1.1. This paper is based on the report of a working party set up by the Institute Research Committee and which met for two years from December 1972. The original objectives of the working party were:

(a) to identify current philosophies of bonus distribution in a fund with a high equity content.

(b) to review the methods used for valuing assets and liabilities and the inter-relationship between the respective methods; and to consider the effect of the current philosophies of bonus distribution on those methods.

(c) to investigate methods of valuing assets and liabilities and to carry out research into methods appropriate to modern conditions.

1.2. The working party was not satisfied that it had satisfactorily achieved its objectives but, nevertheless, felt that it should report the progress it had made. The full report is available from the Institute Library together with synopses of some forty papers that were considered relevant. This paper omits the two sections of the report which reviewed current methods of valuation for publication of assets and liabilities and expands other sections in the light of recent events.

The work of science is to substitute facts for appearances and demonstrations for impressions.

1.1 .This paper is an attempt to describe the extent of ‘Subjectivist’ infiltration into theories of actuarial concern, and to present counter arguments defending the objective ‘classical’ actuarial position. The principal entry point for subjectivist ideas has been the ‘latter day rediscovery of the basically statistical nature of actuarial work’ (F. A. Menzler) which has introduced us to Bayesian Statistical Theory and the concept of Insurance Theory as a Theory of Risk. Classical actuarial theory, however, regards this use of Bayesian theory as fallacious, and the Theory of Risk as of relatively minor interest.