Kitty Chan, Asia Liaison Manager at the Actuaries Institute, recaps the key findings and insights from Institute members at the 2022 International Actuarial Colloquium, hosted virtually and in-person in Hong Kong.
Carrying the theme ‘Global Pandemic – Beyond the New Normal’, the Colloquium aimed to investigate the creeping effects of the COVID-19 pandemic across insurance and pension funds.
Hundreds of participants from 21 locations joined the hybrid event based in Hong Kong, which was co-sponsored by the Actuarial Society of Hong Kong and the International Actuarial Association’s Life and Pensions, Benefits and Social Security Sections.
The two-day program (27-28 April) featured forty speakers from around the world, including six Institute members. Here are just a few of their highly valued contributions at the Colloquium.
Opening Keynote Panel
Featuring Brett Clark (Group CEP & Managing Director, TAL), Jacky Chan (Regional CEO, AIA), Arthur Ozeki (Executive Vice President & Head of Asia, RGA) and Kevin Strain (President & Chief Executive Officer, Sun Life). Chaired by Chris Lincoln (Broadcaster).
Institute member Brett Clark began the keynote panel discussion by sharing what the Australian experience was like during the COVID-19 pandemic.
He touched on the critical infrastructure and resilience needed to support businesses during the peak of the pandemic. With different approaches to closing borders and lockdowns, Australia had a different experience compared to other markets.
Brett said the pandemic was a turning point for the actuarial profession.
Actuaries now had to deal with changing and evolving client business models as most pre-pandemic models were not accurate in predicting business outcomes during COVID times.
He reflected on the past two years, which was fast-moving, volatile, uncertain, and packed with stimulus and government interventions. He said it was no surprise that models were inaccurate under those circumstances.
Traditionally, actuaries deeply analyse data over a long period of time in an attempt to forecast future outcomes. But Brett said these techniques don’t work perfectly in a volatile COVID environment, which he personally saw when analysing seasonal claims records throughout pandemic uncertainty.
Brett predicted that the pace of change won’t slow down soon with the world continuing to adapt to uncertainty.
He said the actuarial profession shouldn’t be overconfident with our ability to predict the future at this time.
To adapt in the new world, Brett emphasised it’s about being agile in our responses, taking the learnings from the pandemic forward to develop a comprehensive view of the risks and how to respond accordingly.
He said modelling can only do so much. It’s critical to integrate a more diversified approach and be comfortable that some parts of the model will be uncertain.
Apart from using data, actuaries should also look at other ideas, be responsive, rely on judgement and think about the important role that actuaries play in the future.
Plenary 1 – The New Era of Hong Kong Pension System by Revolutionary Digitisation
Presented by Cynthia Hui (Executive Director [Members] of the Mandatory Provident Fund Schemes Authority). Chaired by Billy Wong (Gain Miles Group).
Institute member Cynthia Hui opened by recalling the last time she presented at the Colloquium, some 10 years ago, and was pleased to have been offered the opportunity again to share an update. On this occasion, Cynthia took the audience through recent achievements at the Mandatory Provident Fund (MPF).
MPF is the Hong Kong pension system and was launched in 2000. MPF operates under the second pillar of the World Bank’s multi-pillar retirement protection framework, which aims to provide basic retirement protection for the working population.
MPF’s features include mandatory, privately managed trustees with decentralised administration, as well as fully funded defined contributions with a cap. Cynthia discussed the employment-based where the employer chooses the trustee and scheme and the employees choose their own investment funds in the scheme.
Cynthia highlighted the key statistics to demonstrate the ‘scale’ of MPF:
4.6 million scheme members, including 230,000 self-employed members
27 schemes, 411 funds
12 scheme administration systems
Net asset value is over USD $145 billion, with a 3.7% annualised net internal rate of return
As the employees can hold multiple accounts, administration can be tedious and costly. The main challenges for MPF are members’ understanding of the system, low incentive to participate, and high administrative fees. The adaption of technology and the pandemic have accelerated the digitalisation across all the aspects of MPF.
Cynthia introduced the most significant reform, ‘eMPF’. eMPF is a platform that helps increase cost efficiency and create a digitalised ‘one-stop’ place to streamline and automate the administration for 4.6 million scheme members with over 10 million accounts. This reform is still in the construction phase and eMPF will be in full operation by 2025.
The system provides reliability and accuracy to the regulators, facilitates the enforcement of actions, and paves the way for future reform initiatives. Cynthia also compared pension systems in other jurisdictions where many don’t have a centralised system or digital platform. Meanwhile, Hong Kong is embracing the full spectrum through digitalisation.
Cynthia also shared more MPF incentives, such as their Default Investment Strategy, Tax Deductible Voluntary Contribution, and guideline to the industries. Cynthia concluded that the MPF is doing many things to engage the population and stakeholders throughout the digitalisation journey. She said it is crucial to appreciate what the authority is trying to achieve with the accumulation and decumulation of the pension scheme.
Plenary 3 – Professionalism
Featuring Mark Saunders (Institute and Faculty of Actuaries), Sara Goldberg (Society of Actuaries) and Leandro Ao (Actuaries Institute). Moderated by Steve Hui (Actuaries Institute).
Mark Saunders opened the session by examining various behaviour and case studies in the pandemic world. He highlighted the concept of applying the ‘headline test’ in situations such as the use of social media, personal chat groups, and attending virtual conferences.
Sara Goldberg then conducted a case study on actuarial modelling dilemmas, such as when the actuary is being pressured by management to adjust the assumptions in the uncertain pandemic environment. Sara highlighted that the profession has to be technically skilful, ethical, and have clear communications for business outcomes at times of uncertainty, like the pandemic.
Leandro Ao showcased the Actuaries Institute’s response to the changes to the update. He first delved into the professional challenges and dilemma, the six principles from the Code of Conduct, potential options, responses and the outcomes.
Leandro highlighted that according to the Code of Conduct, the actuarial professional has the duty of care to others whose interests may be affected. The Institute’s responses include:
- exposure drafts explanatory memorandums, internal committee discussion;
- insights section for members with polling to inform course of actions
- final exposure draft update with Preferred Approach as default; and
- letters to the Government to express concerns, approach, and position.
The Institute is pleased with the Government’s response throughout the pandemic and its outcomes. Leandro encouraged actuaries to use the professional body to resolve the challenge together. The panel concluded with an interactive Q&A session among the panelists and delegates to discuss the case studies.
Along with these keynote and session highlights, Institute members Louis Lee (Partner, Deloitte) and Alan Yip (Head of Portfolio Solutions Asia Pacific, Neuberger Berman) also presented at the Colloquium. Louis presented the Insurtech topic Market Disruptors vs Big Tech – The Modern Battlefield and Alan joined the panel Time to Implement ESG into Investment.
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