1.1 In recent years, the United Kingdom members of the actuarial profession have become increasingly involved in the general insurance industry and therefore the Institute decided that the subject of general insurance should be included in its syllabus from 1977.

1.2 Prior to 1977 there were a number of papers and articles, written for either the General Insurance Study Group or the Research Committee, on various subjects related to general insurance. These papers and articles have not always had a wide circulation, although they have been deposited in the library at Staple Inn.

1.3 Most of these papers were of an explanatory or technical nature. In the authors' opinion, the actuary has a much wider rôle in general insurance than the technical one of estimating the liabilities of claims. In fact, the actuary should be able to provide a blue-print or framework for the financial management of a general insurance company.

1.4 A general insurance company is a financial concern; therefore the actuarial profession should have a rôle to play. In describing the financial concern, the actuary is required to chart the waters linking profitability, solvency, growth, reserving basis, dividend policy and capital requirements. As the second half of this paper will show, these items are inter-linked and decisions on one should not be taken in isolation as they will have repercussions on one or more of the other items.

1.1. The concept of matching assets and liabilities has for many years been recognized as a crucial aspect of our professional work. Its importance is emphasized in the Institute's guidance notes entitled “Actuaries and Long-Term Insurance Business” and in many papers published in the Journal.

1.2. A particular form of matching, namely immunization, was developed by F. M. Redington in his paper “Review of the Principles of Life-Office Valuations” (J.I.A. 78, 286). Immunization signifies the investment of assets in such a way that the existing business is immune to a change in the rate of interest. One of the consequences of immunization is that the mean term of the asset-maturity dates is appreciably longer than the mean term of the value of the asset-proceeds and of the liability-outgo; and, at other than low rates of interest, a perpetuity can be too short to immunize a long-term contractual liability.