A principal-components analysis of the South African yield curve suggests that two factors explain most of the variability in both yields and changes in yields. This result is used to select which two interest rates to model and, given a model for these rates, how to use them to reproduce the entire curve. The objective of this paper is a methodology for interpolating the South African yield curve given a restricted number of yields on that curve, while at the same time minimising the number of yields from which to estimate the remainder of the curve. The interpolated curve can then be used for the purposes of discounting nominal future cash flows. Given values for the selected yields, this methodology provides the best fit to the remainder of the curve in the sense that it minimises the expected root-mean-squared error of the residuals. The paper does not provide a model for the evolution of the yield curve. KEYWORDS Principal components; par yield curve; descriptive yield-curve models; interpolation; South Africa (South African Actuarial Journal: 2002 2: 129-146)
{"title":"Interpolating the South African Yield Curve using Principal-Components. Analysis: A Descriptive Approach","authors":"A. Maitland","doi":"10.4314/SAAJ.V2I1.24488","DOIUrl":"https://doi.org/10.4314/SAAJ.V2I1.24488","url":null,"abstract":"A principal-components analysis of the South African yield curve suggests that two factors explain most of the variability in both yields and changes in yields. This result is used to select which two interest rates to model and, given a model for these rates, how to use them to reproduce the entire curve. The objective of this paper is a methodology for interpolating the South African yield curve given a restricted number of yields on that curve, while at the same time minimising the number of yields from which to estimate the remainder of the curve. The interpolated curve can then be used for the purposes of discounting nominal future cash flows. Given values for the selected yields, this methodology provides the best fit to the remainder of the curve in the sense that it minimises the expected root-mean-squared error of the residuals. The paper does not provide a model for the evolution of the yield curve. KEYWORDS Principal components; par yield curve; descriptive yield-curve models; interpolation; South Africa (South African Actuarial Journal: 2002 2: 129-146)","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70614061","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents the author's view that the professional life assurance courses for subjects 302 and 402 fail to consider a number of important technical and ethical elements of management and economic theory. These include the marketing concept, the financial life cycle, macro-pricing and public relations, which are important in the management of a life office. They also fail to engage the debates that surround questions of profit, market prices and modelling, especially that between actuarial practice and financial economics. Their failure leads to some incoherence in the courses, and could mean that students are inadequately prepared for professional practice.KEYWORDS Education; life assurance; marketing; profit; modelling; financial economics (South African Actuarial Journal: 2002 2: 53-68)
{"title":"What actuaries might learn about life","authors":"A. Asher","doi":"10.4314/SAAJ.V2I1.24485","DOIUrl":"https://doi.org/10.4314/SAAJ.V2I1.24485","url":null,"abstract":"This paper presents the author's view that the professional life assurance courses for subjects 302 and 402 fail to consider a number of important technical and ethical elements of management and economic theory. These include the marketing concept, the financial life cycle, macro-pricing and public relations, which are important in the management of a life office. They also fail to engage the debates that surround questions of profit, market prices and modelling, especially that between actuarial practice and financial economics. Their failure leads to some incoherence in the courses, and could mean that students are inadequately prepared for professional practice.KEYWORDS Education; life assurance; marketing; profit; modelling; financial economics (South African Actuarial Journal: 2002 2: 53-68)","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613824","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Risk management is central to the running of a successful insurance operation. This means that insurers must be able to measure and monitor their risks using risk-management tools that will effectively help them manage and exploit these risks. This paper considers risk-reporting techniques in the life-insurance industry in South Africa, reporting on the results of a survey of current practice. Liability risk, asset risk, asset-liability risk, and operational risk are each viewed separately. The current state of reporting is considered and a view is taken as to the future outlook, identifying areas for potential improvements in risk reporting. Additionally, comparisons are made with current practices outside South Africa, particularly in North America. KEYWORDS Risk reporting; asset-liability management; South Africa. (South African Actuarial Journal: 2002 2: 1-28)
{"title":"Risk-position reporting in the South African life-insurance industry","authors":"A. Dardis","doi":"10.4314/SAAJ.V2I1.24483","DOIUrl":"https://doi.org/10.4314/SAAJ.V2I1.24483","url":null,"abstract":"Risk management is central to the running of a successful insurance operation. This means that insurers must be able to measure and monitor their risks using risk-management tools that will effectively help them manage and exploit these risks. This paper considers risk-reporting techniques in the life-insurance industry in South Africa, reporting on the results of a survey of current practice. Liability risk, asset risk, asset-liability risk, and operational risk are each viewed separately. The current state of reporting is considered and a view is taken as to the future outlook, identifying areas for potential improvements in risk reporting. Additionally, comparisons are made with current practices outside South Africa, particularly in North America. KEYWORDS Risk reporting; asset-liability management; South Africa. (South African Actuarial Journal: 2002 2: 1-28)","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper explores the ways in which burial societies mitigate the risks associated with funerals that would otherwise devolve on the members of those societies, and on their families. It considers members' perceptions of the risks faced by the burial societies themselves. It explores the ways in which burial societies develop community and establish trust. It investigates the procedures that have been developed by burial societies, on the basis of the trust so established, for the management of their risks. Finally, it considers problems relating to the insurance of mortality risks in the burial society movement. KEYWORDS Burial societies; mutual assistance schemes; funeral insurance; assistance business; social capital; risk management (South African Actuarial Journal: 2002 2: 83-127)
{"title":"The Management of Risk by Burial Societies in South Africa","authors":"R. Thomson, D. Posel","doi":"10.4314/SAAJ.V2I1.24487","DOIUrl":"https://doi.org/10.4314/SAAJ.V2I1.24487","url":null,"abstract":"This paper explores the ways in which burial societies mitigate the risks associated with funerals that would otherwise devolve on the members of those societies, and on their families. It considers members' perceptions of the risks faced by the burial societies themselves. It explores the ways in which burial societies develop community and establish trust. It investigates the procedures that have been developed by burial societies, on the basis of the trust so established, for the management of their risks. Finally, it considers problems relating to the insurance of mortality risks in the burial society movement. KEYWORDS Burial societies; mutual assistance schemes; funeral insurance; assistance business; social capital; risk management (South African Actuarial Journal: 2002 2: 83-127)","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613904","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper describes a new concept, of vital importance to actuaries, which the authors have named 'managing actuaries' professional risk'. Much has been written on the constituent elements of legal causation, risk management, indemnity insurance and professional conduct standards. This paper envisages an integration of these elements using the profession's own guidelines for risk analysis and management for projects (RAMP). Actuaries are experts in risk applications for clients-in an increasingly litigious society, they need to apply their expertise in their own back yard.KEYWORDS Professionalism; professional risk; risk management; professional indemnity insurance. (South African Actuarial Journal: 2002 2: 29-52)
{"title":"Managing actuaries' professional risk","authors":"M. Lowther, J. Mort","doi":"10.4314/SAAJ.V2I1.24484","DOIUrl":"https://doi.org/10.4314/SAAJ.V2I1.24484","url":null,"abstract":"This paper describes a new concept, of vital importance to actuaries, which the authors have named 'managing actuaries' professional risk'. Much has been written on the constituent elements of legal causation, risk management, indemnity insurance and professional conduct standards. This paper envisages an integration of these elements using the profession's own guidelines for risk analysis and management for projects (RAMP). Actuaries are experts in risk applications for clients-in an increasingly litigious society, they need to apply their expertise in their own back yard.KEYWORDS Professionalism; professional risk; risk management; professional indemnity insurance. (South African Actuarial Journal: 2002 2: 29-52)","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper considers the increased interest in and usage of complementary medicine. The movement is being led worldwide, not by healthcare professionals or the funders of healthcare, but by consumers. In South Africa, a pilot study was undertaken in 1999 to identify existing sources of data and collate information as an initial baseline of the practice of and interest in complementary medicine. The paper summarises the findings of that study. The legal framework for the practice of complementary medicine in South Africa is described, the range of therapies is given and the number of practitioners is estimated. First indications of the use by consumers and the coverage by medical schemes are reported. An introduction to the status of African traditional medicine is given. Resources for the actuary wishing to gain more understanding of this consumer-driven movement are suggested.
{"title":"The fall of the bamboo curtain : a review of complementary medicine in South Africa","authors":"Ks Caldis, H. McLeod, Preston Smith","doi":"10.4314/SAAJ.V1I1.24491","DOIUrl":"https://doi.org/10.4314/SAAJ.V1I1.24491","url":null,"abstract":"This paper considers the increased interest in and usage of complementary medicine. The movement is being led worldwide, not by healthcare professionals or the funders of healthcare, but by consumers. In South Africa, a pilot study was undertaken in 1999 to identify existing sources of data and collate information as an initial baseline of the practice of and interest in complementary medicine. The paper summarises the findings of that study. The legal framework for the practice of complementary medicine in South Africa is described, the range of therapies is given and the number of practitioners is estimated. First indications of the use by consumers and the coverage by medical schemes are reported. An introduction to the status of African traditional medicine is given. Resources for the actuary wishing to gain more understanding of this consumer-driven movement are suggested.","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2001-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613216","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The consequences of the HIV/AIDS epidemic in Africa are expected to be considerable. A great deal of what is presently known about the HIV/AIDS epidemic has originated from studies in Europe or the Americas, or from urban African contexts. In contrast, the majority of people in sub-Saharan Africa infected with the virus will live in rural communities. It is important that demographic information be obtained for this rural African environment. This contribution is aimed at investigation and verification of HIV-1 mortality patterns in a rural African context. The authors examine eight years of incident HIV mortality data arising from the Masaka district in Uganda. These data are bivariate and of a type termed doubly censored. The authors explore the non-parametric procedures required for estimation of self-consistent patterns using doubly censored data. Information on age and gender is also incorporated into the analyses. The results are parameterised using a range of survival probability models. The Gompertz probability model provides a reasonable emulation of eight years of empirical underlying hazard, over all age classes, and can be considered as a reasonable first approximation to the HIV/AIDS mortality model for the phenomenon and context of this study. The results also indicate that expected time to death at seroconversion is appreciably affected by age at seroconversion. Extrapolation of these mortality patterns into the future will, however, necessarily remain unsubstantiated until further data become available and the ability to generalise these findings to other contexts remains a subject worthy of further study.
{"title":"PARAMETERISATION OF EXPECTED RESIDUAL LIFETIME AFTER SEROCONVERSION IN A UGANDAN SAMPLE POPULATION","authors":"Daniel Polakow, T. Dunne, J. Whitworth","doi":"10.4314/SAAJ.V1I1.24490","DOIUrl":"https://doi.org/10.4314/SAAJ.V1I1.24490","url":null,"abstract":"The consequences of the HIV/AIDS epidemic in Africa are expected to be considerable. A great deal of what is presently known about the HIV/AIDS epidemic has originated from studies in Europe or the Americas, or from urban African contexts. In contrast, the majority of people in sub-Saharan Africa infected with the virus will live in rural communities. It is important that demographic information be obtained for this rural African environment. This contribution is aimed at investigation and verification of HIV-1 mortality patterns in a rural African context. The authors examine eight years of incident HIV mortality data arising from the Masaka district in Uganda. These data are bivariate and of a type termed doubly censored. The authors explore the non-parametric procedures required for estimation of self-consistent patterns using doubly censored data. Information on age and gender is also incorporated into the analyses. The results are parameterised using a range of survival probability models. The Gompertz probability model provides a reasonable emulation of eight years of empirical underlying hazard, over all age classes, and can be considered as a reasonable first approximation to the HIV/AIDS mortality model for the phenomenon and context of this study. The results also indicate that expected time to death at seroconversion is appreciably affected by age at seroconversion. Extrapolation of these mortality patterns into the future will, however, necessarily remain unsubstantiated until further data become available and the ability to generalise these findings to other contexts remains a subject worthy of further study.","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2001-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613204","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents an empirical approach to immunizing South African nominal liabilities in the presence of non-parallel yield-curve shifts. The results are compared with immunization strategies based on Fisher-Weil duration and illustrate the value in immunizing against non-parallel shifts. KEYWORDS: Immunization; South Africa; principal components; nominal liabilities; arbitrage South African Actuarial Journal: 2001 1: 119-138
{"title":"An Empirical Approach to Immunization in South Africa","authors":"A. Maitland","doi":"10.4314/SAAJ.V1I1.24493","DOIUrl":"https://doi.org/10.4314/SAAJ.V1I1.24493","url":null,"abstract":"This paper presents an empirical approach to immunizing South African nominal liabilities in the presence of non-parallel yield-curve shifts. The results are compared with immunization strategies based on Fisher-Weil duration and illustrate the value in immunizing against non-parallel shifts. KEYWORDS: Immunization; South Africa; principal components; nominal liabilities; arbitrage South African Actuarial Journal: 2001 1: 119-138","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2001-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613259","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper attempts to clarify the different paradigms from which defined benefit funds are viewed, and the financial nature of the contracts implicit in their rules. Suggestions are made as to the principles that trustees might follow in applying the surpluses for the benefit of stakeholders. KEYWORDS: Pension funds; surpluses; defined benefit; fiduciary duties South African Actuarial Journal: 2001 1: 1-34
{"title":"The appropriate disposal of retirement fund surpluses","authors":"A. Asher","doi":"10.4314/SAAJ.V1I1.24489","DOIUrl":"https://doi.org/10.4314/SAAJ.V1I1.24489","url":null,"abstract":"This paper attempts to clarify the different paradigms from which defined benefit funds are viewed, and the financial nature of the contracts implicit in their rules. Suggestions are made as to the principles that trustees might follow in applying the surpluses for the benefit of stakeholders. KEYWORDS: Pension funds; surpluses; defined benefit; fiduciary duties South African Actuarial Journal: 2001 1: 1-34","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2001-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613195","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An investigation by the regulatory authorities into the use of reinsurance by medical schemes indicated clear problems with reinsurance agreements and cases where the contracts were resulting in substantial losses for members of schemes. It was shown that a number of cases reinsurance had become a conduit for systematically removing surplus from medical schemes. Thus undermining the security of members of those schemes. This paper summarises the key features of the investigation into the use of reinsurance by medical schemes over the period 1996 to 1999. The paper then outlines the actions taken by the regulatory authorities. The specific areas of abuse are described and the conduct of trustees, brokers, administrators and insurance companies is discussed. This leads to the question of the professional responsibilities of actuaries in the design and implementation of these arrangements. KEYWORDS: Medical schemes; reinsurance; regulation; professionalism, trustee responsibility South African Actuarial Journal: 2001 1: 95-118
{"title":"The use and abuse of reinsurance in medical schemes","authors":"H. Mcleod, P. Slattery, A. V. D. Heever","doi":"10.4314/SAAJ.V1I1.24492","DOIUrl":"https://doi.org/10.4314/SAAJ.V1I1.24492","url":null,"abstract":"An investigation by the regulatory authorities into the use of reinsurance by medical schemes indicated clear problems with reinsurance agreements and cases where the contracts were resulting in substantial losses for members of schemes. It was shown that a number of cases reinsurance had become a conduit for systematically removing surplus from medical schemes. Thus undermining the security of members of those schemes. This paper summarises the key features of the investigation into the use of reinsurance by medical schemes over the period 1996 to 1999. The paper then outlines the actions taken by the regulatory authorities. The specific areas of abuse are described and the conduct of trustees, brokers, administrators and insurance companies is discussed. This leads to the question of the professional responsibilities of actuaries in the design and implementation of these arrangements. KEYWORDS: Medical schemes; reinsurance; regulation; professionalism, trustee responsibility South African Actuarial Journal: 2001 1: 95-118","PeriodicalId":40732,"journal":{"name":"South African Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":0.2,"publicationDate":"2001-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70613248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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