Tag Archives: Risk

Joint Networking Evening: Trading Longevity Risk – hosted by PRMIA and The Actuarial Profession

When: 17th December 2012, 17:30 to 20:30

Where: Staple Inn Hall, London WC1V 7QJ

A helpful event where delegates gain a range of perspectives on the emerging markets for trading longevity risk.

Panellists will present their views on a number of issues such as: overview of the market and its economic function, key risks involved and challenges, emerging themes, the role of regulation and Solvency II and perspectives from risk sellers and buyers.

Speakers include:

  • Douglas Anderson, Hymans Robertson LLP
  • Pretty Sagoo, Deutsche Bank AG
  • David Epstein, Aviva
  • Emma McWilliam, Milliman

To book your place email eventmanagement@actuaries.org.uk

Rating outlook for UK life firms stable, says Fitch

The rating outlook for the UK life assurance sector remains stable, according to a new report by statistical rating organisation Fitch.

Fitch’s latest outlook assumes a weak economic recovery, with modest GDP growth. It is yet to account for shocks to the economy, but can be updated if unexpected events were to occur.

Fitch’s insurance team senior director David Prowse said: “In contrast to several European insurers, most UK life insurers have negligible direct exposure to the sovereign debt of Greece, Italy, Ireland, Portugal and Spain – typically less than 5% of shareholders’ equity.”

Climate body calls for flood defence upgrade

A further £20m a year needs to be spent on flood defences to keep pace with climate change, according to a new report from a climate change body. If this does not happen, the number of homes and businesses at the highest risk of flooding could almost double to 610,000 from its current level of 330,000 in the next 20 years.

The report by the Adaptation Sub-Committee (ASC) of the Committee for Climate Change, which advises the government, found that the number of properties built on flood plains has increased by 12% over the past 10 years, compared with a 7% rise outside flood-affected areas.

Citing figures from the Environment Agency, The ASC noted that at the same time, funding for flood defences from both public and private sources is decreasing. It was 12% lower for the current spending period compared with the previous period, after inflation.

Take-up of measures to protect individual properties from flooding is 20 to 35 times lower than the rate required to safeguard all properties that could benefit, the report said.

The ASC estimates that if the additional £20m was spent on flood defences, only 160,000 properties would be at significant risk of flooding by 2035.

ASC chairman Lord John Krebs said in a statement: “We must take adaptation more seriously if we are to manage the growing risks of floods and droughts. This can be done by investing more in flood defences, faster roll-out of water meters and giving serious consideration to where and how we build our housing and infrastructure.

“Without action by households and businesses to prepare for these inevitable weather extremes the country faces rising costs, unnecessary damage and future disruption.”



Research shows material worsening of bodily injury claims experience

The Institute and Faculty of Actuaries has released its 3rd annual report looking at ‘third party motor and periodic payment orders (PPOs) UK claims data’; a report which collates and analyses data from across the motor and PPO insurance industry for 2011.

A key finding of the Institute and Faculty of Actuaries report is the increase in the proportion of third party accidents involving bodily injury where data shows a staggering 18% increase from 2010 to 2011. A rise in the proportion of reported accidents involving bodily injury has been a key trend for several years; however this year has seen the greatest increase ever. The Institute and Faculty of Actuaries believes that this rise is down to unprecedented activity by claims management companies. The increase in claims increased costs to insurers to the tune of approximately £400 million in 2011.

David Brown, chairman of the Institute and Faculty of Actuaries UK third party motor and PPO claims working parties which produce the annual reports comments;

“The increase in costs to insurers because of the rise in bodily injury claims is likely to result in a rise in motor insurance premiums for drivers. The clear correlation between claims management companies office locations and the ‘hotspots’ for bodily injury claims suggests that the two are interlinked. We expect to see legislation coming soon which will affect the way in which claims management companies do business, which may account for the significant increase seen in 2011 – it is possible this is a last hurrah.

“In 2010 the worst areas of the UK overtook the worst areas of the US in terms of the proportion of accidents involving bodily injury. It is disappointing to see this trend not only continue, but worsen in all regions with the exception of Scotland.”

Accidents giving rise to third party claims are on the decline according to our 2011 data. Our research suggests that the rise in petrol prices has contributed to a reduction in the number of hours people spend driving and therefore has reduced accidents. Specifically third party damage claim frequencies have continued to decrease. This is the sharpest drop for the last 5 years, representing a decrease of 11%.

Third party bodily injury (TPI) claim frequencies increased by 5% in 2011. Claim numbers have been rising year on year since our records began, (with the exception of 2010 which appears to have been the result of Ministry of Justice personal injury claims reform rather than a change in trend).

A staggering 18% increase in third party accidents involving bodily injury (third party bodily injury/third party damage ratio) from 2010 to 2011. Since our records began year on year a greater proportion of accidents has involved a bodily injury claim, but this year has seen the greatest increase ever. We believe this rise goes with unprecedented activity by claims management companies. This change alone increased costs to insurers in excess of £400m and as a result it is likely that motor insurance premiums will rise.

Hotspots of third party accidents with bodily injury claims were found – mostly in the North West and West Midlands, in particular Liverpool, Manchester and Birmingham.  Previously these hotspots were contained to city centres but our 2011 data shows they are now spreading out to more rural areas within these regions.

One trend that did continue from 2010 is that the worst areas of the UK overtook the worst areas of the US in terms of the proportion of accidents involving bodily injury.

There was a 9% increase in the average cost of small  third party bodily injury claims reported to insurers.

Third party damage claim amounts increased by 12.5%, a dramatic rise from 2010. The data also points to a slowing down in third party property damage settlement rates.

For the 3rd year in a row PPO awards that were settled in the UK motor insurance market totalled around the 70 mark, suggesting that a ‘mercury level’ has been reached.

There is evidence of stabilisation in the average PPO awards. The average age of PPO claimants increased only slightly from 34.4 years in 2010 to 35.2 years in 2011. Consistent with this increase, there was a slight decrease in future life expectancy in the 2011 data from the previous year reducing from 41.5 years to 40.4 years.

The average size of an annual PPO payment in 2011 was £78,700– almost identical to the 2010



UK insurers ‘fail to reward risk culture’

Almost 2/3rds of UK insurance companies are yet to include chief risk officers or heads of risk on their board of directors, according to the results of a survey of senior insurance executives published today.

The research, carried out by consultancy Protiviti, found that 63% of executives said CROs or heads of risk were not on the company board, while only 56% said their board provided executive management sponsorship and ownership of their firm’s risk management procedures.

At the same time, only 22% of executives surveyed said their firms were using risk-based return on capital measures in business planning and only 19% believed the frequency and quality of board discussion around risk management was ‘strong’. Just over half (55%) described it as ‘fairly strong’.

According to Protiviti, the results of the survey show that, while insurers are investing in risk technologies to help meet compliance demands, this ‘tick box’ attitude means they are missing out on the opportunities presented by legislation such as Solvency II.

Peter Richardson, the company’s UK managing director, said: ‘The attitude towards the risk function seems to be that it is a regulatory requirement, rather than a source of added value to the company. It’s worrying that fewer than one in four of those we surveyed saw value-add in the risk function.

‘The need to embed risk culture in insurance organisations may be widely recognised, but Protiviti’s research shows there is a long way to go before boards regard it as more than simply tick-box compliance, though one positive note is that the majority (67%) of respondents report that their firm’s risk culture is being addressed as part of their firm’s training programme.’

SAAX Group Event – Insights on Enterprise Risk Management

Enterprise Risk Management (‘ERM’) is widely recognised as a critical management issue for the Financial Services industry. At the recent SAAX group event, four ERM industry leaders shared their insights on developments in ERM and provide suggestions on how to succeed in a field where there are increasing opportunities for actuaries and risk professionals.

Adrian Baskir introduced the panel which was chaired by Marjorie Ngwenya. The panelists were Paul Sweeting, Jan-Hendrik Erasmus, Malcolm Kemp and Andrew Birrell. There was an interesting and participative discussion with many good questions and contributions from the floor.

Discussion focused on the new CERA qualification. This is a stand-alone internationally recognised qualification and one is eligible for it from Associate level and up.

Three qualities for actuaries are now being highlighted as important ….

  • Business Acumen – ie. “know the specifics of your industry before applying ERM principles” – it is not enough to know the ERM principles in isolation from your specific business
  • Develop strong communication skills – Actuaries are now required to be charismatic and understandable by non-actuarial folk – not enough to be numerate and often non-actuaries are very numerate themselves
  • Contribute to the business strategy of the company – Take time to do proper thinking – away from the audit thinking style of the operational side of the business.

In addition, all four panelists strongly suggest that actuarial thinking has much to offer and that actuaries should not be afraid to just plunge in and learn as they go … there is NO ideal career path … they believe one should just do the very best one can in current roles.

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Do You Know What Actuaries Do?

Actuaries work across diverse industries, from insurance, pensions and benefits, investment and asset management through to banking, healthcare, capital projects and risk. Working individually or as part of a team, you could find yourself being a consultant, analyst, trouble-shooter and risk assessor – all in the same day.

Actuaries use maths and economics every day of their working lives, but they also require good interpersonal skills, as they are in regular contact with clients, senior colleagues, and the staff they manage.

To a certain extent what actuaries do can seem to be shrouded in mystery – watch this entertaining video clip of students at Purdue.

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