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The Actuary The magazine of the Institute & Faculty of Actuaries

Part of the solution or part of the problem?

We were intrigued by the reference to actuarial assumptions at number eight in the list of ‘Insurance Banana Skins’ published last year by the Centre for the Study of Financial Innovation (CSFI) with the support of PricewaterhouseCoopers.

The survey puts together a league table identifying sources of risks to the insurance industry and ranks them by severity. It was based on 139 responses in 21 countries. The industry’s adherence to the pronouncements of actuaries was widely seen as the cause of poor insurance decisions and of its obsolescence. Several respondents made the point the accuracy of actuarial assumptions will become more critical in the period ahead, as the insurance industry enters a softening market.

Insurance Banana Skins 2007
1 Too much regulation
2 Natural catastrophes
3 Management quality
4 Climate change
5 Managing the cycle
6 Distribution channels
7 Long tail liabilities
8 Actuarial assumptions
9 Longevity assumptions
10 New types of competitors
11 Investment performance
12 Managing technology
13 Equity markets
14 Risk management techniques
15 Back office
16 Political shocks and pressures
17 Pricing new risks
18 Terrorism
19 Complex instruments
20 Retail sales practices
21 Pollution
22 Interest rates
23 Corporate governance
24 Demographic trends
25 Contract wording
26 Capital availability
27 Security of reinsurance
28 Availability of reinsurance
29 Business continuation
30 Fraud
31 Merger mania
32 Too little regulation
33 Asbestos