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Editorial advisory panel
Peter Tompkins (chairman), Daniel
Ah-Sun, John Batting, Barry Botelho,
Matthew Edwards, Nigel Hayes,
Julian Leigh, Martin Lunnon, Andrew
                                       Actuary, not responsible
Smith, Chris Sutton, Paul Sweeting,
Matthew Wheatley
Margaret de Valois
HSBC Actuaries and Consultants
Ltd, Level 16, 8 Canada Square,
London E14 5HQ
T 020-7991 3165
F 020-7991 4646
Managing editor
John Harris
28 Burghley Road,
Bristol BS6 5BN
T 0117-924 5060
F 0117-924 0888
Features editor
Wendy Crockford
112B Carshalton Road, Sutton,
Surrey SM1 4RL
T 020-8643 5205
e wendycrockford
                                       ‘NOT A JOB TO BE TAKEN LIGHTLY’ WAS THE FIRST THOUGHT          Easy win #1 is a ‘Hatches and matches’ column.
Deputy features editor
Paula Jackson                          that struck me on being appointed to the role of             Evidence from the past seems to suggest that some
PricewaterhouseCoopers LLP
                                       editor of The Actuary magazine. After all, this is one       actuaries find other actuaries more attractive than
101 Barbirolli Square, Lower Mosley
Street, Manchester M2 3PW              of the only printed forms of communication to reach          non-actuaries. Many actually get married and have
T 0161-247 4422
                                       all members of the profession, wherever you are in           actuarial children. One theory is that this is something
F 0161-247 4113
e           the world. Editing this publication therefore carries        to do with social protection for others. Please write in
News editor                            some responsibility for the written material fellows,        with your theories and if we get enough we could do
Seamus Creedon
                                       associates, and students receive in order to supple-         a full feature on it.
KPMG,1 Canada Square,
London E14 5AG                         ment and improve the toolkit of skills and knowledge           As the past is a good guide to the future, it is my
T 020-7311 5075
                                       we need to do the job. In light of the scrutiny the pro-     expectation that we will have many more actuarial
F 020-7694 2340
e            fession has faced by the Morris review, choosing this        hatches and matches and these should be celebrated.
Company news                           material is no mean task.                                    We have the obituaries, so why not feature the happy
Laurence Kleerekoper
                                          On the other hand it is your responsibility to ensure     stuff as well? Our first list appears on p18 and I encour-
Hearts of Oak Friendly Society,
9 Princess Road West,                  that the material we receive and can choose from is          age you to look out for anyone you recognise and give
Leicester LE1 6TH
                                       interesting and informative. The magazine is pub-            them a call to congratulate them. If you are about to
T 020-8905 5044
e              lished by SIAS and is therefore independent from the         get married, enter into a civil partnership, or have a
Puzzles editor                         Faculty and Institute. This allows healthy professional      baby or two, please let us know. Non-actuarial couples
Rakhee Raja
                                       debate to develop in a neutral environment, and for          are also very welcome.
55a Moss Road, Pinner HA5 3AZ
T 020-8429 9415                        authors to publish features autonomously. As mem-              In March we shall introduce two more new columns,
                                       bers of the profession, you have the opportunity to          both taking the form of a quick interview. The ‘Trail-
Student page editors
                                       make the most of this platform by contributing to the        blazer’ column will feature an actuary who has already
Jean Eu
RGA UK Services Ltd, International     letters page and by contributing features for publica-       made a contribution to the business community and
Financial Centre, Level 40, 25 Old
                                       tion. In this way, between us all we can put together a      the ‘Actuary of the future’ will feature one of our ris-
Broad Street, London EC2N 1HQ
T 020-7448 8255                        magazine that you want to read and take joint respon-        ing stars. We are interested to know whom you would
                                       sibility for the end product.                                like featured, so please send in your nominations. If
Jennifer May
                                          Anyway, this editorial is not about my passing the        none is received I shall be forced to resort to sticking
                                       buck in my first issue. What I am really interested in       pins in the list of members and be calling you some-
Production manager
Joanne Morley                          is what you think of the magazine. Past editorials and       time over the next two years.
Durwyn House, Long Marton,
                                       mutterings in the pub suggest that some of you feel it         Finally, I should like to say thank you to the outgoing
Appleby-in-Westmorland, Cumbria
CA16 6BN                               could be improved (yes, you know who you are). I             editor, Timothy Bramham, and student page editor,
T 01768-362361
                                       believe that the magazine, as it stands, does a good job.    Tristan Walker-Buckton, for all their hard work in the
F 01768-362262
e          However, given the importance of the publication I           past two years. Welcome to Jean Eu and Jennifer May
Editorial illustration                 am keen to hear your views and, where possible,              who are taking over from Tristan and providing advice
Satoshi Kambayashi
                                       implement improvements. And, as I am a ‘doer’ as well        and predictions on life as an actuarial student.
The Actuary online:
                                       as a ‘thinker’, I’ve bitten the bullet and put a couple of     I am looking forward to a great two years and hope
Site administrator                     simple easy wins in place from the start, both focused       that the December 2008 edition is a better and more
                                       on giving the average actuary in the street the oppor-       exciting magazine than this one.

                                                                                                                                     ✍ MARGARET DE VALOIS
                                       tunity to appear in print without first dying, being
                                       disciplined by the profession, moving job, or doing
                                       something embarrassing at a SIAS event.                                                                                                              JANUARY/FEBRUARY 2007        3

                                                                                    threat to members’ accrued bene-        margins into our assumptions’.
                                                                                    fits is the possibility of the            The Pensions Board’s e-alert
    Letters to the editor                                                           employer becoming insolvent             about mortality assumptions
                                                                                    when the scheme’s assets are in         seems to perpetuate the uncer-
                                                                                    shortfall. This risk is reduced to a    tainty. It confirms that the Scheme
    Discontinuing reality                  invest in equities at all unless their   certain extent due to the Pension       Funding Regulations state that
    I have always wondered why             assets are more than enough to           Protection Fund. From the mem-          actuarial assumptions must be
    those accountants and those actu-      cover the discontinuance liabili-        bers’ point of view, is this a risk     chosen prudently. It goes on to say
    aries who believe that FRS17 pro-      ties. (Such pension schemes are a        worth taking for the prospect of a      that both FRS17 and IAS19 require
    vides a meaningful number are so       rarity these days.) If equities are so   better pension? We see that the         best estimates of likely future
    keen on it. As David Linnell has       evil, who should ever invest in          demand for the removal of this          experience. It then concludes that
    explained, FRS17 may provide a         them? Is it only those that have         risk has not led to more secure         it is possible (my italics) for mor-
    suitable measure for valuing a pen-    completely hedged out all the risks      benefits, but rather lower benefits     tality assumptions used for
    sion scheme on a discontinuance        under the sun, and still have spare      in general, in the form of the mas-     accounting purposes to differ from
    basis. But why, when company           cash to indulge in some sin? (Good       sive exodus from defined benefit        those used for scheme funding.
    accounts are prepared and audited      luck to the LSE!)                        to defined contribution. So               Possible? If one assumption is
    on a going-concern basis, are only       The increase in pension                instead of living with the (hope-       prudent and the other a best
    the company’s pension schemes          schemes’ demand for long bonds           fully small) insolvency risk in a DB    estimate, are they not necessarily
    singled out for discontinuance?        owing to companies’ desire to            scheme, members now have to             different?
    Why should any pension scheme          reduce balance sheet fluctuations        bear all the investment and                                   Pete Davis
    be valued on a discontinuance          has already contributed to the fall      longevity risks in a DC scheme.                        18 December 2006
    basis unless there is the intention    and imbalance in yields. There are       While FRS17 and the ‘mark to
    that it should be discontinued and     simply not enough ‘matching’             market’ trend have improved             Regulating US insurance
    not merely closed to new mem-          bonds (or swaps) for all our pen-        transparency and consistency in         The article on the US P&C market
    bers? And why does FRS17 pre-          sion schemes even if you believe         financial reporting, I suspect this     in December’s issue contains a
    scribe conflicting bases for valuing   they actually match salary-linked        ‘side effect’ suffered by employees     statement that is not quite right:
    the assets and for valuing the         liabilities. If return-seeking alter-    has been casually overlooked in         ‘Before the McCarren (sic) Fergu-
    liabilities?                           natives are off limits, then the         favour of shareholders.                 son Act the federal government
                      Solomon Green        only other option must be cash                                Sunny Yang         played a big role in the regulation
                   15 December 2006        under giant mattresses? The ‘risk-                      13 December 2006         of insurance.’ Without going into
                                           free’ investment and funding                                                     an extensive discourse on US
    FRS17 and the after-affects            approach being advocated today is        Understanding the P-word                constitutional law, the US consti-
    again…                                 defeating the fundamental pur-           Having spent many years dabbling        tution allows the federal govern-
    I was somewhat puzzled by the          pose of occupational DB schemes          in actuarial valuations for a large     ment to regulate interstate
    recent letters on FRS17, and would     as opposed to pure insurance con-        life office, I’d like to think I have   commerce. An 1869 Supreme
    like to comment on the issue           tracts, which is (or at least used to    an instinctive feel for the meaning     Court case held that insurance was
    regarding equity investment in         be) to provide meaningful benefits       of ‘prudence’ in the choice of valu-    not ‘commerce’ and therefore not
    particular.                            efficiently with maximum flexi-          ation assumptions. As a pension         interstate commerce. As a result
      Investors in the stockmarket         bility in funding and minimum            scheme trustee, I was pleased           insurance was mostly regulated at
    have different time scopes and dif-    margin in cost, subject to an            when the p-word finally appeared        the state level.
    ferent objectives. There are gam-      acceptable level of security for         in regulations about scheme fund-         In 1944 the court reversed itself
    blers who focus on short-term          members.                                 ing. It filled what seemed to me        and ruled that insurance was com-
    volatility and willingly take on         Although the pension scheme is         like a gaping hole in a regime          merce. McCarran-Ferguson was
    non-market risk; and there are oth-    segregated from the employer’s           designed to offer security to mem-      enacted to maintain the state-level
    ers who wish to participate in the     business, the employer’s continual       bers in an uncertain world. Given       regulation (except as regards
    long-term real economic growth         commitment and ability to make           prudence’s long history in the          certain federal anti-trust laws).
    and diversify from other asset         sure the promised benefits are paid      world of insurance, I assumed             The article also opines that pre-
    classes in their portfolio. Final      is far from irrelevant. Because of       wrongly that its interpretation         mium rate regulation is the most
    salary pension schemes certainly       this, it is unreasonable to expect       would present few problems for          important role performed by the
    fall under the second category, and    absolute security of accrued bene-       pensions actuaries. The impres-         state insurance regulators. One
    their long-term nature arguably        fits to be met by the scheme’s           sion given by the trade press was       might argue that insurer and pro-
    places them in a better position       current tangible assets. Now             that actuaries’ views ranged from       ducer licensing and insurer finan-
    than most other investors to           employers are required by law to         ‘tricky, we need to go away and         cial examination provide much
    absorb the ups and downs. How-         fully meet the buyout cost if they       think about this’ to ‘let’s not get     greater benefits to the public.
    ever, some writers seem to suggest     wind up the scheme while being           bogged down in the idea that we                           David S Powell
    that pension schemes should not        solvent, so the only remaining           need to build contingency                                 9 January 2007

                              The editorial team welcomes readers’ letters, but reserves the right to edit them for publication
                       – please send your letter to the editor, Margaret de Valois, at the address on p3 or to

4   JANUARY/FEBRUARY 2007                                                                                                      

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