A311 Lists

• Actuarial control cycle

  • Specifying the problem
  • Developing the solution
  • Monitoring the experience
  • Professionalism
  • Risks
• Investment Risks

  • Market Risk
  • Equity Risk
  • Volatility Risk
  • Interest Rate Risk
  • Currency Risk
  • Commodity Risk
  • Basis Risk
• Market liquidity risk

  Risk associated with the inability to trade or obtain desired product prices due to market conditions
• Inflation risk


  Risk of rising prices
• Credit Risk


  • Counterparty Risk
• Reinsurance Risk


  Risk associated with reinsurance arrangements
• Insurance Risks


  • Persistency
  • Mortality Risk
  • Morbidity
  • Increased Claims Risk/Claim Frequency
  • Longevity
  • Benefit Amount
• Operational Risks


  • Operational Risk (internal processes, people, systems)
  • Technology
  • Fraud
  • Reputational damage
  • Human resources
  • Outsourcing
  • Business processes
• Model risk


  Risk associated with errors or inaccuracies in financial models used for decision-making processes within banks
• Expense Risk


  Risk of expenses being higher than expected
• Cyber Risk


  Risk associated with cyber threats
• Liquidity Risk


  Risk of inability to trade or obtain desired product prices
• Data Risks


  • Data inaccurate/incomplete
  • Need a lot of data for credibility
  • Data not sufficient for relevant purpose
  • Past data may not reflect future
  • Chosen data groups not optimal
  • Data not available in appropriate form for intended purpose
• Business Risks


  • Underwriting Risk
  • Business Volume Risks (business strain, inadequate new business, early withdrawals)
  • Selection Risk (anti-selection, moral hazard)
  • Healthcare Cost inflation Risk
  • Insolvency Risk
  • Settlement Delays
  • Accumulation of Risk
  • Poor Plan Risk (inadequate planning)
• Pre-payment Risk


  Risk associated with early loan repayments
• Financing risk


  Risk associated with the inability to trade or obtain desired product prices due to market conditions
• Exposure risk


  Risk associated with the amount of business sold or retained, as well as concentration or lack of diversification in business operations
• External Risks


  • Regulatory Risk
  • Catastrophes
  • Climate change
  • Physical Risk (first-order effects of environmental changes; pollution, land use)
  • Transition Risk (economic, political, market changes as a result of efforts to mitigate climate change)
  • Liability Risk (relating to compensation claims due to impacts of climate change)
• Competitive Risks


  • Business Strategic Risk (strategic risks specific to businesses, especially banks)
  • Business Strain (selling too much business, selling too little business)
  • Competitive Risk
• Stakeholders


  • Account holders
  • Accountant
  • Admin manager
  • Actuary
  • Auditors (Ins) & (ben)
  • Banks
  • Board of directors (Ins)
  • Competitors
  • Creditors (Ins)
  • Customers
  • Employers
  • Employees
  • Investment fund managers
  • Members (ben) (investment schemes)
  • Members dependents (ben)
  • Policyholders (Ins)
  • Prospective policyholders (Ins)
  • Regulators
  • Reinsurer
  • Sales & marketing
  • Shareholders (Ins)
  • Sponsors (ben)
  • Sponsors of capital projects
  • State
  • Tax man
  • Trustees (ben)
  • Underwriters
• Types of advice


  • Indicative advice
  • Factual advice
  • Recommendations
• The Wealth of Nations was written in 1776
• Rational (in classical economic theory)

  Economic agents are able to consider the outcome of their choices and recognise the net benefits of each one
• Rational agents will select the choice which presents the highest benefits
• Rational agents


  • Consumers
  • Producers
  • Workers
  • Governments
• Consumers act rationally by


  Maximising their utility
• Producers act rationally by


  Selling goods/services in a way that maximises their profits
• Workers act rationally by


  Balancing welfare at work with consideration of both pay and benefits
• Governments act rationally by


  Placing the interests of the people they serve first in order to maximise their welfare
• Rationality in classical economic theory is a flawed assumption as people usually don't act rationally
• Demand curve shifting right

  Increases the equilibrium price and quantity
• Marginal utility


  The additional utility (satisfaction) gained from the consumption of an additional product
• If you add up marginal utility for each unit you get total utility
• When analysing markets, a range of assumptions are made about the rationality of economic agents involved in the transactions
• Principles of insurance


  • The existence of an insurable interest
  • Pre-funding of the risk
  • Pooling of risk
• Types of benefit schemes

  • Defined benefit
  • Defined contribution
  • Hybrid
• Types of members of pension schemes

  • Actives
  • Deferred members
  • Current pensioners
• Benefit providers


  • The state
  • Employers
  • Individuals
  • Financial institutions (Insurance companies, banks, mutual funds, investment companies)
  • Other organisations (Trade unions, employee associations and religious organisations)
• Investment types


  • Without-profit
  • With-profit
  • Unit-linked
  • Index-linked
• Common investment classes


  • Cash on deposit
  • Money market instruments
  • Fixed-interest bonds
  • Index-linked bonds