The 2010 International Congress of Actuaries in Cape Town is over. It has been, I think, a great success. Over 1,500 delegates – more than ever before – came to the congress from Europe, Australasia, North and South America, Asia and, of course Africa. What’s more, over 200 of the delegates were presenting papers as well as listening to other people talking.
So, what were main themes? Enterprise risk management (ERM) was a major topic in a range of sessions. This was a great opportunity to introduce and described ERM to a bigger audience (for a very brief description, see this post, and the opportunity was well-taken. These sessions were also used to explore a number of cutting-edge risk management ideas, such as Bayesian heirarchical networks (trust me, they’re a really neat approach to coherently linking a range of risks…)
In a similar vein, the financial crisis and role of models was discussed by Paul Embrechts, and this session proved to be one of the most popular. Were models to blame for the financial crisis, as Lord Turner initially suggested? Well, their misuse certainly was. Bad models were used, models were not understood by those who used them, the limitations of models were not appreciated, models used for purposes other than those for which they were designed – the list goes on. But as was noted recently, what are we supposed to use to quantify risks if not models? Homeopathy? The interpretive medium of modern dance? You need to use models – but you need to use them sensibly.
Longevity research also featured strongly. This cuts across so many areas of actuarial work, so these sessions attracted a lot of interest from pension, life, investment, and risk management actuaries. Mortality modelling was covered, but capital market solutions also featured strongly. These may become crucial if the vast amount of longevity risk is to be transferred from pension schemes and insurers to a wider range of risk-takers.
Finally, microinsurance was discussed. The concept here is to provide cover for individuals in low income groups against a range of risks including those relating to property, health, crops and a range of others. This cover is provided through locally-based pooling of risk, and us “micro” because premium sizes can be very small. This means that it is not usually economic for larger insurers to get involved directly, and microinsurance is better run as in community projects. However, there is scope for micro-insurers to pool their risks with networks of micro-insurers to diversify their risks. This is Particularly important to avoid geographic concentration of risks. Microinsurance is an important area, following closely behind microfinance. Microfinance – the provision of small loans to individuals starting enterprises in developing countries – allows individuals to get a foot on the ladder; micro-insurance ensures that if disaster strikes, the ladder is not swept away.
But what next? Well, the point of a congress like this is that the delegates pass on what they’ve learnt when they get home. This should hopefully lead to developments in all of the areas I’ve discussed. This, in turn should mean that the topics discussed at the 2014 International Congress of Actuaries in Washington DC are just as cutting-edge as they have been in Cape Town. Only another four years!