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The Actuary The magazine of the Institute & Faculty of Actuaries

British Actuarial Journal – Volume 11 Part IV

The latest part of British Actuarial Journal (BAJ) is now being distributed. The guest editorial is by Phelim Boyle and reflects on the nature of the research process. This is not always as smooth or as straightforward as published papers might imply and, as the author illustrates with a couple of examples, can be faltering and indirect, with luck sometimes playing an important part.

MHD Kemp presented a paper, ‘Risk management in a fair valuation world’, to an Institute sessional meeting in April 2005. The paper considers the impact that the current trend towards fair (or market-consistent) valuation of assets and liabilities is likely to have on risk measurement and management practices within the financial services industry. After categorising risks faced in the financial services industry and noting an apparent trend to adopt more liability-driven investment strategies by pension funds and life offices in the recent past, the paper considers how the approach to the management of their risks of pension funds, life offices, banks, and asset managers may change if fair valuation becomes more entrenched. The paper goes on to argue that that time series-based risk-management techniques may tend to be displaced by what the paper refers to as ‘derivative pricing’ (or ’fair value’ or ‘market consistent’) techniques. In the discussion the question of the relative merits of intrinsic values and fair values was raised by several speakers.There follows a report on the discussion at the Institute in May 2005 on the topic ‘Is there a retirement savings crisis? Whither pensions reform?’. Themes discussed included the state pension level, whether it should be based on a contributions test or on a citizenship test, whether the state should provide earnings-related pensions, the fairness or otherwise of compulsory savings for retirement, and whether any consensus was possible.

Finally, there is a set of abstracts from actuarial journals worldwide.