The coronavirus pandemic has affected the insurance industry in many ways. However, it may ultimately accelerate actuarial innovation and technology. In this episode of the Society of Actuaries’ (SOA) Research Insights podcast, Milliman’s Pat Renzi discusses some of the short- and long-term effects of COVID-19 on the insurance industry and its digital transformation with the SOA’s Dale Hall.
Predictive modeling has emerged as a field that requires judgment at nearly every step. What are the best ways to implement predictive modeling into relevant areas of actuarial practice? This Society of Actuaries paper by Milliman consultants provides more perspective.
This Society of Actuaries literature review by Milliman consultants provides several perspectives on emerging technologies that influence the actuarial profession within the microinsurance industry. The review assembles a collection of publicly available articles, reports, presentations, books, blog posts, podcasts, videos, and other resources that actuaries and other interested stakeholders can reference. It also provides a foundation for understanding the evolving role of technology in microinsurance, as well as its potential impact on insurance and the actuarial profession.
Liquidity risk is one of those risks we often don’t pause to think that much about, but it’s one that can wreak havoc on a business if not kept constantly in check. It is also a risk that has become heightened in recent times, because of a combination of regulatory and macroeconomic developments. Companies can often grow complacent about liquidity risk, especially if they have tended to generate cash on a consistent basis through ongoing operating performance. However, certain activities, such as mergers and acquisitions (M&A), a new product launch, or perhaps regulatory development, can give rise to new exposures. It’s worth reminding ourselves of some of the key drivers of exposure to liquidity risk, and what we can do to manage and mitigate this risk.
In Europe, the ability to recognize negative best estimate liabilities on the solvency balance sheet, effectively capitalizing estimated future profits on books of in-force business, and considering these profits to be immediately available to absorb losses in the business, requires companies to be extra vigilant. In reality, such assets may be far from liquid, unless they can be repackaged through value-in-force (VIF) monetization, or used to secure reinsurance financing of some sort. The same may be said of the likes of deferred tax assets, except that these assets may be even less liquid, unless they can be sold on to other entities within a group structure.
Other aspects of the liability side of the balance sheet can also pose liquidity challenges. Take, for example, a company with a range of unit-linked funds operating on a t+1 basis (i.e., settlement occurs one day after the transaction date), with a further range of funds operating on a t+2 basis. Policyholder fund switches out of the t+2 funds and into the t+1 funds can leave companies needing to provide liquidity for transaction settlements upon purchase of the t+1 assets, before payment is received from the sale of the t+2 assets. Depending on the volume of transactions, which could be significant, firms may struggle to provide such financing on an ongoing basis. More severe examples of firms struggling to cope with fund switch activity have included suspension of redemptions from property funds, albeit more because of the underlying lack of liquidity of the assets than the nature of the pricing basis, though ultimately leading to similar problems. Funds that permit a mix of both individual and corporate investors may be particularly susceptible, as the latter potentially have the ability to move vast sums of money very quickly, and before redemptions are suspended, precipitating the lack of liquidity for individuals.
Milliman consultants had another prolific publishing year in 2014, with blog topics ranging from healthcare reform to HATFA. As 2014 comes to a close, we’ve highlighted Milliman’s top 20 blogs for 2014 based on total page views.
20. Mike Williams and Stephanie Noonan’s blog, “Four things employers should know when evaluating private health exchanges,” can help employers determine whether a PHE makes sense for them.
19. Kevin Skow discusses savings tools that can help employees prepare for retirement in his blog “Retirement readiness: How long will you live in retirement? Want to bet on it?”
18. The Benefits Alert entitled “Revised mortality assumptions issued for pension plans,” published by Milliman’s Employee Benefit Research Group, provides pension plan sponsors actuarial perspective on the Society of Actuaries’ revised mortality tables.
17. In her blog, “PBGC variable rate premium: Should plans make the switch?,” Milliman’s Maria Moliterno provides examples of how consultants can estimate variable rate premiums using either the standard premium funding target or the alternative premium funding target for 2014 and 2015 plan years.
16. Milliman’s infographic “The boomerang generation’s retirement planning” features 12 tips Millennials should consider when developing their retirement strategy.
15. “Young uninsureds ask, ‘Do I feel lucky?’” examines the dilemma young consumers face when deciding to purchase insurance on the health exchange or go uninsured.
14. Last year’s #1 blog, “Retiring early under ACA: An unexpected outcome for employers?,” is still going strong. The blog authored by Jeff Bradley discusses the impact that the Patient Protection and Affordable Care Act could have on early retirees.
13. Genny Sedgwick’s “Fee leveling in DC plans: Disclosure is just the beginning” blog also made our list for the second consecutive year. Genny explains how different fee assessment methodologies, when used with a strategy to normalize revenue sharing among participant accounts, can significantly modify the impact of plan fees in participant accounts.
12. Doug Conkel discusses how the Supreme Court’s decision to rule on Tibble vs. Edison may impact defined contribution plans in his blog “Tibble vs. Edison: What will it mean for plan sponsors and fiduciaries?”
11. In her blog “Retirement plan leakage and retirement readiness,” Kara Tedesco discusses some problems created by the outflow of retirement savings. She also provides perspective on how employers can help employees keep money in their plans.