With the approach of Solvency II in the European Union, the Lloyd’s market is making greater use of actuarial skills, according to the Lloyd’s Market Association, which represents Lloyd’s managing agents.
During the past three years, the LMA said in its 2010 market survey, Lloyd’s managing agents have increased the size of their actuarial operations by 49%.
The survey, which was based on replies from 50 of the 53 managing agents at Lloyd’s, said 382 people are performing actuarial duties within the respondent group.
This is up from 256 in 2007, said the LMA, which predicted the total would rise by another 10% by the end of 2011.
“The requirements of Solvency II [are] one of the main drivers behind the increase,” the LMA said in a statement. “The demand for better management information coupled with greater demands by regulators also drove the demand for actuarial talent.”
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Apparently yielding to the global demand for a change in the basis for calculating Companies’ Income Tax for insurance firms, the International Accounting Standards Board (IASB) has included liquidity premium in new proposals for insurance company accounting standards.
The proposal is expected to engender a shift from the more market consistent exit value-based approach whereby values of asset and liability reflect the cash required to liquidate them in line with the last draft in 2007.
The proposal was originally intended to be applied in Solvency II only to annuity contracts that cannot be lapsed or transferred and are therefore considered illiquid but it will now apply in different degrees to all insurance liabilities over one year in length.
The controversial premium would be added to the discount rate for liabilities, thereby decreasing their value notwithstanding the fact that its inclusion in the Solvency II directive caused uproar and accusations of protectionism because annuities providers in the United Kingdom will benefit most from it.
Continue reading ‘Insurance Accounting Proposal Includes Liquidity Premium’