In a world of transition for all our disciplines, actuaries can get and keep ahead of the changes by, first, getting our thinking right. Right behaviour and actions will follow. We will think about the needs of our employers and clients and present our findings more in the business context; we will look through their needs to the needs and interests of their employees and customers. We will grasp financial economics and learn banking thinking. The profession will raise issues of public interest and inform the debate.

This Presidential Address is a call for a debate about change, to meet the demands of the 21st century. Change in how actuaries are educated to encourage wider thinking and more flexible careers. Change in how the profession is governed, to introduce more external input, to encourage more challenge of accepted practices and standards and to encourage a greater readiness to embrace change itself. To boost our public image and our influence on public policy. Change in the United Kingdom's social security and pensions systems, the better to achieve a secure retirement for tomorrow's pensioners. Change in how insurers are regulated, ensuring that consumer protection is not diminished in the process. The importance of research is emphasised, as are our relationships with other professions. These are areas where the Faculty is particularly well placed to play its part in taking the U.K. profession forward.

The text of the Presidential Address is printed in this part of British Actuarial Journal on pages 1-33.

The United Kingdom life industry is going through a period of unprecedented change and challenge. This is set to continue, driven, among other things, by economic conditions, market forces, regulatory change and new accounting standards.

The profession has an important role to play in helping the industry to respond to these challenges, and ensuring its future success. This meeting is a chance to meet and discuss these issues and explore what we, as actuaries, can do.

This paper has been written to provoke discussion and will be used as background to the debate on 18 November 2002. An earlier version was produced by the Faculty of Actuaries Pension Research Group and presented as a paper to the Faculty of Actuaries Students' Society.

Dynamic financial analysis (DFA) is a technique which uses Monte Carlo simulation to investigate the evolution over time of financial models of funds, complex liabilities and entire firms. Although of increasing popularity, the drawback of DFA is the dearth of systematic methods for optimising model parameters for strategic financial planning. This paper introduces strategic DFA which employs the only recently mature technology of dynamic stochastic optimisation to fill this gap. The new approach is described in terms of an illustrative case study of a joint university/industry project to create a decision support system for strategic asset liability management involving global asset classes and defined contribution pension plans. Although the application of the system described in the paper is to fund design and risk management, the approach and techniques described here are much more broadly applicable to strategic financial planning problems; for example, to insurance and reinsurance firms, to risk capital allocation in financial institutions and trading firms and to corporate investment and business development involving real options. As well as describing the mathematical and statistical models used in the case study, the paper treats econometric estimation, asset return and liability scenario generation, model specification and optimisation, system evaluation and historical backtesting. Throughout the system visualisation plays an important role.

The Human Genetics Commission intends to study the use of family history in underwriting, regarding it as genetic information in a broad sense. We survey the developments in genetics and insurance that led up to this decision. We propose a model for studying the possible costs of adverse selection in the mortgage-related life insurance market (which is important in the United Kingdom) with and without moratoria on the use of family history. We consider both level and decreasing term assurances, finding that the cost of adverse selection is slightly higher for the latter. Several assumptions about mutation penetrance, incidence of additional mortality, prevalence of genetic testing and insurance-buying behaviour are considered. Overall we conclude that: (a) a moratorium on genetic test results alone will lead to negligible adverse selection costs; while (b) a moratorium extended to family history will lead to premium increases just by redefining underwriting classes, with adverse selection being possible as well, but only in extreme circumstances would all premium increases be likely to exceed about 10%. However, we give examples in a model of a smaller life insurance market that show that our benign conclusions might not apply more generally.