ªA KN OWLEDGE COMMUNITY FOR THE SOCIETY OF … · Global Market The actuarial profession has always been fairly international. 2+2=4 every-where! But in practical work the international

ISSUE NO. 43

NOVEMBER 2007

I N T E R N A T I O N A L N E W S

It is my pleasure to highlight thecurrent activities and future chal-lenges of the International Actuarial

Association (IAA).

Originally the IAA was established toorganize international actuarial congresses.Over the years, it became evident thatthere was a need for a common forum ofactuarial associations to discuss issues ofmutual interest, to promote the develop-ment of the actuarial profession and torepresent the global actuarial professioninternationally. This led to reorganizing theIAA as an association of associations.Currently, the IAA has 56 Full MemberAssociations, 23 Associate MemberAssociations and three InstitutionalMember Organizations and it representsmore than 43,000 actuaries in nearly 100countries. I believe that in 1998 when theIAA took this visionary step not many of uscould imagine the extent and the pace ofglobal development that was to follow.

Global Market The actuarial profession has always

been fairly international. 2+2=4 every-where! But in practical work theinternational aspect has become muchmore important than ever before.Globalization means global challenges,but also global opportunities, more openmarkets and convergence of insuranceand other financial industries. Anincreasingly global market will require aworldwide prudential framework thatwill sooner or later touch each actuary inhis or her professional life.

Two major areas where the presence ofthe international actuarial voice is nowvitally needed are insurance regulation,in particular solvency regulation, andfinancial reporting.

Regulation will become more interna-tional and it will focus more on risks thanthe traditional models. Risk-based capi-tal, risk-based supervision and overallrisk management are key issues whenensuring the financial strength andsound management of an insurancecompany or of another financial entity. Asactuaries, we should welcome this.

Driving the development of interna-tional financial reporting standards wasthe investors’ need to have access tocomparable information of companies.The present practices differ from countryto country. This is not to say that a prac-tice in one country is better than that inanother country. We all know that actuar-ial problems can be approached fromdifferent angles and by definition thereseldom is a unique best solution to aproblem. The challenge is to make thesedifferent approaches converge to such anextent that sufficient comparability andcredibility can be achieved.

To ensure that this global frameworkis consistent with fundamental actuarialprinciples, it is important that we, as aprofession, offer our expertise to influencethis development. In addition to the workof the national actuarial associations, weneed one voice to represent the globalprofession. This is one of the main

Importance of InternationalCooperationby Hillevi Mannonen

contents

I N T E R N AT I O N A L S E C T I O N“A KNOWLEDGE COMMUNITY FOR THE SOCIETY OF ACTUARIES”

Importance of International Cooperationby Hillevi Mannonen .............................................. 1

Editor’s Noteby Michelle John ................................................... 2

Chairperson’s Cornerby Frank Buck ....................................................... 3

Ambassador Corner........................................ 6

Continuous Professional Developmentby Paul H. Grace ................................................... 7

The Insurance Market in Central Eastern Europe by Edina Rozinka.................................................. 11

Pension Accounting Changesby Catherine Robertson .................................... 15

Chinese Insurance Market:Opportunities and Alternativesby Nian-Chih Yang .............................................. 18

SOA International Experience Survey—Embedded Value Financial Assumptionsby Charles Carroll, William Horbatt andDominique Lebel ................................................ 22

Actuarial Involvement In Road AccidentFund Claims in South Africaby Greg Whittaker.............................................. 29

The University of The West IndiesActuarial Societyby Shani Bryan.................................................... 33

Pension Regressionby P.G. Alistair Cammidge..................................35

International News Announcements ...... 37

continued on page 4

Editor’s Noteby Michelle John

I nternational Cooperation, Globalization, Convergence and the Global Village are

some of the buzz words that have crept into our consciousness. Some have a

negative spin while others sound more positive. In this edition, we explore these

concepts as they relate to our profession and work.

Paul Grace looks at the international developments in the area of Continuous

Professional Development (CPD). An actuary may be working in one country, for a

company that reports to a regulatory body in another country and neither of these

countries may be his country of qualification. Which CPD Scheme governs? Hillevi

Mannonen, International Actuarial Association (IAA) president, highlights the activi-

ties and challenges of the IAA. It provides a common forum for discussion among

actuarial associations. Catherine Robertson provides the first in a series of articles on

changes in Pension Accounting. These articles will describe the first steps taken

towards convergence to a global standard. The International Experience Study

Working Group has updated the Embedded Value Financial Assumptions survey for

2006 data.

Working together is not possible if we don't understand the various markets in

which we are to operate. Nian Chih-Yang explores the Chinese insurance market,

Greg Whittaker looks at the role of actuaries in road accident claims in South Africa

and Edina Rozinka provides an extensive review of the insurance market in the Czech

Republic, Hungary, Poland and the Slovak Republic.

Apart from this, Alistair Cammidge, council member, shares his thoughts on what

is happening in the world of pensions and Shani Bryan provides an update from the

Actuarial Society at the University of West Indies in Jamaica.

2007 is winding down, as we look forward to 2008; a number of changes are taking

place. Carol Tom, assistant editor, has decided to bow out after

diligently editing for the last two years. I would like to thank

Carol for all her hard work and dedication. We welcome Carl

Hansen to the team; he will be the assistant editor in 2008. The

council elections have taken place and there's a new team in

place.

With 2008 coming, here are a few suggestions for your 2008

New Year’s resolutions.

• Write an article for the newsletter.

• Introduce yourself to your SOA country ambassador. There

isn't one? Why don't you apply then?

• Admit to your friends and family that you enjoy reading this

newsletter. You may be shunned for awhile—that just gives

you more time for reading the newsletter.o

International Section NewsIssue No. 43 • November 2007

International Section of the Society of Actuaries475 N. Martingale Road

Suite 600Schaumburg, IL 60173

Phone: 847.706.3500 • Fax: 847.706.3599Web site: www.soa.org

This newsletter is free to section members.Current-year issues are available from thePublication Orders Department by contact-ing Aleshia Zionce at 847.706.3525.Photocopies of back issues may berequested for a nominal fee.

Expressions of opinion stated herein are,unless expressly stated to the contrary, notthe opinion or position of the Society ofActuaries, its sections, its committees orthe employers of the authors.

The SOA assumes no responsibility forstatements made or opinions expressed inthe articles, criticisms and discussionscontained in this publication.

Julissa Sweeney, Graphic Designer ([email protected]) • Phone: 847.706.3548• Fax: 847.706.3598

Sofi Garcia, Project Support Specialist ([email protected]) • Phone: 847.706.3597• Fax: 847.706.3599

Martha Sikaras, Director of InternationalActivities, Staff Partner([email protected]) • Phone:847.706.3596 • Fax: 847.273.8596

Meg Weber, Director, Section Services([email protected]) • Phone: 847.706.3585• Fax: 847.273.8585

Kathryn Wiener, Staff Editor([email protected]) • Phone: 847.706.3501• Fax: 847.706.3599

Michelle John, Newsletter EditorSun Life of CanadaPhone: 416.408.8518E-mail: [email protected]

Cathy Lyn, Features EditorE-mail: [email protected]

Carol Tom, Assistant Newsletter EditorSun Life of CanadaPhone: 416.979.6156E-mail: [email protected]

2007 - 2008 Section Leadership Alex Kogan, ChairpersonBosco Chan, Vice-ChairpersonDarryl Wagner, TreasurerRich de Haan, SecretaryAlistair P.G. Cammidge, Web LiaisonJoe Kuocheng Chou, Council MemberJason Liang Zhang, Council MemberCathy Lyn, Council Member

Copyright © 2007 Society of Actuaries. All rights reserved. Printed in the United States of America

Michelle John, FSA,

FCIA, FIA, is assistant

vice president at Sun

Life Financial in

Toronto, Canada. She

can be reached at

michelle.

[email protected].

M y term on the International SectionCouncil ends at the annual meeting, sothis will be my last column as chair. It

has been a privilege to have served the member-ship and I will be leaving the council in good hands.

This year we have started to address the role ofambassador. Many of our overseas representativesperform a useful role for our members, but some,after a promising beginning, run out of ideas anddo very little. The council has decided to play amore active role by requesting progress reportsand, where necessary, updated action plans.Starting this year, we will reappoint ambassadorsperforming well and will seek fresh talent else-where.

The US GAAP seminar held jointly with theFinancial Reporting Section continues to do well.For the second year, we had a full house in HongKong and did well in Brazil. We are planning thenext seminar in Amsterdam and expect to return toAsia next year.

The coverage of the International ExperienceStudies System continues to expand in Asia. Wehave more companies sharing data in Korea andTaiwan and expect to start discussions soon withcompanies in Thailand. After that, we will go toVietnam, if we can get through some regulatory redtape.

International News continues to contain manyimpressive articles from around the world. I thinkthat it is consistently the best of the sectionnewsletters and this is in no small part due to theefforts of the editorial team, Michelle John, CathyLyn and Carol Tom. On your behalf, I would like toextend our thanks to them.

Finally, I hope that many of you will be able toattend the International Section reception at theannual meeting. It is a highlight of the year andwill give you a chance to meet many of the councilmembers in person. And, hopefully, you will beencouraged to run for council yourselves one day.o

NOVEMBER 2007 | INTERNATIONAL NEWS | 3

Chairperson’s Cornerby Frank Buck

Frank Buck FSA,

MAAA, FIA, is vice

president & regional

actuary at Met Life—

Asia/Pacific Region in

Hong Kong. He can be

reached at

[email protected].

Council Election Results

The results of the International Section council elections are in. We have three new council memberswho have been appointed to serve three-year terms.

Kuocheng (Joe) Chou is a manager at Ernst & Young LLP in Philadelphia, Pa.

He has worked in both consulting firms and insurance companies. His experience includesfinancial reporting, pricing, merger and acquisitions, asset liability management, modelingand international assignment. In his words “I would like to bring my perspective tocontinue the progress and success of the International Section.”

Richard de Haan is a senior actuarial advisor at Ernst & Young LLP in New York, N.Y.

He has worked in the global consulting field specializing in mergers and acquisitions andcapital markets. In his own words “I have a keen interest in International Insurance andactuarial developments, and in particular the global convergence of actuarial methodolo-gies and standards.”

Darryl Wagner is a principal at Deloitte Consulting LLP in Hartford, Conn.

His experience includes numerous international consulting assignments involving finan-cial reporting, mergers and acquisitions, reinsurance transactions and policyholderprotection structures. In his own words “…to leverage my international experience servingclients on six continents to help SOA members and other actuaries around the world findways to work together and learn from each other …”

4 | INTERNATIONAL NEWS | NOVEMBER 2007

Importance of International Cooperation | from page 1

Hillevi Mannonen,

FASF, is president of

the IAA. She is chief

actuary at Ilmarinen

Mutual Pension

Insurance Company in

Helsinki, Finland. She

can be reached at

hillevi.mannonen@

actuaries.org.

responsibilities of the IAA and the IAA haspurposefully worked to build beneficial rela-tionships with major international regulatoryorganizations and standard setters.

Standards and Cooperation To be successful, both locally and globally,

the actuarial profession needs to guarantee ahigh-level of competence of its members andresponsible professional practices. Beginningin 2002, the IAA issued global standards withguidelines for social security actuaries,followed by several standards related to inter-national accounting standards. At the moment,several others are under development.

In February, the IAA Risk Margin WorkingGroup issued the Exposure Draft ofMeasurement of Liabilities for InsuranceContracts for public comment and, at the time ofwriting, the second ED is under preparation. Thispaper was originally requested by the IAIS, butthe IASB has also shown interest in the work.They see that the measurement of liabilities forboth general financial reporting purposes andregulatory purposes should be as consistent aspossible and that actuaries have insight into this.This ad hoc working group was establishedjointly by the IAA Insurance AccountingCommittee, the Insurance Regulation Committeeand the Solvency Subcommittee.

I mention this as an example of the verygood working relationship the IAA has with

the IAIS and the IASB as well as with manyother international bodies. The IAA commit-tees have also commented on several IAISdrafts for standards and guidelines: ERM,capital standards, valuation of assets andliabilities, internal models. The Working Plan2008–2012 of the IAIS includes several refer-ences to cooperation with the IAA. The IAA isan Observer of the IAIS and the IAIS is anInstitutional Member of the IAA. An IAISrepresentative takes part in IAA meetings andthe IAA representative participates in IAISmeetings on solvency and accounting. The IAAhas undertaken a project for the IAIS toanalyze the best practices for the determina-tion of technical provisions and capitalrequirements and the assessment of theadequacy, relevance and reliability thereof.These issues are critical to the future work ofthe IAIS in developing supervisory standardsand guidance papers for solvency assessmentpurposes, and to the IAIS's ongoing work inproviding comments to the IASB in connectionwith its Phase II Insurance Contracts project.

Also, it is a top priority of the IAIS to main-tain close communication with the IAA,particularly with respect to standard develop-ment activities in solvency, accounting andactuarial issues. The Solvency and ActuarialIssues Subcommittee of the IAIS has received,in principle, agreement to progress with itsproposal of the structure of solvency papersand high level standards and guidance papers.

According to the work plan, these will befollowed by application guidance or practicenotes developed with the IAA.

Role of the Actuary One of the key objectives of the IAA is to

promote the development of the role of theactuary. At the moment, there are severalinternational initiatives which could poten-tially influence actuarial work.

The IAIS is preparing a Risk ManagementStandard, the first draft of which did notmention actuaries or actuarial work. Instead,the Corporate Governance Task Force of theIAIS has included in its draft report, recom-mendations concerning actuaries and externalauditors, e.g., fit and proper criteria (qualifica-tions, professional proficiency, appropriatepractice experience and updated knowledge ondevelopments within their profession andmembership of professional bodies).

There are also many others like IFAC,IOPS, ISSA and OECD working in this area. Itis important for the global actuarial professionto influence the requirements to be imposed onthem as well as to promote the expansion anddevelopment of the profession. Having builtfruitful relationships with these organizations,and with the support of its member associa-tions, the IAA is pursuing the bestopportunities to work for the benefit of itsmembers.

ERM Many actuarial associations are considering

their role in the broader area of risk manage-ment, particularly in the relatively new field ofenterprise risk management (ERM). The keyquestion relates to the positioning of actuarialqualification vis-à-vis competing professions.One of the pioneers in this area is the Societyof Actuaries which has already introduced anew category of qualification called CharteredEnterprise Risk Analyst (CERA).

The competition in the risk managementarea for the actuarial profession comes prima-rily from two relatively new associations,namely, GARP and PRMIA. In addition, theCFA qualification is also seen as a competitor,although the scope of the CFA is much broader

than risk management. While officially locatedin the United States, these three associationshave taken an international approach and areattracting a global membership.

In order to survive in the long run, the actu-arial profession needs to adjust to the changesin the world surrounding it and to take advan-tage of new opportunities. During thePresidents' Forum meeting in April of 2007 inMexico City, the presidents of the IAA FullMember associations gathered to discuss,among other things, how the profession shouldrespond to the development of ERM. Based onthe work by, for example, the U.S. andAustralian actuaries, the proposal of a globalERM designation within the actuarial profes-sion was introduced. Each supportingorganization should be free to decide how to fitits ERM requirements into its own qualifica-tion process and have the sole authority togrant this designation. In order to ensurecomparability between the requirements of thesupporting associations, those associationscould support the designation through a treatyof mutual recognition. Whether this initiativewill become reality in this or in another form,it is worth discussing together and combiningour efforts.

Challenges create opportunities and foractuaries risk is opportunity.o

“In order to survive

in the long run, the

actuarial profession

needs to adjust to

the changes in the

world surrounding it

and to take advan-

tage of new

opportunities.”

Importance of International Cooperation



T he Ambassador Program is a key initia-tive established by the SOAInternational Section. Ambassadors

assist in carrying out the Society of Actuaries'international programs.

Ambassadors:• Identify and develop subjects of interna-

tional interest for communication to SOAmembers.

• Identify special needs of SOA members indifferent areas of the world.

• Help the actuarial profession to grow inareas where the profession is not welldeveloped.

• Function as a valuable resource and linkbetween the SOA and national actuarialorganizations and actuarial clubs.

Recent activities of SOA ambassadors:• Ronald Poon-Affat in Brazil: Published an

article in The Actuary on the opening up ofthe reinsurance market in Brazil (2007).

• Luis Caro in Colombia: Board Member onthe Asociación Colombiana de Actuariosand frequent speaker at local institutions.

• Cathy Lyn in Jamaica: Member of theMinistry of Finance's Technical Committeewhich was set up to formulate PensionReform Legislation. Invited to give keynoteaddress during the University of the WestIndies Actuarial Society’s (UWIAS) firstannual Awards Ceremony and Dinner inFebruary 2007.

• Suchin Pongpuengpitpack in Thailand: Setup an area (Actuarial Exam Room) on theSociety of Actuaries of Thailand Web site(www.thaiactuary.org) to provide SOAexam news updates and exam informationfor Thai examinees (2007).

• Nhon Ly in Vietnam: Participated duringthe second actuarial meeting in Vietnam tocreate opportunities for professionals tonetwork and re-start building an actuarialcommunity in Vietnam. Also working withother groups to form an official actuarialassociation in Vietnam.

• Ikram Shakir in Luxemburg: Attended theAGM of the Actuarial Association ofLuxemburg (ALAC). He was electedFinance Director of the Board of ALAC.

• Eric Seah in Singapore: Liaises with thesecretariat of Singapore Actuarial Society(SAS), making sure conferences and semi-nar activities in Singapore and the regionare communicated through the SAS chan-nel.

Welcome new ambassadors:

• Carrie Cheung is an actuary at ING LifeInsurance Company in Tokyo, Japan.

• Carlos Arrocha is an actuary at Swiss Rein Zurich, Switzerland.

To learn more about the program, read thecountry webpages and find out how to contactyour ambassador, please go to the AmbassadorProgram section on the SOA Web site ath t t p : / / w w w. s o a . o r g / p r o f e s s i o n a l -interests/international/intl-ambassador-program.aspx.

Being an SOA ambassador can be a rewardingand fulfilling activity, if you are interested infinding out more please contact MarthaSikaras at [email protected]

Ambassador Corner

Guest Speaker Cathy Lyn, FSA, FIA, shares a light moment with UWIASPresident Rohan Hall and Vice President Kerron Blandin.


M any refer to Continuous ProfessionalDevelopment (CPD) as lifelong learn-ing but I believe that CPD goes beyond

lifelong learning; the critical difference is the word“professional.”

Virtually everyone embarks on lifelong learn-ing from the moment they are born until old age.Whilst this will be apparent for those undergoingfull-time education, most continue to learn newthings, new ideas and new concepts beyondretirement. Technological developments meanthat people learn to use new gadgets and equip-ment. People learn to live with new legislation.People learn about what is happening in theworld around them via the media, whether news-papers, magazines, radio or TV. By travelling,people learn about other cultures. A lot of lifelonglearning is voluntary.

The public have confidence in the case ofpeople following a profession—medical, legal,actuarial, accountancy, etc. They expect theprofessional to understand their needs and therelevant legislation and use techniques andexpertise to give them sound advice. In otherwords, the public expect the professional to becompetent and to have the relevant experience.Experience comes with practice over a period;competence has to be maintained. Thus peopleexpect a doctor to be able to diagnose a medicalcondition, or if necessary refer them to a special-ist with the relevant knowledge, and havingdiagnosed the condition use the latest treatmentsto control, if not cure, the condition. Likewisesomeone consulting an actuary expects the bestavailable advice taking into consideration theirrequirements, economic climate and legislativeenvironment. Lifelong learning for a member of aprofession is not a voluntary activity—it is oblig-atory and it extends to all aspects of theprofessional's work:—technical skills, personalskills and business skills.

Actuaries need to carry out CPD to helpensure that they are competent to provideactuarial advice. It is not just technical skillsand competencies that have to be developed

and kept up to date, but also personal, profes-sional and business skills and competencies.

Actuarial CPD Schemes Aroundthe World

In 2006 the International ActuarialAssociation (IAA) conducted a survey ofMember Associations' CPD Schemes—theresults were published at the 28th Congressheld in June 2006 in Paris. Most associationsresponded. But less than 50 percent of therespondents had a formal CPD Scheme;however, schemes covered about 80 percent ofthe world's qualified actuaries.

The Society of Actuaries (SOA) was amongstthose associations without a CPD Scheme of itsown, but most of its members, including all thoseworking in the United States are members of theAmerican Academy of Actuaries (AAA), via itsQualification Standard, who have a CPDScheme. Furthermore, many members of theSOA working outside the United States aremembers of the association in the country wherethey are working and will be subject to the CPD requirements of that association.The SOA's Board of Directors charged the SOA'sKnowledge Management Strategic Action Team(KMSAT) with the task of establishing a CPDScheme applicable to all its members. An expo-sure draft process on the proposals has beenrecommended with a view to their implementa-tion on Jan. 1, 2009. This article does not considerthese proposals.

The scope of the schemes in existence variedenormously. About 80 percent of the CPDSchemes prescribe a minimum amount of CPDeach year, usually measured in hours, althoughsome associations allocate varying weights todifferent types of CPD. The minimum numberof hours prescribed ranged from 15 to 50 hoursp.a., the most common being 15 hours. Someprescribed that certain issues should becovered, e.g., relevant legislative changes. Thebreadth of possible CPD activities is generallyquite wide—and some associations recognisethe value of self-study. Many associations

Continuous Professional Developmentby Paul H. Grace

Paul H. Grace has

been a member of the

IAA Education

Committee for some

years and led the

working group that

developed the IAA

proposed strategy on

CPD. He was president

of the Faculty of

Actuaries from

1996-1998. He can

be reached at

[email protected].

continued on page 8


Continuous Professional Development | from page 7

require those actuaries working in non-tradi-tional areas to do CPD. Only a small numberorganize examinable CPD. Many associationsmonitor that their members are meeting theirCPD requirements, failure to comply can leadto loss of practicing rights or even loss ofmembership.

The table below summarizes the CPDSchemes for members of the associations inAustralia, Canada, Hong Kong, Mexico, SouthAfrica and the United Kingdom, as well as theAmerican Academy.

Country/association

Minimum number of hours perannum (p.a.). These may in some cases be averaged.

Summary of CPD Scheme Exemptions Limitations on provider

Treatment of Self-study

Any other requirements

United States – Academy

30

CPD needs to be done if individual wishes to practice and will issue “statement of opinion.” “Organized Activities” (OA) involve actuaries or other professionals working for other

Failure to comply leads to disciplinary action.

At least three hours must be on professionalism issues and at least six hours on organized activities. If the actuary issues Statutory Statements of opinion, he/she must do 15 hours, of which six hours must be OA, gaining knowledge related to such opinions.

Self-study is permissible.

Some examinable CPD is offered.

Australia

40 – this can be averaged over two successive years subject to at least 20 hours in any one year.

All members required to do CPD. Annual declarations are required and there are random checks. Failure to comply results in loss of practicing rights and possible disciplinary action.

CPD can either be in general actuarial techniques or one’s specialist area.

Those not providing a professional service and either retired or on extended leave.

In the case of commercial activities, they only count if they result in improvement and broadening of knowledge.

Self-study is permissible.

Those providing pro-bono actuarialservices must do CPD.

Canada

100 hours over a two year period. (other references to amount of hours required also relate to a two year period.)

All members required to do CPD. At least 24 hours every two years must be structured, i.e., activity where more than one point of view is provided. Annual declarations are required. Failure to comply initially regarded as a membership issue but continued non-compliance could invoke discipline process.

12 hours of structured CPD must cover technical skills, 4 hours of structured or unstructured on professional issues and 4 hours of either structured or unstructured on business/management skills.

Those not practicing, retired or not employed.Associates still sitting exams. But two year requirements apply to those returning to work.

Self-study counts as unstructured – but discussing outcome could count as structured.

Hong Kong

CPD is not mandatory but all members are members of another association which may or may not have a mandatory scheme. Members are deemed to have met HK requirements if they have met those of own association.

Reasonable proportion of CPD activities should be on HK issues. Sometimes business or management skills might be included in requirements.

Mexico 4032 hours at seminars or courses with formal examination; the rest not evaluated. Failure to follow CPD

Courses approved as part of CPD scheme. Six hours must be spent on legal issues and at least eight hours on specialist technical issues.

Scheme only applies to

members.

Courses for evaluated CPD must be approved under scheme.

Special rules apply if

in more than one specialist area.

South Africa 15 formal and 52 informal

Formal CPD involves attendance at meetings organized by association, etc. Not more than 7.5 hours for any day and not more than 15 hours per event.

comply can lead to loss of Practicing

None unless new technical issue arises. Professional issues are discussed at some sessional meetings and at annual convention.

Not more than 7.5 hours p.a. may be provided by events attended solely by colleagues.

Can be included in informal activity.

United Kingdom – Faculty and Institute

15 except for those not working in specialist actuarial areas who determine their own amount of CPD.

Activity that is observable by others

study leading through to a presentation

complete CPD record on Web site. To

of attendance.

At least 10 hours relevant to practice area; at least two hours on professionalism skills; at least four events including two events covering technical skills. Practice Boards can specify issues to be covered.

Retired members, unless doing voluntary work, are completely exempt.

Those with (statutory) practising

must have obtained at

hours of relevant CPD by attending events not predominantly attended by colleagues.

not allowed for those with (statutory) practising

Attendance at professionalism course at least once every 10 years.

Continuous Professional Development


IAA Proposed StrategyThe IAA Education Committee includes

CPD within its remit and has been develop-ing a strategy to address the issue. Thisarticle reflects the proposed strategy thatwill be discussed at the IAA meetings inDublin in October—the proposals have beenwell received so far, whether they areadopted as guidance to member associationsremains to be seen. Not surprisingly theproposed strategy has regard to the currentpractices of many of the IAA's member asso-ciations.

It is the individual actuary who is aware ofthe work he/she does and thus the scope ofrequired knowledge and competencies—it isthe individual actuary who is best placed toplan his/her CPD program although his/herassociation and possibly even the IAA mightprovide guidance as topics to be taken intoconsideration in developing a CPD program.For many actuaries their CPD program islikely to be integrated with any developmentprogram they have agreed to with theiremployer.

The reputation and status of the actuarialprofession depends on actuaries giving rele-vant and up-to-date advice. It follows that allactuaries should undertake CPD.

On qualification, actuaries are at the startof their careers and still have much to learnand experience to gain, so CPD will be essen-tial to continue the process of development.Actuaries need to keep up with the develop-ment of new products and with the new typesof risk that might evolve over time. It is impor-tant that actuaries keep abreast ofdevelopments in actuarial techniques so thatthe work done is up-to-date and relevant.Actuaries need to be aware of current method-ologies and factors which may affect thesuitability of models and assumptions; in thecase of new techniques it may be necessary todistinguish between the desirability of acquir-ing the ability to perform new techniques andthe necessity to understand that the techniqueexists and what its uses are. Stochastic model-ling is such an example.

Actuaries need to be aware of developmentsin national and international legislation andaccounting standards as well as keeping up

with new actuarial standards of practice andmodifications to existing standards. Whenmoving between countries or working in aninternational environment, actuaries need tounderstand the different products and risks indifferent countries, the regulatory and legisla-tive framework in each country and theapplicable accounting standards and actuarialstandards and practices.

Actuaries may take on a number of differentroles, over their careers, including managerialroles, and personal development will be neces-sary to equip them for these new roles. Theexpansion in the profession means that actuar-ies are moving into new areas of practice withthe consequent need for development.

Actuaries need to be regularly challenged tothink through professionalism questions; forexample, dealing with conflicts or public inter-est issues.

An actuary who is still working but nolonger providing actuarial advice, for example,a senior executive or someone possibly retiredfrom full-time employment but engaged as anon-executive director, may be known bycolleagues to be an actuary and thus a profes-sional should ensure that he/she remainscompetent for the work he/she is doing, i.e.,follow a CPD program appropriate to the workbeing done.

In planning his/her personal CPD program,an actuary should set objectives, the CPDactivities should relate to these objectives andinclude practical application of the knowledgegained. The individual should consider how tomonitor progress on the objectives, possibly inconjunction with his/her employer.

CPD can be achieved in a number of differentways:

• Attendance at local, national or interna-tional actuarial meetings, seminars,colloquia and workshops.

• Attendance at courses, given by actuarialassociations, universities and otherbodies.

• Participation in discussion groups onactuarial topics, possibly amongst

“Actuaries need to

keep up with the

development of new

products and with

the new types of

risk that might

evolve over time.”

continued on page 10


Continuous Professional Development | from page 9

colleagues or peers and possibly via theInternet.

• Participation as an examiner in actuarialexaminations.

• Study for a further qualification includingmembership of other relevant professionalbodies.

• Writing papers and books.• Giving talks or making presentations to

colleagues or at conferences or seminars.• Private reading of relevant journals and

books.

Self-study is perhaps the most valuableform of CPD—it can be carried out at a timemost convenient to the individual, it can betargeted at the individual's requirements anda point not initially understood can be revis-ited. However, whilst the outcome should beeasily reflected in subsequent work done bythe individual, it is the most difficult form ofCPD for monitoring. One way of demonstratingthe results of self-study is a presentation onthe outcome to colleagues.

Some associations encourage participationin CPD events attended by actuaries from vari-ous organizations (external CPD) instead ofthose provided solely for actuaries of a particu-lar firm (internal CPD); the concern being thatinternal CPD events may reflect too closely theemployers views on issues.

The amount of CPD that an actuary does isa personal decision. However, many associa-tions that operate a formal CPD Schemespecify the minimum amount of CPD amember should do and some stipulate its formand topics or issues that should be covered.Minimum requirements that are specifiedrange from 15 hours to 50 hours per annum,averaging in the region of 25 hours perannum. Specifying minimum requirementsmeans that all an association's members areconscious of the need to follow a CPDprogram.

In the case of actuaries working in a terri-tory other than where their association isestablished, their association may haveregard to the CPD requirements of the IAA

association that is based in the territory inwhich the actuary is working, and mayrequire such an actuary to comply with suchrequirements.

Even where an actuary's association is notoperating a CPD Scheme, it is good practice foreach actuary undertaking CPD to maintain apersonal record. Some associations offer a facil-ity on the Internet for their members to recordtheir CPD activities. This record shouldconsider the development undertaken and areflection by the actuary on the learning thathas taken place with indications of futurelearning and development activities.

Monitoring of CPD records is carried out bysome associations. In this connection someassociations distinguish between CPD that canbe verified, for example, attendance at aconference for which there is a list of delegatesavailable, and that which cannot be verified,which could include some self-studying. Someother associations distinguish between formaland informal CPD activities, formal typicallybeing conferences, seminars, etc. and informalprimarily self-study. Failure to undertake CPDin accordance with many association's schemescan lead to disciplinary action by the individ-ual's association.

The survey of CPD carried out in 2006 bythe IAA highlighted lack of adequateresources, in particular by smaller associa-tions, to deliver adequate CPD for theirmembers. This is clearly an area in which theIAA should play a role and it is currentlyconsidering what it can do. In the meantime itwill encourage each association to formulateits own CPD strategy and will provide guid-ance to any association wishing to develop aCPD strategy. The need of CPD will be takeninto account by the IAA (and its sections, i.e.,ASTIN, Life, etc.) when organizing events. TheIAA is planning to create a CPD database,incorporating a diary of forthcoming eventsand links to CPD material; this of course willbe dependant on cooperation by associations indrawing relevant events to the attention oftheir members.o


S tandards for accounting for pension andpost-retirement plans around the worldare changing. The ultimate goal is a

global standard which will replaceInternational Accounting Standard 19 (IAS19), which is used in many European countries,as well as in other countries around the world.The first steps in convergence are underway.This first in a series of articles will concentrateon the changes in the United States undertheir Statements of Financial AccountingStandards (SFAS).

Adapting to a New RealityAt the end of 2006, employers following U.S.

accounting standards were faced with a newset of reporting rules for defined benefitpension plans and other post-retirement bene-fits. The most significant change was a newrequirement to recognize immediately theentire funded position of the defined benefitplans directly on the employer's balance sheet,whether the plans are in a surplus or a deficitposition.

The U.S. Financial Accounting StandardsBoard (FASB) issued its Statement ofFinancial Accounting Standards No. 158Employers' Accounting for Defined BenefitPension and Other Postretirement Plans inSeptember 2006. The standard is applicable tofinancial statements of public companies andnot-for-profit organizations sponsoring single-employer pension and other post-retirement

benefits plans. It amends parts of FASBStatements Nos. 87, 88, 106 and 132 (R). Thechanges do not apply to employer financialstatements related to multi-employer pensionor benefit plans.

What is Different about SFAS158?

This accounting standard introduces thefollowing new requirements:

• Recognition of a plan's funded status inthe balance sheet;

• Immediate recognition of changes infunded status in the balance sheet;

• Footnote disclosure modifications; and• Measurement of assets and obligations at

the end of the employer's fiscal year.

Although the funded position of pension andbenefit plans has been part of the disclosurenotes in financial statements for a number ofyears, the recognition of these surpluses anddeficits on the employer's balance sheet hasgenerally emerged on a delayed basis underUS GAAP, due to the amortization methodsapplied to past service costs and to experiencegains and losses. For certain pension plans in adeficit position relative to the “accumulatedbenefit obligation,” there has been only limitedrecognition of the deficit on the employer'sbalance sheet through the “minimum liability”reporting process.

Pension Accounting Changesby Catherine Robertson



Pension Accounting Changes | from page 15

Recognition of Funded StatusThe new standard now requires employers

to recognize the full funded status of benefitplans in the statement of financial position.The funded status of a benefit plan is thedifference between the fair value of plan assetsand the benefit obligation. For a pension plan,the benefit obligation is the “projected benefitobligation” (i.e., incorporating future salaryincreases on accrued benefits), and for anOther Post-Employment Benefits (OPEB) isthe accumulated post-retirement benefit obli-gation.

The prior standards allow an employer torecognize in its statement of financial positionan asset or a liability arising from benefitplans which in most cases differs from thefunded position of the plan as it allows fordelayed recognition of actuarial gains or lossesand costs of benefit changes. In some cases, anemployer could recognize an asset for a planwhich was underfunded. In the prior stan-dards, information on the funded status of aplan is provided only in the notes to the finan-cial statements.

Under the new standards, the differencebetween a plan's funded status and the currentbalance sheet amount, i.e., any existingunamortized actuarial gains and losses, priorservice costs and/or transitional balances willbe recognized as a credit or charge throughaccumulated other comprehensive income(AOCI) without passing through the company'sincome statement. Essentially, this results in adirect increase or decrease to shareholderequity. For companies with underfunded plans,the reduction could be significant, especially inthe first year of reporting under the new rules.A recent evaluation of the financial status ofcompanies sponsoring pension and OPEBswithin the S&P500 group indicates that about25 percent of them will have a material chargeto shareholder equity resulting from the imple-mentation of FASB No.158.

For not-for-profit organizations or otherentities that do not report other comprehensiveincome (OCI), the adjustment from recognizingthe plan's funding status is reflected in unre-stricted net assets.

The status of all overfunded plans shall beaggregated and recognized as an asset on thebalance sheet. Similarly, underfunded plansshall be aggregated and recognized as a liabil-ity.

This first stage of the project to amendpension accounting standards does not modifythe calculation of the net periodic benefit cost(NPBC). Any existing actuarial gains/losses,prior service costs and remaining transitionalbalances continue to be amortized as under theprior standards, with an appropriate adjust-ment to OCI as they are amortized.

Recognition of Changes in thePlan Funding Status

Any new actuarial gains and losses and/orprior service costs that arise during a futurefiscal period are immediately recognized in thebalance sheet. These new amounts cancontinue to be amortized under the currentstandards. To the extent that these amountsare not recognized as a component of NPBC inthe period that they arise, they are recognizedas a component of OCI, with an appropriateadjustment as they are amortized through theNPBC in future periods. For not-for-profitorganizations, the reclassified amounts mustbe shown separately on the statement of activi-ties for the reporting period.

This change results in immediate recogni-tion on the balance sheet of the cost of anyfuture benefit improvements, although therecognition on the income statement continuesto be delayed. This could have a significantimpact on future changes to plan design.

Disclosures Related to theRecognition

The notes to financial statements have to bechanged. Along with the recognition of the planfunded status and its changes during thereporting period in the statement of financialposition, the new standard introduces newdisclosure requirements and removes theredundant ones. In particular, a footnote recon-ciliation of AOCI status is now required whilea footnote reconciliation of funded status isremoved.

Pension Accounting Changes


The disclosure requirements in respect ofreconciliation of the fair value of assets,accrued benefit obligations, cash payments,and assets portfolio remain unchanged.

Effective Dates for Recognitionand Related Disclosure

The effective date for recognition of the planfunded status on the balance sheet and for therelated disclosures is the end of fiscal yearafter Dec. 15, 2006 for public companies andsix months later, i.e. ,the end of the fiscal yearafter June 15, 2007, for non-public companies.Application as of the end of an earlier fiscalperiod is encouraged in both cases, but must beapplied to all of an employer's benefit plans.Retrospective application is not permitted, sofinancial statements for previous reportingperiods will not change. The methodologyprescribed under FASB Nos. 87, 88, and 106 formeasurement of plan assets and benefit obliga-tions, as well as determination of the netperiodic benefit cost, continues to apply.

Change of Measurement DatePlan assets and obligations are to be meas-

ured as of the fiscal year end. The new rules nolonger permit measurement of assets and obli-gations up to three months before the fiscalyear end.

The effective date of this change is delayed tothe fiscal year ending after Dec. 15, 2008, inorder to give companies enough time to changetheir valuation and budgeting processes. Earlierapplication is encouraged but not required.

The transition from an advanced measure-ment date to a fiscal year-end date must beaccounted for by an adjustment to the retainedearnings. The new standard allows for twocalculation methods of the adjustment.

The first method is to re-measure the assetsand obligations at the beginning of the fiscalyear of the new measurement date and toadjust the opening balance of retained earn-ings by the amount of the NPBC correspondingto the period between two measurement dates.

The second method is to use the earliermeasurement and to adjust the retained earn-ings for the year of transition by the amount of

NPBC proportional to the period between thetwo measurement dates.

Under both methods, any gain and loss aris-ing from a settlement or curtailment duringthe transition period is recognized in earningsin the period and not as an adjustment toretained earnings. Any gains and losses otherthan from settlements or curtailments arerecognized as a separate adjustment to theopening balance of accumulated OCI.

Future ChangesThese changes are the first phase of a two-

phase comprehensive review by FASB of allthe accounting rules applicable to pensions andOPEBs. The aim of the project is to have a setof rules that are consistent with the interna-tional accounting standards.

The first phase of the project focuses onbalance sheet recognition. FASB feels thesechanges will improve financial reporting byproviding more complete financial informationwith the reporting of the plan funded-status,that the statements will be more understand-able, by eliminating the need to reconcile withthe information currently provided in the notesto the financial statements and that the state-ments will be more timely by requiringimmediate recognition of all transactions inthe year.

The second phase of the project is expected totake several years and result in an extensiveoverhaul of the pension and OPEB accountingrules to improve consistency with internationalaccounting rules as well as address numerousconcerns with the current standards. Issuesexpected to be addressed include measurementof assets, smoothing, recognition of gains andlosses, past service costs as well as multi-employer plans. The two-phase approach is alsobeing followed by the International AccountingStandards Board to revise and improveInternational Accounting Standard IAS 19(Employee Benefits). No timing has yet beenconfirmed for the expected completion of phase2 of the project.o

Catherine Robertson,

FFA, FCIA, is a

consulting actuary with

Eckler Partners, Ltd. in

Toronto, Ontario.

She can be reached at

[email protected].


Over 40 foreign insurers have enteredthe Chinese market operating 70+insurance companies. There are actu-

ally more foreign insurance companies thandomestic companies in China. However, domes-tic companies still dominate the Chineseinsurance market. The largest domestic insur-ance company has half of the life business.Foreign insurers possess 6 percent of theChinese insurance market and 18 percent ofthe insurance market in the cities Shanghaiand Guangzhou.

Entering the Chinese insurance market:Most foreign insurance companies enter a

partnership with a domestic company to accessthe market. A few foreign insurance companiesbrought all their managers from the homeoffice to run their Chinese operation to ensuremaintenance of the corporate standards andculture. A different way to enter the market isto provide group coverage to the employees of aformerly state-run enterprise. There are manysuch enterprises with large assets andhundreds of thousands of employees. A foreigninsurance company can quickly make a pres-ence in the market. To enter, the foreigninsurance companies are required to have beenin the insurance business for the last 30 yearsand have at least US$5 billion in net assets.

They can own up to 50 percent of the equity ofa domestic company.

What do Foreign Insurance CompaniesOffer?

Amid the rapid economic growth and demo-graphic changes, the Chinese governmenthopes that foreign insurance companies canbring in needed capital and expertise as thecountry goes from a planned economy to amarket economy. Foreign insurance companiescan provide standard professional practicesand expertise on corporate management, riskprotection and mitigation, and informationquality and effectiveness. They can also help inthe development of underwriting/claim control,legal system, selling channels, and agent devel-opment programs. Finally, some surveys showthat consumers trust well known and estab-lished foreign insurance companies more thantheir domestic counterparts.

Characteristics of the ChineseMarket

The insurance market is influenced by aunique combination of characteristics: Anaging population with a high rate of saving,strong centralized government regulations,regional differences in economic develop-ment, rapid economic growth, huge growthpotential, a low insurance penetration rate,under reporting of personal and businessincomes, market dominance by large domes-tic insurers, and most importantly apopulation of over one billion.

A Cutting Edge Regulatory EnvironmentThe Chinese insurance regulators are

taking a proactive approach. The governmentbelieves the market-based insurance systemcan play an important role in alleviatingmany of the problems the country is facing.The China Insurance Regulatory Committee(CIRC) has established a robust supervisoryand regulatory system during its short exis-tence. CIRC has put in the effort to keep itssystem in tune with the latest developmentsin insurance regulations in other countries.Some might say the system is more sophisti-

Chinese Insurance Market:Opportunities and Alternativesby Nian-Chih Yang

Chinese Insurance Market: ...


cated than most of the products on themarket it tries to monitor. It does encourageorderly competition and provide an invitingenvironment for insurance products.

Main Products on the MarketThe common types of coverage available in

China are life, annuity, health, motor, commer-cial property and group health that wrapsaround the state system. Currently, agents arethe main sales force in the individual market.

Public awareness of insurance productsis low

Many Chinese consumers consider theinsurance premiums as an extra expense,instead of a necessary expenditure. As in anydeveloping market, the public needs to beconvinced of the value of insurance coverage.The insurance industry should take the mainresponsibility for this task and educate thepublic about its products and processes.

Lack of health service providersThere are no HMOs or PPOs in China.

There are some basic health maintenanceplans provided by hospitals. Generally, thereare no physician private practices. Since thereare few regulations on prescription drugs,patients often purchase medicine over thecounter and treat themselves without a physi-cian's involvement.

Uneven health protectionThe government practices Chinese-style

Socialism. In the urban/coastal areas, thesuccess in the last 20 years has resulted in someimprovement of public health services. Yet inthe rural/inland region, there are still remnantsof the commune structure and public healthservice is minimal. Some commune members(excess manpower) go to the cities to work. Theyare not registered residents and therefore haveno access to public health coverage in the citiesthey work in. The unprotected population oftenchooses not to seek medical treatments inmedical emergencies. The publicly fundedportion of health care has actually shrunk inthe last 10 years, while the economy has vastlyimproved. This is the source of manycomplaints; economic growth is carried on theback of the rural population.

Mortality gain:Life insurers in China can count on a more

pronounced mortality improvement as a resultof improved health care and nutrition due toeconomic development and a possible reductionin the smoker population.

OpportunitiesRestrictions removed for foreign insurersto conduct business

Private insurance companies came intoexistence only 20 years ago. After the Chinesegovernment entered the WTO in 2002, foreigninsurance companies can now sell withoutany geographic restriction and with just a fewproduct restrictions. Nevertheless, foreigninsurance companies are still restricted fromselling directly written reinsurance contracts,motor insurance and pension products.

Growth and fierce competitionThe Chinese national GDP growth rate is

high but the growth rate of insurance premi-ums (25 percent annually, 2001-2005) isalmost twice that. A brisk economic environ-ment, expanding affluence, and higher riskawareness all point to a rapidly increasingdemand for insurance products. Yet thecompetition for premium dollars in the majorurban cities, the main marketplace for insur-ance, is fierce.

A need for experienced managersThere are shortages of experienced actuar-

ies and professional insurance managers,which have contributed to under-performingdomestic insurance companies. The local staffare motivated and quick learners, but theyneed guidance from experienced managers.

A need for capital to growThere is an urgent need for capital to

grow. The two top domestic insurance compa-nies have successfully listed on foreign stockmarkets and have access to internationalcapital.Pension/Retirement Plans

The aging Chinese population, exacerbatedby the one-child policy, will face many retire-ment related problems. A young couple would


Nian-Chih Yang, FSA,

is an actuary in

Chicago, Ill. He can be

reached at

nianchihyang@

yahoo.com.


Chinese Insurance Market: ... | from page 19

have two sets of parents to support. There is anurgent need to provide retirement incomeproducts. As the government moves away froma planned economy mode, it also removes statesupport for pension.

Travel coverageThere are 100 million transient workers in

China, with heavy traveling during the majorholidays. Insurers can experiment with designsof affordable simple coverage for the hazardsinvolved in traveling.

Agriculture insuranceCurrently, 80 percent of the Chinese popula-

tion's employment is in agriculture. Thegovernment is especially interested in develop-ing agricultural insurance products.

Internet based products China's young professionals are Internet

savvy and aware of western advertisements onWeb sites. They have easy access to Web-basedselling channels and are adaptable to Web-based policy administration andcommunication. Completely Internet-basedinsurance products may be viable for thissegment of the market.

Mortgage insurance Chinese parents are expected to provide

financial support for their son to achieve homeownership. Due to the high price of housing,despite a high saving rate, the parents and theson often have to jointly sign for a mortgagewith a small down payment. This seems to bean ideal market for mortgage insurance. Yet,the sales results have been poor. Theconsumers consider the mortgage insurancepremium an unnecessary expense.

Reality CheckA need for a long-term plan

Early foreign entrants to the Chinese insur-ance market have invested heavily inpersonnel and contacts for the last 20 years. Itis too late to get in the game for those foreigninsurance companies that are entering Chinasimply because most of their competitors aredoing it and are planning to copy the competi-tors' business models. Several foreign

insurance companies have been in and out ofthe Chinese market several times and invari-ably did poorly. To be successful, the foreigninsurance companies must have a long-termhorizon and stay with a steady game plan.

Competition in urban marketsIn urban areas, where foreign insurance

companies have most of their business, youngprofessional couples are delaying having chil-dren, just like their western counterparts.Their insurance needs are delayed. Thegrowth potential in this segment is limited ifforeign insurance companies do not explorenew products or services. If a foreign insur-ance company decides to stay in this segment,it should pursue profit instead of premiumvolume.

Stay ahead of competitionThe local companies have home court advan-

tage. They have a majority of the market. In thegroup market particularly, contact with theemployers is important. It takes a long time todevelop these relationships. The foreign insur-ance companies need to be innovative and stayahead of the competition. Successful products arecopied quickly. Resting on one's laurels will leadto reduced production in no time.

Evolving legal systemThe legal system is not well established in

China. There have been few lawsuits involvinginsurance matters, but fraud is prevalent in theusage of health coverage. The insurance compa-nies and health care practitioners must avoidfalling into the abyss of defensive medicine.There have been a few reported cases of foreigninsurance companies caught breaching the law,in areas such as under reporting of income orcontracting with agents illegally.

Unprofitable health productsSales for health insurance coverage are

rising as fast as for life coverage. But mostinsurers are not operating profitably on thesepolicies. Insurers have no mechanism for datacollection and viable utilization/claim controls.The Chinese Medical Association is in theprocess of building a database of disease classi-fication codes.

Chinese Insurance Market: ...


AlternativesMarket based products are not the cure-all

Prior to the opening of the market economy, thegovernment did provide basic protection for all. Thebarefoot doctors carried medical care to the remotecorners of the country. How far should the pendulumswing to the “everything for profit” mode? Is theprivately funded insurance model a good fit for apopulous country like China? There are vigorousdebates on Chinese Web sites on the merits of thedifferent approaches. Market based insurance productscannot solve all the insurance needs for the populace.

Provide the right productsBoth the foreign and domestic insurance

companies need to develop a new paradigm tosucceed. The successful companies are the onesthat react to the new market, accommodatedemanding customers, take advantage of newIT technology, and take command of riskmanagement skills. The products need to meetthe specific needs of the consumers with realis-tic assumptions based as much as possible onthe domestic experience.

Think radicallyTo reduce the cost of insurance products,

foreign insurance companies can try various costsaving approaches such as more intrusive under-writing, levelized commissions, and “productpurchased instead of sold (salary based product).”

These approaches have all been tried in theforeign insurers' home market and were unsuc-cessful due to legal/ cultural limitations orconflict with entrenched interests. But theseapproaches may work in the Chinese market.

ConclusionThe Chinese market is a great opportunity

for foreign insurance companies to becomeactive in a rapidly growing and modernizingeconomy with a huge population base. Throughcareful planning and wise collaboration withdomestic insurance companies, there is greatpotential for economic gain. Nevertheless, due toChina's unique economic and demographic qual-ities, alternative approaches to insuranceproducts may be required to achieve success.

Acknowledgements I would like toexpress my appreciation to my fellow membersof the Chicago chapter of the Chinese ActuarialClub. Some of the issues and data included inthis article came from comments and sugges-tions made at our semi-annual seminars.o


T he Society of Actuaries' InternationalExperience Study Working Group hasbeen conducting surveys of published

embedded value (EV) financial assumptionsbeginning with 2003 EV publications.3 Thisarticle updates the survey with 2006 data.

Companies Included in SurveyAegon AllianzAMP AvivaAXA CNPFortis Friends ProvidentGenerali Hannover ReHBOS Industrial AllianceING Irish Life & Perm.Legal & Gen Lloyds TSBManuLife Mitsui Munich Re Old MutualPrudential UK ResolutionStandard Life Swiss LifeSwiss Re T&DTokio Marine Zurich

The purpose of this survey is to provideinternational actuaries with benchmarkassumption data. Since many companies make

this information publicly available, no formaldata request was issued. Instead, the surveywas based on reports published on theInternet by 28 companies centered in Asia,Australia, Canada and Europe, many of whichare active internationally.

Each financial assumption presented inthis article is the average value of theassumption reported by all companies in their2006 embedded value reports. If no companiesreported a specific assumption in a givencountry, then that assumption is labeled “NA”to signify that data is not available. Somecompanies vary assumptions by calendar year,while other companies use a single assump-

tion; if a company varies an assumption bycalendar year, the value for the earliest periodis used in this study.

Limitations

Readers should use judgment wheninterpreting the results of the surveyand note that:

• When comparing one assumptionto another, it should be noted thatdifferent companies might becontributing data to differentassumptions, so that differencesbetween variables may reflectdifferences between companies,rather than differences betweenthe assumptions.

• Some cells include data from manycompanies, while others includedata from as few as one company.

SOA International Experience Survey—Embedded Value Financial Assumptionsby Charles Carroll,1 William Horbatt, and Dominique Lebel 2

1 Charles gratefully acknowledges the assistance of Yoshiaki Ito, FIAJ of Ernst & Young’s Tokyo office.2 Dominique gratefully acknowledges the assistance of Russell Gao of Towers Perrin’s Hartford office.3 International News, Issue 34, October 2004, Society of Actuaries, p. 19. Issue can be found at:

http://www.soa.org/library/international-section-news/isn0410.pdf , International News, Issue 36, July 2005, Society of

Actuaries, p. 28. Issue can be found at: http://www.soa.org/library/newsletters/international-news/2005/july/isn0507.pdf

and International News, Issue 40, November 2006, Society of Actuaries, p.8. Issue can be found at:

http://soa.org/files/pdf/ISN0611.pdf

SOA International Experience Survey …


Financial Assumptions fromSurvey

Financial assumptions presented in thisarticle include

(1) Discount rate—the risk discount rate(RDR) used to calculate the presentvalue of future distributable earnings.

(2) Implied discount rate—for companieswith market consistent embedded value(MCEV) calculations, the traditionalembedded value (TEV) discount ratethat would develop the same EV.

(3) Equity return—the total return oncommon stock investments.

(4) Property return—the total return oninvestments in real estate.

(5) Fixed return—the yield on a corporatebond portfolio held by an insurancecompany.

(6) Government return—typically the yieldon a 10-year bond offered by the localgovernment.

(7) Inflation—the rate used to increasefuture expenses and, possibly, revaluepolicy terms that are tied to inflation.

(8) Tax rates—income tax rates by jurisdiction.

These results are presented in two separatetables. Table 1 provides the number of compa-nies contributing data as well discount ratesfor TEV companies and the implied discountrate for MCEV companies. Table 2 contains therest of the financial data.

When reading Table 1, several thoughtsshould be kept in mind:

• The methodologies followed by the compa-nies to determine discount rates were asfollows:

• A methodology is considered marketconsistent if each cash flow is valuedconsistently with traded instruments thatdisplay similar risks. Thus, under theMCEV approach each cash flow isdiscounted using a risk discount rateappropriate for valuing similar cash flowsin the market.

• Companies following MCEV, strictly speak-ing, do not have risk discount rates thatare comparable to those used by companiesemploying a more traditional approach. Forcompanies employing an MCEV methodol-ogy, discount rates in Table 1, which arelabeled “Implied Discount Rate” are theRDR inferred from the MCEV calculation.That is, they are discount rates that woulddevelop the same embedded value usingTEV techniques.

• Companies that explicitly set discountrates are referred to as calculating tradi-tional embedded values (TEV). Twocommon methods used by them are thecapital asset pricing model (CAPM) andthe company's own weighted average costof capital (WACC).

• Under CAPM, many companies assume alevel of volatility that matches the broadmarket (i.e., Beta is equal to 1), whichresults in a discount rate that is equal tothe risk-free rate plus an average equityrisk premium. Other companies employingCAPM methodology may vary discountrates by product line to reflect the higherBeta associated with riskier business.

In last year's study, out of 30 companiesstudied, 15 reported using some form ofmarket consistent methodology. In this year'sstudy, the authors adopted a stricter defini-tion of what it means to be on an MCEVbasis. The definition is outlined in the secondbullet above. As a result of the stricter defini-tion, four companies that were classified asMCEV companies last year were classifiedunder one of the other categories this year. Inaddition, two companies classified as MCEVlast year did not publish results this yearbecause they were acquired. Four companiesthat were classified under other methods lastyear were classified as MCEV this yearbecause they reported a change to a methodol-


Methodology Number ofCompanies

MCEV 13

CAPM 5

WACC 4

Not Disclosed 6

Charles Caroll, FSA,

MAAA, FCA is a part-

ner at Ernst & Young

LLP in New York, N.Y.

He can be reached

at charles.carroll@

ey.com.

William R. Horbatt, FSA,

MAAA, is a consulting

actuary with Actuarial

Consortium in Short

Hills, NJ. He can be

reached at Horbatt@

ActuarialConsortium.

com.

Dominique Lebel, FSA,

MAAA, FCIA, is a

senior consultant at

Towers Perrin in San

Francisco, Calif.

He can be reached

at Dominique.Lebel@

towersperrin.com.


SOA International Experience Survey … | from page 23

ogy that met the strict definition of MCEVutilized in this year's study. Thus, althoughthe net change in companies on an MCEVbasis is a reduction of two, this does not indi-cate a reduction in the interest in MCEV. Infact, we expect the progression from TEVs toMCEVs to continue to increase.

When reading this and other tables, itshould be noted that some companies useidentical assumptions for multiple countries(on the basis that this results in immaterialdifferences), and this practice would tend todampen differences between countries.

Traditional

CompaniesDiscount

Rate Companies (In Force)(New

Business)Country

(1) (2) (3)Africa

South Africa 0 NA 1 10.8% 10.8%America Latin

Brazil 1 19.1% 0 NA NAChile 1 10.7% 0 NA NAMexico 2 12.8% 0 NA NAPeru 1 13.7% 0 NA NA

America NorthCanada 4 7.4% 1 6.6% 6.6%US 7 7.8% 3 11.4% 12.1%

Asia / PacificAustralia 2 9.0% 1 7.9% 7.2%China 3 10.5% 0 NA NAHong Kong 3 8.3% 1 7.6% 7.2%India 2 14.5% 0 NA NAIndonesia 1 17.5% 0 NA NAJapan 6 6.4% 1 9.8% 4.4%Malaysia 2 9.1% 0 NA NANew Zealand 2 9.5% 0 NA NAPhilippines 1 16.5% 0 NA NASingapore 1 6.9% 0 NA NASouth Korea 2 8.9% 1 NA 8.6%Taiwan 3 7.1% 0 NA NAThailand 2 12.1% 0 NA NAVietnam 1 16.5% 0 NA NA

Europe CentralBulgaria 1 7.9% 0 NA NACzech 2 8.2% 0 NA NAGreece * 2 7.1% 0 NA NAHungary 2 9.8% 0 NA NAPoland 3 8.8% 0 NA NARomania 1 10.7% 0 NA NARussia 1 11.3% 0 NA NASlovakia 2 8.8% 0 NA NA

Europe WesternAustria * 1 6.8% 1 6.3% 6.2%Belgium * 3 7.3% 2 7.5% 6.4%Finland * 1 6.8% 0 NA NAFrance * 6 7.0% 3 6.3% 6.4%Germany * 2 7.4% 4 6.1% 5.5%Ireland * 3 7.0% 1 5.7% 5.7%Italy * 3 6.6% 3 6.4% 5.7%Luxembourg * 3 7.3% 1 7.0% 7.0%Netherlands * 6 7.1% 2 7.5% 6.4%Portugal * 1 6.8% 1 6.6% 5.8%Spain * 4 7.0% 2 6.5% 6.0%Sweden 0 NA 1 6.9% 6.9%Switzerland 1 7.0% 1 5.4% NAUK 7 7.7% 5 6.9% 6.8%

* euro currency zone

Implied Discount Rate

Table 1: Average 2006 Explicit and Implicit Discount Rates



Several observations can be made concern-ing Table 1 when compared to similar datapublished last year:4

• MCEV implied discount rates are mostprevalent in South Africa, the UnitedStates and Western Europe while onlyTEV discount rates are found in CentralEurope and Latin America.

• MCEV implied discount rates arefrequently lower than TEV discount rates,particularly with respect to new business.A number of companies in their EVreports attribute lower implied riskdiscount rates on new business to changesin either contract terms or sales mixwhich have reduced the value of contractoptions and guarantees (particularly mini-mum interest rate guarantees).

• Exceptions to this observation includethe U.S. and Japanese implieddiscount rates which reflect the highvalue of options of guarantees.

• TEV discount rates generally increased fromlast year in the United States and Europe,frequently by 0.3 percent to 0.5 percent.Results were mixed outside these regions.

The second table presents the balance of thefinancial assumptions used in embedded valuecalculations that we surveyed. Note that:

• Equity and property returns normallyinclude both cash income (that is, stock-holder dividends and rental payments)and asset value appreciation (or deprecia-tion), and these yields may be reportednet of investment expenses. Alternatively,equity returns may represent a fundappreciation prior to any fees or chargesmade against the fund. In all cases, equityand property returns will be influenced bycompany investment strategy.

• Fixed returns reflect the investments inan insurer's bond portfolio. Amortizedbook yields are typically used in coun-tries where book profits are based onamortized book value, while currentmarket redemption yields are used whenprofits are calculated using marketvalues. Companies generally do notdisclose whether the fixed incomereturns are net of defaults or investmentexpenses.

• The inflation assumption may differ fromgeneral inflation (for example, theincrease in a consumer price index).

• Tax rates are dependent upon individualcompany circumstances (for example, theexistence of tax loss carry forwards) andthus these rates cannot necessarily beapplied to other companies.


4 ibid

CompaniesEquityReturn

PropertyReturn Fixed Return

GovernmentReturn Inflation

Income TaxRates

Country(4) (5) (6) (7) (8) (9)

AfricaSouth Africa 2 11.4% 9.4% 7.9% 8.1% 4.9% 32.0%

America LatinBrazil 1 NA NA 12.7% 8.2% 4.0% 34.0%Chile 1 NA 11.2% 7.8% 6.4% 3.0% NAMexico 2 12.0% NA 8.6% 7.9% 3.9% 40.0%Peru 1 NA NA 8.3% 7.4% 2.0% NA

America NorthCanada 6 7.9% 8.6% 4.7% 4.3% 1.9% 34.3%US 14 8.6% 6.6% 5.9% 5.0% 2.4% 34.7%

Asia / PacificAustralia 4 9.8% 7.8% 6.1% 6.1% 2.9% 30.0%China 4 8.2% 3.6% 4.3% 4.9% 3.5% 33.0%Hong Kong 5 8.1% 7.3% 5.7% 4.8% 1.4% 14.4%India 2 8.3% NA 6.5% 9.3% 5.3% NAIndonesia 2 15.1% 13.3% NA 11.3% 6.5% NAJapan 7 6.6% 5.0% 2.4% 1.9% 0.5% 36.1%Malaysia 4 9.5% 5.0% 5.8% 5.4% 2.8% 8.0%

New Zealand 2 9.0% 8.0% 6.7% 6.4% 2.6% NAPhilippines 1 NA NA NA 10.5% 5.5% NASingapore 1 9.3% NA NA 4.5% 1.8% NASouth Korea 3 9.1% 6.1% 5.1% 5.1% 2.9% 27.0%Taiwan 4 6.5% 2.6% 3.1% 3.2% 2.1% 25.0%Thailand 2 NA NA 6.4% 6.9% 1.9% NAVietnam 1 NA NA NA 10.5% 5.5% NA

Europe CentralBulgaria 1 NA NA 4.1% 4.1% 1.9% NACzech 3 8.0% 4.7% 4.2% 4.0% 2.5% 24.0%Greece * 2 7.0% NA 4.2% 4.1% 1.9% NAHungary 3 10.5% 9.1% 6.8% 7.0% 2.5% 20 0%

Table 2: Average 2006 Financial Assumptions



Mexico 2 12.0% NA 8.6% 7.9% 3.9% 40.0%Peru 1 NA NA 8.3% 7.4% 2.0% NA

America NorthCanada 6 7.9% 8.6% 4.7% 4.3% 1.9% 34.3%US 14 8.6% 6.6% 5.9% 5.0% 2.4% 34.7%

Asia / PacificAustralia 4 9.8% 7.8% 6.1% 6.1% 2.9% 30.0%China 4 8.2% 3.6% 4.3% 4.9% 3.5% 33.0%Hong Kong 5 8.1% 7.3% 5.7% 4.8% 1.4% 14.4%India 2 8.3% NA 6.5% 9.3% 5.3% NAIndonesia 2 15.1% 13.3% NA 11.3% 6.5% NAJapan 7 6.6% 5.0% 2.4% 1.9% 0.5% 36.1%Malaysia 4 9.5% 5.0% 5.8% 5.4% 2.8% 8.0%

New Zealand 2 9.0% 8.0% 6.7% 6.4% 2.6% NAPhilippines 1 NA NA NA 10.5% 5.5% NASingapore 1 9.3% NA NA 4.5% 1.8% NASouth Korea 3 9.1% 6.1% 5.1% 5.1% 2.9% 27.0%Taiwan 4 6.5% 2.6% 3.1% 3.2% 2.1% 25.0%Thailand 2 NA NA 6.4% 6.9% 1.9% NAVietnam 1 NA NA NA 10.5% 5.5% NA

Europe CentralBulgaria 1 NA NA 4.1% 4.1% 1.9% NACzech 3 8.0% 4.7% 4.2% 4.0% 2.5% 24.0%Greece * 2 7.0% NA 4.2% 4.1% 1.9% NAHungary 3 10.5% 9.1% 6.8% 7.0% 2.5% 20.0%Poland 4 8.8% 6.7% 5.6% 5.3% 2.4% 19.0%Romania 1 9.4% NA 6.6% 6.4% 1.9% NARussia 1 NA NA 7.4% 7.2% 5.5% NASlovakia 2 8.5% 5.3% 5.0% 4.5% 2.5% 19.0%

Europe WesternAustria * 4 7.5% 4.8% 4.0% 4.1% 1.8% NABelgium * 8 7.5% 5.4% 4.3% 4.1% 1.9% NAFinland * 1 7.4% NA 4.0% 3.9% NA NAFrance * 11 7.2% 5.7% 4.2% 4.0% 2.1% 34.3%Germany * 9 7.4% 5.5% 4.6% 3.9% 2.1% 39.9%Ireland * 6 7.3% 5.7% 4.0% 4.0% 3.9% 12.5%Italy * 9 7.2% 5.6% 4.4% 4.0% 2.1% 35.7%Luxembourg * 6 7.4% 5.6% 4.5% 4.1% 2.9% 25.2%Netherlands * 11 7.4% 5.8% 4.3% 4.0% 2.1% 25.5%Portugal * 4 7.7% 5.4% 4.4% 4.0% NA NASpain * 10 7.4% 5.7% 4.3% 4.0% 2.0% 30.0%Sweden 2 6.8% 5.3% NA 4.0% 3.1% 28.0%Switzerland 4 7.1% 4.6% 3.2% 3.1% 0.8% 22.0%UK 16 7.7% 6.7% 4.9% 4.7% 3.3% 30.0%

* euro currency zone

Table 2: (Cont …)Average 2006 Financial Assumptions

Several observations can be made concern-ing Table 2 when compared to similar datapublished last year:5

• Asset returns almost universallyincreased in Western Europe and NorthAmerica, generally increased in CentralEurope and were mixed in Asia.

• Inflation rates did not follow a distinctpattern, which is somewhat surprisinggiven the general increase in interestrates.

Investment Premiums andOther Marginal Relationships

Investment premiums are the additionalyield an investor is expected to receive bypurchasing an asset other than a governmentbond. For those companies calculating MCEVs,the actual size of the investment premiums isnot important, as any differences relative to

government bonds are backed-out in the cali-bration of the risk discount rate. What isimportant for these companies is the definitionof the risk-free rate of return (e.g., governmentbond yield, swap yield) and whether, for illiq-uid liabilities, there is any addition for anassumed liquidity premium.

• Equity Premium—the excess yield frominvesting in common stock over the returnon government bonds.

• Property Premium—the excess yield frominvesting in real estate over the return ongovernment bonds.

• Credit spread—the excess yield frominvesting in a mix of corporate andgovernment bonds over the return ongovernment bonds.

In addition the following two marginal rela-tionships may be of interest:

5 ibid



• Risk premium—the excess of the tradi-tional embedded value discount rate overthe return on government bonds.

• Real return—the excess of the govern-ment return over inflation.

Table 3 presents the marginal relationshipsderived from Table 2. The column numberingcontinues the numbering in the prior table.

TraditionalRisk Premium

EquityPremium

PropertyPremium Credit Spread Real Return

Country(10)=(1)-(7)** (11)=(4)-(7)** (12)=(5)-(7)** (13)=(6)-(7)** (14)=(7)-(8)**

AfricaSouth Africa NA 3.5% 1.5% 0.0% 3.0%

America LatinBrazil 10.9% NA NA 4.5% 4.2%Chile 4.3% NA 4.8% 1.4% 3.4%

Mexico 4.9% 5.0% NA -0.1% 4.0%Peru 6.3% NA NA 0.9% 5.4%

America NorthCanada 3.2% 3.5% NA 0.6% 2.4%

US 2.9% 3.7% 1.5% 1.1% 2.4%Asia / Pacific

Australia 3.1% 3.8% 1.8% 0.1% 3.1%China 5.0% 4.7% 0.6% 0.6% 2.0%

Hong Kong 3.5% 2.9% NA 0.8% 2.5%India 5.2% 0.2% NA -1.6% 4.1%

Indonesia 6.0% 4.0% 2.2% NA 5.0%Japan 4.5% 4.9% 3.1% 0.6% 1.2%

Malaysia 3.1% 4.1% 0.8% 0.8% 3.3%New Zealand 3.1% 3.0% 2.0% 0.3% 3.9%

Philippines 6.0% NA NA NA 5.0%Singapore 2.4% 4.8% NA NA 2.8%

South Korea 3.8% 4.0% 1.0% -0.1% 2.2%Taiwan 3.5% 4.1% 0.4% 0.5% 1.4%

Thailand 5.2% NA NA 0.3% 4.0%Vietnam 6.0% NA NA NA 5.0%

Europe CentralBulgaria 3.8% NA NA 0.0% 2.2%

Czech 4.1% 4.0% 0.8% 0.0% 1.7%Greece * 3.0% 2.9% NA 0.1% 2.4%Hungary 3.1% 3.4% 2.3% 0.1% 4.3%

Poland 3.6% 3.5% 1.1% 0.3% 2.8%Romania 4.3% 3.0% NA 0.2% 4.5%

Russia 4.1% NA NA 0.2% 1.7%Slovakia 4.3% 4.0% 0.9% 0.0% 2.1%

Europe WesternAustria * 2.9% 3.4% 0.7% 0.1% 2.2%

Belgium * 3.3% 3.4% 1.3% 0.3% 2.2%Finland * 2.9% 3.5% NA 0.1% NAFrance * 3.0% 3.2% 1.7% 0.3% 2.0%

Germany * 3.5% 3.7% 1.8% 1.3% 2.0%Ireland * 3.0% 3.3% 1.7% 0.1% 0.1%

Italy * 2.6% 3.2% 1.6% 0.7% 2.0%Luxembourg * 3.3% 3.4% 1.6% 0.5% 1.3%Netherlands * 3.1% 3.3% 1.8% 0.3% 1.9%

Portugal * 2.9% 3.8% 1.5% 0.7% NASpain * 3.0% 3.4% 1.7% 0.5% 2.1%

Sweden NA 3.0% 1.5% NA 0.7%Switzerland 4.5% 3.9% 1.5% 0.5% 2.0%

UK 3.0% 3.1% 2.1% 0.3% 1.3%

* = euro zone** = calculated including only companies with complete data

Table 3: Investment Premiums and Other Marginal Relationships


A few observations can be made whencomparing Table 3 to last year's results:

• Equity premiums generally increased,except in North America and several othercountries.

• Property premiums generally decreased orremained level.

• Credit spreads increased or decreased inequal proportions.

• Real returns generally increased except inAsia.



6 See http://www.cfoforum.nl/ for more information on the European CFO embedded value guidelines

Scenarios Number ofCompanies

100 to 200 1

1,000 4

5,000 1

Please note that the data is relativelysparse outside of Western Europe and NorthAmerica, so observations and conclusions couldbe different if additional data was available.

Stochastic Market AssumptionsA number of European companies are calcu-

lating the values of options and guaranteesfollowing stochastic approaches in order tocomply with European CFO Forum guidelines6

for embedded value calculations. Seventeen ofthe 28 companies surveyed disclosed stochasticmarket assumptions in their 2006 Europeanembedded value (EEV) reports. Averages ofseveral of these assumptions are shown inTable 4 below (volatility may also be referredto as standard deviation).

Note that some companies reported volatil-ity without reporting yields. Some companiesdetermined volatilities from historical marketexperience while others measured the impliedvolatility in current derivative prices, whichmay result in significant differences betweencompanies.

Six companies disclosed the number ofscenarios used to calculate the values ofoptions and guarantees. As can be seen fromthe table below, four of the six companies use1,000 scenarios.

SummaryThe SOA International Experience Study

Working Group (IESWG) publishes this survey toenhance the knowledge of actuaries aboutcurrent international market conditions andpractices. Practices continue to evolve and wewish to encourage an open discussion on appro-priate methodologies and further disclosure ofboth assumptions and the thoughts behind theirformulation.

The IESWG intends to continue to update thissurvey annually. We invite additional companiesto provide data on a confidential basis. To beincluded in this and future surveys, pleasecontact Ronora Stryker ([email protected]) or JackLuff ([email protected]) at the Society of Actuaries forfurther information.o

Stock Property BondsCompanies Yield Volatility Yield Volatility Yield Volatility Type

Europe 11 6.7% 21.0% 5.4% 14.1% 4.0% 7.0% GovernmentJapan 2 3.0% 18.5% 2.2% 10.2% GovernmentSo. Africa 1 11.4% 22.0% 9.8% 15.0% 7.9% 13.0% GovernmentSo. Korea 2 36.4% 5.1% 6.4% GovernmentSwitzerland 2 18.4% 17.0% 3.3% 17.4% GovernmentUK 9 5.0% 20.5% 4.5% 15.9% 4.8% 6.7% GovernmentUS 9 8.0% 19.2% 16.9% 5.1% 9.4% Government

Table 4: Sample Stochastic Assumptions


Whilst not required by South African Law,courts in South Africa place a strong emphasis onactuarial evidence in damages claims. The vastmajority of damages claims passing throughSouth African Courts arise out of road acci-dents—in 2004 alone there were 12,709 deaths onSouth African roads. This article briefly describesthe background of the Road Accident Fund andactuarial involvement in assessing the amount ofdamages arising from road accidents in SouthAfrica.

The Road Accident FundThe Road Accident Fund (RAF) is the product

of a long history spanning more than 60 years,which commenced with the introduction ofcompulsory motor vehicle insurance through TheMotor Vehicle Assurance Act of 1942. Thisstatute provided for compulsory insurance toensure victims could recover damages, whichwere caused unlawfully by motor vehicles. Themain thrust of the initial legislation was toafford protection to persons not in or on a partic-ular vehicle, i.e., pedestrians. During the 1960s itbecame apparent that certain insurance compa-nies had insufficient income to cover claims withthe result that several companies were liqui-dated. In 1965, the Motor Vehicle Accident Fundwas established to act as re-insurer to insurancecompanies which undertook compulsory MVAinsurance.

From 1942 to 1986 the legal basis and thefunding of the MVA system essentially remainedunchanged. The Motor Vehicle Accidents Act of1986, however, changed the compulsory insur-ance system with its statutory annual premiumsto one funded by a levy on fuel sold. The levy in2007 is 41.5 South African cents per litre ofoctane petroleum. Petroleum prices are set bythe South African Government and at presentthe price of one litre of octane petroleum inlandis R 6.88. The average exchange rate in 2007between the United States and South Africa hasbeen around R 7.16 to $1.

The 1986 Act also introduced the agencysystem in terms of which insurance companiescould act as agents for the MVA Fund tohandle and settle claims. The agency system

was undesirable and ineffective and wasphased out from 1993 to 1997 and now allclaims are attended to by the RAF. The RoadAccident Fund Act of 1996 came into operationon May 1, 1997. This act established the pres-ent RAF whose objective is to paycompensation in accordance with applicablestatutes for personal loss or damage wrong-fully caused by the driving of motor vehicles.

The present MVA system indemnifies thedriver or owner of a motor vehicle againstliability incurred as the result of loss ordamage wrongfully caused to another personin road accidents. The RAF only indemnifiesthe driver or owner to compensate for lossessuffered due to bodily injuries sustained or thedeath of a person, and not also for liabilitieswhich the driver or owner may incur fordamage to property (e.g., damages to motorvehicles, personal affects, buildings, luggage orgoods conveyed in a vehicle). Common lawprinciples of wrongdoing are incorporated inthe legislation. Thus during the assessment ofclaims the respective degrees of fault of thevictim and the wrongdoer have to be deter-mined. The victim's claim is reduced by hisown degree of fault or blame for the accident.Claims fall under various types of damages asdescribed below.

Actuarial Involvement in Road AccidentFund Claims in South AfricaBy Greg Whittaker

Gregory Whittaker,

ASA, MAAA, FCA, is an

actuary at Algorithm

Consultants and

Actuaries in

Johannesburg, South

Africa. He can be

reached at

gwhittaker@

iburst.co.za.



Actuarial Involvement in Road Accident ... | from page 29

Treatment of ClaimsPersonal Injury ClaimsClaims for personal injury under the RAF Actare separated into various types, viz.

• Past medical and hospital expenses • Future medical expenses • Past loss of earnings • Future loss of earnings • General damages.

Under personal injury claims, past medicaland hospital expenses can be recovered fromthe RAF provided they can be proved by theclaimant. Future medical expenses arenormally settled via an undertaking by theRAF and also do not require actuarial compu-tation. An undertaking is simply a contractbetween the RAF and the victim by which theRAF reimburses any reasonable expenses thatthe victim incurs as a result of the motor vehi-cle accident. The victim has to incur the costfirst and then that cost is recovered from theRAF—a system that has come under criticismespecially from seriously injured victims.General damages are damages paid for painand suffering, permanent loss of amenities oflife, disfigurement and emotional trauma.General damages are normally awarded byreference to past cases and do not require actu-arial involvement.

Actuarial involvement in personal injuryclaims normally extend to computations inrespect of past and future loss of earnings only.The future loss of earnings component howeveris typically the largest component of the totalamount of damages in larger RAF claims.

Death ClaimsClaims in the event of a death under the

RAF Act are separated into claims for:• Funeral expenses,• Past and future loss of support and • Emotional shock.Under death claims, reasonable and neces-

sary funeral expenses can be recovered fromthe RAF. In addition, if a claimant is proven tohave suffered psychological injury (for examplethe deceased's spouse may have been witnessto the accident), then a claim for psychiatriccounseling may succeed. Neither of thesecomponents requires actuarial input.

Actuarial involvement in death claimsextend to computation in respect of past andfuture loss of support only.

Actuarial Involvement Damages for both past and future loss of

earnings and past and future loss of supportare settled by means of a lump sum capitalpayment. Legislation was drafted in 2006 tochange this system to allow the RAF to settledamages by means of monthly instalments, butthere have been numerous problems and chal-lenges to the legislation to date. At this stagethe exact operation is still murky and in someinstances the RAF will continue to settle lossesunder the above-mentioned types of damageswith lump sum payments.

Past and Future Loss of EarningsComputations

The information required to perform theactuarial calculations will normally besupplied by the claimant's legal representative.In this regard, details of the claimant's date ofbirth, date of accident, earnings at the date ofthe accident and earnings since the date of theaccident (if any) will normally be gathered bythe attorney.

The projection of earnings had the accidentnot occurred and the projection of earningsnow that the accident has occurred (if any) willbe ascertained from various medical-legalreports such as those prepared by remunera-tion consultants or industrial psychologists.Alternatively the attorney will provide specificinstructions in this regard.

Actuarial Involvement in Road Accident ...


Evidence in respect of earnings is normallyprovided by means of pay-slips, personalincome tax returns and an employer question-naire. There is no standard employerquestionnaire and often the employer omitsrelevant details; hence, the actuary needs totake great care in dealing with such evidence.

Factors that are normally commented on bythe relevant experts will include the likelyretirement age of the claimant had the acci-dent not occurred, the likely retirement age ofthe claimant post-accident (if the claimant isstill employable) and any reduction in lifeexpectancy as a result of the accident. Theactuary may also conduct telephonic inter-views with the various experts or with theemployer to ascertain additional details suchas membership in an employer pension fundand fringe benefits that may be included in thecomputations, such as bonuses.

Once all the relevant details have been ascer-tained, the past and future loss of earnings iscomputed. In particular, personal income tax isapplied as the claimant is not liable for taxationon the award for past and future loss of income.No interest is added to past losses, butallowance is made for salary inflation from thedate of the accident to the date of computation.Future losses are determined by allowing forsalary inflation (and possibly merit or promo-tional increases depending on the advice of theremuneration consultant or industrial psycholo-gist) and then discounting these losses at theassumed rate of investment return. The proba-bility of survival from year to year is factoredinto the computation and is based on theclaimant's post-accident life expectancy.

Essentially, the computation is the presentvalue of an after tax earnings stream. The netdiscount rate (i.e., the difference between therate of interest and the base rate of salaryinflation) typically ranges from 2.5 percent to2.8 percent per annum compound. There is nocase law that stipulates the net discount rateto use, unlike countries such as the UnitedKingdom where a net discount rate of 2.5percent per annum is prescribed by statute.

As mentioned earlier, the computation isbased on the post-accident life expectancy of

the claimant. Claimants are normallysubjected to rigorous medical tests and inrecent times this has led to certain claimantsbeing found to be HIV-positive. This presents achallenge in projecting future life expectancywithin the broader controversies surroundinganti-retroviral treatment in South Africa.

Past and Future Loss of Support ComputationsFor loss of support computations, similar

information is required for the deceased asthat listed under the requirements for personalinjury claims. In addition, dates of birth of alleligible claimants are required. Generally thespouse (or partner) and children of thedeceased have valid claims. South African Lawdoes not permit claims on behalf of siblings,grandparents or grandchildren. Parents maysucceed with a claim provided they can provefinancial dependence.

If the spouse of the deceased was notemployed at the time of the death but subse-quently takes up employment due to financialhardship, then the claim is computed on thebasis that she is not working. That is, thespouse is under no duty to mitigate her lossesdue to the unlawful death. If the spouse wasemployed at the time of the accident thendetails of her earnings are also required inorder to determine if there is a claim.

In such instances South African Lawrequires that the income (after tax) of thedeceased and the income (after tax) of thespouse be pooled. The income is then appor-tioned (the courts have come to accept aformula allocating two shares of the income toan adult and one share to a child) betweeneach family member to determine their shareof the family income. Computations thenproceed on the basis that breadwinners lookafter themselves first. If there is any residuebetween their own net income and their shareof the combined family net income then that isallocated to the dependents.

The financial value of loss of support isassessed by taking into account the value ofthe chance of receiving the support for eachdependent. This involves assessing the proba-

“Actuaries have

already made a

significant contribu-

tion to the field in

terms of past case

law and will continue

to contribute to this

specialized area

with their unique

skills set.”



Actuarial involvement in Road Accident ... | from page 31

bility of survival of the deceased from the dateof the accident and the probability of survivalof the dependents from the date of computation(usually the present time) in future. Mortalityin respect of children is usually ignored as thishas a negligible effect on the overall amount.Proof must be provided to substantiate the ageto which a child will be dependent—this isnormally age 18 for a school leaver or age 21 or22 for a university student. The particulars ofthe case have to be assessed and relevantevidence (such as university enrolment certifi-cates) must be provided.

Adjustments to Claims In South African Law, any life insurance or

pension fund monies paid to the dependents arenot deductible from their claim for damages dueto unlawful death, so that an element of doublecompensation is inherent in the system.However, claims are adjusted for the chancesthat the spouse may remarry and for the acceler-ated receipt of inheritance monies (excluding lifeinsurance and pension fund monies.) Remarriagerates are based on culturally specific tablesderived from marriage and divorce census data.Claims are also adjusted for general contingen-cies negotiated by the attorneys for items such as

the chances of unemployment and savings due tonot incurring work travel expenses.

In personal injury matters, any employerdisability pension serves to reduce the claim,whereas personal insurance policies held bythe claimant (not related to the contract ofemployment) do not reduce the claim.

The RAF is the primary payer in the pres-ence of a Workmen’s Compensation claim. TheOffice of the Compensation Commissioner thathandles Workmen’s Compensation claims inSouth Africa recovers their disbursementsfrom the RAF.

ConclusionWhilst the computation of damages claims

applies fairly basic actuarial principles, thearea presents many challenges and provides abroad grounding in other areas such as retire-ment funds, human resources, demography,insurance and social security. Actuaries havealready made a significant contribution to thefield in terms of past case law and willcontinue to contribute to this specialized areawith their unique skills set.o


The University of the West Indies ActuarialSociety (UWIAS) was launched in 2002 at theUniversity’s Mona campus in Jamaica.Membership is open to all students studyingactuarial science and associate membership tofaculty, staff and students’spouses. TheSociety’s main purpose is to assist students inunderstanding the professional field of actuar-ial science, as well as to foster interaction andto facilitate communication between studentsand prospective employers.

The first Executive Committee, which servedfrom 2002-2003, was inspired by a wish for moreinteraction with the actuarial community andintegration of the actuarial science year groupsat the university. In the first year of the club, twomembers of the Caribbean Actuarial Association,Mrs. Janet Sharp, FSA, and Mr. Astor Duggan,FIA, visited and shared their different perspec-tives on actuarial practice with the members.Actuarial students have had an open invitationto attend the student sessions whenever theCaribbean Actuarial Association’s (CAA) confer-ence is held on the island.

UWIAS hosted its first annual AwardsCeremony and Dinner on Sunday Feb. 11, 2007at the Terra Nova Hotel. This provided anopportunity for interaction between actuaries,other members of the CAA and actuarialscience students, whilst honoring top studentsfor excellent academic performance.

The function was attended by many topJamaican actuaries, including the guest ofhonor, the first black female fully certifiedactuary (FIA 1970), the Honorable Mrs. DaisyMcFarlane-Coke O.J., C.D., FIA, affectionately

known as “the grandmother of all Jamaicanactuaries.”

Ms. Cathy Lyn FSA, FIA, newly appointedSociety of Actuaries’ Ambassador to Jamaica,graced the attendees with an inspiring speech.She commended the UWIAS’ efforts in bring-ing together the practicing actuaries and thestudents, stating that the “mixing of genera-tions is part of developing a culture whichcontributes to strengthening the professionand building bonds which are good for thefuture.” She also called for actuaries to makecontributions in areas including: the develop-ment of social policy, identifying andaddressing relevant issues of concern to theprofession, publishing a position statement orissuing a press release and contributing topolicy in health, long-term care, and personal

The University of the West IndiesActuarial Society

by Shani Bryan

Guest of honour Hon Daisy McFarlane-Coke (left) and Director of Actuarial SciencesMr. St. Elmo Whyte (2nd right) mingle with the UWIAS Executive: President Rohan Hall,Secretary Shani Bryan, Vice President Kerron Blandin, PRO Karla Guthrie & TreasurerTameeka Howard

Shani D. Bryan is a

second-year student

at UWI’s Mona campus

in Jamaica, pursuing a

degree in actuarial

science. She is the

secretary of the UWI

Actuarial Society. She

can be reached at

shani.bryan@

gmail.com.



The University of the West Indies … | from page 33

finance. Ms. Lyn also mentioned, in particular,the current work needed to strengthen theretirement system as pension reform takesplace in Jamaica.

The prize-giving segment of the eventsought to recognize outstanding performancefor the previous academic year. Awards forobtaining first class honors degrees in actuar-ial science went to Andre Brown, Anika Peart,Candice Green, Mikhail Francis and ShaynaStennett.

Recipients of awards for exceptionalperformance in the second year were CandaceRollock, Jeneve Jackson and Rohan Hall; whileGillian Jackson, Keneisha Powell, KeziaDalrymple, Rohanne Beckles and Shani Bryanwere honored for outstanding performance inthe first year. Additionally, Mr. W. St. ElmoWhyte, FIA, and Ms. Yvette Johns, ASA, direc-tor and coordinator of the actuarial scienceprogramme respectively, were awarded tokensof appreciation for their contributions to theUWIAS.

The UWIAS’ main project, the mathematicstutoring program, was the focus of PresidentRohan Hall's speech. October and November of2006 saw the Society at Jamaica College, awell-known high school for boys on the island.The aim was to tutor mathematics at theCaribbean Advanced Proficiency Examinations

(CAPE) level (equivalent to GCE A Levels) andto make the students aware of the field of actu-arial science. Students were given overviews oftopics covered in class and individual atten-tion. In March and April of 2007, attention wasdirected to Holy Childhood High School (forgirls) where a similar program is being under-taken.

Mr. Hall also implored actuaries and theirorganizations to follow the lead of the CAA inassisting actuarial science students by offeringsummer internships or establishing a scholar-ship fund. Recently, the CAA donatedUS$10,000 to the actuarial program forpurchasing books for students.

Please visit the UWIAS Web site athttp://uwiactscisoc.tripod.com/index.html o

Awardees of first class honours degrees in actuarial science in 2006 : MikhailFrancis, Candice Green, Andre Brown, Shayna Stennett and Anika Peart(missing from photo)

“It is too simple to say that work until youdrop is the answer to the pensions problems weface.”—General Secretary of the (British)Trades Union Confederation

First, the good news—mortality at the olderages is improving at the best trot ever!

Second, the bad news—the rate of improve-ment far exceeds actuarial projections!

In Japan, the babyboom ‘dankai’ (big clus-ter) generation is reaching normal retirementage at 60. In 2005, 3.3 workers supported eachJapanese retiree; by 2015 that ratio is expectedto have fallen to 2.4.

How can this tsunami of retirees besupported? The issue confronts policymakers inall advanced economies.

Traveling from a pattern of islands off thenortheast coast of the Eurasian landmass to anarchipelago off its northwest shore, we reach theBritish Isles—where a week is a long time inpolitics. With politicians playing politics, retirees-to-be are left to muddle through—under aterrible malediction. I must give favorablemention to the politicians’ answer to Britain’spension problems: In 1997 one policymakerimposed a GBP (pounds) 5 billion (US$10 billion)per annum tax on company pension plans. Taxes—added to low returns, increasing longevity andinadequate advance provision - have broken thebacks of defined benefit (DB) pension funds, caus-ing many to close and some to collapse—whilethe Department of Tramways, Fine Arts andPension Supervision lolled languidly. TheEuropean Court has found British pension super-vision ‘inadequate.’ The High Court has orderedthe British Government to review its decision notto compensate pensioners of failed funds. Thegovernment has said compensation would costGBP 15 billion (US$ 29 billion).

Research by a transatlantic firm of consult-ing actuaries tells us that in Britain the daysof two-thirds final salary pensions are gone—today’s employees must expect far less.

We have regressed—we have gone far back-wards!

Mortality and Interest Rate Riskin Pension Plans

In the United Kingdom—as in the UnitedStates—corporate defined benefit pensionplans are becoming extinct. Defined benefit(DB) pension plans face both mortality andinterest rate risks. Currently many British DBpension plans are being closed to new entrants;later closed plans have benefit accrual termi-nated for remaining members. In happiertimes, open and growing DB plans couldcontrol their mortality risk by employingdynamic mortality tables. For today’s closedand contracting DB plans, the mortality risk ismuch greater—particularly at the higher ages.In mathematical terms, the ratio of the stan-dard deviation to the expected number ofsurvivors increases ever more rapidly with age.

DB pension funds may mitigate interestrate risk by investing in cashflow-matchedbond portfolios. In the United Kingdom, thelongest ‘gilts’ (British government security)mature in 2038, 2046 and 2055. (There aresmall volumes of ‘undated’ gilts redeemable atgovernment option.) Corporate bonds tend tobe shorter but offer higher redemption yields.Similarly, wage inflation risks can be reducedby investing in index-linked gilts.

Traditionally, DB pension plans handledtheir risk from improving mortality by employ-ing projected (static) mortality tables ordynamic mortality tables incorporating rates ofmortality improvement (for each age and sex).Today the grave problem of mortality risk canbe reinsured and soon securitized.

Dark clouds above the heads of working folkhave a silver lining for insurers acting aspension undertakers. Indeed, so lucrative isundertaking that new firms of pension under-takers are being formed to challenge the oldfamily firms. In the United Kingdom, buyingout corporate pension plans (using bulkpurchase of payout and deferred life annuities)is the acceptable face of opportunism.

In the pension buyout market a specialistpension broker will approach highly-reputedinsurers on behalf of a DB pension plan, provid-

Pension Regressionby P.G. Alistair Cammidge



P.G. Alistair Cammidge,

FSA, FIA, describes

himself as a professional

expatriate and climatic

refugee currently with

TIAA-CREF in Charlotte,

N.C. He can be reached

at acammidge@

tiaa-cref.org.


Pension Regression | from page 35

ing details of current and/or deferred pensionersand contingent beneficiaries. Insurers placecompetitive quotations of their charges toassume the risks. The low bid wins! Thepremium may be a one-off for a full buyout,installment premiums over a period of years orsegmented—with only the risks associated withpensioners being transferred.

A new alternative is to securitize thelongevity risk faced by both DB pension plansand insurers writing life annuities.

A mortality or survivor derivative is a finan-cial instrument with a mortality-dependentpayout. The first proposals were “survivor” or“longevity” bonds whose coupons are propor-tionate to the survivors of some cohort of lives.

The first survivorship bond was proposed in2001. In 2005, the European Investment Bank(EIB—a tentacle of the European government),a leading French retail bank and a Bermudareinsurer launched a GBP 540 million 25-yearlongevity bond, with coupons proportionate tothe number of survivors of the English andWelsh male population aged 65 in 2003.Projected coupons were valued at LIBORminus 35 basis points to give the issue price.The greater volatility of elder mortality makeslittle difference in pricing—but a big differencein hedging! (Payment indexation was lagged toallow for calculation and publication of statis-tics.)

Observe the absence of a specific capitalrepayment—thus the bond mimicked a portfo-lio of employee pensions. Purchase of such abond would considerably mitigate a DB plan’songoing mortality improvement risk by spread-ing it across the market. Combiningheavyweight intellect with lightweight judg-ment, the market proved excessively cautiousabout a little-understood instrument; the bondwas only partially subscribed, then withdrawnfor redesign. However, the banks receivedmuch favourable publicity!

Several reasons excuse the slow take-up ofthe bond by the market. At 25 years, the bondprovided a less effective hedge than a longerbond. Similarly, it would be a less effectivehedge for other age cohorts and females.

Perhaps the most serious problem was thelarge amount of capital required in relation tothe reduction in risk exposure.

Securitizing excess mortality has been moresuccessful. The first such bond was issued bySwiss Re in December 2003. Maturity was fouryears, with investors receiving a coupon of USLIBOR plus 135 basis points. The principalrepayment was at risk if the weighted averageof general population mortality in five specifiedcountries exceeded 130 percent of the 2002level in any year. In April 2005 the Swississued a second bond and in November 2006,the Swiss placed $ 442 million in a catastrophemortality securitization on behalf of AXA. Theissue was oversubscribed.

Other mortality and survivorship instru-ments have been suggested. An example is asurvivorship swap in which two parties agreeto exchange two payments at an agreed futuretime. One payment is fixed; the other isdependent upon some mortality index or popu-lation cohort. Such an arrangement does notrequire the expense of a bond issue—just twowilling parties.

Investment banks and financial institutionsare investing time and effort in solving theproblems associated with longevity, for exam-ple the increased stochastic volatility ofmortality at the older ages. Longevity will bethe new frontier for financial derivatives!

But this is old claret in new bottles. Does itamount to any more than rearrangingdeckchairs on the Titanic while British pensionsdisappear beneath the waves? The reality checkjust bounced! “What is to be done?” the late V.I.Ulyanov (a.k.a. Lenin) famously asked.

Public sector pensions begin at 60—privatesector employees will have to work till theydrop! Workers of the World—Unite! You have aright to a pension!

Further reading:Blake, D., A.J.G. Cairns and K. Dowd. 2006.

“Living with mortality: longevity bonds andother mortality-linked securities.” Presentedto the Faculty of Actuaries, 16th January2006. o

JULY 2007 | INTERNATIONAL NEWS | 37

US GAAP for International InsurersAfter two well-attended US GAAP seminars in Hong Kong during 2006 and 2007 and successful USGAAP seminars in Amsterdam and Sao Paulo, Brazil during 2007, the International and FinancialReporting sections are planning for additional seminars outside North America during 2008. The need forsuch seminars is demonstrated by over 300 attendees and some sessions oversold. Locations under consid-eration for 2008 include Hong Kong, Mexico City and Tokyo. Please stay current with upcomingdevelopments at the Society of Actuaries Web site.

The Pacific Rim Actuaries' Club of Toronto Calendar of Events:Founded in 1993, the Pacific Rim Actuaries’ Club of Toronto (PRACT) was established for actuaries withan interest in the Asia Pacific region.

The next PRACT business workshop will take place in November 2007

Our Annual Chinese New Year Dinner Meeting will be held in February 2008, with an exciting speakerfrom the United Kingdom who will discuss various topics concerning the insurance industry in Asia.

For more details on those events please keep checking our Web site: www.pacificrimactuaries.com.

Actuaries from all areas of practice are welcome to join our events.

2008 IAA Sections ColloquiaJoint IACA/IAAHS/PBSS ColloquiumBoston, MA, United StatesMay 4-7, 2008Web site: www.actuaries.org/Boston2008

38th ASTIN ColloquiumManchester, United Kingdom July 13-16, 2008Web site: www.actuaries.org/ASTIN2008

18th AFIR ColloquiumRome, ItalyOct. 1-3, 2008Web site: www.actuaries.org/AFIR2008

Joint Risk Management Section Creates InternationalCommitteeERM is an emerging actuarial specialty that is a new and important issue with insurers, regulators andrating agencies across the globe. The Joint Risk Management Section has created an InternationalCommittee to help to link our risk management efforts in North America to the actuarial risk managementefforts in other countries in other parts of the world. We are working with actuaries in other countries tocreate translations of our newsletter and forming an international network of actuaries who want to worktogether on risk management issues. For more information, contact David [email protected].

International News Announcements



Introducing the Chartered Enterprise Risk Analyst (CERA)DesignationA new designation—the Chartered Enterprise Risk Analyst (CERA)—is now available to help studentsand business professionals prepare for and seize opportunities in the evolving discipline of enterprise riskmanagement (ERM) within broader financial services, insurance, and pension markets.

The curriculum was carefully developed to meet current and future market needs while providing a rigor-ous treatment of critical ERM topics, including actuarial approaches to risk. Successful candidates willreceive the Chartered Enterprise Risk Analyst (CERA) designation and become an associate of the Societyof Actuaries.

The required examinations will be provided by the SOA and will include the following:• Exam P (Probability) • Exam FM (Financial Mathematics) • Validation by Educational Experience (VEE) Economics • Exam M (Actuarial Models) segment MFE • Exam C (Construction of Actuarial Models) • FSA-level Finance/ERM Exam (Advanced Finance / Enterprise Risk Management) • FSA-level Finance/ERM Module (Financial Reporting and Operational Risk) • Associateship Professionalism Course

To learn more about the Chartered Enterprise Risk Analyst (CERA) designation, e-mail Martha Sikaras [email protected] with your questions.

International News Announcements

Dear Ambassadors and International Section Members,

The International Section Council announces our Country Feature Article Competition. Here is a chance for

International Section members to win a cash prize. The PRIZE is US$2,000 for the writer and US$500 for the Ambassador

who co-authors and/or sponsors the entry. If you are not an International Section member, join the section for US$25

and enter before 31 December 2007. The winning article will be determined by the International Section Council.

All feature articles submitted will be published in the International News.

Markets vary by country due to such factors as local economy, regulations, consumer behaviors, social values and cul-

ture. The Country Feature Competition provides you with a forum to share interesting facts, statistics, or experiences

that reflect your country's special qualities. We look forward to reading your entries.

Your article can be about any topic or topics that you find informative and interesting. It might be about local actuarial

organizations and activities, the actuarial profession in traditional or wider fields, financial products, or the business sec-

tor in your country. It might be about a product and why it's successful or how it failed. It could be an industry event

or a market situation. It could be a story or a statistical analysis. Perhaps the article would start with "Do you know that

...?" or a list of "the top 10 reasons why you would want to be an actuary in my country". The choice is yours!

Please contact me or any council member should you have any questions regarding the following:

Eligible Authors:

• anyone who is an International Section member

• Ambassadors may ask someone to co-author and that person should be an International Section member

Rules:

• The write-up should be no more than four pages in length, using Microsoft Word and formatted in Times New Roman

12-point font.

• Photos, charts, tables or graphics are encouraged for illustration. Any photo sent should be in either .jpeg, .tif, .eps

format with a print resolution of at least 300 dpi.

We look forward to hearing from you.

Sincerely,

Frank Buck Chair International Section

Feature Your Countryand win $US 2000!!

Asia, Australia and New Zealand Frank Buck Phone: 852 (2) 199-1059 Email: [email protected]

Europe, Mid East and Africa P. G. Alistair Cammidge Phone: 704-988-4729 Email: [email protected]

Latin America and Caribbean Cathy Lyn FIA, FSA Phone : 876-9261659 W876-5402456 C Email: [email protected]

Deadline: Please e-mail your submission to Sofi Garcia at [email protected] by 31 December 2007. Please give fullcontact details for the author(s).

Selection: The Council will select a winner in early March 2008, using criteria such as "I cannot put this down untilI finish reading it", "That explains what I always wondered about XYZ", etc.

Award: The winning Ambassador/author will be announced in early April 2008.

Documents

ªA KN OWLEDGE COMMUNITY FOR THE SOCIETY OF … · Global Market The actuarial profession has always been fairly international. 2+2=4 every-where! But in practical work the international