The purpose of this paper is to provide an opportunity for discussion within our profession of ‘the use of an actuarial approach and actuarial evidence’ in the assessment of damages arising out of personal injury and fatal accident litigation. The need for such a paper was intimated in the pages of our Journal by William Phillips in his Review of Principles of the Law of Damages by Professor Harry Street. Since the publication of what Phillips described as ‘from the actuarial point of view…the most important legal textbook which has been published in the last 50 years’ the employment of actuaries in this field has been widely discussed within the legal profession. The most important recent development has been the inclusion of personal injury litigation as Item VI of the first programme of the Law Commission set up by the Law Commission Act, 1965. The words quoted in the first sentence above are taken from the list of ‘Questions for Examination’ under (b) of Item VI, ‘Assessment of Damages’. The current examination being conducted by the Law Commission makes this a particularly appropriate time for a sessional meeting on this subject. The writer has had the advantage of a sight of a preliminary Working Paper prepared by the Law Commission and will be quoting certain extracts from that paper below. It must however be stressed that the Working Paper is a preliminary one which attempts to do no more than canvass views: it in no way sets out the conclusions of the Law Commission on the matters discussed.

The results of the investigation from 1945 to 1959 were presented in a paper to the Institute by R. E. Hayward and B. C. Lucena (J.I.A. 91, 286) and readers are referred to this for further detail on practical aspects of the investigation. This further report owes its existence to all those originally involved as well as those specifically involved in the follow-up. Professor J. M. Malins and Dr M. G. FitzGerald have continued to give us the help needed to obtain the required data from the hospital records. Those of our Society particularly involved in producing this follow-up report include B. C. Lucena, R. Betteridge, A. Roberts and M. Willett.

The considerable public discussion of the past two years on the subject of our social insurance schemes and their post-war reconstruction has culminated in the publication of the Government's plans as a White Paper (Cmd. 6550–1). At present, social insurance in this country (now to be called National Insurance) is divided into a number of independent sections, each with its own statistical arrangements covering a large part of the population. At the same time some aspects of the whole population are regularly surveyed by the Registrars-General by means of an independent system of recording. The Government's plan greatly expands the field of insurance to cover all classes and groups. Before this unified plan can begin to function, fresh statistical machinery will have to be prepared, adequate to the task of keeping it efficiently in operation, and there will in consequence be a great opportunity for coordinating, simplifying and generally improving the national population records as a whole.

The paper describes the main features of the market in traded endowment policies (TEPs) and the role of the main players in the market. The controversial, and related, issues of how to put a value on a traded endowment policy and the information given to investors are examined. The issues facing life offices whose policies are traded are discussed.

This paper addresses the process of estimating loss reserves for a company or syndicate writing in the London Market. Particular emphasis is placed on insurers maximising the value of the process, and ensuring that the process is not simply a series of mathematical calculations. The use of sophisticated mathematical techniques should not distract from the importance of understanding the business and ensuring that data are correct. Sophisticated mathematical techniques can give rise to misleading impressions of confidence and accuracy to estimates, which are often subject to considerable uncertainty. The principles (rather than the detailed techniques) are illustrated by a case study based on a hypothetical London Market writer. Many of these principles are relevant to other markets.

Our principal focus in this paper is on ways that a Fast Close process (or indeed any reserving process) can be structured to maximise the value added within the process given the time and resource available. This builds on the use of actual vs. expected techniques investigated in our previous paper, and also looks at forces external to the reserving function that may derail smooth progress. We highlight a number of practical ways that the balance can be restored in favour of adding value rather than crunching numbers. This paper forms the second in the TORP series.

Decumulation Pathways are proposed to help achieve better retirement outcomes for those with Defined Contribution (DC) pensions. The DC fund is split into two parts, in proportions of the consumer’s choice. Most is allocated to the Pension Fund to provide a lifetime income, while the rest is placed in the Flexible Fund for flexible access and/or to leave as a legacy. The Flexible Fund is invested in flexi-access drawdown. The Pension Fund is invested in a guaranteed annuity, Collective Defined Contribution, or a Pooled Pension Fund which maintains individual DC funds but pools longevity risk between participants. An illustrative standard Decumulation Pathway is intended as a default solution, or can be tailored by the consumer. It uses the Pooled Pension Fund, an automated withdrawal strategy which ensures a lifetime income is provided and one that aims to increase in line with inflation, and a moderate risk investment strategy. The standard approach is evaluated using various metrics, indicating that it has as a strong chance of providing a higher income than could be obtained from an annuity or drawdown, with limited downside risk.

This paper highlights how actuarial thinking could contribute to the development of a justice perspective relating to biodiversity risks and also the implications for actuarial work. The impact of biodiversity loss as well as the use of ecosystem services is not equally distributed across society (both intra and inter generationally). The Biodiversity and Natural Capital Risk Working Party has been setup to proactively take forward a series of activities including think pieces, webinars and external engagement on these risks.

Increasing global concern over the impact of climate change has recently led to public scrutiny over the adequacy of existing risk management practices by insurance companies and pension schemes in dealing with these challenges that potentially impact both individual actuaries and the Institute and Faculty of Actuaries generally. Most recently, the Prudential Regulation Authority has issued further guidance concerning its expectations for the UK insurance industry regarding the development of an approach to disclosure on and management of the financial risks from climate change, while a Parliamentary Committee has demanded public clarification from UK pension scheme trustees regarding their degree of engagement with incorporating climate-related financial risks into their investment decision-making. The aim of this paper is to identify the dominating factors of the current evolvement of UK insurance companies’ and pension schemes’ climate risk disclosure practices. This paper analyses both the nature and extent of changes in the risk reporting practices of these entities that have evolved in order to meet these demands for increased accountability. We first analyse relevant sections of latest annual reports produced by a sample of 15 UK insurance companies and 15 pension schemes. We find only limited alignment of insurance firm and pension scheme annual reports with the 11 specific Task Force on Climate-Related Financial Disclosure’s (TCFD) recommended disclosures. We also examine what key financial risk and/or other organisational characteristics are most closely associated with the degree of alignment with TCFD specified disclosures related to governance, strategy, risk management and performance metrics. We find that incentives facing sample insurance companies to align their climate-related disclosures with TCFD recommendations are related to their management of reputation risk (measured on the basis of size and type of business). Whereas the incentives facing pension schemes are related to the desire to reduce information asymmetry (measured by liability risk) among their stakeholders concerning this issue. Further, consistent with a stakeholder theory explanation, it appears that only a minority of large, publicly listed insurance companies and large local government pension schemes are taking action to report on their actions to mitigate climate risk. We also discuss examples of best practice climate risk reporting. The implications for the actuarial profession in engaging with climate risk are discussed in line with the findings of the study.

Medicine-related research includes numerous studies on the hazards of mortality and what risk factors are associated with these hazards, such as diseases and treatments. These hazards are estimated in a sample of people and summarised over the observed period. From these observations, inferences can be made about the underlying population and consequently inform medical guidelines for intervention. New health interventions are usually based on these estimated hazards obtained from clinical trials. A lengthy lead time would be needed to observe their effect on population longevity. This paper shows how estimated mortality hazards can be translated to hypothetical changes in life expectancies at the individual and population levels. For an individual, the relative hazards are translated into the number of years gained or lost in “effective age”, which is the average chronological age with the same risk profile. This translation from hazard ratio to effective age could be used to explain to individuals the consequences of various diseases and lifestyle choices and as a result persuade clients in life and health insurance to pursue a healthier lifestyle. At the population level, a period life expectancy is a weighted average of component life expectancies associated with the particular risk profiles, with the weights defined by the prevalences of the risk factor of interest and the uptake of the relevant intervention. Splitting the overall life expectancy into these components allows us to estimate hypothetical changes in life expectancy at the population level at different morbidity and uptake scenarios. These calculations are illustrated by two examples of medical interventions and their impact on life expectancy, which are beta blockers in heart attack survivors and blood pressure treatment in hypertensive patients. The second example also illustrates the dangers of applying the results from clinical trials to much wider populations.

In the last three decades the life insurance industry was rocked by a series of mis-selling scandals such as endowment mortgage, personal pension and payment protection insurance mis-selling. Regulators have stepped in to try to address the underlying causes and improve customer protection by introducing more stringent regulation targeted at sales practices and remuneration, product design, disclosure and ongoing monitoring together with significantly larger financial penalties for non-compliance. Against this background, the paper considers whether customers understanding of risks and outcomes associated with life insurance products can be further improved and how poor customer outcomes can be avoided in the future. We acknowledge the complexity of these issues, which involve many stakeholders, covering all stages of the product lifecycle and customer journey and being impacted by a constantly changing regulatory landscape. We first review the current regulatory landscape across both the United Kingdom and other jurisdictions, concluding that whilst regulators have acted to improve customer protection, gaps still remain, particularly around the areas of disclosure and consideration of changing customers’ needs throughout product lifetimes. The paper then considers how the current situation could be improved for customers in a cost effective manner. We focus on improvements in disclosure, needs-based selling, ongoing assessment and communication as a means of ensuring that products continue to meet the customers’ needs and risk profile, and on introducing a duty of care which would force financial services firms to act in the best interests of their customers. In this paper we present our preliminary thoughts and recommendations. Some of the recommendations will cost something to implement, and should therefore be supported by cost-benefit analyses that would weigh these costs against the potentially larger benefits to both customers and the insurance industry.