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Bits and pieces

Source: Dallas Federal Reserve

InsuranceERM covered our paper on Equity Release and the Institute yesterday. They are also advertising a conference in February, where I will be speaking on whether arbitrary discount rates are consistent with IFRS principles.

On other matters, the Institute have now published this presentation at Life Conference by the Equity Release Working Party, the one which actuaries voted on, as we reported last week. Note the whacking great disclaimer on the second page stating that ‘The IFoA and our employers do not endorse any of the views stated … in this presentation’, a standard boilerplate that normally appears at the end of presentations bearing the Institute’s logo. What is the Institute worried about?

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Is Equity Release Another Equitable in the Making?

Kevin Dowd and Dean Buckner, 29 November 2018

Our new report, “Equity Release: Another Equitable in the Making” has just been released in the Studies in Applied Economics series edited by Steve Hanke. Steve is professor of applied economics and co-director of the prestigious Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore, Maryland. We are very grateful to Steve for publishing it.

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Stress fest

Projections for 2014 (source, Bank of England)

It’s November again and time for the annual Bank of England stress test results.

To be honest I don’t take too much notice of these. The tests are hardly going to show that the UK banking system is not resilient to deep simultaneous recessions in the UK etc etc., although they may show Brexit is the worst thing ever.

But I was sad to see one chart has gone missing.

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Discounting by risk free

“As a way to commit crimes without interference from Batman, the Penguin once recruited an unnamed actuary. This actuary observed that the best way to commit a crime without being foiled by Batman was to do so in broad daylight”.
http://batmanytb.com/Actuary%20(Comics)

As I commented the other day, life insurers have for a long time used arbitrary methods of discounting insurance obligations. The idea permeates actuarial culture and most actuaries, including even the younger actuaries who qualified under the new actuarial syllabus designed to drag actuarial valuation into the 1950s, show surprise when you suggest that this is completely wrong.
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Insurance fundamentally different?

In a piece last week, Oliver Ralph of the FT says

Many insurers privately argue that the rules will fail to make accounts more comparable because insurance markets worldwide are fundamentally different. They say that the new standard simply imposes a huge burden on the industry in time, effort and expense, for little benefit.

I am sure they would privately argue that, but this is completely false.

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