The current banking crisis has reminded us of how risks materialising in one part of the financial system can have a widespread impact, affecting other financial markets and institutions and the broader economy. This paper, prepared on behalf of the Actuarial Profession, examines how such events have an impact on the entire financial system and explores whether such disturbances may arise within the insurance and pensions sectors as well as within banking. The paper seeks to provide an overview of a number of banking and other financial crises which have occurred in the past, illustrated by four case studies. It discusses what constitutes a systemic event and what distinguishes it from a large aggregate system wide shock. Finally, it discusses how policy-makers can respond to the risk of such systemic financial failures.

This abstract relates to the following paper:

BesarD., BoothP., ChanK.K., MilneA.K.L. & PicklesJ.Systemic risk in financial services ‐ Abstract of the London Discussion. British Actuarial Journal, doi:10.1017/S1357321711000110

This abstract relates to the following paper:

BesarD., BoothP., ChanK.K., MilneA.K.L. & PicklesJ.Systemic risk in financial services ‐ Abstract of the Edinburgh Discussion. British Actuarial Journal, doi:10.1017/S1357321711000110.

A major outcome of ERM activities in insurance companies has been the bringing together of all of the key risks in the company, to be managed collectively in a holistic fashion. The authors of this paper believe that an ERM framework also needs to look beyond the company, and have regard to the risk management needs of investors, from the point of view of the contribution of the insurance company to the overall risk and reward of their total investment portfolios. To meet these needs, the ERM framework needs to provide sufficient information on topics such as systematic risk, potential correlations of earnings from future new business with macroeconomic trends, other risks to franchise value, and sources of model risk within the company. The paper does not provide solutions for the issues described above; but limits itself to describing and discussing the direction for some important new initiatives in ERM activities.

This abstract relates to the following paper:

HitchcoxA.N., KlumpesP.J.M., McGaugheyK.W., SmithA.D. & TavernerN.H.ERM for insurance companies – adding the investor's point of view ‐ Abstract of the London Discussion. British Actuarial Journal, doi:10.1017/S1357321711000122

Personal finance is a challenging topic which can benefit from a scientific approach to individual financial planning. This paper presents an individual asset liability management (iALM) model for life cycle planning which uses the methodology of dynamic stochastic optimisation and incorporates ideas from both classical and behavioural finance. Its implementation is in the form of a decision support tool for use by financial advisers or wealth managers. The investment universe is given by a set of indices for major asset classes and their returns are simulated forward over the lifetime of a household. On the liability side the foreseen cash flows of incomes and outgoings are simulated and punctuated by life events such as illness and death. The household's utility function is constructed for each time period over a range of monetary values in terms of household financial goals and preferences. Taxes and pension savings are treated using the tax shielded saving accounts specific to a national jurisdiction in terms of constraints in the optimisation sub-models. The paper goes on to present an analysis of iALM model recommendations for a representative UK household, together with an evaluation of the sensitivity of the financial plan generated to changes in market environments such as the 2007–9 crisis. The promise of this new technology is to bring modern decision support tools to individual investors in order to facilitate custom designed consumption, savings and investment policies.

This abstract relates to the following paper:

DempsterM.A.H. & MedovaE.A.Asset liability management for individual households ‐ Abstract of the London Discussion. British Actuarial Journal, doi:10.1017/S135732171100016X