The most important practical question arising in an actuary's practice is the following—“By what table of mortality, and according to what process, should the liabilities of a Life Assurance Company be estimated ?” Very wide differences of opinion appear to exist as to the proper answer to be given to this question. Thus, in the Assurance Magazine for January last, are contained two papers, written respectively by Mr. Jellicoe and Mr. Tucker, which bear more or less upon this subject ; and in which very conflicting opinions are expressed by those experienced actuaries.

In my 1981 paper ‘The flock and the sheep’ (J.I.A., 108,361) I explained that I had been writing a number of historical essays and that the paper was based on those which were about distribution of surplus. Some of the remaining essays fall naturally into a set under the general heading of valuation and it is these which have been combined into the present essay. It also includes something which has been on my conscience for a number of years—a critical examination in the light of history of my 1952 paper on the principles of valuation (J.I.A., 78, 286).

Under Common Law an employer has always been liable to his workmen for his own personal negligence, but it was not until 1897 that there was enacted the first of a series of Workmen's Compensation Acts which introduced a remarkable change in the law, inasmuch as the workman was given a statutory right to compensation for accident without requiring him to prove any negligence whatever.

The evolution of the law relating to Workmen's Compensation is traced through the successive Acts of Parliament, and the provisions of the Workmen's Compensation Act 1925, which codifies the law on the subject, are summarised so far as they relate to the liability covered by an Insurance Policy. Under the Act the employer is liable for personal injury to his workmen by accident “arising out of and in the course of” the employment or by certain scheduled industrial diseases.

An Insurance Policy covers the liability at Common Law and under the Employers' Liability Act 1880 as well as under the Workmen's Compensation Acts, and in addition makes the Insurance Company responsible for the cost of defending claims. The injured workman may have to consider whether he is likely to recover a larger sum by way of damages than he would receive in compensation by arbitration proceedings under the Workmen's Compensation Acts, and he can then elect which course to take.

A description is given of the Returns of Compensations made by Insurance Companies to the Home Office on behalf of the employers in certain selected industries as required by the Workmen's Compensation Act 1925.

The requirements of the Assurance Companies Act 1909 relating to Employers' Liability Insurance business are stated. In the Annual Returns to the Board of Trade under this Act, an Actuarial Valuation of the Outstanding Claims that have been in existence for five years or more is called for on an annuity basis, but no regulations are laid down for estimating the Liability in respect of Outstanding Claims of shorter duration. The present method is to take each of such claims and after considering the facts—nature of injury, rate of compensation, etc.—to make the best possible estimate of the ultimate cost to the Insurance Company. Later developments of the injury, however, may cause such estimate to be wide of the amount which the Company is called upon to pay. A plea is advanced for an investigation into the liability in respect of Outstanding Claims, in the hope that it may be found possible to arrive at average factors which could be used, with a suitable grouping of the Claims, to determine the Liability under the non-fatal Outstanding Claims from the first occasion of their becoming outstanding. When there is no recognised method based on past experience of making such an estimate, judgment may be influenced by factors not solely relevant to the ascertainment of the liability.

All the leading Offices transacting Employers' Liability Insurance business are members of the Accident Offices Association. This Association was formed after the passing of the Workmen's Compensation Act 1906, by which the scope of workmen's compensation was widely extended. The Association controls the rates and policy conditions of the Tariff Offices, but as the regulations are in great measure confidential, detailed information can only be given regarding what is already common knowledge.

A further step was taken in Government supervision of Insurance Companies by the Agreement made in 1923 between the Home Office and the Accident Offices Association, the effect of which is to limit to 37½% the expenses and profits in respect of the combined figures of the members of the Association.

The trend of probable future legislation as recommended by the Departmental Committee in the Insurance Undertakings Bill is described, and the questions of Compulsory Insurance and State Insurance are touched upon.

An account is given of an Undertaking made recently by the Accident Offices Association to furnish the Government with workmen's compensation statistics in connection with a Home Office Scheme of enquiry into the Incidence and Causation of Accidents.

The subject is so extensive that it has only been possible to deal with it in broad outline, but in conclusion reference is made to various aspects that could with advantage be expanded.

Of the three major elements in the formulae for office premiums, mortality has been subjected to refined investigation; interest has been considered closely, particularly since the war; expenses alone have hardly been considered. We have found only four papers on the subject in the whole of J.I.A., three (19, 153; 44, 415; 49, 111) many years ago, and the fourth (69, 50) before the war. There have been a few papers since in T.S.A., notably Mr Pedoe's (4, 485).

Our object is to analyse the expenses of a group of British life offices, so as to provide a reliable basis for comparison of offices, to enable managements to test the efficiencies of their own offices against others, and to provide means for getting standard costs as a tool of administration.

It is stated in the notes to Cousin's éloge, and has been repeated, that Fourier was placed at the head of a bureau de statistique by the prefect of the Seine, the Comte de Chabrol. But there is hardly any authentication. Anything done in the subject by Joseph Fourier, the most powerful working member of the Egyptian commission, the originator of mathematical results of the first order of genius, novelty, and utility, and an experienced public man, must be worthy of attention. But so little is his statistical career known, that the Biographie Universelle (Michaud, 1856) only ventures its mention of the connexion of Fourier with the volumes presently described as suivant plusieurs personnes bien instruits.

This paper seeks to explain key characteristics of the New Zealand life insurance industry, in particular the important role played by overseas-controlled mutual companies, and the dearth of regulation relative to other countries. It proposes that the dominance of mutual companies reflects the historical development of the New Zealand life insurance market. It also examines how agency theory may help to explain how the market has come to be dominated by mutual companies, and suggests that the unregulated nature of the life insurance industry may reflect the New Zealand government's historical role of direct intervention in the market through the Government Life Office. Further light on this issue is shed by the economic theory of regulation. This theory suggests that cartelisation and reinsurance may help to explain the existence of the unregulated insurance market in New Zealand. The paper concludes that many socio-economic and historical reasons may account for the distinctive features of the New Zealand life insurance industry. The possibilities are presented in this paper as a stimulus for further insurance markets-based research.

The system of fire insurance has been practised in Great Britain, either by private societies, public companies, or corporate bodies, for more than 180 years. In an article on fire insurance in Vol. XII., Part II., of the Encyclopædia Britannica, 8th edition, recently published, Mr. F. G. Smith draws attention to the various attempts which were made to interest the Corporation of the City of London in the subject, and to the proposals which for this purpose were submitted to the Court of Common Council between the years 1669 and 1680, and more especially to one from Mr. Deputy Newbold, which appears to have been the most acceptable. The delay which occurred before the report of the Committee was presented, enabled other private individuals to originate a scheme for fire insurance; and by the advertisements of the day it appears that they offered to insure against damage by fire, brick houses at 6d. in the pound, and timber houses at Is. in the pound—rates which showed the little knowledge which at that time prevailed upon the subject, provided sufficient business could be reckoned upon to obtain an average of the risks. On the 13th October, 1681, the Court of Common Council decided to effect fire insurances on houses within the city and liberties, and engaged a sufficient fund and undoubted security by the Chamber of London, on lands and ground rents, to provide for the fulfilment of their contracts. The war that ensued between those private Societies which had been the first in the field, and the city insurers, gave rise to much amusing pamphleteering and advertisements in the Gazette. In 1681, 1682, and 1683, the journals of the Court of Common Council record the signing of many policies, and refer to the discussions and arguments of their opponents; but the city authorities appear to have been soon weary of the scheme, for, by a resolution of the 13th November, 1682, the Court decided to relinquish the business, to cancel the existing contracts, and to return the money accepted for them.

Part I of the paper considers in relation to Pension Funds the financial problems so much discussed in recent years in a Life Office context, viz:

(a) asset distribution by date and by class,

(b) financial options against the Fund,

and states the author's conclusions.

In Part II are presented investment statistics and other information relating to a number of actual Pension Funds whose investments comprise 25% of all non Local Government Funds, some £300,000,000 in 1964.

The main conclusions reached in the paper are:

(1) that, normally, irredeemable investments should predominate in a Pension Fund portfolio and include a considerable equity share element;

(2) that financial options exist, but are of far less potential danger to the Pension Fund than to the Life Office;

(3) that, in practice, the Funds investigated are invested shorter than the author would have expected but include a considerable and increasing equity element.

This paper looks at the reasons why a UK life insurance company would wish to consider expanding into an overseas market, the factors it ought to bear in mind when deciding upon which country or countries to enter and the entry routes open to a company wishing to expand overseas.

By way of examples of overseas life insurance markets, the paper provides a detailed description of the German and Indian life insurance markets.

Questions of combination are so connected with an actuary's business, that no apology is necessary for offering solutions to the notice of the readers of this Journal.

When two systems, A and B, of combinations, each having its own individual cases, are so related that each case of A admits of being converted into a case of B, and into one only, by a rule which will not convert any other case of A into that same case of B, it may be said that the system A is convertibly within B. It is obvious that if A be convertibly within B, and B convertibly within A, the numbers of cases in the systems A and B are equal.

The text of this paper, together with the abstract of the discussion held by the Institute of Actuaries on 25 October 1999, are printed in British Actuarial Journal, 6, I, 55-141.

However, when this paper was discussed by the Faculty of Actuaries, the following ‘Survey of Practice’ had been carried out, and was also presented.

The UK defined benefit pension scheme landscape has changed dramatically over the last few decades. During this period of change, conflicting views regarding the measurement of both assets and liabilities has made communication challenging. In turn, this has led to an under appreciation of risk and often suboptimal decision making. This paper seeks to draw together a variety of contrasting views to provide a coherent framework for stakeholders to meet pension scheme obligations over time.

The proposed framework encourages agreement between both scheme sponsors and trustees towards a common target through a well articulated plan or “flight path”. In addition, the proposed flight path structure provides a common basis underpinning the measurement of both pension obligations and the risks inherent in any plan to meet those obligations.

It is probable that some of the points I venture to bring forward have already suggested themselves to other students, but in view of the interest at present attaching to selection, it seems an opportune time for putting forward any considerations that may help to throw light on a somewhat complicated subject.

1. The assessment of industrial ordinary shares has not yet been discussed by the Institute. This is surprising, both in view of the fact that British insurance companies hold ordinary shares to a value approaching £1000 million and also because actuaries are playing an increasing part in the investment world. The Institute is indeed the only professional body which examines candidates for membership in investment knowledge. Hitherto the examinations have been concerned mainly with general principles, but the widening of the scope of the syllabus since the war makes it necessary that the methods by which industrial shares are assessed should be discussed. It is the purpose of this paper to provide an opportunity for such a discussion.

Staple Inn and the Patent Office are only separated by the width of a garden, and it might be wondered why none of the many ingenious schemes of insurance has ever been protected by patenting it. Such protection of an idea should be impossible, as will be explained later, but in 1778 one John Knox ‘Of Richmond in the County of Surry, Gentleman’ took the first step towards such a patent by petitioning King George III ‘that with great assiduity, art and pains and after many laborious calculations and at a considerable expence’ he had invented ‘A Plan, Different to any before that Time Discovered, for Assurance on Lives from Ten to Eighty Years of Age, upon a Twofold Beneficial Principle, Making a certain provision as well for Subscribers or their Representatives upon the Death of the Person on whose Life Assurance should be made within the Term Assured for, as also by Means of a Reserved Capital for the Surviving Subscribers whose Nominees should be Living at the Expiration of such Term….’