Transactions of The Institute of Actuaries of Australia – 1987

632 Pages·2014·23.52 MB·English

THI INSTITUTI Of ACTUARIIS
Of
AUSTRALIA
Volume I
lRANSACllONS
1987
ISSN 1033-0763
© 1988 The Institute of Actuaries of Australia
Professor J.H. Pollard,
ssc,PhD,FIA,Fss.FASSA,FIAA
President of The Institute of Actuaries of Australia

CONTTh'TS
VOLUME I
Bulletin Index 2
Presidential Address - J.H. Pollard,
BSc,PhD,FIA,FIAA,FSS,FASSA 4
The Macquarie Programme, the Profession
and Graduate Employment: An Evaluation
after Twenty Years - D.M. Knox, BA,PhD,FIA,FIAA 72
Bonus Rates lmder Variable Interest
Conditions - S.G. Byrnes,BSc,PhD,FIA,FIAA 153
Super Surpluses - Cause for Concern -
D.J. Solomon, MA,FIA,FIAA & S.M. Bone
BCom ( Hons) , FIAA 217
Some Comments on a paper by R.P.Burrows
BSc,FIA,ASA,MAAA, & G.H. Whitehead,
BA,MBA,FIA,FIAA,ACAS entitled "The
Determination of Life Office Appraisal
Values" by G.L. Melville, BA,FIA,FIAA,ASA 296
Solvency Standards for Life Insurance
Companies - P.S. Carr, BSc,FFA,FIAA,
& P.L. Vinson, FIA,FIAA,ASA 368
A Ramble Through the Property Countryside
- M.D. Hession, BSc, AIA,AIAA,FSLE 432
Notes on the Search for Equity in
Life Insurance - G.C. Ward, MSc,FIA,FIAA 513
Mechanics and Uses of Swaps - I.R. Moore,
BA,FIA,FIAA 544
A Review of the Examination Structure &
Associate Class of Membership - Report
by the Education Policy Committee 580
CON" TENTS
VOLUME II
Use of Simulations in the Actuarial
Management of SLtperannuation Funds
- I. Laughlin, BSc,FIA,FIAA 630
Realistic Financial Reporting - S.P. Miles,
BA,FIA,FIAA & K. Gubbay, FSA,MAAA,FCIA 704
Adjusted Earnings Reporting or Aussie-GAAP -
A.M. Gardner, FFA,FIAA & M.M.S. Hughes,
FIA,FIAA 788
A Bridging Paper to "Objectives and Methods
of Funding Defined Benefit Pension Schemes"
- D.J.D. McLeish,FFA,ASA,FPMI &
C.M. Stewart, CB,FIA 835
Bulletin 1987
The Demand for Actuarial Trained Staff -
A Report from the Resources Planning
and Recruiting Counni ttee 866
The Management of Solvency - R.A. Buchanan
BSc,FIA,FlAA,ASA 882
Discussion Paper to Review the need for, and
Changes to, the I.A.A. "Group Temporary Ins~trance -
Mortality and Disability Kxperience" - G. Whit taker,
MA,FIA,FIAA 963
Report on Sex Discrimination and Insurance as
presented to the Human Rights Conunission -
C.M. Prime, BSc,FIA,FIAA,Dip.Law 978
CONTENTS
Mortality Investigation - Australian Insured
Lives -The Mortality Committee 1043
Report of the Morbidity Committee 1049
Aids & Life Insurance - L.R. Mann,BA,FIA,FIAA
P.R. Muir, FIA,FIAA & R.A. Collins,BA,FIA 1068
The Role of the Actuary and the Theory of
Contracting- M.Sherris, BA(Hons),MBA,FIA,FIAA 1117
Actuarial Advice to Accident Compensation
Schemes - J.R. Cumpston, M Eng Sci,M Admin,FIA,FIAA 1143
Benefit Illustrations for Individual Policies -
J.C. Poole, BSc,FIA,FIAA,ASA 1161
Portfolio Insurance - M.D. Barker,
MA,FIA,FIAA,ASA 1189
Letter to P. Keating on Vesting - dated 1 April 1987 1218
Letter to P. Keating on Superannuation Tax -
dated 21 December, 1987 1222
Australian Investment & Financial Statistics 1238
COURT DECISIONS 1256
ADMINISTRATI\~ APPEALS TRIBUNAL DECISIONS 1260
STATUTES 1264
AUSTRALIAN PUBLICATIONS 1266
4. PRESIDENTIAL ADDRESS
by
J.H. Pollard, BSc, PhD, FIA, FIAA, FSS, FASSA
I feel very honoured to have been elected President of our
Institute. I would like to think that my attainment of this
office reflects the contribution the Actuarial Studies programme
at Macquarie University has made to the profession in Australia.
I look forward to my term with enthusiasm, and because of the
responsibilities involved, with not a little trepidation.
1. INTRODUCTION
1.1 Most of my working life has been devoted to the Actuarial
Studies programme at Macquarie University. Indeed, within
a few days of this address, I shall have been a permanent
member of the Macquarie actuarial staff for 18 years, and
Professor for almost a decade. As other staff members
(past and present), will acknowledge, teaching in the
programme is both stimulating and rewarding. I am very
pleased to be able to claim that I have taught more than one
fifth of practising actuaries in Australia and an even
greater proportion of students.
1.2 My responsibilities at Macquarie, particularly as Professor,
have meant a considerable involvement in Institute Affairs
and close relationships with our parent bodies, the (London)
Institute and the Faculty. It is a rather horrifying
thought that by the time I complete my term as Past-President,
I shall have been a member of Council for 9 out of 10
consecutive years!
1.3 In his Presidential Address last year, Barry Amond looked
at developments within the profession during his working
Presidential Address 5.
life-time and projected these developments forward to the
year 2000. Alan Geddes and David Kimber in their Addresses
at the start of this decade looked at where the profession
was heading in the 1980's. At the time my election was
announced, a colleague from the city remarked: "There is no
prize for guessing the topic of your Presidential Address -
education". My immediate reaction was to plan a more
broadly-based address, looking at some of the more recent
developments and problems within our Institute. As it
turns out, many of these relate to education and associated
matters, so that my colleague's prediction has essentially
been fulfilled. Perhaps it was inevitable!
2. THE INSTITUTE
The office of the Institute
2.1 Over the seven years that I have served on Council, I have
observed a steady and substantial increase in the workload
expected of Council, the various committees and the
secretariat. Our membership has grown, but the demands
placed on members in a voluntary capacity and on the
Institute office have increased more than proportionately.
2.2 Last year saw the opening of the Institute office in Market
Street and all the changes that move implied and which are
still being felt. That year also brought the retirement of
Alan Wylie as Secretary/Treasurer, a position which he had
held since 1976, when a separate Institute office was first
established. References to Alan's contribution to our
Institute have already been made at the opening of the new
office and on other occasions. I would not like to let
this occasion pass, however, without mentioning one or two
of the apparently small, yet I believe important tasks Alan
undertook on his own initiative and beyond the call of duty,
and of which members at large may not be aware, like writing
letters of congratulation to school children who had won
mathematics competitions and telling them about the actuarial
profession, and sitting for hours at various careers markets
for the occasional enquiry.
2.3 Because of the continued growth in the Secretariat workload,
even prior to the establishment of the new office, computer
isation of a number of the routine office functions was
planned. As seems to be the rule rather than the exception,
the time taken to get the system up and running has been
rather longer than planned. Work on the membership record
system is now nearing completion, and the introduction of a
6. Presidential Address
suitable accounting system will follow.
2.4 The other notable event this year in the upgrading of the
Institute's office has been the appointment of a full-time
Executive Secretary. With an ever increasing workload, the
staff of the office must inevitably grow further.
Service to the Institute by members
2.5 In his Address last year, Barry Amond drew attention to the
fact that an incredible 100 members serve on the Institute's
committees, some on as many as four or five. On top of this,
there is the huge contribution by tutors (both for our own
examinations and for the first six London subjects) and
examiners, authors who draft Institute submissions to
government enquiries, authors and leaders for our courses on
professionalism, and so on.
2.6 There has always been great difficulty in attracting tutors
and examiners for our Institutional Investment subject.
Because of this, it has been suggested to me that we ought
to pay our tutors and examiners at normal commercial rates
and increase our examination fees and subscriptions
accordingly; the task of recruiting tutors and examiners
should then be less difficult. Is this the direction we
have to move?
Accredited members
2.7 When the Institute's Articles of Association were amended
late in 1985, a new class of "Accredited Member" was
introduced. The first Accredited Members were admitted
this year, and we now have 11 in this class.
2.8 The need for the new class arose, of course, from the
introduction of our own examinations in 1980. It was
recognised that some affirmative action would be required
(at least in the early years) to protect the integrity of
the Australian examinations, and the restriction of the
Fellowship of our Institute after 1983 to those who had
passed the local examinations was a move in this direction.
2.9 There were other longer-term substantial reasons for the
introduction of the new class, including the need to be
able to trace an actuary's qualification route, and the
fact that professional bodies overseas did not need, and
were unlikely, to grant their Fellowship to an actuary
qualifying through another body, in this case the Institute
of Actuaries of Australia. Early correspondence with the