leadership & actuaries | actuarieel podium | presentation by jos berkemeijer

Actuarieel Podium ---- Presentation Jos Berkemeijer --- Leadershp & Actuaries 1September 27, 2016

Actuarieel PodiumSeptember 27, 2016

@ Jos Berkemeijer

Are you part of the future or the past?

http://actuarieelpodium.nl/

mailto:%[email protected]

Actuarieel Podium ---- Presentation Jos Berkemeijer --- Leadershp & Actuaries 2

Classic view on LeadershipInteractive Olympic Warming Up! Give it a try…

September 27, 2016

Vision, GoalFocus

StructureResponsibilityFirmly in the saddle

StrategySail …the wind

Keep your headabove water

Timely ExecutionHelp, Control


Agenda

September 27, 2016

1. Classic view on leadership

2. Actuarial leadership, Key statements

3. Personal leadership experiences

4. The many faces of leadership

5. Actuarial leadership

6. Actuarial work field, Holistic view

7. Actuarial leadership, Future outlook


Actuarial leadershipKey statement 1: Estimates

September 27, 2016

Jane,

Born in 2016Pension year: 2091

ONLY IF … P(X | X1,X2,X3,..)

1. I think it’s ethically and professionally responsible,to estimate Jane’s average investment return and mortality rate with a 95% confidence level for the next 70 years or more


Actuarial leadershipKey statement 2: Life expectancy

September 27, 2016

2. Within the next 30 years new anti aging medicineswill improve life expectancy with more than 10 years

© DW2

(2016) The Food and Drug Administration has approved human testing for what could be the world’s first anti-aging drug: metformin

https://dw2blog.com/category/aging/


Actuarial leadershipKey statement 3: Manage your own life ending?

September 27, 2016

3. By 2050 most elderly will be able to manage their own life’s exit strategy (pro)actively

To provide a decent pension for my children, I’ve asked my hospice to keep me alive forever, as my pension is $ 300 per

day and my nursing costs are only $ 150


Actuarial leadershipKey statement 4: Robo actuaries

September 27, 2016

4. By 2030 most standard actuarial advice and reports will be handled by Robo Actuaries

Facts……• Computerisation

35% of current UK-jobs are at risk

• Actuaries20Y-Likelihood of automation: 15%.

• The future is for 1. Data scientists 2. Machine learning (predictive models)

Robo Actuary (2030)


Personal leadership experiences Get out of the box!

September 27, 2016

When I applied for….Concern ActuaryInsurance directorPension fund directorSupervisory Board memberFintech Managing Partner

I was asked: Aren’t you morea department manager?an actuary?an insurance director?a director?a board member than a scrum team member?

Be(come) Who You AreNever put people into boxes!


Personal leadership experiences Who am I?

September 27, 2016

Family

HobbiesSocial

ProfessionalInterests

Actuarial

ActuaryBoard Member

Supervisory Board MemberStrategic Advisor

LectorSoftware Developer

Husband Father Caregiver

Friends Networks Professionals, Volunteers

Student

Philosophy, Mathematics,

Science

Risk, Investment, G

overnance


Personal leadership experiences Who are YOU?

September 27, 2016

Family

HobbiesSocial

Professional

Actuarial

InterestsYOU


Personal leadership experiences Stephen Covey: ‘Green & Clean’

September 27, 2016

1. Set Target

2. Define responsibility

3. Offer help

4. Accept failure

5. Success


The many faces of leadershipLeading by example | Leadership types

September 27, 2016

Is there one type of leadership that fits the actuarial profession best?

Obama Mother Teresa Einstein


The many faces of leadershipEinstein as an actuary role model?

September 27, 2016

S = W + P + M Success = Work + Play + Keeping your mouth shut

Einstein’s leadership Principles1. Try not to become a man of success.

Rather become a man of value. 2. An expert is a person who has few new ideas

A beginner is a person with many.


The many faces of leadershipMisunderstanding: Leadership…

September 27, 2016

is about social & personal change, ethics, attitude & principles, commitment, communication

is NOT about • Management• Best expertise • Authority or power• Titles• Having followers

is not about YOU, but about OTHERS & YOU


The many faces of leadershipWhat is Constructive Leadership?

September 27, 2016

1. EmpathyYour consciousness and competence to recognize and identify social and peoples’ needs

2. ConfidenceYour conviction that by engaging your partners and network, these needs can be fulfilled

3. Social CapabilitiesYour power to connect and line up your and others’ strengths and deal with weaknesses

4. Professional CapabilitiesYour skill to translate expertise of combined disciplines into ‘breakthrough’ new solutions

5. AttitudeYour strength to evaluate, learn from others and revise your thinking and approach

6. StewardshipYour Helpfulness, Unselfishness, Perseverance & Flexibility , Helicopter & Birds Eye View

7. MastershipYour power to convince, master principles, accept failure and anticipate the unforeseen

JB View


Actuarial leadership, Self-reflectionExample: Valuing US Pension Liabilities I

September 27, 2016

Valuing US public pension plan liabilities (2016)Current standard actuarial practice: ≈ 7.5% discount rateTopic

Issue

Result

Action

What’s the right discount rate? Framed question?

Common Task Force:1. American Academy of Actuaries (AAA)2. Society of Actuaries (SOA)

Right Approach?

1. Task force planned discount rate advice:‘default-free obligations’ or ‘risk free rate’

2. Risk free rate impact: US$ 8.4 trillion underfunding

3. AAA/SOA- Disband task force- Suppress publication of the paper.

Leadership?Ethics?Decision Quality?


Actuarial leadership, Self-reflectionExample: Projection rate variable annuities

September 27, 2016

How to calculate Dutch variable annuities ?Topic

Issue

Result

Action

What’s the right interest projection rate? Framed question?

1. Advice from Task Force New Pension System - Dutch Social and Economic Council (SER) - Dutch Royal Actuarial Association - Dutch Bureau for Economic Policy Analysis (CPB)2. Advice from Dutch regulator (DNB)

Right Approach?

1. Advice Task Force: macro-stable discount rate2. Advice DNB: risk free rate3. Dutch Government & Parliament without further discussion decide: Projection rate = risk free rate



Actuarial leadership, Self-reflectionExample: Customer Risk Information Regulation

September 27, 2016

A fund's past performance does not necessarily predictfuture results

US SEC

Past performance is not a guide to future performance

Dutch Authority for the Financial Markets (AFM)

2002 Past performance is not a guarantee of future results

2006 Risk MeterKey investor information providesinsight into the nature and risksof the mutual fund offered

http://ec.europa.eu/finance/investment/docs/other_docs/prospectus/afm-financial-information-leaflet_en.pdf


Actuarial leadership, Self-reflectionExample: Customer Risk Information Regulation

September 27, 2016

What is more risky Bonds or S&P-500 ?

Meanwhile…• Actuaries are practicing

a popular song of Simon & Garfunkel

• Or perhaps the songof the regulator?

S&P-500 US Bonds 10Y S&P-500 US Bonds 10Y1928-2015 11.4% 5.2% 19.8% 7.8%2013-2015 15.7% 1.0% 15.5% 9.9%

Yearly Return Yearly Risk (SD)Period


Actuarial leadership, Self-reflectionExample: Prudent Person Principle

September 27, 2016

How to apply the prudent Person Principle (PPP) for Dutch Pension Funds?Topic

Issue

Result

Action

DC Pension funds are forced by law to decrease investment risk for their members as the pension date approaches (mandatory life cycle ).

Framed question?

Lobby of individual actuaries and organizations.PPP should be an open norm.The risk attitude of the members should be leading.

Right Approach?

1. Pension funds may use another principle than life cycle if they can underpin that.

2. Dutch regulator DNB has the last word….



Actuarial leadership, Self-reflectionThe Long Term Investment Communication Dilemma

September 27, 2016

Confident,but not Informative

Informative,but not confident

Inv X 10

Inv X 41

Inv X 14

Inv X 0.7

Inv X 2.5

Inv X 10


Actuarial leadership, Self-reflectionThe Long Term Investment Communication Dilemma

September 27, 2016

Informative,No risk framingInv X 10

Inv X 11

Inv X 4

Inv X 2.5

Inv X 7

Alternatives?Skip estimates. Only communicate a range of constant fixed return outcomes

Any other alternatives?


Actuarial leadership, Self-reflectionConclusion

September 27, 2016

Where are the actuaries?


Actuarial leadership, Opportunities The need for Strategic actuarial help

September 27, 2016

Anybody that can

help with systemic

risk?

CEO CFO

Strategy Mountain

Meanwhile… in the actuarial rabbit hole

One second…, and I’ll be able to estimate the mortality rate 150 year ahead and in 15 decimal

places!

Sea of Risk


Actuarial leadership, OpportunitiesExample of where actuarial help is needed

September 27, 2016

• Actuarial key question: is modest speeding a positive or negative risk factor?• Developing mature risk models: actuarial help is needed

Wireless Insurance DongleCar Insurance: pay-how-you-drive

Safe Driving


Actuarial leadership, Opportunities Actuaries are the binding factor !?&%&@#

September 27, 2016

Big Data

Systemic risk

Regulatory Risk

Model Risk

Parameter risk

Economic Risk Models

Behavior Risk Models

Robo Advice

New Solidarity Crowd/Community- Funding- Longevity Solidarity- Disease Solidarity- InvestingMedical Care

- Efficiency- Waiting list

reduction- Disease

Management

Communication comprehensibility tests

Bitcoin

Gamification

Cooperation Risk


Actuarial leadership, OpportunitiesWhere do actuaries add value?

September 27, 2016

Questions

‐ How to enlarge the scope of institutions that can benefit from actuarial expertise?

‐ Time for a CLO?

‐ What do we need to qualify actuaries for C-level functions?

‐ How to overcome being identified as bringers of bad news?


Actuarial leadership, OpportunitiesPush or pull strategy?

September 27, 2016

• Personal growth: a combined Push-Pull strategy• C-Level ambitions are fine, but remember you have to be asked…• When you give advice, it’s hard to ask for help!• Who is your coach?

Actuarial space

Leadership space


Actuarial leadership, Connecting the dotsClassic lateral thinking for managers

September 27, 2016

The Nine Dot problemLink all 9 dots using four straight lines or fewer, without lifting the pen and without tracing the same line more than once.


Actuarial leadership, Connecting the dotsClassic lateral thinking for managers

September 27, 2016

The Nine Dot problemLink all 9 dots using four straight lines or fewer, without lifting the pen and without tracing the same line more than once.

QuestionWhat’s the probability an actuary can link all dots?

Answer: Bayesian approach, adding implicit conditionsP(linking all 9 D | L<=4 & Straight |Keep pen on paper | No double lines | Actuary) = 1

Solution: Think outside the box!


Actuarial leadership, Connecting the dotsConditional thinking for actuaries

September 27, 2016

Link all 9 dots using one straight line, without lifting the pen and without tracing the same line more than once.

Solutions1. Place the dots in a straight line and draw the line with your pen2. Use an extreme fat pen

LessonNew solutions (innovation!) appear by studying and varying the implicit conditions

Solution: Think outside the circle!

The Nine Dot problem


Actuarial leadership, Connecting the dotsBig Data, Incomplete Data Modelling

September 27, 2016

Big Data SetChaotic, NoisePattern search

N e w e c o n o m i c , b e h a v i o r a l & s c e n a r i o m o d e l s



September 27, 2016


Filter irrelevant dataTestingRelated data dots?Incomplete data?




September 27, 2016



Model assumptions Connect the dotsCheck relevance




September 27, 2016




Project, Estimate Add ScenariosAdd BehaviorRealistic Model?




September 27, 2016




Project, Estimate Add ScenariosAdd BehaviorRealistic Model?

ResultOptimal Model

F a c i a l ke y p o i n t s d e t e c ti o n


Example

http://www.actuaries.digital/2016/03/07/predicting-mortality-around-australia-actuaries-take-home-kaggle-cup/

http://www.actuaries.digital/2016/03/07/predicting-mortality-around-australia-actuaries-take-home-kaggle-cup/



September 27, 2016

There are two kinds of actuaries:those who can extrapolate from incomplete data


Actuarial leadership, Shift & FocusManaging risks before the decimal point

September 27, 2016

1,000,000,000.001Risk Management

Before theDecimal Point

After theDecimal Point

Systemic riskBehavioral modelsEconomic scenariosDecision model

Systematic riskConditional risk

Small, manageable riskIrrelevant risk


Actuarial leadership, Shift & FocusModels: Mathematical or Economic & Behavioral?

September 27, 2016

Adding Rabbits

Math teacher asks six year old Johnny:

"If you have 200 rabbits and you add another 100 rabbits, how many rabbits would you have?"

Johnny…: "I think the answer is 337 Sir".

Math teacher: "No, Johnny. That's the wrong answer. Try again.

Johnny takes another five seconds: "Still probably 337 Sir" "

"No Johnny, wrong again. You know nothing about mathematics!".

Immediately Johnny answers:

"And you know nothing about rabbits Sir"


Actuarial leadership, Shift & FocusClient or Self Centric Thinking & Communication

September 27, 2016

Client Centric Simple

Self Centric Complex

“If you can't explain it simply, you don't understand it well enough." - Albert Einstein

Heliocentrism Geocentrism


Actuarial leadership, Shift & FocusProduct development from a clients perspective

September 27, 2016

Expert viewClient view

Globalization, Expectations, Social dynamics, Learning, Apps, Games, Speed of change, etc.


Actuarial leadership, Shift & FocusProduct development from a client’s perspective

September 27, 2016

If I had asked people what they wanted, they would have said faster horses

You‘ve got to start with the customer experience and work backwards to the technology

Steve Jobs Henry Ford


Actuarial leadership, Shift & FocusChallenge for actuaries: Networking

September 27, 2016

Company Colleagues CEO/CFO Receptionist

YOUPolitics Government departments Project groups Face to face Cup of coffee

Actuarial Space Actuarial Association Permanent Education Research, Publications

Regulators Studies, Projects Research Cup of tea

Science Space Partnerships IT, Communication Accountants, econometrists Informal invitations

Social Sports or Chess team Volunteer work, Friends Have a drink

H o w m u c h ti m e d o y o u s p e n d o n n e t w o r k i n g ?


Actuarial work field, Holistic viewDiscounted space of probable outcomes

September 27, 2016


Actuarial work field, Holistic viewFocus from an actuarial leadership perspective

September 27, 2016

Keynes: ‘It is better to be roughly right than precisely wrong.’

Where to focus?1. Near future (t < 5, 10 years)2. Conditions (Bayesian), assumptions, scenarios (e)3. Strategy: = ’Recipes’ optimization strategy


Actuarial work field, Holistic viewRecipes instead of estimates.

September 27, 2016

Recipes approach examples

• Flexible strategies that manage risk

• Early warning indicators instead of trigger points

• Self adapting profit sharing contracts

• Solidarity algorithms based on groups, communities and big data, instead of guarantees

• Etc., Etc.

Longevity risk

Crowd Investing


Actuarial leadership, Future outlook Challenging beliefs and principles. Examples.

September 27, 2016

Technical• What’s the impact and meaning of negative interest rates• How risk free is the risk free rate?• How to deal with long-term uncertainty?

Model• What are the confidence level and (time)limitations of my models?• Bubbles and Debt in my models? • What is the relevance and value of a model

‐ that excludes parameter, model risk and scenarios?‐ that does not include economic and behavioral effects?‐ that is only a prediction on basis of historical data?

Advice & Decision Model• Predicting the future, or a long-term advice based on scenarios?• Do I clearly state and discuss the limitations of my advice?• Is my report/advice really ‘discussed’ or only ‘accepted’?• How does my advice fit in a board’s decision model?• Are all stakeholders interests and believes discussed in my advice? • Shouldn’t any advice have a section about the possible effects of premises?• What are my boards believes and how can I underpin or challenge them?• How near can we come to a ‘free of believe’ decision model?

How do Black Swans start?


Actuarial leadership, Future outlookBuilding a new generation of actuaries

September 27, 2016

1951

2016

EMAS1. State of the art!2. Ahead?


Actuarial leadership, Future outlookSummary of actuarial leadership focus points

September 27, 2016

2016

1. Take more responsibility: Socially, Personally‐ Widen the area of influence‐ Grow and spend more time on your personal and professional network ‐ Intensify cooperation with other disciplines

2. Strengthen ‘Soft Skills’‐ Communication skills, power to convince, master principles, self-reflection‐ Empathy power: understanding social dynamics, stakeholders & clients

3. InnovationBuild up new client-central products with new adequate regulation principles

4. Adjust professional methods and education‐ Develop new ‘board decision models’‐ From ‘Believes’ to ‘What If, Given Conditions x|y|x’‐ From ‘Long term uncertain estimates’ to ‘Short term recipes’‐ Including systemic, parameter and model risk‐ Anticipating on economic and behavioral effects and scenarios‐ Based on early warning indicators instead of trigger points


Actuarial leadership, Future outlookMotivational wrap up! Self-Leadership

September 27, 2016

1. Make your own leadership plan Without vision and strategy every action or plan is pointless

2. Start networking, learn, generate ideas, evaluate every action3. Find a boss, promotor and/or coach that makes you grow4. Work from a stakeholder & client perspective5. Key values: Responsibility, Respect & Ethics6. Cooperate and learn from other disciplines7. Manage the regulatory setting8. Break with things that stop you9. Define simple but disruptive goals

My next report/advice will look like…10. Use common sense, KISS, accept failure and success will follow


Actuarial leadership, Future outlook Shape your future!

September 27, 2016