The Actuary Jun 2011 by shee8989

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									                                                 Published in London by the Staple Inn Actuarial Society

                           THE MAGAZINE FOR THE ACTUARIAL PROFESSION                                       June 2011

                                                      Plan of action
                                                                 Effective strategies in
                                                                         enterprise risk

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                                                                         Ronnie Bowie Q&A

Inside: Credit ratings post-Solvency II • Risk classification • PPI • Economic theory • Latest jobs
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                                        End of term
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Melanie Jacob
T +44 (0)20 7316 9618
E       June is so swiftly upon us and marks an historic moment for the Profession.
                                        Ronnie Bowie is serving his final month as first president of the Institute
Nicky Brown                             and Faculty of Actuaries and Jane Curtis, our first female president, takes
                                        over in July. In this issue, Ronnie not only delivers his final presidential
Sam Robson                              address but also shares his reflections on an eventful term of office, in an
                                        interview to be found on pages 25-26. Best wishes to Ronnie as he takes on
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                                          From our student page, Stephen Paines bids us farewell with his parting
Group editor-in-chief                   column and a lyrical tribute to the actuarial student. Thank you to Stephen
Jonathan Swift
                                        for an excellent tenure on the editorial team and best of luck to him and
Group publishing director               Caroline in their newly married life. We welcome Matthew Welsh whose
Mark Burton
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E    Apostrophes and solar cycles have
                                        proved effective at getting the
The Actuary website:                    profession talking, while actuaries and                      poetry seem to be the flavour of the
SIAS website:
Actuarial Profession website:           month. Read on to find out more!

                                        Marjorie Ngwenya
              20 888                    Editor
              ( July 2009 to
              June 2010)                                                                                                 June 2011   3
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The   Actuary
Editorial advisory panel
Peter Tompkins (chairman),
John Batting, Margaret de Valois,
Matthew Edwards, Martin Lunnon,
Richard Purcell, Andrew Smith,
                                                                                                       Contents                                   June 2011
Chris Sutton, Sherdin Omar

Marjorie Ngwenya
T +44 (0)7794 031 225
Features editor
Tracey Brown
Lane Clark & Peacock LLP,
                                                                                                           12   Profession news
E                                                                              16   Education news
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Deputy features editors
                                                                                                           18   Industry news
Adam Jorna                                                                                                 20   People/society news
Sonal Shah                                                                                                 22   SIAS events
Profession news editor                                                                                     52   Appointments and moves
Alison Jiggins
T +44 (0)20 7632 2172                                                                                      Comment
Industry news editor
Terren Friend
                                                                                                           3 Editorial
People/society news editor                                                                                      Marjorie Ngwenya looks forward to the end
Kelvin Chamunorwa
Towers Watson
                                                                         p32          Plan of action
                                                                                     Tom Durkin looks at
                                                                                                                of term
                                                                                                           6 Letters
T +44 (0)7502 107 322                                                         risk management strategy          In which actuaries discuss history and hypotheses
Student page editor
Stephen Paines                                                       and why it is a perfect opportunity   8 President’s comment
Government Actuary’s Department                                       for actuaries to make a difference        Ronnie Bowie reflects on the changes that have
T +44 (0)20 7211 2707                                                                                           occurred over the last year
Arts page editor                                                                                           10 Soapbox
Richard Elliott
Scottish Life
                                       Features                                                                 It’s high time that banks paid up over PPI,
                                                                                                                says David Worsfold
T +44 (0)7814 509 081
Puzzles editor                         25     Q&A: Ronnie Bowie                                            51 Book review
Tom Bratcher                                  Marjorie Ngwenya talks to the president of the                    Dermot Grenham reviews Population and
Towers Watson
E                  Institute and Faculty of Actuaries                                Development — The Demographic Transition
                                                                                                                by Tim Dyson
Published by the Staple Inn
Actuarial Society.                     28     Risk management: Speaking the language
                                              Patrick Kelliher outlines the Profession’s guidelines        Regulars
The editor, The Institute and
Faculty of Actuaries and Staple               for a common risk ‘language’
Inn Actuarial Society are not                                                                              46 Technology
responsible for the opinions put
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                                       34     Life: Terms of the guarantee                                      Anthony Dhanendran looks at the need for
this publication may be reproduced,           Alexander van Haastrecht examines the nuances of                  vigilance and tight security in the electronic era
stored or transmitted in any form
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                                              pricing guaranteed annuity options for variable annuities    47 Arts
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or otherwise, without prior written
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                                       41     Solvency II: Credit where it’s due                                an Edinburgh cinema
While every effort is made to                 What will be the impact of Solvency II on insurer credit     48 Puzzles
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accept no responsibility for any                                                                           50 Student page
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                                       42     Solvency II: The end of the beginning                             Stephen Paines pens his last article as student
Important information for                     The FSA’s Anthony Brown looks at what we have                     page editor
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ISSN 0960-457X                                                                                                                                       June 2011     5
    Letters                   Your view

Letters to the editor
In which actuaries discuss history and hypotheses

     Weighing up the ECJ gender ruling —             European authorities drive the final nail       Apostrophe catastrophe —
     response to P. Banthorpe and                    into the coffin of common sense by              response to N. McKay, May 2011
     E. Friedwald, May 2011                          declaring that age can no longer be used       Neville McKay avoids the ‘Mother’s Day/
     Peter Banthorpe and Eli Friedwald’s             as a pricing factor.                           Mothers’ Day’ apostrophe controversy by
     article on the ECJ gender ruling was very         Paul McHugh                                  favouring ‘Mothering Sunday’. This raises an
     informative and helpful, but I think they         10 May 2011                                  interesting side topic.
     are underestimating the potential impacts.                                                        ‘Mothering Sunday’ is not just another
     They may be correct in their assessment         The limitations of game theory —               name for Mothers’ Day. It is an older
     that retrospective application of the ruling    response to A. Smith, May 2011                 tradition in its own right. It is the day
     is likely to be avoided in statute law, but     A mathematician with no experience             that apprentices, especially those in
     I imagine that case law and consumer            of the real financial world might see           domestic service, returned to their mothers
     behaviour may lead to a significant effect on    merit in Andrew Smith’s suggestion             to show what skills they had learnt in the
     in-force policies for long-term business.       (The Actuary, May 2011) that game theory       preceding year. Note they returned to
         For example, consider female                should be applied to competition issues.       their mothers, not parents. Mothers are in
     policyholders whose pensions include            However, Andrew does not appear to have        charge of children’s education, fathers just
     guaranteed annuity options. When they are       carried out due diligence on the quite         pay the bills.
     offered a guaranteed annuity at retirement,     unrealistic simplifying assumptions on            For actuarial students, this should mean
     surely some will take the insurance             which the precarious mathematical edifice       taking to mother all the marked test papers
     company to court on the grounds that the        of game theory has been erected. To save       they have acquired during the year.
     guaranteed annuity being offered                others from having to plough through more      Perhaps accompanying them with an
     (under, effectively, a new contract) is lower   than 600 pages of almost impenetrable          examination question paper and the
     than would be offered to a male? Could this     mathematics in Von Neumann and                 notification of passing it. For those who
     not potentially lead to all female guaranteed   Morgenstern’s Theory of games and economic     have qualified, it could be an actuarial
     annuity rates eventually having to be           behaviour, I refer them to my analyses of      report they have prepared.
     increased to match male guaranteed rates?       these extremely restrictive assumptions as        That is, it should be something mothers
         Then there is the issue of lapses and       set out in my 1993 paper to the third AFIR     can be proud of in the same way they were
     associated anti-selection. By December 2012,    International Colloquium, in my 1996           when given a kindergarten test covered in
     new protection policies will be offered on      Faculty of Actuaries paper on financial         ticks many years before.
     unisex rates, which will undoubtedly lead       economics, and in my invited paper in            Robert Steel
     to an increase in lapses on in-force male       the November 2009 issue of The Journal of        2 May 2011
     protection policies where the insured is in     Financial Regulation and Compliance entitled
     good health, with a resultant deterioration     ‘Actuarial insights into the global banking    A case against authority
     in average mortality experience among           catastrophe’. My due diligence leads me        I am most interested in the judgment
     those policies which are not lapsed.            to the conclusion that game theory, an         in the recent case of the British Bankers
     This will, of course, lead to a deterioration   essential pillar of financial economics, is     Association against the FSA/FOS.
     in profits after December 2012, but really       a classic case of the very virulent GIGO          The case concerned new principles made
     needs to be anticipated via strengthened        syndrome — Garbage In Garbage Out.             by the FSA imposing an increased financial
     reserving assumptions now.                        Robert Clarkson                              burden on the banks in their claims
         These are just two examples showing           12 May 2011                                  handling of payment protection insurance
     the challenges that may face the                                                               complaints. The banks argued that the
     insurance industry as a result of the                                                          FSA did not have the powers, under the
     ECJ gender ruling. But let us be positive:                                                     Financial Services and Markets Act 2000, to
     these challenges could just be seen as                                                         make such new principles. The judgment is
     useful training for the day when the                                                           in favour of the FSA.
                                                                                                       The banks’ point of view was that they
                                                                                                    objected to the principles-based regulation
         YOUR LETTERS                                                                               (PBR) on the grounds that such rule-making
       The editorial team welcomes readers’                                                         should be by formal detailed rules that
       letters but reserves the right to edit
       them for publication. Please email                                                                  MORE LETTERS ONLINE
       The deadline for receiving letters for                                                            More letters are available online at
       the July issue is 17 June 2011.                                                         

6      June 2011                                                                                                          
    would, unlike PBR, be actionable in the                                                              advised to drop the ‘O’ or ‘Mc’ or to change
    law courts.                                                                                          ‘Walsh’ to its Irish equivalent ‘Breathnach’
       I find it surprising that no reference was                                                         (pronounced Brannagh). Was it just by
    made to the academics in this area, such                                                             chance that the last two Taoisigh
    as Julia Black of the London School of                                                               (prime ministers) were Ahern and Cowan?
    Economics who has done sterling research                                                                I devised a simple experiment to put
    into the various PBR regimes.                                                                        this theory to the test in the 2011 general
      Anthony Pepper                                                                                     election. I listed the 165 successful
      3 May 2011                                                                                         candidates in alphabetical order.
                                                                                                         The median successful candidate was
    Playing the long game —                                                                              Enda Kenny, who coincidentally is our new
    response to R. Plat, March 2011                                                                      Taoiseach. I then put the 401 unsuccessful
    Dr. Richard Plat has given new thought on                                                            candidates in alphabetical order, confident
    how to adequately quantify the value at                                                              that the median unsuccessful candidate
    risk for longevity and mortality risk.                                      Enda Kenny               would be some way further down the
       To consider the cure for existing diseases                               © europeanpeoplesparty
                                                                                                         alphabet than the median successful one.
    is a welcome step. I wish to know whether                                                            I was surprised to find that the median
    an outbreak of new diseases that may cause      and subsequent preferences and these lower           unsuccessful candidate — a Mr. Kearns —
    a large number of deaths or disability in a     preferences can be vitally important in              appeared earlier in the alphabet than the
    given period of time has been considered        deciding the final seat in the constituency.          median successful candidate. It was only by
    in modelling? It is a well-known fact that          It is widely believed that the first letter of    a whisker, but still enough to invalidate my
    several new diseases break out periodically.    one’s surname is an important consideration          starting hypothesis.
       A number of diseases have erupted in         in getting elected, to such an extent that             Colm Fagan
    the past, such as small pox, black death,       aspiring politicians have sometimes been               11 April 2011
    pneumonic plague, influenza, cholera,
    tuberculosis, measles, polio, syphilis,
    typhoid, avian flu, AIDS and so on.
    Therefore, the possibility of an occurrence
                                                        Letter of the month
    of new diseases/radiation that may kill a           Preparation is the best defence — response to R. Fitzherbert,
    number of lives at the same time or in a            April 2011
    given period of time may not be ignored.            I’m writing after reading the article ‘Preparation is the best defence’ by Richard Fitzherbert
      Dinesh Chandra Khansili                           in the April 2011 edition of The Actuary.
      29 March 2011                                         What a great and refreshing article. I wholeheartedly agree with the premise.
                                                        I would like to see a slightly different slant, however, and use history to make us
    Alphabetical discrimination —                       aware of just how wrong we can be (and how often). It seems it’s all too easy to
    response to P. W. Wright,                           get over-confident and think that we now know it all. For example, we don’t really
    April 2011                                          know what caused the 2008 financial crisis or the Great Depression in the ‘20s and
    Like Mr Wright, I have long believed that           ‘30s and there is great danger in teaching trainee actuaries to think that they do and
    putting names in alphabetical order is a            hence believe that it was avoidable. Being aware of our biases and just how
    form of discrimination against people with          frequently our models are materially wrong is the key
    surnames towards the end of the alphabet            and we seem to ignore it. To address this I would like
    although, unlike Mr Wright, I don’t have a          to see a course based on two books by Nassim Taleb:
    vested interest in the subject.                     Fooled by Randomness and The Black Swan. I have
       The Irish electoral system is the ideal          learned a lot from these books and think other people
    testing ground for this hypothesis. It is           would too. Including such a course in the education
    multi-seat proportional representation,             system would help avoid actuaries being fooled by
    where candidates are listed on the ballot           randomness.
    paper in alphabetical order; they compete              Ian Thomas
    against colleagues in the same party as well          5 April 2011
    as against those of opposing parties; and
    finally, while voters may allocate their first        The writer of the letter of the month receives a
    preference without considering alphabetical         £25 Amazon voucher
    placing, the same may not be true of second                                                                                                                            June 2011   7
    President’s comment             Ronnie Bowie

     Ronnie Bowie reflects on the changes that have occurred over the
     last year and looks forward to watching future developments unfold

     Last post
     If it is true that time flies when you are         our volunteers. We are also recruiting staff to   Inspiration
     enjoying yourself then I have been having a       make sure that our volunteers — in all parts      This takes time but I do hope that the
     ball. This year as president has flown by.         of the UK and beyond — are used wisely,           higher media profile, our consultation
         In my first article I set the Council of       productively and in a way that benefits            responses (on which we are receiving
     the Institute and Faculty of Actuaries the        them also.                                        excellent government feedback), a generally
     challenge of engaging, delivering and                While surveys and regional forum groups        more outward and inclusive tone and the
     inspiring. I promised to return to these          have helped to build an understanding             increasing opportunities for our skill set,
     themes in this, my end-of-term report.            of your needs, the face-to-face contact           professionalism and ethical approach,
     The real test of whether we are on the            that Jane Curtis, Nigel Masters and I have        are helping to make you proud to call
     right track is what you think. What follows       enjoyed has been much the most productive         yourselves actuaries.
     therefore is only my personal opinion.            medium. I apologise to all of you who                I am certainly proud to have been
         I am, by nature, quite impatient.             prefer the new social media — it just proved      able to serve as your president at this
     There have been times in the last year when       beyond me!                                        very exciting time. Every day has brought

                                                       » As a profession we
     I have been frustrated that things aren’t                                                           something new and rarely has a day gone
     moving sufficiently quickly. However, we                                                             by without something happening that
     have sought to build for the longer term.         have a rare opportunity to                        has made me feel that we are on the
     This has often meant that considerable                                                              right track. As a profession we have a rare
                                                       help make the financial
     time needs to be spent on laying strong                                                             opportunity to help make the financial
     foundations. Overall, I am content that           world a safer place                               world a safer place.
     we have struck the right balance between                                                               To my colleagues Jane Curtis and Nigel
     quick wins — for example, much more               Delivery                                          Masters, to Council, management board,
     media exposure — and longer-term projects         The two key deliveries have been the              the Executive and all the volunteers —
     — such as building our reputation in              strategy and the restructure of the Executive.    thank you for your unstinting support.
     risk management.                                  Both are nearing completion. We really want       To my day-job colleagues — thank you for
         We have also been going through a major       your views on the strategy and you can find        your patience. And to all of you who have
     restructuring of the Executive, which is now      the strategy document and questionnaire at        been kind enough to take the trouble to chat
     much leaner and better equipped to deliver       with me or to contact me with feedback,
     the Profession’s strategy. I am grateful to all   give-us-your-views-strategy-profession-and-       I can assure you that your comments have
     members of the Executive, past and present,       services-you-need-us                              all informed my thinking.
     for their consistent professionalism during          In particular, we want your views on              Jane Curtis’s presidency marks another
     a very difficult and unsettling time. I am         what the qualification should look like in         significant milestone for our profession.
     particularly grateful to Derek Cribb who is       5-10 years’ time — an evolution of what we        As she takes over, my final wish is that you
     leading the Executive most ably.                  have now or a smaller ‘core’ qualification         give Jane the same generous support as you
                                                       with higher level additional qualifications        have shown me.
     Engagement                                        on top?
     Everywhere I have met with members I have            There have been many other notable
     enjoyed great goodwill, a huge untapped           deliverables: major multi-discipline
     potential and a real wish to contribute           research projects, rapid growth in the CERA
     to building the Profession’s reputation,          qualification, real interest in CT1 (the new
     standing and influence. I have been                ‘entry exam’ giving more accessibility to our
     contacted by several senior actuaries who,        profession), our longevity bulletin, more
     after a period of feeling their profession was    tailored newsletters and a major step up in
     no longer relevant to them, have offered          our support for members outside the UK,
     their help and guidance to benefit the             and so on.
     whole profession. This is very heartening.           I really do hope you are noticing a
     Our annual report this year will celebrate        difference and there is much more to come.

8      June 2011                                                                                                              
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                   Hartford | New York | London | Dublin | Cologne
 Soapbox                     David Worsfold

     It’s high time that banks paid up compensation in the wake of the
     global financial crisis, says David Worsfold

     Banks bite the PPI bullet
     It was painful watching them get there but     federation Alliance for Finance told the            “I also feel very comfortable with what
     the UK’s high-street banks have eventually     All Party Parliamentary Group on Insurance       I said about the likely quantum earlier
     made the right decision over paying            & Financial Services that its members —          this year and which was criticised by the
     compensation for the large-scale               bank counter staff — were being set targets      banks. Indeed, my suggestion that it could
     mis-selling of payment protection insurance.   for PPI sales that could only be reached if      easily reach £5bn is now starting to look
     The decision to drop the case against          the policies were sold to people who didn’t      conservative,” said Mr Evans.
     the Financial Services Authority’s (FSA)       need them or wouldn’t be eligible to claim          It does indeed look a conservative figure.
     instruction to pay-up is certainly the right   under them. The MPs were shocked but                The first breach in the previously
     one in terms of liability and could be truly   everyone else, including the FSA at that         impregnable wall of bank opposition to
     shocking in terms of quantum.                  time, merely shrugged their shoulders.           paying compensation came when the
        Why should the banks pay up?                   This scandal is now among the worst           Lloyds Banking Group announced that it
     Quite simply, because they mis-sold the        to hit the financial services sector.             was going to withdraw from any further
     policies over several years as the very        Estimates of the likely costs of the             collective legal action and pay up to the
     lengthy report from the FSA documented.        compensation have been hotly disputed            tune of £3.2bn. The other banks gradually
     Hungry — that is a polite way of putting       by the banks,                                                          followed suit although
     it — for the commission that came with         especially by their
                                                                         » This scandal is now                             most have been rather

                                                                         among the worst to hit the
     selling PPI as the consumer credit market      trade body, the                                                        cautious about putting

     boomed, the banks abandoned any sense of       British Bankers                                                        an estimate of their total
     meeting their customers’ needs by matching     Association.         financial services sector                         liabilities on the table.
     them up with appropriate products.                When the FSA                                                           Lloyds is believed
        Tens of thousands of self-employed          issued its first estimate of the likely cost      to have had around a 40% share of
     people who were never eligible to claim        of redress last August, it came out with a       the market so a simple calculation
     and people with a range of pre-existing        tentative figure of £4.5bn. Earlier this year     suggests that the final bill for this will be
     conditions that would automatically            when Jonathan Evans, Conservative MP             upwards of £8bn putting it well ahead of
     disqualify any claims were sold policies.      for Cardiff North and chairman of the All        endowment mortgage mis-selling which
     As the first rumblings of concern that there    Party Parliamentary Group on Insurance &         cost £2.7bn and taking it into the same
     were some potential problems with PPI sales    Financial Services, said £4bn to £5bn would      orbit as the worst scandal of them all,
     started to be heard in 2006, the trade union   be the starting point for compensation,          personal pensions, which cost £13bn to
                                                    he came under attack from several in the         put right.
                                                    banking sector, especially as he was arguing        As to the numbers of people affected, it is
                                                    that the bill was one for them to pick up,       estimated that this will be in excess of three
                                                      not the rest of the retail financial services   million with 1.5 million having already
                                                             sector already reeling from the         complained to the FSA. The industry is
                                                                 additional costs imposed on         talking of taking on 6000 people to handle
                                                                   it by the Financial Services      the complaints and is facing the prospect of
                                                                    Compensation Scheme. Not         additional heavy fines from the FSA if it fails
                                                                    surprisingly, he now feels       to meet the demanding timescale it has set
                                                                    vindicated: “We have been        for responding to complaints.
                                                                    proved right in our arguments       When you look at these numbers it is
                                                                   that PPI compensation is the      not hard to understand why the financial
                                                                  responsibility of the banks        services sector faces ever-tougher and
                                                                  and that the costs shouldn’t be    more expensive regulation. It only has itself
                                                                 spread across other parts of the    to blame.
                                                                financial services sector, although
                                                              some such as credit brokers might      David Worsfold is group editorial services director at
                                                          still be impacted.                         Incisive Media

10      June 2011                                                                                                                   
Need a hand?
Solvency II is not far away. When implemented correctly it can add value,
but missteps along the way can increase costs. We can help you find sure
footing, cut through the red tape, and gain the advantage you need.

The future is in your hands. Find out more at
 News                        Profession              Register for weekly news alerts at

     Forthcoming events                           Strategy and member services: what’s your view?
     Sessional research event — an                Actuarial Profession seeks member feedback as part of strategic review
     international comparative study of           The Council of the Institute and Faculty of       new strategy for the Institute and
     mortality tables used in pensions            Actuaries is leading a review of the strategy     Faculty of Actuaries can be found at
     20 June, Staple Inn Hall, London             for the Profession and is seeking members’
     16.30 (registration) for 17.00–19.00         views and comments on their thinking by              There are eight supporting documents
     Mortality tables are used in the             way of a questionnaire before finalising and       that are referred to within the strategy and
     calculation of pensions liabilities on       publishing the strategy.                          these can be viewed by following the links
     company balance sheets, but the                 The first part of the strategy and              within the strategy document.
     assumptions made can vary considerably       membership questionnaire seeks your                  Members’ views are very much
     by country. The purpose of this study        feedback on the strategy, the second part         appreciated and members are asked to
     is to look at the mortality tables used      will help build a business plan to deliver        complete the online questionnaire by
     throughout the EU and other selected         better member services. It is therefore           following the link below the draft
     countries, and compare them with the         very important that you complete this             strategy documents. The questionnaire will
     corresponding population tables.             in its entirety.                                  take approximately 15 minutes to complete
     The objective is not to abandon the             The paper which sets out Council’s             and will be open until Friday 10 June.
     use of country-specific tables, but to
     understand the extent to which there
     are systemic differences between
     standard mortality tables in use in the
     EU and selected countries that could
     be accounted for by methodological
     differences in their construction or
     differences in the underlying data,
     assumptions or projection methods.
       We compare, separately for each
     country, the current mortality and
     the assumed future improvements.
     We also deal explicitly with the impact
     of mortality improvements on liabilities,
     since an issue for actuaries that has
     become increasingly significant is to
                                                  CPD determination reports now online
     explain how pension liability values are     Due to the consistent nature of CPD cases,        n Mr. George Michelakis; a reprimand
     affected by changes in both                  these determinations are now published            and a fine of £600;
     economic and mortality assumptions.          on the Profession’s website and are not           6ywhdqr
     Finally, we consider what assumptions        to be taken as a reflection of their lesser        n Mr. Daniel Paul Mikulskis; a reprimand
     (for example, current mortality and future   importance under the disciplinary scheme.         and a fine of £400;
     mortality improvements) are mandated            The following members have faced               n Mr. David William Dullaway; a reprimand
     by the relevant authorities.                 disciplinary action for failure to record their   and a fine of £400;
       The paper is an update and extension       CPD in accordance with the Profession’s           n Mr. Jiang Nan; a reprimand and a fine of
     of the original study, which was published   CPD requirements.                                 £200;
     in 2005 ‘International Comparative Study        The full determinations are available at       n Mr. Martin David Moule; a reprimand
     of Mortality Tables for Pension Fund                              and a fine of £400;
     Retirees’ — Verrall et al 2005.
       If you are interested in attending this
     event, please contact
                                                  CPD reporting deadline approaches
       For further information, visit             The CPD reporting year ends on 30 June            by inserting a learning outcome in the                   and you are reminded that all of your             text box provided. The table of how
                                                  CPD activity must be entered in your              you can meet your requirement can be
                                                  online record by 31 July when the system          found in the CPD Scheme and in the help
                                                  will close.                                       sheet ‘Guide to help you complete your
                                                     Please ensure you are familiar with            CPD requirement’.
                                                  the CPD requirements and ensure                      Please remember that sanctions will
                                                  that your record is updated correctly             apply to those who fail to meet the
                                                  remembering to tick the ‘verifiable’ box.          requirements by the 31 July deadline and
                                                  Remember that at least five hours must             full details can be found in the sanctions
                                                  be recorded as events and at least one            document
                                                  of those events needs to be external.                If you have any problems, please
                                                  Private reading can be made verifiable             contact

12     June 2011                                                                                                          
    GIRO conference and exhibition 2011                                                                Exhibition marketing
                                                                                                       and sponsorship
    11-14 October, BT Convention Centre,              are key to the delivery of Solvency II.
    Liverpool                                         When we visualise a post-Solvency II             opportunities at GIRO
    The programme for the GIRO Conference             world, we ask ourselves: to what extent
    and Exhibition 2011 is complete and open          actuaries, although heavily involved, are        You can be part of GIRO by displaying
    for bookings at        really influential in all their areas of work?    your company’s exhibition literature or by
       The theme this year is ‘Navigating             By examining the part we play in our             sponsoring an item given to the delegates.
    risk: are actuaries at the helm?’.                organisations today, we begin to envisage           The exhibition will take place in a
    The journey to Solvency II is well under way      where we will find ourselves when we              purpose-built exhibition space. All lunches
    in the insurance industry, and whether or         complete our journey and make landfall.          and refreshment breaks will take place in the
    not you are directly involved in preparing            The GIRO committee has organised a full      exhibition area. Please visit
    your organisation for this new regime, your       programme which will appeal to all walks of for further
    work will no doubt be impacted in some            life within our community. Recognising the       information on exhibition times and prices
    way. As we navigate our way through this          growing and increasingly diverse delegation      and the sponsorship items available, or
    additional workload, it is clear that actuaries   that GIRO is attracting, we have allowed         contact
                                                      more time this year for some 60 different
                                                      workshops throughout the conference.
                                                      Ensuring our plenary sessions maintain
                                                      their broader appeal, once again we will
                                                      be covering a wide range of topics from
                                                      familiar areas such as pricing, reserving
                                                      and Solvency II to others such as managing
                                                      pressure and examining the wider industry
                                                      and economy. To deliver all of this, we have
                                                      secured the services of several guest speakers
                                                      and are continually grateful for the ongoing
                                                      support that we receive from within our
                                                      own profession.
                                                          So don’t delay — book your place now!
                                                                                                       Risk and investment
                                                                                                       conference 2011
                                                                                                       19-21 June, Hilton Newcastle, Gateshead

    LinkedIn for the Actuarial Profession                                                              Places still available
                                                                                                       The Risk and investment conference
    Join the growing number of professional           discussions with fellow actuaries, and as        is the premier conference for all actuaries
    people who engage with social media and           a place to network with other members of         working in finance and investment and
    join the Institute and Faculty of Actuaries       the profession. To join, go to                   enterprise risk management, or those with an
    on LinkedIn today.                       and search for ‘Institute       interest in these areas. In a world where it is
       The Profession is pleased to announce          and Faculty of Actuaries’ under ‘Groups’.        now abundantly clear that there is no such
    that it has set up an official LinkedIn               If you have any comments or ideas as          thing as a risk-free investment, and where
    webpage for the Institute and Faculty of          to how we can best use LinkedIn to the           there are perhaps stronger headwinds than
    Actuaries. All members are invited to join        advantage of the profession, we would            at any time in living memory, equipping
    as a means of receiving news hot off the          be very pleased to hear from you. Please         ourselves to make those investment decisions
    press from the Profession, as a place to share    contact             is more important than ever.
                                                                                                           During the conference a range of high-
                                                                                                       profile speakers will depict the economic,
    New micro-insurance member interest group                                                          regulatory and environmental issues we face
                                                                                                       and offer practical insights on investment
    The micro-insurance working party has                To register your interest in joining          and risk to equip ourselves to manage and
    established a member interest group to            the Micro-insurance Group, log into              take advantage of these. The conference is
    further actuarial learning and                    the members’ section of the website              attended by more than 150 delegates.
    involvement in the field of micro-insurance.       and update your profile within the                    For further information, visit
    The group will aim to facilitate a better         ‘Transactions and personal information’
    understanding of the challenges and               section or email
    successes of this area and to promote how            Members interested in learning more
    actuaries can apply their skills to help          about the developments and opportunities         Save the date
    in the development of micro-insurance.            within micro-insurance may also be               SFRA Third Risk Colloquium
    It is planning a series of informal talks         interested in attending the International        28 September, Royal Society of Edinburgh,
    on related topics, which will be open to          Microinsurance Conference — Learning             Queen Street, Edinburgh
    members. For further information, please          Sessions on 30 June, more details of which       ‘Solvency II: Overcoming the Obstacles to
    visit                  are available at      Success’. Open to all members at no charge.                                                                                                                          June 2011    13
 News                         Profession            Register for weekly news alerts at

     Momentum conference 2011: for actuaries of Emerging trends in
     today and tomorrow                         mortality and longevity
     30 November – 2 December, Hilton                                             symposium 2011
     Deansgate, Manchester                                                        13-14 September, Warwick Conferences,
     The Momentum conference is the premier                                       University of Warwick, Coventry
     conference for recently qualified (up to five                                  This symposium will provide an update
     years) and about-to-be qualified actuaries                                    on the latest thinking across associated
     and is attended by delegates from all                                        disciplines, a multi-disciplinary forum for
     practice areas. It allows an opportunity for                                 the exchange of information on the latest
     delegates to develop crucial softer skills,                                  relevant research, plus an opportunity to
     learn from industry experts and increase                                     learn about established knowledge from
     technical knowledge to add further value to                                  a range of different disciplines, all with
     a young actuary’s skill-set.                                                 an interest in better understanding and
        For further information, visit                                            managing this complex yet critical subject.                                                      This symposium will be of interest
                                                                                  to actuaries who are concerned with
                                                                                  pricing or reserving for mortality and
                                                                                  longevity, underwriters, demographers,
                                                                                  epidemiologists, policymakers,
                                                                                  gerontologists, other medical researchers,
                                                                                  and all those with an interest in better
                                                                                  understanding the determinants of
                                                                                  mortality and longevity, projecting
                                                                                  their future course, and managing the
                                                                                  uncertainties. By hosting the conference
                                                                                  adjacent to the Society of Social Medicine’s
                                                                                  Annual Scientific Meeting in 2011 we hope

                      Knowledge is power                                          to attract further participation from the
                                                                                  medical, epidemiology and demography
                                                                                  academic communities as well as the

                                 Order books, publications                        Actuarial Profession’s core membership.
                                                                                     For further information, visit

                                     and calculators online             

                                 from the Profession’s own                        Life conference and
                                                                                  exhibition 2011
                                         Publications Shop                        20-22 November, BT Convention Centre,
                                                    Discounts on many titles      The Life conference is the premier professional
                                                                                  event for life actuaries. The programme will
                                                                                  cover topical issues like regulation and capital
                                                                                  management and will also look to the future;
                                                                                  with talks on product development, future
                                                                                  opportunities and the use of technology.
                                                                                  There will also be opportunities to develop
                                                                                  your professional and softer skills.
                                                                                     We have also included many
                                                                                  international workshops, developed in
                                                                                  conjunction with the life section of the
                                                                                  International Actuarial Association (IAA).
                                                                                  The conference is open to all professionals
                                                                                  working in the life sector, from actuaries to
                                                                                  those who work or have an interest in life
                                                                                  insurance. International members should
                                                                                  find this event useful and members of the
                                                    IAA are invited to attend the conference at
                                                                                  the Actuarial Profession’s member rate.
                                                                                     For further information, visit

14      June 2011                                                                                         
    News from the Resource and Environment Group                                                               services and the actuarial profession in
                                                                                                               particular. Financing the shift to
    This is the first in a regular column by the              Stern summarised the statistics on                low-carbon production will involve massive
    Resource and Environment Group (REG)                  greenhouse gas (GHG) concentrations, which           investment. One issue to face as actuaries
    — a member interest group with over 350               have increased by over 50% since the 1800s           is: what are the implications for economic
    members. The aim is to help actuaries with            and are expected to increase by a further 75%        forecasts if economics is moving through a
    resource and environmental issues as they             by the end of the century if decisive action is      paradigm shift?
    affect our profession, and suggest how                not taken to reduce GHG emissions. Climate               In the REG we believe that actuaries
    actuarial skills may find new and exciting             forecasts published by the Intergovernmental         can successfully adapt to these changes
    outlets in working to confront them.                  Panel on Climate Change (IPCC) indicate              and expand the role of the profession
       Issues of resource depletion and                   that this level of GHG concentrations                by developing new areas, such as energy
    environmental change are closely linked and           would result in an increase in temperature           investment analysis, where our skill-set is
    is believed to be of fundamental importance           with a best estimate of around 5°C. Such             needed. Over the coming months we will
    to our profession. For example, actuaries             an increase in temperature would be a                explore these issues further in this column.
    should be interested in considering how the           30-million-year high. This is likely to result
    volatility and trend of oil prices could affect       in enormous changes including geographical
    economic forecasts. Last November saw                 transformations, the migration of vast                More REG content online
    the launch of the first review of research in          populations and severe political conflict.             Agrotosh Mookerjee reviews two papers
    these areas: ‘Climate change and resource                Stern justified the use of the word                 recently published in Nature magazine.
    depletion; the challenges for actuaries’              ‘revolution’ in the Q&A session by                    The first ‘Anthropogenic greenhouse gas                            explaining that the transition to the new             contribution to flood risk in England and Wales
       Prof Nicholas Stern’s lecture ‘The low-            low-carbon economy will be a dislocation or           in autumn 2000’ by Pall et al examines the
    carbon industrial revolution’ at the                  paradigm shift from the existing economic             attribution of a single flood event. The second
    London School of Economics in March was a             model. Like the first industrial revolution,           paper ‘Human contribution to more-intense
    thought-provoking introduction to some of             this too has the potential ultimately to              precipitation’ by Min et al examines the
    the possible consequences of climate change           transform our lives for the better.                   attribution of heavy rainfall across the Northern
    and on what can be done to avoid and                     If Stern is correct then this raises               Hemisphere. Visit
    mitigate these risks.                                 challenges and opportunities for financial

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              I                                                                                                                                    June 2011     15
 News                          Education

     First issue of Longevity Bulletin published                                                         Actuarial Profession has to say on the subject
                                                                                                         of longevity.
     The Actuarial Profession has launched            speed as an indicator of future longevity.            You can download the first issue of
     Longevity Bulletin, a six-monthly overview of       Edited by Alison O’Connell FIA,                 Longevity Bulletin from the Profession’s
     research into longevity trends, the factors      Longevity Bulletin aims to provide a               website at
     driving those trends and the assumptions         regular guide to the prospects for long lives.
     being made about future longevity. The first      The bulletin will present and explain
     issue focuses on international forecasts of      actuarial perspectives on population
     future longevity, looking at some national       longevity and will look outside the profession
     statistics to see what is projected for future   for statistics, research and the latest thinking
     longevity in the populations of selected         on related subjects. The bulletin will consider
     countries. For the first time,                    longevity internationally with a focus on the
     Longevity Bulletin compares projections          UK. The bulletin aims to be accessible to a
     of future mortality from five countries           non-technical audience as well as to pension
     (Australia, Canada, New Zealand, the             scheme trustees, actuaries, heads of research
     United States and the United Kingdom)            in companies and others who need to keep
     and draws out key themes. A round-up of          up to date on the latest thinking and best
     longevity research news highlights some          practice. It will be of interest to those who
     recently published research, including the       are already on top of their subject, those
     link between mortality and socio-economic        who wish to extend their knowledge and
     circumstances and the reliability of walking     those who are interested in what the UK

     Bridging the gaps: Actuarial Teachers’ and Researchers’ Conference 2011, Oxford
     The guest speakers                                                                                  been one of a small number of practitioners
     at this year’s event                                                                                joining a larger number of academics for
     have now been                                                                                       their annual conference. Benefits include:
     announced.                                                                                          n Lively technical debate where theorems
        The Government                                                                                   and integral signs carry no stigma
     Actuary,                                                                                            n Encountering new ideas and techniques
     Trevor Llanwarne,                                                                                   that may put you 20 years ahead of your
     will speak on his                                                                                   peers or may turn out to be no use at all
                               Trevor Llanwarne       Prof Jens Perch Nielsen   Morten Schantz
     experience in                                                                                       n Learning from the profession’s most
     Government and what this might mean for              The Conference will be hosted by               accomplished educators how to promote
     the actuaries of tomorrow, their training        The Department of Statistics at                    understanding rather than memorise facts
     and how academics can add value.                 The University of Oxford on 14 and 15              n A chance to spend time with others who
        Professor Jens Perch Nielsen of               July. The Actuarial Profession has identified       think deeply about the work they do
     Cass Business School in tandem with              ‘bridging the gaps’ between silos as one of        n It only costs £200 and it still counts as CPD.”
     Morten Schantz of Festina Lente (Denmark),       its key themes for research and knowledge             The full programme will be announced
     will speak on combining actuarial theory and     transfer for 2011-12, whether these gaps           in early June. Further information
     practice with state-of-art IT including case     are between academics and practitioners,           including registration details can be found
     studies from the life and non-life sectors.      between academic disciplines, or between           at
        Kenneth Howse of the Oxford Institute of      actuaries and other professions. The ATRC is       ATRC_2011. The closing date for
     Population Ageing and Ana Maria Madrigal         the only actuarial conference with a research      registration is 27 June.
     will talk about the research partnership         and education focus in the UK that is truly
     between Club Vita and the Oxford Institute.      cross-practice and open to all.
     Their current research project explores the          Andrew Smith, a regular attendee and
     socio-geographic variations in mortality         presenter, explains why he would encourage
     and aims to answer questions such as: Is the     others to attend: “Some people go to
     difference between regions bigger for            conferences for swanky black-tie dinners,
     some socio-economic groups than others?          luxurious spa hotels and generous sponsors’
     Does socio-economic gradient narrow              goody bags. If that’s not you, then you might
     with age?                                        prefer the ATRC. For the last few years I have     Kenneth Howse            Ana Maria Madrigal

     British Actuarial Journal volume 16 part 1                                                          discussions on longevity predictors;
                                                                                                         reserving and uncertainty; management
     The first part of the Profession’s British        available online to members via                    actions in a with-profits fund; Solvency II,
     Actuarial Journal to be published through              and a lecture by Sir Michael Atiyah on
     Cambridge University Press is now freely         The content includes papers and                    lessons from the Scottish enlightenment.

16     June 2011                                                                                                                  
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 News analysis                Industry                   Register for weekly news alerts at

     Banking industry to                              Budget 2011 — consultation on
     provide compensation
     for mis-sold PPI policies                        changes to life assurance taxation
     Following an April 2011 High Court ruling,
     banks need to go back over all their past        The Actuarial Profession’s Tax working party outlines key aspects of
     payment protection insurance (PPI) sales
                                                      HMRC’s proposals on life insurance companies
     to see if the customers have a claim for
     mis-selling. This includes sales for which       Alongside the normal Budget                          This may allow future GRB losses in
     complaints had been rejected or never lodged     announcements made in March,                         proprietary companies to obtain immediate
     and the investigation is a requirement of the    the Chancellor George Osborne made                   relief and reduces one motivation for
     Financial Services Authority (FSA).              some key statements on changes to the life           writing GRB business in a subsidiary.
        The British Bankers’ Association lost a       assurance taxation regime to be made on
     court challenge in which they opposed the        the introduction of Solvency II. These were          I-E regime
     new ruling. They have now announced that         set out in a Technical Note, supplemented            The regime will be maintained, but life
     they are not appealing.                          by a consultation document issued in                 assurance protection business issued after
                                                      April 2011 on which comments are                     1 January 2013 will be excluded and
     Background to mis-selling of PPI                 requested by 28 June 2011.                           taxed on a trade profits business basis.
     PPI covers loan repayments if someone falls         Key aspects of the proposals are set out          Existing life assurance protection business
     ill or loses their job. Some policies were       below, but there is a lot more detail                will continue to fall within the I-E regime.
     mis-sold and compensation payments have          than can be set out in this short article.           This change is expected to result in a
     been made. Examples of such mis-selling          There will be a comprehensive and up-                reduction in profits as a result of the loss of
     include selling to self-employed people who      to-date session presented by the working             expense synergy, or an increase in premium
     cannot claim, telling customers incorrectly      party at the Life convention in November.            rates for new life protection business.
     that purchasing PPI is a requirement for
     taking out a loan, or selling it to consumers    Shareholder profits                                  Apportionments
     who are unaware they are covered.                Insurers will be taxed based on                      Rather than the current formulaic and
                                                      trading profits in the Companies Act                  inconsistent apportionment bases, income
     Impact on banks                                  accounts. Actuarial models will need to              and gains could be allocated on an actual
     Banks have to increase their provisions in       accommodate projections of IFRS profits               basis based on the insurers’ own internal
     order to pay compensation. Barclays set aside    to capture the appropriate timing of                 hypothecation of assets — an approach
     £1bn to pay compensation; HSBC set aside         tax payments that will then affect the               put forward by the Tax working party.
     £269m; and RBS set aside £850m. This is in       solvency capital requirement (SCR) under             This would be a welcome development
     addition to the £100m it has already paid        the Pillar II regime. This may be complex.           to reduce the risks of unexpected profit/
     and £100m it has already set as provisions.      Transitional arrangements are expected               losses or other distortions that might
     Lloyds Banking Group made a £3.2bn               to deal with the step change in existing             otherwise need to be overcome through
     provision for possible claims. Nationwide        taxable surplus, and to protect surplus              restructuring.
     Building Society distanced itself from the       trapped through court scheme restrictions.              Further details on the consultation
     banks that tried to challenge the FSA.                                                                paper can be found under a search for
     It continued to process new PPI complaints       Tax categories                                       ‘Life Insurance Companies: A New
     while the High Court case was being heard.       Gross roll-up business (GRB) and permanent           Corporate Tax Regime’ on
                                                      health insurance business are to be         A series of open meetings
     The FSA’s response                               combined, leaving just two categories —              is taking place which run until July,
     The FSA welcomed the British Bankers’            Basic Life Assurance and General Annuity             arrangements for which are set out in the
     Association’s decision to accept the High        Business (BLAGAB) taxed on I-E, and a new            paper. Together with the profession,
     Court’s ruling. This is seen as a turning        category, here referred to as trade profits           the Tax working party will be responding
     point for an issue that has seen more than       business, which covers all other business.           to the consultation.
     1.5 million complaints since the FSA began
     regulating PPI sales in January 2005.
        Only the affected customers will hear
     from their bank. Any customer with a
                                                         Carbon credit insurance now available
     concern is encouraged by the FSA to make            A likely first question after reading the          purchase these credits to offset their
     a complaint rather than wait for the bank           title of this article is ‘What is carbon credit    emissions and investors can purchase
     to consider the case. Only sales made since         insurance?’ It is new to the insurance             options to buy them at a pre-determined
     January 2005 are enforceable under FSA rules.       market, so may require an explanation.             price and trade them later.
     However, customers of PPI policies sold prior          Carbon credit insurance is an insurance           There is a risk that credits become
     to this date may still complain to their bank.      policy that protects carbon credits,               ineligible as a result of EU decisions.
                                                         such as financial assets generated by              This type of insurance protects the value
         BREAKING NEWS                                   companies when they remove carbon                  of the credits.
      Breaking news is now published online at           dioxide emissions or greenhouse gases                This insurance policy has been                                 from the environment. Companies can                introduced to the market by Kiln.

18      June 2011                                                                                                                 
                                                                                                                 Industry                       News

                                                                                                               FOR MORE GENERAL
    From the world of general insurance                                                                        INSURANCE NEWS
    Solvency II                                     can be submitted from 30 March 2012,                    More news on the following items can be
    On 18 April, at its conference on               a five-month slippage on the original                    found on the website:
    Solvency II, the FSA announced its timeline     date announced.                                         ■ Asbestos and pollution developments
    for implementation of the new regime.                                                                   ■ Solvency II
    This includes the distribution of a workplan    UK motor insurance                                      ■ Regulatory and legal developments
    to companies seeking approval of an             In mid-April, the Automobile Association                ■ Lloyd’s
    internal model which will outline the level     published figures showing that the average               ■ UK motor insurance
    of interaction that such companies could        UK motor insurance premium has increased                ■ Solicitors’ professional indemnity
    expect to receive from the FSA —                by 40% in the last year. This is, once again,           ■ Deepwater Horizon
    this would be sent out in the next few          the highest annual increase on record, and              ■ Marine piracy
    weeks. In addition, in July it will provide     brings the average Shoparound premium                   ■ Airline premium rates
    details of new tools and techniques it          (average of the three cheapest quotes)                  ■ Employers’ liability deafness claims
    would be using, and a further consultation      for comprehensive insurance to £892.                    ■ Quinn Insurance
    in December 2011, with possibly more            In response, the Association of British                 ■ Climate change
    during 2012. In order to deal with the          Insurers called for a ban on referral fees,             ■ Large losses
    expected volume of internal model               under which details of potential personal
    applications, the regulator will concentrate    injury claimants are sold on to solicitors              Visit
    its resources on the firms representing          and claims management firms.
    the biggest challenge in the internal              However, the Confused and                       the middle of 2008 to 35.7%. Their index
    model approval process, including major         Towers Watson car insurance price index            for third party, fire and theft cover rose by
    companies, Lloyd’s underwriters and             has shown that the average price of a              6.3% in the quarter and 53.6% over the
    subsidiaries of major European groups.          comprehensive car insurance policy rose            12 months to the end of March, with an
    However, it admitted it could not               by 3.8% in the first three months of 2011,          average premium
    guarantee to make a decision on every           compared to 7.1% in the final quarter of            of £1,121.
    application in time for implementation by       2010, as a result of which the annual rate
    1 January 2013. Internal model applications     of increase dropped for the first time since

  Large losses                                      The greatest uncertainty in loss estimates          deemed by Property Claims Services to be a
  Earthquake, Christchurch, New Zealand —           relates to the degree to which corporations         single event for insurance purposes.
  22 February                                       are successful in claiming under contingent
  By early April, the number of claims filed with   business interruption protection in relation to     Tornadoes, southern and eastern US —
  the New Zealand Earthquake Commission had         global supply chain problems. Tokyo Electric        25-28 April
  risen to over 108,000 — the commission had        Power Company (TEPCO), the owners of the            At least 426 separate tornadoes were
  managed to renew its reinsurance coverage         severely damaged Fukushima nuclear power            reported in an area including the southern
  from 1 June 2011 in spite of the two major        plant is faced with payouts of billions of          and eastern states and the mid-west.
  losses in the last year.                          dollars, and there is the possibility that the      The severity of the event was due to the
                                                    Japanese government may establish a                 exceptionally warm humid air over the
  Tohoku earthquake and tsunami,                    state-backed insurance fund to assist them in       Gulf of Mexico moving north and colliding
  northern Japan — 11 March                         this case and any future disasters. A collapse      with the jet stream over the southern
  Risk Management Solutions has estimated           in the TEPCO share price (by the end of April it    states. Particularly destructive tornadoes hit
  the total insured property loss from these        had reduced to 25% of its 1 January level) will     Alabama, Arkansas, Georgia, Mississippi,
  events at between US$18bn and $26bn.              impact seriously on Japanese insurers (mainly       North Carolina, Virginia and Tennessee.
  After combining this with expected payouts        life insurers) which hold significant amounts       In addition to widespread property damage
  by the life and health insurance sector for       of investments in the company.                      and power cuts, the death toll is believed to
  deaths and injury, the total insurance loss                                                           be more than 350, although communications
  is likely to be between US$21bn and $34bn,        Tornadoes, southern US — 14-16 April                problems in the areas affected make the
  making it the largest insurance loss for          This event consisted of at least 240 separate       precise figure uncertain — these figures are
  more than five years. International property/     tornadoes affecting 14 states, and causing at       likely to make it the most deadly outbreak
  casualty insurers have so far announced total     least 43 deaths, the highest death toll from        for 75 years. The worst affected state was
  losses to their companies of over US$6bn.         a system of hurricanes for over three years.        Alabama, where around 250 of the deaths
  Residential earthquake insurance in Japan         The principal areas affected were in a swathe       were recorded and where a federal state of
  is subject to the provisions of the Japan         from Oklahoma to North Carolina and Virginia.       emergency was declared by President Obama.
  Earthquake Reinsurance Company (JERC) and         One individual tornado that hit Sanford and         Governors of at least six other states declared
  is not reinsured outside Japan — by mid-          Raleigh in North Carolina, causing severe           states of emergency in light of the tornado
  April, JERC was preparing to pay out an initial   property damage, is understood to have cost         damage and/or associated flooding. An early
  US$2.4bn to insurers to ensure that they were     around US$215m, but it is unknown how               estimate of insured losses suggests a range of
  in a position to pay claims promptly. Premium     much of this is insured. The overall damage         US$2-5bn. For insurance purposes, this event
  rates for Japanese earthquake cover are said      may well be double this figure. This event          has been deemed to be a continuation of that
  to have increased by up to 50% since Tohoku.      and the 25-28 April event below have been           from the 14-16 April.                                                                                                                        June 2011       19
 News                         People/Society                                                                For people moves, see page 52

     Actuary-and-wife team conquer Kilimanjaro
     Paul Sweeney describes the highs and lows endured on Africa’s highest mountain
     to raise £2,243 for the Ronald McDonald House at Alder Hey Children’s Hospital
     Earlier this year, my wife Stephanie and I                                                                                 Paul and
     climbed Mt. Kilimanjaro, raising funds for                                                                                 Stephanie Sweeney
     Ronald McDonald House (‘MacHouse’) at
     Alder Hey Children’s Hospital. We funded
     the trip ourselves, as it had been a life-
     long ambition, but decided to use the
     opportunity to raise funds for charity.
         We chose to support MacHouse as the
     facilities proved invaluable for our friends
     towards the end of last year. The charity
     is totally independent and depends upon
     voluntary donations to stay in operation.
     MacHouse provides accommodation for
     parents and family members of critically ill
     children completely free of charge.
     Since it opened in 1993, the house has
     been full to bursting. In total, they have
     accommodated over 13,000 families
     for as long as it takes. Some stay just a
     few days, some several weeks and some
     for up to a couple of years. Our friend’s
     little boy was there for a couple of months
     and was well enough to be home for his           climb, relative to the Marangu Route, or the      summit in the early hours was punishing
     first Christmas.                                  ‘Coca-Cola’ route as it’s also known.             but my training and the sponsorship
         Mt. Kilimanjaro is the highest mountain          Unlike the gradual incline and huts           helped me battle through.
     in Africa and fourth highest of the              found on the Marangu Route, the climbers             I can honestly say it has to be one the
     Seven Summits (the highest summits on            on Machame hike steeper trails for longer         most rewarding experiences of my life and
     each of the seven continents). It is the         distances, while sleeping in tents. We spent      I would recommend it to anyone. I’ve run
     tallest free-standing mountain in the world,     seven days and six nights on the mountain         marathons, half-marathons, completed the
     with Uhuru Peak rising to an altitude of         to help with altitude acclimatisation.            Three Peaks Challenge and cycled coast
     5,895 metres (19,341ft) above sea level.         I suffered as a result of the altitude and felt   to coast, but this was by far my toughest
     We chose the Machame Route up the                its effects from 3,000 metres upwards. I had      challenge yet, both physically and mentally.
     mountain (about 50 miles) as this provides       prolonged headaches, was physically sick             In total we raised £2,243 for
     spectacular views and a variety of habitats.     and even lost my appetite. For anyone who         Ronald McDonald House, which included
     The route is also known as the ‘whiskey’         knows me, the latter was the greatest cause       a JLT matching contribution of £1,089.
     route, given its reputation for being a tough    for concern! The seven-hour hike to the           By Paul Sweeney

     Not just walking                                 Swimming for hearts Marathon effort
     Actuary David Hamilton recently completed        On 4 June actuary Calvin Wickham will             Actuary Francis Chua recently ran
     a 60km sponsored hike to raise money for         be swimming 3.8km down the River Arun             the London Marathon for the Alan
     two charities: Save the Children and Herts       from Ford to Littlehampton and on 25 June         Morement Memorial Fund, the UK’s
     Air Ambulance.                                   is participating in the South Downs Way           only cholangiocarcinoma charity
        This is the longest course in the Just Walk   cycle. Both these efforts are to raise money      (cholangiocarcinoma is a cancer of the bile
     event on the South Downs, which allows           for the British Heart Foundation. To donate       ducts). Donations to this special cause can
     participants to choose the length of route       to this cause, visit          be made at
     that suits them and raise money for whatever     Calvin-Wickham
     charity is close to their heart.
        David has covered the 40km route for the
     past two years, raising over £1,500 in the
     process and so went the extra 20km this year
     to try and raise even more cash. To support
     David, visit

20      June 2011                                                                                                             
         Follow @TheActuaryMag on Twitter                                    Join The Actuary’s LinkedIn group

    Bowling along with the WCA
    More Strikes Than London Underground             possible, including for the first time Pacific
    (with a striking resemblance to                  Life Reinsurance. The average score across
    Barnett Waddingham’s Mark Paxton,                all 24 players was a highly creditable 103,
    Richard Gibson and Tom Hargreaves)               albeit slightly down on the previous two
    became the third winners of the                  years’ 109.
    Worshipful Company of Actuaries’ annual             The excitement of the matches was
    ten-pin bowling event at the All Star Lanes      followed by drinks and canapés. The
    in Holborn on Thursday 24 March.                 presentation of the trophy came next
      Their aggregate score of 347 pipped            (getting the winning team’s lengthy name on
    Swiss Re’s Size 16 Balls team (Amit Patel,       it will prove a challenge), then the swapping
    Ian Boyd and Joe Paul) by just two points.       of bad luck stories about the bowling.
    Carl Moxley was the evening’s individual            Thanks go to the WCA committee for
    top scorer with 157, a little short of last      organising the evening, which has become
    year’s 169.                                      a popular annual event.
      Eight teams took part, the maximum             By Roger Bevan
                                                                                                       Mark Paxton, Richard Gibson and Tom Hargreaves

    Solo cross-channel WAS five-a-side   The Future Found
    kayaking venture football tournament education charity
    Former editor of The Actuary                     The annual Wessex Actuarial Society five-          Following a gap year in Kenya,
    Margaret de Valois reports that her              a-side football tournament took place on          Joseph Peck recently became heavily
    cousin Adam Alistair Smith who has               Sunday 6 March. It was contested by Aviva,        involved in a charity founded by a friend
    Asperger’s Syndrome has been preparing           LV=, the actuarial students of Southampton        he met while passing through Malawi.
    for a solo cross-channel kayak attempt.          University, LCP, Sun Life and Skandia.            Since then, Joseph has helped the charity
       Adam has just recently bought his kayak       All teams battled for the prestigious trophy,     in its quest to become established in the
    and this was his first major voyage. He had       which was a fairly cheap replica of the           United Kingdom as a registered charity.
    been training hard and has made quite a          World Cup.                                        The charity, The Future Found, tackles an
    name for himself in the kayaking circles of         Each game was ten minutes long with            issue that Joseph and his colleagues saw and
    Kent, even getting the local press on board.     every team playing each other once in             felt through their respective experiences in
       The trip is in aid of the National Autistic   the group stage, a total of 300 minutes of        Africa — the provision of education.
    Society and Margaret has put out a call for      football being played there alone.                The charity is in the process of building a
    sponsors to help meet the £10,000 target            Skandia, last year’s winners, failed to        sustainable school in Mzuzu district, a rural
    set. A JustGiving page can be found at           register even a point and only scored one goal.   area of Malawi. so please           In the semi-finals, Aviva beat Sun Life 2-0           Recently, Joseph ran the Forest of Dean
    do take time to visit and make a donation.       and the students of Southampton University        half-marathon with Liam Smith, a fellow
                                                     overcame LV= by three goals to one.               actuarial student, to raise funds for this
       Adam Alistair Smith                              The stage for the final was set, with Aviva     great mission.
                                                     going head to head with the students.
                                                     The latter turned up with four substitutes
                                                     and so were as fresh as daisies for the final
                                                     when the Aviva team were just about dead
                                                                                                        Memorial service for
                                                     on their feet. After over three hours of           Roger Gray
                                                     football the champions emerged. Aviva
                                                     won 1-0 in a closely fought game against           A memorial service will be held for
                                                     Southampton University Actuarial Society.          Roger Gray Hon FFA, retired senior lecturer
                                                     The victorious team included Graeme Law,           in statistics at Heriot-Watt University, and
                                                     Chris Puzey, Jaime Goss, Tom                       a long-serving principal examiner for the
                                                     Higgins and Mark Pocock.                           Profession. All are welcome to attend the
                                                        The day itself was                              service, which will be held on
                                                     excellent and a few of the                         Monday 20 June at 12.30pm at
                                                     fairer-skinned among us                            St Andrew’s and St George’s Church in
                                                     even got some sunburn.                             George Street, Edinburgh.
        PEOPLE/SOCIETY NEWS                          Many thanks to Jacky
                                                     Cheung for all his hard                            Deaths
     If you have any newsworthy items for            work organising the                                n Lawrence Ernest Coward died on
     these pages, email Kelvin Chamunorwa at         tournament.                                        11 September 2004, aged 89. He became a                       By Graeme Law                                      fellow of the Institute in 1939.                                                                                                                         June 2011    21
       Tuesday 7 June                        Programme event

     Educating actuaries                   How should we educate actuaries? This paper             assessing higher-level learning (such as skills
                                           will be looking at the current and potential future     and attitudes).
     Staple Inn,
                                           responses to this question within the framework            In doing so, it hopes to identify a number of
     High Holborn,                         of the actuarial control cycle, with particular focus   unanswered key questions and avenues for
     London                                on the challenges to specifying, developing and         future research.

     5:30pm for 6pm

       Thursday 16 June                      Social event

     Bowling tournament                    The SIAS ten pin bowling tournament is back by          over both games and for the best team name.
                                           popular demand.                                         Don’t worry if you don’t have a team — we will
     Palace Superbowl,
                                               It is that time of the year for a chance to         assign you to one.
     Elephant & Castle Shopping Centre,    show off your bowling skills and strike out the             Food and drink will be served and are included
     London SE1 6TE                        competition to claim the title of ‘SIAS Bowling         in the ticket price of £18 for SIAS members and
                                           Champions of 2011’!                                     £20 for non-SIAS members. Spaces are limited and
     Time TBC
                                               Teams should consist of three players.              will be offered on a first-come, first-served basis.
                                           Prizes will be awarded for the highest and lowest           Please email to reserve
                                           scoring teams, highest and lowest individual scores     your place.

       Friday 22 July                        Social event

     Summer Boat Party 2011                Get ready for an action-packed evening along            Date to be notified soon for the party of the year.
                                           the Thames, full of dancing, entertainment and          Look out for more details on our website
                                           plenty of food and drink.                     


     Charity-matching                      Did you know that SIAS has a charity-matching           maximum donation of £500. The donation
                                           programme? Any SIAS member or team of SIAS              will be increased to 50% of sponsorship
                                           members will be able to apply to SIAS for a             monies raised for team applications where
                                           donation to their charity fundraising efforts.          members of the team are from more than
                                           The donation will be equivalent to 25% of               one employer.
                                           sponsorship monies raised by the SIAS member,              Other restrictions apply so please see the
                                           excluding any corporate sponsorship, with a             SIAS website for more details at

             For details of events, visit

22      June 2011                                                                                                              
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                                                                                                     Ronnie Bowie                             Q&A

A time to reflect
Marjorie Ngwenya talks to Ronnie Bowie about his time as president of the Institute and
Faculty of Actuaries and the momentous changes that have defined the profession

    What has been your greatest                    internationally. The first failed vote was a    What will be your role as past
    challenge during your term of                  wake-up call. One of the lasting benefits       president?
    presidency?                                    of the merger process, as opposed to the       My first priority is to support
    There were two big challenges — one            merger itself, was the spur it has given us    Jane Curtis during her year as president.
    pre-merger and one post-merger. In the         to a complete change in how we engage          Secondly, I want to make sure that our
    pre-merger phase the challenge was all         with our members.                              project to build our reputation in risk
    about understanding what makes our                In the year since the merger, the           management is successful. Thirdly, I am
    members tick. Despite the fact that we are     challenge has been about setting the new       committed to making sure our increasing
    a relatively small profession it turned out    strategy, transforming the Executive and       public profile and influence is maintained.
    that we really didn’t know our members         building sufficient momentum so that we         One unexpected bonus from our renewed
    and had to learn from scratch how to           can deliver the progress that we promised a    sense of purpose has been the number
    engage with them both in the UK and            merger would enable. Neither challenge         of senior actuaries who stepped forward
                                                   has been easy but I believe we have made       to offer their support to their profession.
                                                   good progress.                                 I will be looking to find productive and
                                                                                                  rewarding uses for their volunteer time.
                                                   How do you believe that the
                                                   profession has benefited from the              What more would you like to achieve
                                                   merger of the Institute and Faculty?           if you had another year in office?
                                                   To what extent have the two bodies             I think that three years in office is plenty!
                                                   fully integrated?                              It is good that the presidency is refreshed
                                                   Part of our argument in favour of merger       and new energy brought to bear. In any
                                                   was that in most respects (education,          case, we have real momentum building
                                                   examination, back office, discipline) we were   and Jane is committed to maintaining it.
                                                   already merged. However, the governance        I have my role to play next year too so
                                                   was still split, which meant decision making   I have the opportunity to help see various
                                                   was slow and cumbersome and it was difficult    projects brought to completion.
                                                   for us to build a clear brand. This was
                                                   becoming increasingly disadvantageous in a     You balance your time between
                                                   21st century environment.                      running a practice at Hymans
                                                      I have been delighted at how the new        Robertson and performing your
                                                   single Council, supported by an able           Profession duties. What was a typical
                                                   Executive, has grasped the opportunities       week for you? Would you do it any
                                                   and how the decisions have been made and       differently if you could?
                                                   implemented much more quickly.                 There was no typical week (except that it
                                                   The strategy is out for member consultation    usually involved six and sometimes seven
                                                   (part of our new approach to engaging          working days).
                                                   with our members), the education and              I love variety and that’s what I got.
  Ronnie became a fellow of the Faculty of         qualification framework is under review,        I attended all the conventions, most
  Actuaries in 1980 and was elected president      an improvement in member support is            regional societies and several international
  of the Faculty in 2008 before becoming the       under way, our public affairs and media        events, which gave me the opportunity to
  first president of the Institute and Faculty     profile is miles ahead of where it was,         meet and speak with hundreds of members
  of Actuaries in 2010. He has also served the     giving us much more of an outward rather       with all sorts of backgrounds and interests.
  Faculty and the Institute as the chairman of     than inward focus, and our research            I personally felt it was important for the
  the Pensions Board and is a member of the        programme is blossoming nicely. At the         president to be visible and accessible in
  Profession’s Management Board.                   same time our support to our members           the post-merger year. Whether that is
     Currently a senior partner with               who live and work outside the UK is really     sustainable is debatable. I suspect we will
  Hymans Robertson, Ronnie first joined the        pushing on.                                    need to share this work more widely. As the
  firm in 1980. A pensions specialist, Ronnie is      We have tried to get some quick wins        year unfolded I became more disciplined in
  scheme actuary and investments adviser           while investing for the future so it feels     allocating my time.
  to a number of large public and private          to me like progress. But what I am really         A lot of time was spent with media,
  pension schemes. He was recently named           interested in is whether our members are yet   politicians and other influencers. As we

  Pensions Personality of the Year by              noticing the difference. They are the proper   build our profile and experience this will
  Professional Pensions magazine.                  judges of whether we are succeeding.           become easier. The risk project,                                                                                                                    June 2011   25
 Q&A                           Ronnie Bowie

»    strategy deliberations, Council and
     Management Board meetings probably in
     aggregate took a couple of days a week. I was
                                                      members and have the opportunity to
                                                      showcase the actuarial profession to those
                                                      outside the profession
                                                                                                      qualifiers are female, but our way of working
                                                                                                      is geared around a somewhat old-fashioned
                                                                                                      male-orientated model. However, what
     able to fit the work for the firm in because       b) Leading Council so that the Profession       we have found is that this model turns off
     my work colleagues have been fantastic in        serves our members as well as it possibly can   both genders. So change is under way.
     supporting me and allowing me to appear to
     be doing far more than I actually have been.
                                                      c) Having the
                                                      opportunity to meet    » We need our volunteer                         It would be symbolic
                                                                                                                             if the more modern
                                                      so many members        individuals to be                               way of supporting
     What’s next for you? Will you return to
     full-time practice?
                                                      all over the world,
                                                      (within which
                                                                             more representative                             our members bears
                                                                                                                             fruit under Jane’s
     Because of the year as immediate past            presiding over the     of the actual profile                           presidency.
     president the reduction in commitment            joyous new qualifiers   of our members than                             We need our volunteer
     will be gradual but I am looking forward
     to a lighter load and less travelling. I owe
                                                      ceremonies is a near
                                                      perfect moment).       it currently is          «                      individuals to be
                                                                                                                             more representative
     my family and my work colleagues a lot of                                                        of the actual profile of our members than
     catching up. They have borne a considerable      To what extent did your role involve            it currently is. Changing the way we work
     burden. My wife Stella has been a star —         co-ordination with other professional           with our members will be a good first step.
     I could not have done it without her.            bodies or with government?
        I am on the board of a hospice that has a     Government, yes. Other bodies, not so           How do you measure your success?
     big project starting, so I hope to give them a   much. The co-ordination with other bodies       We have become much more results-
     lot of support.                                  needs a continuity which is often best          orientated. Our Council reports will
        My career has not been a well-planned         provided by the Executive. Perhaps I could      increasingly be about progress against
     project! I have followed instincts and           have done more but there is a limit to how      published goals. Members will be able to
     opportunities. I am looking forward to           much time there is.                             review what we have done against what
     having more freedom to do new things.                                                            we said we would do. We will also test
                                                      Jane Curtis will be the first female            our members’ views on whether we are
     What are the top three selling points            president of the UK profession from             succeeding. Actuaries rightly demand
     of the presidential role that you                this month. Do you think that the               evidence. It is Council’s duty to provide it.
     would highlight to future candidates?            profession has more to do to further
     The first thing to say is that if you get the     advance women in leadership roles?              What are your pastimes?
     chance, take it. My top three are:               A female president is long overdue and          I look forward to resuming more family
     a) The honour to represent your fellow           Jane is a great choice. 30% of our new          time, more golf and more holidays.              ■

26      June 2011                                                                                                             
   Following the success of our
   Bachelors and Masters programmes
   in Actuarial Science, we are delighted
   to announce the launch of our new
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   with a full set of exemptions has only three more examinations to          courses. It is not necessary to hold exemptions from all of the
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   You can apply for either the full 12-month MSc or 9-month PG
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 Risk management               Classification

Speaking the language
Patrick Kelliher outlines the Profession’s guidelines for a common risk ‘language’

                                                       system for the profession and, in doing           n Is a shortage of buyers in a market a
                                                       so, establish a common risk ‘language’            liquidity or a market risk?
                                                       for actuaries to use when discussing risk.           This list is by no means exhaustive:
                                                       The working party — comprising                    the further one drills down into
                                                       Paul Klumpes, David Wilmot, Jaiwardhan            sub-categories, the greater the potential
                                                       Vij and myself — have recently published          for overlap with other categories and for
                                                       a paper setting out such a common risk            confused classification.
                                                       classification system for actuaries, together         To address this, the working party sought
                                                       with a supporting spreadsheet setting out         as far as possible to parse risk types into
                                                       the very detailed risk categories identified in    sub-components to identify where there
                             Patrick Kelliher is the
                                                       our work.                                         may be overlaps, and to suggest how risk
                             head of market risk
                                                          Note that the working party was not            categories may be demarcated.
                             and ALM at Aegon UK
                                                       seeking to develop a definitive ‘one size
                                                       fits all’ classification. Firms will have their     Risk and economic value
                                                       own classification system, which meets             In their work, the working party
                                                       their own requirements and we do not              used the following definition of risk:
                                                       seek to supplant these — merely to provide        “The possibility of events, or combinations
                                                       a common basis for discussion between             of events, occurring which have an adverse
                                                       actuaries of different firms. Actuaries            impact on the economic value of an
                                                       are not obliged to adopt the common               enterprise as well as the uncertainty over
                                                       classification system but it is hoped              the outcome of past events.”

                 isk classification relates to how      they will find this reference point helpful           It follows that any risk classification
                 an organisation defines the risks      in discussing risk with their peers in            system should start by considering what
                 it faces. Coherent classification      other organisations.                              the ‘economic value’ of an enterprise is.
                 is essential to enterprise risk                                                         The working party considered the following
     management (ERM), as ambiguity will               Differences in risk classification                definition of economic value:
     lead to confused reporting and                    Even at a high level, significant                  n Embedded value comprising:
     management of risk.                               differences can exist between how                 — shareholder net assets (assets less liabilities)
        However, while firms may have a                 different organisations classify risks.           — value in-force (VIF), which is the value of
     coherent system for classifying risks that        Table 1 considers four different high-level       existing business relating to future income
     meet their own requirements, such systems         classifications used by various regulatory         less costs, including the cost of capital
     are unlikely to be identical between firms.        bodies and insurance companies:                   (covering both regulatory and other capital
     Each system represents a risk ‘language’          n FSA Prudential Sourcebook                       requirements as well as economic capital).
     bespoke to the firm, with firms using               n German regulator BaFin                          n Plus goodwill relating to:
     different terminology for the same risks,         n Lloyds Banking Group                            — the value of future new business, plus
     or the same terminology for completely            n Prudential.                                     — future initiatives to drive down costs,
     different risks. The different risk languages        Taking just these limited examples, while      improve persistency and improve the risk/
     used by actuaries in their day-to-day work        there are some common categories such as          reward profile.
     can cause confusion when actuaries from           market risk and operational risk, there are
     different firms come together to discuss risk.     also significant differences in terminology,       Risks to embedded value
        To address this, the Actuarial Profession’s    even at a high level. This is particularly true   The adverse events that affect embedded
     risk classification working party was set up       of strategy-related risks.                        value are:
     at the end of 2009 to develop a common               Moreover, as one drills down to                n Market movements reducing net assets
                                                       sub-categories, further confusion is              and/or reduce the VIF of future income
                                                       possible. For instance, one organisation          (such as fund-related charges)
                                                       may class failure of a project as operational     n Counterparty defaults reducing net assets
                                                       risk, while another may class it as strategy      n Insured perils reducing insurer net assets,
                                                       risk. Some other areas of doubt are:              while for companies in general, there is a
                                                       n Is non-disclosure of material underwriting      threat to VIF from poor persistency levels
                                                       information an insurance/underwriting risk        n Operational loss events that deplete
                                                       or operational (fraud) risk?                      net assets (for example, mis-selling
                                                       n Is spread widening of corporate bonds a         compensation) and/or reduce VIF (as in
                                                       credit or a market risk?                          regulatory challenges of charges).

28      June 2011                                                                                                                  
                                                                    Table 1 — Four different high-level risk classifications
        From this, we arrived at the following             FSA Prudential              BaFin Minimum              Lloyds Banking                       Prudential
    high-level risk categories:                            Sourcebook                  Categorisation                 Group
    Market risk — the risk that as a result of
    market movements, a firm may be exposed                 Market                            Market                     Market                               Market
    to fluctuations in the value of its assets, the         Credit                             Credit                     Credit                                   Credit
    amount of its liabilities, or the income from
    its assets.                                            Insurance (incl. expense   Underwriting (broadly        Insurance (incl.         Insurance (incl. expense
                                                           and persistency risks)      similar to insurance         expense and                and persistency risks)
    Credit risk — the risk of loss a firm is                                                    risk)             persistency risks for
    exposed to if a counterparty fails to perform                                                                insurance business)
    its contractual obligations (including failure
                                                           Operational                     Operational                Operational                        Operational
    to perform them in a timely manner)
    including losses from downgrades and                   Liquidity                        Liquidity             Financial soundness                       Liquidity
    other adverse changes to the likelihood of                                                                     (incl. liquidity, tax,
    counterparty failure.                                                                                            accounting and
                                                                                                                regulatory capital risks)
    Insurance and demographic risk — the
    risk of adverse variation in life and general          Group (risks arising         Concentration (risk
    insurer and pension fund claim experience              from intra-group           from concentrations of
                                                           exposure)                  exposure to individual
    as well as more general exposure to adverse
    persistency and other demographic
    experience, and including adverse changes                                                Strategy             Business (broadly          Business environment
    to assumptions as to future experience.                                                                     covering strategy risks)     (forces in the external
                                                                                                                                             environment affecting
    Operational risk — the risk of loss, resulting                                                                                                         strategy)
    from inadequate or failed internal processes,
    people and systems, or from external events.                                           Reputation                                           Strategy (relating to
                                                                                                                                                senior management
        The market, credit and operational risk                                                                                                   development and
    categories featured above are also categories                                                                                                implementation of
    considered under Basel II.                                                                                                                    business strategy)
        Insurance risk was also common
    (though BaFin termed this underwriting                    There is thus the need to consider the           strategic choices
    risk) but the working party considered the             liquidity as well as the amount of assets           n The risk that the strategy chosen is
    term too narrow, as it implies risk relating           relative to liabilities and we need to add a        sub-optimal.
    to insurance companies only. The reference             high-level category for liquidity risk, which          Note there is a body of opinion that
    to demographic risk makes it clear that                is defined as: “The risk that a firm, although        suggests such strategic risks should not
    this is a broader category — persistency               solvent, either does not have available             be considered as a separate category
    risk in particular is key for many firms                sufficient financial resources to enable it to        but as manifestations of other risks —
    outside the insurance industry and beyond              meet its obligations as they fall due, or can       for example, market risk may cover the
    financial services.                                     secure such resources only at excessive cost.”      impact of falling stock markets on
                                                                                                               equity-related product sales.
    Liquidity risk                                         Risk to goodwill — strategy risk                       However, the working party has chosen
    The high-level categories mentioned above              The categories considered so far relate             to separate out strategic risks in the
    cover threats to the quantum of embedded               to existing assets and liabilities and the          common risk classification system on the
    value, such as threats to the amount of                embedded value arising from these, but a            basis that the controls required to manage
    realistic assets in excess of realistic liabilities.   large component of a firm’s economic value           these are different from those to manage
    However, solvency is based not just on the             relates to goodwill in respect of future new        embedded value. The impact of market
    amount of assets relative to liabilities but           business and initiatives to extract greater         falls on embedded value may be hedged
    also on how liquid these are.                          value from the existing book of business.           using derivatives but, for new business,
       If assets are not sufficiently liquid,               Thus a separate strategy risk category              managing the impact is more about offering
    they may have to be sold at a discount to              has been added to cover threats to the              a diversified product range and not being
    market value to meet liabilities as they fall          realisation of this goodwill.                       overly reliant on, say, equity funds.
    due and/or a firm may have to borrow to                    This will cover:
    cover the shortfall in liquid funds, giving rise       n Risks leading to actual strategic outcomes        Frictional risk

    to interest costs. In extremis, a firm may find          differing adversely to expectations                 The definition of economic value above
    itself unable to meet liabilities as they fall due.    n Risks that may inhibit strategy and               includes a deduction for the cost of capital.                                                                                                                                    June 2011       29
 Risk management                        Classification

              Figure 2 — Working party view of risk

                                                              Enterprise risk management
                     Frictional risk
       Regulatory capital and accounting rule changes
       will affect how profits flow back to shareholders
                  and hence opportunity costs.
                                                                               Goodwill                                                 Strategy risk
                                                            Value of future new business, plus future initatives       Covering internal (eg. brand damage, inadequate
       This could be exacerbated by ineffecient capital
                                                               to drive down costs, improve persistency and               product range) and external (eg. economic
                  structures tying up funds.
                                                                       improve the risk:reward profile                downturn, regulatory rule changes) threats to new
                                                                                                                        business as well as project risks affecting new
      Finally, tax changes and the impact of existing tax
                                                                                                                                 products and other initiatives.
          rules will have a marked bearing on profits
                  flowing back to shareholders.

                                                                        Value in-force (VIF)                                           Market risk
                                                                Value of existing business relating to future
                                                              income less costs, including the cost of capital                          Credit risk                              G
                                                                                                                       Insurance and demographic risk
                                                                                                                            Including the impact of higher lapses                R
                    Embedded value                                   Shareholder net assets                                          or expenses on VIF
                                                                           Assets less liabilities
                                                                                                                                   Operational risk                              G
                                                                                                                      Including regulatory and other threats to future
                                                                                                                                      income and VIF
                                                                                                                                      Liquidity risk                             I
                                                                                                                       Covering liquidity-related losses eg. from assets
                                                                                                                      sold at a discount to meet liabilities; and the risk       O
                                                                                                                      that in extremis there may not be enough liquid
                                                                                                                          assets to meet liabilities as they fall due.

»    The amount, and hence cost, of capital is
     not determined solely by the economic
     risks faced by a firm, but also by regulatory,
                                                            unlikely to crystallise to the same extent
                                                               Firms allow for this diversification
                                                                                                                   the view of risk outlined, the common
                                                                                                                   risk classification system has high-level
                                                                                                                   categories for:
     accounting and rating agency requirements.             benefit in assessing capital requirements,              n Market risk
         The excess of these requirements over              but there is a risk that the combined                  n Credit risk
     economic capital required may be termed                impact may be greater than expected,                   n Insurance and demographic risk
     ‘frictional capital’. Frictional capital               in that the diversification benefit is                   n Operational risk
     requirements may increase in the absence of            less than expected.                                    n Liquidity risk
     any change in economic risk profile with the               Thus the common risk classification                  n Strategy risk
     cost of this extra capital having an adverse           system has a final, over-arching high-level             n Frictional risk
     impact on economic value.                              category for aggregation and diversification            n Aggregation and diversification risk.
         The common risk classification system               risk, which is defined as: “The risk that the
     has a frictional risk category to cover this.          aggregate of risks across individual categories        Conclusion
     The category also covers problems caused by            is greater than the sum of the individual              Risk classification is only a starting point in
     operating structure such as the fungibility of         parts and/or that anticipated diversification           ERM, which ultimately needs to consider
     capital tied up in subsidiaries.                       benefits are not fully realised.”                       how the individual strands represented by
         Finally, the category also covers tax risks           Aggregation and diversification is also              the individual risk categories interact both
     such as changes to the corporation tax                 considered as a sub-set of each high-level             in aggregate and at each entity level, as well
     regime and portfolio-specific impacts such              category, for example, market risk will                as the rewards available.
     as deferral of tax relief because of an adverse        include an aggregation and diversification                 However, it is hoped actuaries will find
     mix of business.                                       risk category to address the combined impact           the common reference point this system
                                                            of individual market risks such as equities            provides useful in discussing risk with their
     Aggregation and diversification risk                   and property. However, this high-level                 peers in other organisations.
     It is important in considering risk to look            category will consider impact across the                  I would encourage actuaries to read the
     at not just the individual components                  other high-level categories, such as between           final paper on the Profession’s website
     but also how they come together as a                   market and operational risks.                 and either make use of
     whole. Risks may be super-additive,                                                                           the common definitions when discussing
     with the combined impact greater than                  Summary of high-level categories                       risk with peers outside their organisation
     the sum of the individual parts. More often            The working party’s view of risk can                   or, if using alternative definitions, to define
     than not risks are sub-additive, with risks            be summarised in Figure 2. Based on                    these as precisely as possible.               ■

30      June 2011                                                                                                                                         
Our mission isn’t to pursue growth.
Growth helps us pursue our mission.

PartnerRe has grown its resources. We have the capital and the capabilities in virtually every risk class and geographic
region to offer customized solutions and significant capacity. We offer this value to our clients within our established risk
management limits. We do this because we want to honor our commitment to being a financially secure reinsurance
partner – providing continuity of offer and preserving the certainty of our ability to pay claims – no matter what the
environment. And that’s a mission worth pursuing.

For more information, go to
 Risk management              Strategy

Plan of action
Tom Durkin looks at risk management strategy and why it is a perfect opportunity
for actuaries to make a difference

                                                                                                    high insurance premiums, or other
                                                                                                    disproportionate and expensive action.

                                                                                                    Risk measurement
                                                                                                    For companies with a ‘measurement’ type
                                                                                                    of risk management strategy, the potential
                                                                                                    severity and frequency of each risk is typically
                                                                                                    estimated using a qualitative scale such as
                                                                                                    ‘one to five’ or ‘low, medium and high’.
                                                                                                    Risks are considered in isolation, rather
                             Tom Durkin is a
                                                                                                    than holistically.
                             partner in LCP’s
                                                                                                        A log of historical loss incidents is
                             Business Analystics
                                                                                                    maintained and risks are reported upwards.
                             practice and
                                                                                                    A rudimentary aggregation of the risks
                             specialises in
                                                                                                    may have been attempted, but the business
                             the area of risk
                                                                                                    will not yet have tackled diversification,
                                                                                                    often meaning the overall risk exposure
                                                                                                    is still overstated. For example, this siloed
                                                                                                    approach does not allow for natural hedges
                                                                                                    between different areas of the business.

             conomic turbulence and regulatory      often needed. However, our analytical skills,       It is important to have effective processes
             pressures have focused a bright        judgment and clear communication are            in place to measure and monitor risk.
             spotlight on risk, and companies       important throughout.                           This allows companies to focus on the most
             are more engaged than ever with           In this article I consider typical           important risks, and avoid long checklists
     risk management. Now is the time for           characteristics of each type of risk            that hide the wood from the trees.
     more actuaries to really make a name for       management strategy and draw on my
     themselves in this exciting and growing        experience in the field to give case studies     Understanding risk
     area, by helping our clients manage these      of how actuaries are helping with the           For companies really wanting to get a
     new challenges.                                development of risk management outside          handle on risk, a more sophisticated
        In our experience, companies’ risk          traditional areas of actuarial work.            understanding and quantification is
     management strategies typically fall into                                                      required. In addition, companies with
     one of four types:                             Risk                                            this type of strategy usually have a
     1. Awareness — the areas where there is        Almost all companies have processes in          dedicated risk manager or department and
     most uncertainty are identified                 place to identify and monitor key risks.        undertake regular reporting of risk to senior
     2. Measurement — risks are quantified in        Tools such as risk registers or matrices are    management and externally.
     silos across the business                      common. These provide an important                  It is for the ‘understanding’ type of
     3. Understanding — a holistic picture of       foundation for all risk management by           strategy where the actuarial skill-set really
     the overall risk profile is built               creating awareness of where uncertainties       starts to come into its own, particularly as
     4. Harnessing — the detailed risk profile is    lie. Companies with an ‘awareness’ type of      companies analyse the interactions between
     an important consideration when making         risk management strategy typically:             different risks.
     business decisions.                            ■ Have developed these risk registers               For example, a global investment
        The most appropriate strategy will          separately within each business function,       manager can be helped to better
     be different for each business.                which can lead to inconsistencies and           understand the operational risks across
     Individual companies must determine            overlap                                         their business and meet FSA requirements.
     what works best for them and this is a         ■ Do not have a dedicated risk manager          Operational risk is both the biggest risk
     decision for the board. Identifying the        and, if they do, it is a compliance role with   facing investment managers and the
     current type of strategy is helpful when       limited presence at board level                 hardest risk to quantify as:
     assessing the actions that will be most        ■ Have limited risk controls                    ■ There is usually limited data on historical
     effective right now and how strategy           ■ View risk only as a threat, rather than an    loss incidents within a firm, in particular for
     should best develop in the future.             opportunity.                                    rare and more extreme incidents
        Actuaries can add particular value for         This can lead to companies                   ■ Information on losses by other firms in
     companies looking to understand and            overstating their risks, resulting in           the industry requires adjustment so that it
     harness risk, where quantitative analysis is   money wasted on unnecessarily                   is relevant due to each firm’s unique risk

32      June 2011                                                                                                           
    exposure, processes and controls.                  and metrics such as Value at Risk provide                  This is an excellent example of actuaries
       These challenges mean that, when                management with the toolkit to harness risk,               applying their modelling and risk consulting
    modelling operational risks, a greater             reduce uncertainty and improve business                    skills to a non-traditional area as part of a
    reliance on expert judgment is needed              decisions. Exactly the same principles                     multi-disciplinary team.
    than when modelling other risks such as            apply in less well-established areas of                       As another example, consider a large
    credit and market risk. These challenges           actuarial work.                                            utilities company that wants to better
    can be addressed using a method known
    as the Delphi process, which is an efficient        » Actuaries can add                                        manage its use of offshore call centres.
                                                                                                                  Advance bookings receive preferential
    and unbiased way to incorporate expert             particular value for                                       rates, but the client is not able to accurately
    judgment within the risk modelling.
       The Delphi process involves running
                                                       companies looking to                                       predict call volumes so is often forced to pay
                                                                                                                  high rates to purchase additional capacity
    workshops attended by relevant experts             understand and harness                                     at the last minute. Here we could develop
    from across the business. These are similar        risk, where quantitative                                   a dynamic model to predict call centre
    to normal group meetings, but with a
    facilitator setting questions and participants
                                                       analysis is often needed                         «         demand and variability, including allowance
                                                                                                                  for weekly and seasonal cyclical trends and
    giving answers anonymously. The output                An example of this would be building                    the impact of customer mailings on call type
    from the workshops provides an excellent           a powerful predictive tool to help analyse                 and volume. This tool could then be used
    foundation on which to build a model of            the impact of policy on the building of new                to manage call centre capacity and
    the client’s overall operational risk exposure,    power stations on CO2 emissions, blackouts                 understand the risk and reward implications
    using fat-tailed distributions to capture          and electricity prices. To do this, we could               of related decisions.
    extreme events, and copulas to allow for           develop a stochastic model to simulate the                    The support that a company requires
    co-dependency between risks.                       risk and reward profile of each policy under                is highly dependent on the type of risk
       By using these advanced statistical             consideration, by projecting supply and                    management strategy in place and the
    techniques, actuaries ensure that the              demand across the whole UK power system                    nature of the risks faced. By fully engaging
    modelling is robust. However, the thing            over the next 40 years.                                    with those close to the business, actuaries
    that clients usually value most is clear              One possible methodology would be to                    can help to develop appropriate and
    presentation and communication of the              use a ground-up agent-based approach to                    effective risk management processes.
    results so that the modelling is transparent       model individual agents and the interactions               Actuaries can help businesses see not only
    and well understood.                               between them. For example, each power                      the dangers that risk can pose but also the
                                                       station is an agent and the model takes into               opportunities it creates.                      ■
    Harnessing risk                                    account the cost and time of development,
    As companies start to harness risk, their          operations, eventual decommissioning                       The views expressed in this article are those of the
    unique risk fingerprint becomes an important        and overall return on capital.                             author and not necessarily those of LCP as a firm
    factor in corporate decisions. A consistent risk
    management approach is likely to be used                   Figure 1 — The four types of risk management strategy and their
    across the business and regular reporting,                 typical characteristics
    including to the board, means visibility of risk
    management is high. The risk appetite or risk                           1. Awareness                                            3. Understanding
    budget will usually be clearly articulated.                                                                                                          Analysis of
                                                         Listing of risks in a risk    Insurance to minimise            Sophisticated
       The idea of harnessing risk is already                                                                                                       interactions between
                                                                 register             exposure to certain risks        modelling of risks
    common across many traditional areas                                                                                                                     risks
    of actuarial work. For example, setting
    a reinsurance strategy, managing an                     Risk monitored
                                                                                                                   Regular risk reporting to
                                                           separately within                Risk controls                                          External risk reporting
    investment portfolio or de-risking a pension                                                                     senior managment
                                                           business functions
    scheme all require risk and uncertainty
    to be harnessed. In each case, a powerful                            2. Measurement                                               4. Harnessing
    approach is to build a model of the issue
    under consideration to gain understanding            Frequency and severity         Risks considered in             Risk a key driver            Risk appetite clearly
    of the expected outcome and the range of             estimated for each key              isolation                    for corporate                   articulated
                                                                  risk                                                      decisions
    possible variance — in other words, the risk
    versus reward trade-off.                                                                                                                       Consistent and regular
                                                           Maintaining log of                Upward                  Risk capital allocated
       In these traditional areas, techniques             historic risk incidents        reporting of risks             across business                     risk
    including stresses and scenario testing                                                                                                              reporting                                                                                                                                             June 2011     33
 Life                         Equity-linked annuities

Terms of the guarantee
Alexander van Haastrecht examines the importance of capturing skewness and kurtosis in
equity returns when pricing guaranteed annuity options for variable annuities

                                                     repeated time-consuming calculations,
                                                     the availability of closed-form
                                                     formulas is a big advantage for
                                                     any model.
                                                        Existing models currently
                                                     fail in one or more of the
                                                     above requirements. In this
                                                     article, we discuss a novel
                                                     pricing framework that is able
                                                     to incorporate all of the above
                            Dr. Alexander van
                                                     requirements. We consider
                            Haastrecht works at
                                                     existing models and their biggest
                            Delta Lloyd as senior
                                                     disadvantages for the pricing of variable                               returns deviating
                            risk manager and as
                                                     annuities, describe a framework that has      from normality and suggesting the use of
                            assistant professor
                                                     practical advantages compared to the          heavier-tailed distributions. For the
                            at the VU University
                                                     other models, discuss the calibration of      pricing of long-dated variable annuities,
                            Amsterdam. This
                                                     the model and apply this framework to the     Ballotta and Haberman (2003) and
                            piece does not
                                                     pricing of GAOs.                              Chu and Kwok (2007) noted that, given the
                            express the views of
                                                                                                   long maturities of variable annuities,
                            his employers
                                                     Existing models                               a stochastic volatility model for equity

                     any types of life insurance     Many authors have considered the pricing      prices would be more suitable.
                     policies contain embedded       and risk management of variable annuities         Using a model with stochastic volatility
                     options, and one of the most    in the past decade. In most papers, the       allows for more realistic modelling of equity
                     well-known is the guaranteed    focus is on unit-linked deferred annuity      prices. For instance, the parameters of a
     annuity option (GAO), which provides            contracts purchased by a single premium.      stochastic volatility model allow for a highly
     the right to convert a policyholder’s           Generally standard geometric Brownian         flexible calibration to market prices of similar
     accumulated funds to a life annuity at          motion is assumed for equity prices.          equity and interest rates options. For both
     a fixed rate when the policy matures.               This assumption, though technically        market-consistent embedded value and
     These options were a common feature of          very convenient, does not find much            Solvency II, the value of embedded policy
     retirement savings contracts issued in the      justification in financial markets. In fact,    options is expressed relative to market option
     1970s and 1980s in the UK. When they            the markets for long-term options exhibit     prices. The calibration quality of the model
     were issued the GAOs were far out of the        a strong volatility skew or smile, implying   is very important for a proper valuation
     money, however, as interest rates fell and      log index                                     (and hedging) of insurance contracts.
     mortality rates improved more quickly than
     anticipated, the value of the GAOs increased
     rapidly. Indeed, they were one of the factors
     that led to the downfall of Equitable Life in
     2000. Currently, similar options are often
     packaged and sold as a feature of variable
     annuity offerings.
        Market-consistent valuation of insurance
     liabilities is the cornerstone of IFRS 4
     Phase II and Solvency II. To date, much
     attention has been drawn to the valuation
     of embedded options depending on interest
     rates or equity values. Many variable
     annuity contracts, however, depend on the
     joint stochastic evolution of both equity
     returns and interest rates. These products
     therefore require a realistic calibration of
     equity markets, stochastic interest rates
     and a suitable correlation coefficient
     between the two. Moreover, to avoid

34      June 2011                                                                                                         
    Stochastic volatility extension                                             model can also be used for the pricing of       market- and model-implied volatilities.
    The model used in this article is the                                       more complex path-dependent insurance              The calibration results are shown in
    Schöbel-Zhu Hull-White (SZHW1) model.                                       products such as specific rate-of-return or      Figure 1, where we have plotted the risk-
    This framework combines the stochastic                                      funding ratio guarantees.                       neutral densities of the log-asset price of
    volatility model of Schöbel and Zhu with                                                                                    the SZHW and BSHW model for a 10-year
    the one-factor interest rate model of                                       Calibration                                     maturity. This figure shows that the
    Hull and White, thereby explicitly taking                                   To analyse the impact of stochastic             stochastic volatility model is significantly
    the correlation between all underlying assets                               volatility, we first calibrate the BSHW          better in calibrating the market’s implied
    into account. The risk-neutral dynamics for                                 and SZHW model                                                          volatility structure;
    equity price process S(t) are given by:                                     to market option
                                                                                data at end July        » Ignoring a model with                         the SZHW model
                                                                                                                                                        gives an extremely
      dS(t) = r(t) dt + v(t) dWs(t)                                             2007. This is done      stochastic volatility may                       good fit, while the fit
                                                                                by first calibrating     lead to significant errors                      of the BSHW model
      dv(t) - k[       – v(t)]dt +                  dWv(t)                      the interest rate                                                       is relatively poor.
                                                                                                        for the valuation of
                                                                                parameters to 168                                                       Clearly, the SZHW
      dr(t) = [ (t) – a r(t)]dt +                          dWr(T)               market prices of        embedded options                                model incorporates
                                                                                swaptions. The mean                                                     the skewness and
       Here, v(t) represents the (instantaneous)                                average price error is 1.34%, which is very     heavy tails seen in option markets, far more
    stochastic volatility of the equity S (t)                                   good given the large set of option prices       realistically than the BSHW model.
    and follows a mean reverting Ornstein-                                      that are fitted using only two interest rate
    Uhlenbeck process. The stochastic interest                                  parameters. Using time-series analysis, we      Impact of stochastic volatility for
    rates are given by a Hull-White process                                     estimated an effective correlation of 34.7%     guaranteed annuity options
    for r(t), which is calibrated to the current                                between long-term interest rates and            The proof of the pudding is in the eating,
    term structure of interest rates using (t).                                 log-returns of the Euro Stoxx 50. Finally, we   so next we consider the impact of using a
    The parameters of the volatility process are                                calibrated the equity model to market call      stochastic volatility model on the pricing

    k (mean reversion), v(0) (short-term                                        and put option prices, by minimising the        of GAOs. More specifically, a GAO gives the
    volatility), (long-term volatility) and                                     sum of absolute differences between             policyholder the right to receive at his/her
      (volatility of the volatility). Note that the
    deterministic volatility Black-Scholes-Hull-                                        Figure 1 — Log-densities of market option prices compared to
    White (BSHW) model can easily be obtained                                           the calibrated stochastic volatility (SZHW) model and
    as a special case.
                                                                                        deterministic volatility (BSHW) model
       The SZHW model preserves much of the
    analytical tractability that is available for
    constant volatility models. For instance, the                                60%
    European call option price C(K,T) with strike                                                 Implied market
    K and maturity T can be computed in closed                                                    BSHW model
    form using the following formula:                                            50%
                                                                                                  SZHW model
   C(K,T) = P(t,T) —   ∫ Re [e
                                 — (a + iu)lnK      (u – (a + 1)i)
                                                 (a + iu)(a + 1 + iu)   ] du,    40%
       where P(t,T) denotes the market risk-
    neutral discount factor at time t for                                        30%
    maturity T and (s) the characteristic
    function of log-asset price. Note that
    this formula can be evaluated fast and                                       20%
    accurately using basic numerical integration
    techniques2. This is a significant advantage
    as it enables fast calibrations to liquidly                                   10%
    traded options and accurate sensitivity
    analyses for potential hedges.
       Finally, we note that efficient
    Monte Carlo simulation methods are                                                  -6             -4            -2            0              2             4               6
    available for the SZHW model. Hence the                                                                                                                                                  June 2011   35
 Life                                Equity-linked annuities

»    retirement date, either a cash payment equal
     to the investment in the equity fund S(T),
     or a life annuity calculated by converting
                                                              of GAOs3. That is, conditional on survival
                                                              of the policyholder, the GAO prices are
                                                              given by the following modified
                                                                                                                     be some very low pay-offs for equity prices
                                                                                                                     in the left tail, but relatively higher pay-offs
                                                                                                                     for the remaining scenarios.
     S(T) at the guaranteed rate, g. A rational               Black-Scholes formula:                                    The results indicate that variable
     policyholder would choose the greater of the                             n                                      annuity prices and hedges are significantly
     two assets. In other words, if at inception,                   gS(0)∑ c i[F N(d 1) – Ki N(di2)],
                                                                                                                     underestimated if one ignores skewness
     the policyholder is aged x and the normal                                i=0                                    and kurtosis in equity returns. A stochastic
     retirement date is at time T, then the                      where N(z) denotes the cumulative                   volatility model produces more realistic
     annuity value at maturity is S(T) + H(T),                normal distribution. Using the above                   prices and hedges for equity-linked
     where H(T), the GAO pay-off, is given by:                expression, we have computed GAO prices                annuities and is able to capture the shape of
                             n                                for both the deterministic and stochastic              risk-neutral equity price distributions in a
     H(T) = max S(T)g ∑ci P(T,ti ) – S(T),0 ,
                                                     ]        volatility model. The results can be found             suitable way.
                                                              in Table 1.
        In the following example, the                            From the results we can see that the                Conclusion
     policyholder is a male aged 55 and the                   prices for GAOs are significantly higher if             For the valuation of long-dated variable
     retirement age is 65, meaning the GAO                    one uses a stochastic volatility model for             annuities it is important to consider realistic,
     matures in ten years. Survival rates are                 equity prices, especially for GAOs with                heavy-tailed returns for equity funds in
     based on the PNMA00 table. Prices for the                out-of-the-money strikes. Note that these              combination with a full correlation
     GAO are calculated for different guaranteed              price differences are not caused by a                  structure with the underlying interest rates.
     rates, g. In the 1970s and 1980s g was                   volatility effect as both models are calibrated        We demonstrated that the SZHW stochastic
     typically around 11%. Currently, GMIB                    to the same market data. Nonetheless, the              volatility model is able to incorporate all
     contracts will be based on at-the-money                  distribution of equity prices under a SZHW             these characteristics in a suitable way and
     guaranteed conversion rates.                             process does capture the skewness of equity            also allows closed-form calibration methods.
        Note that the pay-off of the GAO depends              prices more accurately, as can be seen in              Using market option data, we investigated
     on both the future term structure of interest            Figure 1 on page 35.                                   the impact of a stochastic volatility model
     rates, which determines the value of the                    This means that equity prices using a               on the pricing of GAOs. The empirical test
     guaranteed conversion factor g, as well as               stochastic volatility model have a heavier             cases indicate that ignoring a model with
     the performance of the equity fund, which                left tail and relatively more mass on the              stochastic volatility may lead to significant
     determines the amount of funds available                 right of the distribution when compared                errors for the valuation of embedded options.
     for conversion at g. This is typical for                 to the BSHW process. Given a positive                  These results are of particular importance
     long-dated variable annuities, which often               correlation between equity prices and                  for life insurers working on the pricing or
     depend on multiple underlying assets.                    interest rates, and the fact that the GAO              hedging of their variable annuity portfolio. ■
        For both BSHW and SZHW, closed-form                   pays off when interest rates are low, this
     expressions can be derived for the cost                  means that for the SZHW model there will               1 A. van Haastrecht, R. Lord, A. Pelsser, and D.
                                                                                                                     Schrager. Pricing long-dated insurance contracts with
                                                                                                                     stochastic interest rates and stochastic volatility.
         Table 1 — Impact on equity-linked annuities prices (GAOs) with a
                                                                                                                     Insurance: Mathematics and Economics, 2009.
         stochastic volatility model for equity prices
                                                                                                                     2 R. Lord and C. Kahl. Optimal fourier inversion in
         The at-the-money guaranteed rate is equal to 8.23% and the effective correlation between the stock price
         and interest rates equals 34.7%                                                                             semi-analytical option pricing. Journal of Computational
                                                                                                                     Finance, 2007.
 Guaranteed rate                  Stochastic volatility      Constant volatility           Relative difference       3 A. van Haastrecht, R. Plat and
 8.23%                                    3.82                         3.07                                + 24.5%   A. Pelsser, Pricing
                                                                                                                     Guaranteed Annuity
 7%                                       0.59                         0.39                                + 50.7%   Options using a
                                                                                                                     Stochastic Volatility
 8%                                       2.89                         2.26                               + 28.0%
                                                                                                                     model for equity
 9%                                       8.40                         7.25                                + 15.8%   prices”, Insurance:
                                                                                                                     Mathematics and
 10%                                      17.02                       15.53                                 + 9.6%   Economics,
 11%                                     27.37                        25.69                                 + 6.5%   2010.

 12%                                     38.30                        36.47                                 + 5.0%

 13%                                     49.35                        47.37                                 + 4.2%

36      June 2011                                                                                                                                     
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                                                                                Solvency II
  Obtain a wealth of information not obtainable in any other way       Forecast distributions
            Obtain wealth of information not obtainable i         ther • Reserve, Underwriting
            Obtain a wealth of information not obtainable in any other way
                                                                                  and Combined
                                                                                Liability Stream
                                                                                V@R, T-V@R
                                                                                Risk Capital Allocation
                                                                                                             Credit ratings                           Solvency II

Credit where it’s due
David Prowse and Clara Hughes discuss the potential impact of Solvency II on
insurer credit ratings

                                                       to a lower-risk product mix, more cautious       reflects the recovery in financial markets
                                                       investment strategy and, for certain products,   and the balance sheet de-risking that many
                                                       higher premiums. Insurance companies hold        insurers have carried out both in response
                                                       large amounts of corporate and government        to the financial crisis and in anticipation of
                                                       bonds and equities. Changes in their             Solvency II, which is designed to discourage
                                                       investment strategies could significantly shift   balance sheet risk. However, several non-life
                                                       demand between these asset classes, with         insurers may fall short of Solvency II capital
                                                       implications for asset prices and yields.        requirements as currently drafted. Unless the
                                                          For product lines with increased capital      Solvency II risk charges for non-life business
                                                       requirements under Solvency II, insurers         are recalibrated, some non-life insurers may
    David Prowse is a senior director at Fitch
                                                       could pass the associated extra costs onto       have to recapitalise or reshape their business
    Ratings and leads Fitch’s UK life insurance
                                                       policyholders wherever possible. A key           in order to survive. That said, the European
    ratings team. Clara Hughes is a director at
                                                       example is the UK annuity market, where          Insurance and Occupational Pensions
    Fitch Ratings and leads Fitch’s Solvency II
                                                       annuity rates have already been seen to be       Authority is already performing additional
    analysis and European capital modelling
                                                       cut in direct response to Solvency II.           work to improve the calibrations and it seems

                   orking at a rating agency means     People retiring are facing lower annuity         that Solvency II will ultimately be more
                   anticipating the impact of big      rates than five years ago; this has been due      favourable for non-life insurers than the draft
                   shake-ups in the insurance          to increasing longevity and diminishing          rules as they stand.
                   industry and credit ratings.        investment returns but now it is being              Many smaller and niche insurers face a
    The latest and arguably most significant            exacerbated by Solvency II. Many insurers are    significant increase in capital requirements

                                                       » Solvency II is expected
    storm to hit the insurance industry in years                                                        because they lack risk diversification, an
    is the introduction of Solvency II, the new                                                         important factor under Solvency II. This may
    European insurance regulatory regime due
    to come into force in 2013.
                                                       to have far-reaching                             lead to an increase in merger and acquisition
                                                                                                        activity, which could provide opportunities
        Solvency II is expected to have                impacts, with both positive                      for larger insurers but could also bring
    far-reaching impacts, with both positive           and negative credit                              integration risks to the insurance sector.
    and negative credit rating implications
    (see Figure 1). Rating changes will be driven
                                                       rating implications                  «              European insurers are lobbying hard
                                                                                                        for Solvency II to be recalibrated to avoid
    by the characteristics of each insurer and its     preparing for the new regulations by moving      potentially negative impacts for the
    management of the transition to Solvency II.       to much more cautious asset strategies driven    industry. In a recent letter to the European
    The main rating drivers are likely to include      by the new rules. However, this means            Commission, top professionals from the
    exposure to risks that require significantly        lower expected returns and therefore lower       CRO Forum and other bodies representing
    more capital under Solvency II such as             pensions for retirees.                           the insurance industry’s views expressed
    equities, low-grade corporate bonds, products         Under quantitative impact study 5             their extreme concern, saying “Stakes are
    with high guarantees, as well as marine,           (QIS5), the latest indication of how capital     high and time is running out: a failure to
    aviation and transport insurance.                  positions may look under the new regime,         properly implement this reform would
        Solvency II could transform the insurance      the strong capital position of the European      have dire consequences for an industry
    landscape with some fundamental shifts             insurance and reinsurance sector in aggregate    that represents a significant component of
                                                                                                        the EU economy, capital markets, old age
        Figure 1 — Implications for credit ratings under Solvency II                                    savings and jobs.”
                                                                                                           There are a significant number of
               Capital requirements     Increased        Improved         Transparency
                    up means            barriers to      risk-based     and comparability
                                                                                                        outstanding issues that could swing
                 leverage down            entry         assessment             up?                      companies’ capital positions between
                                                                                                        comfortable solvency and significant deficit.
                                                                                                        These must be resolved before the true
                                                                                                        impact of Solvency II can be ascertained
                                                                                                        and investors can understand the impact on
                                      Implications for ratings                                          their holdings.                                ■

                                                                                                        Fitch’s report ‘Solvency II — Far-Reaching Implications of
                                                                                                        New Insurance Regulation’ is available at
                       Short-term       Threats to        Technical       Transparency         on the Solvency II market focus
                     implementation       some         issues: coupon   and comparability
                                                                                                        page, along with reports on Omnibus II and the QIS5 results
                          risk         product lines      deferrals          down?                                                                                                                                        June 2011   41
 Solvency II                  QIS5

The end of the beginning
Anthony Brown looks at what we have learned from the fifth Solvency II quantitative impact
study and considers where we go from here

                                                    Occupational Pensions Authority (EIOPA),        EIOPA and the European Commission.
                                                    it will be the last.                            Over the coming months the quantitative
                                                       The exercise was designed to test a near-    aspects of Solvency II will be finalised, and
                                                    final implementation of Solvency II, and         throughout this process the decision makers
                                                    provided three main benefits:                    are leaning heavily on the results that have
                                                    1. A close to final chance to assess the         been gathered from the exercise.
                                                    potential financial impact of Solvency II           The feedback provided in the qualitative
                                                    on firms. With the clock ticking until           questionnaire will dictate if and where
                                                    implementation, QIS5 was seen by most           simplifications are added, and where
                                                    firms as a vital opportunity to understand       guidance will be provided by EIOPA to
                            Anthony Brown is a
                                                    the likely effect of the new regime on their    help actuaries perform the required
                            senior policy actuary
                                                    capital position. Many firms will be using       technical calculations.
                            at the FSA and was
                                                    the findings from QIS5 to drive business            The financial results are also helping to
                            the FSA lead for QIS5
                                                    decisions on both the quantitative and          inform decisions and discussions in Europe
                                                    qualitative elements and inform senior          on some of the key outstanding financial
                                                    management of the likely impact of the new      concepts in Solvency II. These include the
                                                    regime. For this reason we expect some firms     liquidity premium, expected profits in
     What was QIS5 and why did we do it?            will calculate their QIS5 results on year-end   future premiums (EPIFP), the levels of
     The fifth quantitative impact study (QIS5)      2010 and even half-year figures.                 calibration for non-life and catastrophe risk,
     took approximately 1,500 person-months         2. As ‘go live’ for Solvency II looms           and many others.
     of actuarial resource across the UK industry   ever nearer, QIS5 provided an excellent
     last autumn, and so will be a topic very       opportunity to test the preparedness of the     Who took part?
     close to the heart of many readers.            firm to perform the required calculations.       We were very pleased by the participation
     It was the largest and most comprehensive      There is still time to take action where        in QIS5. Around 70% of UK insurance
     QIS5 exercise undertaken for Solvency II       systems were unable to perform the              companies took part, covering the vast
     and may be the largest such exercise ever      calculations to the required auditable and      majority of the industry by market share,
     undertaken in the world. In the words          publishable standards under Solvency II.        and more than twice as many took part as
     of the European Insurance and                     3. An invaluable learning exercise for       did for QIS4.
                                                                                                       In terms of quality of submissions,
                                                                                                    we were pleased to see the amount
                                                                                                    of effort put into the exercise by firms,
                                                                                                    approximately double the resource as was
                                                                                                    committed to QIS4.
                                                                                                       This excellent level of participation and
                                                                                                    resource commitment clearly reflects the
                                                                                                    importance firms attached to this exercise;
                                                                                                    it was a key milestone for the Solvency II
                                                                                                    implementation project and treated
                                                                                                    with a high degree of importance by the
                                                                                                    Commission and national regulators.
                                                                                                    Particularly pleasing was the increased
                                                                                                    involvement from smaller insurers, around
                                                                                                    three times as many took part in QIS5 than
                                                                                                    in QIS4.
                                                                                                       The FSA and EIOPA QIS5 reports both
                                                                                                    give many further details on the capital
                                                                                                    impacts of various parts of the regime and
                                                                                                    are available at
                                                                                                    In the coming months, it will be important
                                                                                                    that clear guidance is provided on the
                                                                                                    issues that proved difficult, such as contract
                                                                                                    boundaries or the risk margin, and EIOPA
                                                                                                    and the FSA are working on this guidance.

42      June 2011                                                                                                          
                                                                              Figure 1 — Dispersion of the evolution of surplus from Solvency I
    The headline figures                                                      to QIS5 split by life and non-life firms
    The EIOPA report noted that the total
    UK industry surplus has reduced from
    €62bn under Solvency I, to €35bn under                                   -80%
    QIS5. However, this €27bn fall substantially
    overstates the total capital effect of QIS5                               60%
                                                       Percentage increase

    for four main reasons. First, the change is
    measured with respect to Solvency I
    (Pillar 1) figures — for many firms the                                     20%                                                                   range (IQR)
    fall in surplus from the biting ICAS
    regime is significantly less pronounced.                                    0%
                                                                                         All             Life                   Non-life            Median
    Second, the total surplus looks only at the
    ‘standard formula’, and the application
    of internal models may provide lower                                     -40%
    capital requirements in some cases.
    Third, the effect of transitional provisions                             -60%
    aimed at smoothing the capital impact
    from Solvency I to Solvency II was not                                   -80%
    included. These transitionals can provide
    very high levels of capital relief, for
    example a discount rate transitional was
    tested which reduced required capital by          new business plans take shape and the                     with firms, as we work together to ensure
    €4bn for UK annuity writers alone.                regime becomes finalised.                                  that the implications of the new regime are
    Finally, QIS5 necessarily didn’t take                                                                       fully understood, and that preparation for
    account of the likely management actions          What happens next?                                        implementation is well under way.
    in the run-up to Solvency II, and again           In line with many firms, the FSA saw                           The European Commission, Finance
    these will provide significant levels of relief.   the QIS5 exercise as a key milestone in                   Ministries, EIOPA and national regulators
       The overall
    surplus figures mask     » With the clock ticking                         its Solvency II
                                                                                                                are all hard at work to finalise the
                                                                                                                quantitative details of Solvency II (in the
    significant variation    until implementation, QIS5                       programme. During                  delegated acts, which used to be known as
    between firms.
    Figure 1 shows the
                            was seen by most firms                           the exercise we
                                                                             answered 600
                                                                                                                the level 2 implementing measures), and to
                                                                                                                provide guidance for how the calculations
    dispersion of the       as a vital opportunity                           questions and                      should be performed. Things are moving
    evolution of surplus    to understand the likely                         committed vast                     fast, and the QIS5 results and feedback
    from Solvency I to                                                       supervisory resource               have been, and will continue to be, a key
                            effect of the new regime
    QIS5 split by life and                                                   to understanding                   input to the policy development process.
    non-life firms.          on their capital position                        the QIS5 results                   It is for this reason that we are so grateful
    The graph illustrates                                                    on a firm-by-firm                    for all of the hard work done by the
    that some firms saw significant increase to         basis. The FSA is using the QIS5 results as a             UK industry to complete the exercise to
    their surplus, and others marked decreases.       springboard in its supervisory discussions                such a high standard.                         ■
    81% of firms across the industry met their
    solvency capital requirement (SCR), and the
    vast majority met their minimum capital
                                                           Will there be a QIS6?                                  exercise before the implementation”.
                                                                                                                    There will be further impact analyses,
    requirement (MCR).                                     The QIS5 process took 15 months from                   in part this will be through modelling
       The 19% of firms that did not meet                   inception in January 2010 to final                     performed by the regulators, and in part
    their SCR fall into three broad categories,            reporting in March 2011. Given the time                through exercises smaller in scope than QIS5
    annuity writers, protection and indemnity              to implementation (proposed as 1 January               aimed at gathering particular data points,
    clubs, and firms with large amounts of                  2013 — just 18 months away) it is difficult            or targeting particular sectors. Further, it is
    unrated reinsurance. For these firms                    to see room for a further exercise of this             part of EIOPA’s mandate to perform ‘stress
    transitional arrangements and internal                 scale, as noted by Carlos Montalvo on                  tests’ to assess systemic risk (the first of
    models may provide significant capital                  being elected executive director of EIOPA,             which is well under way as this article goes
    relief, but they should be closely                     when he said, “QIS5 is the last one. It is             to press), and we can expect these to take
    monitoring their capital positions as                  simply too late to undertake another full              place annually.                                                                                                                                   June 2011      43
 Economics                     Theory

Claims and counterarguments
Angus Sibley continues his analysis of economic ideology and the conflicting views of
neoclassicists and Austrian School economists

                                                      in a St Petersburg library reading Hayek as        existence of universally valid economic laws:
                                                      the happiest of his life”3. These leaders’ shock   “Understanding [of diverse cultures] does not
                                                      therapy led to economic mayhem;                    permit the modern historian to state that an
                                                      thereafter, the authoritarian regime of            economic law was not valid in ancient Rome
                                                      Vladimir Putin was seen by most Russians           or in the empire of the Incas”4. The Historical
                                                      as a welcome relief.                               School began with Wilhelm Roscher in the
                                                         One basic difference between the two            early 1840s, predating Kaiser Wilhelm I’s
                                                      schools is that neoclassicism is dominated         Second Reich (1871).
                                                      by the theory, pioneered by Léon Walras                According to Arthur, Austrians
                                                      in the late nineteenth century, of general         had little political influence even in the
                             Angus Sibley is a
                                                      equilibrium. This means that the various           Margaret Thatcher era, and have none
                             retired actuary and
                                                      activities in the economy interact in such         today. This seems unlikely, given Thatcher’s
                             former member of
                                                      a way that they form, or tend towards, an          admiration of Hayek and the continuing
                             the London Stock
                                                      integrated system in which everything is in        prominence in America of politicians
                                                      equilibrium with everything else. The theory       who still want to leave markets to their
                                                      implies that it is possible to construct models    own devices, despite all the evidence that

                    y article, ‘A Battle of Minds’    of the economy as a whole, or of distinct          poorly regulated markets have disgraced
                    (The Actuary, March 2010          parts of it, and that these models can             themselves. Visit, the site
          ,       predict the behaviour of the whole or parts.       of the Ludwig von Mises Institute in
                    focused on Austrian economics,    Such modelling techniques form the basis           Auburn, Alabama, to see the huge efforts
     but also attacked the neoclassical economics     of, among other things, financial economics.        still being made to promote Austrian ideas.
     of Milton Friedman and the Chicago School.       But clearly too many models failed to              Congressman Paul Ryan, author of the
     In ‘Opposing opinions’ (The Actuary,             predict the misbehaviour of complex                recent controversial US budget proposals,
     August 2010,          marketable instruments, or the disaster to         lists Hayek’s The Road to Serfdom among his
     Terry Arthur claims that these two schools       which that contributed.                            favourite books.
     are now miles apart, yet they have many             Austrian economics, by contrast, denies             Like other free-marketeers, Arthur claims
     basic features in common — their belief          that economic behaviour, even of large             that post-war West Germany achieved its
     that democracy and unhampered markets            groups of economic agents, can be predicted        fine record of recovery, stability and growth
     are inseparable; their certainty that markets    mathematically. Therefore, Austrian                under conditions ‘close to laissez-faire’.
     know best and are self-correcting; their         economists avoid the use of mathematical           Certainly the Ordoliberal economists
     rejection of attempts by the state to mitigate   models. But both groups believe in ‘universal      Walter Eucken and Wilhelm Röpke, leaders
     inequalities; and their disapproval of state     laws’ of economics. Mises, for example,            in the creation of the Soziale Marktwirtschaft,
     ownership and enterprise. One can scarcely       claimed that the German Historicists were          were founding members of the Mont Pèlerin
     deny that this cluster of ideas did indeed       not economists at all, since they denied the       Society, along with Austrians Hayek and
     ‘conquer the world’ in the late twentieth                                                           Mises as well as Chicagoans Friedman,
     century. Whether it came mainly from                                                                George Stigler, Frank Knight and
     Vienna or from Chicago is a moot point —                                                            Aaron Director. Yet Eucken and Röpke were
     the two schools influenced and reinforced                                                            hardly mainstream Austrians. “Both… believed
     each other. According to Alan Greenspan,                                                            in the merits of the market, but they did not
     “The long tentacles… of the Austrian school                                                         believe that it could function automatically
     reached far into the future from when most                                                          without the help of the government.
     of them practiced and have had a profound                                                           In this sense, government was not seen
     and, in my judgment, irreversible effect on                                                         as an enemy but as a friend of the market,
     how most mainstream economists think in                                                             and the libertarian economics of today would
     this country”1.                                                                                     not have been acceptable to Ordoliberals.” 5
        Friedrich Hayek’s ideas underpinned                                                                  West Germany, the ‘Rhenish model’, was
     the chaotic liberalisation of the Russian                                                           always a mixed economy with considerable
     economy under Boris Yeltsin, whose                                                                  public ownership and control. Actuaries
     prime minister Yegor Gaïdar recalled that                                                           familiar with German insurance will recall
     “I read Milton Friedman’s book with interest,                                                       that, until 1994, the Bundesaufsichtsamt für
     and also Hayek. They were very authoritative                                                        das Versicherungswesen (federal supervisory
     for me”2, while his economic strategist                                                             office) had to give prior approval of contract
     Anatoly Chubaïs “remembered nights spent                                                            terms and premium and valuation bases

44      June 2011                                                                                                               
    for both life and general policies, imposing           There is something very odd about               customers, of bond investors, and of rating
    minimum standards. This procedure                  this. Economics, like law and religion, is          agencies with their faulty models. To put the
    suppressed competition between insurers.           concerned with human behaviour and                  primary blame on central banks is like saying
    Many banks were public sector entities             with the interactions of people in society.         that policemen ‘caused’ a fire by not being
    such as the Landesbanken, with restrictions        A jurist who held that the law should not           quick enough to arrest the arsonists.
    on the scope of their operations; keen             concern itself with justice would be justly             Austrians take this line because a key part
    competition between banks was discouraged          ridiculed. A priest who preached that religion      of their ideology is the belief that the public
    on the grounds that “… the principles of           had nothing to say about justice would              sector is always wrong — “… big government
    competition… must take second place to the         get the same treatment. Yet we tolerate the         is incorrigible”. So they have no interest in
    confidence of depositors in their banks”6.          bizarre notion that justice need not concern        the vital, but difficult and unending, task of
    Large, stable bank shareholdings in private        economists. The Indian economist                    creating and maintaining a well-functioning,
    sector companies meant that a free market in       Amartya Sen, professor at Harvard,                  beneficent state. They want instead to
    corporate control was essentially absent.          Nobel prizewinner and former master of              minimise the state and entrust most of its
        As Arthur observes, the historical             Trinity College, Cambridge, complains of the        duties to untrammelled markets. But markets
    economist Werner Sombart wrote that                “…self-consciously ‘non-ethical’ character of       are not substitutes for politics. And, with too
    “… facts are like beads: they require a string     modern economics”13.                                much power and too little supervision, free
    [of theory] to hold them together”7.                   This unconcern with justice underpins           markets can themselves become tyrants.          ■
    Quite so, but it                                                             the very bedrock of
    generally makes better
    sense to infer a theory   » Austrians like to claim                          laissez-faire — the
                                                                                 doctrine of unlimited
                                                                                                           1 Alan Greenspan, testimony to the House Financial
                                                                                                           Services Committee, 25 July 2000
    from facts, than to       that they are the best, or                         freedom of contract.      2 Yegor Gaïdar in an interview on PBS ‘Commanding
    assume a priori a theory  even the only, predictors                          It is held that any       Heights’, 10 May 2000
    and then expect facts
    to fit it. Only theories   of boom and bust                 «                 human being has an
                                                                                 inalienable right to
                                                                                                           3 Andrew Cowley, Moscow correspondent of The
                                                                                                           Economist (London), letter to the International Herald
    well grounded in observed facts make sound         contract with any other, provided only that         Tribune, 10 February 1995
    bases for deduction. Does Mises’ assumption        the terms of the contract are mutually agreed.      4 Ludwig von Mises, Human Action (Hodge, London,
    that “… human behaviour is necessarily             There lies the libertarians’ excuse for rejecting   1949), chap. 2, #10
    always rational”8 pass this test?                  regulation by governments, or by unions,            5 Naoshi Yamawaki, Walter Eucken and Wilhelm Röpke
        Arthur objects to my thesis that Austrian      or by trade associations. But this theory           in The German Historical School, ed. Yuichi Shionoya
    economics is harsh, inhumane and unjust.           overlooks the obvious fact that the parties to      (Routledge, London, 2001), page 198
    Its harshness would seem to be a matter            economic contracts are often of very unequal        6 Magali Demotes-Mainard, L’Economie de la
    of widely shared experience, which might,          strength; therefore, such contracts are             République Fédérale Allemande (La Découverte, Paris,
    however, be written off as mere subjective         often inequitable.                                  1989), page 88
    opinion. What can be quantified are                     The Austrian attitude to charity is another     7 Werner Sombart, Economic Theory and Economic
    the prevalent increases in inequality,             logical consequence of ethics-free economics.       History (1929), #3; see Journal of Institutional
    unemployment and destitution — these               Austrians cannot or will not see that poverty       Economics, vol. 2, no. 1 (Cambridge University Press,
    are matters which induce a real sense of           that reflects persistent exorbitant inequalities     2006)
    injustice. Austrians and other libertarians        constitutes an injustice, not simply a              8 Mises, Human Action, chap. 1, #4
    reply, with Arthur, that “… the study of           personal misfortune calling for a helping           9 M R Griffiths (Tillinghast Towers Perrin) and J R Lewis
    economics… has no moral dimension”.                hand from charity.                                  (fellow of Merton College, Oxford), Ethical Economics
    In other words, “… important though justice            Austrians like to claim that they are the       (Macmillan, 1997), chap. 2
    is, most economists deny that it has any           best, or even the only, predictors of boom          10 Lionel Robbins, An Essay on the Nature and
    bearing on economic transactions”9.                and bust. Yet a fascinating survey14, ironically    Significance of Economic Science (Macmillan, London,
        In the neoclassical and Austrian worlds,       titled ‘No-one saw this coming’, identifies          1932), chap. 6
    this charge sticks. Lionel Robbins wrote that      twelve serious forecasters, including               11 Milton and Rose Friedman, Free to Choose (Harcourt
    “… it does not seem possible to associate          Wynne Godley, Fred Harrison and                     Bruce Jovanovitch, San Diego, 1980), chap. 5
    economics with ethics”10; Friedman claimed         Nouriel Roubini, who predicted the latest           12 Friedrich von Hayek, The Mirage of Social Justice
    that “… there is a fundamental conflict             disaster. Two of the twelve are clearly             (Routledge & Kegan Paul, London, 1976), chap. 10
    between the ideal of ‘fair shares’ and the ideal   Austrians. And it is surely inadmissible to         13 Amartya Sen, On Ethics and Economics (Blackwell,
    of personal liberty”11; Hayek insisted that, in    claim, as Austrians do, that central banks          Oxford, 1987), preface
    a free market, “the question of whether the        ‘cause’ the booms that precede busts.               14 Dirk J Bezemer (University of Groningen), ‘No-one
    resulting distribution of incomes is just or       The house of subprime cards was built by            saw this coming’, see http://mpra.ub.uni-muenchen.
    unjust has no meaning”12.                          the stupidity and greed of bankers and their        de/15892/1/MPRA_paper_15892.pdf                                                                                                                                      June 2011      45
                                                                                                                         Sponsored by
 Technology                   Electronic security

Secure in the knowledge
Anthony Dhanendran looks at the ever-increasing need for vigilance and tight security controls
in the electronic era
                                                     data is more openly available: even in banks     Every employee — even those without
                                                     or actuarial firms where there are good, tight    high-level access — is a potential target
                                                     controls on databases, the data is still being   because attackers will take any opportunity
                                                     used in ways that it wouldn’t have been          to get inside a system.
                                                     before — we outsource communications                 It’s not just electronic security that’s
                                                     or administration to other companies, or         important: as a journalist I find myself
                                                     put out work on temporary projects, all of       looking over people’s shoulders on the
                                                     which require data transfer. That means          train — out of sheer nosiness, to be honest
                                                     more people have access to it, which means       — and often they’re reading papers marked
                                                     there are more potential threats.                ‘confidential’ or ‘private’. It’s bad enough
                                                        Finally, the consequences can be              if a journalist gets wind of a good scoop
                             Anthony Dhanendran
                                                     greater. Not just in terms of fines or other      because someone’s been exposing papers
                             is the reviews editor
                                                     punishments, some of which have been             they shouldn’t have, but it could be even
                             of Computeractive
                                                     tightened up or toughened, but when news         worse if someone with malicious intent gets

                ne of the problems with the          can spread around social networks within         hold of private details.
                age in which we live is that         days or hours, it’s harder to keep control of        Encryption can be important. In 2009
                we sometimes find ourselves           events once a data breach has been made          the FSA handed one financial services
                having to care about things that,    public, and companies’ reputations can be        firm a hefty fine for, among other things,
     previously, would have been someone else’s      tarnished or even trashed.                       sending out customer data on unsecured
     problem. Take information security.                Another thing that’s changed in the last      discs and USB devices and for sending those
     Only ten years ago it would have been           ten years is the proliferation of devices we     by ordinary post. It may be common sense,
     most unlikely that an employee outside the      carry with us, which has led to companies        but when you’re dealing with sensitive
     IT department would have had to worry           opening up their networks. Where they            data, make sure you keep it secure. If it’s
     about information security. Now, however,       were once locked down to company-owned           going elsewhere it should be encrypted and
     there are more threats coming from myriad       laptops and desktop computers, now many          sent securely. Under Windows 7 and Vista,
     sources and countless ways for attackers        of us can connect our own devices to access      laptops can be encrypted at the hard disk
     to get into our companies’ systems, so it’s     corporate systems. But if you’re connecting      level to prevent any unauthorised access.
     extremely important to be on guard.             your own device to the corporate network,            Finally, your company will probably
        That’s not to say that data thefts weren’t   that makes corporate network security your       have minimum requirements for secure
     being perpetrated ten years ago but several     problem. Your own computer needs to be           passwords, but it’s good to use different
     things have combined to compound the            kept up to date with recent security updates     passwords for different systems even if
     problem. First, there’s more data: databases    and patches, and with fully working, up-to-      that’s not mandatory. Several password-
     accumulate, whether they’re about clients       date security software.                          remembering tools are available such as
     or customers or anything else. Second, the         Most attacks contain an element of            Lastpass ( and Roboform
                                                                              ‘social engineering’    (, which will save
                                                                              — when the              passwords in an encrypted file. These are
                                                                              Anonymous group         good for personal use, but check before
                                                                              attacked the HBGary     using them for work-related information.
                                                                              Federal IT security         All of this security advice really boils
                                                                              firm in February,        down to common sense: it’s a bad idea to
                                                                              one of the hackers      send unencrypted client data through the
                                                                              contacted an IT         post, or to use ‘password’ as a password.
                                                                              administrator posing    Sometimes, in the rush to get things
                                                                              as the CEO and          done we forget the basics and cut corners,
                                                                              asked him to reset      but when it comes to computer security
                                                                              the master password,    it’s worth taking the time to follow the
                                                                              a request that was      procedures even if they seem onerous,
                                                                              promptly granted.       just in case.                                ■

       ReMetrica for Solvency II

46      June 2011                                                                                                                                                                                               Richard Elliott                            Arts

Richard Elliott sees Frankenstein brought to life in an Edinburgh cinema

                                                                                                       Theatre’s best-kept secrets:

                n 25 June 2009 the National           camera, directed downward to the stage
                Theatre made history by               from the middle of the circle. Instead, a        Tales of the Bard
                broadcasting Racine’s Phèdre to       camera crew attempted to ensure that, no
                73 cinemas throughout the UK.         matter where the action was occurring on         Remember that Britain vs France car advert
    Since then, nine more productions have            the stage, the cinema audience always had        from a few years ago?
    enjoyed live transmissions, with the              the ideal angle. Of course, at some points,        “Jules Verne, Jean-Paul Sartre,
    Season Two programme concluding in                such as facial close-ups, this approach          Baudelaire, Volt…”
    June 2011 with Chekhov’s The Cherry Orchard.      seemed intrusive, denying the viewer the           “Shhhhhhh-akespeare.”
    Although derided in some quarters as a pale       right to focus on other parts of the stage.        Well, it seems that Renault’s ingenious
    imitation of the real thing, the enterprise has   For the most part, though, it was difficult       attempt to destroy The Bard by having
    generally been praised for bringing theatre to    to argue with the camera crew’s choices.         Britain’s most annoying man endorse him
    a larger audience.                                   The facial close-ups themselves served        failed. People still flock to his plays and
       Earlier this year, I had my first               as a reminder of some of the differences         stellar actors (and Jude Law) still seek parts
    cine-theatrical experience with                   between good acting on screen and on stage.      in them. All-male Shakespeare company,
    Danny Boyle’s Frankenstein. I approached          While nuanced gestures, such as                  Propeller, are currently on tour, performing
    the event with a mixture of scepticism about      eye movement, are easily captured by a           both a comedy and a tragedy.
    how the play — or any play — would fare           camera lens, in theatre more overt body            The Comedy of Errors is transplanted from
    being reduced by a dimension, and curiosity       language (as well as exaggerated volume) is      Ephesus to a contemporary setting — an
    as to how the atmosphere would compare            required. Hence, in some of the close-up shots   unspecified location rejoicing in the tackiness
    to both conventional theatre and cinema.          the acting came across as a little overdone.     of a cheap Mediterranean holiday resort.
    Would the audience on screen respond                 One element of the production that            As the maracas shake lazily in the
    differently to the (Edinburgh) one around         the cameras struggled to keep up with            background, the farce, involving two sets
    me? Would the latter audience applaud at the      was the special effects. A dazzling piece of     of twins, unfolds at speed. If you can’t wait
    curtain call?                                     pyrotechnics early in the play had me both       for the panto season, or if you never quite
       My first surprise of the night arrived          envious of the actual theatre audience and       believed your English teacher when she
    upon discovering that the play would be           wondering just how big a budget had been         insisted that Shakespeare was funny, then
    conveyed to the big screen via multiple           granted the Oscar-winning director.              this production is well worth a look.
    cameras. I had, naïvely perhaps, assumed             The response of the cinema audience             Richard III is, unsurprisingly, a much darker
    there would be                                    during the play seemed to broadly match that     affair. In its entirety, the play is Shakespeare’s
    just one                                          of the theatre, although a jibe at Scotland in   second longest; this version is radically
                                                      the script predictably brought a bigger laugh    shortened. Richard Clothier brings an extra
                                                      from the former. As the actors took their        dose of suave to the role of the diabolical
                                                       bows, a few isolated attempts to applaud        charmer who ruthlessly plots his path to
                                                        them were soon aborted. Perhaps the            power. The production appears to take its
                                                         cinema audience felt that paying three        aesthetic from The Texas Chainsaw Massacre,
                                                          times what they would normally pay           and the music, more integral than in Errors,
                                                           for a movie was token enough of their       heightens the unsettling atmosphere as
                                                           appreciation, without submitting their      the violence
                                                          palms to a ritual agony that would be of     escalates.
                                                          no ostensible benefit to the actors anyway.   Not for the
                                                             Despite no applause, judging from         faint-hearted.
                                                             the comments I overheard as I exited,
                                                              it seemed that the 2D version of         Hampstead
                                                              Frankenstein had not disappointed.       Theatre,
                                                              Maybe having a movie director at the     London,
                                                             helm meant that the play translated       22 June —
                                                            easily to the big screen. Would other      9 July 2011
                                                         plays work so well? I will certainly be
                                                      returning to the cinema to find out.

                                                                                                             OVER TO YOU
                                                        The Cherry Orchard will be
                                                        broadcast live on 30 June 2011.                    If you would like to contribute a book
                                                         See for your           review or main article, please email
                                                            nearest venue.                                 Richard at                                                                                                                          June 2011       47
 Puzzles                            Coffee break

          June prize puzzle                           Word search                                 A blank grid is also included to assist you. For a chance to
          Four points on offer for this question. Consider the diagram below.                     win a £50 Amazon voucher, please send your answer to
          What word is missing? Where? And why?                                          by 17 June.

                                                  C    I   L      O
                           R   T    S   Y   T     I    R   G      H
                           E   L    O   S   M     U    L   E      C
                           N   I    L   U   N     E    P   T      N
                           G   C    U   O   N     R    Y   N      A
                           T   I    M   W   S     F    R   I      L
                           H   T    C   F   O     G    R   E      E
                           C   O    R   A   N     B    E   S      M
                           H   R    M   A   S     S    E   U      C
                           A   U    V   I   N     I    S   T      I

          Terms and conditions
          The prize will be awarded for a correct answer received before the closing date picked at random by the puzzles editor. The winner’s name will be
          announced in the next edition. Please note that the puzzles editor’s decision is final and no correspondence will be entered into. We reserve the right
          to feature the winner’s name and a photo (if supplied) in The Actuary. Your details will not be passed to any third party in connection with this draw.

          Puzzle 474                                  Gilty pleasures (reprise)
          Across:                                                                              Down:
          1. Backward broadcast in real kind of science (9)                                    1. Performed the 1 across note-maker (5)
          6. Confining evening, we hear (11)                                                   2. The Russian king of star arranging (4)
          7. Poem code 100 short (3)                                                           3. Fast-paced cinematography of weird atom invoice (11)
          9. Steal broken sphere (3)                                                           4. Reserving that’s initially interesting, but not really (4)
          11. Underlay endlessly removed to make money legal (7)                               5. Burmese gibbon outside a French of silver (5)
          12. Book without beginning, we hear, provides resistance (3)                         7. Surprised up and down (3)
          14. Eastern ship letter (3)                                                          8. Headless tiller gives tree (3)
          18. A reserve that’s overseen (11)                                                   9. Iron, maybe, in forever (3)
          19. Give up, in addition, tear with little hesitation (9)                            10. Below upwards vehicle (3)
                                                                                               13. Belongs to me and you, say, for a long time (5)
               1               2              3              4               5                 15. Coverer, not in, is more certain (5)
                                                                                               16. Equal page with energy and little hesitation (4)
                      8                                                                        17. Exploited American journalist (4)

                                                                                               Puzzle 475                                  Rebus XI
                                                                                               See if you can solve the following themed rebuses.
                                                                                                          1.                      OF F

                                                                                                          2.                       GEL
     7                8                                               9             10
                                                                                                          3.                    _LLION

                      11                                                                                  4.                    ALERL–

                                                                                                          5.                    SIEDGEDE
     12        13                                                     14    15
                                                                                                          6.                       C
                               16                            17
                                                                                                          7.                    LAPSE
                                                                                                          8.                         W

                                                                                                          9.                     VOL_

               19                                                                                         10.                    TFIL

                                                                                                          11.            LOUIS XVI & HENRY VII
     Crossword creator: Benjamin Van Heerden
48        June 2011                                                                                                                       
     Bridge challenge 16                     ‘Eleven’ rules               Please send any
     A useful beginners’ guide to playing bridge can be found at                   comments you have to Tom Bratcher at

     South opens 2NT (20-22 points) and North           ♠Q64       ♥1074           ♦KJ1064 ♣875             The ‘Rule of Eleven’ is a useful defensive tool,
     bids 3NT. West leads the 7♠ (standard                                                                  especially in No Trumps. When the lead is the
     leads), you play low from Dummy and East                                  N                            4th highest, you deduct the spot card from 11
     contributes the 3. Plan the play.                                     W        E                       and that equals the number of cards in the
       Note that when you tackle diamonds, you                                 S                            other 3 hands, which are higher than the card,
     will find that East has 3 headed by the Ace        ♠A108      ♥AJ96           ♦Q73          ♣AKQ       led. However, Declarer can also make use of
     and wins the 3rd diamond.                                                                              this, too…

    Solutions for May 2011                                                         Puzzle 471 solution                        Light entertainment
                                                                                   The red bulb on the traffic lights is broken. Mary has seen the
    May prize puzzle                       The prime of your life lights turn amber, then blank and then amber again (implying red
    The rule is as follows:                                                        and amber should be showing) so continues on.
      A number x appears as red if, and only if, there are a prime
    number of adjacent boxes (including diagonally adjacent) containing            Puzzle 472 solution                       Rational grid
    the number x -1 coloured red. For example, the top left-hand box               The question mark should be replaced by a purple figure 1.
    contains a red number one because two of the adjacent boxes                      Each colour in the grid signifies a direction of movement
    contain a red zero.                                                            (red = up, green = down, blue
      The puzzle is essentially a variant of Conway’s Game of Life on a            = left and purple = right) plus a          3     3    1   1            4
    finite board, hence the title.                                                 number indicating the number of
                                                                                                                              2     3    2   3            2
      The highest red number to appear is 55, which appears in each of             squares to move (so the green
    the four corner boxes.                                                         figure 3 in the top left corner
                                                                                                                              2     1    2   2            4
                                                                                   means ‘move down 3 squares’).
    Bridge challenge 14 solution                                                     Inserting a purple figure 1 in
    Double conundrum                                                               place of the question mark means
                                                                                                                              1     1 3 1                 1

    1. You pick up this almost pointless hand                                      that the grid will then form a             3     4    2   1            2
    and can hardly believe your ears as the          ♠832              N           closed loop.
    opposition sail into 6♥. They cannot make        ♥J10975       W       E
    their contract, so why shouldn’t you double?     ♦108                          Puzzle 473 solution                       Sequential study
    2. North’s hand is as follows. What should       ♣532                          The missing step is ‘1 on, 2 off’.
    he have bid over 3♥?                                                             The complete sequence gives the number of bars on a standard
                                                                                   bar digital readout, which need to turn on and off when moving
    You definitely pass! Golden rule number one: don’t double one                  from zero to one, one to two, two to three, and so on.
    contract, unless you can double them all. North has made a dreadful
    bid. What is wrong with Blackwood? What is wrong with No Trumps?               Bridge challenge 15 solution
    If you double, you give North a chance to recover and bid 6NT.                 How bad can it get?
    This makes comfortably after setting up diamonds (3 spades,                     ♠KQ985          You, as South, are surprised to find Partner pushing
    3 hearts, 4 diamonds and 2 clubs). When the hand belongs to the                 ♥AKQ862         you to 7♠. All you have to do is make it.
    opposition, if you can end up with a positive score, you have done              ♦4              1. After you win with A♣, which card do you play next?
    well. Just settle for 1-off, undoubled. The full hands look like this:          ♣3              2. How bad can the spade and heart breaks be such
                                    ♠K75                                                            that you can still make your contract?
                                    ♦AKQ75                                          W        E      If spades break 4-0, you can only pick them up if West
                                    ♣A84                                                S           has all 4. If East has 4, you cannot make the contract.
                     ♠832                       ♠J1094                              ♠A632           Can you afford a 4-0 spade break? Yes, provided hearts
                     ♥J10975                    ♥--                                 ♥7              are no worse than 4-2. Cash A♠. Now play spade
                     ♦108          W     E      ♦J643                               ♦AJ932          towards Dummy. Assuming West plays J or 10, win with
                     ♣532             S         ♣QJ1096                             ♣A42            Q♠. Play A♥ and ruff a heart. Now play your remaining
                                                                                                    spade, covering West’s card. Draw the last trump and
                                ♠AQ6                                                                you have the remaining tricks. If hearts are 5-1, you
                                ♥AK6432                                                             need the spades to break 2-2.
                                ♣K7                                                               MORE PUZZLES ONLINE

      May prize winner                                                                      To access the puzzles archive, visit
                                                                                            puzzles. The puzzles editor is pleased to receive ideas for
      No correct answers were received this month.                                          new puzzles from readers at                                                                                                                                June 2011    49
 Student page                    Stephen Paines                                    Follow @TheActuaryMag                        Join The Actuary’s
                                                                                   on Twitter                                   LinkedIn group

     This month Stephen Paines pens his last article as student page editor,
     while we hear The Rime of the Actuarial Student

     Goodbye and good luck
     After nearly a year and a half it is time to         do it in the way that works best for you.     they can feel like it the day before you
     pass on the torch. Before I go, here are a few       After all, 21 years of studying before        sit them. Ultimately you are paid for your
     of my thoughts on being a student, actuarial.        becoming a trainee will probably have given   work, and while your study feeds into it,
                                                          you more than enough practice. That said,     it is probably the experience you get at
     Lecturing Birds on Flying                            it is still worth being open-minded about     the office from which you learn most.
     The title of Pablo Triana’s recent book seems        new ways to study — for example, the power    So maybe having a glut of exemptions is
     quite appropriate to this page, because              of collaboration (see last month’s student    not as desirable as you may think —
     even if people recommend to you new                  page at           though I’m sure some of the actuarial science
     ways of studying, chances are, as an                     And it’s worth remembering that exams     degree students out there may disagree.
     actuarial student, you already know how to           are not the be-all and end-all, even though
                                                                                                        Breadth after depth
                                                                                                        After the CTs, the CA, ST and SA exams
     The Rime of the Actuarial Student                                by David E. W. Walker             can feel like a bit of a culture shock.
     To be sung to the tune of Gilbert & Sullivan’s ‘Modern Major General’.                             Suddenly, depth is not as important as
                                                                                                        breadth. At first I found the desperate search
     I am the very model of a student, actuarial,                                                       for half-marks for the later papers very
     I’ll calculate in seconds the exact time of your burial,                                           hard, and I wondered if breadth is what
     I’ve holidays and flexidays, and study days start in the fall                                      papers should be testing. But actually, the
     (It’s reasonably fair to say I’m hardly ever here at all),                                         ability to generate ideas around an issue
     I know about Bayes’ Theorem and the processes stochastical,                                        is very important — as a qualified actuary
     I sneer at junior clerkesses in manners most sarcastical,                                          at my office said to me, “… it’s all well and
     My massive cerebellum’s full of data on morbidity                                                  good having great ideas, but if you haven’t
     But the only thing that stumps me is my bank account’s liquidity.                                  looked at the legislation and your ideas are
                                                                                                        just plain illegal, you won’t get very far”.
     Don’t ask me for decisions, I just talk in generalities,                                           So as you desperately write ‘Tax! Legislation!
     I’m dreadfully obsessed by peoples’ curves (of their mortalities),                                 Competition!’ in those exams (maybe
     I’ve incredible statistics, my projections are amazing,                                            without the exclamation marks, and perhaps
     In fact I’m quite a superman (excuse the modest phrasing),                                         rather more padded out), it probably makes
     I’ll sit examinations set each April by the Faculty                                                you a more rounded actuary and, ultimately,
     And scribble utter waffle with a ballpoint, and alacrity,                                          better at your job.
     In June I’ll find out whether all my frenzied efforts “hit or missed”
     And if I’ve passed, I’ll disappear for lunch, then come back ‘Brahms and Liszt’.                   Examine others, too
                                                                                                        It is worth remembering that the exam
     I’ll postulate on surplus and pontificate on matching                                              process can always be improved, and
     And, of course, immunisation (don’t be daft, it isn’t catching!),                                  your opinion matters. You have people to
     I’ll qualify quite shortly, if my swotting bears fruition,                                         represent you — the Student Consultative
     Then I’ll join a Working Party, or give erudite tuition                                            Forum, who meet with the members of
     To some weedy little students, quite devoid of inspiration,                                        the Profession twice a year. For more
     (Or maybe I’ll become a guard in Glasgow Central Station?)                                         information, see
     My head’s so high up in the clouds, it’s positively aerial…                                        students/pages/student-consultative-forum
     I am the very model of a student, actuarial.
                                                                                                        And finally…
                                                                                                        I’m sure my successor, Matthew Welsh, who
     Originally published in Fiasco, the forerunner to The Actuary magazine,                            wrote the article for May’s issue, will do a
     in January 1990. Thanks go to Ian Ogden for supplying this and to                                  great job carrying the student page torch.
     David Raymont for his help in locating the original article.                                       Good luck Matthew!

50      June 2011                                                                                                              
                                                                                                    AOTF/Book review           People/Comment

     Actuary of the future                              Book review
                                                        Dermot Grenham reviews Population and Development —
                                                        The Demographic Transition by Tim Dyson
      Employer and
      area of work                                      Many books claim to describe a grand         went before.
      RSA,                                              theory that explains all or most of          As for women
      motor pricing.                                    what is happening in the modern              becoming
                                                        word, Fukuyama’s The End of History          more like
      How would your best friend                        and the Last Man being a relatively          men, Dyson’s
      describe you?                                     recent example. But often they are           argument goes
      Friendly, vivacious and slightly mad.             no sooner published than something           as follows.
                                                        in the world happens to prove them           As mortality
      What motivates you?                               wrong. However, professor Tim Dyson,         declines, so
      Red wine and chocolate.                           head of the Department of International      does fertility.
                                                        Development at the London School             This leads
      What would be your personal                       of Economics, not only expounds a            to women
      motto?                                            grand theory that aims — and here I          having to
      Don’t worry, be happy.                            exaggerate only slightly — to explain not    spend less
                                                                                                                          Population and
                                                        only all of the key current demographic      of their life
                                                                                                                          Development —
      Who do you admire most and why?                   processes but also a much wider range        bearing and
                                                                                                                          The Demographic
      Marie Curie — girl power!                         of phenomena from why countries are          raising children,
                                                                                                                          Transition is published by
                                                        tending to become more democratic to         and to greater
                                                                                                                          Zed Books. RRP £16.99
      What’s your most ‘actuarial’ habit?               why women are wearing jeans. He also         involvement of
      Watching Deal or No Deal and calculating          future-proofs his theory by making it        women in the world of work and social
      expected winnings…                                clear that it works over the very long       and political life. However, the models
                                                        term and so cannot be contradicted by        in these spheres are men and so
      How do you relax away from the                    current events of whatever form.             women end up imitating men rather
      office?                                              The basic premise of the book is          than the reverse. Hence women start
      Travel, food, wine, music and books               that falling mortality rates are the         wearing jeans rather than men starting
      (and Neighbours!)                                 key underlying driver for four other         to wear skirts.
                                                        demographic processes: falling fertility        Dyson is aware that a challenge to
      Alternative career choice?                        rates, population growth (the world’s        his theory is the question “But what
      Politician — I’d get paid to talk for a living!   population is growing not because we         caused the mortality decline?” He has no
                                                        are breeding like rabbits but because        specific answer to this but posits that it is
      Tell us something unusual about                   we are no longer dying like flies),           somehow based in the Enlightenment as
      yourself                                          urbanisation (for instance, an increasing    this led to a more scientific view of the
      At various points in my life I have had a         share of the global population live          world. However, there were many great
      broad Suffolk accent, an indecipherable           in cities) and population ageing.            scientists before the Enlightenment.
      Glaswegian accent and a posh Home                 While individual countries will              What the Enlightenment may have
      Counties accent, before landing on my             experience all of these processes in         contributed is a change in how people
      current bland Southern accent, due to a           different ways, what is common is that       viewed the world and so a change
      lot of moves when I was younger.                  sooner or later they will happen.            in how they would react to falling
                                                           Dyson provides a wide range of            mortality. I would also disagree with
      Greatest risk you have ever taken?                data and information to support his          his negative view of the relationship
      Snorkelling with sharks that were bigger          grand theory and to explain why he is        between population growth and
      than me, although it’s not difficult to be         interested in the underlying ‘remote’        economic performance.
      bigger than me!                                   cause of fertility decline, for example
                                                        mortality decline.                           Dermot Grenham is a part-time
      If you ruled the world, what would                   Where Dyson goes further out on a         tutorial fellow at the London School of
      you change first?                                 limb is when he links mortality              Economic’s Development Studies Institute
      It’s a bit of a cliché, but securing world        decline with non-demographic
      peace would be quite high up the list.            processes. He puts forward interesting               CRITICALLY CHALLENGED
                                                        arguments as to why mortality decline
            WHO WOULD YOU LIKE TO                       should lead sooner or later to                    We welcome readers’ suggestions of
            SEE FEATURED HERE?                          increased democratisation. Is this what           relevant books for our contributors to
          If you would like to nominate someone         we are seeing now in the Middle East?             review or, alternatively, if you would like
          for Actuary of the Future, please e-mail      Time will tell whether what arises will           to submit your own reviews, then please
                       be more democratic compared to what               email                                                                                                                         June 2011   51
                                                                                                   Sponsored by
 Appointments                 People moves

                                                                                                           Have you moved?
                                                                            with in-depth
                                                                            and wide-ranging               Please send news of moves,
                                                                            experience in                  promotions, retirements and
                                                                            Solvency II and                appointments to peoplemoves@
                                                                            EEV. She joins from  
                                                                            Prudential and has
                                                                            previously worked              Change of address
                                                                            at PwC and                     Please remember to update your
                                                                            Standard Life.                 details on the Profession’s website
                                                                                The firm has                at
    Fabrice Brossart         Patrick Race           Paul Kennedy            also appointed                 transactions
    Chartis in Europe        for the Investment        Mr Kennedy is        Ed Choularton to

                                                                                                     Forward features
    has appointed            Consulting teams       a qualified actuary,     its Bristol office.
    Fabrice Brossart to      in Birmingham,         accountant and          Mr Choularton is

                                                                                                     in The Actuary
    the newly created        Windsor, Bristol,      barrister, and is       a qualified actuary
    role of chief actuary,   Liverpool,             currently head of       with 11 years’
    based in London.         Manchester, Leeds      actuarial oversight     experience of the
       Mr Brossart joins     and Edinburgh,         at the FRC.             life industry.           The Actuary’s team welcomes contributions
    from AXA Insurance       and brings over        Prior to joining        He has experience        from members or contacts in and around the
    where, as chief          20 years of            the FRC, he held        of process               profession. Below is a list of themes for the
    actuary, he had          consulting             various actuarial and   improvement,             next few months along with the deadline for
    overall responsibility   and leadership         managerial positions    corporate pricing,       submission. If you would like to contribute,
    for capital, solvency,   experience to the      in the private sector   Peak 2 reporting and     please contact Tracey Brown at features@
    reserves, pricing        role.                  and is a former head    Moses modelling. with suggestions.
    and performance                                 of the legislation                                 For a full list of 2011 issue themes,
    monitoring across        Newly formed           team at the             Hymans Robertson         visit
    all lines of UK          Barker Tatham          Financial Services      has announced
    non-life business.       Investment             Authority.              the appointment          August 2011
    Prior to that he         Consultants Limited                            of Alison Murray         (Published 28 July,
    spent four years at      has announced its      KPMG has                as head of policy        editorial deadline 17 June,
    Watson Wyatt (now        founding managing      announced the           and technical            advertising deadline 12 July)
    Towers Watson),          directors as           following senior        development.             ■ Investment
    with primary             Steve Barker and       appointments:           Ms Murray returns        ■ Life
    responsibility for       Charles Tatham.        Roger Jackson has       to the firm after         ■ Careers: work-life balance
    developing premium       Mr Barker was          joined as a partner     a brief spell with
    rating activities in     previously head of     in the non-life         the Government           September 2011
    France.                  JLT’s investment       actuarial team.         Actuary’s                (Published 25 August,
                             practice and           He will spearhead       Department.              editorial deadline 15 July,
    Mercer has appointed     Mr Tatham was          KPMG’s non-life         A partner and            advertising deadline 9 August)
    Patrick Race             deputy head.           capital management      actuary, Ms Murray       ■ Reinsurance
    as head of its                                  and Solvency II         has worked in            ■ Environment
    UK Investment            The Financial          offering. Mr Jackson    pensions for             ■ Modelling and software
    Consulting business.     Reporting Council      has 18 years’           15 years and has
    In addition to           (FRC) has appointed    experience in the       been advising            October 2011
    the day-to-day           Paul Kennedy           general insurance       exclusively on           (Published 29 September,
    management of the        as acting director     industry, with          public sector            editorial deadline 12 August,
    business, Mr Race        of the Board for       most of these in        pensions for over        advertising deadline 13 September)
    will lead the UK         Actuarial Standards    consulting.             eight years.             ■ Careers: graduate
    executive team and       (BAS). Mr Kennedy          KPMG has               The firm has           ■ Risk management
    will also sit on the     will take up the       also appointed          also appointed           ■ Mortality/longevity
    leadership team for      position in June on    Debbie Laird as a       Linda Selman as
    Mercer UK.               the departure of       principal advisor in    head of public          experience and was     head up a team of
       For the last four     Louise Pryor who       its Edinburgh office.    sector investments.     previously a client    12 partners,
    years, Mr Race has       has been director of   Ms Laird is a           Ms Selman has over      director at Baillie    senior consultants
    been responsible         the BAS since 2008.    qualified actuary        25 years’ industry      Gifford. She will      and consultants.                                                                                                                    June 2011   52
                                                                              To advertise your vacancies in the magazine and online please contact:
                                                                  Melanie Jacob, Tel: +44 (0)20 7316 9618, E-mail:

                   High Finance Group
                   Specialist Recruiters                                      
        Life Insurance Actuary (Start Up)                            Life          Actuarial Consulting (Asia)                                   Life
        Salary: Dependent of Experience                                            Salary: Up to US $150k + bonus
        Location: London                                                           Location: Singapore / China
        Rare opportunity to join a new Life Insurance business in London.          Fantastic chance to capitalise on your UK Life insurance experience
        Backed by Capital Market experts this proposition will revolutionise       and join a global consultancy as they grow their presence in Asia. Our
        the industry with their highly innovative product. They are searching      client is searching for nearly qualified to experienced life Actuaries to
        for a technically and commercially astute UK Life Actuary to build and     join their offices in Beijing, Shanghai, Hong Kong, Singapore & Kuala
        develop the infrastructure of the business. You will be utilising all      Lumpur. You will have a broad range of Actuarial expertise, an
        your UK regulatory knowledge in this highly rewarding and exciting         impressive academic record, excellent communication skills in
        new business. Interim and permanent applications considered. CB708         English and Chinese or Malay. Visa sponsorship offered. CB7970

       Actuary (Investment Bank)                           Life & Pensions         Boutique Consultancy                                          Life
       Salary: £65k + Bonus + Benefits                                             Salary: £45k - £75k + Bonus + Benefits
       Location: London                                                            Location: South East
       Excellent opportunity to join the ALM team of a US Investment Bank.         A fantastic opportunity to join a boutique consultancy providing
       They require both a Life Insurance and a Pensions Actuary to be             bespoke Actuarial services to niche insurers, mutuals and with-profit
       involved in detailed analysis and asset liability modelling to              based clients. You will cover a range of work across unit-linked
       presenting and delivering tailored solutions to major European Banks        products and with profit ISAs, receiving in depth training and support,
       and Insurers. You will be recently qualified with outstanding               to become an industry expert. This is a growing team with a friendly
       mathematical capabilities. CB4860                                           and focused working culture. Flexible hours offered. GB4863

        Exams Over, What Next?                                       Life          Contract Roles                                               Life
        Salary: £25k – £70k + Bonus + Benefits                                     Salary: £500 - £1500 per day
        Location: London & UK Wide                                                 Location: UK Wide
         The demand for intuitive and career driven students within Life            Part qualified / qualified applicants required with Solvency 2, Capital
         Insurance has never been higher! Opportunities include working             or Financial Reporting experience. You will be involved directly in the
         with global consultancies, niche insurers and liasing with market          interpretation and implementation of Solvency 2 for European
         leading investment teams. You will be offered responsibility quickly       companies. You will work the internal model, develop the economic
         and be exposed to variety of actuarial disciplines including Solvency      capital methodology, manage the ORSA and work with the global
         2 and Investments.Students at all levels please get in touch. GB8149       offices. Project management skills required. RP8001

        International Life Actuary                                  Life           Senior Life Reinsurance Analyst                              Life
        Salary: Up to £200k +Bonus + Benefits                                      Salary: Up to £130K + Bonus + Benefits
        Location: Switzerland                                                      Location: Zurich, Switzerland
         Switzerland offers a range of opportunities for young, experienced         A unique opportunity for a senior Life Actuary to take responsibility
         British and EU citizen Actuaries in areas such as Risk Management,         for the reporting requirements of Group Finance, Global Life, Group Re
         ALM, Financial Reporting and Health Product development. Salaries          Management and other Stakeholders at this global reinsurer. You will
         are significantly higher than in the UK in a tax friendly environment.     be accountable for the delivery of EV, IFRS, local Swiss stat, for actual
         If you are interested in launching your international career, contact      closing as well as Plan/Forecast for internal Life re’s. A perfect
         High Finance Group’s Europe team. DB1950                                   opportunity to enhance your international career. DB8571

       Life                                                                       Europe                                 Executive Search
       Clare Bethell: 020 7337 8829         Damien Bernard: 020 7337 1206          Mark Dainty: 020 7337 8816
       Graeme Braidwood: 020 7337 8820
       Jack Eccles: 020 7337 1208   
                               Insurance | Investment Banking | Investment Management | Management Consultancy

          020 7337 8800                                                                                                                                                      June 2011       53
A refreshingly different service for contractors

As an award-winning actuarial and financial services consultancy we pride ourselves on being
different to other interim resourcing agencies.

OAC supports its contractors by providing them with PII cover and offering important
supplementary benefits such as paid release for CPD, advice from OAC actuaries at any time,
and free trial access to ® financial modelling software.

As an actuarial firm we fully understand the changing needs and requirements of our
contractors. We are committed to working with them so that they can achieve their personal
and business objectives.

Contractors are quickly realising that OAC is the preferred choice for benefits and winning
contracts. Experience the difference yourself and register your interest on our website today.

 Pricing Actuary                                                                       Solvency II Actuarial Analyst

 Experience: Near Qualified Actuary / Qualified Actuary                                  Experience: Qualified Actuary.
 Location: Bristol (UK).                                                               Location: South East (UK).
 Daily rate: £750+.                                                                    Daily rate: £900.
 Duration: 3 months.                                                                   Duration: Initial contract is for 6 months.
 Description: 5+ years in pricing role. Experience of Prophet.                         Description: Internal model development role.

 ALM and Risk Contractor                                                               Unit Linked Product Pricing Actuary

 Experience: Near Qualified Actuary / Qualified Actuary                                  Experience: Qualified Actuary.
 Location: Manchester (UK).                                                            Location: South (UK).
 Daily rate: Excellent, dependent on experience.                                       Daily rate: £900.
 Duration: Initial contract is for 3 months.                                           Duration: 3 months.
 Description: To develop existing risk management processes,                           Description: Knowledge of Prophet and investment and savings
 policies and documentation to meet Solvency II standards.                             products.

 Business Support (Life)                                                               Investment Team Manager

 Experience: Student Actuary.                                                          Experience: Near Qualified Actuary / Qualified Actuary.
 Location: Manchester (UK).                                                            Location: Basingstoke (UK).
 Daily rate: £550-£600.                                                                Daily rate: Excellent, dependent on experience.
 Description: To work in Business Support Team. Needs                                  Description: To manage an investment administration team.
 with-profits, Prophet and claims method experience.

                                                                                       Opportunities in WP and NP Reporting, Modelling,
 Reserving and Capital (Life)                                                          Actuarial Systems Development and Actuarial Data

 Experience: Student Actuary.                                                          Experience: Newly Qualified Actuary / Qualified Actuary.
 Location: Manchester (UK).                                                            Location: Midlands (UK).
 Daily rate: £550-£600.                                                                Daily rate: Market rate.
 Description: To work in Reserving and Capital Team. Needs                             Duration: Initial contract is for 3 months.
 experience in Excel and Prophet, modelling of dynamic                                 Description: Preferably with 1-5 years’ post-qualification
 management actions in DFA, Peak 2 valuation or ICA, and                               experience and with-profits experience.
 regular solvency monitoring.

For more information
Colette Lurshay | +44 (0)20 7278 9500 |

OAC Actuaries and Consultants, a trading name of OAC plc, is a member of the Recruitment and
Employment Confederation (REC) and offers the services of an Employment Business.

Life Reporting Actuary                                                                 Chief Actuary – Middle East & Africa
£100,000 + Bonus & Benefits                                           – Munich         £130,000 + Bonus & Benefits                               – South Africa

This leading global life insurer currently requires an experienced, qualified          Leading general insurer currently seeks a Chief Actuary with responsibility
actuary to join the life actuarial team based in Munich. With responsibility           for the MEA region. Reporting to the CFO, the Chief Actuary will be
for group level financial reporting from the business units across the globe,          responsible for the management and development of the actuarial team and
the successful candidate will have substantial knowledge of IFRS/USGAAP,               provide expert actuarial insight and advice to both local and regional
good communication, personal planning and organisation skills and be                   management. The successful candidate will be a fully qualified actuary with
able to show initiative in applying good problem solving and analytical                at least eight years’ experience in a non-life actuarial environment. You will
skills. Overall the successful candidate will be enthusiastic, inquisitive and         have experience of working as part of a global network and be comfortable
adaptable with between four and eight years’ experience.                               working in a multi-cultural environment.
Contact: – London Office            Ref:IJC473553           Contact: – London Office            Ref: IJC473760

Solvency II – Contract                                                                 General Insurance Actuary
To £1000 per day                                                      – London         £90,000 + Benefits                                               – London

Six month contract for a leading London based insurance provider; supporting the       The day-to-day role of the General Insurance Actuary will be to support the
current actuarial team and the Group Actuary on key deliverables for the               existing actuarial function, which is currently predominantly involved in
Solvency II project. This will include; technical provisioning, documentation and      providing claims reserving, capital modelling and Solvency II consulting
sensitivity testing of the internal models.You will be required to engage with other   services, as well as some audit support services and bespoke model
members of the Solvency II Policy & Methodology team (including consultants or         building for clients. Our client is looking to develop its offerings and
contractors) to refine areas of each other’s designs, to improve the overall quality   therefore requires a qualified actuary to join the team in a part-technical /
of the design and documentation of the Solvency II solution and to agree               part business development role.
implementation plans.                                                                  Contact: – London Office          Ref: IJC473489
Contact: – London Office                  Ref: IJC473577

Senior Manager Pensions & Investments                                                  Consulting Leader – Employee Benefits
£70,000 - £90,000                                        – Channel Islands             Competitive Package                                   – South East Asia

Our client is a market leader within the international pensions arena and is           International consulting firm which advises multinational and domestic
looking to hire a part or fully qualified actuary to join as Senior Manager.           employers on their employee benefit programmes wishes to appoint an
You will be the contact point for actuarial related issues including Solvency          experienced manager to lead and develop a team of EB consultants. This
II. You will also provide technical support to the Company with regard to              person would be responsible for leading major accounts and developing
reinsurance, pooling and the underwriting portfolio and be responsible for             new business. Candidates will be qualified with at least 5 years pqe
managing relationships with those investment managers involved in                      advising multinational clients on Benefit programmes preferably in a
managing the Company’s insurance and unit linked funds. You should have                consulting environment. Experience in the region would be advantageous.
an actuarial background with a life insurance company or consultancy.                  Contact: – London Office    Ref: Z472657
Contact: – Leeds Office                Ref: SA473532

Director - Corporate Pensions Advisory                                                 Actuarial Consultant
Top Quartile Salary Bonus – Benefits package – London                                  SGD110K + per annum                                          – Singapore

One of the leading advisory firms with an exceptional pensions practice is             Leading insurance consultancy requires a General Insurance actuary to
looking to hire a senior actuary to advise and develop FTSE 250 client                 provide actuarial and financial modelling to clients around Asia. You will
base. The firm advises the corporate management and trustee bodies on                  provide project leadership for medium sized analytical projects and assist
a range of different issues including financial control, pensions risk                 the client servicing team to help clients meet their risk management goals,
management and future redesign. Candidates will be qualified actuaries                 including the design of appropriately priced self-insurance, insurance and
with at least 5 years experience of leading client assignments for larger              reinsurance options. Previous experience of client interaction and daily
listed clients within another consulting firm. He/she will have strong                 operational management would be ideal.
commercial and client relationship development skills.                                 Contact: – Singapore Office Ref: RB473565
Contact: – London Office    Ref: Z473765

                                London Office: IPS Group, Lloyd’s Avenue House, 6 Lloyd’s Avenue, London, EC3N 3ES
                                   Tel: 020 7481 8686 Fax: 020 7481 8660 Email:

                                             Leeds Office: IPS Group, 8 St Paul’s Street, Leeds, LS1 2LE
                                    Tel: 0113 202 1577 Fax: 0113 202 1598 Email:
More jobs online at

      Kent School of Mathematics, Statistics and Actuarial Science (SMSAS)

     the UK’s European University
     The University of Kent is one of the UK’s most dynamic universities with a strong European and international presence. Our excellent RAE results
     reflect our world-leading research and, while we are currently increasing our postgraduate activities, our undergraduates continue to rate us one
     of the top universities in the country according to the National Student Survey.

     Professor/Reader in Actuarial Science                                                                                                                      Ref: STM0213

     Applications are invited for the position of Professor/Reader in Actuarial Science. This post will be based at our Canterbury Campus on a
     full-time basis and is available from 1st September 2011 or as soon as possible thereafter.
     The successful candidate will join the Centre for Actuarial Science, Risk and Investment (CASRI), which is part of the School of Mathematics, Statistics
     and Actuarial Science (SMSAS). The Centre is well established and enjoys an excellent working relationship with the professional bodies. Currently,
     undergraduate and postgraduate programmes in Actuarial Science and Finance are offered by the Centre. All our Actuarial Science programmes are
     accredited by the UK Actuarial Profession.
     The persons appointed will be expected to lead innovative research programmes in Actuarial Science and other related areas of finance and contribute to
     the School’s teaching activities in Actuarial Science and Finance (particularly in the area of Risk Management). There may be opportunities for some
     consultancy work. An excellent package including relocation costs is offered.
     Informal enquiries may be made to Professor Malcolm Brown, Head of SMSAS, tel: + 44 (0)1227 823508 (direct line) or e-mail:
     Informal visits to the School are welcomed.
     Further information is available from our website Minicom users please telephone 01227 824145
     Closing date for completed applications: 30th June 2011.
     Interviews are expected to be held in: July 2011.
     For posts of this nature you will be required to fill in the main details section as well as upload you CV which should
     include a personal statement and any supporting documents.

                    We actively promote equal opportunity in education and employment and welcome applicants from
                    all sections of the community.

      Actuarial Analyst, Pensions Buy In / Out, London                                      Retirement Consultant, Edinburgh
      Up to £45,000 plus bonus                                Ref: MJB48472                 £45,000 - £60,000 plus bonus                               Ref: JT48507
      One of the leading players in the rapidly expanding pensions buy                      A top tier consultancy is recruiting for a recently qualified actuary
      in / out industry is looking to hire an analyst. You will be expected                 to join its Edinburgh practice. As a Retirement Consultant you
      to contribute to all areas of activities of the Origination team                      will apply your consulting, actuarial, and project management
      including marketing, business development, consultant relations,                      expertise in the areas of plan design, compliance and risk & financial
      deal management, product development, process improvement,                            management to organisations ranging from FTSE 100 to smaller
      pricing and modelling. The ideal candidate will be a part qualified                    specialist companies. There is further potential to gain exposure
      pensions actuary with significant interest in this area and excellent                  to other areas of the business including investment consulting or
      communication skills.                                                                 pensions de-risking to further enhance your knowledge.
      E: T: +44 (0)20 7324 0505                              E: T: +44 (0)20 7019 8861

      Senior Analyst / Associate, Dublin                                                    Risk Management Actuary, London
      €70,000 - €80,000 plus bonus / benefits                  Ref: MP20705                  £40,000 - £70,000                                         Ref: ME44912
      Following the successful expansion of the London office, this leading                  A large consulting firm has an opportunity to join one of its
      global life insurer is expanding the Dublin office as it continues                     specialist areas, which is set up to act as a strategic overall risk
      to increase its share of the Irish market. You will work closely                      management offering to its large clients. You will be involved
      with the Financial Reporting Actuary to analyse statutory reports,                    in a wide variety of projects focused around ALM modelling,
      prepare business plans and support new product initiatives.                           liability-driven investment, buy in / out, enhanced transfer values
      Successful candidates should be nearly qualified (or equivalent)                       and other investment strategy techniques. Current vacancies
      with experience of Irish / UK Statutory and US GAAP Reporting.                        are at part and newly qualified levels.
      Protection experience and modelling skills are beneficial.                             E: T: +44 (0)20 7019 8828
      E: T: +44 (0)20 7019 8842

        Please contact us on 020 7336 7711 or visit
        Goodman Masson is an equal opportunities employer. Goodman Masson offers the services of an agency for permanent work and an employment business for temporary work.

56      June 2011                                                                                                                                  
            Join the Life team at Legal & General and – no matter
            what your current industry and level of experience –
            we can promise you variety, responsibility, innovation
            and career development.

                                         ACTUARIAL STUDENTS
                                         AND ACTUARIES
                                         Kingswood, Surrey
                                         Competitive salary and benefits packages
                                         Whether you’re an actuarial student studying for
                                         your exams, part-qualified or even a fully qualified
                                         actuary, we’d be interested to hear from you. Your
                                         background might be in pensions and you may not
                                         have previous experience in the Life sector – but
                                         that’s fine with us. As long as you demonstrate solid
                                         technical talent, an ability to learn quickly and a
                                         positive attitude, we’ll give you all the support you
                                         need to make a vital contribution.

                                         FIND OUT MORE.
                                         To find out more, please email
                                         to arrange an informal, confidential discussion.


More jobs online at

                                                                                                         T:       020 8420 1818

                                Actual Search
                                         SEEKING       THE    EXCEPTIONAL

     South West / South Coast                                                         North West & South Midlands
     New Business Actuary                                    £58-70K + benefits       Pensions                                                    £35-75K + bens
     Key role at expanding life company for a nearly qual or qualified life actuary   Pensions students & actuaries. Great chance to learn the investment sector.
     with exp. in marketing, product development, business planning or financial      Major consulting firm needs p/q & qual pensions actuaries for key roles in
     reporting. Manage a small team responsible for new business profitability,       pensions / investment dept. Team has varied duties inc liaison with
     VNB & capital management and become an influential strategist. Ref:1501          investment mgrs, pensions valuations, client meetings, some ALM. Ref:1504

     Midlands                                                                         South Coast
     GI - Capital & Reinsurance Manager                         To £70K + bens        Learn GI Pricing                                                   up to £50K
     Exciting non-life role within a leading business. Develop a capital modelling    Chance to move out of pensions or life. Due to expansion this award winning
     capability to deliver the requirements of Solvency 2 & embedding it. Manage      GI insurer needs jnr & snr pricing analysts with min 2 yrs exp. in any sector.
     a small capital modelling team & take a leading role in their reinsurance        Duties are commercial & personal lines pricing & some reserving for motor,
     programme. Will liaise across a wide range of business areas. Ref:1502           travel & health. Strong Excel + exam progress. Full training offered. Ref:1505

     UK Off Shore                                                                     Midlands
     New Business Life Actuary                                  £55-70K + bens        Life roles                                                             £40-75K
 Join a company that’s expanding into new markets in new jurisdictions. With          Market leading, niche life insurer offers varied & challenging role to aspiring,
 your life reporting skills you will initiate process changes in reserving, MCEV      snr analyst / actuary. Duties inc valuation, ICA, solvency & modelling. Great
 & capital assessment. Be a key player working closely with AFH, identify             chance to broaden your exp. & learn new skills. P /q or qual actuaries with life
 risks, develop actuarial reporting systems through analytics & make                  or pensions exp should apply. Flexi working options possible. Ref:1506
 recommendations. Ref:1503

           To apply for any of these vacancies please phone 020 8420 1818, and speak to Peter or Norma
                    or apply online at or email

                w w w. a c t u a l s e a r c h . c o . u k                         

      GI Reserving & Capital Actuary, London
      circa £80k to £100k + Bonus + Benefits
      In this role your work will include Solvency II development,
      Reserving and capital setting. You will manage a team of
      analysts and also liaise with other departments. Your
      responsibilities will include:
      • Leading development of the Actuarial Function Solvency II
      • Managing development and analysis of QIS exercises.
      • Liaising with the FSA.
      • Managing development surrounding technical provision
        methodologies for Solvency II.
      • Reviewing internal model.
      • Advising on Reserving & Capital projections.
      • Providing general reserving support as required (e.g. reserving
        cycles or large loss reviews)
      • Acting as ICA team leader by reviewing ICA work and
        identifying key issues, and discussing modelling points.
      For this role, you will be a qualified Actuary with capital &
      reserving experience, and have excellent communication skills.
      Interested applicants should email their CV to, quoting ref: NR8077
      Also, GI Reserving & Capital contracting opportunities available
      circa £800 to £1000 per day.

                      Parvinder Matharu
                   Newton Recruitment
                    t +44(0)1689 862937



58        June 2011                                                                                                                      
                              Latest jobs from The Actuary are now on Twitter

                                       A name you can trust
                                       Life                                                        Non-Life
                                       Student, Group Capital Team                                 Lloyd’s Of London, Reserving, Solvency II
                                       Bristol to £60,000                                          London £40,000 - £80,000
                                       Ref: 4650342                                                Ref: 4648785
                                       The role of this project-oriented capital management team   Based within the London market and supporting
                                       is to exploit opportunities to secure the interests of      syndicates with reserving, Solvency II and pricing,
                                       policyholders’ and improve the return to the company’s      this role is an opportunity for an outstanding Non-Life
                                       shareholders. This is a superb opportunity to apply your    Actuary to further their career. Our client will consider
                                       actuarial skills to corporate restructuring, portfolio      PQ or qualified Actuaries.
                                       de-risking and innovative reinsurance deals.                t: 020 7220 4774
                                       t: 020 7220 4774                                            e:
                                       Pensions Investment                                         UK-Wide Vacancies
                                       ALM Actuary, Investment Bank                                Ref: 4648542
                                       London to £Negotiable                                       GI Capital Modellers, London & Birmingham, £800 - £1000
                                       Ref: 4605064                                                per day. Various opportunities for experienced capital
                                       The ALM team provides cutting-edge LDI solutions to a       modelling Actuaries and senior students. Solvency II
                                       European client base of providers and pension funds. Our    experience a distinct advantage.
                                       client requires an FIA/FFA with a superb exam record and    Prophet Modellers and Developers, various UK locations,
                                       stunning academics who is looking to apply their pensions   £600 - £1000 per day. At least 3 years Prophet modelling
                                       investment skills within a hands-on ALM environment.        and/or developing experience required.
                                       t: 020 7220 4774                                            t: 020 7220 4774
                                       e:                               e:

                                       Reed Specialist Recruitment Ltd is an employment agency and employment business.

                                                                                                                                                                                                                                                        June 2011   59
More jobs online at

     AC T UA R I A L P R I C I N G
     C O N S U LTA N T
     S TA I N E S , M I D D L E S E X
     C O M P E T I T I V E S A L A RY P L U S E XC E L L E N T B E N E F I T S

                         Join the market leader in Private Medical Insurance (PMI). Due to business growth and the
                         emerging requirements of Solvency II, we are actively seeking to expand our actuarial team.
                         We have specific opportunities for Actuarial Pricing Consultants to join a highly successful
                         and growing Actuarial Team with promising future prospects within our Group.
                         In this role you will be responsible for the development of innovative pricing solutions for
                         new and existing product portfolios in our Business-to-Consumer and Business-to-Business
                         segments as well as other products such as Travel and Dental insurance.
                         Ideally you will have strong experience of modelling existing and/or new business prices
                         for insurance products and data analysis tools such as SAS (specifically SAS Base and
                         SAS STAT) and Excel. Experience in pricing of health-related or other general insurance
                         products would be advantageous.
                         Bupa is a UK market leader and a globally recognised health insurance and private
                         healthcare provider. Our core services and products include PMI, travel insurance, care
                         homes, health assessments and occupational health. Our credibility is built around the
                         provision and delivery of world class customer service, industry leading products and
                         Join us. Contact Pius Bozumbil on 01784 893554, or visit
                for more information or to arrange a confidential discussion with
                         our actuaries.

                 Looking for
                 the next challenge?

                                             Current interim assignments include:
                                             • ICA and capital modeling                            • SII model validation
                                                                                                     (life and non-life)
                                             • Stochastic modeler (life)
                                                                                                   • Reserving manager
                                             • CAT modeling                                          (P&C/home/motor)
                                             • SII documentation                                   • Prophet developer
                                               (life and non-life)

     Are you a contractor seeking new opportunities?                          Broaden your horizons with one of the UK’s
                                                                              leading providers of actuarial contractors.
     Do you have the skills and qualities to move
     into the consulting world?                                               To register with Mazars PGC Interims or
                                                                              for more information please contact:
                                                                              Joanne Young
                                                                              T: +44 (0)20 7063 4162 M: +44 (0)7794 031 485
     MAZARS PGC INTERIMS                                                      E:

60   June 2011                                                                                                    
  iWorks Prophet are recruiting actuaries like you
                                                                                                                                   © 2011 SunGard
Trademark information: SunGard, the SunGard logo and iWorks Prophet are trademarks or registered trademarks of SunGard Data Systems inc.
     or its subsidiaries in the U.S. and other countries. All other trade names are trademarks or registered trademarks of their respected holders.
               Unrivalled contract opportunities
Demand is still high for contractors of all levels, from students to senior qualified, and we continue to look for talented and ambitious
individuals who have a real interest in forging a career in this dynamic and lucrative market.A broad range of opportunities are currently
available on high-profile assignments with major clients throughout the UK.

Hazell Carr is a preferred supplier to a number of major companies and has some of the best opportunities available in the actuarial
market.We offer competitive rates and are committed to finding the most suitable match between our clients and contractors, building
rewarding, long-term relationships in the process. We continue to offer a range of benefits to our contractors through Xchange, our
on-line contractor community.

Skills in high demand include:

Solvency II and ICA
There is high demand for contractors with experience in Risk & Capital management, Economic capital, ICA, QIS 4 and
approaches to QIS 5. Additional opportunities exist on Pillar 1 Methodology for qualified actuaries or senior students
with any actuarial experience to work on documentation and formulae testing.

Life Reporting
Demand for qualified and part-qualified actuaries with reporting experience for Solvency II projects and ‘BAU’ teams continues
to grow.The skill sets most in demand include ICA, MCEV and IFRS.

There is great demand for qualified and part-qualified actuaries with experience of model development, especially in systems
such as Prophet, MoSes and MG-ALFA.There is an immediate need for DCS Coders on a range of assignments.

Actuarial Analysts
We have a range of opportunities available for actuarial analysts and technicians to undertake work on specifying actuarial
calculations, systems testing and completing complex pension calculations.

  If you are interested in joining Hazell Carr or would just like to find out more about becoming a
   contractor, contact us in confidence on 0118 951 3817 or email us at
                              Latest jobs from The Actuary are now on Twitter

               Statistically, no two actuaries can be the
               same: that’s fine by us.
               Hiscox, a leading FTSE listed specialist insurer, is                  This role will involve running and assisting with further
               expanding its Group Actuarial Department and is looking               development work; testing on the internal model in the
               to fill two exciting, newly created actuarial roles within its        run-up to the approval process, and then supporting the
               Capital Modelling and Reserving teams.                                model on an ongoing basis.

               Reserving                                                             Why Hiscox?
               For our Reserving team, we are looking for either a                   This is a fantastic opportunity to join a leader in the world
               nearly, or newly qualified actuary. Reporting to the Head             of specialist insurance during a time of focused growth.
               of Reserving, who in turn reports directly to the Group
               Chief Actuary, this role will work alongside existing                 We provide a challenging and supportive environment
               members of the team. The successful candidate will deal               where you are encouraged to grow with the team while
               with external and internal clients, and be given a high               given the remit to make a real difference. This is an
               degree of autonomy.                                                   exciting time to be joining a fast growing organisation
                                                                                     with a highly competitive salary and plenty of opportunity
               Capital Modelling                                                     for future career development.
               For our Capital Modelling team, we are looking for a
                                                                                     For more details please visit
               candidate who is technically strong with a confident
               approach and a keen interest in this field.

              Our growth.
               Your opportunity.
              Actuarial Opportunities Available
              Equity Insurance Group comprises Equity Red Star (ERS) and Equity Direct Broking Limited. ERS is one of the largest personal lines
              syndicates and has been established at Lloyd’s for over 60 years. Owned by Insurance Australia Group, Equity Insurance benefits
              from the support and backing of an international parent company in order to compete in the personal lines insurance market.
              In a drive to strengthen and expand the Actuarial team Equity Insurance has several vacancies for:

              Experienced Actuaries – £Attractive + Bonus + Benefits
              Nearly/Newly Qualified Actuaries – £Competitive + Bonus + Benefits
              Actuarial Analysts – £Competitive + Bonus + Benefits including study support
              With roles available in reserving and capital management along with involvement in the pricing team, these new positions offer
              opportunities to broaden experience, influence business decisions, work on Solvency II assignments as well as business as usual tasks.
              This is an excellent opportunity to contribute to a growing team in a dynamic and quickly changing environment with exposure to
              senior/executive management and underwriters. With offices in London and Essex we offer flexibility regarding working arrangements.

              To find out more or apply please contact The Resourcing Manager at
     or via post The Resourcing Manager, Equity
              Insurance Group, Library House, New Road, Brentwood, Essex, CM14 4GD.
              Equity is an equal opportunities employer                                                                                                                    June 2011   63

                                           A t i l C t t Lif I
                                           Actuarial Contract - Life Insurance
Head of Reporting                                        Rob Bentham           Capital and Internal Model Actuary                         Gary Rushton
Midlands - 6 Months                                          £1200/day         South Coast - 6 Months                                        £1200/day
A closed book insurer is looking for someone to manage the delivery of key     My client is currently looking for a senior actuary to develop and maintain
actuarial reporting requirements for one of their Life Divisions.              the capital models in line with Solvency II requirements.

Valuation/ALM Actuary                                          Ik Onyiah       Head of Risk Capital                                       Rob Bentham
South East - 6 Months                                        £1100/day         South East - 6 Months                                         £1100/day
Our client is looking for an experienced valuation/ALM actuary. Some of the    To ensure that the Group has internal models and planning and ORSA
work required will involve Solvency II technical provisions.                   processes that reflect the risk profile of the group.

Methodology Actuary                                            Ik Onyiah       Reporting Actuary                                          Rob Bentham
South West - 6 Months                                        £1000/day         South East - 6 Months                                         £1000/day
The successful candidate will be tasked with developing and proposing          To assist in the delivery of a financial reporting process for the Solvency II
methodology for Solvency II technical provision and capital calculations.      programme of this market leading client.

Moses Development Contract                               Gary Rushton          Annuities Reporting Actuary                                Gary Rushton
London - 6 Months                                             £900/day         South East - 12 Months                                          £900/day
International insurer is looking for a Moses modeller with minimum 3 yrs exp   An outstanding contract opportunity to lead the financial management of a
to develop the existing model across a number of high profile projects.        deferred annuities business for a leading UK life insurer.

Solvency II Technical Author                                   Ik Onyiah       Prophet Developers                                         Gary Rushton
Edinburgh - 6 Months                                           £850/day        South East - 6 Months                                           £800/day
As a Technical Author in our client’s Modelling Methods workstream, you'll     My client is currently looking for a number of experienced Prophet develop-
be producing technically complex modelling methodology docs .                  ers with either stochastic or deterministic modelling experience.

Actuarial Modeller                                       Rob Bentham           Development Analyst                                             Ik Onyiah
Midlands - 6 Months                                           £800/day         South West - 6 Months                                           £750/day
To provide market leading modelling expertise with a strong stakeholder        Prophet expert required to provide development capability across a number
focus to the design and implementation of the new actuarial systems.           of Deterministic and/or Stochastic actuarial models.

                                       Actuarial Contract - General Insurance
Capital Actuary                                        Stewart Cherry          Igloo Actuary                                           Stewart Cherry
London - 6 Months                                            £1000/day         London - 6 Months                                               £900/day
A Lloyd’s syndicate is looking for a Capital Modeling actuary, ideally with    London Market insurer seeks an Igloo modeling actuary for a 6 month
Remetrica experience.                                                          contract. The role will focus on the internal model development for SII.

Solvency II Actuary                                    Stewart Cherry          Pricing Actuary                                         Stewart Cherry
London - 6 Months                                             £800/day         London - 9 Months                                               £750/day
An experienced Solvency II actuary is required to join a London Market         An experienced pricing actuary with Commercial lines experience is
insurer. The candidate must be available at short notice.                      required for a 9 month contract working within the London Market.

Reserving Actuary                                      Stewart Cherry          Part Qualified Actuary                                  Stewart Cherry
London - 9 Months                                             £700/day         London - 12 Months                                              £400/day
A leading London Market insurer is currently looking for an experienced        Part Qualified Reserving actuary required for a 12 month contract with
qualified reserving actuary for a 9 month contract.                            particular focus on Solvency II.

                        Contact                                                                       Contact
Gary Rushton                                           0207 310 8793           Stewart Cherry                                           0207 310 8651                                        
Ik Onyiah                                              0207 310 8785           Rob Bentham                                              0207 649 9351                                           
                                                      High Finance Group is a specialist consultancy, providing Finance, Actuarial, Audit, Risk
                                                      Management, Compliance and IT Recruitment solutions to major Insurers and Asset Managers,
          High Finance Group                          professional services firms and SMEs. We aim to provide a market leading recruitment service,
          Specialist Recruiters
                                                      bridging the gap between large agencies and executive search.

 Head of Actuarial                                         General           Head of Reserving                                         General
 Salary: Up to £140k + Bonus + Benefits                                      Salary: Up to £140k + Bonus + Benefits
 Location: London                                                            Location: London
 Rapidly expanding Lloyd’s syndicate is looking for a Head of                Small boutique Insurer is looking for a Head of Reserving to join their
 Actuarial to work closely with the CRO, FD and Board members.               growing Actuarial team. The role will take responsibility for building
 Responsibilities include Pricing, Capital Modelling and Reserving.          and leading the reserving function and managing the team
 This is a superb opportunity for a Qualified Actuary looking for            underneath. You will work closely with the COO and implement new
 exposure to senior management and the opportunity to build and run          reserving solutions. This will suit someone with strong reserving
 an Actuarial team. You should be outgoing and happy to challenge            experience who is looking for more responsibility. WG8363
 and work with Underwriters. WG1289

 Newly Qualified Actuary                                   General           Mixed London Market Actuary                               General
 Salary: Up to £100k + Bonus + Benefits                                      Salary: Up to £60k + Bonus + Benefits
 Location: London                                                            Location: London
 Exciting Lloyd’s syndicate looking for a qualified Actuary to join its      This London Market Insurer has recently centralised European and
 dynamic Actuarial team of five. This role will work across all areas of     Irish business to it’s London headquarters and are seeking to fill a
 pricing, reserving and capital modelling whilst working closely with        number of positions to meet increased business. The ideal candidate
 the Head of Actuarial. They will consider candidates who have               will have commercial lines exposure, be working towards Actuarial
 previous pricing and or capital experience and would consider               qualification and be seeking the support of an established team to
 someone who has put their exams on hold. WG8364                             learn from. Proficiency in a foreign language is a bonus. JK1030

 Reserving Actuary                                         General           Contract Roles                                            General
 Salary: £45k + Bonus +Benefits                                              Salary: £400 - £2,000 per day
 Location: London                                                            Location: UK Wide
 This highly regarded reinsurer is looking to appoint a talented             In a rapidly changing market, our clients are looking for contractors
 student Actuary to assist with the delivery of the team’s objectives.       with a strong Pricing or Capital Modelling background to assist with
 You will support quarterly reserving exercises, improve the reserving       their Solvency 2 requirements. Modelling experience especially with
 process to comply with FSA principles and have the chance to support        Igloo or ReMetrica is in demand as well as commercial and/or
 pricing and capital management teams. The successful candidate will         personal lines experience. Opportunities for part qualified to
 have previous GI reserving experience. JK7394                               qualified Actuaries are available. RP234

 European Actuary                                         Life               Corporate Advisory                                      Pensions
 Salary: All Levels, from €40k to €200k                                      Salary: £35k - £80k + Bonus + Benefits
 Location: Europe                                                            Location: London
 Do you speak a second European language? Or do you simply have a            Varied and challenging opportunities have arisen within this
 taste for travel and experiencing new cultures? High Finance Group          well-known financial services provider. Our client is seeking
 offers a wide range of opportunities across Europe, for Life and GI         proactive and forward-thinking individuals to join their team due to
 Actuaries at all levels. To find out what opportunities exist for you,      new business wins. Working on projects across the business, this is
 contact our Europe Team to discuss your future in an exciting new           a unique chance to move in to a truly commercial area of the Pensions
 role. DB1949                                                                market. A proven ability in all aspects of pensions Actuarial work and
                                                                             strong communication skills are essential. MW7653

 Pensions Buyout                                         Pensions            Pensions Consulting                                     Pensions
 Salary: £30k - £40k + Bonus + Benefits                                      Salary: £35k - £60k + Bonus + Benefits
 Location: London                                                            Location: UK Wide
 Join the business development team of this leading pension buyout           This leading global consultancy has excellent opportunities for
 provider. A rare chance for a dynamic and commercially minded               motivated, career-focussed part to recently qualified pensions
 part-qualified Pensions Actuary to move to a niche and competitive          Actuaries. Working on a portfolio of Trustee and Corporate clients
 area of the market. Providing support to Senior Consultants you will        you will benefit accellerated career development whilst advising an
 actively contribute to the team attaining new business including the        exceptional client base and have the chance to work on a variety of
 pricing and process management of potential deals. MW7856                   non-traditional and investment based projects. MW7833

General                                                                     Pensions                               Contract
William Gallimore: 020 7337 8826        Miranda Wilkinson: 020 7337 8815       Rupa Pithiya: 020 7337 1200
James Kitt: 020 7337 1202   

               Insurance | Investment Banking | Investment Management | Management Consultancy

020 7337 8800                                   
There’s never been a better time to advance your actuarial career.
Demand from employers is intense and the right candidates can take their pick of
challenging, prestigious roles and excellent rewards.
Our online jobs board,, carries hundreds of actuarial vacancies
across all levels and sectors, giving you a wealth of opportunities.
It’s easy to search, select and apply, plus you can register for alerts to ensure you get
the latest, most relevant job details.
Minimum effort, maximum result. It’s time to make your move.

           Make your next move at:
                               Latest jobs from The Actuary are now on Twitter

         A rewarding 9 to 5 guaranteed
         (and the 5 ’til 9 is not too bad either)

         Senior Manager, Actuarial - Are you a qualified or partly qualified actuary looking for a unique challenge ?

         Nordben is part of the Norwegian Storebrand Group                  Towers Watson acts as actuary to the Company and we
         and is located in Guernsey – one of the leading financial           are looking to recruit an individual to work in conjunction
         services jurisdictions in the world. The Company is the            with them across our diverse range of products. In this
         leading provider of international pension plan solutions           challenging and varied role you will be involved in
         to Nordic industry, provides life and disability solutions         product design, product pricing, product literature,
         to multinationals in respect of expatriates, third country         Solvency II, modelling, investments and more.
         nationals and globally mobile employees, and provides
         bespoke insurance solutions.                                       To apply for this role please contact Tina Marley,
                                                                            Nordben Life and Pension Insurance Co. Limited,
         Guernsey in the Channel Islands has been described as              Harbour House, South Esplanade, St. Peter Port,
         a small slice of England with French dressing. Nestling                                 .
                                                                            Guernsey, GY1 1AP Telephone: 01481 702960.
         near the coast of France just 45 minutes from Gatwick              E-mail:
         airport, it is an island of stunning natural beauty offering
         an excellent standard of living, good air and sea links to
         the United Kingdom, warm climate as well as a thriving
         finance industry.                                                                                                                 wherever life takes you

                                                UK I Europe I Asia Pacific
                                                                                                       GI Reinsurance Reserving Actuary, London
                                                                                                            up to £90k + bonus + benefits
                                                                                                      This is a unique opportunity to have significant influence within the
                                                                                                      reserving team of this leading (re)insurance company. In this role you
                                                                                                      will manage a team of actuarial students, and have significant
                                                                                                      exposure across the business, which includes leading discussions at
                                                                                                      underwriter meetings and contributing to business planning. You will:
                                                                                                      • Be responsible for the delivery, review and documentation of
                                                                                                        quarterly reserving for all the company’s reinsurance lines globally.
                                                                                                      • Work with the capital modelling team to provide input into
                                                                                                        modelling of reserve uncertainty.
                                                                                                      • Review the loss ratios and other key assumptions used within the
                                                                                                        business planning process.
                                                                                                      • Implement a new liability valuation processes for Solvency 2 and
                                                                                                        IFRS as required.
                                                                                                      • Provide guidance/review to classes reserved in other countries.
                                                                                                      • Contribute to reports by legal entity.
                                                                                                      • Continually develop and refine the projection methodologies.
                                                                                                      • Work with underwriters and pricing actuaries to come to agreed
                                                                                                        business plan loss ratios and other key assumptions as necessary.
                                                                                                      • Assist in special ad-hoc projects.
                                                                                                      Suitable candidates should be nearly/ newly qualified with reserving
                                                                                                      experience, and have strong communication skills. Interested
         “ of the best recruitment and                                                          applicants should email their CV to
         search firms I have worked with...”                                                 ,quoting ref: NR7066
                                                                                                      Also, a Student Reserving Actuary is required, salary circa £40k +
         HR Manager, Amlin                                                                            bonus. ref: NR 7070

                     Rob Bulpitt,                              Dennis Ball,
                      Manager                               Senior Consultant
               Tel +44 (0)20 7092 3237                   Tel +44 (0)20 7092 3286                                      Parvinder Matharu

                    Rupert Rickard,                           Mansi Koshy,
                                                                                                                   Newton Recruitment
                 Managing Consultant                       Senior Consultant
                Tel +44 (0)20 7092 3219                  Tel +44 (0)20 7092 3283
                                                                                                                    t +44(0)1689 862937
                    Zoe Campbell,                                Alistair Allan,
                 Senior Consultant                             Senior Consultant                           w
               Tel +44 (0)20 7092 3208                     Tel +44 (0)20 7092 3262                                                                                                                                       June 2011      67
“, integrity and a long term perspective.”
More jobs online at

          MAKE A
           Senior Manager, S2 & IFRS2, London                                 Senior Manager, EEV, London
           To £120,000 + car + bonus + benefits                                To £120,000 + car + bonus + benefits
           This senior role in the group finance (GHO) actuarial function      You will become a member of a team of actuaries and
           oversees all actuarial aspects of internal and external            actuarial analysts who will develop and oversee all actuarial
           reporting, including International Financial Reporting             aspects of the group’s external and internal reporting
           Standards (IFRS) and Pillar 3 of Solvency II. You will lead the    methodologies, with particular focus on European
           development and implementation of IFRS Phase 2 (including          Embedded Value (EEV) reporting. Principal accountabilities
           lobbying activities, field testing, impact studies etc) and         include setting economic assumptions, addressing other
           implementation of Solvency II (disclosures, lobbying activities,   assumptions and methodology issues, providing guidance
           analysing gaps in data). As an experienced qualified life           to BU’s, reviewing results and input into disclosures. As
           actuary with PQE, you will have proven technical expertise         an experienced qualified life actuary with PQE, you will
           and a sound industry understanding. You will also have             have proven technical expertise and a sound industry
           proven experience of financial reporting and life insurance/        understanding. You will also possess deep actuarial modelling
           pensions products, an understanding of statistics and financial     knowledge, proven experience of financial reporting and of
           economics as well as a deep knowledge of actuarial modeling.       life insurance/pensions products and a command of statistics
           Ref: 1241644                                                       and financial economics. Ref: 1419691
  or 020 7481 9984                     or 020 7481 9984

           Senior Pricing Actuary, London                                     Household Optimisation Manager, London
           c.£140,000 + bonus + benefits                                       c.£60,000 + car allowance + bonus
           Reporting to the head of pricing for the UK and across             Join this FTSE 500 global insurance and financial
           Europe, this is a unique opportunity to enhance your career        investment organisation. You will assist in managing a
           within a global insurance provider that operates within            personal household pricing team, developing the skills and
           various specialist and general insurance sectors. With             competencies of the team, together with responsibility for
           six direct reports, you will have experience of managing           pricing and analytical excellence. You will deliver the pricing
           the development of junior pricing actuaries. The work              reviews, both multivariate and one-way analysis, in line with
           will be varied and refreshing and will involve exposure to         pricing plan. Your role will also be to monitor and forecast
           syndicate modelling, together with opportunities to work           the impact of rate changes against expectations and drive
           with actuarial colleagues in planning, reserving and capital       further actions where necessary. Ref: 1390426
           modelling. You will support the STII technical provision  or 020 7481 9984
           department and migrate these developments. Ref: 1393363
  or 020 7481 9984

           For further information or to apply for any of these vacancies,
           visit and enter the relevant job reference number.


70   June 2011                                                                                                               
                                                                                                                 T:       020 8420 1818

                              Actual Search
                                         SEEKING THE              EXCEPTIONAL

Financial Reporting with work / life balance                                            Risk / Capital Management
Surrey                                                   to £60K + flexi working        London                                                    £70-90K + Overtime
Looking for a reporting role with flexibility where you can strike a good work/         Technical role at leading insurer. Help manage the capital requirements for
life balance? Here it is! Enjoy financial reporting where you'll be involved in         Solvency II including adequacy & efficiency metrics. Lead a small team. To apply
delivering Peak 1 & 2, EV, IFRS & MI. Suit part or nearly qual life reporting           you’ll need to want to expand your skills & be either a p/q or qual actuary with good
analyst / actuaries looking for flexible hours & great benefits. Ref:1507               interpersonal skills & risk management exp. Ref:1513

Investment Analysts & Consultants                                                       Ground Breaking Life Pricing
London or Surrey                                           £60-80K + benefits           London                                                          £35-80K + bens
Evolving investment role where you can build on your experience & become                Award winning insurer needs a p/q & newly qual actuary to work on new,
expert in all major fixed income asset classes & derivatives whilst working on          innovative & ground breaking life products. Duties incl pricing, product
projects & reporting functions. Ideal for a nearly/newly qualified investment           development, profitability analysis & some reinsurance work. Terrific career
actuary with strong financial modelling and Excel (VBA) skills. Ref:1508                opportunity to broaden your skills. Min 1 yrs life experience needed. Ref:1514

Senior Analysts – Systems & Modelling                                                   Contract Solvency Manager
London                                                                    To £75K       South Coast                                                     £Excellent Rate
Great role for part qualified or qualified actuaries with excellent IT skills, strong   Expanding life & pensions provider needs an interim solvency manager to lead
modelling & knowledge of UK life insurance products. Widely varied &                    the project development of their internal model. You’ll coordinate the internal
challenging - to develop, test & document actuarial modelling systems across            design & provide technical leadership to the team. Qual life actuaries with
both analysis & pricing functions. Want to know more? Send CV! Ref:1509                 hands on staff & project management skills should apply. Ref:1515

Actuarial Analyst – X-train to GI                                                       A Life Consultant’s Life
Berk / Surrey / Hants                                      £30-45K + benefits           London                                                                 £Excellent
Part qualified actuarial analysts looking to enhance your careers? Cross train          Varied, challenging & stimulating roles for p/q’s & quals with this prestigious,
from life or pensions into general insurance. You should have passed the                award winning, international life consultancy. Projects vary from valuation &
majority of your CTs and have experience in a pricing or reserving role.                reporting to capital & solvency II & from pricing & profitability to investment &
Brilliant opportunity to change direction into a thriving sector. Ref:1510              ALM. Don’t get typecast. Learn new skills. Dull it isn’t. Ref:1516

Pensions – Buy-out Market                                                               GI Snr Analyst & Management
London                                                      £40-55K+ benefits           Surrey / Hants                                                            £55-95K
Join the actuarial team of this international life insurer where you’ll assist with     Commercial & personal lines pricing & reserving roles available at this blue
pricing new business lines & ensure quotations are accurate. Perfect if you’re          chip insurer. Reserving roles involve development of ICAs & Solvency II
a part or nearly qualified pensions actuary with good communications ability,           estimation. Pricing roles incl some product development as well as statistical
strong UK DB pensions background with Excel & modelling skills. Ref:1511                analysis. Management jobs in both areas. Part timers considered. Ref:1517

Investment Analysts & Consultants                                                       Pensions & Investment Consulting
London                                                        £35-90K + bonus           London                                             £35-100K + bonus + bens
Amazing career prospects for pq or qual actuary or CFA with a solid                     Use your pensions knowledge for investment work & learn new skills. Part, nearly
understanding of asset classes & trends in pension & investment areas. Join             & qual roles available in a small team of highly respected consultants. Work with
a team developing creative viable solutions to meet clients’ needs. Present             corporate & trustee clients Duties incl valuation, ALM, pensions & investment
reports with highly complex information & concepts then plan & deliver                  advisory etc. Friendly & hospitable team. Min 1 yrs exp. Prospects to partnership
investment strategy. Ref:1512                                                           Ref:1518

         To apply for any of these vacancies please phone 020 8420 1818, and speak to Peter or Norma
                  or apply online at or email

              w w w. a c t u a l s e a r c h . c o . u k                            
The Actuarial Recruitment Company

 Qualified Actuaries                                                                                 Life and Non-Life
 London                                                                                     £90K -£130K + Benefits DOE

  Are you a qualified actuary interested in using your actuarial background in a business focused
  consultancy role working with the UK’s largest life and non life insurers?
  Our Client is working with major UK insurers on the implementation of Solvency II Programmes.
  The Opportunity is to join a specialist team and work with the leading insurers in the UK on a variety
  of commercially focused and high profile assignments. It is a client facing role and you will provide
  advice to insurance businesses as they deliver complex Solvency II Programmes. Beyond Solvency
  II you will have the opportunity to help shape the financial strategy and processes of insurance
  businesses as they continue to optimise the finance functions of their organisations.
  The Successful Candidate will be a qualified actuary who has gained experience within life or non life
  insurers, perhaps with a broader experience set than just pure actuarial work. You will need excellent
  client facing skills, a commercial focus and an appetite to work on projects which extend beyond the
  boundaries of traditional actuarial technical focus. In return, a significant benefits package is offered
  with excellent career prospects.
  For more detailed information, or a confidential discussion, please contact Chris Cannon on
  +44 (0) 7711 228 449 or email

                                                     Life Contracts

                South East – 12 mths; Solvency II; qualified; life financial reporting exposure / to £1250pd

              Midlands – 6 mths; Part Qualified; strong actuarial modelling skills; WP experience / to £750pd

               South West – 6 mths; Reporting Experience; to work on Solvency II Programme / to £1000pd

           Midlands – 6 mths; Part Qualified; stochastic modelling experience; strong Prophet skills / to £850pd

          South – 12 mths; Qualified; Some S2 exposure; strong leader; good communication skills / to £1200pd

             South West – 6 mths; Part Qualified; Prophet or MoSes; experience of testing models / to £800pd

          London – 3/6 mths; Near Qualified or Qualified; Reporting / ICA Experience in life insurer / to £1200pd

Please contact Chris Cannon on +44 (0) 7711 228 449 or email

Call us anytime including evenings and weekends on 020 7717 9705 or

                                                              General Insurance - UK

Chief Pricing Actuary                                 Paul Francis              Senior Group Actuary                                      Paul Francis
London                                    £150,000 + Bonus + Bens               London                                        £140,000 + Bonus + Bens
Newly formed team in the London Market are seeking a senior pricing             I am seeking a senior actuary for a London Market entity. You will cover a
actuary to lead and manage a team. You must have extensive knowledge of         range of duties including reserving, pricing, capital, S2, risk, M&A,
working with Underwriters in a highly visible role, and be comfortable with     commutations and board reporting and management. Excellent future
working closely with the board. Greenfield role with excellent package.         management prospects for role holder.

Reserving / SII Actuary                                  Jamie Howard           Senior Capital Actuary                                     Rick Davis
London                                    £110,000 + Bonus + Bens               London                                       £110,000 + Bonus + Bens
Multinational Commercial and Personal lines insurer requires an                 A top London Market business requires a recently qualified actuary to lead
experienced reserving actuary to work in Group HQ in the City. Variety of       the capital work for a key division of their business. This is a highly visible role
work across all business lines and involvement in Solvency II. Ideally you      in which you will also manage a team of analysts. Requires strong capital
should be a qualified actuary or have over 7 years experience.                  experience and a high level of commercial acumen.

Business Actuary                                               Rick Davis       Syndicate Actuarial Analyst                                   Ben Pitt
London                                      £70,000 + Bonus + Bens              London                                          £55,000 + Bonus + Bens
Excellent broad role within a leading London Market company. Working with       An excellent opportunity for a part-qualified actuary to join a highly
senior actuaries you will gain a variety of experience across capital           respected Lloyd’s Syndicate. Working directly with the Chief Actuary, you will
modelling, pricing, risk management and reserving duties. An outstanding        play a pivotal role in supporting the Actuarial Risk Management & Solvency
role for an ambitious student actuary with strong communication skills.         II teams, whilst also being involved with Pricing and Reporting.

Student Actuaries                                    Jamie Howard               Capital Modelling Analyst                                               Ben Pitt
UK Wide                                    £50,000 + Bonus + Bens               London                                          £50,000 + Bonus + Bens
We have a vast selection of actuarial student positions available with          Market leading London market insurer requires a bright, enthusiastic and
regionally based insurance companies. Opportunities exist in commercial         communicative junior actuary to join their impressive capital team. You will
and personal lines across all disciplines. If you are seeking good study        gain experience with leading modelling software and work closely with
support and training our clients can offer this across the UK.                  senior management. Excellent career progression is guaranteed.

                                                   Ireland, Continental Europe & Asia

Responsible Actuary                                Emma Gilbert                 Senior Corporate Actuary                                  Clare Nash
Zürich, Switzerland                  CHF 200,000 + Bonus + Bens                 Dublin                                       €120,000 + Bonus + Bens
An exceptional opportunity at this world renowned commercial lines              Global insurer seeks a qualified actuary to play a pivotal role in ambitious
insurer. You will be the point of contact for the Swiss regulator, FINMA and    growth plans, offering huge career progression potential. Protection
coordinate with all the international actuarial teams. In addition to your 7+   experience in Pricing or Valuation advantageous, alongside Irish statutory
years’ experience, Igloo knowledge would be ideal.                              and US GAAP reporting. Apply now for a confidential discussion.

Operational Risk Manager                              Phu Le-Ngoc               General Risk Manager                                      Julien Fabius
Germany                                   €100,000 + Bonus + Bens               Brussels                                        €90,000 + Bonus + Bens
Fantastic opportunity for an actuary to join an international team. You will    Global Top 20 insurance group seeks a General Risk Manager to work at the
be working with the CRO office. International experience, strong                group head office. You will be managing a team of two actuaries and take
communication skills and the ability to drive forward relevant projects         responsibility for all projects concerning the Risk Governance at group level.
within the global group are required. Full relocation package provided.         Strong strategic experience is required.

                 General Insurance - UK                                                             Life Insurance - UK
Rick Davis                                              0207 649 9353           Clare Nash                                                    0207 649 9350                                           
Paul Francis                                            0207 649 9469           Patrick Flanagan                                             0207 649 9355                                         
Jamie Howard                                            0207 310 8725           Harriet Hall                                                 0207 310 8783                                         
Ben Pitt                                                0207 310 8719           David Parker                                                 0131 278 0133                                             
                                                                Life Insurance - UK

Head of Actuarial                                              Clare Nash        Head of Capital Planning & Oversight      Harriet Hall
South East                                £150,000 + Bonus + Bens                South                        £120,000 + Bonus + Bens
Exceptional opportunity to lead and develop a growing team; my client            Working within this growing Group insurance business, you will be
seeks an experienced actuarial professional to play a pivotal role in growing    responsible for S2 model validation from a risk oversight perspective. This is
the organisation. A high profile role in which strong technical and man          a brand new role where you will be tasked with growing your own team.
management skills are essential.                                                 Great career opportunity for those looking for a new challenge.

Reporting | SII Actuaries                             Patrick Flanagan           Group Risk Manager                                              Clare Nash
South East                                  £90,000 + Bonus + Bens               London                                       £85,000 + Bonus + Bens
Are you interested in achieving a better work/life balance? I am working on      A global market leader seeks a newly qualified actuary to take on a high
a number of exciting and interesting opportunities with large Life               profile role at Group level. Working alongside the Head of Risk, you will be
companies that cover all levels and areas of specialism. Qualified and part      exposed to a variety of challenging work from new product analysis to
qualified positions. Top tier/ambitious Pensions actuaries will be considered.   Senior Management reporting and Solvency II.

Pricing and Products Actuary                                 Harriet Hall        Market Risk Actuary                                    Patrick Flanagan
London                                      £80,000 + Bonus + Bens               London                                       £70,000 + Bonus + Bens
We are currently working on a variety of exciting commercial actuarial           A niche City based organisation is looking to strengthen their financial risk
positions for both reinsurers and life offices, encompassing business            management team. With exposure to Solvency II implementation, ALM and
development, pricing and product development. We are also keen to speak          Economic Analysis, this varied role requires an analytical thinker who thrives
to those from other life actuarial disciplines looking for a change.             on project-based work within a team environment.

Capital Management Actuary                                 David Parker          Close to qualifying?                                     Harriet Hall
Edinburgh                                £Excellent + Bonus + Bens               London                                       £65,000 + Bonus + Bens
My client has numerous actuarial vacancies from part qualified to senior         My client, a global insurer, is looking for those at the nearly/newly qualified
level. Working within risk and compliance, you will provide leadership on        level to further grow a team responsible for the development and oversight
various projects, including Solvency II implementation. A superb                 of the latest regulations. Reporting and/or S2 experience required. A unique
opportunity for those seeking a variety of work within an industry leader.       opportunity to gain some cutting-edge experience.

                                                   Ireland, Continental Europe & Asia

Senior IFRS Reporting                               Emma Gilbert                 Reserving Manager                                       Clare Nash
Zürich, Switzerland                   CHF 150,000 + Bonus + Bens                 Dublin                                     €100,000 + Bonus + Bens
This role deals with Lobbying for the business at the International Regulators   Qualified Non-Life actuary required to lead specialist Reserving work and
and reporting back to various teams within the Group. For this role, you will    preparation for Solvency II requirements. You will work towards instilling
ideally have 7-10 years’ experience, ideally in consulting or with a Rating      group-wide best practice and inform the business planning process. A
Agency. German skills are not needed.                                            varied role offering exposure to European projects.

Junior / Senior Actuary                                Phu Le-Ngoc               Senior Modelling Actuary                               Julien Fabius
Germany                                     €90,000 + Bonus + Bens               Brussels                                     €70,000 + Bonus + Bens
Great opportunities for PQ or qualified actuaries. My clients, some of the       Global Top 20 insurance group seeks a Senior Modeling Actuary to work at
most renowned (re-)insurers and consultancies, look for talented actuaries       Group level. You will work as a senior member within the modelling team
to join their ERM and Actuarial Services teams. International candidates         and work on the design and validation of the group models for both life and
welcome. Relocation / study support will be provided.                            non-life insurance. Strong modelling experience is required.

                       International                                                    Asian Opportunities - Life / GI / Investments
Clare Nash                         +353 (0)1 685 2413                                                      Jonny Plews                                   +44 (0)207 649 9467
Julien Fabius                      +32 2-88 860 51                            0207 649 9466
Emma Gilbert                       +41 (0)43 508 0509        0207 310 8782
Phu Le Ngoc                        +49 (0)89 2206 1068         0207 310 8643
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