An actuarial showcase of challenge and opportunity

At the CIA’s annual conference, act22,last June, we delivered a mix of technical sessions and inspiring keynote presentations, and encouraged discussions to help Canada’s actuaries with their work, post-conference. CIA members can now enjoy recordings of the sessions on the CIA website in time to meet year-end continuing professional development requirements.

We’ve also compiled a few of the highlights from these two days of learning and networking:

From the Great Resignation to Great Opportunities (presented in French as “De la grande démission aux grandes possibilités”)

The current labour market is undergoing profound transformations, such as the tendency to change jobs or career directions, the disengagement of workers, the shortage of workers in particular fields, and more. This “great resignation” does not exclude those working in the actuarial profession, with other realities specific to actuaries playing a role in the loss of skilled workers.

These realities include the need for actuaries with professional skills in areas such as leadership, management, and communication, in addition to traditional technical skills; the decline in the number of defined benefit plans; and the emergence of non-traditional areas of practice, namely data science, programming, and research and development.

However, prospects for the future of the profession may remain positive if these challenges are transformed into opportunities. Taking a human-centred approach to talent management as well as valuing considerations related to flexibility, personalized remuneration, personal development, and maximizing the company’s talent potential will be key steps in the future growth of the profession.

Pension Risk Transfer: Trends, Strategies, and the Changing Economic Environment

Providing insight into the Canadian pension risk transfer market, this session started with a comparison of the market from 2008 versus 2022 and examined why 2022 is expected to continue being a strong year, comparable to 2021 (which accumulated Canadian group annuity sales of $7.7 billion).

Demand and supply, as well as external factors, have influenced what insurers are offering, with future trends including the affordability of fully indexed annuities; environmental, social, and corporate governance factors; and occasional supply/demand imbalances (which can be smoothed by careful planning and communication with insurers).

In preparation for a potential group annuity purchase, several steps and best practices were outlined:

  • Defining objectives: discussing alignment of fiduciary and corporate objectives.
  • Governance and compliance: agreeing on who will decide, how the decision will be made, etc.
  • Data return on investment: providing complete and high-quality data to insurers.
  • Pre- and post-transaction asset allocation: de-risking plan assets before the transaction.

Life Insurance in the Gig Economy: Personalized and Embedded

Gig workers include anyone who works on contract (e.g., people who work through digital platforms like Uber and Lyft), freelancers, or anyone doing “side hustles” (i.e., a part-time job or occupation undertaken in addition to one’s regular employment).

However, while gig workers may have fewer restrictions in some ways, they also work without benefits, such as employer-provided insurance and medical coverage. Depending on how insurance is packaged and presented, gig workers may be more open to buying insurance personally, and artificial intelligence can provide better data to assess bundle targets.

Aging Demographics

Aging populations are impacting just about every corner of the financial security world in different ways.

However, while Canada’s population is aging, particularly in the next 10 years, the impact will not be as severe as is expected in many other countries. In fact, apart from interest rates, insurers expect there will be more benefits than challenges arising from the aging population, with time to anticipate and address the impacts.

While data and research point to a correlation in Canada, the link between interest rates and aging populations is challenging to measure.

Lastly, a prolonged period of low (and even lower) interest rates and declining investment returns could become increasingly likely. This will continue to present significant challenges to the insurance industry going forward.

Stochastic-on-Stochastic Simulation: Practical Considerations for Segregated Funds

A stochastic-on-stochastic simulation-based approach for segregated funds capital calculation enables insurers to model hedging in an explicit manner, whether in the context of simple vanilla European call options, provided in the session as a foundational reference, or for more complex variable annuity guarantees, discussed in much greater detail.

The transparency of explicit hedge modelling may allow regulators to recognize hedging credit more easily.

However, the complexity of explicit hedge modelling will require that insurers consider several factors when determining if and how to integrate explicit hedge modelling into existing processes and capital calculations before it can be adopted. Such factors include the scope of hedging, the hedging strategies, and computational and memory requirements (e.g., whether it should be based on the graphics processing unit of the computer), among others.

The Canadian Economy: What Actuaries Need to Know

While the backdrop of the Canadian economy looks strong, with above-trend growth coming out of the pandemic, there are concerns about generation-high inflation. Will resilient growth compel ever-higher interest rates, or can central bankers ultimately ease monetary policy and soft-land the economy in an 18- to 24-month horizon?

The CIA’s 46th Report on Canadian Economic Statistics 1924-2021 was highlighted in this session, as it can be a useful tool for actuaries in fulfilling numerous responsibilities, whether setting assumptions about pricing, valuation, investment, compensation, or pension benefits.

The presenters offered macroeconomic commentary and insights into where the Canadian economy and financial market might be headed, as well as addressing the US market, given its important influence on ours.

Make plans to join us in Halifax for act23!

Don’t miss the opportunity to participate in high-quality sessions, savour East Coast hospitality, and engage in actuarial content at act23, taking place June 15-16, 2023. Looking to speak at the conference? The call for proposals is on now.

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Canadian Institute of Actuaries
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