The conditions under which pension schemes merge is an important issue which has been under-researched. Mergers can affect the strength of the sponsor's covenant and the balance of power between the trustees and the sponsor, as well as the deficit or the surplus of the receiving scheme and its funding ratio. This paper sets out two financial criteria to be met by any pension scheme merger: no profit or loss on merging with another scheme; and no dilution of the funding ratio. After defining a merger basis for valuing the assets and liabilities, and allowing for adjustments to the funding ratio via side receipts and payments; it is shown that, whether or not these criteria are met, depends on the state of the financial markets.

This paper extends the methods introduced in England & Verrall (2002), and shows how predictive distributions of outstanding liabilities in general insurance can be obtained using bootstrap or Bayesian techniques for clearly defined statistical models. A general procedure for bootstrapping is described, by extending the methods introduced in England & Verrall (1999), England (2002) and Pinheiro et al. (2003). The analogous Bayesian estimation procedure is implemented using Markov-chain Monte Carlo methods, where the models are constructed as Bayesian generalised linear models using the approach described by Dellaportas & Smith (1993). In particular, this paper describes a way of obtaining a predictive distribution from recursive claims reserving models, including the well known model introduced by Mack (1993). Mack's model is useful, since it can be used with data sets which exhibit negative incremental amounts. The techniques are illustrated with examples, and the resulting predictive distributions from both the bootstrap and Bayesian methods are compared.

The International Accounting Standards Board (IASB) is introducing new International Financial Reporting Standards (IFRS) which aim to make financial statements more useful. The process has generated considerable debate. This paper is a contribution to the debate, in the particular context of insurance accounting, and attempts to provide a coherent framework for accounting theory which makes a clear distinction between retrospective statements required for administrative accountability, fair value for current market transactions and to measure value creation, and a prospective prudence required to protect policyholders, depositors and other creditors. It is argued that the IASB's founding purpose to provide a single set of accounts is therefore incoherent; different purposes require different numbers. This also implies that fair value accounts should attempt to value intangible assets. In this context, actuarial analyses of surplus would greatly assist in measuring whether model assumptions are appropriate.

We consider a classical surplus process modified by the payment of dividends when the insurer's surplus exceeds a threshold. We use a probabilistic argument to obtain general expressions for the expected present value of dividend payments, and show how these expressions can be applied for certain individual claim amount distributions. We then consider the question of maximising the expected present value of dividend payments subject to a constraint on the insurer's ruin probability.

This paper examines income inequality over stages of the later-life course (age 45 and older) and systems which can be used to mitigate this inequality. Two hypotheses are tested: (1) levels of income inequality decline during old age because public benefits are more equally distributed than work income; and (2) because of the progressive nature of government benefits, countries with stronger public income security programmes are better able to reduce income inequalities during old age. The analysis is performed by comparing age groups within seven OECD countries (Canada, Germany, the Netherlands, Norway, Sweden, the United Kingdom, and the United States of America) using Luxembourg Income Study data from around 2000. Both hypotheses are supported. Several conclusions are drawn from the findings.

Mutations in the BRCA1 and BRCA2 genes confer very high risk of breast cancer (BC), but only account for about 25% of the observed familial clustering of BC. Antoniou et al. (2002) proposed a model which included the BRCA1 and BRCA2 genes, and a polygenic component which acted multiplicatively on the rate of onset of BC. We use this model to find premium rates for critical illness insurance: (a) given knowledge of an applicant's polygenotype; and (b) given knowledge of a family history of BC or ovarian cancer. We find that the polygenic component causes large variation in premium rates even among non-mutation carriers, therefore affecting the whole population. In some cases the polygenic contribution is protective enough to reduce or remove the additional risk of a BRCA1/2 mutation, leading to cases where it will be advantageous to disclose genetic test results which are adverse in absolute terms. Premiums based on family history are lower than those found in an earlier study which attributed all genetic BC risk to the BRCA1/2 genes.

This paper investigates the use of censored regression quantiles in the analysis of claim termination rates for income protection (IP) insurance. The paper demonstrates the importance of modeling quantiles given the growing interest of regulators and others in stochastic approaches to valuation of insurance liabilities and risk margins.

To gain insight into the use of Dynamic Solvency Testing (DST) and Financial Condition Reporting (FCR), a questionnaire was distributed to Appointed Actuaries in United Kingdom life offices. The response rate of the main survey was 76%. An independent-samples t-test for non-respondent bias was conducted and the results suggest that the respondent sample is representative of the survey population. Results from the 62 firms responding revealed: (1) Scenario testing was the most commonly used DST techniques. (2) Most life offices regularly run less than ten scenarios in scenario testing. (3) Most life offices reported using a five-year forecast period in DST. (4) The two most commonly seen difficulties are: difficulties in communicating complex issues to non-specialists, and how to present extremely adverse scenarios without causing undue concern. (5) Nearly all life offices use FCR. (6) Guidance Note 2 is generally considered acceptable. (7) Compared with the results reported by previous studies, the use of DST techniques is now more common in life offices. (8) There is a significant difference in DST/FCR practices between with-profits and non-profit offices.