Actuarieel Podium

Actuarieel Podium
September 27, 2016

@ Jos Berkemeijer
Are you part of the future or the past?

September 27, 2016
Actuarieel Podium ----
Presentation Jos Berkemeijer
--- Leadershp & Actuaries
Classic view on Leadership

Interactive Olympic Warming Up! Give it a try
Vision, Goal
Focus
Strategy
Sail the wind
Keep your head

above water
Structure
Responsibility
Firmly in the saddle
September 27, 2016
Timely Execution
Help, Control
Agenda
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
September 27, 2016
Actuarial leadership
Key statement 1: Estimates
Jane,
Born in 2016
Pension year: 2091
1. I think its ethically and professionally responsible,

to estimate Janes average investment return and mortality rate
with a 95% confidence level for the next 70 years or more
ONLY IF
September 27, 2016
P(X | X1,X2,X3,..)
Key statement 2: Life expectancy
DW2
(2016) The Food and Drug Administration has approved human testing for what
could be the worlds first anti-aging drug: metformin
2. Within the next 30 years new anti aging medicines

will improve life expectancy with more than 10 years
September 27, 2016
Key statement 3: Manage your own life ending?
3. By 2050 most elderly will be able to manage their own
lifes exit strategy (pro)actively
To provide a decent
pension for my children,
Ive asked my hospice to
keep me alive forever, as
my pension is $ 300 per
day and my nursing
costs are only $ 150
September 27, 2016
Key statement 4: Robo actuaries
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
Actuaries
20Y-Likelihood of automation: 15%.
The future is for
1. Data scientists
2. Machine learning
(predictive models)
Robo Actuary (2030)
September 27, 2016
Personal leadership experiences

Get out of the box!
When I applied for. I was asked: Arent you more
Concern Actuary
Insurance director
Pension fund director
Supervisory Board member
Fintech Managing Partner
a department manager?
an actuary?
an insurance director?
a director?
a board member than a scrum team member?
Be(come) Who You Are

Never put people into boxes!
September 27, 2016

Who am I?
Actuarial
Family
Husband
Interests
Father
Caregiver
Professional
Actuary
Board Member
Supervisory Board Member
Strategic Advisor
Software Developer
Lector
Friends
Networks
Student
Professionals, Volunteers
Social
September 27, 2016
Hobbies

Who are YOU?
Actuarial
Family
Interests
Professional
YOU
Social
September 27, 2016
Hobbies
10

Stephen Covey: Green & Clean
1. Set Target
2. Define responsibility
3. Offer help
4. Accept failure
5. Success
September 27, 2016
11
The many faces of leadership

Leading by example | Leadership types
Obama
Mother Teresa
Einstein
Is there one type of leadership that fits the actuarial profession best?
September 27, 2016
12

Einstein as an actuary role model?
S=W+P+M
Success = Work + Play + Keeping your mouth shut
Einsteins leadership Principles

1. 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.
September 27, 2016
13

Misunderstanding: Leadership
is not about YOU,

but about OTHERS & YOU
is NOT about
Management
Best expertise
Authority or power
Titles
Having followers
September 27, 2016
is about social & personal change,

ethics, attitude & principles,
commitment, communication
14

What is Constructive Leadership?
JB View
1. Empathy
Your consciousness and competence to recognize and identify social and peoples needs
2. Confidence
Your conviction that by engaging your partners and network, these needs can be fulfilled
3. Social Capabilities
Your power to connect and line up your and others strengths and deal with weaknesses
4. Professional Capabilities
Your skill to translate expertise of combined disciplines into breakthrough new solutions
5. Attitude
Your strength to evaluate, learn from others and revise your thinking and approach
6. Stewardship
Your Helpfulness, Unselfishness, Perseverance & Flexibility , Helicopter & Birds Eye View
7. Mastership
Your power to convince, master principles, accept failure and anticipate the unforeseen
September 27, 2016
15
Actuarial leadership, Self-reflection

Example: Valuing US Pension Liabilities I
Topic
Valuing US public pension plan liabilities (2016)

Current standard actuarial practice: 7.5% discount rate
Issue
Whats the right discount rate?
Framed question?
Action
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
Result
2. Risk free rate impact:

US$ 8.4 trillion underfunding
3. AAA/SOA
- Disband task force
- Suppress publication of the paper.
September 27, 2016
Leadership?
Ethics?
Decision Quality?
16

Example: Projection rate variable annuities
Topic
How to calculate Dutch variable annuities ?
Issue
Whats the right interest projection rate?
Action
1. Advice from Task Force New Pension System

- Dutch Social and Economic Council (SER)
Right Approach?
- Dutch Royal Actuarial Association
- Dutch Bureau for Economic Policy Analysis (CPB)
2. Advice from Dutch regulator (DNB)
Framed question?
1. Advice Task Force: macro-stable discount rate

2. Advice DNB: risk free rate
Result
September 27, 2016
Leadership?
Ethics?
Decision Quality?
3. Dutch Government & Parliament

without further discussion decide:
Projection rate = risk free rate
17

Example: Customer Risk Information Regulation
Past performance
is not a guide to
future performance
A fund's past performance

does not necessarily predict
future results
US SEC
Dutch Authority for the Financial Markets (AFM)
2002 Past performance is not a guarantee of future results

2006 Risk Meter
Key investor information provides
insight into the nature and risks
of the mutual fund offered
September 27, 2016
18

Example: Customer Risk Information Regulation
Yearly Return
Yearly Risk (SD)
Period
S&P-500 US Bonds 10Y S&P-500 US Bonds 10Y
1928-2015
11.4%
5.2%
19.8%
7.8%
2013-2015
15.7%
1.0%
15.5%
9.9%
What is more risky Bonds or S&P-500 ?

Meanwhile
Actuaries are practicing
a popular song
of Simon & Garfunkel
Or perhaps the song
of the regulator?
September 27, 2016
19

Example: Prudent Person Principle
Topic
Issue
Action
Result
How to apply the prudent Person Principle (PPP) for Dutch Pension Funds?
DC Pension funds are forced by law to decrease
investment risk for their members as the pension
date approaches (mandatory life cycle ).
Lobby of individual actuaries and organizations.

Right Approach?
PPP should be an open norm.
The risk attitude of the members should be leading.
1. Pension funds may use another principle than

life cycle if they can underpin that.
2. Dutch regulator DNB has the last word.
September 27, 2016
Framed question?
Leadership?
Ethics?
Decision Quality?
20

The Long Term Investment Communication Dilemma
Confident,
but not Informative
Inv X 41
Inv X 10
Inv X 2.5
Informative,
but not confident
Inv X 14
Inv X 10
Inv X 0.7
September 27, 2016
21

The Long Term Investment Communication Dilemma
Alternatives?
Skip estimates. Only communicate a range of constant fixed return outcomes
Informative,
No risk framing
Inv X 10
Inv X 2.5
Inv X 11
Inv X 7
Inv X 4
Any other alternatives?

September 27, 2016
22

Conclusion
Where are
the actuaries?
September 27, 2016
23
Actuarial leadership, Opportunities

The need for Strategic actuarial help
CEO
Sea of Risk
Anybody
that can
help with
systemic
risk?
CFO
Strategy Mountain
Meanwhile in the actuarial rabbit hole

One second, and Ill be able
to estimate the mortality rate
150 year ahead and in 15
decimal places!
September 27, 2016
24

Example of where actuarial help is needed
Wireless Insurance Dongle

Car Insurance: pay-how-you-drive
Safe Driving
Actuarial key question: is modest speeding a positive or negative risk factor?

Developing mature risk models: actuarial help is needed
September 27, 2016
25

Actuaries are the binding factor !?&%&@#
New Solidarity
Big Data
Crowd/Community
- Funding
- Longevity Solidarity
- Disease Solidarity
- Investing
Robo Advice
Gamification
Medical Care
- Efficiency
- Waiting list
reduction
- Disease
Management
Communication
comprehensibility
tests
Bitcoin
Systemic risk
Model Risk
Behavior Risk Models
Parameter risk
Regulatory Risk
September 27, 2016
Cooperation Risk
Economic Risk Models
26

Where do actuaries add value?
Questions
September 27, 2016
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?
27

Push or pull strategy?
Leadership space
Actuarial space
Personal growth: a combined Push-Pull strategy

C-Level ambitions are fine, but remember you have to be asked
When you give advice, its hard to ask for help!
Who is your coach?
September 27, 2016
28
Actuarial leadership, Connecting the dots

Classic lateral thinking for managers
The Nine Dot problem
Link all 9 dots using four straight lines
or fewer, without lifting the pen and
without tracing the same line more
than once.
Solution: Think outside the box!
Question
Whats the probability an actuary can link all dots?
Answer: Bayesian approach, adding implicit conditions
P(linking all 9 D | L<=4 & Straight |Keep pen on paper | No double lines | Actuary) = 1
September 27, 2016
29

Conditional thinking for actuaries
The Nine Dot problem
Link all 9 dots using one straight line,
without lifting the pen and without
tracing the same line more than once.
Solution: Think outside the circle!
Solutions
1. Place the dots in a straight line and draw the line with your pen
2. Use an extreme fat pen
Lesson
New solutions (innovation!) appear by studying and varying the implicit conditions
September 27, 2016
30

Big Data, Incomplete Data Modelling
Big Data Set

Chaotic, Noise
Pattern search
Filter irrelevant data Model assumptions

Testing
Connect the dots
Related data dots? Check relevance
Incomplete data?
Project, Estimate
Add Scenarios
Add Behavior
Realistic Model?
Example
Result
Optimal Model
N e w e c o n o m i c , behavioral & s c e n a r i o m o d e l s
Fa ci a l key p o i nt s d ete ct i o n
September 27, 2016
31

Big Data, Incomplete Data Modelling
There are two kinds of actuaries:

those who can extrapolate from incomplete data
September 27, 2016
32
Actuarial leadership, Shift & Focus

Managing risks before the decimal point
Risk Management
1,000,000,000.001
Before the
Decimal Point
Systemic risk
Behavioral models
Economic scenarios
Decision model
September 27, 2016
After the
Decimal Point
Systematic risk
Conditional risk
Small, manageable risk

Irrelevant risk
33

Models: Mathematical or Economic & Behavioral?
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"
September 27, 2016
34

Client or Self Centric Thinking & Communication
Heliocentrism
Geocentrism
Client Centric
Simple
Self Centric
Complex
If you can't explain it simply, you don't understand it well enough." - Albert Einstein
September 27, 2016
35

Product development from a clients perspective
Client view
Expert view
Globalization, Expectations, Social dynamics, Learning, Apps, Games, Speed of change, etc.
September 27, 2016
36

Product development from a clients perspective
Youve got to start with the
customer experience and work
backwards to the technology
Steve Jobs
September 27, 2016
If I had asked people what

they wanted, they would
have said faster horses
Henry Ford
37

Challenge for actuaries: Networking
Actuarial Space
Company
Actuarial Association
Permanent Education
Research, Publications
Colleagues
CEO/CFO
Receptionist
Science Space
Politics
Government departments
Project groups
Face to face
Cup of coffee
YOU
Partnerships
IT, Communication
Accountants, econometrists
Informal invitations
Regulators
Social
Studies, Projects
Research
Cup of tea
Sports or Chess team

Volunteer work, Friends
Have a drink
How much time do you spend on networking?

September 27, 2016
38
Actuarial work field, Holistic view

Discounted space of probable outcomes
((E(x,t|e1,e2,..)),t,it)
x,t
Discounting
Integrating
Expected
Outcome
Risk
Time t
Events
Scenarios
Conditions
Discount rate
Event x
Big Data
September 27, 2016
39

Focus from an actuarial leadership perspective
((E(x,t|e)),t,it)
x,t
Where to focus?
1. Near future (t < 5, 10 years)
2. Conditions (Bayesian), assumptions, scenarios (e)
3. Strategy: = Recipes optimization strategy
Keynes: It is better to be roughly right than precisely wrong.
September 27, 2016
40

Recipes instead of estimates.
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.
September 27, 2016
41
Actuarial leadership, Future outlook

Challenging beliefs and principles. Examples.
Technical
Whats 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
How do Black Swans start?
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 boards decision model?
Are all stakeholders interests and believes discussed in my advice?
Shouldnt 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?
September 27, 2016
42

Building a new generation of actuaries
EMAS
1. State of the art!
2. Ahead?
2016
1951
September 27, 2016
43

Summary of actuarial leadership focus points
1. Take more responsibility: Socially, Personally
Widen the area of influence
Grow and spend more time on personal and professional network
Intensify cooperation with other disciplines
2. Strengthen Soft Skills
Communication skills, power to convince, master principles, self-reflection
2016
Empathy power: understanding social dynamics, stakeholders & clients
3. Innovation
Build 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
September 27, 2016
44

Motivational wrap up! Self-Leadership
1. Make your own leadership plan
Without vision and strategy every action or plan is pointless
2. Start networking, learn, generate ideas, evaluate every action
3. Find a boss, promotor and/or coach that makes you grow

4. Work from a stakeholder & client perspective
5. Key values: Responsibility, Respect & Ethics
6. Cooperate and learn from other disciplines

7. Manage the regulatory setting
8. Break with things that stop you
9. Define simple but disruptive goals
My next report/advice will look like
10. Use common sense, KISS, accept failure and success will follow
September 27, 2016
45

Shape your future!
September 27, 2016
46

Actuarieel Podium - Leadership and Actuaries - Presentation Jos Berkemeijer

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September 27, 2016

Are you part of the future or the past?