new zealand society of president’s newsletter december 2015 …€¦ · prepare a survey for...

New Zealand Society Of Actuaries (Inc)

PRESIDENT’S NEWSLETTER DECEMBER 2015

New Zealand Society Of Actuaries (Inc) PRESIDENT’S NEWSLETTER – DECEMBER 2015 1

Message from the PresidentChristmas is upon us and the editorial team is eager to get a last edition of the 2015 newsletter to members before the year is over. I can feel the editor looking over my shoulder as I write.

It takes a good deal of effort and collaboration to put together the newsletter and we are indebted to the small group of volunteers who make it possible. We haven’t had many editions of the newsletter this year but I’m hopeful that, going forward, the new website will provide an easier means of communicating to members.

In fact, we are indebted to all of the volunteers who are behind the work that goes on for our members. NZSA relies upon nearly a dozen committees or interest groups, all with full agendas. There are also working groups formed to organise the biennial conference, the GI Seminar and Financial Services Forum. Council meets monthly and our very efficient secretariat, looked after by the talented team at ONZL, ensures that everything runs smoothly.

The past few months have been particularly busy for the Society. We enjoyed the great inter-city debate, now named in honour of Jonathan Nicholls, where the Auckland Team wrestled the trophy from Wellington. Members enjoyed a chance to get together in Auckland at the 7th biennial GI Seminar to hear from the Hon Paula Bennett and other industry leaders on issues and opportunities for our profession. A similarly thought-provoking Financial Services Forum a few weeks later drew over 60 delegates to Wellington. Both of these

flagship events highlighted that actuaries can contribute in a number of ways to address the challenges that New Zealanders face.

Two new interest groups were formed recently, hot on the heels of the successful Retirement Income Interest Group, to consider how NZSA can stay abreast of, or even influence, discussion on the Public Sector and Climate Change. Well done to those members who have joined the interest groups and started the discussion.

I am delighted that the majority of Council will stay in their roles for the coming year. Anne Lord and John Smeed were reappointed to Council for further two-year terms, and I was appointed for a further one-year term as President. Adam Follington, who was co-opted to Council in September, will also remain on Council for another year, as do Andrea Gluyas and Paul Rhodes. I am disappointed to note, however, that Greg Bird has decided that, because of his promotion to a new senior role in Sydney, he cannot fulfil his Council role to the level he would expect, so has resigned from Council. I will miss Greg’s wise counsel but respect his decision to stand down. Council will look to co-opt a new member soon.

Council continues to work closely with the Actuaries Institute and maintains an open dialogue with the Reserve Bank. During 2016 we will take the opportunity to share in the Actuaries Institute’s strategic discussions, and invite our Australian colleagues to join our own. We will also continue to monitor the Reserve Bank’s data

Andrea Gluyas, Vice President

Richard Beauchamp, President

collection initiative and stay abreast of the thematic reviews that the regulator has indicated will be held periodically.

Do take time over the festive season to reflect on your successes from 2015 and enjoy a good break with family and friends. We will look forward to catching up again in the New Year.

All my best. Richard




News from Council and Committees Council 2015-2016The AGM was held on Monday 16 November, with all roles filled uncontested. Council for 2015-2016 is as follows:

President: Richard Beauchamp

Vice-President: Andrea Gluyas

Secretary: John Smeed

Treasurer: Anne Lord

Immediate Past President: Paul Rhodes

General Council Members: Greg Bird, Adam Follington

Subsequent to the AGM, Greg Bird has reluctantly resigned from Council after accepting a permanent role in Sydney. A vacancy has therefore arisen for the remainder of Greg’s term (to November 2016). Under the Society’s rules, this may be filled through co-opting. Anyone who would be interested in filling this role should speak to Richard Beauchamp or Andrea Gluyas.

Strategy and external relationsThis year Council has decided to allocate each member of Council a portfolio of responsibilities, to ensure that we are cohesively progressing our key objectives, including the pillars of Capability, Communication, Influence and Collaboration. Portfolios have been drafted and will be worked through over the next few months. With the pillars highlighting the importance of our voice and relationships, External Relations will change to a Council portfolio, although volunteers with an interest in this area are welcome to continue to contribute.

Conference 2016The conference committee has now confirmed the dates and venue of the 2016 biennial conference. This year we are off to Tauranga and the fabulous Trinity Wharf convention centre. Book your diaries now for Sunday 20 to Wednesday 23 November 2016. Further details will follow next year.

Professional Standard 20 updateIt has been brought to our attention that there is a concern that some actuaries are inappropriately applying PS20 (Determination of Life Insurance Policy Liabilities). The concern is that a gross of tax discount rate is being used to discount cash-flows and this is contrary to the standard, which could reasonably be interpreted as requiring a net of tax discount rate. Council is aware that the Life Insurance Committee is currently reviewing PS20 including consideration of this issue. Council believes it is appropriate for this review to be concluded, in order that there is a full and complete consideration of the issue. Council is also aware that there several different practices being applied in this area across the profession.

As an interim measure Council has conducted its own analysis of PS20, in consultation with members of the Life Insurance Committee, and concluded that the use of gross discount rates is not unreasonable provided the actuary is comfortable that the overall methodology used is appropriate under the financial reporting framework. We accept that this will be a matter of judgement and ask that all members consider the issue carefully and fully document and disclose their approach. We note paragraph 6.1 which states that “It is the principles that are paramount in determining the Policy Liability; methodology is incidental to the principles”.

New interest groupsCouncil was delighted with the number of volunteers expressing interest in the two proposed new interest groups, so both are underway. If you are interested in joining the Public Sector Interest Group, contact Charles Hett ([email protected]), and for the Climate Change Interest Group contact Margaret Cantwell ([email protected]).

General insurance practice committeeThe committee completed a submission on the EQC review. We will wait to hear feedback from Treasury on all public submissions made.

ASTIN, the non-life insurance section of the International Actuarial Association, is forming a working party on reserving best practice. The committee is investigating the terms of reference and is considering contributing to the working party.

The solvency catastrophe charge working group is looking to prepare a survey for Appointed Actuaries to complete on the solvency catastrophe charge and what they do to achieve an acceptable level of comfort with the requirements.

EducationThe Entrants and Education Committee recently made a submission on the International Actuarial Association’s updated core education syllabus proposal. The core education syllabus sets out minimum education requirements for a Fully Qualified Actuary (typically known as an associate). The submission was generally in favour of the proposed changes, which include:

mailto:[email protected]





News from Council and Committees • RestructureofthesyllabustoconformtoHeer’smodeloflearning

objectives. This clarifies expectations for learning outcomes.

• Increasedsyllabusdetail(egfortheEconomicslearningarea).Thisclarifies the breadth of content to be covered, which would aid universities administering actuarial education on behalf of Full Member Associations in course delivery and assessment.

• Introduction of a learning area on Data and Systems. This tiltsthe syllabus into data analytics, which is a growth area for the profession. The increased focus on the use of computer models would represent a timely shift toward modern analytical methods.

• Removal of learning objectives regarded as redundant orspecialist.

The Institute and Faculty of Actuaries (IFoA) is reviewing its education syllabus and delivery as well. The Entrants and Education Committee expects to draft an initial submission on the IFoA proposal early in the New Year. If you would like to know more about either set of proposed changes, contact Jeffrey Azzato ( [email protected]).

New Zealand Health StrategyThe Health Committee has also been busy, completing a comprehensive submission on the update of the New Zealand Health Strategy Consultation Draft. The submission touched on the implications for health of the ageing population, what is covered as

health expenditure in the national health accounts, the need for an explicit strategy for end of life care, and the projected increase in the number of deaths relative to the number of births.

Website updateThe new website is nearly ready with testing due to start in mid-December, and likely to be online by the end of February. Some members may have received an email in error when their membership data was transferred across, and our website developers have apologised for this error.

Jonathan Nicholls Memorial PrizeIn memory of Jonathan Nicholls, ACC donated two prizes to the top students in the inaugural year of Victoria University’s Actuarial Science Programme. The winners were Ross Engelbrecht and Juanying (Jenny) Hu, pictured here with Peter Donelan (Head of School of Mathematics and Statistics, VUW), Herwig Raubal (Chief Actuary, ACC) and Gillian Spooner (ACC Board member). Jonathan’s wife, Sharon, and parents, Margaret and Trevor, were also present, and were particularly delighted that Ross is an Old Boy of Tawa College which Jonathan also attended.

Jenny’s and Ross’s certificates included a note written by Jonathan, who was aware before he died that the awards would be made. It said:

News from Council and Committees

“I found my professional life interesting and rewarding and never regretted my decision to become an actuary. It takes a lot of work through all the exams, but is most worthwhile and I commend Victoria University for making that process easier for their students. I feel my work at ACC in particular made a difference to the lives of all New Zealanders. I wish the winners all the very best in their future careers.”






Event reports The great debate a speech on the investment approach being used by the Ministry of

Social Development. She had high praise for the work of actuaries in identifying beneficiary segments that contribute the most to the overall benefit system liability that has enabled the Ministry to target resources more appropriately to provide the greatest reduction in the overall liability.

Following Paula, there was a diverse range of topics from floods in the UK to investment strategies for general insurance companies. Some of the highlights of each presentation were as follows.

Long term health projections

Ben McBride from Treasury presented on long term health projections for New Zealand. Ben also touched on the investment approach used by Social Services and how this could be applied to the health sector.

The CRO and the Actuary

Karl Armstrong, CRO at IAG NZ, gave some useful insights into the working relationship of the CRO and actuaries in a general insurance setting and most notably on how his opinion of actuaries has changed as he transferred from being a business unit manager to the CRO’s office.

Panel discussion

Craig Lough then chaired a panel session featuring Karl Armstrong, Margaret Cantwell, Terry Jordan and Herwig Rabaul. Topics included a discussion on risk versus community rating for natural disaster insurance and just how bad it would be for Wellington (and NZ) when the big earthquake does happen.

Flood risks

Iain White, Professor of Environmental Studies at the University of Waikato, presented on the evolution of flood risk assessment and methods for mitigating risk based on his experiences in the UK.

Investments for general insurers

George Carter gave a useful refresher on investments and methods to optimise a general insurance fixed interest investment portfolio. He also questioned the asset risk charge that is applied in the Solvency Standard for Non-Life Insurance when, if managed appropriately, investment in fixed interest and derivatives can significantly reduce the investment risk in a portfolio.

The day ended with a chance to socialise over drinks where, despite the outstanding line up of presentations, most of the talk revolved around the All Blacks imminent Rugby World Cup semi-final against South Africa.

Many thanks to all those who contributed to the running of the seminar and to all those who attended. The Society looks forward to hosting the next General Insurance seminar in 2017.

Winning team (non-playing) captain Brian Lenehan proudly holds the Jonathan Nicholls Memorial Trophy.

The NZSA annual Auckland-Wellington debate was held on the 23rd of September. This year the trophy was renamed the “JONATHAN NICHOLLS MEMORIAL TROPHY INTERCITY DEBATE” to commemorate Jonathan.

The debate was the normal robust affair with a fair amount of sledging from one team to the other, but well adjudicated by the neutral Cantabrian, Alison O’Connell. The moot was “It should be compulsory to undertake an actuarial course at university” with Wellington in the affirmative and Auckland

in the negative. The Auckland team of Abey George, Daniel Mussett and Ross Simmonds (with Brian Lenehan as non-playing captain) had their first ever victory over the Paul Rhodes-captained Wellington team.

GI SeminarA sunny day greeted delegates as they arrived at Novotel Auckland Airport for the 7th NZSA General Insurance Seminar. The Society’s President, Richard Beauchamp, opened proceedings and reminisced on the humble beginnings of the first seminar held in 2003, at a less salubrious airport venue, with around 30-40 delegates, and noted how it has evolved and grown to its current format with over 80 attendees.

The General Insurance Committee was very pleased that Paula Bennett agreed to be the keynote speaker for the day. Paula is currently the Minister of Local Government, Social Housing, State Services, and Associate Minister of Tourism and Finance. She gave

Karl Armstrong

Professor Iain White

Christmas lunchesThere was much festive merriment at the recent NZSA Christmas lunches held in Auckland and Wellington. Attendance was great – 48 people in Auckland and 30 in Wellington. There are rumours that the lunch in Auckland carried on till 10pm making it a very late one!!




Through the Looking Glass: NZSA Financial Services Forum 2015A remarkably calm Wellington day greeted everyone as they arrived at Rydges Hotel for the 2015 NZSA Financial Services Forum. There was a fantastic turnout of over 60 delegates and presenters from around the country and across the Tasman.

The ever-changing world of financial services provides actuaries with a myriad of opportunities to lead debate in areas as diverse as retirement income policy, product innovation, banking, risk management, and regulatory reform. Under the theme of “Through the Looking Glass” our presenters this year brought us their visions of what the future may hold for the life insurance and wider financial services industry.

Here are some of the highlights of the day’s presentations

Decumulation

The Retirement Income Interest Group, represented on the day by Christine Ormrod, Joe Benbow and Alison O’Connell, kicked things off with the “Decumulation debate”. Christine first gave us a recap of their previously published paper on retirement income streaming and an update on international developments. Although NZ is somewhat unique with its universal Government-funded superannuation and tax treatment, other countries are also struggling to find an ideal solution.

In considering how one may provide an income in retirement the importance of advice was highlighted. The question becomes not “what products are needed?” but “what financial guidance is needed?”

Joe presented us with some modelling results using a few simple rules of thumb before Alison led an audience Q&A session. The panel were able to take away some valuable feedback for future work in this area.

Risk Management

John Evans, Associate Professor and Director, Sydney Business School, having first stated his view that ERM has not been of much use so far except possibly as part of a regulatory risk assessment system, went on to discuss the major issues he sees preventing ERM moving forward.

One problem is that institutions have been split into functional units, with the result that the people at the coal face don’t actually need to talk to each other and emerging risks cannot be identified.

The continual reorganising and changing that occurs in a ‘complex adaptive system’, such as our financial sector, mean that analysis and prediction are impossible using the linear models into which so much effort and money has been put in recent years. John gave a brief overview of a ‘cladistics analysis’ algorithm, which links the characteristics of events and outcomes and works backwards to inform management of the characteristics of emerging risk events and linkages. He warned that the process doesn’t show path dependencies, and events may not have occurred in the order shown by the model outputs.

Event reports

Medical advances and their effect on trauma

insurance

Dr William Monday, Chief Medical Officer at Munich Re, gave us some fascinating insights into the realms of medical advances and their impact on trauma insurance. Recent experience has seen an increase in claims incidence placing upward price pressure on what it is already viewed as an expensive product. It was not surprising that on a show of hands only one person thought trauma insurance in its current form was sustainable.

Advances in medical screening and imaging technology are leading to the earlier detection of diseases such as cancer. Our current trauma products are not keeping pace and the inevitable outcome will be a mismatch between the severity of the condition suffered and the corresponding claim payment.

Self-screening is becoming more accessible to consumers, potentially exposing insurers to a growing wave of early claims by those possessing information that the insurer does not. The question now is how to future-proof trauma insurance so it is sustainable in the long term.

FSF 2015FSF 2015

http://www.actuaries.org.nz/pdfs/NZSA%20Income%20Streaming%20Full%20Paper%20June15.pdf




Event reports Prudential supervision

Toby Fiennes, Head of Prudential Supervision Department, RBNZ, described the principles and the three pillars framework underlying the RBNZ approach as well as recent regulatory change and market activity. He suggested that had the Council of Financial Regulators (RBNZ, FMA, MIES, Treasury) been in place a few years ago, the finance companies’ debacle would have been foreseen.

RBNZ will soon be starting the five year regime review promised for 2018. As part of that process, the regulators themselves will be reviewed next year as part the IMF Financial Sector Assessment Programme. The last such assessment was in 2003/04 and did not include the insurance sector. A lot of input from the industry will be required; the IMF team (10-20 people, making 2 visits each of 2-3 weeks, conducting hundreds of meetings) are expected to interview 10-15 insurers.

Toby took away an interesting question from one member present – how can RBNZ measure whether it has been successful in meeting the aim of “promoting public confidence in the financial sector”?

Life insurance commission

David Chamberlain, Principal at Melville Jessup Weaver, gave us some personal thoughts on regulating life insurance sales. The GFC has stimulated regulatory activity around the world. David shared with us some global developments in the US, UK and Australia. Most recently Australia has taken steps to regulate commission but will there be more to come following a post-implementation review in a couple of years?

Closer to home, the FMA has identified (i) distribution models that embed conflicts of interest; and (ii) the mis-selling of insurance products, as specific areas of focus over the next 3 years. It seems certain the selling of life insurance in NZ will be closely examined.

On a more light-hearted note, David left us with this entertaining clip from an episode of The Simpsons. It is interesting on two levels: (i) life insurance is something we can make fun of; and (ii) Marge actually wants to buy it – if only this were true of all people!

An actuary’s view of banking

Ian Perera, General Manager Management Information, ASB, shared his impressions of an actuary in banking perspective as a trainee

banker of six months standing. He highlighted the differences he saw between banking and life insurance, including the pace of pricing (weekly in banking), data models (more complex in banking) and monthly result variances being meaningful (rather than simply ‘noise’). Ian also explained something of fund transfer pricing, the method used by banks to determine interest rates on loans and deposits. Finally, he summarised the opportunities and challenges for actuaries looking to move into banking and what aspects of the banking environment he had found most interesting.

Following closing remarks from the President the day then wrapped up with the AGM after which members made the most of the social networking opportunity over refreshments.

The organising committee – Nick Smart, Graeme Lewis and Kate Dron – would like to extend their thanks to all those involved in making the day, and to members for supporting the event. We look forward to the next edition scheduled for Auckland in 2017.

Christine Ormrod Dr William Monday Toby Fiennes John Evans Alison O’Connell

https://www.youtube.com/watch?feature=player_detailpage&v=bCcFlwlkUW0




Members’ NewsNewly qualified Fellows

Marina Hall (née Ivanova)Marina moved to New Zealand nearly eight years ago, working initially as a sales analyst for Johnson & Johnson. After completing her Masters degree at Auckland University, Marina joined Sovereign where she has had several diverse roles: working with reinsurers, doing data analysis, financial reporting, experience investigations, and most recently, pricing.

In her (now ample) spare time Marina has a wide range of interests, from running, swimming and cycling to reading, cooking and doing all things crafty and creative.

Jessica McCrearyJessie has worked at Sovereign for the past five and a half years and has held a number of roles during this time, including valuation and capital management. She has recently moved back to the pricing team to gain pricing experience at a more senior level.

Having purchased her first home earlier this year, she is looking forward to planning the

renovation over the next few months and hopes to learn a few DIY skills along the way.

New members and changes of membership class Welcome and/or congratulations to the following:

FELLOWS:Hua Wen – Zurich Financial ServicesPauline Blight-Johnston – AMPRick Shaw - Deloitte Touche TohmatsuSimon Young – Finity ConsultingHecy Su – VeroJessica McCreary – SovereignMarina Hall – Sovereign

STUDENTS:Glen Chen - Fidelity Life

RETIRED:Christopher CoonJohn Melville

If you have any thoughts on a newsworthy item for next year or feedback on this year’s newsletters, please contact: Chantal at the Secretariat: [email protected]

Thanks for reading

NOTE OUR CONTACT DETAILS:

New Zealand Society of Actuaries PO Box 10087, Wellington Phone 04 815 8179

Email address: [email protected]

Upcoming events 9 March 2016 – Future Pathways, Auckland

10 March 2016 – Future Pathways, Wellington

20-23 November 2016 – NZSA Biennial Conference, Tauranga

From the archives:A description of the purpose of the Institute of Actuaries (under the picture) from a 1930 Business Encyclopedia.



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