This paper focuses on sections of the insurance industry which are not often widely discussed. If catastrophe insurances are to be transacted successfully, a large number of different technical skills and experiences must be combined. Actuaries in the U.K. are still relatively little employed on the problems of general insurance, and are rarely involved in the complexities of these particular sections of it. It must be recognized that there is only limited scope for the application of actuarial skills in this field. However, there may be some advantage to be gained by mixing an intelligent statistical opinion with other specialized technical or practical ones when some catastrophe problems are being discussed. Before expressing a view on any topic, it is, of course, essential to learn about the background and existing conditions.

The concept of catastrophe is considered in section 2 of this paper. Potential catastrophe situations can be classified into two groups, natural hazards and man-made hazards. Each of the sections 3–9 deals with one of the principal natural hazards, giving an outline of the causes of catastrophic events, the type of losses to be expected, and the form of insurance cover likely to be available in vulnerable areas. Section 10 describes the New Zealand state scheme, which provides cover in the event of extraordinary losses from nearly all elemental perils, and war. Sections 11–16 each deal with a different type of situation where a man-made catastrophe can occur, and the insurance provisions available in each case.

The introduction of high-speed electronic computers has opened the way for analyses of motor insurance risk statistics on a scale not previously possible. We may regard the purpose of the analyses which form the subject of this note as being to test the validity of the existing rating structure by finding out how the claims experience varies from one rating cell to another within that structure; and, more generally, to explore the possibility of devising a more efficient rating structure by defining new levels within the existing factors, or by using new factors in addition to, or in replacement of, those already used.

To achieve this purpose it is appropriate to consider on the one hand a detailed investigation of the experience over a limited period, analogous to that carried out when constructing a new standard life table and, on the other hand, a system for keeping the emerging experience under more or less continuous review. For this second aspect it is natural to think in terms of making comparisons between the actual experience and that expected according to the standard table.

It is now some ten years since it was accepted, cautiously at first, that computers might be of some value in performing ordinary clerical procedures. Since that time, they have been gradually installed at an everincreasing rate in offices of all kinds, including insurance offices. Our own Institute was, I believe, the first body to publish tables—the a(55) tables—which had been prepared by means of a computer, In some respects it is a pity that the insurance world in this country has not been more to the fore in utilizing this new equipment although, from the number of insurance people who attend any meeting connected with computers, it is not due to any lack of interest in new methods but rather to a cautious attitude concerning making use of equipment until it has been fully proved by actual field service. This is in contrast to the position in U.S.A. where the insurance offices have been well to the front in development of office use of computers; indeed, an insurance office there was the first non-governmental business user and that office now has four very large machines in full-time use. As a result of this we were fortunate to have had the very instructive surveys published by our sister body, the Society of Actuaries.

Corporate bonds and privately placed loans constitute a large proportion of the portfolios of several financial institutions. When bonds of a corporation are purchased in the market or loans are granted by some other arrangement, the lender evaluates the risk relating to the investment in question. Determination of the level of risk is important, among other things, for facilitating comparison between different investments, setting the terms of loan agreements and making a rational decision concerning the acceptance or rejection of a loan proposal. Since evaluation of risk is very important for rational investment decision-making, the nature of risk in bond investment is examined briefly in the next section. In the subsequent sections, the prevailing techniques of evaluation of risk will be reviewed and the cash flow simulation model presented.

Although two papers on industrial assurance by K. J. Britt (T.F.A.21, 265 and 26, 200) have been submitted to the Faculty of Actuaries in recent years there have been no similar discussions of this business at Institute sessional meetings. In addition, papers by G. W. E. Allaway (J.S.S.13, 1) and by K. F. Gardner (J.S.S.13, 22) have been published by the Students' Society, but in none of these papers have the particular problems of collecting friendly societies been fully considered. The industrial assurance funds of societies represent approximately one-fifth of all such funds in this country, and this paper is therefore intended to be complementary to those above-mentioned, to introduce current actuarial problems of collecting friendly societies, and to provide a vehicle for general discussion of industrial assurance.

This paper finds a strong size effect for the total business of 106 U.K. life companies from the 1981–82 Insurance Directory and Year Book.

The industry is regulated by the 1982 Insurance Companies Act which consolidated earlier legislation. This does not control output or prices of firms but many other items including investment. The industry is not highly concentrated with the five largest firms in 1980 with 30% of premiums. In 1980, total ordinary branch premiums amounted to £5.8 billion.

Section 2 surveys briefly some relevant research, while §3 discusses the data and size and other economic factors for life assurance firms. Section 4 discusses the empirical results while §5 has a brief conclusion.

This paper sets out a framework, based on option pricing theory, that can be used to assess the value of deferred unrealised capital gains tax. In the U.K. and Australia, capital gains tax is paid on realisation of assets and the basis for determining the tax allows for inflation indexation of the cost base of the asset. Capital gains tax payments under these circumstances are shown to resemble those of a complex option. A number of theoretical approaches to the valuation of this option are discussed in the paper.

The underlying idea of this paper is the valuation of the sum assured (S) in groups of t years by multiplying the total sum by a tabulated function α and by a tabulated β.