CAPITAL ALLOCATION AND HOW MATHS FROM THE 1700S CAN HELP US OUT
Peter Carswell and David Kirk
October 22, 2021, 08:30 AM – 09:00 AM
Relevant practice area: Life / Non-Life Insurance / ERM
Suggested audience knowledge level: Foundational
Demonstration of the Euler capital allocation method and how it can be used to allocate capital at a product level for both Life Insurance and Non-Life insurance products. This can be used for IFRS17 risk margins, LACDT calculations and embedded value work.
Euler capital allocation is an economically rational method that allocates capital without having to make any scaling factors or fudges.
The talk will focus on the application of technical papers already published by other authors in the UK and Continental Europe.
QUANTIFYING RISK IN ALTERNATIVE REIMBURSEMENT MODELS
Barry Childs, Poonam Doolabh and Lubalethu Dube
Paper with Presentation
October 22, 2021, 10:00 AM – 11:00 AM
Relevant practice area: Healthcare
Suggested audience knowledge level: Intermediate and Advanced
The dominant mode of reimbursement for healthcare services in the private healthcare sector in South Africa remains fee for service. So called Alternative Reimbursement Models (ARMs) can align incentives between funders and providers of care in healthcare systems but these also involve a transfer of risk. One of the obstacles to the adoption of ARMs is a poor understanding of these risks transferred between the parties. Population profile and case mix are key systemic risks familiar to providers, but stochastic risk is less familiar as these risks are usually borne by insurers. This research seeks to fill some of this gap in knowledge by quantifying stochastic risks under a variety of reimbursement model constructs such as capitation, per diems and fixed fees.
The aim of the paper is to:
– Demystify risks in ARMs
– Empower funders and providers to better under the type and range of risks being transferred
– With the overall aim of improving the adoption of ARMs in the market
HOW TO PICK OR BECOME AN ACTUARIAL EMPLOYER OF CHOICE
Wilhelm De Wet, Henda Pretorius and Jurie Gouws
October 21, 2021, 07:15 AM – 08:15 AM
Relevant practice area: Professional Matters
Suggested audience knowledge level: Foundational
The best employees do the best and the most work. But many companies do an awful job of finding and keeping them.” – McKinsey senior partners Scott Keller and Mary Meaney
Attracting and retaining high-quality individuals should be the number one priority for every employer in South Africa. Companies rise and fall by the quality of the people they employ.
What makes an employer of actuaries in South Africa an employer of choice? Why do some companies find it easy to recruit great people whilst other companies seem to struggle? The SA3 team have made it their mission to find out why and we will be sharing our findings during the Breakfast Session. We are convinced that the session will be both practical and informative and will benefit everyone attending.
In preparation for our session, we have been running short, anonymous surveys with every Convention newsletter distributed in the run-up for the Convention. We have covered topics like:
- Management and Leadership
- Company reputation, values, culture, and results
- Exposure and opportunities for growth and advancement
- Remuneration and other forms of recognition
We are looking forward to engaging with the actuarial community on this interesting and relevant topic.
BANKING AND COVID-19: THE IMPACT ON CREDIT LOSS MODELLING
Anja du Plessis and Matthew Walker
October 20, 2021, 11:15 PM – 12:15 PM
Relevant practice area: Banking
Suggested audience knowledge level: Intermediate
One of the financial services sectors that has been most affected by the Covid-19 pandemic is the lending industry. Banks and other credit providers have had to re-evaluate almost every aspect of their credit risk management processes. This includes credit limit and risk appetite setting; the definition of default and modelling; reporting and financial disclosures; and the governance and control environment.
Our presentation will start with a recap of the impact Covid-19 had on the banking industry. This will include the Covid-19 relief measures and an analysis of some of the financial results disclosed by South African banks for the December 2020 and June 2021 reporting periods.
We will then explain some of the modelling challenges banks faced and the approaches they took to deal with the impact of the pandemic in the short term.
Lastly, we will provide insights into future modelling enhancements that banks and other credit providers can consider to future-proof their models and enhance their credit risk management processes.
Outcomes that attendees can look forward to benefitting from include:
– An understanding of how Covid-19 has affected the lending industry in South Africa.
– Knowledge of the government relief measures that were introduced and the associated impact on credit extension, modelling and reporting.
– Awareness of the ongoing challenges faced by banks and credit providers in addressing the impact of Covid-19 on credit risk management.
– An understanding of the financial impact of the pandemic on South African banks over the period December 2019 to June 2021.
– Awareness of future modelling enhancements that banks can consider to cater for the challenges faced.
INTRODUCTION TO IFRS 17: HANDS ON TRAINING
Valerie du Preez, Nico du Preez and Patrick Moehrke
Workshop (Please note that no recording of this session will be available post-Convention.)
October 22, 2021, 8:30 AM – 9:30 AM
Relevant practice area: Wider Fields
Suggested audience knowledge level: Foundational and Intermediate
Welcome to Introduction to IFRS 17: Hands on Introduction. After this workshop, you should have a strong grasp of the fundamentals underlying the new IFRS insurance contract standard (the Standard) and start utilising it in a workplace context. This course assumes an understanding of the standard facilities and functionality in Microsoft Excel, and principles of actuarial and financial reporting.
Practical outcomes
– Basic understanding of key requirements and changes the new IFRS 17 Standard is bringing
– Hands on exercise calculating the Contractual Services Margin using the General Measurement Model; including subsequent measurement
– Understanding of differences of key metrics based on different reporting regimes
– An overview of the new disclosure requirements
ACTUARIAL INNOVATION IN THE COVID-19 ERA
Colin Dutkiewicz
October 22, 2021, 08:30 AM – 09:30 AM
Relevant practice area: Professional Matters
Suggested audience knowledge level: Foundational
This presentation will outline some of the work done by the IFOA Covid-19 Action Taskforce (ICAT). This will cover work in the main practice areas (Life, Pensions, General, Investments) as well as specific work on pandemic modelling and support for the UK government scientific support (Sage).
The talk will also deal with how the IFOA, the profession and practicing actuaries can and should step up to act in the public interest.
The audience will have practical outcomes of:
– Understanding more about the IFOA response to COVID
– Understand more about the UK social and economic response to COVID
– Think more about actuaries professional duty to act in the public interest in time of crisis.
PAST, PRESENT AND FUTURE OF THE PENSIONS ACTUARY IN SOUTH AFRICA
Chair: Costa Economou
Panellists: Arthur Els, GJ Mellet and Rowan Burger
October 20, 2021, 1:15 PM – 2:15 PM
Relevant practice area: Retirement Matters
Suggested audience knowledge level: Intermediate
The role of the Pensions Actuary in South Africa has changed drastically over the past few decades. From the expert defined benefit valuator to the actuary checking the rules, financial statements and administration procedures to apply for exemption from statutory valuations and, by extension, not requiring any actuarial services whatsoever. Is this just the natural progression for the profession to move away from the traditional retirements field that we need to accept following to the predominant move from Defined Benefit to Defined Contributions Funds and lately the big move to Umbrella Funds?
While the underlying mechanisms and statutory environment may have changed, the fundamentals are unchanged from the days when the role of the actuary was deemed invaluable, i.e. saving over a working lifetime to ensure an income for life in retirement. The uncertain variables and risks in this equation is as relevant as ever, if not more, considering that added difficulty of managing risks at an individual level.
It is evident from the lack of research being done in the retirements field and the fact that no technical papers in the retirement field were submitted to be presented at this year’s ASSA Convention, that the actuary’s involvement in the retirement industry is currently shrinking. Not many students are writing the Pensions examinations and there are fewer Valuators with Practicing Certificates than ever before. Does this mean that actuaries are actively withdrawing from this field even though the Retirement Fund Industry is continuously growing in terms of number of members and assets under management?
We will hear from experienced experts who were there during the heydays of Defined Benefit Funds and their involvement in the Retirement Fund Industry then and how they view the landscape changes since. We will further hear what the more recently qualified actuaries and valuators have to say about their experiences and expectations as purely Defined Contribution Actuaries.
It is our view that Actuaries have much value to add in the Retirement Fund Industry into the future. Whether it will be in the Social Security space, personal financial planning, alternative investments for retirement specific investments/products or something entirely new. The challenges are real. Our challenge is to make the Pensions Actuary invaluable again and to reshape our role in the retirement industry for the better for all.
ONE SCR TO RULE THEM ALL? ASSESSING THE APPROPRIATENESS OF THE STANDARDISED FORMULA SCR
Lafras Eksteen and Ryan Subotzky
Panel: Suzette Vogelsang, Wynand Louw, Hilda Vigoureux and Ricardo Govender
October 22, 2021, 12:00 PM – 1:00 PM
Relevant practice area: Life/Non-Life Insurance
Suggested audience knowledge level: Intermediate
The SCR is core to assessing the financial soundness of South African insurers, but it’s not a one-size-fits-all solution: despite the SCR’s sophistication and risk-based nature it cannot accurately capture the nuances and complexities that are unique to each insurer. This is what we address in this presentation, which includes a panel discussion consisting of seasoned life, non-life and group Heads of Actuarial Function, as well as a senior supervisor from the Prudential Authority.
We will start by summarising a framework to assess the appropriateness of the Standardised Formula SCR relative to an insurer’s own risk exposures. The framework consists of practical principles and also considers steps to take should there be a shortfall in the SCR. The presentation will also touch on selected aspects of the SCR that are likely to lead to shortfalls within the South African context. For example, insurers might find that some risks are missing from the SCR, while other risks could be understated or overstated.
An understanding of this topic is critical for risk management purposes, including economic capital modelling, stress testing and the broader Own Risk and Solvency Assessment (ORSA) process. It is also directly relevant to the Actuarial Function, which needs to provide advice to the Board on the appropriateness of the SCR (as per GOI 3). Finally, it impacts on insurance pricing through the allowance for the cost of risk.
The presentation will be followed by a practical unpacking of this topic by a panel of experts.
Practical outcomes:
- Learn about a framework to assess the appropriateness of the SCR
- Understand how shortfalls in the SCR could be treated
- Learn about selected shortfalls of the SCR
- Gain a practical understanding of how HAFs may assess the appropriateness of the SCR
- Appreciate how the appropriateness of the SCR is viewed by regulators
REFRAMING UNCONSCIOUS BIAS: UNDERSTANDING BIAS IN DECISION MAKING
Roy Gluckman
October 20, 2021, 2:15 PM – 3:15 PM
Relevant practice area: Transformation
Suggested audience knowledge level: Foundational
Much of the discussion around Unconscious Bias (UB) is about identifying our biases and interrupting them. We do not think that this is possible, let alone probable. So, where does this leave the conversation around UB in organisations. Well, for us, all organisations (even 2-person shows) are comprised of decisions made on previous decisions that affect future decisions. As such, understanding decision making, and what information we use and dont use, is INCREDIBLY important. The more information we use in decision-making, the better the quality of that decision. In this presentation, we unpack how bias crowds out information, or includes types of information erroneously, that affects the quality of our decisions. We unpack two factors that influence decision making in organisations: our personal decision-making matrix (what we find safe, familiar, valuable and likable) and then the systemic (or organisational) decision-making matrix (what the organisation sees as safe, familiar, valuable and likable). We unpack how our history of exclusion influences our respective dcision-making matrices and how in order to make better decisions, it is not about removing our bias, but allowing spaces for more information to enter the decision making process.
LEARNINGS FROM THE FIRST APPROVED MICRO-INSURER IN SOUTH AFRICA
Zandile Gobe and EC du Toit
Oral Presentation
Relevant practice area: Micro Insurance
Suggested audience knowledge level: Foundational
A discussion on the journey followed in starting South Africa’s first micro-insurance organisation. This presentation focuses on the partnership between Emerald Life and Gen Re.
More specifically, we discuss:
– Challenges faced in building an inclusive product for the South African market
– The regulatory journey followed
– Lessons learnt
– Value added relationships in partnering with Gen Re
Outcomes:
– An understanding of micro-insurance in South Africa
– An overview of possible challenges that micro-insurers are faced with
CLIMATE MODELLING: AN INTRODUCTION
Alicia Gounden, Michael Leitschkis and Abdal Chaudhry
October 20 2021, 10:15 AM – 11:15 AM
Relevant practice area: Wider Fields
Suggested audience knowledge level: Foundational
The debate on climate change has rapidly evolved in recent years. It is no longer on whether the evidence of human impact on climate change is real, but on whether key mitigating strategies being adopted are sufficient. While actuaries are already developing models to quantify the impact of climate change on insurance businesses, it is becoming increasingly evident that the actuarial community’s understanding of climate risk is not yet as developed as its expertise on traditional insurance risks such as mortality risk.
This lecture will introduce actuaries to ‘traditional climate models’ used in climate research and the underlying science of global warming. Key highlights include: Section 1 – Introduction to climate change. Starts by defining an insurance problem (e.g. pricing of a specific product) and introduces the audience to the science of climate change e.g. greenhouse gas physics.
Section 2 – Introduction to Energy Balance Models. Follows from Section 1 and introduces the audience to energy balance models. Results from these EBMs are then applied to the insurance example presented in Section 1.
Section 3 – Forecasting future emissions. Focusses on how simple emission forecasts can be developed and how these can be used to model climate variables.
Section 4 – Introduction to General Circulation Models. Introduces the audience to GCMs and applies results obtained from running a ‘simple’ GCM to the insurance problem presented in Section 1.
Section 5 – Closing Remarks. A more in-depth conversation on climate models and how useful these models are in determining the impact of climate change on traditional life insurance risks such as mortality rates.
Practical outcomes:
- Learn about 3 different climate modelling techniques.
- Learn (at a high level) how to interpret output from these models
- Learn how these models can be applied to the insurance world.
MORBIDITY AND MORTALITY TRENDS DURING PERIODS OF ECONOMIC DOWNTURN
David Hatherell
October 22, 2021, 09:00 AM – 09:30 AM.
Relevant practice area: Life Insurance
Suggested audience knowledge level: Foundational
The effects of the COVID-19 pandemic have been discussed widely and in depth, with lockdown measures and restrictions on travel and trading having a severe impact on the global economy. It is therefore essential the insurance industry investigates these changes in the economy in terms of their impact on morbidity and mortality. In this article, we highlight some of the key findings on this topic.
We also take a look at suicide rates—what we might expect based on data from economic downturns prior to COVID-19 and on data emerging from the more recent impact of the pandemic and associated lockdowns. We close with some thoughts on how the pattern of recovery may affect mortality.
Practical outcomes include:
– understanding the link between economic performance and mortality
– an understanding of what experience has been observed during the COVID-19 pandemic
– gaining a range of perspectives and how countries may be affected by adverse economic performance
RISK MARGINS: WHY DOES INDUSTRY PRACTICE VARY SO MUCH? (AND HOW TO FIX THIS)
Andrew Henning
Oral Presentation
Relevant practice area: Short-Term Insurance
Suggested audience knowledge level: Intermediate
• High level findings from working group and feedback discussion.
• Description of the purpose and requirements in calculating the non-life risk margin in a SAM context.
• How the SAM non-life risk margin calculation differs from other jurisdictions such as Solvency II and the Swiss Solvency Test (“SST”).
• Key sources of difference in approaches and suggestions to improve industry consistency.
• Key components to be included in the risk margin and the underlying drivers of the risk margin.
• Circumstances where simplifications are appropriate for calculating the non-life risk margin and typical analysis required to justify the use of simplifications.
• Comparison between SAM risk margin and IFRS 17 risk adjustment
• Current developments on the topic in other jurisdictions.
Outcomes for attendees:
• Deeper understanding of the mechanics and drivers behind the non-life risk margin calculation.
• Understanding the key considerations when calculating the risk margin using the standard formula as outlined in the FSIs.
• Background behind and the appropriateness of using simplifications in calculating the risk margin in a SAM context.
• Understanding the link between SAM risk margin and IFRS 17 risk adjustment.
• Understanding of how to align risk margin calculations in the non-life insurance industry.
• Understanding different approaches used to calculate the risk margin in other jurisdictions.
SOVEREIGN CREDIT RISK: ASSA WORKING GROUP UPDATE
Idelia Hoberg, Machsie Boshoff and Henre Prinsloo
October 20, 2021, 11:15 AM – 12:15 PM
Relevant practice area: ERM
Suggested audience knowledge level: Intermediate
The Sovereign Credit Risk Working Group was initiated by the LAC and ERM Committees, and reports into these as well as the STIC and Retirement Matters Committee. The scope of the working group is to consider South African sovereign credit risk from the insurers’ and retirement funds’ perspectives.
During this session, we will share with you the objectives of the working group, as well as the work done and outcomes thereof to date. This will relate to the following workstreams:
1) Workstream 1 – Case Studies: Global government defaults and sovereign credit risk events globally and responses
2) Workstream 2 – Research: How insurers / retirement funds in globally manage risk related to government defaults and sovereign credit risk and responses by IAA member organisations
3) Workstream 3 – Analysis: Impact of assuming South African sovereign debt is risk-free on solvency calculations
We will also share the next steps of the working group.
UNVEILING OPPORTUNITIES FROM REINSURANCE IN THE IFRS 17 LANDSCAPE
Niel Johnson and Madjer Dehar
October 20, 2021, 10:15 AM – 11:15 PM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Foundational
IFRS 17 introduces a dramatic overhaul of insurance reporting. With limited discretion in actuarial reserve setting, there is a natural business case for the use of reinsurance in managing P&L volatility and in preserving balance sheet stability. This session will highlight how reinsurance solutions can act as a strategic lever to support and enhance key performance indicators of insurance companies. Opportunities exist both pre- and post-transition, including protection against increased volatility in results, reducing the effect of onerous contracts, managing the impact on transition, etc. We will highlight a number of these and discuss them in further detail.
HOW AND WHY INSURERS FAIL
David Kirk
October 20, 2021, 1:15 PM – 2:15 PM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Intermediate
Actuaries are heavily involved with regulatory solvency reporting, internal risk and capital management, product development and pricing, reinsurance decisions, and financial reporting. Each of these areas can drive or obscure the decline and ultimate failure of insurers. Practices also vary widely between insurers and between actuaries. Few actuaries have much exposure to failing insurers and therefore don’t have broad knowledge to bring to bear, and can be less confident in their views given their modest experience of these situations. It’s also often the insurers that are closest to failure that place the most pressure on their actuarial staff and advisors. This results in technical and professionalism challenges for actuaries. The presentation will cover how and why insurers fail, drawing on my direct and indirect experience within South Africa, and experience of others in South African and other countries. This will be covered through case studies and ultimately extracting a set of principles and high risk areas.
Practical outcomes:
- Greater awareness of how and why insurers fail
- Provide practical lists of red flags to look out for
- Suggested steps to deal with these red flags and escalation
- Identify ways of avoiding the red flags in the first place and keeping insurers healthy.
- Grow the list of risks and emerging risks to include in insurers’ ORSAs and risk management processes
THE BLURRY LINE, WHEN SAYING NOTHING IS UNETHICAL: THE RESPONSIBILITIES OF ACTURIES AND THE HAF FOR MICROINSURANCE BUSINESS
Alex Kühnast, Paul Zondagh, Lusani Mulaudzi and Karl Meissner-Roloff
October 20, 2021, 10:15 AM – 11:15 AM
Relevant practice area: Micro-Insurance
Suggested audience knowledge level: Intermediate
The microinsurance market in South Africa is a growing and dynamic. Since the introduction of the microinsurance license in 2017, there are an increasing number of actuaries consulting to microinsurers or taking on the role of the microinsurance Head of the Actuarial Function (HAF). Actuaries providing advice to microinsurance businesses are often exposed to wider business practices beyond pricing and solvency calculations that may infringe on regulatory requirements or raise ethical practice questions.
Prudential Rules for microinsurers sets out the responsibilities for the HAF for microinsurers, covering expressing an opinion on the reliability and adequacy of the technical provisions and solvency requirements of the business and giving advice on the design of products. Members of the Actuarial Society have a responsibility to act in the public interest and treating customers fairly is receiving increased attention. Actuaries need to consider their responsibilities beyond the clearly demarcated role in the prudential rules and debate ethical questions around product offerings and operational areas of microinsurance business. These questions are pertinent for microinsurance where there are new players and diverse service providers with little experience with regulatory requirements and many actuaries servicing these providers or acting as the HAF in an outsourced capacity. This heightens the risk of non-compliance, unethical business practices and unfair treatment of customers. Actuaries working in this space should be aware of potential pitfalls in considering their obligations to their employer or clients and to the wider public.
The panel will explore the difficult questions around the regulatory and public interest responsibilities for actuaries advising microinsurers using several scenarios adapted from the experience of the panel members. The panel will cover the following professional issues:
- Tricky scenarios prevalent in microinsurance business including renting out licenses, fair products and outsourcing.
- The statutory and wider public interest role for actuaries in microinsurance.
- Managing conflicts of interest for the outsourced HAF and balancing responsibilities to clients, different stakeholders and the wider public interest in a new regulatory environment.
- Insights from panel members’ experiences in providing actuarial advice in the inclusive insurance environment.
Practical outcomes:
- Increase awareness of types of scenarios that actuaries involved in advising microinsurers may come across.
- Debate statutory and public interest responsibilities of consulting actuaries and the HAF for microinsurance business.
- Discuss managing conflicts of interest and balancing responsibilities to the client, different stakeholders and wider public interest in giving advice for microinsurance business.
- Discuss insights from experiences acting as a HAF and first line actuary in the inclusive insurance environment.
EXPLORING THE ROLE OF EMBEDDED VALUE POST IRFS 17.
Victor Manyenyere and Lloyd Balshaw
October 20, 2021, 11:15 AM – 12:15 PM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Foundational
Given the discretion available under IFRS 4, profit emergence under IFRS reporting is often not comparative between insurers. Embedded value (“EV”) and some of its elements has become a common valuation and performance reporting measure used by life insurance companies to resolve this lack of comparability.
EV measures value by measuring the release of future margins over best estimate assumptions that are contained in the liabilities, adjusted for risk, and adding these to the net assets of the company. These methods are also extended to non-insurance businesses in some instances.
The changes in the valuation basis under IFRS 17 will fundamentally change the embedded value calculations, if those are based on the requirements of IFRS, as opposed to those under SAM. IFRS 17 also has several enhanced disclosures that will assist users of financial statements to appreciate the value of the insurer’s insurance business and the source of profits over time.
With the removal of the margins embedded in the cashflow based valuations under IFRS 17, the nature of EV calculations will change significantly. Also, through informal discussions with industry participants there are divided views on the relevance of Embedded Value measurement once IFRS 17 metrics are being published. Some view that it may take some time before users familiarise with the behaviour of performance under IFRS 17 and the new disclosures, and this will keep the relevance of Embedded Value.
The purpose of this presentation is to explore the following areas:
- Challenges in Embedded value reporting post IFRS 17 implementation
- What are the changes to embedded value reporting post IFRS 17?
- What are the alternatives to embedded value reporting under IFRS 17?
- Explore the stakeholder needs that were addressed by embedded value which are not addressed by IFRS 17
We aim to use these elements to unpack some key questions:
- Do we need an embedded value measure post IFRS 17?
- What are the market’s plans for value/ performance measurement?
- What are the views of users EV and will IFRS 17 disclosures meet their needs?
- What changes can be made to the embedded value framework so that it can be applied in a post – IFRS 17 world?
ACTURARIES IN THE COMPLEX QUADRANT: EXPLORING THE APPLICATION OF ACTUARIAL TOOLS AND PROFESSIONALISM IN THE COMPLEX QUADRANT OF THE CYNEFIN FRAMEWORK; THE REALM OF “UNKNOWN UNKNOWNS”.
Andrew Le Roux
Oral Presentation
Relevant practice area: Professional Matters
Suggested audience knowledge level: Intermediate
Overview of the Covid pandemic and the different ways that actuaries participated/contributed to the national response effort and decision making.
Introduction of the Cynefin framework, especially the distinction between the Complicated quadrant (where sufficient analysis and technical expertise can provide solutions with a high degree of certainty) and the Complex quadrant (the realm of “unknown unknowns” where one has to act, sense/measure the response to your action and then learn/adjust your approach). The challenge for actuaries, is (1) acknowledging “complex” environments and (2) the trade-off between the time/investment required to build rigorous models and participation/contribution in real time processes.
Overview of other existing bodies of work that relate and that actuaries may not be aware of. This includes the study of “complexity” (unrelated to the Cynefin framework), “warm data” etc.
Discussion of some of the dimensions of the “future of work” of actuaries in the face of both the advance of technology and computational power as well as increased complexity and unpredictability of the environment in which we operate. Implications for the ways that actuaries contribute to businesses and other decisionmakers. (I am not advocating that existing ways stop, but that new/alternative ways are added to our armoury.)
Review of professional guidance and (if time allows) training material in the light of the above.
Recommendations for an ongoing dialogue.
PRACTICAL OUTCOMES:
– Challenge members to consider different scenarios that require different approaches. Get us to think a bit more critically about the assumptions underlying some of our tools.
– Introduce terminology and existing bodies of work that members may not be aware of. Hopefully, this also leads to more personal research and upskilling.
– Contribute to the collective review of our response to Covid and learnings for future crises.
– Promote the widening of the actuarial “playing field”.
‘WHERE ANGELS FEAR TO TREAD’ : REFLECTIONS ON THE ROLE OF AN ACTUARY AS EXPERT WITNESS IN THE LAND CLAIMS COURT
Mickey Lowther
Paper with Presentation
October 22, 2021, 12:00 PM – 1:00 PM
Relevant practice area: Damages
Suggested audience knowledge level: Intermediate
In this paper, the author reflects on his experiences of giving expert actuarial witness in the Land Claims Court regarding the calculation of financial compensation as an alternative to the restoration of dispossessed land. As no specific formula for compensation has been legislated in South Africa’s land reform programme, relevant case histories are examined in which the common law has been developed. The technical, ethical and professional inputs which an actuary can provide are reviewed. The author concludes that actuaries are well suited to assist the Land Claims Court to resolve the potentially large number of claims, in the public interest.
COVID-19 ACTUARIES RESPONSE GROUP
Stuart McDonald and Louis Rossouw
October 22, 2021, 1:00 PM – 2:00 PM
Suggested audience knowledge level: Foundational
This presentations covers the activities of the COVID-19 Actuaries Response Group over the course of the pandemic and also touches on how the group use social media and address disinformation.
CONVERSATIONS WITH ACTUARIES
Sphe Msane, Soeren Kruse, Dunny Semwayo, Itumeleng Kgafela and Memory Zimba
October 20, 2021, 1:15 PM – 2:15 PM
Relevant practice area: Transformation
Suggested audience knowledge level: Foundational
This is a panel discussion where different actuaries come to the stage to tell the audience about their career journeys, the different challenges they’ve faced along the way, how they’ve overcome them and how they’ve shaped their careers. This had really good attendance and was really well received in the 2019 and 2020 Conventions and we would like to continue the conversation in 2021. In 2019, we had a good mix of panelists and approached the conversation around racial diversity. Last year, there was shift towards a focus on the differently abled and gender diversity. We had good views across different practice areas, corporate, consulting and across generations of actuaries. This year we would like us to get perspectives from different nationalities working as actuaries in South Africa. We really believe as a profession our transformation journey will benefit greatly from continuing to give people from different backgrounds the stage each year to tell their stories, create awareness about challenges from different perspectives and awareness around support mechanisms that have worked.
ACTUARIES IN PUBLIC POLICY ANALYSIS
Lusani Mulaudzi
October 21, 2021, 12:30 PM – 1:30 PM
Relevant practice area: Wider Fields
Suggested audience knowledge level: Foundational
The cost benefit analysis (CBA) method requires both a quantitative and qualitative analysis of the problem statement. It is an effective tool to enable public policy analysis, but it is not without criticism.
CBA is a practical guide to social decision-making Brent (2006) . Posner and Adler (1999) considered situations in which government agencies should use CBA. They concluded that CBA is a useful decision procedure and should be routinely used by government agencies. This methodology has the following advantages: enables agencies to account for relevant influences on overall well-being and to weigh the advantages and disadvantages of an intervention in a systematic way.
Posner and Alder acknowledged that CBA enables government to select an intervention that maximizes overall well-being, but this is not the only consideration that governments have. Not only is this tool useful in public policy analysis but it also employs actuarial techniques. It is thus important to examine how public policy analysis can be enhanced using actuarial techniques as in CBA. This presentation will explore how actuaries can use CBA to enhance public policy analysis.
Practical outcomes
– This is a potential new wider field and the presentation will demonstrate how this can be achieved
– The audience will get to understand how CBA works in public policy analysis.
– They will be able to see how actuarial techniques are applied
– To see how actuaries can add value to the field of public policy analysis.
ALLEVIATING CLASS IMBALANCE IN ACTUARIAL APPLICATIONS USING GENERATIVE ADVERSARIAL NETWORKS
Kwanda Ngwenduna
October 22, 2021, 12:00 PM – 1:00 PM
Relevant practice area: Data Science
Suggested audience knowledge level: Intermediate
To build adequate predictive models, a substantial amount of data is desirable. However, when expanding to new or unexplored territories, this required level of information is rarely always available. To build such models, actuaries often have to: procure data from local providers, use limited unsuitable industry and public research, or rely on extrapolations from other better-known markets. Another common pathology when applying machine learning techniques in actuarial domains is the prevalence of imbalanced classes where risk events of interest, such as mortality and fraud, are under-represented in data.
In this work, we show how an implicit model using the Generative Adversarial Network (GAN) can alleviate these problems through the generation of adequate quality data from very limited or highly imbalanced samples. This presentation will provide an introduction to GANs and how they are used to synthesize data that accurately enhance the data resolution of very infrequent events and improve model robustness. Overall, we show a significant superiority of GANs for boosting predictive models when compared to competing approaches on benchmark data sets.
Practical Outcomes:
– Thorough theoretical, empirical and practical applications of GANs, with possible leverage in actuarial science for inter alia new sample creation, data augmentation, boosting actuarial models, anomaly detection, missing data imputation, time series simulations and projections in life insurance, short-term insurance, health and care, banking, investment, enterprise risk management, and other non-traditional actuarial areas, such as telecommunications, economics, medicine, engineering, and other wider fields.
– Essentially, show that synthetic data generated using GANs can augment imbalanced data sets, leading to significantly higher predictive power of possible actuarial models fitted after.
THE EFFECTS OF COVID-19 ON GROUP BUSINESS
Bruce Robertson and Jason Cooper-Williams
October 21, 2021, 1:30 PM – 2:00 PM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Foundational
An overview of how COVID-19 has affected experience in the group sector.
This presentation will cover:
– Feedback from a range of our group clients (relating to what changes have ocured in the group setting)
– Overall premiums and claims observed in the group space
– Any structural challenges observed in this market
– An overview of factors that are considered when rating a group scheme
– How COVID-19 and how it has influenced the rating process for group schemes
– A discussion on how to project historic experience forward
KEEPING UP WITH COVID-19: WHERE ARE WE, WHAT HAVE WE LEARNT AND WHERE ARE WE GOING?
Louis Rossouw
October 21, 2021, 12:30 PM – 1:30 PM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Foundational
The session will bring the latest reproduction number estimates, modelling and relevant data to the fore with an overview to understand recent and current trends, and more importantly to assess the direction of the pandemic.
These insights would be based on my ongoing work to model and monitor the epidemic that I’ve been sharing for some time now.
Outcomes would be to understand recent and current COVID-19 trends in reproduction numbers and latest research, get a sense of the near future of COVID-19 and it’s impact on SA population mortality, and sharing of further insights into possible longer term trends of COVID-19 including herd immunity.
The topic may require some adjustment nearer to the time as new trends emerge.
UNDERSTANDING SOCIAL MEDIA MENTIONS OF ACTUARIES AND COVID-19: AN ANALYTICAL APPROACH
Louis Rossouw
Oral Presentation
Relevant practice area: Wider Fields
Suggested audience knowledge level: Foundational
The main aim of this proposal is to understand how actuaries are tweeted about in the context of COVID-19. The idea is to understand the impressions and mentions of actuaries in the context of this topic.
The presentation would follow analytical techniques to understand sentiment, network / clustering of opinions and other metrics used in textual analytics to objective investigate this.
The author is keen to do this work to better understand the impact of actuaries as seen in social media, but do so in an objective analytical manner (rather than subjectively).
The practice area is somewhere between Data Analytics and Professional interest.
CSI COMMITEE UPDATE: CRITICAL ILLNESS AND ANNUITANT STUDY
Brice Salence, Anja Kuys, Nicholas Harrison and Andile Mabuyakhulu
October 20, 2021, 2:15 PM – 3:15 PM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Foundational
Through this presentation, we would like to:
– Provide the industry with an update on the studies the ASSA CSI Committee have been completing.
– An introduction to the studies will be provided, showcasing uses of the results for the industry.
– In particular, we will share the preliminary results of the technical analysis on the Critical Illness and Annuitant Mortality studies
– The results include experience analysed from most large insurers operating in the South African market
DISCOVERY HEALTH’S COVID-19 EXPERIENCE
Chanie Suttner, Shirley Collie, Michael Cohen, Tommy Chen, Jared Champion, Sameera Haneef, Roseanne Harris and Matt Zylstra
October 21, 2021, 12:30 PM – 1:30 PM
Relevant practice area: Healthcare
Suggested audience knowledge level: Foundational
Over 2 million COVID-19 infections have been reported in South Africa since March 2020. There have been over 61,000 reported deaths and over 176,000 excess natural deaths, of which the majority is likely attributable to COVID-19. The loss of life has been accompanied by strain on the healthcare system, adverse socio-economic effects, psychological distress and serious economic regression.
With 19 schemes and just over 3.5 million lives under administration, Discovery Health has recorded just under 300,000 COVID-19 cases to date. Discovery Health has used its large multi-faceted data to assess variations in clinical outcomes and the direct financial impact of the pandemic on our members and the healthcare system.
This presentation will cover the spectrum of analytics and initiatives undertaken to support the evolving needs of our members and national strategic objectives over the course of the pandemic thus far. It will highlight the power of analytics in optimising outcomes and protecting the lives of our members. We will share detailed insights on: the variation of admission and mortality outcomes of COVID-19 members among different cohorts and across the waves of the pandemic, methodologies applied to identify possible repeat infections, promising results from the assessment of our pulse oximeter distribution initiative, our COVID-19 resilience index and the vaccine roll out and vaccine efficacy assessments.
Furthermore, unprecedented claiming patterns and changes in non-COVID-19 health-seeking behaviour has resulted in a large degree of uncertainty of future utilisation levels and budgetary requirements of medical schemes. We will focus on cases of loss, substitution and delay in non-COVID-19 health seeking behavior due to the COVID-19 pandemic and this potential impact on members. We will share our analytical approach to understanding both the direct and indirect long-term impacts of COVID-19 on our members and schemes.
GLOBAL DEVELOPMENTS IN IMPACT AND PRIVATE DEBT
Michael Tichareva and Molesh Singh
Oral Presentation
Relevant practice area: Banking
Suggested audience knowledge level: Foundational, Intermediate and Advanced
Discussion on the role of Private Debt and its implications on impact investing. This includes definition and the history of private debt and impact investing and expectations for the future in South Africa and globally. This also touches on global trends in impact investing and private debt.
The practical outcomes is to encourage actuarial professionals to recognise and participate in impact investment activities utilising private debt as an asset class. This should also encourage actuaries to influence the allocation of capital towards Impact Investing and Private Debt by institutional investors.
IMPROVING PERSONAL EFFECTIVENESS AND CAREER ADVANCEMENT FOR PROFESSIONALS THROUGH SOFT SKILLS
Michael Tichareva
October 21, 2021, 1:30 PM – 2:00 PM
Relevant practice area: Wider Fields
Suggested audience knowledge level: Foundational, Intermediate and Advanced
This discussion is meant to discuss with other actuarial professionals the importance of soft skills in developing ourselves as we deliver our professional promise.
Soft skills are a combination of people skills, social skills, communication, character and personality traits, attitudes, mindsets, career attributes, social intelligence, contextual intelligence and emotional intelligence quotients, among others, that enable people to navigate their environment, work well with others, perform well, and achieve their goals with complementing hard skills. Soft skills are defined by the Collins Dictionary as “Desirable qualities for certain forms of employment that do not depend on acquired knowledge. They include common sense, the ability to deal with people, and a positive flexible attitude.”
Soft skills are, therefore, at the heart of lifelong learning and are considered important elements of Continuous Professional Development by many professionals and business leaders as we deliver on our professional promise. It’s a lifelong journey.
The expected outcome is to raise awareness among actuarial professionals and encourage ourselves to seek opportunities to develop our soft skills as we progress with our professional careers.
THE FUTURE OF BANKING
Michael Tichareva and Moorad Choudhry
October 22, 2021, 10:00 AM – 11:00 AM
Relevant practice area: Banking
Suggested audience knowledge level: Foundational, Intermediate and Advanced
Discussion on the Future of Banking based on global banking developments.
Outcomes is equipping attendees with banking practice developments and opportunities for actuaries.
CONSIDERING A BASIC INCOME GRANT FOR SA: IT ALL DEPENDS ON PERSPECTIVE
Natalie Van Zyl
Oral Presentation
Relevant practice area: Wider Fields
Suggested audience knowledge level: Foundational
Introducing a BIG the basic income grant has become an urgent consideration for the ANC-led government (DSD budget vote, 2021/2) and consultations of this are on-going at Nedlac.
Whether or not to implement a BIG can be considered through many more lenses than pure financial affordability. Actuaries tend to focus on this aspect and I will present on this and alternative aspects to consider when reflecting on SA’s potential implementation of a BIG. These include social justice and reducing food poverty, public opinion, social cohesion and the impact of scarcity on cognitive function and behaviour control.
Interesting research has been published on the attitudes of SA citizens towards increasing tax to expand social grants, what the special Covid-19 (relief of distress) grant of R350 to unemployed citizens was spent on (as well as basic income spending across the globe), the multiplier effects of government social grant spending in 7 sub-Saharan countries and the impact of social grants on recipients and their households. This information will be shared with attendees.
Practical outcomes for the audience:
1. Informed regarding the current financial costs of social grants and estimated costs of a BIG compared to other budget items.
2. Introduced to wider issues when considering BIG implementation.
3. Informed on latest relevant research on potential BIG impact on SA citizens.
4. (Re-)Consideration of their personal viewpoint of BIG.
THE ROLE OF ACTUARIES IN A DEFINED CONTRIBUTION ENVIRONMENT
Lucia Viegas
October 20, 2021, 2:15 PM – 3:15 PM.
Relevant practice area: Retirement Matters
Suggested audience knowledge level: Intermediate
The last few decades have seen an evolution in the retirement fund industry in South Africa. In addition to the shift from defined benefit to defined contribution retirement saving structures, there are an increasing number of funds seeking valuation exemption and many employers are forgoing stand-alone funds in favour of participation in their “umbrella-type” counterparts. Although aspects of this evolution can be seen as innovative change, little emphasis has been placed on the actual and potential impact that these changes have on retiring members’ outcomes. National statistics suggest that the vast majority of retirees in the current environment are retiring with grossly inadequate levels of income.
Historically, the management of employee benefits – particularly for retirement – has been seen as an area in which actuaries play a vital role. It is evident however that the evolution of the retirement fund industry has been accompanied by a growing perception that actuaries have a limited role to play therein. This suggests that variations in structure and design of retirement savings vehicles diminishes the importance of the end goal: adequate post-retirement income levels. In reality, the post-retirement liability persists whether it is explicitly identified or not. The need to quantify this liability and manage the pathway to meeting the end goal requires skills that only an actuary can provide.
The ongoing role of the actuary in retirement fund environment, no matter the structure, has been brought to the forefront in meetings of the Retirement Matters Committee. In this spirit, the committee has drafted professional guidance to enhance the role that actuaries can play in the current employee benefits environment. The professional guidance aims to provide direction to actuaries in the utilisation of their actuarial skill set to improve the retirement outcomes for members in defined contribution retirement arrangements.
This presentation will discuss the points made in the professional guidance note as drafted. The evolution of the retirement fund environment and the implications thereof will also be covered.
MACHINE LEARNING FOR UNDERWRITING LIFE AND HEALTH INSURANCE
Patricia Wang
Paper with Presentation
October 22, 2021, 10:00 AM – 11:00 AM
Relevant practice area: Life Insurance
Suggested audience knowledge level: Intermediate
Underwriting is a risk assessment process that classifies insurance applications into different categories. Traditional underwriting is costly, time-consuming and perceived as a barrier for the underserved population. Despite many attempts in automating life and health insurance underwriting, the dominant approach is a mix between rule-based engines and traditional underwriting. Applications would be first assessed by rule-based engines; only a third of all applications are processed by these engines. The remaining applications that cannot be assessed by the rule-based engines are reviewed by underwriters or even referred to the reinsurers. The rule-based engines have no predictive ability of applications that do not fit into the existing rules encoded into the engines. Therefore, the natural-step improvement to the current approach is predictive machine learning models.
This research aims to construct predictive machine learning models to predict underwriting decisions for life and health insurance applications, using reinsurer data that are predominantly applications with complex medical conditions and large sum insured. The models are designed to provide an end-to-end solution, so machine learning techniques such as natural language processing and clustering analysis are used to process real-world data; in particular, free-text descriptions of impairments and occupations, which the traditional statistical models cannot process. Text mining tools such as word clouds are used as part of preliminary analyses and give some insights into medical underwriting. Various feature selection methods such as mutual information and recursive feature elimination are used to improve prediction accuracies. Lastly, machine learning algorithms such as XGB, Random Forest and bagging are used to predict the underwriting decisions.
The accuracies of various machine learning models are then compared, and the extreme gradient boost algorithm with a combination of feature selection methods performs the best, with 94% accuracy on the training set and 71% accuracy on the testing set. This result is a significant improvement from the rule-based engines that can process only a third of the applications. The feature ranking function of the extreme gradient boost algorithm gives additional underwriting insights such as the features that are the most important for the model to determine underwriting decisions. The remarkable increase in prediction accuracies, as well as additional functionalities such as feature ranking, indicate that predictive machine learning models could be used to improve the current underwriting process significantly.
MEDICAL MALPRACTICE IN THE SOUTH AFRICAN PUBLIC SECTOR
Gregory Whittaker
Presentation with Research Report
October 22, 2021, 1:00 PM – 2:00 PM
Relevant practice area: Damages
Suggested audience knowledge level: Intermediate
Medical malpractice claims cost the State close to R 2 billion a year. Contingency liabilities are R 100 billion and growing. Close to 2,000 medical malpractice claims are lodged each year.
This presentation presents the findings from a research report on medical malpractice in the South African public sector and includes:
– Unpacking the contingent liability
– Contributing factors to the surge in medical malpractice claims with a focus on cerebral palsy claims
– An analysis of available case law and causation
– An analysis of the composition of settlements and an interrogation of certain aspects such as the frequency of treatment
– A comparison of international medical malpractice systems
– An analysis of the various methods of paying compensation
– State Liability Amendment Bill
– Research on life expectancy of cerebral palsied children and reversionary trusts.
Practical outcomes
– An understanding of the extent of the medical malpractice problem facing the South African public health sector
– A sound understanding of the legal framework surrounding claims in delict.
– An understanding of the quantum of claims and alternative methods of payment.
– An understanding of medical malpractice liability systems in an international context.
“MAYBE GI ACTUARIES GOT IT RIGHT ALL ALONG”: A LIFE ACTUARY
Jeanine Wilson, Karen Muyengwa and Anne Driver
October 21, 2021, 12:30 PM – 1:00 PM
Relevant practice area: Short Term Insurance
Suggested audience knowledge level: Intermediate
For the measurement of the Liability of Remaining Coverage (unexpired risk liability) IFRS 17 prescribes the General Measurement Model (GMM). A simplification of the GMM called the Premium Allocation Approach (PAA) may be used by insurers if specific conditions are met. The presentation is not meant to provide IFRS 17 training but rather to provide an alternative appreciation of IFRS17 as a revenue recognition and less of a balance sheet focus which ultimately demonstrates that GI actuaries may have got it right all along.
The presenters of this presentation include Anne Driver who is the Deloitte Global General Insurance (GI) IFRS17 lead who was involved in the IFRS17 implementation for the largest GI in Australia. The presentation will provide a high-level explanation of the PAA and GMM and it will illustrate, practically, the requirements in terms of data (from policy systems), process and tools/systems (Actuarial/GL/Subledger) between the GMM and PAA methods.
The benefits of the PAA method will be discussed. These include the less demanding data requirements, processes and systems. Based on these benefits, many companies have preferred to use PAA, particularly for short-term business where the PAA and GMM generally give similar financial results.
The presentation will then highlight why it is important to understand GMM when implementing PAA. This will mainly focus on providing an understanding of the revenue recognition of IFRS17.
After this presentation the attendees will be able to appreciate the following:
- Why GMM is important to understand when implementing PAA
- Be able to consider if implementing PAA is the right approach, relative to the GMM
- What are some of the benefits of using the simplification?
- Understand the implications (and downsides) of implementing PAA
- Appreciate how IFRS17 is less of a balance sheet focus and rather revenue recognition.