The European Central Bank’s (ECB) chief economist Peter Praet made some remarks that received a lot of attention earlier this month at the 31st International Congress of Actuaries (ICA) held in Berlin. Praet outlined the ECB’s response to different phases during the steady decline of short- and long-term interest rates and added that low interest rates create challenges for many business models of insurance companies. Praet revealed ahead of a policy meeting later in the month that discussions in this meeting would be key in determining when to end ECB’s bond-buying program.
Praet made these statements during a session at the ICA on the future of the low interest rate environment. Milliman’s Ken Mungan, in that same session, moderated a panel on the macro-economic aspects and impacts on the insurance sector, which included Praet, Stephen O’Hearn, global insurance leader for PricewaterhouseCoopers, and Klaus Wiener, chief economist of the German Insurance Association.
Masaaki Yoshimura of Milliman’s Tokyo office, who is president of the International Association of Actuaries, opened and closed the event. Over 100 countries were represented and there was a record number of attendees, with just under 3000 participants, including more than 50 Milliman consultants.
The event covered a variety of content encompassing all areas of actuarial work, and there were a number of perspectives about that work—including from insurance actuaries, regulators, consultants, and academics. This year, there was a strong focus on potential changes to the industry due to technology and the risks this could introduce to companies and to policyholders. Actuaries were encouraged to think carefully about these emerging risks.
Milliman was well represented, with eight consultants speaking on various topics relevant to the global attendees.
Milliman speakers and their topics were:
• Alexandre Boumezoued. “Individual Claims Reserving: Opportunity as a Challenge.”
• Zachary Brown. “Improving Actuarial Communication.”
• Joanne Buckle and Chris Bristow (Institute and Faculty of Actuaries). “Life Long Learning in the IFoA.”
• Joanne Buckle and Didier Serre. “Alternative Payment Models for High Cost Creative Therapies.”
• Naoufal El Bekri. “Mortality Tables Update through Multi-Population Models.” Applications to Longevity Risk Transfer and Shock Computation.”
• Tigran Kalberer. “Architecture of Internal Models.”
• Allen Klein. “Long-Term Drivers of Future Mortality.”
• Allen Klein. “Underwriting around the World: An Update.”
• Noriyuki Kogo. “Predicting Incidences of Acute Myocardial Infarctions: Are Big Data and Machine Learning Algorithms Useful for Predictive Models?”
• Bridget MacDonnell. “Recovery and Resolution Plans in Banking and Insurance.”
• Pat Renzi. “New Developments in Insurance IT.”
In Europe, more countries are now offering telematics services such as Pay As You Drive (PAYD), where drivers can benefit from lower premiums if they drive less, and Pay How You Drive (PHYD), which rewards “good” drivers. As new products and services emerge, it’s important for motor insurance companies to know how to extract information to deduce driving habits from telematics data. This article by Milliman’s Rémi Bellina, Antoine Ly, and Fabrice Taillieu explores the technological choices and opportunities telematics provide insurers. It also explains how insurers can process data to detect driving behaviour based on projects led by Milliman’s analytics team.
School districts and legislators across the United States are considering how best to protect children and school staff from gun violence at schools. At least 24 states across the country have policies that allow security personnel to carry weapons in schools, and at least nine states have policies that allow other school employees to do the same.
Arming school staff and allowing guns in schools pose challenging risk and liability issues. As with any legislation, the ramifications of a new policy can be complicated, and there are a variety of factors that governments and school boards must weigh as they debate this issue. This paper examines risk and insurance considerations for school districts and legislators tackling this difficult subject across the United States.
A key focus of the insurance regulatory authorities around the world has been the protection of policyholder interest. This has resulted in more emphasis on product governance and product life-cycle management. The insurance directive launched under the European Union insurance law has issued guidelines for insurers to embed product oversight and governance into their risk management frameworks.
A robust product governance process can help reduce mis-selling and complaints, and increase policyholder confidence in the market. It can also ensure internal and regulatory compliance for the products offered by the insurer.
The core components of a robust product governance process are:
• Product governance policy
• Product development
• Pricing and value
• Distribution and sales
• Legal, compliance and risk management
• Ongoing assessment of the product
To read more about building a strong product governance policy, read Neha Taneja’s article here.
Few would debate the importance of recognising and addressing conduct risk. The recent increased attention it has received within the financial services industry has been largely driven by ever-strengthening conduct of business supervision. This paper by Milliman’s Emma Hutchinson and Jennifer van der Ree covers recent regulatory developments in the United Kingdom in relation to conduct risk. The authors also discuss best practice for robust conduct risk management frameworks.
The Transition Resource Group (TRG) for IFRS 17 will meet four times during 2018 to discuss questions raised regarding the implementation of the IFRS 17 Standard. In this article, Milliman consultants summarise key points arising from the TRG meeting of 2 May 2018. The TRG meeting covered some of the implementation challenges raised by TRG members and a number of examples relating to the following concepts in IFRS 17:
• Coverage units
• Contract boundaries
• Risk adjustment at the group level
• Bundling insurance contracts