with no prior knowledge of the business. With
the latter, a noose had gradually been tightened round the
employer by the progressive improvement in the rights of
early leavers and the way surpluses were dealt with. In
both cases, actuaries should have been more proactive in
alerting their principals. Alas, senior actuaries were
learned not learners.
Nearly all men can stand adversity, but if you want to
test a mans character, give him power. Abraham Lincoln.
Sadly this is the cause of the problems of the Equitable,
the Independent, Northern Rock and the Royal Bank of
Scotland. Better to remain silent and be thought a fool,
than to speak and remove all doubt. Abraham Lincoln.
OK, Abe, I will stop, but let me make a final point.
Will Solvency II really be a panacea? It seems to me that
at a basic level it makes insolvency
more likely because of the
depletion of net assets by the
cost of building complex
models, encouraging blind
belief in its output when a
dose of common sense is all
thats required.
Surely it is far better to
create an environment in
which prudent attitude is
taken to risk management and
there is congruence of interests
of the shareholders, seniormanagement and traders?
Icki Iqbal 15 July 2014
Communication woes
IFoA aims to deliver value for money
ALAMY
-
8/10/2019 Act Sept14
7/52
7www.theactuary.com
September 2014 T HE ACT UA RY 7
OpinionPresidents comment
Research and thought leadership are crucial
to the long-term sustainability of the actuarial
profession. Because of the hard work of those
member volunteers who put in the time and
effort to undertake such work, we have built
up a strong knowledge bank for the benefit of
a diverse range of interested parties: from our
members to others in society such as
academics and public policy makers.Research informs what we do as practitioners
and how we do it.
It drives our communications with policy
makers and provides the evidence base and
voice of the IFoA. It helps to improve our
professional standards and fulfil our royal
charter obligations.
I believe that my theme of diversity is
relevant to our research efforts in two areas.
Firstly, by working across practice areas we will
strengthen our actuarial expertise by
encouraging greater diversity in the subject
matter that we explore.
Secondly, by adopting a global outlook on
research topics, we can ensure that our high
quality work remains relevant to the global
issues affecting our members no matter where
they are located around the world.
To help to facilitate this progression our new
Research and Thought Leadership Committee
(RTLC) has been established. It was designed to
complement the commissioning of research by
the practice boards, either directly or through
working parties.
We encourage cross-practice analysis and
identify any gaps in our research programme
where we need intellectual capital to further
actuarial science or inform the key public policy
debates of the day. Themes it has identified forfurther investigation include new economics
and cyber risk.
Some of you may have noticed that we
recently advertised for a lay chair for the RTLC
and the selection process is underway. It is
expected that the successful candidate will
bring an external and different perspective to
actuarial science, complementing the expertise
of our members and broadening the focus of
the committee.
The IFoA already sponsors and co-sponsors
research by external bodies and academics to
bring other perspectives to our knowledge
bank. The Actuarial Research Centre, theLimits to Growth Research from 2013 and
sponsored research by the Pensions Policy
Institute are all examples of this. We also
encourage these external influences to join us
at the many events that we run to aid our
members in accessing the latest thinking on a
variety of relevant topics, from dementia to
holistic balance sheets.
By including these within our research and
thought leadership programme we are
encouraging access to diverse thinking and a
broader range of research.
I would encourage all of you to remain up to
date on all these developments not only for the
area in which you practice,
but also other areas.
There is real value in
the work that is producedin all of the practice areas,
and it is encouraging to
see more and more
cross-practice research
being produced like the
recent examination of the
social care cap by the Pensions and Long Term
Care Working Party.
Our research is disseminated in a variety of
ways: through the media, member newsletters,
the website and at events. We will be running
three key events, all of which offer members
access to a diverse breadth of thinking on key
topic areas.From 15-17 September, we are hosting the
International Mortality and Longevity
Symposium in Birmingham. Academics, policy
and decision makers and members from
around the world will hear from sharp thinkers
with expertise on mortality and longevity.
The GIRO conference is being held at the
Celtic Manor resort in Wales from 23-26
September. This years theme is innovation
and, in addition to the sharing of research and
experience, there will be consideration and
discussion of future opportunities for the roles
of actuaries.
We also have our autumn lecture on 1 October
in Edinburgh, where one
of our
newly-elected Honorary
Fellows, professor CarolJagger, will share her
research and insights on
healthy and unhealthy
life expectancy. I am keen
that we all undertake
continuing professional
development because we want to stay up-to-
date and develop our own knowledge banks,
and not because it is a requirement or a chore.
There are plenty of opportunities to get
access to the research output. Sharing
knowledge and research across sectors and
regions is beneficial to us all. Encouraging
further diversity in this way will, I hope you allagree, be of even greater benefit.a
NICK SALTER
Diversity in research is key toprofessional survival, says Nick Salter
It is encouraging tosee more cross-practiceresearch being produced like the examination of
the social care cap
Nick Salter is the president
of the Institute and Faculty
of Actuaries
Adopting anopen outlook
-
8/10/2019 Act Sept14
8/52
www.theactuary.com8 T HE ACTUA RY September 2014
OpinionSoapbox
The basic principlesof fracking or
hydraulic fracturing have not changed since
the 1860s when a brave man dropped an
explosive charge down a well to fracture
hard rock and stimulate the release of
oil or gas.
Today, more controlled methods use
high-pressure water, chemicals and
proppant, such as sand or a ceramicmaterial, to break up rock formations and
keep the gas or oil flowing into the well.
A more recent development has been to
combine hydraulic fracturing with
horizontal drilling, again an existing
technology, which has allowed the
development of oil and gas resources which
would otherwise not be commercial.
The implementation of these technologies
on a large scale comes with risks that need to
be understood and mitigated. Most risks
associated with unconventional wells are,
however, similar to those for conventional
wells, but there is particular public sensitivity
to fracking, especially in places without any
significant experience of drilling.
For either form of drilling, the risks range
from vehicle accidents at the frequency end
of the scale to infrequent but potentially
catastrophic events, such as blowouts or
drinking water contamination, with latent
risks to human and animal health.
Environmental pollution is a major
exposure and, if not well managed, could
lead to intensified opposition to any
further exploitation of the technology,
political backlash and draconian
regulatory requirements.
Much of the concern about theenvironmental impact of fracking relates to
the many chemicals that are added to the
frac water and that should not, but could, get
into drinking water aquifers as a result of a
blow out or accidental seepage.
From an insurance point of view if, in 10 or
20 years, water from fracked wells was
discovered to have slowly but widely
contaminated drinking water supplies with
adverse health effects, the liability claims
would be unquantifiable. Such pollution
claims could breach the limits on the
operators or contractors policies and leave
large uninsured losses against companieswith varying degrees of financial resilience.
Reducing pollutionThe key to minimising water pollution risks is
good well design, good operating, maintenance
and abandonment practices. In particular,
designing the well creating a minimum of two
barriers, to flow between any formation that is
capable or potentially capable of flowing into
subsurface drinking water aquifers or the
surface environment, will result in a dramatic
reduction in risks associated with the well.
Other environmental risks include
greenhouse and other gas emissions, the
release of chemicals and the effect of dust,
smells, noise and light. Air pollution should
not be dramatically
different from
conventional energy
extraction, but lowerstandards, mistakes or
insuffi cient caution
could result in
substantial losses.
There are also risks
related to the handling,
storage, transport,
treatment and disposal
of the residuals from fracking activity which
need good management.
As we have seen from reports from
Oklahoma, there are also seismic risks
associated with fracking. The likelihood of an
earthquake depends critically on whether thearea is tectonically stressed in the first place.
Water injection can increase underground
pressures, lubricate faults and cause
earthquakes a process known as injection-
induced seismicity. Those caused by fracking
are almost always very small, under magnitude
3.8, and often unnoticed, but injecting large
quantities of water in the wrong place can
cause bigger events.
None of these risks is completely exclusive to
fracking, and there is extensive good practice
guidance available. Fracking, however, is likely
to be deployed across the world. Any industry-
wide structural deficiencies in design,
operations, maintenance or abandonment
practices could result in
more widespread
incidents that fuel
resistance globally.Ultimately the worlds
growing demand for
energy and diminishing
conventional reserves
suggest a strong,
long-term case for the
continuing recovery of oil
and gas from shale.
The experience in the US and elsewhere also
shows that the extent to which fracking will
become viable and acceptable will depend in
large part on how well risks are managed
and mitigated.
Francis Lobois head of energy engineering, Catlin
FRANCIS LOBO
Fracking themanageable risk
Francis Lobooutlines theenvironmental impact of fracking
If water fromfracked wells widelycontaminated drinking
water supplies, theliability claims would
be unquantifiable
-
8/10/2019 Act Sept14
9/52
SAM KESTEVEN SAM PEACH September 2014 T HE ACT UA RY 9www.theactuary.com
MORE EVENTS ONLINE
For details of events, visitwww.sias.org.uk
SIAS IS ON TWITTER!
Follow us on@SIAScommittee for latestnews on meetings, socials and more!
SIAS IS ON FACEBOOK!
Check out the SIAS Facebook page forphotos from the latest social events
MONDAY 13 OCTOBER SOCIAL EVENT
Welcome Drinks
Staple Inn Hall
High Holborn
London
WC1V 7QJ
Drinks 5.30pm
Presentations
6.00pm
SIAS would like to welcome new members of the Institute and Faculty of Actuaries to a cheeseand wine evening at Staple Inn Hall. This event is a great way for new members to meet fellow new
joiners and to l earn more about the p rofession, th e qualification process and SIAS, whilst enjoying
a selection of fine wines and delicious cheeses.
The tasting will begin at 5.30pm and will be followed at 6.00pm by a series of brief talks covering
the education process, SIAS and business skills.
For those of you not so new to the profession, please encourage any new joiners from your
company to attend. There is no need to register in advance for this event.
TUESDAY 21 OCTOBER JUBILEE LECTURE & SIAS AGM
Jubilee Lecture and
SIAS AGM
Staple Inn Hall
High Holborn
London
WC1V 7QJ
Refreshments 5.30pm
SIAS AGM 5.45pm
Lecture 6.00pm
Speaking at this years Jubilee Lecture will be Steve Webb, minister of state for pensions, andSteve Groves, CEO of annuity writer Partnership.
The UK pensions landscape has undergone a series of radical reforms in 2014, with retirees now
granted greater access to their pensions pots and faced with more choices as to how to invest
and spend their pensions. With the removal of compulsory annuitisation for many investors, the
UK annuity market is undergoing a major overhaul as providers seek to remain competitive in the
face of shifting market conditions.
Our Jubilee Lecture speakers will offer two different perspectives on the changes made to the
UK pensions market, their impact to date and going forward. Steve Webb, as pensions minister in
the coalition government, has overseen the creation and introduction of the new pensions rules.
Steve Groves, as CEO of one the largest UK annuity writers, has first-hand experience of dealing
with the commercial effects of the rule changes.
Refreshments will be served from 5.30pm and the lecture will
follow the SIAS AGM, which will run from 5.45pm to 6.00pm.There is no need to register in advance for this meeting, and non-
members are welcome.
There will be live tweeting throughout the talk via #SIASOct14.
Please get involved with any comments or questions for
the speakers.
FRIDAY 21 NOVEMBER SOCIAL EVENT
Annual SIAS Dinner
Save the date!
Save the date for the Annual SIAS Dinner, which will be held at The HAC on Friday 21 November.
Tickets will go on sale on 13 October at 9am.
Look out for further updates over the coming weeks.
-
8/10/2019 Act Sept14
10/52
10www.theactuary.comTHE ACTUARY September 2014
NewsIFoA
Upfront
NEWS UPDATES FROM THE ACTUARIAL PROFESSION
Its always a pleasureto get together with IFoA
members at our annual residential conferences.
I am disappointed therefore that I am not able to
attend the GIRO conference this year. But on
reviewing the programme of speakers one of our
most interesting and diverse yet, which includes
Bank of England governor Mark Carney and author and philosopher
Alain de Botton I am very much looking forward to seeing its outputs,
which will be available on the IFoA website after the event.
One of the great things about GIRO is that it attracts attendance from
across the non-life community, from around the world and from outside
the IFoAs membership. Bringing such a large, diverse group of
professionals together goes a long way towards promoting cross-practice
learning and the spread of new ideas, which in turn facilitates the
development of actuarial research and thought leadership.
Non-life and here I am including professionals who may be working
in a variety of fields such as resource and environment, investment and
health and care is the most rapidly expanding area where the actuarial
skillset is being put to use. Looking specifically at the IFoAs general
insurance (GI) community, student membership is up over 60% in the
past three years and GI members are now based in over 70 countries.
Over 200 people have passed their GI Fellowship exam within the past
year and GI student membership is now at 27% of the IFoAs total
student population. GI is our third largest practice area and the
fastest growing.
On that note, I would like to encourage all IFoA members to look
outside their current field of work and see what they can learn fromactuaries working in other sectors. Lets not get hung up on practice-
specific mentality: think of your actuarial skillset and how it can be used
in a wider business context. One of the IFoAs key strengths is the
diversity of its membership, another being the community
feel which is amply demonstrated by our GI members.
But there is nothing to be gained from the silo
approach. We must remember to reach out, across
the whole of our membership and beyond, to
move forward.
The GIRO conference is taking place on 23-26
September at Celtic Manor Hotel, Newport.
www.actuaries.org.uk/events/residential/
giro-2014
Follow the event on Twitter at #IFoAGIRO2014
A diversecommunity
OpinionCEOs comment
Derek Cribb looks forward to GIRO andstresses the importance of diversity
DEREK CRIBB
Derek Cribb is the
chief executive of
the Institute and
Faculty of Actuaries
Although many of us can expect to experience
an extended old age, it is likely to be with longer
periods of diminished mobility, cognitive
function and other complex health conditions.This presents a challenge for the ageing
population, their families and carers. For
policymakers, providers of health and social
care services and financial services companies
seeking to support any personal financial
planning, there are a number of uncertainties
that raise questions.
Professor Carol Jagger is the AXA professor of
epidemiology of ageing at Newcastle University
and is an acknowledged authority in the UK on
the demography and epidemiology of ageing.
As a recently elected Honorary Fellow of
the IFoA, she will address the Autumn Lecture
on the complex challenges facing extended
longevity and what is known about ageing
trends in modern societies, including research
on healthy and impaired life expectancy and
ageing population projections.
Chaired by the IFoAs new president, Nick
Salter, the evening will also include the
presentation of IFoA Honorary Fellowships to
both Jagger and Sir Philip Mawer.
This event will take place at the Royal College
of Physicians in Edinburgh on 1 October.
To book your place, visit tinyurl.com/ojjohob
Autumn lectureon longevity
Chinese microsite to launchAutumns arrival heralds the launch of our
brand new China microsite.
It is specifically designed to increase our
visibility in China, as there is a huge benefit in
our being able to communicate in Chinese with
a market of such strategic importance.
As a profession we are committed to
increasing international visibility and
engagement with a key focus on China and
South-East Asia.
The new China microsite is but one of the
ongoing improvements we are making to our
digital services and a key first element of ouroverall digital strategy, to enable users and
search engines to locate our content.
-
8/10/2019 Act Sept14
11/52
11
www.theactuary.comSeptember 2014 THE ACTUARY
CA3 (communications): the way forwardBy Trevor Watkins,
IFoA director of education
Further to the article on the student page in the
August 2014 edition, I would like to clarify some
of the issues raised in respect of the core
applications CA3 (communications) exam.
The purpose of CA3 is to test the candidates
ability to communicate actuarial matters in a
manner that is acceptable to a non-actuarial
audience. As the article rightly points out,
actuaries are not usually known for their good
communication skills. However, these skills are
essential for business professionals, and
therefore form a key part of our qualification.
CA3 is currently tested via an onlineapplication. With more than half of our student
members based overseas, we need to ensure
that students are given consistent and fair
treatment during their assessment. Further,
there is the issue of scalability; more candidates
can be assessed in an online session. Candidates
now record their presentation online rather
than having to wait in turn at a venue and
indeed, when given a choice, many candidates
deliberately opted for the online assessment
over a face-to-face version. The increased
capacity the online mode provides has
eliminated waiting time. Indeed, a recent exam
was cancelled due to lack of take-up.Presentations are performed in front of a
webcam and there are plenty of opportunities
for the candidate to demonstrate their abilities
to make their presentation engaging. The
examiners do appreciate that this is not the
same as presenting live. Furthermore, they will
not penalise candidates for any distractions that
occur during their recording; this also happened
during the face-to-face presentations, when
occurrences such as fire alarm tests would
interrupt a recording.
One major benefit of the online application is
that students can play back recordings they
make. This is a powerful tool for self assessment
and preparation. There are a number of other
tools the students can access via the application,
such as the modules that explain the criteria for
passing CA3, as well as a bulletin board wherecandidates can post questions and discuss CA3.
We encourage candidates to make full use of
these tools to maximise their chances of passing.
Other resources available include our
guidance documents on the pass criteria, which
can be found on the CA3 page of the website.
They explain, for both the presentation and
written question, how and where marks are
awarded. They are based on the detailed and
objective marking schedules to which the
markers work. We also work closely with the
Actuarial Education Company (ActEd) and
would encourage candidates to use the ActEd
course as part of their preparation.The entry criteria for the CA3 examination
were introduced to ensure candidates
familiarity with the technical material. The
questions are based on the concepts from CA1,
which, in turn, draw on material from the core
technical (CT) subjects.
Lastly, as the article says, CA3 is under review.
At an initial meeting of employer
representatives, they agreed that
communication skills need to be assessed. From
reviewing a sample of past candidates
submissions, the group was satisfied that the
pass standard set was appropriate. However, the
low pass rate needs addressing and students
need more support and encouragement in their
preparation for CA3. Much of this can be done at
employer level but we would welcome any
suggestions and feedback from employers andstudents as to how the IFoA can legitimately
improve pass rates.
We are looking at ways in which we can
improve the experience of using the application
and have taken steps to improve it since it was
first introduced. Less than 10% of our student
population use a Mac or have firewall issues
through their employer and we will always work
with them to resolve any problems. At a recent
Student Consultative Forum meeting, we
informed the group that we were introducing a
new Moodle-based virtual learning
environment (VLE), which is web-based and
therefore can be accessed by all students. Wewill look to move CA3 onto this platform once
the review has taken place.
Member of Council Kathryn Morgan wasone of a select group asked to test the IFoAs
new website, launched this month. Here she
gives her opinion on the usability of the site
and its look and feel
The first thing that struck me is that the newly
designed website really helps to display the
information that I am looking for very clearly.
This in turn meant that I found it extremely easy
to use and navigate, something that I think is
very important for websites.
I tested the new website on my tablet so that I
could see how the new design worked. I really
liked how it automatically adapted to my tablet;its a really responsive design.
I think the inclusion of the new sliding left
and righthand navigation is a great new feature
to have included and one that is very intuitive
and simple to use. It is this feature in particular
that made it very easy for me to find the
information that I wanted.
Five minutes with Kathryn Morgan
Kathryn Morgan: site is easy to use and navigate
Our refreshed website is a really fantastic stepforwards towards meeting the first objective of
the IFoAs digital strategy, namely enabling user
and search engines to easily find our content.
The refreshed design of the website is the
perfect springboard for the following phases of
the digital strategy that are to happen by the
years end, such as the launch of our new virtual
learning environment (VLE) as well as
improvements to the search facility.
As an actuary based in Manchester, the VLE
and the content it is to contain will be
invaluable to me as a means of staying abreast
of actuarial developments. The search project
that is to follow is also incredibly exciting as itwill seek to make over 10,000 documents easier
to find. This will vastly increase the ease of
access to all manner of information at the IFoAs
disposal to fellows, members and students alike.
The launch of the first phase of the website is
a hugely exciting start towards a much
improved digital offering.
-
8/10/2019 Act Sept14
12/52
12www.theactuary.comTHE ACTUARY September 2014
NewsIFoA
NEWS UPDATES FROM THE IFOA
Anthony Hugh Carus FIA
At a Disciplinary Tribunal Panel hearing on
24 June 2014, the investigation actuary laid the
following charge of misconduct against
Anthony Hugh Carus (the respondent).
Being at the material time a Fellow of the
Institute and Faculty of Actuaries:
1.In November 2012, when contacted by the
complainant, a solicitor representing a
business (in sequestration) and the trustee in
sequestration in legal proceedings against the
Financial Services Authority (FSA) in the
Upper Tribunal (Tax and Chancery Chamber),
you prepared a report in those legalproceedings which was not expected by the
complainant, and you thereafter:
(a)contacted the FSA to inform it that a draft
report you had created in relation to the
ongoing legal proceedings was in existence;
(b)your actions were intended to cause
embarrassment to the complainant;
(c)in doing so, you acted in a vexatious and/or
malicious way.
2.In your actions at 1(a) (c) above, you failed
to maintain and observe the standards of
conduct expected of a member, in breach of
principles 1, 2, 3 and 5 of the Actuaries Code
and, in any event, constituting misconduct interms of Rule 1.6 of the Disciplinary Scheme
of the Institute and Faculty of Actuaries, being
conduct falling below the standards of
behaviour, integrity, competence or
professional judgement which other
members or the public might reasonably
expect of a member.
In respect of charge 1(a), the respondent had
accepted, on reflection after the event, that it
had not been appropriate for him to have
contacted the FSA and had admitted that to
have done so had been a mistake.
The panel found that, in the circumstances
of this case, the communication which the
respondent had with the FSA constituted
misconduct in terms of Rule 1.6 of theDisciplinary Scheme.
In respect of charges 1(b) and 1(c), the panel
did not find these charges proven from the
evidence which had been submitted, and so
these charges were dismissed.
The panel imposed the following
sanctions in respect of charge 1(a) which it
had found proven:
a reprimand;
costs: the panel determined that the
respondent should make a payment of 5,000,
inclusive of VAT, towards the costs of the
Institute and Faculty of Actuaries.
Balakrishnan Subramaniam Iyer (student)
At a Disciplinary Tribunal Panel hearing on
1 July 2014, the tribunal considered charges
that the respondent had cheated on the
Institute of Actuaries of India CA1 examination
and that his behaviour had been dishonest.
The panel found the facts proven on the
respondents admission.
In respect of the charge of dishonesty, the
panel also found that charge proven by
applying the legal test of dishonesty to the
evidence submitted.
The panel found that the respondents
actions were in breach of Principle 1 of the
Actuaries Code and, in any event, constituted
misconduct in terms of Rule 1.6 of theDisciplinary Scheme.
As a result of the finding of misconduct, the
panel imposed the following sanctions:
suspension from membership of the IFoA
from 1 July 2014 to 3 August 2015.
costs: having considered the conduct of both
parties to the case, and taken into account the
respondents submission on costs, the panel
considered it appropriate to make an award of
costs of 5,104.20 against the respondent and
to require that they be paid by no later than
31 December 2014.
Full reports on the above cases, including thepanels reasons, can be found on the IFoAs
website atwww.actuaries.org.uk
Disciplinary Tribunal Panel hearings
SHUTTERSTOCK
Michael Tobias FFAOn 21 May 2014, the Adjudication Panel
determined that the respondent had failed to
produce suffi cient records to prove
participation in continuing professional
development (CPD) events entered on his
record. The panel dismissed an allegation that
the respondent had not complied with the CPD
monitoring exercise. In accordance with Rule
4.4(a)(i), the panel invited the respondent to
accept the following sanctions:
a reprimand; and
a fine of 750.
The respondent accepted that there
had been misconduct and accepted theabove sanctions.
Richard John Hall FIA
On 21 May 2014, the Adjudication Panel
determined that the case report disclosed a
prima faciecase of misconduct in respect of an
allegation that, between March 2013 and
October 2013, the respondent in the
employment of his previous employer sent
confidential material to his personal emailaccount for no legitimate business purpose, in
contravention of clause 25 of his contract of
employment. The Adjudication Panel
dismissed two further allegations that did not
disclose aprima faciecase of misconduct.
In accordance with Rule 4.4(a)(i), the panel
invited the respondent to accept the
following sanctions:
a reprimand; and
a fine of 4,000.
The respondent accepted that there had
been misconduct and accepted the sanctions.
See full reports atwww.actuaries.org.uk
Changes to PractisingCertificates Schemes
Members are reminded that changes to the
Practising Certificates Scheme came into effect
on 1 September 2014. View the changes at:
tinyurl.com/lnxjZk5
N E W S I N B R I E F
Adjudication Panel hearings
Following Augusts commemorations around
the world, writes IFoA president Nick Salter,
it seems right to take a moment to reflect onthe First World War, which started 100 years
ago last month. The figures are truly shocking
some 10 million soldiers died in battle as well
as 7 million civilians, in a war that touched
people around the globe. We all have a duty to
ensure that this does not happen again, but this
leaves me thinking about the good, ordinary
people on both sides who gave their lives for
their country. We should not forget the fallen.
President urgesremembrance
-
8/10/2019 Act Sept14
13/52
13www.theactuary.com
September 2014 T HE ACT UA RY 1 3
Life Conferenceand Exhibition 20149-11 November, ICC, Birmingham
Whether UK based or international, the Life Conference
is the premier event for life insurance professionals.
The plenary sessions will give you the opportunity to hear
insights from well-regarded industry and market leaders.
This year our keynote speakers include:
Steve Webb MP, Minister for Pensions
Nigel Wilson, CEO, Legal & General
Jasmine Birtles, Broadcaster
Sarah Harper, Director of the OxfordInstitute of Population Ageing
Andrew Roberts and Ross Walker,Economists, RBS
This will set the backdrop for a broad range of technical and
non-technical workshops where you will be able to learn
from, as well as challenge, knowledgeable specialists. The
ideas with a broad range of professionals.
Book your place by 15 Septemberto ensure the Early Bird Fee.To find out more information about the Conference and to book a place visit: http://bit.ly/1rDb8T0
Find out how your company
can be involved in the Life
Conference and Exhibition 2014.
Please contact:
Sponsorship andExhibition Opportunities
Keynote Speaker
Announced:
Steve Webb MP, Minister
for Pensions will close
the Conference
EVENTS AND CONFERENCESGIRO2014
23-26 September,
Celtic Manor Resort
You can still book for GIRO 2014, the
premier conference for general
insurance actuaries. The theme is
innovation and we are delighted to
announce that delegates will be able
to engage in workshops and interact
in real time with plenary speakers
via the new freeGIRO2014app,
available to download from the
Apple Store and Google Play.
The app will allow you to browse the
programme and delegate list, plus
details of presentations, including
Bank of England governor Mark
Carneys keynote talk and author
and philosopher Alain de Bottons
views on The ever-changing world
of work.
To book, visit tinyurl.com/n3vv4jr
or email the event manager at
Follow GIRO 2014 conference on
Twitter at#IFoAGIRO2014
Senior Life Actuaries
Workshop
30 September, 09.00 to 17.00,
30 Euston Square, London
Responding to feedback from
members of the Life Practice, the
Life ECPD Committee is planning
an autumn event aimed specifically
at senior actuaries and actuarial
function holders (AFH) who are
preparing for the year end. This will
be an interactive workshop, with an
agenda built around suggestions
from the senior actuary and AFH
community. This event replaces the
CILA II event of previous years.
For further information, visit:
tinyurl.com/jvrw4cd
Model Documentation
Workshop
7 October, 09.00 to 12.00,
Staple Inn Hall, London
Producing and maintaining
good-quality model documentation
is an essential part of daily actuarial
work. Representatives from the
Prudential Regulation Authority
(PRA), audit and actuarial education
will explore what this entails. This
seminar is particularly beneficial for
those less familiar with CA2 or
Solvency II. The final programme is
now available.
For further information, visit:
tinyurl.com/pot7gmf
Momentum Conference 2014
3-5 December, Edinburgh
International Conference Centre
For further information and to book,
visittinyurl.com/mhdbayx
SAVE T HE
DATE2014 Actuarial Teachers and
Researchers Conference
1-2 December, University
of Edinburgh
Further information and a call for
presentations will be issued shortly.
Queries should be directed to
-
8/10/2019 Act Sept14
14/52
www.theactuary.com1 4 T HE ACTUA RY September 2014
NewsPeople & Society
If you have any newsworthy itemsfor these pages please [email protected]
By Nicola ToozeOn 19 June, the SIAS ten pin bowling took
place in Elephant and Castle. Seventeen
teams of three battled it out for the esteemed
first place prize. Play went a little slower than
usual, as teams took it in turn to watch the
disappointing World Cup England
performance between bowls.
Congratulations go to I cant believe its
not gutter from Ageas Protect, who scored an
impressive total of 857 over two games to take
first place, with each member of the team
scoring over 100 points in each game!
Other special mentions go to Vishal Patel,
who got the highest individual score for one
game of 204 (five strikes and three spares)
and to Alex Aiken, who found out he had
qualified while at the bowling alley and not
surprisingly never finished his bowling game!
Prizes were also awarded for some
impressive bowling by Palace Superbowl in
their World Cup giveaway. Many thanks go
to Palace Superbowl and to all the teams
that took part.
Bowlers not gutted by football
The IFoA Health and Care Board is sad toreport the recent passing of Robert Plumb,long-time IFoA volunteer and member.Robert (Bob) was well known to manyhealth and care actuaries for his valuableinsights, both from commercial andacademic perspectives. Notably, he wasvalued as an expert in PHI now known asincome protection, and he served for many
years on the Health and Care Board,helping to push forward timely and
important CPD and research for IFoAmembers. His work on the exam syllabuswas particularly invaluable.
He will be most remembered for hiswillingness to put forward the firstquestion at a seminar we could alwayscount on him! Those wishing to sendcondolences can get in touch withJennifer Chapin, practices manager,
health and care:[email protected]
Obituary: Robert Plumb
Actuaries takento the Tower
SHOOTING FOR GOLD: Congratulations to David Luckman, an actuary who won his
second gold of Glasgow 2014 in the individual full-bore rifle Queens Prize event. David, 38,
added to the pairs gold he had won with Parag Patel at the Commonwealth Games.
By Bill RaynerA party of 60 visited the Tower of London to
watch the Ceremony of the Keys, the daily
formal closure of the Tower, a traditional
practice observed for centuries.
The Company was lucky to have yeoman
warder Colin Smith MBE as guide for a short
walking tour of the Tower. He also arranged
access to the Yeoman Warders Club for a buffet
and drinks, a privilege for the group as visitor
access is only granted by a yeoman warder
personally. Throughout there was a steady flow
of fascinating explanations of the history and
rituals of the Tower, ranging from the gore of
torture and executions to the daily working
routine, and the most popular questions posed
by 21stcentury tourists, each tale a source of
(often mischievous) amusement.
The ceremony was followed with predictable
military precision. Most in the party returned
to the club afterwards to enjoy the hospitality
and to marvel at the memorabilia collected by,
and gifted to, the club over many decades.
Births: Ajeet (Global Thematic Partners)and Charlotte (Mercer) Manjrekar are
pleased to announce the birth of their babyboy, Theo Ravin Manjrekar, on 23 May.
-
8/10/2019 Act Sept14
15/52
www.theactuary.com15September 2014 THE ACTUARY
By Derek NewtonOn 8 July, Drapers Hall in London hosted the
installation of Martin Miles as the 36thmaster of
the Worshipful Company of Actuaries, together
with Peter Thompson as senior warden and
Michael Tripp as junior warden. The ceremony
took place in the Court Dining Room with a
dinner that followed in the Livery hall.
The Companys chief guest at the dinner was
Michael Fallon, MP for Sevenoaks and then
minister of business and energy, now secretary
of state for defence. Other guests of members
included Greg Andrews, chief executive of
Christs Hospital Foundation; alderman Alison
Gowman, the master glover; John Dewhurst,
the master tax adviser; Michael Webster, the
master information technologist; and Neil
Braithwaite, chairman of the Brathay Trust.
The new master thanked Michael Fallon for
finding the time in his extremely busy schedule
to dine with the Company, before paying tribute
to his immediate predecessor as master, Charles
Cowling. He highlighted Charless recent
extraordinary achievement running 10
marathons in 10 days. While 5,000 people have
climbed Mount Everest, more than 800 have
won Nobel Prizes and more than 500 have been
into space, Charles was only the 79thperson to
do the 10-in-10. In so doing, Charles also raised
more than 65,000 for charity, including the
Brathay Trust.
Martin talked about the Companys
commitment to supporting education, both
mathematical and actuarial, and he took the
opportunity to present prizes to Clinton Elliot
and Ian Rogers for their excellent performances
in last years actuarial exams.
Before he closed proceedings he set the
Company the challenge of raising at least
200,000 a year for the next five years which
he described as a Million-in-five challenge to
put his predecessors paltry 10-in-10 in the
shade. Martin also paid tribute to the very first
master of the company, Geoffrey Heywood,
who died a few weeks earlier, aged 98. He had
contributed greatly to the Company and to
the actuarial profession over many years and
continued to support the Company even in his
twilight years. He will be fondly remembered
and greatly missed by many.
Martin Miles made master
We would be delighted to hear from
you if you have any newsworthy
items for these pages. Please contact
Yvonne Wan [email protected]
New actuaries
lauded at dinnerBy James Falla and Rosie AllsoppThe qualification of six new actuaries was
celebrated at the annual dinner of the
Channel Islands Actuarial Association (CIAA)
at La Grande Mare Hotel.
More than 80 people attended, including
members from the finance and public sectors.
Guest of honour was David Hare, president of
the Institute and Faculty of Actuaries.
He described the critical role of the profession
and the contribution actuaries make to
society: To have four new Fellows and two
Associates is remarkable given our
population and that we have less than 50local members, including trainees. It must be
a record, said Francis Kehoe, president of the
CIAA. Their success reflects commitment
and discipline combined with academic
achievement, as actuarial exams are
renowned for being most challenging.
Mr Hare presented certificates to new
Fellows Sam Langlois, Gayle Lloyd, Andy
Mountford and Stacey Wilen, and Associates
Carolyn Baty and Luke Mauger.
By Bijal PatelDid you know that one in three people over 65
will die with dementia? Or that excessive
drinking in mid-life doubles the risk of
developing it? It is World Alzheimers Month
and important for us all to get informed, raise
awareness and challenge stigma.
A team of interns at Lloyds Banking Group
(LBG) have been fundraising for Alzheimers
Scotland and generating as much awareness
as possible. They have been selling fortune
cookies, running marathons, organising pub
quizzes, bag packing at supermarkets,
mountain climbing, penny collecting, hosting
competitions and many other activities.
The fundraising frenzy hasnt been limited
to the interns. Toby Strauss, group director for
Insurance at LBG, and a host of insurance
personalities within the group, along with
Scottish Widows, have been eagerly training
for their Prudential Ride London-Surrey 100
cycle, creating an atmosphere of generosity
and team spirit from the top down. They have
already raised more than 10,000 and,
together with the commercial banking team,
have raised more than 32,000. This is in
addition to the incredible 4 million the LBG
has already raised.
Friendships have been cemented, a great
time has been had by all and tons of money has
been raised. Alzheimers Scotlands Live Well
Campaign is a fantastic programme that aims to
train carers across the UK so that they have the
skills and support necessary when being the
prime carer for a loved one with dementia.
www.alzheimers.org.uk
Fundraising frenzy at Lloyds
LIKE US ON FACEBOOK
www.facebook.com/
TheActuaryMagazine
JOIN US ON LINKEDIN
www.linkedin.com/groups/Actuary-
magazine-UK-Group-3751335
FOLLOW US ON TWITTER
@TheActuaryMag
@ActuaryEditor
Last month, actuaries who lost their lives
during the First World War were remembered
by the IFoA. To coincide with the centenary
of the outbreak of the war on 4 August 1914,
the IFoA published a list of the names, ranks
and regiments of the 43 Faculty of Actuaries
members and 82 Institute of Actuaries
members who lost their lives in service.
A total of 198 Faculty members and 430
Institute members served in the armedforces during the 1914-1918 war.
Remembering World War I
t
-
8/10/2019 Act Sept14
16/52
THE ACTUARY September 201416www.theactuary.com
MORE GI NEWS ONLINEFor further GI news,visit www.theactuary.com/news
Air disasters to increasewar-risk premiums by 300%Insurers are expected to hike war risk premiums by up to 300%
following the spate of flight disasters triggered by conflicts around the
world, a senior aviation insurance executive has told The Actuary.
Malaysia Airlines Flight MH17 crashed in Ukraine on 17 July after it
was shot down by a surface-to-air missile as it flew from Amsterdam to
Kuala Lumpur killing all 298 people on board. Fighting between rival
militias at Tripoli airport and the militant attack on Karachi airport in
June also fall on the war-risk market, as does half of the $100m hull loss
on flight MH370, which disappeared over the Pacific Ocean in March.
Philip Smaje, global head of transportation broking and chief
executive of aerospace for broker Willis, said: In the aviation hull and
liability insurance market there will be a reaction in terms of pricing
levels The abundance of capacity could limit the extent to which
insurers can hike rates. But in the war risks market, certain insurers
have inferred that hull war rates could go up approximately 300%.
Towers Watsons senior consultant Tim McMurrough agreed that the
aviation war market would see rates increase quickly and significantly,
with underwriters hungry to achieve payback. He told The Actuary
that the four war-risk incidents would lead to very material losses for
insurers as the war-risk market within aviation is small, with income
of $65-$70m. So, in the aviation war market, it looks likely that we will
see significant rate increases, he concluded.
See more at: bit.ly/1s37xtT
Government to cap fees forwhiplash medical reportsThe fees for whiplash medical reports are to be cut significantly as
part of government efforts to clamp down on insurance fraud, justice
secretary Chris Grayling has announced.
It follows moves to discourage insurers from settling whiplash
claims that are not backed up by medical evidence. Doctors preparing
whiplash assessments are also to be prevented from offering treatment
to injured claimants to ensure that incentives are removed.
From October, medical professionals can only charge 180 for an
initial report, reflecting the time taken to carry out assessments and
write them up. Currently, prices of up to 700 are charged, leading to
concerns that they are being used to generate profit.
Grayling said: Honest drivers have been bearing the cost of a
system that has been open to abuse and it is time for a change. TheAssociation of British Insurers also welcomed the announcement.
See more at: bit.ly/1lj0sYg
GENERAL INSURANCE NE WS ROUNDUP
The House of CommonsJustice Committee hascriticised a government review of
compensation claims for the asbestos-
related disease mesothelioma,
including an agreement reached with
the insurance industry to pay for
some deals.
The Mesothelioma Claims
report concluded that the review,
which examined the law relating to
compensation claims, had not been
undertaken in a thorough and even-
handed manner.
Committee chair Sir Alan
Beith MP said: We listened carefully
to views on both sides of an emotive
and polarised debate about the
process of claiming compensation
for this terrible disease, caused by
exposure to asbestos. We have
concluded that the governments
approach has been unsatisfactory on
a number of counts.
MPs were concerned government
had not been transparent or open
about the fact that its overall policy
in relation to mesothelioma had
been shaped in accordance with an
agreement reached with insurers.
A Ministry of Justice spokesman
said: We are considering the best
way to get claims settled fairly and
quickly. We will consider the reports
recommendations and respond in
due course.
The Association of British Insurers
said: We make no apologies for
negotiating with government a
scheme, paid for by insurers, that
will compensate an extra 3,000
sufferers over the next 10 years, who
would otherwise go uncompensated.
See more at: bit.ly/1sWVTFg
GETTY
Driverless cars require new
insurance approachThere needs to be a fresh approach to motor insurance if driverlesscars are to become a feature of the UK road landscape, a senior
industry leader has claimed.
The government announced that it is to explore the potential
to introduce driverless cars onto UK roads from the start of next
year. A review by the Department for Business, Innovation & Skills
is examining feasibility, looking at the type of insurance and
regulations other countries have put in place.
AA Insurance director Simon Douglas said: Motor insurance is
based on risk and much of the cost of a policy is associated with
the driver such as age, experience, past claims and convictions.
If that element is largely removed, then driverless cars could
potentially attract significantly lower premiums than conventional
vehicles, providing the technology that operates them is reliable anddemonstrably reduces the likelihood of a collision.
James Dalton, head of motor at the Association of British
Insurers, agreed that more research on driverless cars was needed.
Graeme Trudgill, executive director at the British Insurance
Brokers Association, said the research into driverless cars was a
positive move. Further work will need to be completed on behalf
of the industry before we understand the full implications of this
technology and its impact on the insurance market, he added.
See more at:bit.ly/1tt9ocu
GI
MPs criticise government overmesothelioma review
-
8/10/2019 Act Sept14
17/52
September 2014 THE ACTUA RY 1 7www.theactuary.com
NewsIndustry
BREAKING NEWS ONLINEVisitwww.theactuary.com for up-to-datenews and to register for weekly news alerts
IAS19 change could wipe 25bn fromcompany balance sheets
More than 25bn could be wiped off the balance sheet ofFTSE 350 companies when proposed changes to pensionaccounting standards come into effect in 2017, Aon Hewitthas claimed
On 15 July, the International Accounting Standards Board proposed
changes to its IFRIC14 guidance, which supports the international
accounting standard IAS19. Proposed changes would mean that surplus
on defined benefit pension assets would no longer be recognised unless
there is a realistic expectation that the company will eventually be able to
have access to the surplus.
According to Aon Hewitt, around 25% of FTSE 350 companies have an
accounting surplus in relation to their pension scheme that is recognised
on their balance sheets. Aon said the proposed changes would have a
significant impact on balance sheet calculations.Aons principal consultant, Simon Robinson, said: The big change
being proposed is that in the future, when assessing the funding position
of a pension scheme, companies will have to take into account the
expected behaviour of the trustees. This means that they will need to
recognise trustees potential future actions, such as de-risking exercises,
that might reduce the calculated accounting surplus.
Under the new proposals, Robinson said he expected most FTSE 350
companies with schemes that already have a surplus to reduce their
balance sheets by 8bn.
See more at: bit.ly/1qtdHlb
Solvency II: small insurers could cutcosts by outsourcing actuaries
Many UK-based general insurers could benefit fromoutsourcing their actuarial function as they prepare forSolvency II to avoid the cost of the extra expertise needed,OAC Actuaries and Consultants has said
The European Unions upcoming Solvency II capital rules require
all insurers to have an actuarial capability to help them assess their
liabilities.
However, actuarial and financial modelling consultancy OAC warned
that many firms would not have suffi cient assets under management
to allow them to meet the cost of the extra regulatory obligations.
Its examination of a sample of 28 firms found 17 had assets under
management the market value of the firms assets of under 150m.
Speaking to The Actuary, Christopher Critchlow, consultant actuary at
OAC, said: Actuaries are not cheap and the work that needs to be doneis such that you need a cross-section of skills to ensure you can provide
the breadth and depth of an actuarial function for any insurer, no matter
how big or small the needs. For smaller firms, therefore, it makes greater
economic sense and makes for a more well-rounded actuarial service to
outsource the function to specialists.
He added that companies needed to start making preparations for
these changes now as the deadline [1 January 2016] is just around the
corner and firms cant afford to fall behind.
See more at: bit.ly/VHRbfN
Top firms devote over a thirdof DB spending to deficits
FTSE 350 companies devoted 37p out of every
1 spent on defined benefit (DB) schemes to
clearing pension deficits last year, according
to an examination of 220 FTSE 350 companies
with DB pension arrangements by actuarial
firm Barnett Waddingham.
Although deficit contributions were at their
lowest level for five years, 40% of companies
were still paying more towards deficits than to
future pension provision for their employees.
Nick Griggs, head of corporate at the firm,said: This is striking and illustrates just how
much companies are still having to pay in order
to reduce funding shortfalls. This 37p, along
with the significant amounts that have been
paid historically, is being diverted to pay for
pensions for the generation of employees lucky
enough to receive a DB pension.
Nonetheless, the overall picture of DB
funding last year was better than in previous
years, according to the firms fourth annual
Impact of Pension Schemes on UK Business
report. It found that the total level of DB
deficits decreased from 63bn to 56bn in 2013
because of good asset performance as well asrising bond yields.
See more at: bit.ly/1tkIJjX
Scottish independencetimetable too short
The timetable for Scottish independence doesnot give businesses enough time to make
the necessary changes to workplace pension
arrangements and would be significantly
worse for companies that operate cross-border,
according to global HR benefits and human
resource consulting firm Buck Consultants.
The firms Coping With the Issues report
outlines the workplace pensions issues that
would arise from a Yes vote in the referendum.
Businesses that run a single workplace
pension scheme covering employees on both
sides of the border might have to split the
scheme into two parts, the report said. This
would significantly change future workplaceprovisions, with such schemes unlikely to be
replaced by defined benefit schemes.
Steven White, managing director for Europe,
said: One thing we can be confident of is
additional costs, both to defined benefit and
defined contribution schemes, which may
suffer reduced economies of scale. These costs
would be likely to fall across employers and
employees on both sides of the border.
Independence is expected to be implemented
on 24 March 2016, 18 months after the vote.
See more at: bit.ly/1p0pCp5
UK consultationon Solvency IIlaunched
The Treasury has openeda consultation on how the
government should
implement the European
Unions Solvency II
directive in the UK. The
launch of the six-week
consultation on 6 August
comes after the initial
plan to hold one in 2011
was abandoned as work
was ongoing to finalise the
Omnibus II directive that
underpins Solvency II.
See more at:bit.ly/1kXPczT
Regulator yetto issue fines onauto-enrolmentThe Pensions Regulator
revealed that it has had to
take action 23 times since
July 2012 to ensure that
employers comply with
their auto-enrolment
duties. However, in its
first quarterly auto-
enrolment compliance
and enforcement report,
the regulator said it had
not yet had to use its
powers to issue 400
fixed penalties for failure
to comply.
See more at:
bit.ly/1s4frDs
Reinsurancesector urgedto diversify
Standard & Poors (S&P)has advised the global
reinsurance sector to
diversify its business
risks or face negative
ratings and increased
volatility in earnings
between 2014 and 2015.
Increased competition
has caused premiums to
decline, S&P said, with
the knock-on effects
threatening reinsurers
ability to maintain their
financial strength.See more at:
bit.ly/1nek5LW
-
8/10/2019 Act Sept14
18/52
THE ACTUARY September 201418www.theactuary.com
On my [email protected]
Lord Robert Winston,world-renowned scientist,emeritus professor offertility studies at ImperialCollege London, Labourparty peer and popular TVpresenter, has a reputationfor being provocative in hisviews. Angus Macdonaldand Sharon Maguiremeet him to find out why
Tales of
evolution
MANUEL VASQUEZ
-
8/10/2019 Act Sept14
19/52
September 2014 T HE ACT UA RY 1 9www.theactuary.com
It was a packedhouse at the Royal Society of Medicine on
15 May, when Lord Robert Winston delivered the Institute andFaculty of Actuaries Spring Lecture, on the topic of Genes,
Genomics, Genetics: Human or Hubris?
Millions of TV viewers will recognise him from the vast
array of largely BBC commissioned programmes. Among
them the BAFTA award-winning series The Human Body,and
Walking with Cavemen a four-part documentary series about
human evolution.
As the countrys leading expert on in vitro fertilisation (IVF) ,
he is outspoken and more than happy to venture an opinion on
the commercialisation of fertility treatment via private clinics;
the inadequacies of the Human Fertilisation and Embryology
Authority; and is scornful of the UK governments attempts to
reform the National Health Service. In keeping with his robust
reputation he is also keen to acknowledge the downside ofevery advancement.
Speaking to The Actuaryjust prior to the evenings lecture,
Winston gave an insight into the main issues currently
preoccupying him, paying particular attention to the premise of
uncertainty and the diffi culties of prediction; both topics of
great interest to actuaries.
He immediately sets the record straight in relation to
sensationalist tabloid headlines that have stated with horror
that certain IVF treatments will inevitably lead to designer
babies. Winston insists that this is not the case. It should be
possible to use a technique that we have devised to introduce
new genes into humans without using a complex technology
so you wouldnt need to use IVF. Any risks that would need to
-
8/10/2019 Act Sept14
20/52
be managed would be for society, rather than scientists, to
decide. They would be very different risks, he adds. The
issue is that we might be able to produce humans that have
enhanced attributes, and in so doing, we may change theway humans might be in the future. That technology is
nearer now than it ever has been, and with it comes all
sorts of implications.
The implications he refers to would revolve around
whether it is ethically permissible to alter a patients DNA,
and potentially that of any offspring. Are we to give
scientists a free rein in manipulating our genetic blueprint
via eggs and sperm?
Winston is mindful of the reasons parents may seek
fertility treatment, and sees private healthcare as a
problematic issue. It is, he says, a market of anxious couples
and willing scientists keen to try out experimental
treatment. He has gone as far as to suggest that when a
symptom of infertility is initially diagnosed, IVF isautomatically given despite there possibly being other,
cheaper methods that are more effective, and that the
industry watchdog is doing nothing about it.
There are, he says, all sorts of reasons why people may
decide they want to try and enhance their offspring we
send them to better schools so we might as well give themgenetic advancement in intelligence, memory or cognitive
ability of some kind. He adds that if we can train them to
become outstanding athletes then we might as well
consider modifying the genes that control muscle
development too. Perhaps less controversial is that it may
allow scientists the ability to replace faulty or unhealthy
genes. One example of this is how our genome could be
altered to make future generations resistant to HIV.
Emergence of epigeneticsIt has often been said that knowledge of our genetics will
change medicine and make health outcomes more
predictable, but with a few exceptions that has yet to
happen. So are we being wildly over-optimistic aboutscientific discoveries, of which genetics is a prime example?
Winston thinks that the whole notion of genomics is
THE ACTUARY September 201420www.theactuary.com
MANUEL VASQUEZ
-
8/10/2019 Act Sept14
21/52
misunderstood. I dont believe that it is
going to be quite as important as hasbeen claimed, he says. I think we will
be looking at the field of epigenetics
which is more to do with how we inherit
certain characteristics.
One of Winstons primary concerns is
public health and how to improve it. In
this the potential for epigenetics is
massive, and the idea of using it as a way
of improving the environment for
humans, and to ensure better health, is
an area he thinks actuaries may well be
interested in.
He later explains in greater detail
how there is a real need for public
engagement. How can we educate the
population to protect their own health?
One major flaw, according to Winston, is
that we are not doing the social science
research we should be doing. The need
to address social conditions rather than
scientific ones remains a bugbear of his.
He sees diabetes (type 2) as a scourge
which will more than likely double in
the next 15 to 20 years, largely through
obesity. Pandemics will be on the
increase as the danger is more immediate with the ease and
accessibility of air travel. Viruses are equally perilous as
they can mutate across species. Coupled with this is the
increasing ineffectiveness of antibiotics with not reallyany new approaches to antibiotic medicine in recent years.
I pre-empt his later lecture by asking about stem cell
therapies, and the potential they have in the treatment and
management of some illnesses. Again, this is another
important field that needs far more research, and it is one
that is very diffi cult to predict. Winston seems unsure of
just how much it can achieve: It has prospects for being
really useful to develop tissues, but Im not so sure about
organs, at least not in the near future. There are some
diseases, he claims, where it is diffi cult to see how stem cell
biology can be as helpful as it is claimed. He cites dementia
as a prime example.
So where does all this leave the insurance industry?
There is currently a moratorium on the use of geneticinformation by insurance companies. Would Winston like
to see this continued, or is there a place for some genetic
information to be utilised? Winston reverts back to his
earlier premise that there is a misunderstanding of genetics.The genome is not going to be as predictive in the way it
has widely been rooted, he says, and he remains suspicious
of the claims that sequencing the human genome will lead
to a massive change in the way we are able to insure in the
next 10 years. The whole point is that the field is
immensely complicated the amount of data so
overwhelming, that it is diffi cult to see how big data can be
analysed in individual cases to create any useful
information that might be valuable to life insurers.
Thinking aheadWinston doesnt believe we anticipate the future terribly
well. I may well be wrong, because you may say actuarial
studies do that brilliantly, but I suspect its only done in a
limited model, he says. When it comes to the health of a
population, did actuaries consider and factor in 30 years
ago that we could be wiped out by a pandemic infection, or
that we might be destroyed by climate change? These, he
believes, are very serious questions. He sees pandemic
infections as probably the greatest threat facing humans.
Climate change is certainly happening and could have a
devastating effect. How could we go about deciding the
effect of a 4C rise in the temperature in Britain in the
next 30 years?
Winston is convinced that we are all consumed with an
arrogant view of our own ability to change the world, and
that most things that come along are largely unpredictable.
When asked what role the actuarial profession might play
in any of these developments hereplies that it depends on whether
actuaries were any better at predicting
the future than anyone else. We
always believe experts can predict the
future scientists certainly cant.
He cites as an example, the laser,
now so ubiquitous in everything from
electronic devices to experimental
fusion science that it shapes our
modern lives. Einstein established the
foundation of the laser in 1917, yet it
took 50 years for someone to make
one, and when they did, no-one could
think of any use for it.Thats how diffi cult meaningful
predictions can be. a
September 2014 T HE ACT UA RY 2 1www.theactuary.com
On my [email protected]
We might be able to produce humans withenhanced attributes, and in doing so we may
change the way humans might be in the future
-
8/10/2019 Act Sept14
22/52
-
8/10/2019 Act Sept14
23/52
September 2014 T HE ACT UA RY 2 3www.theactuary.com
THERESA RUHAYELis a
structured finance analyst,
product development, at REEF
Partners. She holds a masters
in international finance from
Lund University, Sweden
To date, utilitycompanies have been the
most important and largest developers of
renewable energy assets, mostly by issuing
investment grade corporate bonds which are
then purchased by traditional corporate bond
investors. However, a new investor-base is
required to finance the need for geo-
politically secure, environmentally affordable
and competitive energy in the 21stcentury
economy. The market has had to diversify by
seeking new investors that are able to provide
capital, like pension funds and insurers.
Securitisation is the pooling of assets,
typically representing the payment obligationsof a number of borrowers. Renewable energy
assets, such as electricity generated from
onshore and offshore wind farms, solar parks
and other renewable energy technologies, form
potential assets for securitisation. With a
weighted average life of 20-25 years, this asset
class is stable, uncorrelated and its cashflows
are inflation protected.
Financing new energy assetsSolarCity, an American provider of energy
services, announced in July 2014 the pricing of
the third offering in its solar asset-backed
programme. The LMC Series III, LLC is priced at
$215.5m principal aggregate amount, secured by
and payable solely from the cash flow generated
by a pool of photovoltaic systems, an
arrangement of components designed to supply
usable electric power for a variety of purposes,
using the sun or, less commonly, other light
sources as the power source.
Elsewhere in Jdras, Sweden, an interesting
example of an onshore wind farm was
commissioned in 2013. The 203 MW wind
project had a total capital expenditure (CAPEX)
of 360m and was innovative due to the
guarantee placed by the K
