Dr Pradip Tapadar and Aniketh Pittea presented at the International Congress of Actuaries in Berlin

Senior Lecturer in Actuarial Science, Dr Pradip Tapadar, and PhD Student in Actuarial Science, Aniketh Pittea, from the School of Mathematics, Statistics and Actuarial Science (SMSAS) at the University of Kent, gave presentations at the 31st International Congress of Actuaries (ICA) earlier this month (June 2018).

The ICA is one of the largest conferences for actuarial professionals, and takes place every four years. This year’s conference took place in Berlin, Germany, and saw over 2,500 actuaries, academics and high-ranking representatives from the international insurance and financial industry attend.

Pradip (pictured above), delivered a talk titled, ‘Why insurance works better with some adverse selection’.

Abstract:

Regulatory restrictions on insurance risk classification are a common feature of personal insurance markets. Whilst such restrictions appear motivated by social objectives, they may also induce adverse selection. This is usually perceived as a disadvantage, both for insurers and for society. We suggest a counter-argument to this perception in circumstances where modest levels of adverse selection lead to an increase in ‘loss coverage’, defined as expected losses compensated by insurance for society as a whole. This happens if the shift in coverage towards higher risks more than offsets the fall in number of individuals insured. The possibility of this outcome depends on insurance demand elasticities for higher and lower risks. We state elasticity conditions which ensure that for any downward-sloping insurance demand functions, loss coverage when all risks are pooled at a common price is higher than under fully risk-differentiated prices. We also discuss some empirical evidence on insurance demand elasticities, and some limitations of the loss coverage concept. For a more discursive treatment, see our recent book Thomas (2017) and papers (Hao et al. (2016, 2016a, 2016b)).

Click here to view the manuscript and presentation slides.

Aniketh gave a talk titled, ‘Examining Pension Plan Risk in an Economic Capital Framework’.

Abstract:

The generation born in the 20 years following the end of World War II has had a profound impact on long-term economic growth in developed countries over the last half of the 20th century. The retirement of this “boomer” generation has the potential to continue to be a dominant economic factor. In particular, ageing populations will continue to put pressure on the benefit delivery and cost of social security systems in many developed countries. The effect will be compounded if changing population structure reduces asset returns below levels currently anticipated.

We implement existing economic and demographic models in actuarial literature to quantify financial risks underlying large pension plans. We further incorporate models specifically designed to capture the impact of ageing on both economy and demography. Our analysis is focused on the UK and US and we examine the risks of existing pension schemes as well as “stylised” schemes.

The interaction between population structure, investments and asset returns will be of interest to pension funds, actuaries and policy-makers, all of whom are interested in the overall health of both public and private pension plans.​

Click here for more information about ICA 2018.