ISSUE 118 | APRIL | 2007
ACTUARY A U S T R A L I A
THE FINAL STEP – 2007 PROFESSIONALISM COURSE
STERN REVIEW ON THE ECONOMICS OF CLIMATE CHANGE
THE AUSTRALIAN GOVERNMENT ACTUARY
COMMUNICATIONS TASKFORCE UPDATE
editorial
M
y thinking this month was sparked by Mark Baxter at the
Presidential Address when he told us that working in the
banking industry he has had to consider carefully whether and
when he will ‘come out’ to his colleagues about being an actuary.
What does this say about our brand and our view of its
perception in banking? My observation is that the brand places
us squarely in a box, although as individuals actuaries are usually
highly regarded for their skills and abilities. This is reinforced by
comments in the The Actuarial Pulse (page 8). While we are
generally proud of our qualification and what it says about us,
we don’t seem to be any closer to being able to explain what
it means. We recognise gaps in our areas of expertise and we
clearly don’t think we need to do more than ‘do a good job’ in
order to be recognised as experts in an area.
While I have some empathy with the view that if we work hard
enough and do a good job we will be recognised, I think the world
has moved on. We risk being marginalised by others who either :
• have developed a greater depth of expertise in areas we like
to claim as part of our core knowledge; or
• are less able technically/professionally, but are proactive and
have more effective promotion and influencing skills
A strong brand is key to success and whether we like it or not
we need to be more active in the branding and advertising of our
profession – I am not suggesting flashy TV ads here but a clearly
defined strategy which as a membership we are proud to own
and promote. There are certainly some risks in this – potential for
over selling ourselves and the impact of negative publicity and
errors but the examples of other professions suggest that you
can both survive these and move forward. Concerns about the
risk of ‘watering down’ the ethics and integrity of the profession
can be met by continued reinforcement of our professional
values and support for members to take responsibility for their
own behaviour.
My experience of the newly-qualified actuaries at the
Professionalism Course is that they are ready for the challenge!
In the words of Bevan Damm, a newly qualified actuary, to the
more experienced attendees at the Presidential Dinner, “Move
over, it’s time for us to have a go”. ▲
Jenny Lyon
[email protected]
Actuary Australia
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NEXT EDITION Publication date: May 2007
AA120 June 2007 Deadline for contributions: 1 May 2007
AA121 July 2007 Deadline for contributions: 1 June 2007
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© The Institute of Actuaries of Australia ISSN 1035-6673
ACTUARY AU S T R A L I A
APRIL 2007
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AA No 118, April 2007
What’s New on the Web
contents
www.actuaries.asn.au
Cover photos: NASA images of Cyclone Craig over northern
Australia and cyclones over the Pacific
4
Calendar / Events
JUNE
Wednesday 20 – Saturday 23 June 2007
ASTIN 2007 – Actuarial Studies of Non-Life Insurance
Disney’s Contemporary Resort, Orlando, Florida, USA
UPOMING MAJOR EVENTS
Sunday 23 – Wednesday 26 September 2007
Biennial Convention 2007 – Adventures in Risk
Christchurch, New Zealand
Please note that important future calendar events will be listed
on the Institute website and within this What’s New on the Web
listing, but no longer as a separate Calendar section on page 31
Education
Education Calendar – Tutorial Details
Report from the Professionalism Course February 2007
and Congratulations to new Fellows
Donald Campbell
7
Prizes and Awards
8
The Actuarial Pulse
10
Ask Gae
11
Actuary Unearthed
12
Postcard from Italy
14
Council gets on Board
15
Appointment – Manager Strategic Projects
16
The Australian Government Actuary
19
Stern Review on the Economics of
Climate Change
Publications
Actuary Australia, Issue 118, April 2007
Actuarial Practice of General Insurance 7th Edition
Available at:
http://www.actuaries.asn.au/PublicationAndResearch/books.htm
PHI Newsletter 173
Public Affairs
Submission to the Private Health Insurance Administration
Council released 27 February 2007 in relation to the insurer
obligation rules. View at http://www.actuaries.asn.au/PublicAffairs
Actuaries on the Move
Change of Business Details from 25 January 2007
Peter Jonas Grigaliunas, FIAA
Consultant
CGU Insurance Limited
Level 7, 485 La Trobe Street
MELBOURNE, VIC 3000
Mehran Redjvani
Consultant
PricewaterhouseCoopers Australia
Office: +61 2 826 60875
Mobile: +0405 615 761
Fax: +61 2 828 60875
[email protected]
http://www.pwc.com/au
Mark Schneider, a founder of Classic
Solutions which developed the
MoSes actuarial system, has left the
firm after 13 years. Mark was also
the Managing Principal of Tillinghast
Software Solutions (TSS) which
acquired Classic Solutions in 2002.
The Final Step
Institute prize winners 2006
Member survey
Jenny Lyon
Answers to life’s serious and not-so-serious questions
Gae Robinson
Chris White
Alan Smee
Report
Anne Peters
Sue Wetherbee
Report
Peter Martin
Review
Pauline Durant / Jill Green
22
Two Ducks Swimming
23
Communications Taskforce Report and
Update
24 Report from the CEO
26
Notes from the President’s Blog
28
Education Update Call for expressions of interest
Provisional accreditation
29 Obituary: William David Owen
30 Obituary: Les Oxby
Stephen Woods
Lesley Traverso
John Maroney
Fred Rowley
Volunteers Cocktail Party / Part III – Education
Philip Latham
Part III Education
Curtin University of Technology
Chris White
Ian Salmon
Members are encouraged to advise [email protected]
if they would like to be included in Actuaries on the Move
Members’ details are available via the search function on the Institute
website – www.actuaries.asn.au
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
report
The Final Step
– Professionalism Course February 2007
This is possibly not something a newly-qualified actuary should
admit but my assumptions were flawed. The course schedule
differed from the one I imagined. It had a lot more learning and
a lot less swimming.
Day One
For non-Sydney attendees, day one of the course began the
previous evening as we flew to Sydney in preparation for an early
start on Monday. Our hotel in Manly was right on the beach but
unfortunately cool winds and persistent drizzle put to rest any
desire for a swim.
Early the following morning day one began in earnest with
the arrival of the Sydney students by coach from the CBD.
The majority of the 34 attendees were survivors of the most
recent CAP course but the attendees also included those who
had qualified under the old Part III system, were earning an
exemption from the UK professionalism course or were seeking
accreditation in Australia.
Our steadfast MC, Barry Rafe, welcomed us to the course and
provided an overview of what we could expect, ending with
Tasmanian comedienne Dolly Putin’s video for the 2005 Biennial
Convention.
Given that this was the Professionalism Course, it came as no
surprise that our first session was on professionalism – What is it?
What does it mean for actuaries? And how do we achieve it?
Chris White discussed the recent actuarial scandals in Australia
and overseas and the avoidance of future scandals by engendering
a stronger ethical culture both within professions and in the
wider community.
ACTUARY AU S T R A L I A
APRIL 2007
Chris continued to present to us in the second session on ethics.
His studies in theology were undoubtedly useful as he presented
us with the theory and practice of ethical frameworks, including
how to systematically, rather than instinctively, deal with the
ethical dilemmas that we are highly likely to encounter in our
future careers as actuaries. A key part of these frameworks was
balancing integrity, fairness and compassion in determining the
best choice of action.
The ethics session included breaking into groups to tackle
selected case studies. The scenarios were deliberately challenging
with no easy answers. For example, your parents are about to
invest 25% of their retirement savings in a company to which you
consult. You know confidentially that the company’s share price
is about to dive. Where do your loyalties lie?
one
L
eaving Melbourne on a sunny Sunday afternoon, I had
high expectations for the Professionalism Course: a
beautiful seaside location, swims at the beach, catching
up over food and drinks with friends made at the CAP Course
and perhaps, after all that, some useful education about being
professional as well.
Difficult decision-making is hungry work, so the Institute
organisers Katrina McFadyen and Lauren O’Donnell cleverly
held lunch to ransom until we had completed not only a group
photo but also individual headshots.
The afternoon held as many difficult decisions for us as the
morning, with Tim Jenkins taking us through the recently revised
Code of Professional Conduct before we again broke up into
groups. These case studies involved some role-playing, including
a confrontation regarding suspected insider trading between an
actuary and his AIAA work colleague.
Fred Rowley wrapped up the day’s play with an address loosely
associated with his official Presidential Address but made more
interesting with the inclusion of a number of war stories,
including tough questions asked by a local actuarial student
during his travels in China.
After a few drinks with the President on the balcony, there was
barely enough time to put our notes back in our rooms before the
QED Dinner – no time for a swim in between. QED sponsored
the dinner for the eighth time running and as hosts they set
table against table in a dinner trivia quiz. ‘Murphy’s Law’ was
the eventual winner, edging out the competition by successfully
answering questions such as “Who played Karen Silkwood in the
movie Silkwood?”
Professionalism Course attendees (and trusty fascilitator)
Congratulations to our new Fellows – March 2007
Kane Boulton
Dimitri Lampitsi
Andrew McInerney
Donald Campbell
Alex Lee
Daniel Murphy
Ken Cheung
Wallace Lee
Mehmet Ogut
Bevan Damm
Jamie Levitt
Jakub Ronowicz
Sarah Elsey
Heng-Yeow Lim
Lori Tan
Kerryn Ferris
Adam Lin
Dimity Wall
Saul Field
Andrew Loh
Jeremy Weight
Dale Andrew Jackson
Nikki Mahemoff
Teresa Yam
Jack Jiang
James Makin
Gloria Siu Yan Yu
Sarah Johnson
Adrian McCarthy
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
report (continued)
Day Two
After a hearty breakfast next to fellow hotel guests the South African
Bulls (Super 14 rugby team), we were ready to go for day two.
Both the Melbourne and Sydney Dinners went very well as we
officially became Fellows of the Institute. Of the two, the Sydney
dinner was more eventful – the Finity boys wore garish kaftans
and our new President had to move fast to avoid an amorous
new Fellow leaning in for a kiss along with his certificate.
On behalf of all the new Fellows and Accredited Members,
I would like to thank Barry Rafe, the session presenters and
Institute organisers for a fun and well-run course. I may not have
had a swim but in two very intensive days I learned a lot about
what is expected of a qualified actuary and how to fulfil those
expectations. ▲
Donald Campbell
[email protected]
two
The first session asked what the Institute can do for us and what
we can do for the Institute. The Institute CEO John Maroney set
out the current state of play and future plans for the Institute.
Kirsty Hogan and Paul Carrett told us about their experiences
volunteering with the Institute. They encouraged us as newlyqualified actuaries to volunteer not just in the traditional role of
exam marking but to get involved in organising events, writing
papers and sitting on practice committees.
After a final wrap-up by Barry, the Melburnians grabbed taxis to
their flights home while everyone else immediately hopped on a
bus to the Sydney Presidential dinner that evening.
After the obligatory recaffeination break, Mark Blair discussed
the importance of managing the conflict of interest between
being a trusted adviser and a product seller, particularly after the
financial services reform.
Insurance lawyer Stephen Connell continued the regulatory
theme, presenting legal liability issues for actuaries. He told us
the good news that historically there have been very few legal
claims against actuaries. The bad news followed – that this was
likely to change given the expansion of personal liability for
professional services and the number of different ways actuaries
could be held liable in court for services they provided. The
solution: implementing risk management not only for financial
risks but for legal risks as well.
Sydney Presidential Dinner: Vote of
thanks – (L to R) Fred Rowley,
John Maroney and Bevan Damm
Melbourne Presidential Dinner:
Sydney Presidential Dinner: (L to R) John
Vote of thanks – Donald Campbell Maroney, Fred Rowley, Richard Lyon and
John Shepherd
As we neared the end of two long days of learning, Barry
promised us a ‘high energy’ finale to the course. This we
received via a presentation skills workshop with Tony Bulmer
(only the second non-actuarial presenter). We succumbed to
‘Bulmerisation’ as we learned to improve our presentations by
playing to our individual strengths and styles. Tony needed to
use his best presentation skills to compete with the sunny Manly
beach scene tempting us just outside our conference room.
Two volunteer presenters capped off the workshop. Catherine
Hodson became a sales consultant for speed dating and Bevan
Damm explained Surviving Pregnancy (for Dads).
ACTUARY AU S T R A L I A
MARCH 2007
Sydney Presidential Dinner: Fred Rowley (2nd from left) with colourful new
Fellows (L to R) Kane Boulton, Jeremy Weight and Andrew McInerney
Donald Campbell
After-dinner discussion revealed that Dimity Wall had received
an upgrade to a suite on the second floor. A large proportion of
us adjourned there for the ultimate challenge of mathematical
minds: a Texas hold’em poker tournament, which ended in a
fortunate victory by yours truly. Afterward, we headed to bed in
preparation for another early start.
2006
Prizes & Awards
Congratulations to all our prize winners
H M Jackson Memorial Prize 2006
Andrew Jackson
Andrew Jackson
Trade Generation, Reputation and Sell-Side Analysts.
The Journal of Finance, Volume LX, Number 2, April 2005.
Professor David Dickson
Insurance Risk and Ruin (Text Book) Cambridge University Press
Prof David Dickson
(2005)
A M Parker Prize 2006
Anthony Asher
The Major Actuarial Challenges: A partly idiosyncratic view
presented at the Institute of Actuaries of Australia 2005
Biennial Convention.
Melville Prize for Practitioners 2006
Anthony Asher
Anna Mo
Richard Bruynel
Optimal Investment Strategies AAJ, Volume 11, Issue 3, 2005.
Andrew Prescott Memorial Prizes 2006
Anna Mo
for meritorious performance in the investments examination
Ben Facer
Ben Facer
for meritorious performance in the commercial actuarial
practice examination
Daniel Murphy
for outstanding performance in the Fellowship examinations
Daniel Murphy
2006 Katherine Robertson Prize
Daniel Butt
for meritorious performance in the general insurance
examination
Daniel Butt
A H Pollard Scholarship 2007
The 2007 A H Pollard Scholarship has been awarded to
Christopher Beveridge for his PhD project The study of
long-dated hybrid exotic interest rate derivative contracts,
through the University of Melbourne.
Christopher Beveridge
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
members’ survey
The Actuarial Pulse
Next Survey A new set of questions will be available in the
first 10 days of each month. Please login to the Members’ area
of the Institute web site (www.actuaries.asn.au) and select ‘The
Pulse’. The next survey will be available in May 2007.
What would you like to know? If you have a question
you would like to put to the membership, email it to
[email protected]
Results
106 responses
● Presentation generated on 14 March 2007.
●
Question 1. How proud are you to tell people that you
are an ‘actuary’?
Choice
Very proud Proud
Neutral
Generally prefer not to mention it
Never really admit it
Count
21
48
23
13
1
% Answering
19.8%
45.3%
21.7%
12.3%
0.9%
So around 65% of us are proud or very proud to say we are an
actuary. The comments suggest however that some people are
less proud than they used to be – often because it has become
less important in their day-to-day work that is what more
clearly defines them but we should consider whether in fact the
message is more about the standing of the profession. Some
of the people who were proud to be an actuary said they often
wouldn’t admit to this because they would then have explain
what an actuary is.
Question 2. When asked what you do, what are you most
likely to say?
Choice
Consultant
Manager
Actuary
Work in insurance/finance/banking
Other (Please specify)
Count % Answering
11
10.5%
2
1.9%
47
44.8%
28
26.7%
17
16.2%
It seems as if we are happy to tailor our answer to the situation.
A few comments indicated that it depended on the situation/
person asking the question etc and that “even actuaries can be
adaptable”. A good indication of active listening and flexibility!
ACTUARY AU S T R A L I A
APRIL 2007
The Actuarial Pulse is an anonymous web-based survey
of Institute members and is run on a monthly basis giving
members the opportunity to express their opinions on a
mixture of serious and not-so-serious issues.
Question 3. When you say you are an actuary, you feel it
makes people think you are:
Choice
Count % Answering
Professional 11
10.4%
Intelligent
28
26.4%
Good with numbers
29
27.4%
Earning lots of money
5
4.7%
In a senior role in your company
0
0.0%
Highly regarded in the business sector
1
0.9%
Well-rounded 0
0.0%
Fun to talk to
0
0.0%
Other (Please specify)
32
30.2%
Well I got this question wrong, as the general consensus was
that we should have let people choose more than one option.
It seems, on balance, they would have gone for all of the above
except ‘well-rounded’ and ‘fun to talk to’. Having said that, the
way the question worked was to help polarise the thinking
and clearly the most common reactions were ‘intelligent’ and
‘good with numbers’. This is possibly a guide to what the wider
community also thinks in the first instance.
Question 4. Working from the premise that the areas of
investment and finance are core actuarial skills, how can
we improve the actuary brand in these fields?
Choice
Count % Answering
Advertising 5
4.7%
Publishing material in the magazines/
journals of other organisations
24
22.6%
Joint seminars with other relevant
and highly-regarded associations
34
32.2%
Increasing the links with other
courses at university level
17
16.0%
Other (Please specify)
26
24.5%
There was support for all the proposed activities except
advertising. The comments suggest that we just need to do a
good job and there will be a flow on effect – “do it better than
anyone else’, “the best advertising is through actuaries operating
in the fields doing it well and talking up their actuarial skills”,
“be walking advertisements for the brand”. This was reinforced
by comments that our best advertising was from people who are
already successful in these areas.
There was also a view that we were by no means experts in all
areas of investment and finance and that we were “quite ignorant
outside our own areas”.
Question 5. What the...
You always knew they made up the answers to survey questions!
One of my questions was excluded from the survey which in my
view gives me free rein!
I wanted to ask for your ideas about how we can increase the
link with the profession for those people working outside the
traditional areas. It’s by no means a forgone conclusion that we
should expect such individuals to want this but for those working
in areas where the profession would like to have a greater level
of influence and recognition, there is an advantage in providing
services that develop a closer relationship.
Thoughts included:
● Increased numbers of seminars/events in the areas
of interest
● Increasing quality of such events
● Greater focus on publishing articles in these areas in
Actuary Australia
● Encourage publishing by the Institute of serious technical
papers
● Greater links and sharing of material with other
organisations in these fields
● Increased branding and marketing
● Getting greater ‘buy in’ to the Institute from university
graduates
I think the answers would have been that we need to increase
the number of relevant events but only if we can increase the
quality and depth. I think this can only really be achieved
by partnering with other organisations/groups as we are too
small as a profession to ‘do it all’. If we get greater buy in from
graduates, which I think we can achieve, then we need to make
sure we can follow through in terms of adding value for them
as they progress in their career. ▲
Jenny Lyon
[email protected]
© Kirk Palmer Design
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
with Gae Robinson
G a e . R o b i n s o n @ f i n i t y. c o m . a u
Gae answers your serious and not-so-serious questions about life in the office, career, study and coping as an actuary in the real world
To Stand or Not
Approach to Job Search
I am a new actuary looking to change jobs. My friend suggested
I apply directly to the companies in which I’m interested but
I’m worried my application will get shelved if they don’t
have a position now. Another friend suggested I approach a
recruiter because they’ll know who has roles available and
will make my resume look slick. Which approach would
you recommend?
Yes, there are advantages of using a recruiting agency for
your job search. As well as finding out about specific job
opportunities, you can get some independent advice on your
career direction. Perhaps your own view of what you can do is
too narrow? Or there may be possibilities out there of which
you would not have thought. An agency will also be able to tell
you about opportunities that aren’t public – companies don’t
always advertise.
But don’t be scared to go directly to potential employers
either – if you know what you want, it’s simpler, easier and saves
the employer money (always go directly if they advertise!). You
could talk directly to the actuaries, not HR, if you know them.
Even when using an agency, you can still apply directly to
some companies. You can also use a couple of agencies at the
same time (exposure to more ideas/opportunities). Just make
sure that any potential employer hears about you from only
one source!
As for your resume – you can get help and suggestions
from friends, family or colleagues. Here’s my advice:
● don’t write several paragraphs on your career ‘vision’ or
goals or long summaries of your strengths – this material
almost always comes across as completely meaningless. A
brief description of why you’re interested in the company
and your relevant skills and strengths in your covering
letter is enough
● do write in plain simple English; don’t try to make it
sound ‘fancy’ or be overly formal
● please don’t make your resume more than two or three
pages long! If you can’t sound impressive in three pages,
you’ll sound terrible over five
Will a company remember you in future if there’s nothing
happening right now? Potentially not. But you can stay in
touch yourself (not too often!).
10
ACTUARY AU S T R A L I A
APRIL 2007
On my crowded morning bus, I am often faced with the
dilemma of whether to give up my seat to someone else.
Can you tell me how to decide?
To get my seat, you need to be more deserving than I. Generally,
there are three ways you can qualify:
● age – extreme youth (under 10) or old age (at least 60)
● pregnancy
● disability
While these rules are simple, their application can be complicated.
Age can be hard to judge and pregnancy – in the early stages –
even harder. Many times I’ve wrestled with the “is she pregnant
or just a bit tubby?” dilemma. I have to say on this one I err on
the side of caution – I really don’t want to offend some slightly
tubby woman by asking her if she’s pregnant.
If you qualify, normally I will be up straight away.
Occasionally, if I’m feeling old or sick on a given day – or if
I’m desperate to do some work before I get to the city – I will
wait first, hoping someone else will be generous.
I do have a slightly bolshy (mean?) approach to old women
who dye their hair to look younger – you know, the skin looks
75, the hair is solid brown. I think to myself “If you expect to
convince me with that hair, lady, I’m convinced – you look 40
not 75 and you’re not getting my seat!”
I also get annoyed when I’m standing and I see fit young
people in all the seats wasting them – not working, not
reading, just staring blankly into the distance. If I have a seat I
make good use of it!
I’m a firm believer that if you’re offered a seat – no matter
how offended you are at the implications – you should take
it. The person giving it up has made a chivalrous gesture that
shouldn’t go unrewarded! ▲
© Kirk Palmer Design
actuary unearthed
Chris White
Title...
Feather duster (last full-time job was MD
UK & Regional Manager Europe, Towers
Perrin)
Organisation...
Involved with several; I think the
pretentious response would be that I have
a ‘portfolio post-career’
My favourite energetic persuit...
Cycling and bush walking, both of which I
do badly
My favourite meal...
French-style dinner party prepared by my
wife Ros, for whom I am the kitchen hand,
table setter and pseudo-sommelier
The sport I most like to watch...
Rugby, cricket and Aussie rules
The last book I read (and when)...
I have several books on the go e.g.
Useless Beauty: Ecclesiastes through the
Lens of Contemporary Film by Robert K
Johnston and Nature, Design and Science
by Del Ratzsch
My favourite CD...
Anything by British soprano Emma Kirkby
My favourite film...
Dr Zhivago; more recently Wit (starring
Emma Thompson)
My interesting/quirky hobbies...
Theology/philosophy/ethics, antique
furniture, wine (hardly interesting or quirky)
My ideal weekend day...
Read The Age with a coffee, catch up with
family, concert or dinner out, church (on
Sunday)
If stranded on a desert island I’d like
to take...
Family, my library, hat and SPF 30 (for my
Celtic skin)
The person I would most like to meet...
Thomas Aquinas
What gets my goat...
Intolerance and grocer’s apostrophes, of
which I’m intolerant
What I wanted to be when I grew up...
An academic mathematician
I’m most passionate about...
Self-interested narrow-mindedness
Why I decided to become an actuary...
It gave financial independence while
studying for a mathematically-related
profession
I’d like to be brave enough to...
Right now, to ditch enough of my
involvements to get my PhD finished
Where I studied to be an actuary...
Part-time while working in Sydney for AMP
(1963-7), GL Melville & Partners (1967-8)
Degree/qualifications obtained...
FIA (1969), BTheol (Melbourne College of
Divinity, 1995), MA (King’s College London,
2000)
My work history...
AMP/GLM&P 1963-8 actuarial student/
computer programmer; PTOW (successor
to GLM&P) 1969-75 partner in Sydney,
1975-83 partner-in-charge in Melbourne;
Towers Perrin (successor to PTOW) 198392 Manager Melbourne, 1992-94 MD
Australia & SE Asia, 1994-98 MD UK &
Regional Manager Europe. I mainly worked
in superannuation and, increasingly over
my last 15 years, management
My current role...
I now have a variety of part-time roles in a
diversity of organisations – board member,
ethics teacher, consultant, student, garden
labourer, grandfather, etc
My role’s greatest challenges...
Finding enough time, while taking time to
enjoy ‘retirement’
Who has been my biggest influence
on my career (and why)...
Tim Trahair, who mentored me as a young
consulting actuary through most of my 20s
My most important ‘had to’ lifedecision...
Marrying my wife Ros (1967 – though ‘had
to’ gives the wrong impression), whether to
become a Christian (1983) and whether to
move to London (1994)
My biggest regret...
Regrets are pointless but if I had my time
over I’d go to university after finishing
high school
My proudest moment...
Finishing my BTheol after 8 years while
working full-time
If I were a car, I would I be...
I’ve got it – an aging Jaguar S type,
showing sedate, decaying elegance
What’s my earliest memory...
At age three, looking through a yellow
plastic ruler at the setting sun and reading
the words ‘The Golden Rule’ on it
My most embarrassing moment...
Being invited to lunch 25 years ago with
a major client for whom I was running late
with a report and drinking too much out of
relief that I apparently hadn’t lost the case
(I still kept it!)
In my life I’m planning to change...
My weight and standard of fitness
The age I would like to stay...
Now (age 60) will do! Where do I sign?
At least once in their life, every
actuary should…
Study a humanities subject in some depth
My next holiday destination is...
A tour of the New Testament sites in
Turkey and Greece
My best advice to my children...
Oral advice: You’ll give the best start to
your kids if you love your spouse (the real
‘advice’ was given by how we parented
them in total, not just by what we said)
4 words that sum me up...
Friendly, talkative, over-committed,
self-critical ▲
Chris White
[email protected]
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
11
Venice is just one and a
half hours up the road
postcard
ITALY
f rom
The Barcolana.
The last major race
of the Mediterranean
Summer season.
Approximately 2,000
boats participate in a
race of a few hours.
Piazza Unita, Trieste’s main square
W
hen I first told people that I was going to work in
Italy, I think people had visions of Tuscan hills and
great food. Certainly the food part is right (outside of
the staff cafeteria). We are however far from the Tuscan hills, in
a part of Italy that is definitely Italian but with influences from a
number of other cultures.
Fast facts
Trieste is at the northern end of the Adriatic Sea and sits in a
narrow arm of Italian territory that juts into Slovenia. The city
has a population of 207,000 and is geographically constrained by
the high plateau (the Carso) that surrounds the city.
The region of Trieste has been occupied since before Roman
times. More recently it was part of the Austro-Hungarian empire
before being annexed by Italy at the end of World War I. Trieste’s
changing ownership is reflected in the architecture of the city.
There are Austrian and Italian influences along with a hint of
Eastern Europe.
Italian Lifestyle
Living in Trieste is very different from Sydney. The geographical
constraints of the city result in it having only a few houses on the
outskirts. The majority of buildings are four to six stories high,
divided by narrow streets. The Australian dream of a backyard is
therefore just that.
The reduced space has some advantages. From where we live,
work is a 25-minute walk, the waterfront is ten minutes away
and supermarkets and shops are literally just around the corner.
Often it is quicker to walk than drive. To manage the narrow
streets, the average vehicle is much smaller. Commodore – and
Falcon-size vehicles are rarely seen and ‘Toorak tractors’ (4WDs)
are also much less prevalent.
Grocery shopping in Trieste is different as the stores and
quantities are smaller and the range is very different to Australia.
People tend to shop daily. Dress is far more formal in general,
with more attention paid to appearance. As one would expect the
quality of clothing is quite high. Thankfully to date my wife has
been quite disciplined in resisting the temptations!
One of the great things about living in Trieste is that so much
is within reach. Within a couple of hours are places including
Venice, stunning Lake Bled in Slovenia and the start of the
Croatian coast. Only a few more hours away are places such as
Munich, Vienna, Salzburg and Milan.
Driving in Italy is different with both pedestrians and drivers
mutually agreeing that pedestrian
crossings are illustrative only. Limits to
overtaking and speed seem to be both
less enforced and less obeyed. Double or
illegal parking is common. In fairness
however, crazy driving probably occurs
only slightly more than in Sydney.
It has been fairly well-publicised
that Italy has one of the lowest birth
rates in Europe of 1.3 births per female.
Little people investigating nearby Ljubljana
12
ACTUARY AU S T R A L I A
APRIL 2007
Those squares have some uses for little people
Working in Italy
Lloyd Adriatico, the Allianz company where I am based, competes
with Illy coffee as one of Trieste’s largest employers. A number of
Italy’s insurance companies were born in Trieste as a result of its
maritime history. The Lloyds offices overlook the Adriatic and on
a clear day you can see the Croatian coast about 30km distant.
Working in Italy is far more formal with business casual and
open plan being much less common. Tradition and hierarchy is
relatively more important. One example of tradition is shown by
the art collection that graces the walls of the boardroom floor,
including a number of Renaissance and pre-Renaissance works.
The working week is a bit different in that people tend to
work a bit later during the week but leave earlier on the Friday.
Having coffee breaks is, as one would expect, of great importance
– and the coffee is very good. Being a small city, many of the
employees go home for lunch.
rise of budget airlines and of course the rise of the Euro is in my
observation pulling Europe much closer together. Whilst there
are setbacks, the EU as a whole seems to be a success story.
One thing that I have noticed compared to my backpacking
days is the ongoing rise of English, which is becoming the
business language of Europe. To my frustration I’m finding that
whilst this makes it easier to communicate, my learning of Italian
has been quite slow as any inter-country conversation inevitably
occurs in English.
Actuarial Opportunities
The actuarial profession in Italy is in relative terms smaller
than Australia with only about 700 members. Italian actuaries
are required to sign off reserves and are moving into pricing.
Training includes quite comprehensive technical training. For
actuaries with the right experience there will inevitably be
opportunities.
Working in Continental Europe should not be overlooked
compared to the more obvious magnet of London. Whilst
London has if anything become even more important in recent
years as a world centre for financial services, much actuarial work
occurs in other cities. The quality of life in many of these places
is often much better, particularly for families. Combining the
opportunity to experience another culture, along with opening
oneself to different work experiences offers real value.
In summary we’ve found our time in Italy to date fascinating,
extending and charming. Apart from it being a positive career
move, we feel fortunate to have sampled some of ‘la dolca vita’. ▲
Alan Smee
[email protected]
Alan Smee
We therefore stand out as a family of
five. A number of times in Trieste
old people have come up to us and
declared “Uno, due, tre, bravo!”,
congratulating us for ‘personal
achievements in the field of fertility’.
In some ways the low birth rate is surprising as
we’ve found that the kids get treated very well. Our children
in particular seem to be experts at scoring free food samples from
shopkeepers and elderly shoppers!
In Italy you are very much surrounded by history and this
history is felt by the people. This goes hand-in-hand with a
greater acceptance of things as they are. This leads to a more
conservative society in terms of change but also comes with
greater acceptance of one’s place in the world.
Europa
The insurance sector in the continent has in recent times seen
a transformation in many countries to a far more competitive
environment, a process which is only likely to accelerate.
Obviously for many people there is some apprehension regarding
these changes. Coming from Australia where such change has
both been part of the landscape for a significant period of
time and has been largely successful provides me with some
perspective to this process.
In my role I am involved with the different European business
units. It is fascinating to see the different ways people in different
countries act and react in various situations. Despite the cultural
differences, the continent is rapidly seeing more advanced
techniques being used and such techniques becoming more
standardised across the continent.
It is interesting to observe how Europe is progressing from
the inside. Whilst in Australia we often hear about the difficulties
of the various changes, it is my observation that economically
and socially things are gradually and perceptibly changing for
the better.
The combination of a range of factors including free
movement of labour, mutual recognition of qualifications, the
In January Trieste had
the first snow in six
years. We took the
opportunity to go up
on the Carso (the
plateau 400m above
Trieste).
Sunset over Trieste harbour
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
13
report
Council
gets on
Board
T
he Institute’s Council continues to work hard on its internal
corporate governance and processes in order to ensure that it
maintains an effective and efficient structure.
The current focus has been on making the operation of
Council more efficient and maximising the effectiveness of your
Councillors – the directors of the Institute.
The process begins
In August 2005, Cameron Ralph conducted a consultative study
on improving Council effectiveness. It identified a number of
areas for potential improvement – spanning group dynamics,
information, decision processes and monitoring.
Following the study, a number of changes were made that
improved Council’s performance. However, Councillors felt the
time was right to push further on increasing their effectiveness as
a strategic governing body.
During the December 2006 quarter, The Boardroom
Consulting Group was commissioned to survey Councillors on
the induction process for new Councillors. The survey raised a
number of other issues, including the purpose of the Board, the
functions and responsibilities of Council, the effectiveness of the
Executive Council Committee, impressions of Council meetings,
the expectations of Board decision making and the President’s
role as Chairman.
Workshopping the issues
Based on the survey feedback and input from the Institute’s
President, Company Secretary and Chief Executive Officer,
a Board induction workshop was designed and held on
31 January 2007.
A very full program was enthusiastically embraced by
all Councillors with extremely positive contributions and
considerable progress made.
Topics for the day included:
● enhancing Councillors’ effectiveness as Board members
● professional development on directors’ duties
● the role of the Board, group dynamics and collective
decision-making
14
ACTUARY AU S T R A L I A
APRIL 2007
●
the future shape and direction of the Board, including
strategic focus, policy development, process improvement
and delegations
● reviewing Council policies with a strategic focus.
Key workshop outcomes
The Board agenda
A key Council concern has been the limited time available for
strategic focus, given the breadth of issues that come before it.
A number of avenues were explored to ensure that
Council’s agenda reflected strategic issues rather than
operational drivers.
A new style of agenda was approved in principle and then
trialled at Council’s February 2007 meeting. It includes the
introduction of a rolling six-month outline agenda for Council
meetings to ensure ongoing continuity between Presidential
terms and maintain control of Council’s focus on key
strategic issues.
Other mechanisms for achieving this outcome – such as
reviewing delegations of authority for relevance and optimal
effectiveness – will also be implemented.
Council papers
In order to improve the overall quality, as well as consistency, of
papers put before Council, a Guide to Writing Council Papers
will be prepared and made available to the Secretariat and
through the Institute’s website. Also included will be a template
to help writers structure their papers more effectively.
Council policies review
A review will be conducted during 2007 of existing Council policies
to ensure their continued strategic and operational relevance.
New induction process for Councillors
When new board members are not properly inducted to the role,
function and business of the board and receive direction as to
what is expected of them, it can take up to 12 months before they
are able to participate fully in board decision making. As such, a
well-designed and relevant induction program is a contributing
factor to effective decision making by a board.
In addition, the workshop designers see considerable value
in maximising personal development opportunities for those
actuaries who devote so much of their time to serving on Council.
They believe that all Councillors should be fully equipped to
serve on other boards through their experience on Council.
A new induction process for Councillors was therefore agreed
involving:
● meeting with the President for a briefing on:
– current broad policy issues and their background
The Director’s Compendium
The Director’s Compendium provides a learning, as well as future
reference, tool to:
● assist Councillors in fulfilling their duties as officers of the
Institute
● allow new Councillors to be productive and effective as
quickly as possible
The Institute of Actuaries of Australia
appoints Manager Strategic Projects
T
he Institute of Actuaries of Australia is pleased to announce
the appointment of Sue Wetherbee as Manager Strategic
Projects. Sue’s appointment will see her manage strategic
projects for the Institute, the first of which is ‘Integration of
CPD and Education’.
Sue brings to the role an extensive background in learning
and development in both the government and corporate
arenas. Sue’s management roles at regional, state, national and
international levels have provided rich experiences that will
contribute to the Institute’s developments in the future.
Sue commented “I am learning more each day about the
The Director’s Compendium provides a wealth of material on
topics such as:
● how to be an effective director, including key expectations,
qualities and attributes of an effective director and tools to
self-evaluate Board performance
● directors’ duties and liabilities, as well as confidentiality
● risk, liability and the director
● a profile of the Institute and Board
● corporate governance, including the basic principles of
good corporate governance and the governance structure of
the Institute
● the Constitution, Council policies, rules and terms of
reference for committees and taskforces
● frequently asked questions
● professional development options
● the Institute’s current strategic plan, budget, annual report
and directors’ and officers’ liability insurance policy.
Continuous improvement
The last six months or so have seen the implementation of
significant changes directed at enhancing the strategic focus
and effectiveness of Council.
Many of those initiatives will offer increasing benefits over
time but ‘getting on Board’ with more effective
corporate governance practices demands continuous
improvement. Watch this space! ▲
Anne Peters
[email protected]
Sue Wetherbee
past history and present operation of the Institute’s education
and CPD programs. These pieces of the jigsaw along with many
meetings and discussions with key Executive, Council and
Secretariat staff have given me an outline of the puzzle to be
solved by the project.
I have observed a tutorial and have attended a Young
Actuaries Program event, the ERM symposium and some of the
CAP program. Exposure to and participation in many aspects
of the present CPD and education programs will also give me
an opportunity to meet members. I look forward to including
member voices in the completion of the jigsaw.” ▲
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
15
Anne Peters
– his or her approach to managing Board meetings,
dynamics and debate
– a general overview of the Board membership
– the expectations of the new Councillor as a director
● meeting with the Chief Executive Officer for a briefing on:
– progress on implementation of the current strategic plan
– financial performance of the Institute
– key highlights of the Institute’s operational business plan
– a general overview of the senior management team of
the Institute
● meeting with the Company Secretary for a briefing on,
among other things, directors’ duties and the contents of the
Director’s Compendium (more about this later)
● receiving:
– minutes of Council meetings from the previous
12 months
– schedule of Council meetings for the next year
– an open invitation to meet members of the Institute’s senior
management team to discuss areas of responsibility
– for those candidates who do not face a contested election,
an invitation to attend Council’s December meeting.
review
The
Australian
Government
Actuary
Introduction
If thinking of the Australian Government Actuary (AGA) conjures
up a mental picture of a human calculator poring over vast tables
of factors and projecting public service pension costs with great
precision, then perhaps you should read this article. Although
the idea of an AGA might sound somewhat archaic, the office
continues to play an effective role as one of the tools available to
government in the 21st century.
Today, AGA is a small but dynamic organisation that provides
actuarial and related public policy advice to government and its
agencies. There are seven staff, including three actuaries, with a
range of public and private sector backgrounds. AGA has a large
client base and its advice is sought in a wide variety of contexts.
Brief history
The first AGA was Charles Wickens. He was appointed
commonwealth statistician in 1922. He added the title of
commonwealth actuary in 1924. Following Wickens’ departure
in 1932, the position was unfilled until late in the 1930s.
1n 1938, Englishman Walter Balmford became commonwealth
actuary and remained in the position until 1957. After Balmford,
Sid Caffin occupied the dual role of life insurance commissioner
and AGA until his retirement in 1978. Caffin was renowned
as a conservative ‘hands-on’ regulator of the life insurance
industry. After Caffin, John Ford held the role of AGA until the
mid-1980s.
Thus, the first sixty years of the history of the AGA saw only
four occupants of the position – Wickens, Balmford, Caffin and
Ford. In contrast to that, there have been five since 1990. Notably,
Donald Duval who was AGA during 1992 and 1993 is recognised
as the architect of the SIS legislation, which transformed the
regulatory framework for the superannuation industry in the
early 1990s.
16
ACTUARY AU S T R A L I A
APRIL 2007
The office of the AGA was located within the federal Treasury
until the establishment of the Insurance and Superannuation
Commission (ISC) in 1987. From 1987 until 1998, AGA was
part of the ISC. In 1998, the ISC was replaced by APRA. Two
years later, AGA was transferred from APRA to the Treasury,
thus completing the circle. Location within the Treasury puts
AGA in a much better position to contribute to broader public
policy issues.
Legislative basis
Neither the position nor the office of the AGA is established
anywhere in legislation. This situation has existed since Charles
Wickens first took the title of commonwealth actuary in 1924.
Oddly enough, however, the AGA is referred to in several
pieces of commonwealth legislation, including some which has
been enacted in the last few years. Thus, for example, the Medical
Indemnity Act 2002 requires various reports to be prepared by
the AGA.
Since the AGA is established or defined nowhere legally, it
appears that successive governments have simply assumed that
there is one and everyone knows whom it is!
Operational basis
For operational purposes, AGA is located within the federal
Treasury. This means that AGA staff are employed under
Treasury terms and conditions and that AGA shares facilities
(accommodation, IT systems, etc) with the Treasury. For business
purposes, however, AGA necessarily operates quite independently
from the Treasury. AGA provides professional advice to its clients
and it is essential that it can maintain a confidential relationship
with each of its clients individually. So, for example, other
parts of the Treasury do not have access to AGA’s computer
files, even though they are maintained on the same network.
On the other hand, access to high level economic expertise
within Treasury facilitates relevant contextualisation of AGA’s
professional advice.
The vast majority of AGA’s work is fully contestable. This
means that, in general, public sector agencies are free to choose
their actuarial service providers. Only a small portion of AGA’s
work is ‘tied’. In a few cases, the legislation requires that something
be done by the AGA while in other cases the government may seek
advice specifically from the AGA. In order to able to discharge its
legislative responsibilities effectively and to be able to provide
high quality, responsive and timely advice to government, it is
important that AGA maintains a critical mass of staff. To do this,
AGA has to win a reasonable share of the available public sector
work since, unlike its competitors, it cannot compete for work in
the private sector space.
Financial basis
Historically, AGA was funded from the federal budget and while
having some reasonably well-defined responsibilities in relation
to commonwealth superannuation and reporting on population
mortality would undertake other work either as requested or as
determined internally to be a priority. The concern in government
in the late-1980s and early-1990s to have a more transparent and
accountable allocation of resources led to a shift to user charging
for services and the cost of actuarial services provided by AGA to
other agencies began to be billed to those agencies. Since 2000,
AGA has been required by government to charge on a basis that
is competitively neutral and fully self-funding. That is, AGA
must rely wholly on fees from its clients to pay for all of its costs
including employee expenses and other direct expenses such as
travel, rent etc. As well as this, AGA purchases corporate support
(payroll, IT support, etc) from the Treasury. For all intents
and purposes, AGA operates as an actuarial and public policy
consultancy service to government from within government.
To facilitate these arrangements, AGA operates its own
‘special account’. Fee revenue is paid into the special account
and the expenses of the office are met from it. Although this is
different from the normal public sector model where unspent
money is typically returned to consolidated revenue at the end
of each year, it is an essential element of AGA’s operation to
allow smoothing of the fluctuations in the demand for services.
AGA could not operate on a self-funded basis without the
special account.
It is interesting that the 2005 Morris Review into the actuarial
profession in the UK made a number of recommendations in
relation to the UK Government Actuary’s Department (GAD),
most notably that GAD operate on a more contestable basis
and that, to allow this to work, it operate as a ‘trading fund’.
In effect, this means that Morris recommended GAD should
operate a special account. It is fair to say that the Morris
Review recommended that GAD should move onto an AGA
operational model.
What does AGA do?
The AGA is possibly best-known for its role in producing the
Australian Life Tables that provide an ongoing record of the
mortality of the Australian population. The Income Tax Act refers
to Australian Life Tables published by the AGA but provides no
indication as to how often this should happen.
In practice, the need for reliable estimates of exposed
population has meant that tables have been produced when
census data becomes available. The first Australian Life Tables
were prepared in 1911 as part of the documentation of the
1910 census. Charles Wickens produced the 1920-22 tables as
commonwealth statistician and actuary while the 1932-34 tables
were produced without actuarial input. The 1946-48 tables and
all subsequent Australian Life Tables have been prepared by the
AGA. With the move to quinquennial censuses in 1961, the
tables are now also published on a five-yearly basis. The next
tables, ALT 2005-07 are due for publication in 2009. They will
be the seventeenth tables in the series, with the exposed-torisk calculations based on the data recently collected in the
2006 census.
The Australian Life Tables actually form a very small part of
the AGA work program. During the course of a year, AGA might
typically provide advice to around 40 client agencies. In the past
year, for example, all of the commonwealth’s major agencies
have sought advice from AGA; clients have included: Treasury,
Defence, Health, FACSIA, Immigration, PM&C, ATO, AGs,
Finance, Veterans’ Affairs and DEST. Sometimes, the advice will
be provided in response to specific questions from government
or its agencies while on other occasions agencies may want us
to work in tandem with them in developing policy proposals
for consideration by the government. As well as this, AGA
provides pure technical advice to support the public sector
financial management process and to support implementation
of government policy.
The nature of the work done by AGA has changed considerably
since the mid-1990s. Then the vast majority of its work was
focussed on public sector superannuation. Most of the rest was in
support of the prudential regulator (the ISC). Only a very small
proportion of AGA’s work related to other contexts.
In contrast, public sector superannuation counts today for
less than a third of AGA’s fee revenue. In recent years, a significant
amount of work has had a general insurance flavour. Some of
this has been ‘internal to government’ – for example, around
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
17
review (continued)
the complex compensation arrangements for military personnel
and veterans. And some of it has arisen as a result of external
factors: the collapse of HIH, the government’s desire to support
and stabilise the medical indemnity industry, the withdrawal of
terrorism cover, etc.
These latter contexts are examples of greater involvement
today in policy development. On prudential regulation, for
example, AGA today provides advice to the Treasury on the
policy framework whereas 10 years ago, AGA supported the
prudential regulator directly. Similarly, AGA has been involved in
the development and implementation of the superannuation in
family law and superannuation simplification policies.
As well as these more traditional areas of work, many
other interesting contexts crop up from time to time. A few
recent examples include: higher education funding, immigration,
climate change and genetics.
The future
It is said that the net worth of a consulting firm is made up
of perhaps a few months of work and its reputation. Actuarial
consulting is unlikely to be significantly different. Moreover, the
actuarial workspace is being increasingly targeted and eroded
by other disciplines and professions. Computer technology has
made complex calculation accessible to everyone. Present value
tables and formulae have become redundant. At the same time,
the actuarial profession is looking to broaden its horizons and
get into non-traditional areas such as banking and infrastructure
financing to name two. The lines are becoming blurred.
For these reasons and more, competing for actuarial work
in the public sector is no easy task. Firstly, policy agencies
employ economists and other quantitative analysts who are
comfortable dealing with numbers and probabilities. As a
general rule, AGA has to ‘compete’ with these people for advice
opportunities. Secondly, government agencies have to meet
budgets and actuarial advice comes at a cost. Although that
does not sound any different from the private sector, actuarial
advice to a government agency most often will not improve that
agency’s own bottom line. Thus, an insurer might seek advice
from an actuary either because the law requires it or because it is
looking for a direct financial benefit. In this case, the insurer has
a positive financial reason to spend the money on the advice.
More often than not, however, a government agency will only
spend the money if it thinks it is a good idea to do so. It will
likely never have a positive financial reason to do so. The best
that we can hope for is that the agency believes that the advice
will add to its policy development and that it can afford the
advice. The natural incentives are, therefore, arguably weaker
for public sector entities than for for-profit entities. AGA
operates wholly within the public sector marketplace.
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ACTUARY AU S T R A L I A
APRIL 2007
It is true to say that AGA’s current operational model means
that it will have to work hard to maintain its relevance. AGA’s
response to this situation is simple: it aims to ensure that it
continues to provide timely, robust, authoritative, unbiased advice
which comprehends both the government’s policy priorities and
government processes.
AGA is, of course, uniquely placed to do this and the
government recognises the value that AGA can add to its
product. For example, as recently as 10 October, the AGA
was referred to in a second reading debate in the House. The
parliamentary secretary to the treasurer closed with “The
Australian Government Actuary advises that current market
conditions suggest we have before us now the best opportunity
to negotiate the sale of pre-transfer contracts”. As well as
this, AGA enjoys a good reputation within the public sector.
Moreover, AGA now has a diversified client base. Contacts
across a wide range of agencies mean that it is ‘plugged into’
many issues. Location within Treasury gives AGA access to
economic and related expertise. All of this facilitates practical,
relevant and properly-contextualised advice, which is likely to
add real value to the policy development process.
The AGA and the Institute
The first government actuary, Charles Wickens, advised the
federal government on its then new public service superannuation
scheme. However, the government’s decision to operate the
scheme on an unfunded basis was not favoured by Australian
actuaries. Wickens explained the government’s viewpoint to the
local actuaries who, probably only because time ultimately beat
them, did not to write to the government about the matter.
The interaction between Wickens and the actuaries and then
among the actuaries themselves is reported (Bellis, 1997, The
Future Managers) to have been quite unseemly.
Even now, as it was then, there does not seem to be a strategic
dimension to the interaction between the AGA and the Institute.
The ‘relationship’ has been ad hoc.
The Institute has a desire to promote the benefits of actuarial
input in government policy making. It is clear that this endeavour
would be significantly enhanced by the ongoing presence and
involvement of a vibrant AGA. There is therefore a convergence of
interest. It would make sense to leverage this to the extent possible.
Perhaps a worthwhile activity for the next twelve months
would be to explore the issues involved systematically with a
view to developing a framework intended to ensure that the
operational relationship between the AGA and the Institute is
mutually optimal. ▲
Peter Martin
[email protected]
review
Stern
Review
on the Economics of Climate Change
NASA image of Cyclone Craig over northern Australia
T
he community’s awareness of climate change has gained
traction in the last few months and as Cameron Hepburn
from Oxford University has said “When the history of the
world’s response to climate change is written, the Stern Review
will be recognised as the turning point.”
Sir Nicholas Stern, a former chief economist of the World Bank,
was commissioned by the Chancellor of the Exchequer to report
to the UK government on the economics of climate change in the
UK and globally. Robert Solow, the 1987 Nobel Prize economist
commented, “If the world is waiting for a calm, reasonable,
carefully-argued approach to climate change, Nick Stern and
his team have produced one. They outline a feasible adjustment
policy at tolerable cost beginning now. Sooner is much better.”
The review finds that “..while cost estimates for action are not
trivial, they are also not high enough to seriously compromise the
world’s future standard of living – unlike climate change itself,
which left unchecked could pose much greater threats to growth”
The review predicts that “Over the next 10 to 20 years carbon
pricing will be universal and automatically factored into decision
making” as “All economies undergo continuous structural change;
the most successful have the flexibility and dynamism to embrace
the change” and “Tackling climate change is the pro-growth
strategy for the longer term”.
We have set out to give a brief overview of the modelling, the
main findings and the main recommendations made in the
575-page review. Space limitations preclude anything but a high
level view.
The modelling
A 200-year timeframe
A long timeframe of about 200 years is needed for comparing
inaction (business as usual or ‘BAU’) with the effects of possible
policy options. This is due to the exceedingly long lead times before
any actions taken will have an impact on the level of greenhouse
gases (‘GHG’) in the atmosphere – the absorption capacity of
the biosphere is such that GHG (carbon dioxide in particular)
emitted now will remain in the atmosphere for about 100 years.
The expectation is that it will take at least fifty years to stabilise the
global level of emissions. Once the emissions level is stabilised, the
stabilisation of the GHG concentrations in the atmosphere will
take at least another 50 to 100 years to fully flow through.
The connection between GHG concentrations and
temperature/ climate change
The key assumptions underlying the economic modeling in
the review are projections made about future levels of GHG
concentrations in the atmosphere and the associated changes in
climate that will occur over time. The predictions made in the
Inter-governmental Panel on Climate Change Third Assessment
Report in 2001 are the main ones used. However, the results of
many other scientific studies are also taken into account.
Prior to the industrial revolution GHG concentrations were
around 280 ppm CO2e. Currently the concentration is about
430 ppm and the level of emissions is higher than the capacity
of the biosphere to absorb. Hence, even if emissions could be
stabilised now, the concentration of GHG is still predicted to
increase to 550 ppm CO2e (parts per million CO2equivalent) by
2050 and to higher levels by 2100. Under the BAU scenario with
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
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review (continued)
emissions increasing, the 550 level could be reached by 2035 and
the concentration could treble to 750 ppm or higher by 2100.
The table below summarises the predicted range of increases
in average global temperatures arising from various possible
levels of GHG concentrations.
Stabilisation Global Mean Level Increase Temperature (relative to pre-
5% to 95% Temperature
Increase range
(relative to pre-industrial levels)
(ppm CO2e)
industrial levels)
450
2º C
1ºC to 4ºC
550
3º C
1.5º C to 4.5º C
>77% chance will exceed 2ºC
650
2ºC to 6ºC
3.5º C
>57% chance will exceed 3ºC
750
2.1º C to >6º C,
4º C +
>50% chance will exceed 5ºC
How the model assesses the cost of temperature/
climate change
The review includes detailed descriptions of the potential effects
of climate change on different regions of the world. The major
points taken into account in the development of the models of
economic costs are that:
● the impacts are unevenly distributed with the poorest
countries due to suffer earliest and the most due to their
geographical locations and ability to adapt
● some parts of the developed world will benefit through
increased agriculture, reduced heating costs, etc from
moderate levels of temperature increases but the net benefit
will disappear at higher temperatures, in particular due to
the costs of extreme weather events, which could reach 0.5 –
1.0% of global GDP by 2050 and the effect on global financial
markets through higher and more volatile costs of insurance
● amplification effects could lead to dramatic increases in costs
and social consequences associated with water shortages and
rising sea levels
As the projection of costs based on the mean expected temperature
increase conceals the risks of much higher outcomes, the models
used are designed to analyse risk explicitly. Ethical judgments are
also made on the distribution of incomes and how to treat future
generations. An overall welfare cost is calculated by:
● aggregating the results of stochastic simulations across a
possible range outcomes of temperature increases
● averaging the effects on incomes over the next 200 years
incorporating a utility discount rate of 0.1%pa
● weighting the results by population so that the higher loss
of income in percentage terms that will be suffered by low
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ACTUARY AU S T R A L I A
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income countries is not overshadowed by the higher incomes
of the developed countries
The model includes allowance for market impacts (agriculture
losses, damage to coastal zones) and non-market impacts
(increased mortality, environmental degradation) and also
probabilities of catastrophic events such as hurricanes.
The findings
What is the BAU cost compared to the cost to stabilise
GHG concentrations?
The review demonstrates that the long-term cost of inaction is
much larger than the cost of action.
BAU cost of climate change to the economy
The average total cost over 200 years of changes from BAU
scenarios is equivalent to average reduction in consumption per
capita of at least 5% pa but adding the other considerations these
costs increase as follows:
● non-market impacts (environment and health) add 5% to
this cost
● limited allowance for amplifying feedbacks adds another 3%
● applying higher weight to the poor scales up these previous
costs by about 25%
Putting all these together increases the total cost to a 5% to 20%
pa reduction in consumption per capita “now and forever”.
Optimum stabilisation level (550 ppm CO2e) – cost to
the economy
The review chooses 550 ppm CO2e as a reasonable objective for
stabilisation of GHG concentrations. Lower levels are considered
too expensive. For example costs to achieve 450 ppm would be
three times higher.
In order to stabilise at 550 ppm, a feasible reduction trajectory
is for the absolute level of emissions to peak in 10 to 20 years’
time and then fall by 1% to 3% per year. By 2050 emissions would
need to be 25% below current levels despite the world economy
being 3 to 4 times larger then than it is now. Historically CO2
emissions per capita have been strongly correlated with GDP
per capita. This trend will have to be reversed so that emissions
per unit of GDP are about one quarter of current levels by 2050.
Of course if the reduction does not occur until later then more
severe reductions will be required. (See Figure 8.2 on opposite
page, reproduced from the review.)
The expected cost to achieve the stabilisation level is 1% of
GDP by 2050 but with a range of –2% (a net benefit) to +5%.
Beyond 2050 the range of estimates diverges strongly but
on average the cost is expected to remain at around 1% pa
of GDP.
Reference The Report and further information can be found at http://
www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_
climate_change/sternreview_index.cfm
Policy requirements to achieve reductions
The review gives three essential requirements for an emissions
reduction policy:
● carbon pricing
● technology policy
● removal of barriers, and
● encouragement of behavioural change
Carbon Pricing
Greenhouse gases are in economic terms an externality – those
that produce them are bringing about climate change and thereby
imposing costs on the world and future generations. Meanwhile
they do not face the full consequences of their actions themselves.
A carbon price can be achieved explicitly through tax or trading
schemes or implicitly through regulation.
Carbon trading appears to be preferable to taxation as it is a
method that is structured to achieve emissions reduction at the
lowest possible cost.
Technology Policy
The recommendations
Carbon pricing gives an incentive to invest in new technologies
to reduce carbon. Policies to support the market for early stage
technologies will be critical.
Summary of global greenhouse emissions
The pie chart below provides a snapshot of the major sources of
GHG emissions.
Green house gas emissions in 2000 by source
Removal of Barriers to Behavioural Change
Information policies including labelling and the sharing of
best practice can help consumers and businesses make sound
decisions. There was a recent example of this in the UK where
a minister declared, just before Valentines Day, that roses flown
from Kenya cause less emissions than roses shipped from Holland
that were grown in heated greenhouses.
Governments and organisations can be catalysts for dialogue
through evidence, education, persuasion and discussion. The
efforts of our Institute in this area have been outstanding and a
tribute to the foresight of our Presidents.
Pauline Durant
In summary, we found the report to be a fascinating read. Where
else could you find a complex stochastic valuation over a period
of 200 years incorporating not only the usual pure financial
considerations but also chemistry, physics, geography, economic
theory, sociology, ethics etc? Now that’s really something for an
actuary to get her teeth into! ▲
Pauline Durant
Emissions can be cut in four ways:
Jill Green
[email protected]
A C T U A RY A U S T R A L I A
Jill Green
reducing demand for emissions-intensive goods and services
● increased efficiency
● action on non-energy emissions, eg land use and
deforestation
● alternative low-carbon energy sources.
[email protected]
●
A P R I L 2 0 07
21
22
Two Ducks Swimming
Calendar awareness
with Swoodsy
The April fool’s test
April 1st is the day upon which we are reminded of what we
are on the other three hundred and sixty-four. – Mark Twain
You couldn’t fool your mother on the foolingest day of your life if
you had an electrified fooling machine. – Homer Simpson
April is the fourth month of the Gregorian calendar that we use
and is carried over from the Roman calendar – although it was
briefly known as Neroneus during the reign of the very modest
emperor Nero.
Candidates should attempt all questions.
April is officially the designated month for (amongst other
things) chocolate eaters and mathematics awareness.
Which came first: the rabbit or the egg?
Easter is the most significant day of the Christian calendar,
celebrating the death and resurrection of Jesus Christ –
notwithstanding the discovery of any occupied tombs by
Titanic director James Cameron. Despite this, Easter is named
for a pagan spring goddess Eostre. Easter eggs and the Easter
bunny are also remnants of prehistoric pagan culture, being
symbols of fertility.
Easter is celebrated on different days around the world as a
result of divisions in the church and slight discrepancies in the
chronology of the gospels.
● Traditional: the Sunday following the first astronomical full
moon on or after the vernal equinox
● Western church: the Sunday following the ecclesiastical full
moon after March 21
● Eastern church: a Sunday according to the Julian calendar
● Jehovah’s Witnesses: a day according to the Hebrew calendar
Where appropriate, solutions should be illustrated with labelled
diagrams.
1. What date is April fool’s day?
2. Which will be the shortest day of 2007 in the southern
hemisphere?
3.
Spell the following:
(i) aging
(ii) asymptotic
(iii) googol
4. How many are there in a baker’s dozen?
5. (a)Who won World War I?
(b)Who came second?
6. (a)What was King George VI’s first name?
(b)Name 5 other English kings named George.
7. The Canary Islands are named for which animal?
8. Which country makes Panama hats?
9. The international Morse code distress signal is ‘SOS’.
The letters ‘SOS’ stand for what?
Holiday bonanza(c)
10.Approximately how many commandments was Moses given?
April 25 is ANZAC Day, a national holiday in Australia, ensuring
that when Easter falls in April it is the shortest working month
of the year. Party on dude.
11.Which two leap years immediately preceded 8AD?
In the swing I
For your chance to win the sensational prize of $150 to spend
at the restaurant of your choice (provided courtesy of the
Institute), send your solution by email to <twoducks@actuaries.
asn.au> or by regular mail to Two Ducks via the Institute.
In the second week of April, Augusta National hosts the US
Masters, the first major golf tournament of the year.
● My cousin Tiger holds the record for the best score, an 18under 270 in 1997 when he won by 12 shots!
● The legendary Sam Snead holds the record for the highest
winning score, a 1-over 289 in 1954.
In the swing II
In the USA the last week of April is National Lingerie Week.
It may not be a holiday but it probably should be.
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ACTUARY AU S T R A L I A
APRIL 2007
12.How many months of the year have 30 days?
Puzzle solution deadline
To meet printing requirements and to be eligible for the
sensational prize, puzzle solutions must be received by the first
week of the month following publication. ▲
Stephen Woods
[email protected]
report
T
he Institute Communications Taskforce was set up in 2006
to review the need to develop communication capability
across the actuarial profession in Australia. This culminated in a
report to the December 2006 Council meeting of the key findings
and recommendations.
The taskforce’s work during 2006 included an investigation of how
different actuarial bodies around the world approached the issue
of communication skills of actuaries. These approaches included:
●
in the UK, a formal, examined subject as part of the
qualification of Fellow
●
in the US, an emphasis on producing articles, ‘how to’ tips
and practical help via publications
●
for the smaller actuarial populations such as Australia, a
longstanding commitment and recognition of the importance
of this aspect of actuarial training but less emphasis on
providing practical and structured assistance to those in the
profession keen to improve their communications skills
Despite the various approaches, it is apparent throughout
the global actuarial community that the market in which
actuaries work is changing not only via transition to ‘wider
fields’ where effective communication with those outside of the
profession is an obvious necessity but also increasingly within
the more ‘traditional’ areas. As international legal and accounting
requirements become more onerous, boards of directors are
required to deeply understand and take responsibility for the
numbers presented to them. The onus is increasingly on actuaries
to ensure that they communicate their message effectively.
But it is not only at senior level that the actuarial environment
is changing. Students trying to find their first actuarial role are
increasingly chosen not just because they have a high TER or
all exemptions but because they can communicate effectively
as well. Gone are the days of the back office actuarial office
that simply spits out numbers; analysts are being given broader
responsibilities, which includes liaising with clients. Recruitment
firms are also finding that employers increasingly seek actuarial
professionals with strong communication capability.
Good communication is not just about being able to speak
enthusiastically and eloquently, it is also about being aware of the
‘big picture’, the business context and expectations of the client.
For actuaries trained to look at the detail, this is often a shift in
perspective and can be quite challenging.
Much of the skill of communicating the results of actuarial
analysis is gained ‘on the job’ and with practical living data and
circumstances. To support actuarial professionals to develop these
skills, the taskforce found that training and coaching in this area
is an important supplement to practical experience. Discussions
with universities and feedback from students revealed that there
could also be an opportunity to start to develop these skills more
formally during a student’s academic study. This will be explored
more fully during the year ahead.
One of our key tasks during 2007 is to be able to provide a central
point, a platform for information that will assist members to
take control of their own communications skills development.
The first step in this is to incorporate a ‘Tool Box’ within the
Institute website that will contain useful academic papers,
articles, downloads etc that can be accessed to help with this selfdevelopment process.
The new web page tab will be live shortly and initially there will
be three sub-sections:
●
Application of communication skills and industry discussion,
which will include information from around the world about
the value of communication skills for actuaries and some
case studies of companies that have focussed on developing
communication capability
●
Presentation skills, which will be more generic articles on
putting a message across verbally, translating technical jargon
for non-technical audiences etc
●
Methods and examples, which will be items written by
actuarial practitioners and actuarial academics that are
practical examples of written communication within the
actuarial field
We would really welcome contributions to the Tool Box; its
value will be driven by contributions from members. So, if
you come across some examples that you
would like to share with members, please let
Darren Davis ([email protected])
or myself know. ▲
Lesley Traverso
[email protected]
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
23
Lesley Traverso
Communications Taskforce Report and Update
report
from the CEO
Public Policy in 2007 –
Why should actuaries bother?
Some members take the view that education is the core business
of the Institute of Actuaries of Australia and that we shouldn’t
get too distracted by other activities, such as lobbying or trying
to grab media headlines. I take a different view, although our
approach to public affairs is much more subtle than that!
Many members are probably not aware that 6 of the 16 objects
in our constitution relate to public affairs. These are:
(c)To represent the actuarial profession in Australia
(e)To increase public awareness of the actuarial profession
and to enhance its reputation
(i) To discuss and comment on the actuarial aspects of
public, social and economic and financial questions
which from time to time may be the subject of
public interest
(j) To consider the actuarial aspects of legislation and
regulation existing and proposed and to take such action
as is considered desirable in relation to such legislation
and regulation
(n)To safeguard the interests and welfare of Members to
further their advancement and to promote whatever
may lead to the improvement of their status
(o) To institute, defend, appear and join in any proceedings
or hearing before any court, tribunal or commission
in Australia or elsewhere in which, in the opinion of
the Council, the Members may have an interest and to
make submissions and give evidence as the Council may
consider desirable
Council sets the policy for public affairs. Regular discussions
take place between all the practice committee conveners and
the Executive Committee to ensure that we have a consistent
approach to dealing with governments and the media and to
enable us to act strategically and proactively.
Submissions are usually prepared by practice committees
in response to requests from governments, parliamentary
committees and other bodies. They can all be found at: http://
www.actuaries.asn.au/PublicAffairs . 11 of the 17 submissions
made last year related to superannuation issues, which is not
surprising given the major reforms announced in the last Federal
budget. It’s also not surprising that Steve Schubert and his team
of volunteers were exhausted by the end of the year! In addition
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ACTUARY AU S T R A L I A
APRIL 2007
to the public submissions, several actuaries have also been
assisting in confidential discussions with government officials on
superannuation and other issues. Such discussions are often very
productive and the invitations our members receive to participate
reflect the high regard held for the actuarial profession.
Philip French is the Institute’s Director, Public Affairs and
usually works fulltime on public policy submissions, media
management and other public affairs activities supported by
our media advisers, Buchan Consulting. In recent months,
Philip has also been managing our disciplinary scheme and will
continue to do so until later this year.
Where possible, the President and CEO take leading roles in public
affairs activities. In addition to the formal sign off of submissions,
the President, CEO and others develop relationships with key
organisations and contacts who are involved in the development
of policies that could affect actuaries or the industries in which
actuaries work.
Recently in Canberra for the Presidential dinner, the President
and CEO met with representatives of:
● Treasury
● The Australian Government Actuary
● The Private Health Insurance Administration Council
● The Australian Health Insurance Association
● Department of Foreign Affairs and Trade
Discussions were broad and varied and included issues such as:
● Future directions in prudential regulation
● Implementation of superannuation reforms
● The future role of the Australian Government Actuary
● Recent developments in private health insurance and the
increasing role for actuaries in this area
● Developments in risk management in different sectors
● The proposed Free Trade Agreement between Australia and
China (which could include the provision of professional
actuarial services)
Much of the discussion related to the general direction these
issues will head over the months and years ahead. More specific
issues have been dealt with in recent submissions or those
expected to be made shortly.
With the addition of the statutory role of Appointed Actuary for
health insurers, Australia now has the widest range of reserved
John Maroney
roles for actuaries in the world. This is the clearest indication of
the continued effectiveness of our public affairs activities since
1995 when the role of Appointed Actuary for life insurers was
enshrined in the new Life Insurance Act that year.
The Canberra visit gave the President a chance to address the
actuarial students at Australian National University. Thanks to Tim
Higgins and his colleagues, over 150 students listened to a tailored
version of the Presidential Address and asked questions for one
and a half hours. It was an impressive gathering and we hope for
similar interest at the other universities the President visits.
We also had a fruitful discussion with the Dean of the ANU
College of Business and Economics Professor Keith Houghton
and the Head of School Professor Terry O’Neill who is the
Professor of Applied Statistics. Both are strong supporters of
the actuarial program at ANU and stressed the university’s
desire to increase its profile by appointment of a full professor
of actuarial studies. A global search for an experienced academic
is underway.
finances. We plan to continue these discussions in the coming
months, especially in the light of the second intergenerational
report that the Treasurer released on 2 April. I have collaborated
with Access Economics in previous roles and always
found the combination of actuarial and economic analysis
very powerful.
We also plan to launch the new Private Health Insurance CPD
course in June in Canberra. This will provide us with a great
opportunity to showcase the contribution of the actuarial
profession to improving education standards not just for our
members but for other industry participants.
Yes, education is a core business of the Institute but there are
other core businesses: provision of CPD and other member
services, professional standards and governance, research
and public affairs. They are all very important activities to
the future success of the actuarial profession in Australia.
That’s why we bother! ▲
John Maroney Chief Executive
I was living in Canberra when the ANU’s Professor Chip
Heathcote first approached the local actuarial community for
support of the proposed actuarial program. It’s great to see how
well the program has developed over the past two decades. It
was also great to hear that Emeritus Professor Heathcote is still
a regular visitor to the campus.
[email protected]
Institute visit to ANU 14 March (L to R): Professor Keith Houghton, Convener
and Dean of the ANU College of Business and Economics; Tim Higgins,
Lecturer; Professor Terry O’Neill, Head of School for Finance and Applied
Statistics; Fred Rowley, President of the Institute of Actuaries Australia;
and John Maroney, Chief Executive of the Institute of Actuaries Australia.
Our profession has a long standing
connection with ANU and we were
reminded of that during this visit. One
of the university’s buildings, Melville
Hall, is named in honour of Sir Leslie
Melville who was an Emeritus Professor
at ANU for many years.
The President and I also visited Access
Economics, which is the second largest
employer of actuaries in Canberra.
Apart from a general discussion
regarding the synergy of actuaries
and economists working together, we
commenced a discussion on possible
research topics of mutual interest,
including climate economics and the
likely impact on intergenerational
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
25
notes
I
from the President’s Blog
t seems a long time since my year started with preparations
for the January Board effectiveness workshop and the lastminute editing of my Presidential Address.
You can read more about the workshop elsewhere in this edition
of Actuary Australia (p14). Overall, it seems to have been very
worthwhile from the Councillors’ viewpoint. And of course, the
Address has been published for some time now and some of
what I advocated there is already in motion.
Straight after the workshop, I made a rapid foray into Asia to
meet some of our membership – visiting Hong Kong, Singapore
and Mumbai in the space of a week.
In Hong Kong, I visited Hong Kong University with Pat
Kum, head of the Hong Kong joint office. I was very
impressed with the capabilities of the faculty in HKU and was
interested to learn that the university is well-prepared to teach
quantitative risk subjects and already delivering a number of
relevant courses.
I followed up this visit by addressing an ASHK lunch about
the Australian profession’s recent experiences in redeveloping
its professional standards and Code of Professional Conduct,
reconstructing the PSC, etc. The Insurance Commissioner
is about to redesign the standards in Hong Kong, so my talk
seemed very timely. I fielded a number of insightful questions
around the potential value of an ‘appointed actuary’ role there
and the risks to which actuaries can be exposed if regulations
are not thoughtfully drafted.
That evening, I was the honoured guest at a dinner for around
30 actuaries working in Hong Kong. I was pleased to meet many
new and old friends, including Sim Ng – an FIAA who is now
President of the ASHK. I spoke briefly about some of the issues
in the Presidential Address and again received some perceptive
questions. There was considerable interest and discussion of
ERM and the need for practising certificates.
In Singapore, I again took the opportunity to talk through the
Presidential Address material. This was a smaller gathering
of around 16 people but the smaller numbers didn’t stop a
very active discussion – around ERM, climate change, youth,
practising certificates and more.
In both venues I was asked “What more can the Institute do for
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ACTUARY AU S T R A L I A
APRIL 2007
us over here?” My answer was “watch for the e-Learning pilot”
– which will soon lead to e Learning CPD activities.
I was also urged in both places to open up better on-line –
not necessarily live – video delivery. Watch out for the
Presidential Address!
In Mumbai, on 12-13 February, I attended the 9th Global
Conference of Actuaries, organised by the Actuarial Society of
India. One highlight was a plenary address by the deputy head
of the Reserve Bank of India. In the Indian context, 9+% growth
with 5+% inflation is not regarded as necessarily indicating any
overheating! Nevertheless, the increase in cash deposit ratios
that was announced almost simultaneously with his talk may
do a little to cool down rapid stockmarket growth and the
booming property markets in India.
Views were expressed that India’s growth path seems here to stay
(for the medium term at least) – and the pay and prospects for
Australian-qualified actuaries in India remain very good indeed.
As a conference participant, I was proud to chair a session
in which two young Indian actuaries spoke with passion and
intellect about the overriding need for moral values and ethics
in our work – spot on!
Overall, it was a very useful and informative trip and I was
touched by the warm reception and generous hospitality that I
received in every venue as the President of our fine Institute.
No sooner back in Australia than over to Angel Place for the
2007 Presidential Address, which was repeated a week later in
Melbourne.
The change in timing for delivering the Address from December
to February has received almost universal support as a very
worthwhile move. I certainly believe it’s a better time to build
up momentum. Comments from the floor were as always
insightful and helpful – very much up to the standard we have
come to expect. I repeat my thanks here to all those who took
the trouble to share their ideas and views.
That was a busy two weeks for me – around those dates
this President was also called upon to speak at two awards
dinners, a volunteers cocktail party in Sydney and a
professionalism course.
Fred Rowley
Of course it was a huge pleasure for me to meet and thank our
enthusiastic volunteers and to address and present certificates
to all those new FIAAs and prize winners. Congratulations to
all concerned!
The February Council meeting wasn’t any shorter than previous
meetings but I know we spent the time wisely and focussed on
the things we knew were important.
Importantly, the meeting gave approval to a future vision for
significant developments in ERM, based on an authoritative
and convincing Council paper produced by the RMPC under
the leadership of Ian Laughlin. We also approved the short-term
CPD developments needed to raise our members’ ERM skills
and awareness in response to regulatory developments which
should be especially useful for actuaries in reserved roles.
Melbourne Presidential Dinner attendees
The meeting also set up Council-based taskforces to pursue three
important initiatives mentioned in my Presidential Address:
(i) the Strategic Planning Taskforce that will produce plans
for the next three years by the third quarter of this year;
(ii) the co-ordinated implementation of recommendations
from the Leadership and Communications Taskforces;
and
(iii) a re-evaluation (as separate concepts) of the educational
and licensing needs of the AIAA and FIAA designations in
the light of present-day demands placed on our members
in their various roles.
Betty Campbell and Don Campbell Snr. at the Melbourne Presidential Dinner
Those three items each constitute a major and important effort
and I am delighted that Councillors and others have stepped up
to the mark to get some real progress in these important areas.
As I write, there seems to be no prospect of a let up on travel
with visits to Brisbane, Adelaide and Canberra for Presidential
Dinners. I also plan to visit four of our universities to speak to
(and listen to!) the students who will inherit our vision.
This is an exciting and important year for us all! I’m very much
looking forward to it. ▲
Fred Rowley
[email protected]
Fred Rowley at the Sydney Presidential Dinner
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
27
Philip Lathatm
education update
Volunteers Cocktail Party
Part III Education Coordinator
The Institute created the new position of Part III
Education Coordinator to assist with the volume
of work in administering the Part III education
operations. Robyn Butchart commenced in this role on 15
January 2007. Robyn has been doing a great job of recruiting
volunteers as assignment markers, exam scrutineers and exam
markers. This semester we have managed to fill the quota of
required assignment markers without overburdening people
with excessive workloads. We are still short of the required quota
of exam markers, so if you receive an email or a phone call from
Robyn, please consider helping out.
Robyn Butchart
It was a great pleasure to meet many of our Part III education
volunteers at the inaugural volunteers cocktail party at the
Crystal Bar in Sydney on Wednesday 21 February. In 2006 over
300 people volunteered their services in the Part III education
program. Well done to the Events team for organising this
event. Let’s hope it continues.
courses to ensure that course materials have clear performance
objectives and a stronger link between objectives, course material
and assessment.
The Institute has contracted the services of two education
specialists from Macquarie University in Professor John Hedberg,
Millenium Professor of Information and Communications
Technology (ICT), as Curriculum Specialist and Matt Bower,
Senior Lecturer in Education, as Instructional Designer. Matt is
also a graduate of the Macquarie actuarial studies program.
The first of these projects for Course 1 Investments has
been successfully completed for semester one 2007. Students
should appreciate the more focussed nature of the new course,
which now covers two fundamental units, each with one clear
performance objective. Materials not relevant to these objectives
have been moved to a background materials section on CD in
searchable PDF format.
The curriculum review project for general insurance 3A
and 3B is in progress and due for release in semester two 2007.
Curriculum review projects for other Part III courses will be
ready for semester one 2008. ▲
Part III Curriculum Review Projects
As a result of the Baker Review of Part III education, the
Institute is undertaking curriculum review projects in all
Call for Proposals and Expressions of Interest
The Institute of Actuaries of Australia is requesting proposals
and expressions of interest from appropriately-qualified
individuals and organisations for the following areas:
1. Request for proposals for the outsourcing of the Part III
education investment subject, with an implementation
date of semester one 2008, proposals to be submitted by
23 April 2007;
2. Expression of interest for development of a five-day CPD
for enterprise risk management (ERM), due for release in
July 2007, EOI to be submitted by 7 May 2007; and
Provisional Accreditation Notice
28
ACTUARY AU S T R A L I A
APRIL 2007
Philip Latham
[email protected]
3. Expression of interest for the outsourcing of Part III
education modules 2 & 3, with an implementation date
of semester one 2009 EOI to be submitted by 9 July 2007.
The Institute is committed to outsourcing the investments
course and development of the ERM CDP provided there are
suitable proposals. The EOI for outsourcing modules 2 and 3
of Part III is a request for ideas at this stage.
Please contact Stephen Wright on (02) 9233 3466 or via
[email protected] for the full request for
proposal and/or expression of interest documentation. These
documents contain the specifications as well as the criteria for
assessment of proposals / expressions of interest. ▲
The Institute of Actuaries of Australia is pleased to announce
that Curtin University of Technology has received provisional
accreditation for Part I for their undergraduate actuarial
studies program. ▲
obituary
William David Owen (1929 – 2006)
David Owen became a Fellow of the Institute of Actuaries
in 1959, having graduated from Manchester University (BSc,
Mathematics – 1951), completed two years compulsory national
service in Minden, Germany and worked as mathematics
teacher and in consulting actuarial work. (He used to say he
made the switch from teaching when the salary scales crossed
over.) David was recruited by James Parker in 1959 (along with
Ray Palmer and Sandy Campbell) to work in his organisation
in Melbourne – a consulting actuarial firm (eventually part of
Mercer) and a unit trust operation.
The three UK recruits travelled by ship on 1st class tickets, on
the condition that a minimum 3 years’ work be completed.
Disappointed with how Parker ran his business, almost 3
years to the day David left to establish his own actuarial
consultancy from scratch, gradually acquiring a number of
significant employer-sponsored superannuation clients. Along
with other consulting actuaries of the period, David argued for
and worked on conversions of endowment-assurance-based
schemes to independently-invested and trusteed arrangements
– activity that sometimes complicated working relationships
with life office actuarial peers. The growth of independent
defined benefit plans and with it the consulting profession
contributed to the Institute becoming a distinct professional
body rather than a life insurance industry technical committee;
David played a significant role in this process.
In 1965 David merged his firm with Sydney-based G.L.
Melville & Partners (the principals of which were Tig Melville,
Ray Palmer and Tim Trahair), which in turn merged in 1970
with Bruce Whittle & Co to become PTOW and subsequently
the Australian actuarial/human resources operation of Towers
Perrin in the 1980s.
He wrote topical articles in the broader media with an
eye-catching turn of journalistic phrase. One of the more
controversial articles, published on pages 2 and 3 of the
Australian Financial Review, attacked the generosity of the
public service superannuation benefits introduced under the
Whitlam government and referred memorably to the allegedly
self-interested mandarins involved as “a privileged, priestly
caste, the lamas of Canberra”.
In 1975, David left actuarial work on his ‘mid-career,
menopausal break’ to study philosophy at La Trobe University.
Just before commencing study he joined a group sailing across
Bass Strait. The boat capsized in a storm; one of the crew was
drowned and the three survivors floated for three days in a
lifeboat, suffering dehydration and sunburn.
He set up Investment Action Friendly Society with HSBC in
1986 then moved from his 175-acre farm at St Andrews (near
Melbourne) to Tasmania in 1989. Participation in an insurance
delegation to China spawned his interest in Mandarin; his
language studies at the University of Tasmania led to PhD
candidature – once again, ahead of his time, investigating USChina relations.
David was an intelligent, perceptive, unusual, sometimes
frustrating individual. He was fascinated by the world of ideas,
defied convention with a passion and unceasingly sought a
‘better way of doing things’. He was colourful and courageous
– the antithesis of the stereotypical actuary of the jokes that
actuaries seem to like telling. David’s zest for adventure leaves
those who knew him well with a fund of stories – some
unrepeatable, many unforgettable. ▲
Chris White
[email protected]
David Owen
David played a significant role in the development of actuarial
thinking and practice in Australia. He contributed to the
establishment of investment performance surveys, which for a
long period were primarily run by consulting actuarial firms.
He completed early work on accrued benefit funding methods
for defined benefit schemes and fostered separation of actuarial
reports to scheme trustees and sponsoring employers (to
emphasise the separate roles and responsibilities of each). His
most significant Institute paper investigated historical returns
on Australian shares, written more than a decade before any
finance academics took up the subject.
A C T U A RY A U S T R A L I A
A P R I L 2 0 07
29
Les Oxby
Les Oxby
obituary
(1914 – 2007)
Some Recollections
Les Oxby died on 3 February this year just short of his 93rd
birthday having been an actuary for nearly 70 years after
becoming a Fellow of the Institute of Actuaries at the youngest
age allowed, 23. He was involved in many of the changes found
in today’s actuarial kaleidoscope and he served in the second
world war.
Born in Australia in 1914 he embarked on a career in
insurance after leaving Wellington College, New Zealand as
dux of the school at the age of 15. Joining the AMP Society in
1930 his career of 46 years took him from a humble clerk at £80
per annum to deputy chief executive during his last 10 years.
He previously held the roles of chief actuary and secretary.
Serving the profession in numerous roles for some years he
was the Sydney representative of the Institute of Actuaries for
examinations, tuition service and entrants.
Les became President of the then Actuarial Society of
Australasia in 1951. He was a strong advocate and supporter for
the incorporation of the Institute of Actuaries of Australia and
New Zealand in 1963 when became a foundation Fellow. In 1987
Les was honoured by life membership with his good friend the
late Alf Pollard.
In 1941 Les married Mollie Dobson and they spent 65 happy
years together before Mollie died a few weeks before Les. They
had one son and three daughters who have so far produced 11
grandchildren and seven great-grandchildren.
Leaving behind these brief statistics what was Les Oxby really
like? What did this man achieve during a career which started in
1930 in the midst of the worst depression the world has known?
He was highly competitive at the academic level liking nothing
better than a challenge which could be addressed by his quick and
logical mind. There are numerous examples of the challenges he
took on and most of them turn around the actuarial profession
and the insurance industry in Australia.
Those who worked with Les at the AMP experienced his
relentless pursuit of the “truth” in any problem and AMP used
him to identify and resolve many of the issues it confronted
during his time. One example is of special note to the whole of
the investment industry in Australia and New Zealand.
In the 1930s when the Australian equity market was very small
and equity investment not well understood the British life offices
were investing substantially in equities. Les was sent to Britain
to study the practice of equity investment. Spending much of
his time with the Scottish life office “The Scottish Widows” he
brought back new ideas. The practices then developed by Les and
others at AMP were adopted generally by others in the Australian
long term investment market and underlie many of the practices
followed throughout Australia and New Zealand today. Les’
interest and involvement in investment extended over most of
the rest of his career. One comment about the British investment
practices recorded in his report will amuse today’s investment
practitioners “they even invest in mining companies.” Where
would Australia be today without the mining industry?
30
ACTUARY AU S T R A L I A
APRIL 2007
Joining the Royal Australian Air Force in 1941 he served as a
navigator until 1945 ending as a Flight Lieutenant and navigation
instructor. There he excelled in his approach to navigation
training by reducing the training time very substantially.
In 1945 Les was seconded by AMP to the Commonwealth
Treasury to work on drafting the Commonwealth Life Insurance
Act drawing from the equivalent South African Act. This was
adjusted to reflect the special characteristics of a federation of
states and the life insurance industry’s operations in Australia and
most of the principles established then are embodied within the
current legislation.
Les had a philosophical commitment towards AMP
and its principle of mutuality and when AMP decided that
demutualisation was the way forward the views of Les and other
past chief actuaries were sought. Les accepted that management
had done its homework and supported the proposal, a response
that gave encouragement to the management of the time.
Outside AMP, insurance and actuarial matters there were other
things to occupy Les.
He took up wine production – for family consumptionaround 1970. Grapes were collected, crushed and processed into
wine. A privilege (?) was to receive a bottle of Les’ wine for some
achievement. While the wine won no special medals a great deal
of enjoyment was had by all involved. He was keen on a range of
sports. Bushwalking, skiing, cricket, tennis, golf at Avondale and
bowls at Warrawee Bowling Club where his name can be seen on
the achievements board in partnership with a great AMP friend
of his, Bob Wood. At home he was a gardener of some note. He
was multi-lingual with French, German, Italian, Spanish and
Norwegian among the languages he read and occasionally spoke.
After retirement Les served for a few years as a member of the
Administrative Appeals Tribunal where he was involved in some
notable cases.
Les played a leading role in the application of the use of
computers within AMP but retired before the era of PCs, email
and the internet. After retirement Les took on PCs at the personal
level with enthusiasm – learning programming and developing
models such as predicting the path of a lawn bowl.
We do not know how he would view the many investment
vehicles of today but he would probably have embraced
the mathematics of derivatives and the like with gusto. It
would have been interesting to have had his views on the
development and use of hedge funds and the effect of the private
equity movement.
Throughout his life he was a tireless worker in many pursuits
and I have no doubt that Les Oxby would have seen himself as a
debtor to his profession. We can judge that he returned that debt
and in the process made a major contribution to the wellbeing of
the profession. ▲
Ian Salmon
[email protected]
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