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Be An Actuary   In London
 

Be An Actuary In London

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Presentation on working as an actuary abroad in London, as presented to University of Wisconsin\'s actuarial club in 2005

Presentation on working as an actuary abroad in London, as presented to University of Wisconsin\'s actuarial club in 2005

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    Be An Actuary   In London Be An Actuary In London Presentation Transcript

    • Be An Actuary – In London Presented by: Kyle Mrotek Presented on: October 27, 2005
    • Agenda
      • Insurance in London
      • Individual Capital Assessment
      • Exams
      • Q&A
      • Resources
    • Insurance in London
      • History
        • Growth of global shipping and commerce (17 th Century)
        • Great Fire of London (1666)
        • Lloyd’s Coffee House (1688)
        • Edmund Halley (1693)
        • Joseph Dodson (1756)
        • Modern insurance corporations develop (17 th / 18 th Century)
    • Insurance in London
      • Presently
        • Global insurance marketplace
          • Estimated 10% to 15% of world’s GWP on industrial risks
      10 10 Number with London Operations PartnerRe Group ZFS 10 Converium Group Nippon Life Insurance 9 SCOR Re Group Munich Re Group 8 Allianz Re Group Aviva 7 Lloyd’s Berkshire Hathaway 6 Hannover Re Group Assicurazioni Generali 5 Employers Re Group AIG 4 Berkshire Hathaway Re Group ING Group 3 Swiss Re Group AXA 2 Munich Re Group Allianz 1 Reinsurers Insurers Rank Top 10 Companies by 2004 Revenues
    • Insurance in London
      • Presently
        • “London Market”
          • Components
            • (Re)insurance companies
            • Lloyd’s
            • Marine Protection and Indemnity Clubs (P&I Clubs)
          • Risks covered by Lloyd’s
    • Insurance in London
      • Unique risks insured by Lloyd’s
        • Celebrity body parts (legs, toes,faces, weight gain)
        • Britney concert tour
        • Satellites
        • Accidental death by Russian sputnik
        • Hole-in-one insurance
    • Insurance in London
      • Presently
        • Lloyd’s
          • Who insures with Lloyd’s?
            • Lloyd’s syndicates insure the world’s leading businesses:
              • 93% of Dow Jones Industrial Average companies
              • 94% of FTSE 100 companies
              • 82% of Fortune Top 50 European companies
              • 85% of Fortune 500 US companies
              • Top 7 pharmaceutical companies
              • Top 20 global banks
          • Comparison of Insurers
          • Entity 2004 Written Premiums
          • Lloyd’s $22.2 billion ( £14.7 billion)
          • Northwestern Mutual $10.7 billion
          • American Family $6.3 billion
          • CUNA $1.7 billion
    • Insurance in London
      • Structure of Lloyd’s
        • Structure – society of members, both corporate and individual, who underwrite in syndicates on whose behalf professional underwriters accept risk
        • Capital – provided by outside investors
        • Central fund
        • Three-year accounting
    • Insurance in London
      • Structure of Lloyd’s
    • Insurance in London
      • Role of actuary
        • Pricing / reserving
        • Lloyd’s syndicate opinions
        • Reinsurance to close (RITC) – A reinsurance agreement under which members of a syndicate for a year of account to be closed are reinsured by members who comprise that or another syndicate for a later year of account against all liabilities arising out of insurance business written by the reinsured syndicate
        • Commutations
        • Mergers & Acquisitions
        • Capital adequacy modelling
        • Very little health insurance work
    • Insurance in London
      • Capital adequacy modelling
        • Individual Capital Assessment (ICA)
        • Financial Services Authority (FSA)
        • Probability of insolvency over a 1-year time horizon is no greater than 1 in 200
        • Dynamic Risk Model (DRM) of 2 of the major risks – Insurance and Market risks
        • Non-modelled (excluded) risks need to be assessed separately
        • Combine capital requirements for risk factors allowing for diversification benefits
    • FSA Risk Types – Defining Capital Requirements Capital Credit Market Liquidity Group Insurance Operational
    • Risk Assessment for ICA Purposes
      • Insurance Risk:
        • Adequate premiums, pricing methodology, deterioration of reserves, catastrophes
      • Market Risk:
        • Adverse movements in assets (both capital & interest)
      • Credit Risk:
        • Reinsurance, intermediaries, quality of counterparties and off balance sheet transactions
      • Liquidity Risk:
        • Low liquidity of assets when required
      • Operational Risk:
        • Administration, compliance, event, fraud, governance, strategic and technological risks
      • Group Risk:
        • Insolvency/credit downgrading of parent, removal of guarantee, compulsory dividends, performance guarantees, contagion …
    • Determining the ICA Based on Risk Assessment Estimate correlations between risk areas and determine aggregate capital requirement Dynamic Risk Model Individual Capital Assessment Insurance Risk Credit Risk Market Risk Operational Risk Liquidity Risk Group Risk Additional Risk Consider Benchmarks Loss History Consider Maximum Cash-flow Contingency Plans Consider Capital Structure Contagion Risk Consider Concentration Risk System Controls Capital requirement for Insurance and Market Risk Consider Counterparties Off Balance Sheet Items
    • DRM Overview
        • Excel spreadsheet with VB add-ins
        • Projects on a stochastic basis expected cash-flows for 5 years from the valuation date in respect of:
          • business in-force and asset holdings
          • planned future business (for next 5 years)
        • DRM is run for (say) 10,000 scenarios based on realistic assumptions for the mean and variance of loss ratios, claim payment patterns, future investment returns and expenses
        • Additional assets required to cover liabilities and deficits emerging at the 99.5 th percentile (over 1 year) is the required capital for that scenario
    • Outline of Process Simulate Results Sample from Distributions Model Insurance and Asset Portfolio Gross, and Net Results, in Financial Accounting Framework Loss distributions Premiums Balance Sheet Generate random number Obtain value from distribution
    • DRM Flow LOB 1 Business characteristics and patterns LOB 3 Business characteristics and patterns LOB 2 Business characteristics and patterns Financial Calculator Starting Balance Sheet Corporate Elements Reinsurance Investment Capital Mix Taxes
      • Years 1-5
      • Financial Results
      • Balance Sheet
      • Income Statement
      Analyser
      • Measures of
      • Risk
      • Return
      Capital Requirement
    • Exam System
      • Passing all exams  “qualified” actuary
      • UK governing bodies
        • Institute of Actuaries – English / Welsh actuarial governing body
        • Faculty of Actuaries – Scottish
        • Institute / Faculty largely merged
      • Exam “bits and pieces”
        • Average time to qualification = 5 years
        • All exams offered twice annually
        • Sittings September and April
        • College course work can lead to exam exemptions
        • About 15 exams
          • Communications exam
    • Exam System
      • Designation: FIA (Fellow of the Institute of Actuaries) or FFA (Fellow of the Faculty of Actuaries
      • FIA / FFA designation allows practice in any actuarial discipline
      • Last exam either Investment, GI, Life or Pension
      • Reciprocity with SOA and CAS
    • Q&A Lloyd’s
    • Resources
      • www.actuaries.org.uk
      • www.iii.org
      • www.lloyds.com