Keeping an eye on things
BEIS published its long awaited consultation “Restoring trust in audit and
corporate governance” yesterday. UK Shareholders’ Association will be responding in due course.
However, the consultation is not just about audit and corporate governance. Chapter 11 (section 2) of the consultation is all about oversight and regulation of the actuarial profession.
Continue reading “Restoring trust in the actuarial profession”
One of the problems writing about equity release is to get hold of up to date ‘real world’ data. The Equity Release Council has some useful data, but their data are somewhat limited.
Continue reading “‘Real World’ Estimates of ERM Profitability with a Just a Touch of Alchemy”
An actuary writes:
“Please be fair Eumaeus team. Most actuaries working in life/GI today encounter market consistent and risk neutral concepts on an everyday basis. The fact that some prominent valuations have not been performed in a reasonable manner by some actuaries does not mean that you should criticize the whole profession. I for one was astonished to read on this excellent blog about what has been done in the market for NNEG valuation and agree with the views mentioned here.”
Eumaeus. Please show some respect. [1] Most actuaries have degrees in mathematics/ statistics and then put themselves through countless hours of additional studying to ensure they are well placed to make these judgements. [2] I have read your articles where you make us out to be misleading shareholders and jeopardising customers for profit and it’s frankly offensive. [3] I’ve also repeatedly seen you mocking actuaries such as with your title and picture caption in the article just linked. As an actuary I follow your work out of professional curiosity; if someone thinks we are making miscalculations then I’m listening. [3] My request is just this: keep it to the maths please. (My numbering)
From the Penrose report following the Equitable Life disaster, 2004.
Eumaeus is pleased to announce the release of the second edition of our equity release valuation report, THE EUMAEUS GUIDE TO EQUITY RELEASE VALUATION Restating the Case for a Market Consistent Approach.
The new edition involves some simplification and tidying up, including: a simpler treatment of volatility estimation; a simpler treatment of the Market Consistent approach reflecting our more recent work on option pricing (of which more later); a brief discussion of Professor Mario Wüthrich’s 2011 European Actuarial Journal article on market consistent valuation; and a discussion of the IFoA Equity Release Working Party’s magnificently flawed approach (“A Discussion Note on the Economic Valuation of Equity Release Mortgages as Part of the PRA’s Effective Value Test”) to the PRA’s Principle III (“The present value of deferred possession of a property should be less than the value of immediate possession”).
As always, we thank the many people who have contributed to it.
Please keep the comments flowing in through our contact box.
The Institute has confirmed Louise Pryor as next President-Elect. Congratulations to Louise, who I worked with many years ago on data issues.
Kevin questioned yesterday whether the deferment rate is affected at all by any illiquidity premium. Here is a mathematical approach to the same question.
The IFoA working party on equity release mortgages chaired by our friend Craig Turnbull has just issued an interesting ‘discussion note’ about equity release valuation. You might have thought that the WP might have had something to say about some of the rude things we have said about the subject, or about the IFoA or even about the WP itself, but no.
At one level, the WP’s non response is admirable. From a scientific perspective, however, it isn’t helpful to ignore research that gives conclusions they might not like. Better to confront and rebut, otherwise people might be tempted to draw their own conclusions.
There is also nothing about the ostrich elephant in the room, which is whether the industry are getting it wrong, like getting NNEG valuation an order of magnitude wrong.
Published on Friday 28 Feb, although dated earlier, this Discussion Note on the Economic Valuation of Equity Release Mortgages has some interesting stuff. It is written by the IFoA Equity Release Mortgages Working Party, published by the Institute (although the Institute has the usual disclaimer).
We will be commenting shortly.