A few people have mentioned that they found my “live blogging” or tweeting of the 2013 LAC Seminar in Cape Town and Joburg useful. I used the hastag #LACseminar2013. I’m repeating all of them here in case they’re useful in a slightly more long-lived medium of my blog. I didn’t cover all the sessions – below is all there is and yes, in reverse order for bizarre reasons I’m not going to go into now.
@23floor: Also, envisaged that product specifications, including commission, must be filed with regulator #LACseminar2013 #microinsurance
@23floor: And yes, a range of market conduct, board composition requirements are envisaged for micro insurance #LACseminar2013 #microinsurance
@23floor: Raw (cleaned and anonymize) data *might* be released publically. I would definitely support this. Data should be open #LACseminar2013
@23floor: PA90 understates mortality on average, but more under for males and only a little over for females #LACseminar2013 Continue reading →
I can only begin to imagine the data horrors of dealing with multiple insurers, multiple sources, multiple different data problems. The analysis they do is critically useful and, in technical terms, helluva interesting. I enjoyed the presentation at both the Cape Town and Johannesburg #LACseminar2013 just because there is such a rich data set and the analysis is fascinating.
I do hope they agree to my suggestion to put the entire, cleaned, anonymised data set available on the web. Different parties will want to analyse the data in different ways; there is simply no way the CSI Committee can perform every analysis and every piece of investigation that everyone might want. Making the data publicly available gives actuaries, students, academics and more the ability to perform their own analysis. And at basically no cost.
The other, slightly more defensive reason, is that mistakes do happen from time to time. I’m very aware of the topical R-R paper that was based on flawed analysis of underlying data. Mistakes happen all the time, and allowing anyone who wants to have access to the data to repeat or disprove calculations and analysis only makes the results more robust.
So, here’s hoping for open access mortality investigation data for all! And here’s thanking the CSI committee (past and current) for everything they have already done.
Income inequality is a bad thing. It’s a suboptimal scenario. This isn’t something that is debatable. It follows from a few fairly fundamental principles:
Wealth demonstrates diminishing marginal returns. This is evidenced through risk aversity and other empirical studies
Happiness does generally increase with wealth, but at a decreasing rate.
There’s plenty of evidence that living in an area where others have more money than you makes you unhappy, even if you’d be happy with the exact same amount of money in a neighbourhood where you earned more than average.
In other words, taking money away from the wealthy to give to the poor makes the wealthy less unhappy than it makes the poor happy. More equal incomes will improve over happiness. Although I suspect the action of “taking away from the wealthy” has a certain inherent bias to unhappiness itself.
URL shorteners are handy when space is limited, but each one adds another fatal point of failure. To make the point, if I want you to read about New Business Margin on Revenue. And by the way you should because it’s an important newish concept, the link will work provided your internet connection is working, the relevant DNS is working and my server is running.
Let’s look at an extreme alternative:
First shorten link at http://goo.gl/ gets to http://goo.gl/TpJHG
Then take http://goo.gl/TpJHG and shorten at https://bitly.com to get http://bit.ly/17zpwir
Then http://tr.im/ gets http://tr.im/42hfd
Then TinyURL gets http://tinyurl.com/bnqfylu
Interestingly, is.gd didn’t want to shorten the link. TinyURL has a longish URK, but does have the awesome ability to provide your own shortened URL like http://tinyurl.com/NBMR-shorten
I’m not provide embedded links for all of those because it’s a bit silly. But you can see when you click on the last link as it backtracks through each of the shorteners before arriving at the destination. Each step is the chance for catastrophic failure.
So please don’t use link shorteners in ordinary web content. It’s not necessary and makes the internet increasingly fragile.
KPMG has been awarded the FSB SAM Economic Impact Assessment project. This is a perfect opportunity to combine our insurance, actuarial, capital market and economics skills to deliver on a critical project for the insurance industry and FSB.
We still need to fine-tune scope with the FSB and the Economic Impact Task Team, but we’ll be covering some of these issues:
Expected impact on capital requirements, capital ratios and free capital for insurerrs
Resultant scenarios around capital raising, consolidation and what this means for new entrants
The once-off and BAU expenses of SAM compliance, what this does to returns to policyholders and shareholders.
Impact on capital markets (especially equity investments, government bonds, swaps, corporate paper, sources of capital issued by insurers) and interaction with banks in this space.
Impacts on reinsurers, then extending to interactions with other service providers and competing industries
Likely responses and actions by insures in response to this changed environment
Potential broader economic impacts on employment and economic activity arising from these changes to an important part of the financial services industry.
There’s fairly obviously a fair amount of subjectivity in all of this and we don’t expect to have everyone happy with the conclusions, but we are going to perform a rigorous analysis of the possibilities and will be engaging with a wide range of stakeholders in forming our views.
So I may need to revisit my prediction about Bitcoin irrelevance. While they’re still an awful idea as a currency, they’ve had more attention this year than last.
To reiterate the point about how awful they are as a currency, let’s take the price movement over the last few days.
From the peak (yes, I am taking the worst case scenario to illustrate the point) of $236 closing 6 days ago to a recent trade today of $57, taking that as 7 days of change in price, that means the prices of everything measured in Bitcoins has increased by an annualised 15707854302953800000000000000000000%
So yes, not great for a currency. Although the real risk is of a currency destined to be ongoing deflation. Deflation will encourage hoarding, which will encourage price spikes (massive deflation) then profit-taking (crashg implying hyperinflation). So it looks like not only is ongoing deflation a problem, but massive intrinsic instability.
The exchange is insolvent. It seems like the operator didn’t separate member money from its own money and then spent it. This basically makes it a ponzi scheme. It can keep operating as long as it keeps operating. There are sufficient member balances that it still has positive cash. As soon as it accounts for these liabilities to members, it is insolvent.
So, members are offered the chance to agree to a voluntary reduction in their claim and/or conversion to long-term investment. If nobody agrees, the exchange will be liquidated and everyone loses out and any inherent value in the exchange disappears. If enough agree, then those who don’t agree get to withdraw their full funds.
Under this argument, the incentive is for each member to be selfish. Let’s see why.
There are two scenarios – enough accept the terms, too few accept the terms.
If too few accept the terms, the payout is the same whether you agreed to accept the terms or not. So that won’t affect the decision. If there are enough who accept the terms, those who declined will get paid out in full. The only way it makes sense or an individual to accept the terms is if the value of accepting the terms is greater than 100% of their account balance. This might be the case if they were converted to an equity value in the business and believed in its ongoing sustainability, but seems pretty unlikely.
The equity value has been massively damaged by the damage to brand value of the exchange. Outside parties or existing members wishing to take an equity stake need to consider carefully the extent of brand damage already and the $700,000 shortfall needed to restore solvency let alone any capital for future operations and investment.