Tag Archives: Actuaries

Actuaries should establish MPs expenses allowance

Actuaries have the skill set to establish an average expense allowance for MPs, believes Dr Geraldine Kaye, managing director of actuarial recruitment consultancy GAAPS Actuarial. “Based on past legitimate expense claims coupled with the size of an MP’s constituency and distance from London it should be possible to create a model which calculates what their individual expenses should be within a given range.

“With all the publicity and criticism surrounding MPs expenses this to me would make sense and settle public unease over this volatile issue. The actuarial profession looks at probability and developing statistical data from a long term perspective so is very well qualified.”

Actuaries calculating Bankers bonuses

“Actuaries should be involved in calculating banking bonuses as they are trained to determine where there are any unacceptable risks being taken. As actuaries it is the long term that concerns us,” says Dr Geraldine Kaye, an actuary herself and managing director of actuarial recruitment consultancy GAAPS Actuarial.

“Where there are enormous bonuses for profitable performance and with no downside for poor performance, you can only encourage risky and in some cases even irresponsible behaviour.

“With-profit life policies fell out of favour because non-actuaries could not understand the smoothing techniques that were used and required. A variation of those techniques, but with much better communication of what is being done, would be very well suited to smoothing bankers’ bonuses. Once bonuses are accurately spread over several years, then traders would have to be much more careful that the risks they take will not result in large or even catastrophic losses.

“All it requires is for a few actuaries to enter this area of work and to be seen actively involved in calculating banking bonuses, then others will be able to follow.”

Global insurance prices continue to rise

Global insurance prices increased by 0.9% in the third quarter of 2012, continuing the gradual increases that began in the second half of 2011

The latest quarterly insurance market briefing by Marsh, also found a 1.4% increase in renewal rates in the third quarter. This was the same level as seen in the second quarter, which Marsh said was evidence that price increases might be stabilising.

Andrew Chester, chief executive of the firm’s placement brokering division Bowring Marsh, said: ‘While the global insurance market continues to be in a state of clear transition, the results for individual insureds vary significantly. With capacity and appetite for well-managed risk still strong, insureds are still able to achieve favourable results on renewal in many lines of business.’

Insurance rates for financial and professional business rose by an average of 1.9% for renewals in the third quarter. In particular, concerns over the eurozone crisis among underwriters saw financial institutions in every major eurozone country experience increases in their liability insurance rates.

Casualty insurance rates rose by an average of 1.2% globally – higher than the 0.8% increase seen in the second quarter of 2012. However, a lack of natural catastrophes so far this year has helped to stabilise property insurance rates.

Launch of the first Actuarial Research Centre

50 business leaders, academics and MSPs met at the Scottish Parliament to celebrate the opening of the new Actuarial Research Centre (ARC) earlier this month.

Mark McDonald, MSP welcomed the audience and outlined some of the areas where the profession has already been interacting with politicians. He also said that they would welcome any input from the profession, which aligned to their public affairs objective.

The centre is set up in the same month that marks 250 years since the birth of actuarial work in life offices.  The first Director of the ARC, Professor Andrew Cairns spoke of his vision for the centre, collaborating with business, developing academic disciplines and researchers that will be an asset to industry.

The consequences of living longer – the 2011 Census

We all know that people are living longer, which impacts on many areas of welfare, society  and finance.  Fraser Smart, Managing Director of Buck Consultants, discusses the data from the 2011 census:

“Much of what this data reveals should come as no surprise to those of us in the pensions industry, people in England and Wales are living longer than they did 100 years ago. There is a decreasing proportion of the population that is aged under 15 and an increasing proportion that is aged 65 and over. The percentage of residents aged 65 and over was the highest seen in any census at 16.4 per cent, which means that one in six people in the population was 65 and over in 2011. In 1911, the figure was one in twenty.

“Very worryingly the number of active members of occupational pension schemes is at the lowest level since the 1950s. Employee membership of employer-sponsored pensions in the private sector fell from 46% in 1997 to 32% in 2011. In 2010 the average worker in a private sector defined benefit pension scheme contributed 5.1% of salary to their pension, compared with 2.7% for employees in defined contribution occupational pension arrangements.

“Great news we are all living longer, as no doubt we all wished for. However, this has now come to the attention of those in authority and, with an ever increasing percentage of the population relying on pension income. We are awaiting with interest the Government’s proposals on defined ambition pensions which are expected later this year. Radical reform of pensions arrangements are needed to meet the needs of a growing population of pensioners in the wake of the disappearance of final salary pension schemes.

“I would love final salary schemes to make a comeback, but the reality are that most are in their endgame paying out benefits rather than accruing new liabilities. Will the Government be brave enough to remove the shackles which led to a large extent to the disappearance of final salary schemes? We will have to wait and see.”

 

Motor rates show minor fall in July

Motor insurances prices have remained stable this month with prices dropping 0.6% compared with last month, according to Tiger.co.uk’s monthly car insurance price monitor.

Prices fell 1.8% when compared to the same period last year. Analysis of prices by gender revealed another significant movement towards greater equality in policy pricing. Tiger Watch estimated that female drivers have seen their policies increase in price by around 0.1%, whilst prices for male drivers dropping by 1.2% compared to a month ago.

Women have held the historical policy price advantage but this has been eroded since March. Since then car insurance prices for women have soared by 5.6% – equivalent to an annualised inflation rate of around 17% – whilst male prices have dropped by 1.6%.

 

This means males are paying around 5% more for their policies in July 2012 than women drivers, whereas they were paying some 12.4% more just four months ago as the gender gap narrows in anticipation of the introduction of the EU Gender Directive in December 2012 that prohibits the use of gender as an insurance rating factor.

Month Male policy prices compared to women

March 2012 +12.4%

April 2012 +10.3%

May 2012 +9.8%

June 2012 +6.1%

July 2012 +4.8%

Tiger.co.uk commercial director Andrew Goulborn said: “What we are seeing is, broadly, continued stability in car insurance prices – they’ve been pretty flat for the last 12 months. However since March we’ve seen female pricing increase by 5.6% – more than five times the current rate of inflation. Essentially women drivers are seeing the results of what we consider to be an unfair EU ruling that comes into effect at the end of 2012.”

Call for speakers from the Institute and Faculty of Actuaries

If you would like to propose a session for one The Institutes residential conferences, we want to hear from you. Session proposals will be reviewed by the conference programme committee.  The more detail you can give about your proposed session, the more it will help the programme committee with the selection process.  Please see below for how to submit a proposal.

 The programme committee is looking for session proposals that offer:

 •new and relevant subject matter contributions from more than one company

 •practical experience presentations from working parties

 •contributions from practitioners in the products, distribution and customer area case studies

 •contributions from non-actuarial speakers

 •contributions from wider fields

 •dynamic and entertaining speakers

For more details, e-mail:  eventmanagement@actuaries.org.uk