Twenty Third Floor

Figuring out the future and the now

Category: Actuarial and Risk

Actuarial and Risk, complexity, Featured, financial risk, insurance, InsurTech, life insurance, managing uncertainty, microinsurance, Solvency Assessment and Management, Solvency II, systemic risk

How and why insurers fail

27 May 2024

David Kirk

I’ve been updating my presentation from 2021 on “How and Why Insurers Fail”. I now estimate the annual failure rate (or at least getting into serious financial difficulty) for an insurer in South Africa at 0.4% using an approximation over 2009 to 2024. With a hefty additional dose of approximations, I get about the same…
Read more: How and why insurers fail
Actuarial and Risk, Featured, GRC

The hidden dangers of opinion shopping and trusting good news.

25 May 2024

David Kirk

I had a recent discussion on the value of getting a second opinion. There’s the old line that “if you want five opinions, ask three people” – but in my experience that doesn’t often happen. Much of the time the second opinion does confirm the first. (If you are getting so many different views, it…
Read more: The hidden dangers of opinion shopping and trusting good news.
Actuarial and Risk, climate change, Demography, economics, future studies, managing uncertainty, Predictions

Demographic headwinds

22 May 2024

David Kirk

In what should be a surprise to nobody, US fertility has fallen to a century low. The US has better population growth forecast than many countries, but is still facing long term headwinds. South Korea still is the most glaring example, but China will continue to see truly shocking population ageing and decline. https://edition.cnn.com/2024/04/24/health/us-birth-rate-decline-2023-cdc/index.html Declining…
Read more: Demographic headwinds
Actuarial and Risk, financial reporting, IFRS17, measurement

IFRS17 consistency – VFA vs GMM

16 May 2024

David Kirk

Your experience with IFRS17 over the past couple of years likely depends on the insurers you’ve been closest to—whether they’re predominantly using PAA, GMM, or VFA approaches. The differences between the General Model (GMM) and the Variable Fee Approach (VFA) can be substantial. VFA does away with the awkwardness of locked-in rates on CSM and…
Read more: IFRS17 consistency – VFA vs GMM
Actuarial and Risk, costofcapital, Embedded Value, Equity Risk Premium, financial reporting, IFRS17, market risk, measurement, Solvency Assessment and Management, Solvency II, valuation

Frictional cost and tax

15 May 2024

David Kirk

There are many reasons to doubt the perfect applicability of the 6% cost of capital rate used in South Africa for the solvency Risk Margin calculation. Not least of which is the decrease to the rate in Europe and in the UK. However, if we borrow ideas from Embedded Value (TEV/EEV or MCEV) and look…
Read more: Frictional cost and tax
Actuarial and Risk, capital, capital structure, Emerging Markets, insurance, life insurance, measurement, regulatory risk, Solvency Assessment and Management, Solvency II

The relevance of Insurance Capital Standards

14 May 2024

David Kirk

The world of group supervision for South African insurers is surprisingly immature for regulations that have been in place for 6 years. [All of this post applies as of May 2024. Regulations may have changed between then and the time you are reading this.] I started this journey investigating Insurer Capital Standards (ICS) as a…
Read more: The relevance of Insurance Capital Standards
Actuarial and Risk, creating value, customer value, distribution, Featured, financial risk, insight, InsurTech, life insurance, marketing, microinsurance, product & pricing

40,000

13 May 2024

David Kirk

40,000. That’s the ballpark figure I usually work with as the minimum number of micro insurance policies required for scale. The expenses of running even a micro insurer are not that trivial. For underwritten products within a full life licence? Larger premiums per policy but definitely more complexity. Competition is tougher too. Hyper local brands…
Read more: 40,000
Actuarial and Risk, insurance, life insurance, Solvency Assessment and Management, Solvency II

LACDT still perplexes many

7 May 2024

David Kirk

It’s been years since I helped author the ASSA Information Note on Loss Absorbing Capacity of Deferred Taxes (LACDT). Yet I still see fundamental errors and misunderstanding recurring, especially when it comes to ORSA scenarios and LACDT. Weirdly, for life insurance, despite the complexities of multiple tax funds, it’s usually relatively simple. The large Deferred…
Read more: LACDT still perplexes many

About David Kirk

Featured Posts

The Complexities of Comparing SCR Cover Ratios Across Insurers
by David Kirk
In the insurance industry, we often use Solvency Capital Requirement (SCR) cover ratios as a key metric for comparing insurers’ financial strength. While these ratios… Read more: The Complexities of Comparing SCR Cover Ratios Across Insurers
One answer could be pet insurance
by David Kirk
I firmly believe major demographics shifts are going to have massive social, political, economic, financial market and commercial impacts in the coming decades. The balance… Read more: One answer could be pet insurance
A piece of the failure puzzle – decreasing insurer failure rates through Skilled Person Reviews
by David Kirk
Every failure hits policyholders’ savings or cover, impact their lives and their livelihoods. They destroys shareholder value and decrease confidence in the entire financial sector.… Read more: A piece of the failure puzzle – decreasing insurer failure rates through Skilled Person Reviews
How and why insurers fail
by David Kirk
I’ve been updating my presentation from 2021 on “How and Why Insurers Fail”. I now estimate the annual failure rate (or at least getting into… Read more: How and why insurers fail
The hidden dangers of opinion shopping and trusting good news.
by David Kirk
I had a recent discussion on the value of getting a second opinion. There’s the old line that “if you want five opinions, ask three… Read more: The hidden dangers of opinion shopping and trusting good news.
40,000
by David Kirk
40,000. That’s the ballpark figure I usually work with as the minimum number of micro insurance policies required for scale. The expenses of running even… Read more: 40,000
IFRS17 may not kill off EV
by David Kirk
Will IFRS17 kill off Embedded Value (EV) reporting in Africa? Or will it finally bring Market Consistent Embedded Value (MCEV) to life? I gave a… Read more: IFRS17 may not kill off EV

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