The purpose of this paper is to document some recent developments in unit linked life assurance and in particular Universal Life policies, highlighting some areas of current controversy and some potential problems.

Some of the reasons for the current design of Universal Life products are given in §2. Section 3 contains a detailed description of the operation of the policy and §4 describes briefly the benefits and options available. The methods used to make charges for expenses, commissions, benefits and profit are described in § 5 and some of the problems involved in deciding the levels of charges for benefits are discussed in § 6. Section 7 discusses the profit objective of the office and §8 highlights some aspects of valuation which are peculiar to Universal Life. Future developments and some speculation about the effect these will have on the Universal Life product are discussed in § 9 and a brief summary containing the major conclusions of the paper is given in § 10.

I would like to extend my sincere thanks to all those who gave advice and comments on the paper and to Andrea Hills for typing it.

Recent years have seen many changes affecting the market for professional indemnity insurance. The law is changing, widening the scope of liability. The insurance market is changing, with more mutuals and captives being formed. The price and availability of insurance are changing, too.

The internationalization of professional firms has introduced new problems, with claims being brought in the jurisdiction perceived as most favourable to the claimant. The broadening range of services offered by individual firms, and the consequent growth of truly multidisciplinary firms, can only make the situation more complex.

Like many other insurance markets, the market for professional indemnity insurance is cyclical. In the two or three years following 1984 most premiums more than doubled in real terms, and deductibles rose significantly. At the same time capacity fell. The result of all this change is that professionals are considering their indemnity insurance needs in a new light. The main reason for buying insurance is to provide a smooth cash flow. This need has not been met in the recent past.

We therefore believe that now is an appropriate time for the attention of actuaries to be drawn to professional indemnity insurance.

This paper is about actuarial methods of funding pension schemes and follows on from the report of the Working Party of the Pensions Standards Joint Committee on Terminology of Pension Funding Methods (The Terminology Report) published in 1984. It looks at the basic structure of the main methods and at how they behave. We then discuss the question of the suitability of the methods under various conditions. The reader may find it useful to have a copy of the Terminology Report to hand.

The paper is written against a background of uncertainty, as regards the State Earnings-Related Pension Scheme, and of great debate and legislative activity as regards Occupational Pension Schemes. This activity and debate makes it more important than ever before that the actuarial profession explains its methods and approaches to those in the pensions industry who are not actuaries, but who nevertheless rely on actuarial advice.

Traditionally the interest of actuaries and many other life assurance specialists in the ‘corporate structure’ of life offices has largely been limited to questions surrounding the distinctions between mutual and proprietary companies. More recently, attention has also been paid to composite insurance companies—principally to protect the interests of the long term business policyholders.

Developments over the past ten years or so have led many life offices to reappraise their corporate structure. A number of companies have decided to set up a (non-insurance) group holding company, the principal subsidiary of which would be the established life assurance company. This paper will consider some of the pressures which have resulted in these reorganizations, in particular:

(a) the impact of Section 16 of the Insurance Companies Act 1982 which restricts insurance companies to only conducting activities in connection with insurance;

(b) the various provisions in the Insurance Companies Regulations 1981 which limit the admissibility of particular assets and specify minimum accounting standards which must be adopted when writing down certain fixed assets;

(c) the additional flexibility with regard to marketing and the financing of marketing costs which a revised structure will allow;

(d) the purchase of companies for sums substantially in excess of their net asset value which may give rise to difficulties in accounting for the ‘goodwill element’ in the purchase price;

(e) the potential tax advantages (and, in some cases, disadvantages) which may result from the creation of a non-insurance holding company.

The education of actuarial students has been a problem for the profession almost since its inception. Despite considerable efforts to seek improvements, difficulties have repeatedly arisen in the examinations, the syllabus and the teaching.

Over the past five years the profession has identified four major areas of concern:

—The average time to qualification of those who complete the exams is too long.

—The proportion of entrants who never qualify is too high.

—It is becoming difficult to recruit enough students to produce the required number of qualified actuaries 4–10 years later.

—There are insufficient actuaries available to fulfil the tutoring and examining duties required by the education service.

The first three of these points can be illustrated by considering a single cohort. In 1980, 289 students enrolled in the Institute. Only 5% of these had completed the exams within 4 years, and only 14% within 5 years. It is unlikely that more than about 30% of this cohort will ever qualify. Incidentally, much of the careers literature available to these students indicated that a diligent (but not extraordinary) student could expect to qualify in 3 or 4 years.