Published in london by the staple inn actuarial society The www.the-actuary.org.uk ActuaryThe magazine for The acTuarial Profession June 2008 Divine intervention? How God lost his grip on probability solvency II impact studies • With-profits estates •g cT reforms • DB pension risk • latest jobs 001_Actuary_Cover_0608.indd 1 20/5/08 15:32:03 The Actuary See page 5 for full details of the editorial team Incisive Financial Publishing Editorial 32-34 Broadwick Street, London W1A 2HG June 2008 T +44 (0)20 7316 9000 Publisher Philip Harding T +44 (0)20 7316 9393 E [email protected] For politics’ sake? Recruitment advertising manager Hazell Cockle The editor of Vanity Fair magazine made the discusses with-profits estates in the light of FSA T +44 (0)20 7316 9493 following comment this month: “It can fairly principles; and Matthew Little looks at how E [email protected] be said that politics brings out the worst in recent changes to CGT could impact the life Designer people, and at times simply the worst people”. assurance industry. Nicky Brown A few individuals aside, I am not sure that Elsewhere, Andrew Slater and Con Keating this statement is true. However, it made me assess the risks, costs and security of voluntary Sub-editors wonder how much politics adds to our working defined benefit pensions, and our cover feature David Whittam Ann Ives lives? Does it in fact cause people to take their is Chris Lewin’s fascinating review of Thomas eye off the ball and do things that defeat the Gataker’s writings, which challenged divine Production manager objective of obtaining a balance between intervention in the outcome of events and Matt Parle T +44 (0)20 7316 9766 professionalism and commercialism? helped to pave the way for probability theory. E [email protected] Anyone who watched The Apprentice’s Online this month, there are exclusive Jenny Celerier being given her long-overdue features from Mike Brockman, reviewing the Group editor-in-chief marching orders by Alan Sugar will have seen fourth UK Bodily Injury Awards Study, and Anthony Gould first-hand how far playing politics gets you in Simon Sheaf, who discusses best practice for Group publishing director the boardroom. But neither is being ignorant insurance company rate monitoring systems. Derek Peck of office politics a viable option. Can you be aware of the politics without being involved? Reader survey Print and distribution Benham Goodhead Print Ltd., Oxon Or is the knowledge of it enough to deem you Thank you to all those who completed our to be playing the game? online reader survey. We have had an excellent Subscriptions There is currently a large amount of response and a review of your feedback and For subscriptions from outside the energy, emotion and expense being dedicated results is due for publication in the July issue. actuarial profession: UK, Eire, and Europe: £50 a year/£5.00 a copy. to the potential merger of the Institute and For the rest of the world: £75 a Faculty. I suspect that this game is detracting The stylish actuary year/£7.50 a copy. Please contact: from the day job, and so may not be Finally, thank you to everyone who contacted Maria Lyons The Actuarial Profession, Napier beneficial, unless of course the merger goes us about actuaries and their style. Matt and Finn House, 4 Worcester St, Oxford ahead, and then we can view this investment continue the fashion theme this month with OX1 2AW as justly made. some light-hearted advice for gentlemen actuaries T +44(0)1865 268236 Now democracy only works if a large dressing for the office. They are also due to attend E [email protected] enough number of people, with a cross- a special event at the London Fashion and Textile Students on actuarial science courses section of views, put a cross on the ballot Museum to celebrate style in the city. Surely this at universities may join the Staple paper. As a general rule, people vote if they makes them two of the most stylish actuaries in Inn Actuarial Society for £6 a year. feel that there is something to be gained the UK? Photos to follow, I promise. They will receive The Actuary as part of their membership. Apply from registering their view. In the case of to: Membership Department, The the merger, the majority of people that I Margaret de Valois Actuarial Profession, Maclaurin have spoken to (and I have spoken to many) Editor House, 18 Dublin Street, Edinburgh have been members of the Faculty who are editor@the- EH1 3PP. T +44 (0)131 240 1325 passionately against the merger. In fact, only actuary.org.uk E [email protected] 53% of the 137 Faculty members attending a special meeting on 16 April voted to cancel Changes of address should be made known to the membership the proposed in-principle election. Everyone department at the same address. else who has expressed a view to me has said that they don’t care whether the Institute and Internet Faculty merge or not. The Actuary website: www.the-actuary.org.uk On this basis, and subject to the usual SIAS website: www.sias.org.uk caveats that I apply to my actuarial predictions, Actuarial Profession website: I think that the merger proposals will not reach www.actuaries.org.uk a vote. The Profession is sensible in its decision Published by the Staple Inn to gauge members’ feelings towards a merger Actuarial Society before holding an election. This way, it will save the cost and administrative time of running an The editor, the Faculty of Actuaries, election that results in absolutely no action. the Institute of Actuaries and the Staple Inn Actuarial Society are not responsible for the opinions put Issue themes forward in The Actuary. Our technical theme for this edition © SIAS June 2008 is insurance. Phil Vermeulen and Jeev All rights reserved Muthulingam update us on the Solvency ISSN 0960-457X II quantitative impact studies; David Forfar www.the-actuary.org.uk June 2008 003_Actuary_Editorial_0608.indd 3 21/5/08 10:28:36 The Actuary Editorial advisory panel Peter Tompkins (chairman), John Batting, Timothy Bramham, Chris Daykin, Matthew Edwards, Gerard Contents Francis, Nigel Hayes, Martin Lunnon, Andrew Smith, Chris Sutton, Paul Sweeting, Matthew Wheatley June 2008 Editor Margaret de Valois HSBC Actuaries and Consultants Ltd, News Level 16, 8 Canada Square, London E14 5HQ 12 Profession T +44 (0)20 7991 3165 F +44 (0)20 7991 4646 E [email protected] 18 Education and research Features editors 20 Industry Tracey Brown T +44 (0)7970 230 892 E [email protected] 24 People Marjorie Ngwenya Swiss Re Life & Health, 25 Society 30 St Mary Axe, London EC3A 8EP 26 SIAS notices T +44 (0)20 7933 3163 E [email protected] 27 Calendar and events Industry news editor Louisa Lobo p37 50 Appointments and moves T +44 (0)7719 631 955 E [email protected] People/society news editor Comment Amy Guna Features Grant Thornton UK 3 Editorial T +44 (0)7879 453 949 28 Doubting Thomas E [email protected] Margaret de Valois questions the value of Chris Lewin reviews the writings of Thomas Gataker playing politics Student page editors who questioned the role of God in the outcome of Jennifer May events and paved the way for probability theory Hewitt Associates, 6 Presidential address 6 More London Place, Nick Dumbreck issues a final rallying call London SE1 2DA 30 From consultation to implementation towards Profession merger T +44 (0)20 7939 4000 Phil Vermeulen and Jeev Muthulingam chart the E [email protected] 8 Letters progress of the Solvency II quantitative impact studies Jean Eu In which actuaries discuss open minds, open RGA UK, IFC Level 40, debate and open shops 25 Old Broad Street, 32 Simplifying CGT London EC2N 1HQ T +44 (0)20 7448 8255 Matthew Little assesses the impact of recent changes 10 Soapbox E [email protected] to CGT on the life insurance industry Roger Mattingly charts the rise of inflation Arts page editors Matthew Fewster 34 Where’s the incentive? Regulars JPMorgan Con Keating and Andrew Slater look at the costs, 125 London Wall London EC24 5AJ risks and security of defined benefit pensions 44 Student page T +44 (0)20 7777 9707 Guest editor Matthew Pinkney issues a well- E [email protected] 37 Peak performance reasoned justification for exam failure Finn Clawson How to get the most out of your graduate employees Hewitt Associates 46 Puzzles 6 More London Place More brainteasers to test your mettle London SE1 2DA 40 Ringing the changes T +44 (0)20 7939 4435 E [email protected] Clive Weber considers recent changes to debt 48 Arts regulations in relation to occupational pension schemes Matt and Finn give Trinny and Susannah a run Puzzles editor Rakhee Raja for their money Xafinity Consulting Ltd, 42 A matter of principle Xafinity House, David Forfar asks whether the build-up and use of 51 Appointments 42-62 Greyfriars Road, 26 pages of the latest actuarial jobs Reading RG1 1NN with-profit estates falls in line with FSA principles E [email protected] More features online Writer of the month The following features can be found exclusively on The Chris Lewin is the editorial team’s Circulation Actuary website this month: choice for June for his article on 17,570 n Mike Brockman assesses the implications of the fourth Thomas Gataker and receives a £50 (July 2006 to June 2007) UK Bodily Injuries Study book n Simon Sheaf explains the features of the best rate token monitoring systems for insurers.