Description: Deciding where to spend that next dollar of capital is at the heart of financial management. Executive teams regularly grapple with decisions on whether to purchase a new Enterprise Resource Planning (ERP) system, invest in growing a distribution channel, expand into a new geographic area, or develop a new product, among many. The great news is there is no shortage of sound financial theory and logical rationale for making these transformational decisions. Yet business literature is filled with examples of decisions that did not meet expectations, sometimes materially missing the mark when comparing experience to assumptions. This is particularly the case with mergers and acquisitions, where multiple studies have shown that a sizable majority of such transactions do not achieve their intended outcomes. While some of the disappointing returns are attributable to random chance and unfortunate circumstances, a material number of them can be traced back to cognitive issues that arose during the decision-making process. Mental shortcuts or heuristics taken by individual decision-makers in evaluating information, as well as organizational dynamics such as groupthink both contribute to sub-optimal choices involving significant outlays of money. Being aware of these and having established protocols to mitigate against them can substantially improve decision-making around capital allocation and reduce misallocation of funds. In this session, the panelists discuss several common cognitive biases that can adversely impact the capital allocation decision process, introducing the notions of time, accounting convention, positivity, hierarchy, and social proof in describing them. Historical case examples of sub-optimal capital allocation are then explored, identifying the contributing behavioral factors including the simultaneous confluence of multiple factors. The panelists will close the session with several suggestions for attendees to consider for incorporation into their decision-making processes. At the conclusion of the session, attendees will be able to: - Learn common cognitive biases that impact capital allocation decisions - Differentiate which biases impact different aspects of the capital allocation process - Build awareness of biases affecting capital allocation decision models - Mitigate cognitive biases present in decision making processes

Description: This session will provide an analysis of the latest activities and trends in asset-intensive reinsurance (AIR), including life, annuity, long-term care (LTC), and pension risk transfer (PRT) transactions, and their anticipated impact on the industry in the coming years. Speakers will delve into the strategic considerations of reinsurers, the concerns and preferences of insurers, and the perspectives of rating agencies. Through a case study, the session will demonstrate how asset-intensive reinsurance can serve as a capital lever and profitability enhancer within the evolving regulatory landscape. The discussion will highlight how these strategies support insurers' strategic initiatives, enhance internal rates of return (IRR) and other key performance indicators (KPI), facilitate sales growth and product launches, and improve the financial strength of the company. Additionally, as many of these transactions utilize alternative asset classes to enhance yields, the speakers will examine the differences among these asset classes and the key considerations when incorporating or modeling them in actuarial work.

Description: The National Association of Insurance Commissioners (NAIC) project for the transition to a new real-world economic scenario generator (ESG) prescribed for principle-based reserve and capital calculations selected a vendor in the fall of 2020. The American Academy of Actuaries and other interested parties have been assisting the NAIC in this transition. Over the past four years, extensive analysis, model validation, and comparison work has been done. There have been many updates on the project but few opportunities to obtain an in-depth understanding of the new features of the new ESG and its impact on reserves and capital. Practitioners are very interested in the questions: - How different are the scenarios from the Academy/Society of Actuaries ESG and the new NAIC ESG? - How different are the models and techniques used to create the scenarios in both generators? - Is there a significant difference in capital and reserve requirements for model office tests between the two ESGs? - Are there concerns with the new NAIC ESG? The session addresses each of these questions in detail. At the conclusion of the session attendees will appreciate the key differences between the model structure and scenario performance of the two ESGs and will understand the differences in capital and reserve requirements for model office tests across the two ESGs. Attendees will also learn how the initial yield curve fitting differs between the models, about fund mapping considerations, and the interpretability of parameters in the new NAIC model.

Description: This session will provide insights into current industry allocations to asset classes with a focus on emerging and growing allocations to complex assets. Additionally, participants will gain an understanding of the risks associated with complex assets and the associated regulatory discussions.

Description: This article will examine four approaches under two different methods (eight in total) used to combat the non-additivity of key rates and will compare them under a number of rate environments.

Description: Learn about considerations and industry observed trends which cover different ways companies try to manage their inforce business in low and rapidly rising interest environments. You will explore M&A, block transaction, and offshore reinsurance solutions.

Description: This webinar is a panel discussion covering the technology behind blockchain and digital assets as well their uses, implications and risks. Investment considerations for both tokens and fund structures, along with a variety of other topics in the space will be addressed.

Description: The growing global recognition of the importance of climate-related risks (transition and physical) has triggered a significant demand for research on the interface between climate and actuarial sciences, for example on the impact of risks from climate change on insurance markets and their operations. Furthermore, the systemic nature of climate-related risks underpins actuaries’ need to engage and work with diverse groups of stakeholders, including clients, communities, governments, regulators, boards, and investors. Contributions are invited for a special issue of the Annals of Actuarial Science featuring research on the topic ‘Managing Climate-Related Risks’. This special issue aims to capture leading interdisciplinary thinking, with clear relevance to actuarial problems in pensions and insurance.

Description: This article will highlight the issue that the sum of key-rate metrics does not add to metrics derived by parallel shift to the entire curve, even at very low shift size. Additionally, in the article I will outline how to define a single rate change to be applied to a key rate (or the entire curve) since the rate changes are generally not level or parallel.

Description: In this article, we summarize inflationary factors that may result in a sharp increase in interest rates and implications for life insurer convexity risk exposure, most notably to dynamic policyholder lapsation. We further provide insights into potential ALM strategies to mitigate this convexity risk. Due to the prolonged low-interest rate environment and low minimum interest rate guarantees offered to policyholders, liability convexity is higher than prior historical periods, which results in life insurers’ ALM positions being extremely vulnerable to short-term interest rate spikes. Convexity mismatches cause issues for life insurers under both rising and declining interest rate scenarios. This means that life insurers are not compensated for taking convexity risk and, therefore, convexity matching should always be considered in the asset optimization process. There are mixed signals from policymakers and financial markets regarding potential inflationary and sharply rising interest rate scenarios. The key takeaway is that life insurers are not compensated for taking convexity risk and it is the right time for insurers to review convexity exposure. There are different approaches available to mitigate convexity exposure through rebalancing of asset positions and hedges within each life insurer’s risk limits.