Transactions of The Institute of Actuaries of Australia – 1989

622 Pages·2014·19.49 MB·English

THl INSTITUTl Of ACTUARilS
Of
AUSTRALIA
Volume I
TRANSACTIONS
1989
ISSN 1033-0763
© 1991 The Institute of Actuaries of Australia
THE INSTITUTE OF ACTUARIES OF AUSTRALIA
Suite 1, 8th Floor, 49 Market Street,
Sydney. N.S.W. 2000. (Tel: [phone])
FOUNDED 1897 INCORPORATED 1963
COUNCIL & OFFICERS
1988-89
President
JOHN RONALD HUNTER
FFA, FIAA, ASA (1985)
President-Elect Immediate Past President
JOHN FINDLAY MORTON ROSS, GEOFFREY BERNARD KURT TRAHAIR,
FFA, AIA (1987) FIA, ASA (1983)
Council
(1988) RODNEY JOHN ATFIELD, FIA
(1987) KENNETH ALFRED BOAG, FIA
(1986) PETER STRAFFORD CARR, BSc(Hons), FFA
(1987) RONALD WILLIAM CHAMPION, FFA
(1986) DENNIS SYDNEY POINTER DUNHAM, FIA
(1987) GEOFFREY ALAN DUNSFORD, FIA
(1988) COLIN ROYCE GRENFELL, FIA
(1986) DAVID GRANVILL HART, BSc, FIA
(1986) RODNEY ROSS LESTER, BSc, MBA, FIA
(1986) DAVID CHARLES ORFORD, BSc, MBA, FIA, ASA
(1988) IAN ALFRED POLLARD, BA, MA, FIA
(1988) CATHERINE MARY PRIME, BSc,FIA
(1987) DAVID JOHN SOLOMON, MA, FIA, ASA
,1988) PETER LAURENCE VINSON, FIA
Secretary & Treasurer
ALEXANDER CRAIG GINNANE, AAII, AFAIM, MACS
The year in brackets is the year of election to Council.
CONTENTS
VOLUME I
Bulletin Index
Presidential Address - J.R. Hunter, FFA,FIAA,ASA 5
Funding for Superannuation Plans under Volatile
Financial Conditions- S.M. Bone, BCom(Hons),FIAA 63
Realistic Reporting of Earnings of Life Insurance
Companies - Life Insurance Committee 137
Teaching, Learning & Examining in Superannuation -
S.C. Driver 168
Foreign Currency hedging of Australian Portfolios -
J.J.Beggs, BEc(Hons),MA,PhD, M.J. Brooks, BA,FIAA,
D.Q. Lee, BEc,MBA,M.Phil 243
Future Directions for Actuarial Education in Australia -
Education Policy Committee 303
Discussion Paper - AIDS Workshop 357
Wellth Insurance & the Health Actuary- B.W. Walker,
FIA,FIAA,FSS,ASA 382
Calculation of Superannuation Transfer Values -
D.A. Edwards, MA,FIA,FIAA 470
BULLETIN 1989 543
COURT DECISIONS 543
ADMINISTRATIVE APPEAL TRIBUNAL 546
STATUTES 546
AUSTRALIAN PUBLICATIONS 1989 547
Aids Report No. 4 548
1989 Examinations 586
CONTENTS
VOLUME II
1989 CONVENTION
The Future of the Actuary - G.L. Melville,
BA,FIA,FIAA,ASA 621
Life Insurance Act Review - A.M. Gardner, BSc,FFA,
FIAA,ASA, C.M. Prime, BSc,FIA,FIAA,ASA,
P.L. Vinson, FIA,FIAA,ASA 661
National Retirement Incomes Policy -
Superannuation Committee 725
Superannuation Scheme Design for the 90's? -
F. Baker, Bsc,FIA,FIAA 810
Report of the Disability Committee 844
Publishable Solvency Ratios - P.S. Carr,BSc,FFA,FIAA 891
Solvency Principles - P.S. Carr, BSc,FFA,FIAA,
A.M. Gardner, BSc,FFA,FIAA, C. McLeod, MSc,FSA,
L.J. McMullen, FIA,FIAA, C.M. Prime, BSc,FIA,FIAA,
P.R. Swinhoe, MA,FIA,FIAA 904
Solvency Requirements for Investment Account Business -
A.Brown, BA(Hons),MSc,DipEd,FIAA,AIA, F.M. Mcinerney,
BA(Hons),FIA, I.D. Moore, MSc,DipEd,FIAA, D.C. Orford,
BSc,MBA,FIAA,FIA,ASA, E.S.S. Rudge, MA,FIAA,FIA,ASA,
C.J. Stevenson, BSc,FIAA,FIA 917
Evaluation of Industry Superannuation in Australia -
A.J. Lally, FIA,FIAA, C.A. Newman, BA,FIA,FIAA,FAII,
M.J. Rice, FIAA,ASA 970
Application of Option Pricing Models to General
Insurance - G.C. Taylor, BA,PhD,FIA,FIMA,MACS,FIAA 1030
The Measurement of Investment Performance - D. Knox,
BA,PhD,FIA,FIAA, R. Prowse, BEc(Hons) 1060
Professional Negligence - D.G. Hart, C.M. Prime,
C. Ringstad 1089
Liability for Professional Negligence -
C.M. Prime, BSc,FIA,FIAA 1109
CONTENTS
Challenges for the Actuary in General Insurance in
Australia- D.J. Minty, MBA,FlAA,ASA 1131
An Experience Qualification - Necessary? - Effective?
-Education Policy Committee 1171
Mortality Investigation- Australian Insured Lives
1985-1987 1177
Application of Option Pricing Theory to Superannuation
Funds - M.D. Barker, MA,FIA,FlAA,ASA 1198
Investment Account Policies Option Pricing and
Solvency Reserves - M.J. Brooks, BA,FIAA, C.R. Condon,
BCom(Hons),AASA,AlAA, C.C. McLeod, MSc,FSA 1220
Options: Pricing and Applications - M. Sherris,
BA,MBA,FIA,FIAA,ASA 1261
PRESIDENTIAL ADDRESS
PRESIDENTIAL ADDRESS
by
J .R .HUNTER, FFA. FIAA. ASA.
1. INTRODUCTION
1.1 Each of the actuarial bodies with which I am familiar
has developed its own traditions surrounding the
delivery of the Presidential address.
l. 2 Our Presidential address used lo be delivered at the
end of the year of office of the President. While this
gave the Presidents a year in which to collect and
codify their thoughts, it meant that the year had gone
by before the members had an opportunity to listen to
their ideas and to debate them. This was only changed
a few years ago and the tradition established of the
delivery of the Presidential address at the outset of
the year.
1. 3 In Scotland the 3d dress is timed for the beginning of
the Presidential term of office, but the custom is for
the address to be delivered and for a vote of thanks to
be given by the retiring President. There is no
opportunity for the members to debate 1:he address and
thus it imposes the restriction on the presidents that,
as their words may not be challenged, they should not
be controversial. In England the Presidential address
to the Institute is deliversd later ln the President's
term but again the tradition is that the address is not
6 PRESIDENTIAL ADDRESS
debated. In America the Presidents of the Society
deliver their addresses much later in the year of
office but they are able to be more controversial
because their views are subject to the checks and
balances of debate at a sessional meeting.
1. 4 I am glad that we are not bound by the traditions of
the other bodies and I feel that we have "got it right"
by expecting the Presidents to give their addresses at
the outset of the year so that members can hear what
they are in for. At the same time the members have the
opportunity of indicating to the Presidents whether any
of their ideas are "avant garde" and not acceptable, or
to correct them if they have strayed from the straight
and narrow path acceptable to the majority.
1.5 Right at the start of this address let me say how proud
I am to have been elected President of the Institute.
There have been a number of distinguished Fellows of
the Faculty who have held this office before, either as
Scots who emigrated, or as Australians who qualified
here, but I think I am the first to have chosen the
"alternative route" via the Council and Chairmanship of
what has now matured into the New Zealand Society of
Actuaries.
1 . 5 When I emigrated to New Zealand in 1953, there were
only eight Fellows in the country and two of them, Bert
Cubie and Edwin Sumner, worked for insurance brokers.
Those of you with long memories will remember that the
life offices did not wish to deal with brokers and it
was the sworn objective of the life managers in New
Zealand to ensure that brokers did not gain a foothold
in the country. To that end, they did their best to
freeze out these two actuaries. However, no such black
balling took place in the profession and Edwin Sumner
played a distinguished part in establishing the Society
there. I mention this tonight solely to comment that
the brotherhood of the profession transcended the
business objectives of the major offices in New
Zealand.
PRESIDENTIAL ADDRESS
1. 7 My other recollection of that gathering was of drying
the dishes in the office cafeteria with Vic Thompson,
the Government Actuary. I could imagine no greater
contrast with an actuarial meeting in Edinburgh! The
demonstration of equality in the profession set the
scene for a recently qualified young actuary assuming
actuarial responsibility for a New Zealand life
company, and made the supervision of his life company
much easier for the Government Actuary.
1.8 I was made no less welcome by the profession here in
Australia when I migrated about six years ago. I am
very conscious that I am not steeped in the traditions
of federalism and therefore find it difficult to
appreciate the need for so many Houses of Parliament,
separate public ervices,s education systems, police
forces etc. What a relief it was to find that at least
the laws and regulations governing life insurance and
superannuation apply throughout the country, even
though certain aspects of actuarial work are covered by
different state laws, for example, workers
compensation, friendly societies and some investment
transactions such as the purchase of property.
1.9 Over the years I have been deeply grateful to a series
of employers for allowing me to practice my chosen
profession in the way which I saw proper. Thus, time
has been granted to me to tutor students, invigilate at
exams, serve on committees, attend International
Congresses, prepare papers, help on council and now my
present employer, the AustraLian Reinsurance Company,
has accepted the costs and inconveniences of having one
of their executives serve you as President.
1.10 My thanks also go to my wife Fay and my family for
accepting the strains and stresses that accompany
trying to balance the demands of God and church, family
and home, office work and professional duties.
For my part I shall try to continue the tradition of
service to the profession handed down by my
predecessors and I trust that I shall not be found
wanting.
8 PRESIDENTIAL ADDRESS
1.11 As I said at the outset, the Presidential Address gives
the incoming President the opportunity to ride a few
hobby horses and display his prejudices, and a chance
to set before members some thoughts on the development
of the profession.
I have chosen four topics this evening:
Ethics in a permissive society.
* Freedom with publicity.
A Corporate plan for the Institute.
* An International qualification.
1. 12 It is said that if you steal from one author, it's
plagiarism; if you steal from two or three authors,
it's literary discernment; and if you steal from many
it's masterful research. I shall leave the readers to
decide into which of the three categories my various
points fall.