A summary of insight and discussion topics related to risk management from the 2021 All-Actuaries Virtual Summit.

Uncertainty – A word that eloquently captures the ongoing transformation of the financial services industry, which continues to shine the spotlight on the Risk Management practice area for Actuaries.

Whilst the 2021 All-Actuarial Virtual Summit may have officially concluded, registrants have ongoing access to the diverse sessions covering a range of contemporary and complex topics impacting actuaries across all industries. These sessions are expected to be available to all members at a later point during the year.

This article provides a preview of the insights and discussion topics to expect across selected sessions that showcase the risk management practice area.

Category: Guidance for Members

Target Capital Practice Guide Session (13 May 2021)

Speakers: Ashutosh (Ash) Bhalerao & Stephen Goh

A Target Capital Practice Guideline is being developed, aimed at providing guidance to Members setting or reviewing target capital policies for general, life and health insurance companies. This session is likely to appeal to experienced actuaries working in capital teams or supporting functions such as reinsurance and finance. The session will also be of particular interest to those working in capital consolidation teams at financial conglomerates spanning multiple practice industries.

The session explores:

  • Rationale for establishing a Target Capital Practice Guide

  • The proposed Target Capital Framework, approach to quantify target capital and exploration of target capital as a management tool

  • Timeframes for next steps and indicative implementation dates

The Target Capital Working Group (TWG) is seeking feedback from members on a range of topical considerations impacting target capital setting. For further information on the proposed Practice Guide or to provide any feedback, contact the speakers Ash & Stephen in the first instance.         

Long-term Risk Metric (LTRM) for Superannuation (4 May 2021)

Speakers: Estelle Liu, Ian Fryer, David Carruthers, Rein van Rooyen & Young Tan

Appealing to those specialising in the Superannuation practice area, this session provides a revised set of recommendations from the Long-Term Risk Management Working Group (working group) for a Long-term Risk Metric (LTRM) for superannuation.

Discussion topics cover:

  • Feedback from industry and regulatory consultation, including 20/20 Actuaries Summit, and the working group’s proposed solutions to address this.

  • Intra-fund or Inter-fund? Merits of each option are explored as the working group aims to seek feedback on deciding which option to proceed with.

  • Integration of the current Standard Risk Measure (SRM) alongside the LTRM and feedback sought on the optimal way to present these to members.

  • Next steps, including further industry and regulator consultation as well as consumer testing.

Category: Know your Regulation and Frameworks

Future Proofing the ERM Framework (17 May 2021)

Speakers: Elizabeth Baker (Convenor of Risk Management Practice Committee) & Tim Gorst

Amidst the unprecedented velocity of changes across the financial services industry, it remains paramount that the Enterprise Risk Management (ERM) framework remains contemporary and effective. To illustrate and reinforce this, the session covers:

  • Indicative signs of stale and outdated ERM frameworks;

  • Essential attributes in future proofing Risk Management Frameworks (RMF):

    • Applying learnings from past failures such as Conduct Risk, ‘Fee for No Service’ and other RMF weaknesses highlighted by the Financial Services Royal Commission.

    • Holistic integration with enterprise strategic planning through buy-in and funding of key risk management initiatives.

    • Developing forward looking scenarios to explore uncertainty associated with emerging risk categories with limited historical data availability.

    • Addressing recently emerged topical risks such as Climate Change.

    • Consideration of a stakeholder scorecard to monitor the delivery of stakeholder interests.

    • Capturing prevalent issues such as managing the ongoing pandemic through relevant and effective Business Continuity Plans.

Wide-ranging regulatory reforms for insurers in the fast lane (20 May 2021)

Speakers: Brendan Fehon & Kalaiya Bhrajna

This session explores the various topical regulatory concepts including:

“Design and Distribution Obligations; Breach Reporting; Anti-Hawking; Deferred sales model and Claims Handling regulation”.

  • A suite of regulatory changes is currently underway. This session highlighted key implications and opportunities for our profession:

  • Prevalence of regulatory changes is of great significance to actuaries in fulfilling obligations and providing optimal outcomes for customers and clients.

  • Opportunities for businesses to rethink processes, improve customer value and minimise future risks.

  • Reshaping of the insurance value chain with questions posed by the presenters relating to the cost of sales, cost of claims, and additional overheads.

  • The regulatory changes also provide an opportunity to capitalise on changes in governance, monitoring and data to enable greater insights into the business as a whole, for example, insights that actuaries can gain into pricing, distribution strategy and product strategy.

What’s Happening Across the Tasman? Local challenges through a New Zealand lens (13 May 2021)

Speakers: Shami Shearer, Ross Simmonds & John Smeed

This session provides a useful precursor to the 20 May session that covered ‘local’ regulatory reforms with highly relevant perspectives from ‘across the ditch’.

Tune in to learn more about:

  • Recent and upcoming reviews the Reserve Bank of New Zealand (RBNZ) has conducted:

    • 2019-2020 Appointed Actuaries Thematic Review (AATR) – a key finding that not all Appointed Actuaries (AAs) were meeting professional standards re FCRs.

    • Review of Insurance Solvency Standards Review (RISSR).

    • Review of Insurance Prudential Supervision Act 2010 (RIPSA).

  • How the RBNZ is moving from its current light-touch approach to a more active supervisory role, incl. a key expectation on the value of actuarial advice for boards and executives.

  • The New Zealand Government’s approach to tackling climate change in a regulatory-driven climate disclosure regime for financial institutions.

  • Affordability and other emerging issues driven by response to earthquakes, broader climate change impacts, health insurance affordability for older ages and medical cost inflation.

  • Surprisingly, the affordability and sustainability issues plaguing the disability cover product in Australia are yet to emerge in NZ.


Category: The age of technology

Deep Reinforcement Learning for Variable Annuities Hedging (7 May 2021)

Speakers: Michael Sherris, Xiao Xu, Jonathan Ziveyi & Jennifer Alonso-Garcia

A technically focused session exploring the merits of Artificial Intelligence based approach to hedging compared against existing pricing and hedging methods such as Monte Carlo simulation and Greeks hedging. Appealing to actuaries working in quantitative risk management fields in Life Insurance, the session explores:

  • Summary of existing research and progression in the field of deep neural networks.

  • Operational considerations greatly reduced computation times for single contracts.

  • Benefits in estimating tail risk compared to traditional methods based on Black Scholes Framework.

The summary above touches only the surface of what is a compelling session exploring mathematical rigour and depth of artificial intelligence hedging related concepts.

The Hidden Risks of Data Science and Machine Learning (18 May 2021)

Speaker: Michael Storozhev

This session explores the rapidly growing and immersive world of modern AI. Insights you can expect to digest are:

  • AI and Machine Learning (ML) continue to identify pathways to solving prominent societal challenges.

  • Technological advancement often comes at a cost. The session contrasts the benefits against the undesirable impacts on society and the environment.

  • Thought provoking examples discussed:

    • Social & Ethical risks

      • Amazon workers being paid a median wage of $2 per hour for its Mechanical Turk service. Creation of such ‘training data’ model encompasses repetitive or mentally taxing tasks.

      • Social media companies, like Facebook, paying contractors to filter illicit content, often leading to psychological harm.

    • Environmental challenges

      • Increasing electricity consumption

      • The impacts of mining specific elements needed for modern computation compounded by growing amounts of e-waste.


Evolution of Cyber Risks and Insurance (11 May 2021)

Speakers: Win-Li Toh, Ross Simmonds & Michael Neary

Cyber Risk – a topic that needs little introduction yet an insurmountable amount of time to unearth the complexities and the surrounding uncertainties.

What can you expect from this session?

  • The pricing journey of cyber insurance;

  • Unsurprisingly, cyber remains a top risk for executives, boards and regulators;

  • Product coverage and rating considerations, accelerated by the impact of COVID-19 and heightened reliance on technology;

  • The concept of ‘Silent Cyber’ and its gradual phasing out; and

  • Diversification considerations – unlike traditional geographical risk diversification, turning instead to diversification across attack surfaces and policyholders.


Recordings of the above (and many more!) sessions are available on demand via the official 2021 All-Actuaries Virtual Summit app for attendees only.


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