Over the past few years the Pension Managers of most large groups of companies, and some not so large, have had to grapple with the pension complications which have arisen when their holding company sells or acquires another company. For example, the pension costs of an acquisition may not have been adequately considered, possibly because the Pension Manager had not been one of the limited number of principals who were involved in the negotiations leading up to the acquisition. Even if the Pension Manager has been involved in an advisory capacity during the negotiations, formidable problems may subsequently arise in integrating the previous pension benefits of the new employees with the benefits of existing employees.

Detailed consideration of the financial condition of the pension scheme of the company which is taken over has been the exception rather than the rule and many companies have found that a seemingly straightforward undertaking to ‘safeguard’ employees' pension rights involves both higher than anticipated pension costs and problems of comparability between similar grades of employees at different locations within the group.

In the United States the theoretical and practical aspects of the measurement of investment performance have been well researched, and the investment managers and pension fund trustees are accustomed to having a battery of statistics available on the performance of a pension fund.

By contrast, in the United Kingdom, attention has only really been given to this subject in this decade. It has taken time for both investment managers and trustees to appreciate the need to measure performance and to move away from a solely qualitative assessment of the ability of investment managers to one involving a quantitative element.

There are just a few papers by U.K. authors on the investment performance of pension funds and the Institute has discussed the subject only once. This was in November 1976 when J. P. Holbrook presented a comprehensive paper covering both theoretical and practical aspects of performance measurement.

In my opinion, the implications of the Employee Retirement Income Security Act of 1974 (ERISA), which was enacted in the U.S. on 2 September 1974, are of vital importance to U.K. pensions' actuaries.

Pension schemes which are established in the U.K. by U.K. branch operations of a U.S. parent are subject to the provisions of ERISA. Furthermore, there have recently been suggestions that U.K. subsidiary company operations of a U.S. parent might also be required to prepare ERISA-style reports.

Since U.S. enterprises account for some 13% of the U.K.'s total gross product in manufacturing in the private sector, almost every U.K. insurance company, firm of consulting actuaries or pension consultants will have come into contact with some aspect of, or question relating to, ERISA.

This paper focuses on sections of the insurance industry which are not often widely discussed. If catastrophe insurances are to be transacted successfully, a large number of different technical skills and experiences must be combined. Actuaries in the U.K. are still relatively little employed on the problems of general insurance, and are rarely involved in the complexities of these particular sections of it. It must be recognized that there is only limited scope for the application of actuarial skills in this field. However, there may be some advantage to be gained by mixing an intelligent statistical opinion with other specialized technical or practical ones when some catastrophe problems are being discussed. Before expressing a view on any topic, it is, of course, essential to learn about the background and existing conditions.

The concept of catastrophe is considered in section 2 of this paper. Potential catastrophe situations can be classified into two groups, natural hazards and man-made hazards. Each of the sections 3–9 deals with one of the principal natural hazards, giving an outline of the causes of catastrophic events, the type of losses to be expected, and the form of insurance cover likely to be available in vulnerable areas. Section 10 describes the New Zealand state scheme, which provides cover in the event of extraordinary losses from nearly all elemental perils, and war. Sections 11–16 each deal with a different type of situation where a man-made catastrophe can occur, and the insurance provisions available in each case.