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Über dieses Buch

In the first book of its kind, Turnbull traces the development and implementation of actuarial ideas, from the conception of Equitable Life in the mid-18th century to the start of the 21st century. This book analyses the historical development of British actuarial thought in each of its three main practice areas of life assurance, pensions and general insurance. It discusses how new actuarial approaches were developed within each practice area, and how these emerging ideas interacted with each other and were often driven by common external factors such as shocks in the economic environment, new intellectual ideas from academia and developments in technology.

A broad range of historically important actuarial topics are discussed such as the development of the blueprint for the actuarial management of with-profit business; historical developments in mortality modelling methods; changes in actuarial thinking on investment strategy for life and pensions business; changing perspectives on the objectives and methods for funding Defined Benefit pensions; the application of risk theory in general insurance reserving; the adoption of risk-based reserving and the Guaranteed Annuity Option crisis at the end of the 20th century.

This book also provides an historical overview of some of the most important external contributions to actuarial thinking: in particular, the first century or so of modern thinking on probability and statistics, starting in the 1650s with Pascal and Fermat; and the developments in the field of financial economics over the third quarter of the twentieth century. This book identifies where historical actuarial thought heuristically anticipated some of the fundamental ideas of modern finance, and the challenges that the profession wrestled with in reconciling these ideas with traditional actuarial methods.

Actuaries have played a profoundly influential role in the management of the United Kingdom’s most important long-term financial institutions over the last two hundred years. This book will be the first to chart the influence of the actuarial profession to modern day. It will prove a valuable resource for actuaries, actuarial trainees and students of actuarial science. It will also be of interest to academics and professionals in related financial fields such as accountants, statisticians, economists and investment managers.

Inhaltsverzeichnis

Frontmatter

1. Probability and Life Contingencies, 1650–1750: The First One Hundred Years

Abstract
Coming at the end of the Renaissance period and some 100 years after the Reformation, the mid-seventeenth century is generally regarded by historians as part of the early modern epoch. We should not, however, infer from this label that for Britain it was a time of stability in its political institutions or sophistication in its financial institutions. England spent the middle of the seventeenth century at war with the Netherlands, Scotland, Ireland and itself. The country recovered quickly from the tyranny of Cromwell’s Commonwealth; the arrival of King William III from the Netherlands in 1689 brought peace with the Netherlands but still more wars in Europe, this time with France. In the second half of the seventeenth century, England lagged behind some of northern Europe, and most notably the Netherlands, in the sophistication of its financial systems. King William imported Dutch practices in the raising of long-term government funding, and his costly wars had much use for them.
Craig Turnbull

2. Revolutionary Developments Between 1750 and 1810

Abstract
The second half of the eighteenth century was a remarkable period of development for both probability (and statistics) and actuarial thought (and practice) more broadly. Two fundamentally important fields of statistical and actuarial thought emerged over the period that can each now be seen as a natural flowering of the seeds planted over the previous 100 years. First, a number of major theoretical breakthroughs were made that created the permanent foundations for the inversion of mathematical probability into inferential statistics. Second, the whole-of-life-with-profit policy was conceived and successfully brought to market. This transformed life assurance from a short-term insurance contract into a long-term savings vehicle that strongly resonated with the emerging professional classes of late-Georgian Britain.
Craig Turnbull

3. Life from the Napoleonic Wars to the Second World War

Abstract
So said Samuel George Warner in his 1917 presidential address to the Institute of Actuaries. And yet, with the benefit of 200 years of hindsight, this statement might be more applicable to the beginning of the nineteenth century. In Warner’s era, actuarial thought and practice was largely reactive in the context of a series of unprecedented events and circumstances: global war, high inflation, interminable economic depression, low interest rates, more global war, government-induced ultra-low interest rates. At the start of the nineteenth century, life assurance practices still had to navigate the political and economic challenges of their time, but the actuaries of the nascent life assurance industry were arguably freer to plot the course of their profession and its practices. The trail had been blazed in the final half of the eighteenth century and a revolutionary vision of life assurance as a long-term savings vehicle for the middle classes had been realised with the remarkable success of the Equitable in the final two decades of the century. Many new life offices would follow in Equitable’s wake. The pioneering work of Dodson, Price and Morgan now had to be systematically developed into robust best practices for an embryonic profession that was invested with substantial powers and discretion in a fast-growing and increasingly significant element of the financial sector.
Craig Turnbull

4. A Brief History of Financial Economics for Actuaries

Abstract
This chapter gives an historical overview of the emergence of some of the key ideas in financial economics (the branch of economics concerned with fields such as securities pricing, portfolio theory, corporate financial and investment theory and the behaviour of financial markets). Financial economics was not developed by actuaries. You may well ask why it is included in a history of actuarial thought. The answer is that, rather like probability and statistics, once its foundations had been developed, its ideas had important practical application in the world that actuaries occupied. As these ideas emerged, the actuarial profession had to determine how to incorporate the new insights provided by financial economics into its thinking and practices (and, indeed, where theory did not translate into practice). This was not an easy process, as these insights were often incongruent with the traditional actuarial perspective. It triggered great actuarial debate: was this incongruence merely a result of the theoretical and unworldly nature of the economic studies, or did it signal that some key areas of actuarial thought needed fundamental revision? This process is arguably still underway. It is one of the more interesting and fundamental aspects of the historical development of actuarial thought in the second half of the twentieth century. To really appreciate it, we need to understand something of the ideas of financial economics and how they originally developed, and this is the object of this part of the book.
Craig Turnbull

5. Life Offices After the Second World War: The Underwriting and Management of Financial Market Risk (1952–2004)

Abstract
The history of actuarial thought in the British life assurance sector over the second half of the twentieth century is tumultuous. This was increasingly the case as the century wore on, reaching something approaching a crisis by the century’s end, from which the profession started to reorientate itself in the early 2000s. The root causes of the late twentieth-century challenges initially emerged earlier in the century and have already been briefly noted. The most important of these was the increasing trend, started in the 1920s and 1930s, of abandoning the strictly risk-averse investment disciplines of nineteenth century Bailey in order to pursue greater investment in equities and other risky asset types.
Craig Turnbull

6. British Actuarial Thought in Defined Benefit Pensions (1905–1997)

Abstract
The recognisable British private staff pension scheme, funded by a mixture of employer and employee contributions based on percentage of salary, paid over the period of service of the employee and invested in a trust fund, with benefits defined with reference to the salary history and years of service of the employee, first emerged over the second half of the nineteenth century. Ad hoc unfunded pension arrangements arose amongst some large employers earlier in that century. The occasional historical precedent of earlier funded arrangements for post-employment benefits can also be found: the earliest funded scheme for the provision of widows’ annuities to ‘employees’ is thought to be the Scottish Ministers’ Fund, which was established in the mid-eighteenth century.
Craig Turnbull

7. British Actuarial Thought in General Insurance (1851–1994)

Abstract
General insurance—that is, the insurance of risks other than life contingencies—pre-dates life assurance in its development as an established business activity of critical importance to Britain’s economy. Marine insurance first emerged as a significant commercial activity in early thirteenth-century Italy in ports such as Genoa. The earliest historical records of British marine insurance date from sixteenth-century London. Over the following 200 years, the City of London and its insurance institutions such as Lloyds of London developed into a leading global centre of maritime insurance. These institutions delivered dependable insurance to the cargos and sailing ships whose perilous sea voyages drove Britain’s maritime trading economy and the expansion of its Empire.
Craig Turnbull

Backmatter

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