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The Actuarial Review & Unfunded Liabilities - The Trustee’s Side Algernon Cargill

The Actuarial Review & Unfunded Liabilities - The Trustee’s Side Algernon Cargill Director, Bahamas National Insurance Board Atlantic Connection July 11 th , 2012. Agenda. About NIB Bahamas My introduction to Social Security Good Governance Working with your Actuary

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The Actuarial Review & Unfunded Liabilities - The Trustee’s Side Algernon Cargill

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  1. The Actuarial Review & Unfunded Liabilities - The Trustee’s Side Algernon Cargill Director, Bahamas National Insurance Board Atlantic Connection July 11th, 2012

  2. Agenda • About NIB Bahamas • My introduction to Social Security • Good Governance • Working with your Actuary • Asset Liability Matching

  3. About nib bahamas • Started in 1974 • Comprehensive income-replacement benefits package • Contribution rate • 8.8% from 10/1974 to 5/2010 • 9.8% from 6/2010 (when unemployment added) • 96% of Investments local

  4. reserves

  5. income & expenditure

  6. Reserve-expenditure ratio

  7. 8th actuarial review projection results

  8. Unfunded liability $7.9 billion 115% of GDP

  9. In the private sector these would be awful numbers..…… but I have come to appreciate that social security is (or maybe?) different!

  10. Reflective questions • Does a financial deficit reflect poorly on trustees/management? • Should we just live with a large unfunded liability? • As a trustee and good steward, what can I do to make these numbers look better? • What is the actuary thinking when he says “don’t increase the contribution rate just yet”?

  11. only one solution Good Governance Practices

  12. Good governance practices • Change the rules • Reduce benefits and/or increase contributions • Adequate and affordable promises • Investments • Current Investment Policy Statement • Effective & Efficient Administration • Collect what is due, • Pay only the entitled, • With lean staff using available technology

  13. Good governance practices • Everyone has their role: • The Minister • The Chairman • The Board • The Director • Executive Team

  14. stewarding the actuarial review • Actuarial Standards of Practice • Know what report should contain • Assumptions • Have some input • Scenarios • Ask for the “what ifs” you want to see • Peer Review • 2nd opinions seldom hurt

  15. the actuarial report • Make it public • Don’t hide the facts, findings & recommendations • Build consensus behind key recommendations • Be persistent with policymakers re need for reforms • Fix the things you can

  16. Asset-liability issues • Difficult when investment options limited • Long-term liabilities • Few options for long-term assets • Always balance Risk & Return • Keep Investment Policy current • Manage your investment managers

  17. conclusion • Be a good Steward • Follow Good Governance Practices • Embrace actuarial review • Be transparent • Share information • Embrace reform

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