In this paper we use a case study of a non-life insurance portfolio to demonstrate how recent research in ruin theory can be applied to solvency problems. By approximating the aggregate claims distribution for the portfolio by a translated gamma distribution, we estimate ruin probabilities through a recursive procedure when the insurer earns investment income on its surplus. We also show the results of applying simulation techniques to this problem, and discuss some advantages and disadvantages of simulation as a means of assessing ruin probabilities. Finally we discuss the calculation of the probability of ruin at the end of a specified time period.

When I agreed to prepare a paper for the consideration of the Institute of Actuaries, on the Life Assurance Companies Acts, 1870–72, I did not do so with a light heart. The task in any case would have been onerous, and events which have since transpired have not tended to increase my confidence. It has become a matter of public knowledge that the Council of the Institute had under consideration the laws relating to life offices, and that it was intended to take an early opportunity to debate the question. Moreover, it has been surmised that Government had in contemplation to take action in the matter, and, possibly in next session of Parliament, to bring in a Bill for the amendment of the law. I, therefore, cannot help feeling that a great responsibility rests upon me in opening a discussion of such importance, but I am emboldened to proceed, because, even if I fail to produce anything new or important, there are many here of far riper experience than myself, and a debate in such an assembly cannot but be instructive and useful.

The paper deals with the development of unitised with-profits business in the United Kingdom. The authors trace the recent history of these products and comment on the main reasons for their development They also deal with corporate issues, including implications for policyholders and shareholders of different fund structures and different types of life office. Pricing and product development issues are also covered. Reserving issues including the range of valuation methods, statutory requirements and policyholders' reasonable expectations are explored. Finally the paper considers the actuary's contribution to the management of unitised with-profits policyholders' expectations.

This paper explores an approach to assessing the adequacy of capital resources for non-life insurance companies. It examines the range of risks faced by these companies and the factors that influence the analysis of their impact on an organisation's financial condition. The paper considers how the actuarial profession may contribute to this process, with particular reference to the regulatory regime envisaged in the United Kingdom.

The paper reports the results and conclusions of a project which provided a statistical analysis of survival after stroke (or cerebrovascular disease) and derived appropriate life assurance underwriting ratings. The methodology used has been described elsewhere and will be referenced as needed.

The project forms a pilot study set up to consider the feasibility of collecting and analysing in detail the considerable medical and actuarial literature that has accumulated on the prognostic experience of impaired lives over the last 30 years.

By courtesy of Robin Michaelson, data derived from a United States of America life insurance experience (1970–75) for individually insured lives was made available. The data consisted of the proportions of smokers in the population and the ratio of smokers' mortality to that of non-smokers. In both cases separate data was collected for males and females and at integral ages from 15 to 84. From these data it was possible to construct separate life tables for smokers and non-smokers, which were subdivided for males and females. These tables are shown as Tables A–D at the end of this note.

The Presidential Address celebrates the 150th anniversary of the Institute of Actuaries by recalling speeches and press comments from the time of its foundation in 1848, and goes on to draw parallels between the issues of the day and those facing the profession in 1998. Foremost of these, there is a continuing emphasis on the public interest; it remains important for the Institute to be a learned society, and educational requirements have continued to be a central part of the profession's activities. The need for the profession to become more deeply involved in investment research is identified. A particular issue highlighted in the address is the constraint placed on the profession's growth and breadth by heavy reliance on self-study; much greater involvement of the universities is recommended.

In 1848, as in 1998, the potential for actuaries to use their skills in fields beyond life assurance was recognised, but the address notes that the opportunity to become involved in banking has never been properly grasped.

The leading role of the United Kingdom in the international development of the actuarial profession has continued throughout the history of the Institute, and recent developments in the International Actuarial Association are noted.

The need to educate clients and the wider public in what it is that actuaries do and how they go about it is the remaining major theme.

The final section identifies some current issues needing urgent attention, including the need to influence the shape of national and international accounting standards.

The aim of this paper is to use a model office to examine the potential impact of AIDS on non-linked life assurance business in the UK.

The subject of AIDS continues to stimulate a large amount of research. The UK actuarial profession has been kept informed by the regular Bulletins [1-5] from the Institute of Actuaries AIDS Working Party (the “IAWP”). Using a model developed by A. D. Wilkie [6], the IAWP examined the possible spread of the infection amongst male homosexuals and produced tables of additional mortality. The most recent Bulletin (No. 4), published in March 1989, updated these projections in the light of new data, and we have based our investigations principally upon these more recent projections.

In many respects, this paper may be regarded as a logical sequel to an earlier one presented to the Institute nearly seven years ago. In that paper the assessment of industrial ordinary shares was discussed in considerable detail and methods were suggested which could be used both to make projections of future dividends and earnings for different companies and to utilize these estimates in making investment decisions. Much of the discussion on the earlier paper centred on the latter problem and the present paper is concerned entirely with this aspect of share assessment. The making of future projections will not be considered again; suffice it to say that our methods have remained largely unchanged. The principle on which the technique that we have now developed rests is closely linked with the previous concept of a ‘capitalization rate’ but in passing we would mention that we have made a brief experiment with what we term ‘growth yields’, i.e. the compound interest return to be expected from a particular share at a given price on the basis of the forecast future dividends. Our results utilizing this method were in fact significantly better than those obtained using the more familiar concept of relative yields (see §8) but, as the figures presented later in this paper show, they were not as good as those obtained using the method which forms the basis of this paper.

Pollard and Pollard have considered a stochastic approach to certain actuarial problems. In their notation ãx denotes the random variable whose expected value is ax. The random variable ãx depends on the random variable, time until death and the (assumed constant) rate of interest. The authors show how to calculate the second and higher-order moments of some common actuarial random variables such as ãx and Ãx. The second moments, in particular, are useful in estimating confidence limits for the total liability in respect of a group of contracts.

This paper considers actuarial science within the context of the framework provided by the formal study of scientific method. A review of key points of recent developments within the methodology (study of method) of science and the methodology of economics is presented. A characterisation of actuarial science and its methods is then developed using as inputs the United Kingdom actuarial education syllabus and recent work of the profession, most notably Bell et al., (1998). The methods of actuarial science are then considered within the framework provided by formal methodology to propose an articulation of the methodology of actuarial science. This methodology is explored in relation to that of other sciences, and some of the implications and opportunities for actuarial science which arise from this investigation are identified. The paper concludes that actuarial science has a distinctive and potentially powerful empirical method of applied approximation. This methodological analysis is intended, in part, to add to the momentum of the programme concerned with furthering the use of actuarial methods within broader spheres (eg Nowell et al., 1996).

The climate of any place is the result of the various phenomena regulating the natural order of the universe, as these are modified by circumstances affecting the particular locality. Climate has been concisely defined by Humboldt to signify all those states and changes of the atmosphere which sensibly affect our organs,—temperature, humidity, weight, agitation, electric tension, purity, and transparency. If we would correctly consider the climate of any place, it is accordingly necessary to give some consideration to every one of these phenomena. Temperature alone, if that be held to signify the mean annual temperature, gives a very imperfect idea of climate. It no doubt forms a most important element, but it must be considered with reference to its range, and that not only the minimum and maximum temperatures of the year, or the average daily temperature of the various months of the year, but it is also essentially necessary to know the daily range of the thermometer throughout the year, and during a series of years. The suddenness of the variations of the temperature is a most important element in judging of climate, and it is also important to understand the causes of the daily extremes of heat and cold, and the accompanying force and direction of wind during these extremes. Very intense heat and very severe cold may be borne without uneasiness, or even without much discomfort, provided these are unaccompanied by wind.

This paper focuses on Enterprise Risk Management (ERM) and strategic business management for health insurance companies in our world of ‘unknown unknowns’ and the emergence of unexpected risks over time. It illustrates how Chief Risk Officers (CROs) can focus on ‘risk and opportunity management’ through an ERM framework, and thereby balance risks against opportunities, whilst being resilient against ‘unknown unknowns’ and their emergence over time as ‘known unknowns’ and ‘known knowns’. The paper has been designed to meet the broad requirements of health insurers that would like to implement an ERM framework for the effective risk management of their health insurance lines of business. Risk management for health insurers in the context of Solvency II and broader European Commission regulatory requirements is also discussed. The authors discuss how insurers can develop and apply risk management to build resilience in the face of the storms and shocks that may lie ahead.

The first life table was a brilliant ‘guesstimate’ by John Graunt (1662) based on mortality data analysed by cause of death but not by age or sex. It was over thirty years before Halley (1693) constructed a table to show “the odds that there is, that a Person of that [any] Age does not die in a Year”. In the meantime several writers tried to use Graunt's figures to make deductions about probabilities of death. This note is a description of these efforts.