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STAY TUNED! If you are anticipating additional search filters by attribute and level to align with the CAS Capability Model, it is coming later this Summer. As the CAS begins to code recorded sessions by specific attributes and levels (starting with the 2023 Annual Meeting), these will be tagged in the CAS database of presentations going forward and should be searchable.
But you may use the Capability Model now to help you identify topics. For example, if you want to move up one level under the content area “Functional Expertise,” you may search topics in the particular functional area to expand your knowledge.
Recorded content is searchable by Capability Model attribute and level in the CAS Online Library.
Improve Health and Lower Diabetes Costs  A Comparison of Seven Countries
Healthcare spending growth is a global issue. This presentation will look at how seven countries across the globe are improving their population health and lowering health care costs by focusing on a growing chronic disease –diabetes. In 2010, health expenditures on diabetes were estimated to be 11.6% of the total health expenditure in the world, and its prevalence is projected to continue to increase in the coming decades. Countries exhibit many commonalities in their efforts to reduce the economic burden of diabetes. We will examine how these countries have deployed various interventions both at population level and clinical level. We will also look at how health actuaries can use their expertise to contribute to the overall goal of improving outcomes and lowering costs to the healthcare system.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
IAIS Global Capital Standards
This session will present the challenges and progress of the International Association of Insurance Supervisors' initiative to develop global insurance capital standards. The session will include speakers from IAIS who will outline the vision, the goals and the actuarial implications of this IAIS initiative. Other speakers will include a Chief Financial Officer and a Chief Risk Officer from two Global Systemically Important Insurers (G-SIIs). The speakers will provide a range of perspectives on how the process of developing three global insurance capital standards over three years is going to play out … not to mention the implementation challenges and implications for the years following.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
IAA Publications: New Books on Modern Actuarial Sciences & Practice
The IAA has published new books and mongraphs on actuarial sciences, related to "Stochastic Modeling","Discount Rates" and "Risk Margins". The General Session idea of the session is that a co-author from each could present the highlights and features of each publication.
Be ready for an interactive session when you join Andrew Dalton, Principal and Consulting Actuary, Milliman, Inc. for a discussion on the International Actuarial Association’s (IAA) Educational Monograph on Issues Associated with the Determination of Discount Rates for Financial Reporting Purposes. This monograph, intended for practitioners in the insurance and pension sectors, covers the following five major sections: 1) General Session methodology; 2) current applications, including economic scenarios, life, non-life and pension examples, and country or region-specific issues; 3) recommended procedure for the evaluation of results audit; 4) peer review; 5) and communication.
Bob Miccolis, Director, Deloitte Consulting LLP - will present “Measurement of Liabilities for Insurance Contracts: Current Estimates and Risk Margins”. He will present the results of the work of the ad hoc Risk Margin Working Group (RMWG) of the International Actuarial Association (IAA) which has conducted research into the measurement of liabilities for insurance contracts that has resulted in this paper. The issues addressed are those that will help determine future practice for measuring liabilities for insurance contracts for both regulatory and General Session purpose financial reporting. It focuses on current estimates and risk margins, which the RMWG believes to be an appropriate basis for the measurement of liabilities for insurance contracts. During the course of this research the RMWG has sought and incorporated input from various stakeholders in the measurement of these liabilities.
Jim Stoltzfus, Principal and Consulting Actuary, Milliman, Inc. will present “Stochastic Modeling — Theory and Reality from an Actuarial Perspective”, a Stochastic Modeling guide for practitioners interested in understanding this important emerging field. It presents the mathematical and statistical framework necessary to develop stochastic models in any setting (insurance or otherwise). Sufficient mathematical detail is presented but no advanced background in mathematics or statistics is required.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
IAA ISAP 2: Financial Analysis of Social Security Programs
TBD
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
How Powerful Are Your Rating Factors?
Session Description:
This session is a practical mortality demonstration using General Sessionised Linear Models (GLMs). GLMs provide an approach where rating factor interactions can be analysed, thereby avoiding the dangers of a one way analysis. Keeping theory to a minimum, we consider a practical mortality demonstration, investigating the predictive power of different rating factors and look at the impact when key risk factors are removed from the analysis.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
How Accurately does 70% Final Earnings Replacement Measure Retirement Income (In)Adequacy?
The most commonly advocated benchmark in retirement planning is that 70% of gross final annual employment earnings will sustain an individual’s standard of living after retirement. This benchmark has been used by financial planners, pensions plan advisors, academics, public policy makers and much of the research that has predicted that Canadian and American workers will be financially unprepared for an adequate retirement.
This presentation examines whether Canadians who hit this target actually can expect to maintain their living standards in retirement. I also discusses the optimal construction of a replacement rate measure that might better predict living standards after retirement.
*Awarded PBSS Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
High-Performance Reserve Calculations for Life Insurance Portfolios
We describe a software design for efficient reserve computations for
life insurance and pension products, described using a flexible and
precise notation that is both machine-readable and human-readable; in
effect, a domain-specific language for actuaries. Mathematically,
this notation is based on multistate models.
First, from a collection of such product descriptions and from
assumptions about transition intensities (eg. survival, disability)
and yield curves, the software can generate eg. the Thiele
differential equations that characterize the reserve or other
quantities of interest.
Secondly, these differential equations can be solved efficiently in a
range of different ways. Since we use numerical solvers, we can
handle reserve calculations for advanced pension products, for which
the Thiele equations do not have closed-form solutions. The
computationally most advanced solvers generate product-specific CUDA C
code for graphics processors. Experience shows that this can speed up
the solution by a factor of around 100 over standard desktop hardware,
while retaining the same accuracy.
Future work includes the generation of product-specific C and C# code
for standard multicore (desktop and server) hardware, which is likely
to be somewhat slower than the graphics processor hardware, but more
readily available and better suited to adaptive-step differential
equation solvers such as Runge-Kutta-Fehlberg. Taking this path
requires no change in the actuarial product descriptions.
The bottom line is that we can develop and describe advanced and
non-standard pension and life insurance products, yet still
efficiently compute reserves and other quantities of interest. Core
to this is the use of modern programming language technology,
including domain-specific languages and code generation for a range of
hardware platforms.
Possible audience involvement: A demo to show how reserves can be
interactively computed for various insurance products.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Health Reform Methodologies Considered
The objective of this presentation is: • Gain a General Session understanding of how certain governments handle the challenge of providing healthcare to its constituents. Systems such as the beverage model, bismark and NHI models will be considered.
• Understand the differences between the discussed countries delivery systems and how they compare to SA
• Understand how the possibility of healthcare reform might impact South Africa. This will consider supply and demand factors, costs of providing cover, resource and cost constrains will be analyzed while a final assessment of the fiscal and funding impacts will be assessed.
• Consider a Namibian case study. This will consider how health reform and social security interact.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Health on a Shoe-String Budget: Assessing Private Sector Solutions to Public Sector Problems
A major health event can leave a lower income family destitute with the adverse impact of medical costs and related expenses potentially crippling for generations. This is particularly true for developing countries like South Africa in this instance with high and multiple disease burdens and quality health care usually not available to the majority of the country. The aim of this paper is to assess the efficacy of low cost private insurance products in alleviating the risks to low income individuals related to both the direct and related costs of a major medical event. The analysis considers both the affordability aspects as well as the applicability of benefit factors. I used detailed actuarial modelling techniques on in depth industry data to compare the value of different products for low income individuals. I also quantified the risks posed by these products to the more formal pooled benefit funds that provide financial protection to higher income individuals. The model results indicate that these products can be a very effective tool for protecting low income individuals against both the direct and related costs of a major medical event. The results quantify the benefit richness of the different products. Individual case studies are also used to illustrate the benefits of different product classes and the impact of different regulations that have recently been proposed in the South African market. The nature of benefit levels and structure of pay-outs also imply that these products pose a very limited risk to products that provide financial protection to higher income individuals. Health funding mechanisms for low income individuals is one of the key challenges facing developing countries. Low cost private sector insurance products if managed and marketed correctly can be very effective in filling this void and if given the correct structure and distribution channels can alleviate the burden of the state and act as a wealth preserving tool to the most vulnerable sector of the population.
.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Graduate Views on Actuarial Education
The underlying purpose of the project is to gain an understanding of how Australian actuarial graduates perceive the quality of their education after some period of work experience. It is somewhat of a follow up to a paper written by myself (Adam Butt), Brian Chu and John Shepherd in 2011 (see in particular Section 4.1 of the following link). I believe these responses will provide valuable information that will guide the profession and educating institutions such as universities in their future decisions on the structure of education programs, both in Australia and internationally.
This understanding will be obtained via a survey of those who have recently undertaken actuarial courses at Australian universities and/or through the Actuaries Institute of Australia. This survey will ask a number of questions on how the material learned in these courses relates to their current employment, the strengths and weaknesses of the various components of the education program and views on generic skills that should be taught as part of formal education versus those that should be learned "on the job". This approach is different to the typical course feedback requested of students on an individual course level, as it asks students to look at their education holistically.
The session will be interactive by asking participants (via an audience response tool) to postulate what they believe will be the graduate responses to these questions and what the results mean for the profession.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
General Session and Dynamic Immunization with Replicating Portfolios
In the actuarial area, the immunization was born over fifty years ago. It has overcome several theoretical problems which initially remained pending, as the supposed need for the interest rate curve to be flat and the need of a continuously rebalance, supposedly because the conditions for immunization were only maintained at the concrete time the portfolio was immunized. On its latest developments, it has been found that immunization is a valid, agile and dynamic strategy to manage interest rate risk of a bond portfolio. On the other hand, emerged the option of replicating portfolios as a way to avoid the risk of investment through continuous reallocation of assets. They eliminate the risks arising from the change in the value of the underlying, by the passing of time and so forth.
Since both methods allow, in theory, the generation of portfolios without risk, it is essential to try to compare them to understand what is the best strategy for the management of risk –the risk always remains- using RIA (absolute immunization risk measure developed by Iturricastillo and De La Peña). The aim of this paper is this comparison from an actuarial point of view, taking into account the extent to which risks are eliminated in each of them, the expected returns offer by them, and how can be tried to manage them as intelligently as possible.
The need for this study in the actuarial field is evident as these techniques are a crucial part of the offer of risk management tools, and every actuary needs to have a well founded opinion on the pros and con of each strategy.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Forward Transition Rates in Multi-State Models
During the last decade the idea of forward interest rates has been transferred to the mortality framework, and meanwhile forward rates have become a helpful tool for the securitization of mortality and longevity risks. Up to now the market for mortality-linked assets is relatively small, but under Solvency II it becomes more and more important for two reasons. First, such assets can help the insurance companies to lower their Solvency Capital Requirement by outsourcing some risks to the financial market. Second, the calculation of the Solvency Capital Requirement under Solvency II fundamentally bases on market values. Therefore, models for the construction of market values are needed, including all biometrical risk factors.
While there exists a lot of literature on forward mortality rates, multi-state insurance products are hardly discussed. A first attempt to define General Session forward transition rates was made by Norberg (Insurance: Mathematics and Economics, 2010, 47(2), 105-112), who discusses different approaches to define forward transition rates, but concludes that in General Session there is no clear answer.
Our paper has three major objectives: a sound definition of forward rates that features some desirable properties, uniqueness of that forward rate definition, and necessary conditions for the existence.
First, we theoretically discuss how forward transition rates can and should be defined. In particular, we follow the substitution concept and stress the notion that forward rates should be invariant with respect to some set of derivatives. These sets should include all common benefits (i.e., for staying in one state and for the transition into another state) and some standardized products (i.e., a forward representation of each single hazard rate). We give examples where this invariance property is fulfilled.
Second, we discuss the uniqueness of our forward rate definition. We consider cycle-free multi-state models where unique definitions can be obtain from the Kolmogorov forward equations. Most multi-state models can at least be approximated by a cycle-free model. In particular, we show the link between uniqueness of forward rates and the set of derivatives that are included into the model.
At last, we show under some weak requirements what kind of dependency structure is necessary to obtain the invariance property. The result bases on a fixed class of stochastic processes that includes most of the forward mortality rate models that can be found in the literature.
*Awarded Life Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
FONPET An Example to Follow (Poster Session)
The Colombian pension system inherited from long ago a great pension liability as the result of decades during which the contributions for his financing were lower than the benefits received by the workers, or just these contributions were not made, that is why the system is nowadays underfunded.
Looking for the financial sustainability of the system and due to the lack of knowledge of the real value of the pension liabilities of the territorial entities (Departments, municipalities and capital cities), there was created in 1999 the National Fund of Pensions for the Territorial Entities FONPET, as a fund with individual accounts in the name of each territorial entity with the aim to supply the necessary resources to cover the above mentioned liabilities. It is a schematic of obligatory saving that allows them to accumulate the necessary resources to cover the above mentioned liabilities, which come from the Territorial Entities and from the Nation and are administered by the Treasury Department through autonomous heritages handled by fiduciary and pension funds. The above mentioned Fund does not substitute the territorial entities responsibility of handle his pension liabilities, it is just a provisioning mechanism to establish the respective reservations by the territorial entities.
Because of the insufficient and inadequate information about the employment history that allows the quantification of the pension liabilities, it was designed a computer program named PASIVOCOL, through which the Territorial Entities can obtain an actuarial calculation and know the goal of provisioning related to the saved resources. This project was projected for 30 years starting in 1999.
The Law ordered to the Treasury Department and Public Credit, to design a unique methodology to generate actuarial calculations, for both the territorial entities and the decentralized ones that depend on them, this methodology has been implemented.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
A Current Review Of The Insurability And Survival Of Lives Living With Hiv And Other Chronic Disease
The understanding of the insurability and survival prognosis of lives living with HIV infection and other chronic manageable disease continues to advance. The industry and public debate on increasingly including such lives in insurance risk pools continues against a backdrop of growing cohort-survival patient data, international literature estimates of life expectancy and an industry philosophy of treating customers fairly.
The presentation aims to contrast the mortality and survival of different populations, from the General Session South African population to lives qualifying for fully underwritten life assurance to lives living with chronic disease. Nuances contributing to uncertainty around insurability are highlighted with a view to informing an industry debate.
This topic is tackled from the perspectives of a leading HIV and AIDS managed care provider, medical researchers at the UCT Faculty of Medicine and the actuarial expertise of a reinsurer.
*Awarded Health Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
A Cross-Country Comparison of Historical Changes in Period Life Expectancies and Mortality Improvement
This presentation takes all available data from the Human Mortality Database and presents it in two novel and informative ways: • An MS Excel utility comparing Period Life Expectancy for all countries and years available from HMD for Males and Females (and the gap) for ages 0, 40 and 65
• Mortality Improvement Heat Maps produced using 1 or 2 methods: P-splines and possibly an expanded van Broekhoven algorithm for all countries and years available from HMD for Males and Females
The extensive changes that have been observed over time as well as both the variation and similarities between countries will be discussed and commented.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
A Century and a Half, Respectively, of Casualty and Consulting Actuarial Work
A CENTURY AND A HALF, RESPECTIVELY, OF CASUALTY AND CONSULTING ACTUARIAL WORK
A century ago (1914) the Casualty Actuarial and Statistical Society (CAS) was founded. My purpose in writing this paper will be to review the origins of the CAS, to discern trends in its operations over the years, and to consider plausible scenarios for its future. My review will be helped by interviews I had a half-century ago (1962-63) with one of the Charter Members, and by an interview I had a generation later (1986) with the son of the first CAS President. The latter interview constituted a small part of the research I did in preparing for a Society of Actuaries presentation on the Founding Fathers of the North American actuarial organizations.
A half-century ago (1964) I became (and remain) a consulting actury. While my practice over the years has covered all actuarial areas, it has been primarily concentrated in casualty actuarial work, a speciality that previously was rare among consulting actuaries, but which subsequently has become a significant part of the field. My paper will review the origins of this consulting actuarial speciality, will look for trends in the field over the years, and will consider plausible scenarios for the future. My review will be helped by my full-time work as a consulting actuary over the past fifty years and by my extensive professional activities during that same period.
My proposed paper thus will be an analysis rather than a history of non-life actuarial work in the United States from its origins a century ago, and of corresponding consulting work from its origins a half-century ago. As might be expected of an actuarial paper, it will then build upon that analysis to construct alternative scenarios for the future.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
A better Approach to Measuring the Performance of a Portfolio of Customers in a Property Casualty Product
Most currently used PC performance measures only look at a one year proifitability and retention for a whole portfolio without taking into account the multi-year angle and the various different dynamics on individual customer level:
- Aging of the customer and the related change in risk, premium and retention (incl. company’s renewal strategy)
- Underwriting cycle and the company’s strategy to react to this
- Cash-Flows, investment return, expenses and taxes
Without a proper measure we can't assess a portfolio during the duration of the whole contract and we can't understand how different strategies influence short, medium and long term goals, e.g. which customer doea a company prefer: one with an expected profit of 20$ and an average duration of 5 years versus an expected profit of 10$ over 12 years.
This session describes how we can construct a measure that can allow for all of the above and how this then can be used in in various different business cases like
- making smarter pricing decisions and assess different strategic pricing options
- having a much more detailed understanding of the future development of your business for planning purposes
- gives a specific value to a whole portfolio (e.g. for M&A purposes)
For the construction of this measure we need various inputs and assumptions and we will show how this sensitive this measure will react to changes to these inputs and to the change of the environment. We will show a practical example under different scenarios and show that the measure is reacting as anticipated.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Risk of Ruin: A framework for Reviewing Greenhouse Gas Stabilization Targets
Most analyses of the economics of climate change tend to use cost-benefit analysis to decide how much to spend on reducing greenhouse gas emissions. But, a risk based view shows that the extreme tail of the probability distribution should dominate the analysis, and make cost-benefit analysis problematic. This paper uses a capital modelling type approach to analyze the risk from climate change.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Risk Appetite Revisited
As insurers (as well as other institutions) have embarked on the implementation of enterprise risk management programmes, they have recognised the need for clarity around the organisation’s appetite for taking risk in exchange for attractive expected returns. And because no organisation’s capacity for risk is unlimited, risk appetites must include boundary constraints.
While most insurers have, by now, developed risk appetite policy statements and discussed them with their boards, many have expressed dissatisfaction with the exercise. In particular, some are questioning whether they are getting good value from the investment of the time and senior management ‘band-width’ devoted to the topic. The main issue appears to be insufficient linkage to the business, in terms of business planning and performance management. (One CEO described their risk appetite statement as ‘high-quality, but somewhat sterile’.)
This session presents our latest thinking on risk appetite for insurers, focusing on ways to make it a more effective and valuable process.
*Awarded ERM/Financial Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Retirement with and without a Hump (Poster Session)
Views on retirement may differ depending on how this stage of life is lived. This paper discusses changes in mortality experiences subsequent to retirement. When there are adequate pension arrangements, one would assume retirement would unfold as expected. However, if plans fall short of expectations, there might be changes in mortality experiences. We investigate changing patterns of mortality experiences for a group of Iranian retirees. Indications are that for some, in particular those with high stress occupations, there is an increase in mortality and a fall in expected life. Whereas, for others in this group of employees who had less stressful occupations, life expectancy might be greater than the average.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Retirement Adequacy Goal Estimation Revisited: The South African Experience
Retirement adequacy goals provide an indication as to how much wealth is needed at retirement to provide for an adequate retirement income. These goals have design and strategy implications for social security systems and retirement funds and can be used by individuals to assess their retirement preparedness. Previous South African work[1]used a consumption-smoothing approach to estimate goals that would be sufficient to provide for the higher of the pre-retirement lifestyle or subsistence living.
The aims of this research are to:
- estimate goals from the most recent official South African data, the Living Conditions Survey; and
- develop the methodology used in the estimation of retirement adequacy goals.
In terms of the first aim, for goals to be useful for long-term planning purposes they should be stable over time. The estimated goals for US households have not been stable[2]. The South African methodology is different and tracking the result over time will provide an indication as to if it provides more stable estimates and hence may benefit researchers in other countries. In terms of methodological development, South African official data is cross-sectional and this paper proposes the use of XAID, a continuous version of Chi-Square Automatic Interaction Detection statistical technique, in order to control for the bias that cross-sectional data would otherwise introduce. In addition, this research considers different household compositions to the one- and two-adult households with full employment considered in previous South African research. This development recognises the reality that 71% of South Africans over 65 live in households of 3 or more and a considerable number of households do not have full employment[3].
[1] Butler, MBJ & Van Zyl, CJ (forthcoming 2012a). Consumption Changes on Retirement for South African Households. South African Actuarial Journal 12, 29 pages and Butler, MBJ & Van Zyl, CJ (forthcoming 2012b). Retirement Adequacy Goals for South African Households. South African Actuarial Journal 12, 34 pages
[2]
Palmer, BA (1989). Tax Reform and Retirement Income Replacement Ratios. The Journal of Risk and Insurance 56(4), 702-725
Palmer, BA (1992). Establishing Retirement Income Objectives: The 1991 RETIRE Project Report. Benefits Quarterly 8(3), 6-15
Palmer, BA (1994). Retirement Income Replacement Ratios: An Update. Benefits Quarterly 10(2), 59-75
Palmer, BA (2008). 2008 GSU/AON RETIRE Project Report 08-01, Georgia State University, Georgia, http://rmictr.gsu.edu/Papers/RR08-1.pdf, 14 March 2010
[3]
Statistics South Africa (2005). Census 2001: Stages in the Life Cycle of South Africans.Report no. 03-02-46(2001), Statistics South Africa, Pretoria
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Pooled Target Benefit Pension Plans
Pooled Target-Benefit Pension Plans
Robert L. Brown, FCIA, FSA, ACAS, FIA (Hons)
Canada
(co-author, Tyler Meredith)
Proposed Paper for ICA 2014
Summary
More than 60 percent of working Canadians currently don’t have a workplace pension. For
those who do have one, it does not guarantee them retirement security. With employers
increasingly opting for defined-contribution (DC) rather than defined-benefit (DB) pension
plans, the burden of managing the risks associated with a pension — such as longevity and
the market performance of assets — has shifted to the worker.
While this shift may have curtailed pension costs for businesses, as the paper argues, it has also left workers more vulnerable financially, since many do not have the wherewithal to plan effectively for retirement. In this study the author explores ways to improve pension coverage and better manage risk for pension members, while also providing cost predictability for employers.
The paper proposes a voluntary pooled target-benefit pension plan (PTBPP). It would involve commingling assets across all participating workplaces to maximize scale efficiencies in investment and manage actuarial risk. Employers’ matching contributions would be
mandatory but fixed, as in a DC plan. It would be available to individuals
and the self-employed.
Most importantly, upon retirement, members could expect a benefit within a target range,
depending on market performance. The paper suggests a minimum benchmark of 50 percent
income replacement, requiring a slightly higher contribution rate than in many DC plans today.
While the target-benefit design would not eliminate the risk that benefits decrease due to market
underperformance, the model proposed includes mechanisms to mitigate this risk. The
plan would be managed by actuaries and investment managers, instead of by workers. To curtail
administrative costs, the PTBPPs would be required to maintain a minimum pool of $10
billion, with management fees capped at 40 basis points, which would be considerably more
cost-efficient than are most DC plans and RRSPs today (250 to 300 basis points).
In sum, for employers the proposed model would provide protection from pension cost
volatility, and for employees it would offer more effective retirement saving through low
administrative costs and reasonable retirement benefits. For many workers and employers this
would be a vast improvement over their situation today.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Perspectives of Social Security in Latin America and the Role of the Actuary
Latin America is in a process of aging with the sustained increase in the ratio of older above retirement age over adults at working stage, which implies the need to valuate and generate understanding of the present and future financial implications of this in the various social security programs especially on those with potential strong impact on the Public Budget and taking a growing share of the Gross Domestic Product. Aspects that are not necessarily in the public domain about social security entities.
So the actuary should participate in this process using his scientific and technical training presenting Actuarial Valuations and Financial and Demographic Projections in accordance with international accounting standards and assessments that comprise the entire horizon of Cash Flows and Investments, identifying aspects such as actuarial deficit and critical situations in advance and allow Governance to start rebalancing processes on objective basis and interpreting the implications of present decisions .
The presentation will include an analysis of the evolution of the population of Latin America in General Session and in some specific countries, showing how has evolved and is projected the relationship between adults above retirement age and adults at working ages, and its implication in Social Security Programs.
Public Interest and Professionalism become an important issue in this aging context and the actuary has to work in accordance to the previous Guidelines of Actuarial Practice for Social Security Programs and the new International Standard of Actuarial Practice (ISAP -2) on "Financial Analysis of Social Security Programs" of the International Actuarial Association, and has to take into account the recent issue of the International Social Security Association about "Guidelines ISSA for the good governance of social security institutions", giving great importance to the accounting and actuarial function.
*Awarded Professionalism/Education Track Prize
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Participating Life Insurance Contracts under Risk Based Solvency Frameworks: How to increase Capital Efficiency by Product Design
Traditional participating life insurance contracts typically provide a guaranteed benefit at maturity resulting from some guaranteed minimum interest rate. On top of this guaranteed interest rate, surplus is credited to the contract in case of good performance of the insurer’s assets. In many countries, in particular in Continental Europe, the guaranteed rate is applied each year, also on surplus from previous years. This is often referred to as year-to-year guarantee or cliquet-style guarantee.
Products with cliquet-style guarantees have come under pressure in the current situation of low interest rates and volatile capital markets, in particular when priced in a market-consistent valuation framework such as MCEV. In addition, such guarantees lead to rather high capital requirements under risk based solvency frameworks such as Solvency II.
Since capital requirement alone is not a suitable figure for steering a product portfolio from an insurer’s perspective, we introduce a measure for “Capital Efficiency” that considers both, profits and capital requirements. We then introduce several alternative models for surplus participation, analyze their impact on the insurer’s financial situation, in particular on Capital Efficiency, and compare the results to the traditional product design.
To perform these analyses, we conduct a market consistent valuation of the products, and analyze the key drivers of Capital Efficiency, particularly the value of the embedded options. Furthermore, we compare the asymmetric distribution of profits between policyholders and shareholders, and investigate potential shortfalls of the customers’ accounts implying additional contributions by the shareholders. We illustrate the features of the proposed modified products to the audience and explain why they enhance Capital Efficiency. We show the relationship between product design, Capital Efficiency, profit chances and shortfall risks in the context of Solvency II, and argue why certain product characteristics will be necessary to support sustainability in this framework.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
Overview of Actuarial Sciences (Profession and Education) in West Africa: Example of Benin
Imagine how to practice actuarial science in West Africa. It is certainly not easy for someone who is not accustomed to this area. The socio-economic and cultural realities make the application of actuarial sciences interesting but totally different elsewhere. This presentation covers the history of training programs in Actuarial Sciences and a state of actuarial's environment in West Africa. It details the achievements and projects of an association whose aim is to promote actuarial sciences in Africa. It then put the focus on the impact of training on insurance companies with respect to changes in their management. It finally presents the application of actuarial sciences in our region and the difficulties faced by an actuary in the exercise of its functions.
Source:
2014 International Congress of Actuaries
Type:
Concurrent Session
