Product Spotlight - Graphene Application and Potential

1. Sir Andre Geim and Sir Konstantin Novoselov, isolated and characterised graphene in 2004 with remarkable properties – strong, light, almost transparent, and an excellent conductor of heat and electricity.

2. Sheets of graphene held together by van der Waals bonding make graphite. Graphene sheets are composed of carbon atoms linked in hexagonal shapes with each carbon atom covalently bonded to three other carbon atoms. Each sheet of graphene is only one atom thick, and each graphene sheet is considered a single molecule.

3.  Graphene Market has been gaining remarkable traction, owing to the extensive use of graphene for power storage and composites with a graphene market revenue at USD 20 million in 2016.

4. R&D on this revolutionary material continues with more than $2.4 billion in funding committed globally.

Generalized Linear Model - Part 3 - Overcoming Rigid Pricing Structure and Alternative Use

1. the most important elements of the price,is the expected claims cost and the demand for the product.

2. There are other considerations, such as a more in-depth treatment of variable expenses, investment income, cash flows, claims development, return on capital and fixed expenses.

3. How we can build these different rating components into a pricing system.

4. Most statistical analyses are compromised in order to fit into a rigid table design from which the premiums are calculate. The situation is further exaberated when profit margins especially when loads and discounts given for a variety of reasons.

Generalized Linear Model - Part 2 - GLM Functions for Pricing Structures

DEVELOPING OPTIMAL PRICING STRUCTURES
1. There are four basic components of estimating the premium to be charged; firstly the risk premium, secondly the direct policy related expenses, thirdly a contribution to fixed overhead expenses and finally a profit margin.

2. The industry partices with profit load and risk premium relativities for different customers being combined in some way. Consequently, in a competitive market, marketing discounts and/or rating action in response to competition become indistinguishable from rating action taken in response to changing claims experience.

3. if it were possible to anticipate an individual customer's response to the new business or renewal terms offered, then a probabilistic approach could be adopted in setting both the contribution to overheads and the profit margin in order to maximise expected profit.

4. The model needs to be flexible enough to take into account the individual characteristics of each policyholder and be able to respond to the dynamics of the market place. Under certain market conditions or market segments it is quite plausible that the profit loads can be negative.

Generalized Linear Model - Part 1 - Multiple Regression Approach

1. A dynamic pricing system can be built for personal lines business, whereby profit loads and risk premiums can be tailored to the individual behavioural characteristics of the customer. 

2. The objective is to use as much information as input to these models in order to establish which risk factors are the most predictive.

[Framework] Key lessons from national industry 4.0 policy initiatives in Europe

1. Exploring the essential components of the national flagship I4.0 policies of Spain, UK, France, Italy, Germany, the Czech Republic, Sweden and the Netherlands.

3. Although  united in their goals, the I4.0 policies differ in their policy design, funding approaches and implementation strategies.

China's Overall Global Impact and Brief on the Chemical Industry's Impact

1. China is the world’s second-largest economy. From 2000 to 2015, China has grown from 3.6% of global GDP to 14.9%, while the United States has shrunk from 30.9% to 24.4%.

2. China plays a prominent role in the global economy on multiple fronts, including trade, foreign direct investment, and even outward direct investment. 

China's Next Move and Four Potential Scenarios

1. China now appears to be changing from an adapter to a driver of globalisation. In effect, the next China is upping the ante on its connection to an increasingly integrated world—and creating a new set of risks and opportunities along the way.

2. China is transforming and rebalancing to move away from an export-based economy to a more consumption-based one. This transition is not without challenges, and policy actions could determine whether a downward trend in China's economic growth since the global financial crisis leads to a hard landing, Japan-style stagnation

3. China Dream is taking shape as a concrete plan of action, centered on China’s One Belt, One Road (OBOR) plan supported by a new set of China-centric financial institutions—the Asian Infrastructure Investment Bank (AIIB), the New (BRICS) Development Bank, and the Silk Road Fund.

3. Do the figures reflect economic restructuring? Services now count for more than half of the economy, high-tech manufacturing is expanding rapidly, and the issuance of new credit is slowing. But despite these efforts, productivity is still flagging.

[Misconduct] Game Changing FCA Fines Senior Officer for Pension Transfer Failings

1. FCA launched a investigation in FGS McClure Watters (FGS) and Lanyon Astor Buller Ltd (LAB) and subsequently fined Watters  £75,000 for failing to exercise due skill, care and diligence in his role as compliance oversight officer

2. the investigation found that Watters failed to take reasonable steps to ensure that the process in place at FGS and LAB, for giving advice on ETV pension transfer exercises, was adequate and met regulatory standards. 

Provision of Risk Margin for Adverse Deviation (PRAD) Models - Characteristics, Pros and Cons

1. Many countries in the region are using the RBC (Risk Based Capital) approach to determine the capital requirements.

2. The PRAD shall be determined such that the overall valuation of guaranteed liabilities secures 75% sufficiency.

3. Why do we need risk margins? As we progress, we are facing an Increased uncertainty in the current estimate of liabilities and its trends. 

4. Different countires have different names for risk margins.

Capital Adequacy Ratio for Banks and Insurers

1. The capital adequacy ratio promotes stability and efficiency of worldwide financial systems and banks. The capital to risk-weighted assets ratio for a bank is usually expressed as a percentage. The current minimum of the total capital to risk-weighted assets, under Basel III, is 10.5%.

WTO's Report on Non-Tariff Measures and ASEAN Tackling Trade Barriers

1. Non-tariff measures that can potentially affect trade in goods present the multilateral trading system with a basic policy challenge – how to ensure that these measures meet legitimate policy goals without unduly restricting or distorting trade. The same challenge applies to measures that can affect trade in services.

2. The motivations for using non-tariff measures and services measures have evolved, complicating the policy panorama, but not changing the core challenge of how to manage the tension between public policy goals and trading opportunities.

3.  While intra-Asean trade has been soaring around 25 per cent, it is far below what the European Union has achieved, which is at 63 per cent of the total trade in 2015, whereas the North American Free Trade Agreement (Nafta) registered almost 50 per cent of the intra-group trade of its total exports in the same year

Valuation in Derivatives Markets and adopting Multiple Discount Curves

1. Derivatives are Financial transaction whose value depends on the underlying value of the reference asset concerned.

2. A contract that specifies the rights and obligations between two parties to receive or deliver future cash flows (or exchange of other securities or assets) based on some future event.

3. Historically, all derivative valuation was performed assuming a single standard discount curve (LIBOR). This methodology was based on the belief all market participants had equal credit risk. However during the crisis, the assumption that each institution had equal credit risk was clearly invalidated.

Applying Smart Beta in Alternative Markets

1. If you construct a value fund with small stocks that kicks out initial public offerings, bankruptcies and small companies that aren’t profitable, the screening of those duds is smart beta.

2. The typical S&P 500 index fund owns all 500 stocks in the index but doesn’t invest an equal amount in each. Traditional index fund weights are determined by market capitalization. However Smart-beta indexes tilt toward value stocks that perform well over time.

3. Smart-beta ETFs are rules-based. The rules are established in advance. Using the PowerShares S&P 500 ETF (SPLV) as an example, the fund takes the 100 least volatile stocks in the broader S&P 500 index, and then every three months it rebalances by selling what no longer fits its rules-based criteria and buys what does fit. 

Automotive Hubs in ASEAN

 As the automotive industry grapples with the fundamental changes in their business models. One thing remains constant: they will need to build the vehicles. They will need to build lots of them. They will need razor-sharp supply chains, economies of scale and supportive state structures. All of this indicates a strong likelihood that automotive ‘hubs’ will continue to play a major role in ASEAN's vehicle production.

Testing and Monitoring Risk Margin

1. A stochastic risk margin will be based on a stochastic model capable of predicting the probability distribution of the total outstanding claims, as the 75th percentile must be estimated.

2. The amount of comfort this gives us about the risk margin will depend on how much of the outstanding claims relates to payments to be made in the next transaction period and how confident we are about the payment pattern. 

3. Some of the more common stochastic models used for assessing risk margins are:

(i) Chain ladder bootstrap

(ii) Other non-parametric bootstraps based on different models

(iii) Mack’s model

(iv) Generalised linear models

(V) Adaptive generalised linear models

Practical Considerations for IBNR Issues

1. Excess or shock claims, especially their timing, number and amount, are  examples of real world disruptions to a health actuary’s IBNR calculations. There are other outside Influences on Health Claim Reserves and Patterns

2. Shock claims have a material impact on completion factors produced by development IBNR calculation methods. Often the adjudication time for these excess claims is longer; thus, when they are paid, they can lower all paid lag month’s completion factors, raising the overall claim reserve produced. 

3. By incorporating the excess claim’s impact (e.g., lower completion factors), one is essentially providing an ongoing reserve for a similarly expected excess claim. Alternatively, in the rare case that the large excess claim is paid much faster than other claims, the resulting completion factors will be increased, thus lowering reserves, a likely unwanted result.

Comparing IBNR Methods

There are five basic types of approaches to calculate claim reserves. These types are:
(i) Tabular methods

(ii) Case reserve methods

(iii) Projection methods

(iv) Loss ratio methods

(v) Development methods 

Risk Margin Types, Applications, Pricing and Application in Accounting

1. The term risk margin is commonly used in the observation that stating the loss reserve at nominal (rather than discounted) values provides an implicit risk margin. It is clear that the amount of the risk margin in this circumstance is the difference between undiscounted and discounted reserves.

Plastic Packaging Economics and Supply Chain

1. In 2013, the industry put 78 million tonnes of plastic packaging on the market, with a total value of $260 billion.Plastic packaging volumes are expected to continue their strong growth, doubling within 15 years and more than quadrupling by 2050, to 318 million tonnes annually – more than the entire plastics industry today.  2. As packaging materials, plastics are especially inexpensive, lightweight and high performing. Plastic packaging can also benefit the environment: its low weight reduces fuel consumption in transportation, and its barrier properties keep food fresh longer, reducing food waste.  The main plastic resin types and their packaging applications are as follows:

Solar PV Inverters Efficiency Analysis and Industry Forecasts

1. The job of an inverter is to invert – it takes DC (Direct Current) and converts it into AC (Alternating Current) so that it can  run on electrical equipment designed to run on AC.

UPR and Estimation of URR

1. Unearned Premium Reserve (UPR) is that portion of premium which is not earned by the insurer. The insurer has to maintain a premium reserve for this unearned period to meet their ongoing obligation to the policy holder. It is normal for insurer to use the 1/24th method for Non-Marine classes and for Marine, it is a norm to provide on basis of 25% of total net (of reinsurance) premium as unearned as at the end of each financial year. 

2.  Unexpired risk reserve (URR) works somewhat similarly like UPR. However for URR an actuary will be called to assess the development of losses with reference to time factor. The insurer needs to maintain an extra level of reserve (usually in the form of PROVISION FOR PREMIUM DEFICIENCY) if the appointed actuary deemed that the specified ‘unearned premium reserve’ level is not sufficient to meet its ongoing or future obligations.

Reinsurance Basics - Part 3 - Quota Share and Unearned Revenue

1. As a financing mechanism, a quota share treaty is very important to provide surplus relief

2. The more surplus (assets minus liabilities) a company has to “back up” its premium writings, the more financially stable that company will be.

3.Regulators focus on insurer solvency and apply what is known as “statutory accounting principles” which are very conservative. 

Reinsurance Basics - Part 2 - Pro Rata Quota/Surplus Share and XOL Treaties

1. As described earlier, pro rata, also called “proportional,” is a form of reinsurance in which the reinsurer shares a proportional part of the original losses and premiums of the ceding company. Pro rata forms are often used in property insurance, since this form provides catastrophic protection in addition to individual risk capacity

2. There are two distinct types of pro rata reinsurance - quota share and surplus share.

Reinsurance Basics - Part 1 - Fac/Treaty and Pro Rata/XOL

The purpose of reinsurance is to spread risk. This post provides a simple overview for those new to the industry.

Extending Falling Mortality Rates

1. It is a natural law that the historic longevity trend will continue into the future. 

2. Every stochastic mortality forecast model extrapolates the observed evolution of falling mortality rates.

3. What does it take to continue this trend? 

Understanding and Managing Anti Selection

One of the greatest threats facing life insurers is anti-selection (also called adverse selection or negative selection). Anti-selection occurs when an underwriting information deficit allows a higher-risk group (such as smokers) to purchase life or health insurance at the same price a lower-risk group (non-smokers)

Surety Insurance - Pricing, Reserving and Frameworks

1. Surety is a promise by a surety (the obligor or insurer) to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract.

2. They’re mistaken for insurance because they often involve payment when things don’t go as planned.

Automating the Supply Chain with Robotics

1. Process robotics works by automating the entire supply chain from end to end—not just individual tasks—enabling all different sections to be managed in tandem. 

2. The adoption of software robotics allows professionals to focus less time on day-to-day processes and, instead, provides more time to drive value for the entire business.

Strategic/Smart Beta in Investing

1. beta is a measure of a security's or portfolio's volatility in comparison to the stock market as a whole.

2. "beta" is also used as shorthand to describe getting broad stock-market exposure, typically through investments that often track the S&P 500 and other major indexes.

3. Smart beta strategies occupy a middle ground between passive and active investment approaches. Smart beta funds are similar to passive index funds in their use of a systematic, rules-based framework to create portfolios. Smart beta strategies deviate from traditional index funds by emphasizing factors that may enhance returns relative to capitalization-weighted indexes.

Passive Investing for Asset Management

1. A passive fund is composed to track its benchmark (for example a large-cap fund might be benchmarked against the S&P 500 index) without making any deviations or analytical bets. 

2. mutual fund industry seems to have realized that they face an existential threat not just to their growth but to their very existence, and many of them are responding by cutting fees and offering passive investment choices.

Active Fund Managers In a Negative market

1. Index funds will tend to underperform active managers in strongly positive and strongly negative markets.

2. The argument is based on the premise that active managers can position their portfolios to benefit from the prevailing conditions.

[Misconduct] FCA Probes Risk of Fund Manager Failures

1. In April The Financial Conduct Authority investigated how the financial system would cope in the event of a fund manager failure. 

2. The regulator is concerned that a 'disorderly failure' of investment managers and/or their portfolios could disrupt the financial system.

3. The regulator examined the design of investment products, probing investment managers' oversight of investors' portfolio oversight and questioning some of the motives behind the launch of new funds.

Correlations and Diversification Benefit

1. When a company writes risks across a number of classes, it seems reasonable to anticipate that the values assessed to give a 75% likelihood of sufficiency for each class

2. The reduction from this sum to arrive at the amount assessed to have a 75% chance of covering the company’s total Insurance Liabilities is called the diversification benefit.

3.  Correlation, between how the amount ultimately paid compares to the central estimate for different classes can arise in two categories (Direct and Indirect correlation)

Selecting Tail Factors for Actuarial Valuation

1. The selection of the loss development tail factor is extremely important because it affects estimates for all accident years.

2. A minor adjustment to the tail factor can have a significant impact on the unpaid claim liability.

3. We will demonstrate the selection of tail factors that consider three key variables: retention, location, and industry.

4. We will use examples of triangles at several different retentions for countrywide losses and state-specific losses.

Understanding Trade Credit Insurance

1. In April 2017, The Actuary reported trade credit insurers paid £210m to businesses last year due to non-payment claims, the equivalent of over £4m a week.

Malaysia's 2017 FDI Outlook

1. Malaysia's economy is performing well in the region in terms of efficiency and business regulations despite modest GDP growth of 4.1 percent in 2016 (below the ASEAN average of 4.5 percent).

2. Malaysia is a net recipient of FDI, which accounts for the majority of inflows into the economy. Inward FDI is projected to have grown by 40 percent year-on-year in 2016 to reach MYR 50 billion, with the 2015 total (MYR 36 billion) having been surpassed by the end of September. Manufacturing accounted for the majority (51.2 percent) of investment, followed closely by services (47 percent). Primary industries received the final 1.8 percent.

Hedge Funds - Part 2 - Process and Policies Due Diligence

1. Hedge funds trade securities in volumes that are a multiple of their traditional asset management counterparts. In addition, hedge funds have less regulatory oversight than traditional asset managers.

2. A sound operational due diligence (“ODD”) process can serve as an effective mechanism to mitigate the risk of investing in hedge fund frauds. 

3. Here are some detailed insights and recommendations pertaining to Due Diligence practices on hedge fund managers focusing on their policies and process.

Hedge Funds - Part 1 - Basic Risks and Due Diligence

1. Hedge funds are unregulated investment pools. They generally are more nimble and dynamic in their trading strategies than other investment funds.

2. Hedge funds are successful only if they make money in both up and down markets. To do this, they employ some creative and risky investment strategies—selling short, using leverage, trading put and call options, trading futures and investing in emerging markets. 

3. Here is some information about hedge funds and their risks CPAs can use to evaluate the suitability of this investment for their clients.

Solar Energy Global Demand and Value in the Supply Chain

1.  Malaysia is ranked number three in the world in the solar manufacturing industry with China at number one and Taiwan in second place.

2. In 2015, 48 solar projects had been implemented with total investments of RM28 billion to produce solar wafers, cells, modules and system components subsequently in 2016 Mida attracted seven solar manufacturing projects and 83 renewable energy projects in the solar industry worth RM1.77 billion and RM650 million.

Asset Liability Mismatch and Management

ASSET LIABILITY MISMATCH IN BANKS SYSTEM

1. Mismatch occurs when the tenure of maturing loans do not match the tenure of the sources of funds on the liabilities side. The liabilities side of the balance sheet of a bank includes sources of funds and for a bank one of the main sources of funds are the deposits.

2. From 2010 onwards with the economy recovered, disbursements of infrastructure loans were sanctioned by banks to projects such as power and roads had duration between 10 and 15 years. However, deposit tenures were getting shorter and this huge disparity in tenures between assets and liabilities created the instability in banks’ balance sheets.

3. Countries pegging interest on deposits to market-determined rates has resulted in a fall in the rates and deposits are now of shorter tenure. With the de-regulation of interest rates, most depositors are not looking beyond one or two years. 

4. Constant monitoring and periodic evaluation of its investment portfolio is important for a bank as many of its short-term liabilities are met through this resource.

World Manufacturing Risk Index and Pioneer Index Report

1. A Manufacturing Risk Index assesses the, economic, technological and environmental risks in site selection for new manufacturing facilities.

2. A report by Cushman & Wakefield (C&W), ontains an Established Index, which ranks the 30  largest countries by manufacturing output, and a Pioneering Index, which measures the attractiveness of growing but less mature markets.

3. The highest rankings are described as “the scenario of a highly automated manufacturer” and the factors and weightage are as follow:

(i) Conditions - including labor force, logistics, and business environment are weighted at 40 percent.

(ii) Risks - including natural disasters,  economics and energy, are weighted at 20 percent.

(iii) Costs - including labor, construction and  electricity, are also weighted at 20 percent.

4. The rankings also factor in alternative  scenarios, such as manufacturers driven by low  operating costs, which weighs conditions and risks at 20 percent and costs at 60 percent.

[Framework] IFRS 17 Insurance Contracts - Part 3 - PAA on liability for remaining coverage

1. The Premium Allocation Approach (PAA) is a simplification of the Building Block Approach (BBA) to measuring insurance contract assets and liabilities. The IASB developed the PAA as an approximation during the coverage period for a short duration contract.

2. It is an optional measurement approach for contracts of short duration under IFRS 17, prior to and during the exposure period of the contracts. 

3. This post focus on the liability before the occurrence of an insured event (liability for remaining coverage). There is no contractual service margin under the liability for incurred claims as by definition the contractual service margin is amortized over the coverage period of the contract.

4. The liability for incurred claims is measured using risk-adjusted expected present value of fulfilment cash flows.

[Framework] IFRS 17 Insurance Contracts - Part 2 - Remeasuring, Presentation and Impact

1. Remeasuring after subsequent period.

2. Presentation in Financial Statement

3. Impact on Insurers (Life and General)

[Framework] IFRS 17 Insurance Contracts - Part 1 - Summary and Features

1. IFRS 17: Insurance Contracts will take effect on 1 January 2021.  

2. The new standard will replace interim standard IFRS 4: Phase I for entities to continue with their current diverse practices of reporting insurance contracts. 

[Misconduct] Deutsche Bank Fined £163 Million and $7.2 Billion for 2 Serious Failings

1. Deutsche Bank reaches a $7.2 billion settlement over US mortgage-backed securities

2. Deutsche Bank Fined £163 million by FCA for Anti-Money Laundering Failings.

ASEAN Manufacturing - Part 3 - Malaysia's Potential Industry

1. Although the weak ringgit has made Malaysia an inexpensive market for foreign investors, the country remained a resilient economy despite having been affected by global financial volatilities. Oil and gas, biotechnology and electrical and electronics are among the sectors on a list of National Key Economic Areas.

2. The government has singled out chemicals, E&E and machinery and equipment under the 11MP to drive the manufacturing sector’s transition to high-value, high-technology production. Along with these industries, other industries such medical devices and aerospace have been identified as segments with potential for substantial levels of growth. 11MP targets the manufacturing sector to grow at 5.1% per annum and contribute 22.5% to GDP, as well as 18.2% of total employment by 2020.

ASEAN Manufacturing - Part 2 - Key Sectors Review and Changing Trends

1. Businesses must understand the changing landscape and how it could affect their decisions on the location of manufacturing plants and could use a new methodology for making better decisions about plant location in the region.

2. ASEAN countries account for about 5 percent (McKinsey Global Institute) of global manufacturing (in value added terms) with dominant shares in sub-sectors such as chemicals, food and beverage, metals, and motor vehicles with new trends shaping these sectors.

ASEAN Manufacturing - Part 1 - Overview & US Manufacturing Outlook

1. A brief overview of recent developments that have influenced investors to build and expand operations in the region as foreign investors are diverting their attention towards ASEAN.

2. And also an overview on the growth forecast  in the U.S. economy as well as its manufacturing sector and subsectors.