Life Office Research Articles

The roles of actuaries in UK life offices: changes and challenges

AbstractWe examine the roles of actuaries in UK life offices, along with trends, challenges to and opportunities for actuaries. We carry out an analysis of senior roles in life offices, a questionnaire survey and interviews with relevant senior personnel. We find that actuaries occupy many important roles in life offices and are regarded as having good industry knowledge and technical skills, especially in financial modelling. There are fewer executive directors and more non-executive directors of life offices who are actuaries compared with the position in 1990. A higher proportion of reserved roles is outsourced to consultants than was the case in 1990. Only a small number of Actuarial Function Holders are directors. Actuaries are more siloed than was the case in the past, although actuaries are well represented in the finance and risk functions of many offices. Although actuarial work in connection with the preparation for Solvency II will decline, there will be important ongoing requirements for actuaries following Solvency II implementation. We also see opportunities for actuaries in four areas: in risk management, in financial analysis and management based on Solvency II and international financial reporting standards, in connection with “big data”, and in product development and the customer proposition. There are implications for the examination syllabus, continuing professional development and research.

Longevity Risk and Capital Markets: The 2013-14 Update.

Longevity risk and related capital market solutions have grown increasingly important in recent years, both in academic research and in the markets we refer to as the new Life Market, i.e., the capital market that trades longevity-linked assets and liabilities. Mortality improvements around the world are putting more and more pressure on governments, pension funds, life insurance companies, as well as individuals, to deal with the longevity risk they face. At the same time, capital markets can, in principle, provide vehicles to hedge longevity risk effectively and transfer the risk from those unwilling or unable to manage it to those willing to invest in this risk in exchange for appropriate risk-adjusted returns or to those who have a counterpoising risk that longevity risk can hedge, e.g., life offices with mortality risk on their books. Many new investment products have been created both by the insurance/reinsurance industry and by the capital markets. Mortality catastrophe bonds are an example of a successful insurance-linked security.

An efficient algorithm for the calculation of reserves for non-unit linked life policies

The underlying stochastic nature of the requirements for the Solvency II regulations has introduced significant challenges if the required calculations are to be performed correctly, without resorting to excessive approximations, within practical timescales. It is generally acknowledged by practising actuaries within UK life offices that it is currently impossible to correctly fulfil the requirements imposed by Solvency II using existing computational techniques based on commercially available valuation packages. Our work has already shown that it is possible to perform profitability calculations at a far higher rate than is achievable using commercial packages. One of the key factors in achieving these gains is to calculate reserves using recurrence relations that scale linearly with the number of time steps. Here, we present a general vector recurrence relation which can be used for a wide range of non-unit linked policies that are covered by Solvency II; such contracts include annuities, term assurances, and endowments. Our results suggest that by using an optimised parallel implementation of this algorithm, on an affordable hardware platform, it is possible to perform the ‘brute force’ approach to demonstrating solvency in a realistic timescale (of the order of a few hours).

Analysis of Electric Energy Consumption Patterns: A Case Study of a Real Life Office Building

Electric energy consumption shares a great portion of commercial building energy. Electric energy saving is essential to reduce total energy consumption in commercial buildings. To draw energy saving methods, it is necessary to monitor real energy consumption patterns and analyze the results. We monitor the lighting and non-lighting energy consumption of eleven zones in a real working office building every fifteen minutes during eleven months. We observe and analyze the monthly and daily energy consumption patterns of all zones and draw several feasible energy saving methods. Moreover, the lighting and occupancy are monitored simultaneously in detail to investigate the unnecessary energy consumption. It shows the possibility of a great amount of energy saving. Because we analyze the energy consumption patterns in all zones, the drawn energy saving methods are applicable to the current building with some added infrastructure and expandable to other similar office buildings. Our result is expected to contribute to reducing the energy consumption in buildings.

No Muggles in the Library Tonight! Harry Potter Night at an Academic Library

This article describes how an annual Harry Potter Night program fits into a college library’s mission. The literature shows college and university libraries are already accustomed to supporting their campus communities’ academic and cocurricular needs. Harry Potter Night at Lycoming College is an engaging experience. For one Friday night a year, the college library transforms into Hogwarts School of Witchcraft and Wizardry through food, decorations, and music. The central events are variations of trivia games and two obstacle courses, one focusing on Voldemort’s horcruxes and the other focusing on the Sorcerer’s Stone. These games and simulations are critical to creating an emotionally immersive as well as a multisensory experience. The attendance for this program has ranged from 30 to 100 students (on a campus of approximately 1,400), and the enthusiasm has been immense. This program has led to positive attitudes toward the library and valuable publicity in campus publications and has strengthened the library’s relationship with the college Residential Life office.

An Analysis of Supervisor Support of Policies on Workplace Flexibility

ABSTRACT Workplace flexibility policies provide workers with an opportunity to attain a healthy work–life balance. This study utilized a secondary data set of 658 supervisors from a study that was commissioned by the work–life office of a major university in the Southern United States to get a better understanding of the implementation of flexibility policies at this university. The purpose of examining this secondary data set was to determine whether supervisors who have caregiving responsibilities are more likely to be supportive of workplace flexibility policies than those with no caregiving responsibilities. The findings indicate that supervisors who have caregiving responsibilities are no more likely to be supportive of workplace flexibility than those with no caregiving responsibilities. This finding is important to those who have a vested interest in understanding factors that may promote or undermine workplace policies that have direct impact on workers and their families. Future research and recommendations for practice are made.

Pressures for Change in the Australian and South African Insurance Markets: A Comparison of Two Companies

Since the 1980s a wave of demutualizations has occurred across the financial services sector from stock exchanges to building societies, savings and loans associations and insurers. In both Australia and South Africa, this has had a marked effect on the life insurance markets that had been dominated by mutual life insurers for 150 years. This article adopts a case study approach to analyse the key drivers of organizational change. It examines the experiences of the Australian Mutual Provident (Australia's oldest and largest life insurance mutual) and Sanlam (the second-largest mutual life office in South Africa) as they proceeded down the path to demutualization. Firm-specific, market-specific and country-specific forces are identified as placing pressure on existing mutual structures.

The Ohio State University College of Medicine

The Ohio State University College of Medicine

Carving Out a Public Space for Multiple Interpretations of Islamic Law: A Look at the Conference on “Women’s Rights: Beyond Rhetoric”

The Los Angeles Muslim community, positioned in a Western metropolis, thriving with intersectional views of transnational migrants from firstand second-generational backgrounds, mostly Egyptian organizational and clerical leadership, and a burgeoning population of white and black American converts, is contemplating the contemporary evolution of a seemingly intractable Islamic law and its implications for Muslim women living in the diaspora. A conference titled “Women’s Rights: Beyond Rhetoric”—venue provided by the Office of Religious Life and the Center on Public Diplomacy at the University of Southern California, and intellectual fuel and platform provided by the Islamic Center of Southern California—ventured to reinsert public debate and multiplicity into the rigid, monolithic, modern formulations of Islamic law’s jurisdiction in society. The momentous questions on women’s rights posed by LA’s Muslim community gained enough propulsion that on October 17, 2009, some 50 to 100 people, mostly those active in the Muslim community and with a scattering of students, sat in rows filling USC’s Salvatori Auditorium, facing the stage and the shared knowledge that would rise from it. Those taking the stage chose the tools of social justice, agency, and public engagement in place of the reactionary, defensive channels often used to demean and reject Western reclamations of Islamic social viability, while still questioning

Economic factors, firm characteristics and performance: a panel data analysis for United Kingdom life offices

This article examines panel data evidence to investigate the linkage between insurer performance proxied by investment yield and several economic and firm-specific factors in the United Kingdom life insurance industry. The empirical results indicate that investment yield is positively related interest rate level, but negatively related to interest rate changes, reinsurance dependence, assets held to cover linked liabilities and instability of asset structure.

The Status of Licensed Professional Counselors in Michigan Public Universities

This article documents the findings of a study investigating the employment status of licensed professional counselors in Michigan’s 15 public universities. Structured interviews were conducted by telephone with 85 professionals working in college counseling centers, career centers, advising, admissions, financial aid, and residence life offices. The results indicated that only a very small percentage of employees in these offices are licensed as professional counselors, and a substantial number have not received training in counseling.

Normal Bodies, Normal Prices: Interdisciplinarity in Victorian Life Insurance

Victorian life insurance offices challenged disciplinarity by inviting doctors and statisticians to work together toward a single aim, hence prompting these professions to depart from the territorialism that otherwise motivated them. They facilitated these links among disciplines by diverting the attention of their expert employees from specific pathologies to a common-enough conception of what counted as "normal" or "natural" in a field of knowledge. Nor did they do so in a way that replicated the reformist agendas of eugenics or social hygiene, which carried the perfectionist impulse of most late-Victorian disciplines into the interdisciplinary arena. Instead, they took the normal as they found it, because it was easier to make money that way than to try and convince people to aspire to a norm that did not yet exist. If interdisciplinarity in life insurance altered usual conceptions of what it meant to possess a normal body or to find one's place on a normal curve, it had a similar effect on the late-Victorian concept of a natural or normal price. Unlike classical and neoclassical economists, who identified cases of price disequilibrium (the economic equivalent of the pathological) and sought to remove obstacles that stood in the way of normal prices, Victorian life offices started with a normal price (their standard set of premiums for healthy-enough lives) and exclusively sold their product to customers who were normal enough to pay it.

Corporate liquidity: evidence from the United Kingdom life insurance industry

This study analyses the extent and effects of macroeconomic and firm-specific factors on insurer liquidity in the context of UK life companies with panel data for the period 1985 to 2002. Ordinary least squares regressions, static and dynamic panel data models are estimated. Econometric tests indicate a preference for the random effects estimation procedure over other alternatives. The results indicate that the life office liquidity is an increasing function of equity returns, free asset ratio, termination rate, and claims ratio and a decreasing function of pension reserves-to-total reserves. Also, it is found that mutual companies tend to hold more liquid assets than do stock companies.

Empirical Evidence on the Use of Dynamic Solvency Testing and Financial Condition Reporting in the United Kingdom Life Insurance Industry

ABSTRACTTo gain insight into the use of Dynamic Solvency Testing (DST) and Financial Condition Reporting (FCR), a questionnaire was distributed to Appointed Actuaries in United Kingdom life offices. The response rate of the main survey was 76%. An independent-samples t-test for non-respondent bias was conducted and the results suggest that the respondent sample is representative of the survey population. Results from the 62 firms responding revealed: (1) Scenario testing was the most commonly used DST techniques. (2) Most life offices regularly run less than ten scenarios in scenario testing. (3) Most life offices reported using a five-year forecast period in DST. (4) The two most commonly seen difficulties are: difficulties in communicating complex issues to non-specialists, and how to present extremely adverse scenarios without causing undue concern. (5) Nearly all life offices use FCR. (6) Guidance Note 2 is generally considered acceptable. (7) Compared with the results reported by previous studies, the use of DST techniques is now more common in life offices. (8) There is a significant difference in DST/FCR practices between with-profits and non-profit offices.

A study to identify the training needs of life insurance sales representatives in Taiwan using the Delphi approach

This article reports a study conducted to identify the needs for continuing professional development for life insurance sales representatives and to examine the competencies needed by those sales representatives. A modified Delphi technique was used. Most life insurance companies in the USA implement an education and training plan advocated by the Life Office Management Association. Insurance companies in Taiwan implement similar education and training plans, but they do not seem to result in the successful performance of their sales representatives. Besides augmenting knowledge of various financial products and marketing approaches, this study also suggests that life insurance companies need to train their sales representatives to an adequate standard in competencies of problem solving, communication, information technology utilization, culture compatibility, emotional intelligence, collective competence and ethics.

Mortgages and bonds: The asset management practices of Australian life insurers to 1960

Recent studies of the experience of the British life insurance industry indicate that a period of transition, and the development of more diversified investment strategies, began in the interwar period. Australian life insurers lagged behind their British counterparts in the introduction of such strategies. This paper investigates why this was the case. It argues that in the Australian market there was both a lack of opportunity and incentive to broaden asset portfolios. However, this did not mean that asset management practices did not advance. Australian life offices became progressively more sophisticated in their approach to portfolio management during this period. Developments in the interwar period provided a grounding for post-war expansion into the equity market.

Realistic Valuation of Life Office Liabilities. A Discussion Meeting

The meeting took the form of a Panel Discussion, chaired by Mr D. O. Forfar. Before the meeting he prepared a short paper on topics for discussion, and this is summarised here.

Measuring and Managing the Economic Risks and Costs of With-Profits Business

ABSTRACTThe approaches to liability valuation, assessment of prudential capital and measurement of profit for life offices are undergoing radical change. A common thread runs through all of these proposed changes — each change represents a move away from traditional actuarial approaches towards a more economically coherent, market-consistent approach. These changes should encourage a general improvement in the life industry's risk management processes. However, they will come at a cost. The measurement of the economic risks generated by the complex guarantees written by life offices is far more difficult than applying the latest resilience test equity fall. This will require a step change in the sophistication of life offices' risk and capital measurement and management know-how. The measurement of value, risk and capital will soon demand the application of ‘stochastic’ modelling tools. In this paper, we explore some of the issues raised by the application of these approaches to the valuation and risk management of with-profits business.

Pensionmetrics 2: stochastic pension plan design during the distribution phase

We consider the choices available to a defined contribution (DC) pension plan member at the time of retirement for conversion of his pension fund into a stream of retirement income. In particular, we compare the purchase at retirement age of a conventional life annuity (i.e., a bond-based investment) with distribution programmes involving differing exposures to equities during retirement. The residual fund at the time of the plan member’s death can either be bequested to his estate or revert to the life office in exchange for the payment of survival credits while alive. The most important decision, in terms of cost to the plan member, is the level of equity investment. We also find that the optimal age to annuitise depends on the bequest utility and the investment performance of the fund during retirement.

Stochastic analysis in life office management: applications to large annuity portfolios

AbstractThe paper deals with the riskiness analysis for a large portfolio of life annuities. By means of the limiting distribution of the present value of the portfolio, in the first part of the paper a model for evaluating the investment and the projection risks is presented. In the second part, with regard to the investment risk's effects, the insolvency risk is measured considering the cumulative probability distribution function of the discounted average cost per policy. Copyright © 2003 John Wiley & Sons, Ltd.