"Santander UK Plc has been fined £12,377,800 by the Financial Conduct Authority (FCA) after the regulator uncovered serious failings in the way it offered financial advice from its bank." Published:- 26/03/2014
Source: fca.org.uk
Thursday, 7 January 2016
[Misconduct] AXA Fined For Advice Failings In Investment Sales
"The Financial Conduct Authority (FCA) has fined AXA Wealth Services Ltd (AXA) £1,802,200 for failing to ensure it gave suitable investment advice to its customers." Published:- 13/09/2013
Source: fca.org.uk
Source: fca.org.uk
Guide to Commercial Insurance Pricing - Part 3 - Adding Value & Modelling
EFFECTS OF RELYING ON NON-ANALYTICAL AND HISTORICAL DATA ON RISK SELECTION AND PRICING OF COMMERCIAL INS.
2. Insurers tend to focus selecting policies with lower risk exposure regardless of the market price which may be unprofitable in the long run.
3. Insurers may focus on writing high hazard risks for the high premium charged. Due to the typical low frequency and high severity claims for a typical Corporate portfolio, the high hazard risks can make super profits for a number of years but are susceptible to large losses which can result in a significant loss larger than all of the achieved profits over the period.
1. The pricing and profitability of the overall segment has historically been very cyclical, starting from super-profits by early players followed by entry capital into the market driving the price down to unprofitable levels.
2. Insurers tend to focus selecting policies with lower risk exposure regardless of the market price which may be unprofitable in the long run.
3. Insurers may focus on writing high hazard risks for the high premium charged. Due to the typical low frequency and high severity claims for a typical Corporate portfolio, the high hazard risks can make super profits for a number of years but are susceptible to large losses which can result in a significant loss larger than all of the achieved profits over the period.
Guide to Commercial Insurance Pricing - Part 2 - Corporate Portfolio & Pricing Methods
CORPORATE SEGMENT
1. Key differences with SME segments are as follow:
2. Higher level of case underwriting with more exclusions or higher deductibles due to different insurance risk.
3. Poor quality of data due to business complexity and uniqueness.
4. With more capital and able to retain more insurance risk, majority of claim costs are from infrequent large claims.
5. Higher gross written premium & level of reinsurance.
1. Key differences with SME segments are as follow:
2. Higher level of case underwriting with more exclusions or higher deductibles due to different insurance risk.
3. Poor quality of data due to business complexity and uniqueness.
4. With more capital and able to retain more insurance risk, majority of claim costs are from infrequent large claims.
5. Higher gross written premium & level of reinsurance.
Monday, 21 December 2015
[Misconduct] Fined and Banned For Delaying The Allocation Of Trades
"Between January 2010 and October 2012, Mr Miah exploited weaknesses in the trading systems and controls at Aviva Investors in order to delay the booking and allocation of trades."
Published : 17/11/2015
Source: fca.org.uk
Published : 17/11/2015
Source: fca.org.uk
Guide to Commercial Insurance Pricing - Part 1 - SME Portfolio
OVERVIEW OF COMMERCIAL INSURANCE
1. This post aims to provide an overview of the main features of Commercial insurance and the roles of portfolio managers and case underwriters in the pricing process.
2. Issues covered would also include the key differences between the Corporate and Small Medium Enterprise segments of Commercial Insurance and the drivers behind the market prices.
1. This post aims to provide an overview of the main features of Commercial insurance and the roles of portfolio managers and case underwriters in the pricing process.
2. Issues covered would also include the key differences between the Corporate and Small Medium Enterprise segments of Commercial Insurance and the drivers behind the market prices.
Actuarial Valuation for Pension Plans - Part 2 - Cost Methods
1. There are two widely used actuarial cost methods to calculate the Actuarial Accrued Liability (AAL) and Normal Cost (NC).
2.Pre-funded Defined Benefit Plans require a periodic Actuarial Valuation to determine the recommended contribution amount.
3. Actuaries apply a discount rate to future benefit payments in order to calculate a present value or value in today’s dollars.
Note: The higher the discount rate, the lower the present value, and vice versa.
COST METHODS - ENTRY AGE NORMAL (EAN) & PROJECTED UNIT CREDIT (PUC)
1. The AAL is based on projected pay and current service.
2. EAN method defines the normal cost as a level percent of pay from entry age until retirement (Puts more of the liability into the AAL and less into PVFNC)
3. PUC methods dicates the normal cost for each member increases as a percent of pay as the member. (puts less of the liability into the AAL and more into the PVFNC than EAN)
Actuarial Valuation for Pension Plans - Part 1 - Amortization Methods
TYPES OF PENSION PLANS
1. Defined Benefit Plan - Pension plan where a monthly benefit, payable at a certain retirement age, is defined in the plan.
2. Defined Contribution Plan - Pension plan in which specified contributions are made to each participant’s account. The contributions and interest earned on the investments serve as the total retirement amount for the retiree.
3. The equation of pension plan financing is Contributions(C) + Income (I) = Benefits (B) + Expenses (E)
Wednesday, 18 November 2015
China's Fund Managers Shift to Bonds
CHINA'S BOND MARKET
1.Chinese government has succeeded in getting funding to higher risk sectors by relaxing bond approvals.
2. Regulators began allowing unlisted companies to issue bonds on public exchanges.
3. Chinese bonds' higher yields are appealing given the lack of options in Europe or other developed bond markets.
4. Over 40% of the bonds outstanding mature in less than three years. This is in contrast to elsewhere in the world.
1.Chinese government has succeeded in getting funding to higher risk sectors by relaxing bond approvals.
2. Regulators began allowing unlisted companies to issue bonds on public exchanges.
3. Chinese bonds' higher yields are appealing given the lack of options in Europe or other developed bond markets.
4. Over 40% of the bonds outstanding mature in less than three years. This is in contrast to elsewhere in the world.
Life Insurance Policy Admin Moving Forward
INSURANCE VALUE CHAIN
1. Insurance operations can be broadly divided into three core elements.
2. They are Front office, Policy Administration & Underwriting, and Claims Processing & Payout
KEY IDEAS
1. Ideas towards driving changes in policy administration and underwriting function are:
2. Switching of business process outsourcing (BPO) for closed-book operations.
3. Enhanced use of business intelligence (BI) and analytics for underwriting.
4. Increasing adoption of self-service for policy servicing.
1. Insurance operations can be broadly divided into three core elements.
2. They are Front office, Policy Administration & Underwriting, and Claims Processing & Payout
KEY IDEAS
1. Ideas towards driving changes in policy administration and underwriting function are:
2. Switching of business process outsourcing (BPO) for closed-book operations.
3. Enhanced use of business intelligence (BI) and analytics for underwriting.
4. Increasing adoption of self-service for policy servicing.
Understanding Longevity Risks
1. Countries with pensions freedoms that enables pensioners to spend their retirement savings as they wish is a ticking time bomb.
2. Longevity risk is not “well understood” and it has “significant implications” for retirement income.
3. Pensioners living above their life expectancy will cause a strain in the retirement system resulting in a "time-bomb"
4. The UK’s IFoA, the American Academy of Actuaries and the Actuaries Institute Australia joined forces to compare retirement income systems in their three countries and highlighted five principles.
2. Longevity risk is not “well understood” and it has “significant implications” for retirement income.
3. Pensioners living above their life expectancy will cause a strain in the retirement system resulting in a "time-bomb"
4. The UK’s IFoA, the American Academy of Actuaries and the Actuaries Institute Australia joined forces to compare retirement income systems in their three countries and highlighted five principles.
[Misconduct] Financial Reinsurance Product Fraud
REINSURANCE FRADULANT ACCOUNTING PRACTICES
1. in 2010,Gen Re agreed to pay $US31.7 million ($35m) to settle charges brought by the US Securities and Exchange Commission for its role in fraudulent accounting practices in 2000 and 2001 at insurers American International Group and Prudential Financial.
1. in 2010,Gen Re agreed to pay $US31.7 million ($35m) to settle charges brought by the US Securities and Exchange Commission for its role in fraudulent accounting practices in 2000 and 2001 at insurers American International Group and Prudential Financial.
Sunday, 18 October 2015
[Misconduct] Miselling & Incentives - Good Intentions With Poor Executions
FINED FOR POOR MANAGING OF INCENTIVES
1. Management often have schemes to help boost sales such as recruiting third party as agents/advisors or providing commissions and bonus to staffs.
"The Financial Conduct Authority (FCA) has fined Lloyds TSB Bank plc and Bank of Scotland plc, both part of Lloyds Banking Group (LBG), £28,038,800 for serious failings in their controls over sales incentive schemes. The failings affected branches of Lloyds TSB, Bank of Scotland and Halifax (which is part of Bank of Scotland)."
Source: www.fac.org.uk
2. The news was announced in December 2013 and below are key points pertaining to the SOP and management of incentives and advisors.
1. Management often have schemes to help boost sales such as recruiting third party as agents/advisors or providing commissions and bonus to staffs.
"The Financial Conduct Authority (FCA) has fined Lloyds TSB Bank plc and Bank of Scotland plc, both part of Lloyds Banking Group (LBG), £28,038,800 for serious failings in their controls over sales incentive schemes. The failings affected branches of Lloyds TSB, Bank of Scotland and Halifax (which is part of Bank of Scotland)."
Source: www.fac.org.uk
2. The news was announced in December 2013 and below are key points pertaining to the SOP and management of incentives and advisors.
[Framework] Tail Risks AKA Blackswans
COVERAGE
1. "An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict."
Source: www.investopedia.com
2. Market tails are fatter or more frequent than people realise with extreme events not as rare as people thought.
Source: www.investopedia.com
2. Market tails are fatter or more frequent than people realise with extreme events not as rare as people thought.
3. These events are usually not predicted by computer models or traditional risks assessment exercises (falling near the low likelihood & high impact area).
4. Traditional risks assessment's low likelihood scenarios does not account for blackswans as they are still Unknowns.
Tuesday, 6 October 2015
Insurance & Banking Innovation
INNOVATION CYCLE
1. Innovation is crucial as it evolves the industry with domino's effects onto other industries as processes becomes easier or faster.
2. The innovation cycle starts by problem identification, generating ideas to solve the problems and to execute the idea. Below are some of my comments on the innovation cycle.
3 Identify Problem - Is enough market Research being done? Are there distribution channel gaps? Market segment Gaps?
4. Ideas - Are there enough ideas to solve the Problem?
5. Execution - How fast is the execution to achieve first mover's Advantage?!
6. Below are some current trends that may or may not disrupt the industry follow by examples of innovative products found globally.
1. Innovation is crucial as it evolves the industry with domino's effects onto other industries as processes becomes easier or faster.
2. The innovation cycle starts by problem identification, generating ideas to solve the problems and to execute the idea. Below are some of my comments on the innovation cycle.
3 Identify Problem - Is enough market Research being done? Are there distribution channel gaps? Market segment Gaps?
4. Ideas - Are there enough ideas to solve the Problem?
5. Execution - How fast is the execution to achieve first mover's Advantage?!
6. Below are some current trends that may or may not disrupt the industry follow by examples of innovative products found globally.
[Framework] How COSO Perceives Risks
MISCONCEPTIONS
This post discusses the misconceptions on COSO's key concepts and how modern and traditional risks managers perceive and interpret risks.
The Committee of Sponsoring Organizations of the Treadway Commission(COSO) has established a common internal control model against which companies and organizations may assess their control systems. COSO focuses on critical aspects of organizational governance, business ethics, internal control, enterprise risk management, fraud, and financial reporting.
This post discusses the misconceptions on COSO's key concepts and how modern and traditional risks managers perceive and interpret risks.
The Committee of Sponsoring Organizations of the Treadway Commission(COSO) has established a common internal control model against which companies and organizations may assess their control systems. COSO focuses on critical aspects of organizational governance, business ethics, internal control, enterprise risk management, fraud, and financial reporting.
Wednesday, 30 September 2015
[Framework] Monitoring Emerging Risks with Swiss Re - Part 8 - Claims and Insurance Operations
This post covers risks from legal action precedents, personal damage compensation, big data, regulatory fragmentation concerns, and contingent reputation risks.
Tuesday, 22 September 2015
[Framework] Monitoring Emerging Risks with Swiss Re - Part 7 - Financial Markets
This post covers risks from inflation and bond yields, sovereign debts, underfunded infrastructure.
Tuesday, 8 September 2015
[Framework] Monitoring Emerging Risks with Swiss Re - Part 6 - Life Insurance
This post covers risks from lifestyle changes, new infectious diseases, drug resistance and future medicine.
Tuesday, 1 September 2015
[Framework] Monitoring Emerging Risks with Swiss Re - Part 5 - Casulty Insurance 2
This post continues from previous post and covers risks from toxic substances, mobility, DIY Trends, and robotics.
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