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  • Actuarial Services in Microinsurance:

    Joint IAA-IAIS Project

    Nigel Bowman, IAA, and Jules Gribble, IAIS

    IAA Presidents Forum, Cape Town

    21 November 2016

  • Financial Services

    Infrastructure

    Banking

    Insurance

    Investment

    Retirement

    Financial

    Inclusion

    Standard

    Traditional

    Mass

    Insurance

    Micro

    Insurance

    Social

    Insurance

    Financial inclusion - terminology

    Financial inclusion contexts Development of insurance markets - in developing countries

    Development of micro-insurance for low income more broadly

  • Prior IAA IRC material

    Develop an International Actuarial Guidance Note on Microinsurance

    Include microinsurance in existing IAA education and awareness initiatives and develop a medium term strategy for training

    Expand actuarial education efforts in microinsuranceto include non-actuaries, particularly in countries where local actuarial associations do not exist

    Provide additional application guidance to national insurance regulators with respect to proportionate actuarial services in inclusive insurance markets

    Some key recommendations from Issues Paper: Addressing the Gap in Actuarial Services in Inclusive Insurance Markets IAA Task Force on Microinsurance, February 2014

    3

  • Objective

    The IAIS, in cooperation with the IAA, will identify

    and develop approaches to establish and apply

    actuarial expertise in inclusive insurance markets

    based on an understanding of a proportionate

    application of prudential requirements in inclusive

    insurance markets.

    4

  • Deliverables

    IAA Paper: Approaches to Actuarial Services in Inclusive Insurance Markets Focus on actuarial matters

    IAIS Application Paper: Proportionate Prudential Requirements in Inclusive Insurance Markets Focus on supervisory matters

    Both scheduled for the Consultation later in 2017 and finalisation by the end for 2017

    5

  • Context

    Three key players Actuarial profession

    Product providers

    Supervisors

    Progress limited by the least capacity Need to progress together and co-operatively

    A key outcome will be to provide a common language to facilitate discussion and improve understanding between and within these key players

    6

  • Criteria for success

    Short term Actuarial contributions in the financially inclusive

    context are accepted as being valid and are adopted by all the key players

    Longer term Actuarial contributions seen to contribute to better

    outcomes of financial inclusion services by all the key players

    Challenges: Address proportionality in meaningful way

    Flexibility to cater for changing environments

    Recognise key differences between inclusive and traditional insurance

    7

  • Actuarial guiding principles

    Barriers: Not intentionally create them for Financially

    Inclusive Insurance, and permit innovation

    Simplicity: Of use of outcomes for end users (not the

    same as of underlying process

    Differences: Manage key differences (risks and needs)

    between FII and Conventional insurance

    Assessments: Objective and quantifiable to give language

    to start conversations (recognising need for professional

    judgement

    Interactions: Parallel development of the three key players

    Sustainability: Long term in local environment

    Consumers: Solution support their needs and protect their

    interests

    8

  • Actuarial skill levels needed Need to recognise realities

    Very few qualified actuaries in many countries

    Development of insurance products is taking place regardless of this

    Some preliminary thoughts for discussion:

    9

    Low Qualified actuarial technician

    Low-Med Qualified actuarial technician

    + Initial Review by Fully Qualified Actuary

    Medium Qualified actuarial technician

    + Periodic Review by Fully Qualified Actuary

    High Qualified Actuary

    Expert Qualified Actuary

    + Topic Experienced

  • Approach

    Develop a scorecard approach, which takes into account criteria to assess: Riskiness of proposed product designs

    Capacity of a provider to deliver the product

    Readiness of the (financial inclusive) insurance market

    Supervisory capacity

    This will provided a process and language to support discussions starting and then outcomes emerging using professional judgement

    10

  • Business risk assessment (indicative)

    11

    Colours:

    Focus of IAA paper

    The outcome is input to Supervisory risk assessment

    Need for actuarial skills increases as outcome assessments move from Low to

    High risk

    Residual risks of product

    Low xx Medium xx High

    Insurer

    capacity

    Low

    xx

    Medium

    xx

    High

    Low outcome (residual) risk High outcome (residual) risk

  • Some key challenges

    What are, and who may provide, Actuarial

    services

    And who ensures criteria are met

    How to:

    Enhance the value, role and reputation of actuarial

    services amongst users

    Develop and retain actuarial skills and expertise to

    deliver (various) actuarial services

    Support supervisors carry out their actuarial (and risk

    management) responsibilities effectively

    12

  • Moving forward

    These are challenging issues

    In theory and in practice on the ground

    New concepts to apply in evolving and non-

    traditional environments

    The glass is half full!

    13

  • Thank you

    Actuarial Services in Microinsurance:

    Joint IAA-IAIS Project

    Nigel Bowman

    nigel@inclusivitysolutions.com

    Jules Gribble

    jules.gribble@bis.org

    14

    mailto:nigel@inclusivitysolutions.commailto:jules.gribble@bis.org

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