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Economic Modelling

This programme seeks to explore current approaches in economic modelling and identify gaps requiring future research

Actuarial practitioners have traditionally utilised conventional economic theory to identify the approach to adopt in economic and financial issues. For example, using the Black-Scholes formula to value options held by their client companies, or relying upon the Efficient Markets Hypothesis to explain and validate the valuation of shareholdings.

The experience of the 2008 economic and financial crisis challenged conventional economic tools, with other schools of economic thought brought into sharp focus.  This has opened up a number of questions that the IFoA would like to explore through a research programme focused on economic modelling.

Research Project Summary

Dr Iain Clacher of Leeds University Business School was engaged in June 2017 to undertake the first phase of the research; a survey of the economic theories used, both explicitly and implicitly, by firms which employ actuaries in the UK. Dr Clacher undertook a series of detailed interviews with a range of experts, both internal and external to the Profession, looking at economic theories in common use in actuarial practice. Dr Clacher's initial findings were discussed at a recent Actuarial Research Centre (ARC) event with senior actuaries and experts, looking at how the Profession could improve economic understanding in areas that inform actuarial work. Following these thought-provoking discussions, ARC and IFoA actuarial volunteers will be progressing further research and stakeholder discussion to ensure the profession is contributing to, and learning from, this important debate. Dr Clacher's report - summarising his research findings - will be published soon.

Research Methodology

Face to face interviews with relevant individuals working in firms including, but not limited to, insurance companies, consultancies, banks and pension funds. The research will be carried out in two phases to allow for a round table event at which preliminary results can be used to guide the second phase of research.

Expected Outputs

The expected initial output of this research is a report summarising Dr Clacher's findings as well as presentations at relevant IFoA events.

ARC Launch Event, May 2018: The economic modelling programme hosted a round table launch event on 29 May 2018 at Staple Inn Hall, to share thinking so far, following a series of confidential interviews of leading actuarial thinkers in a wide range of roles. An introduction to the ARC's Economic Modelling programme was given by Professor Mark Cross (Lay Chair of the IFoA's Research and Thought Leadership Board). Dr Iain Clacher and Professor Steve Keen also presented at this event. A report summarising Dr Clacher's findings will be available in due course.

View Dr Iain Clacher's presentation

View Professor Steve Keen's presentation

IFoA Life Conference, November 2017: Dr Iain Clacher (Leeds University Business School) delivered a workshop on "Economic Theory and Actuarial Practice". Following this, the economic modelling programme will host a round table event to share thinking and look at how the Profession could improve economic thought in actuarial practice.

View Dr Iain Clacher's presentation


In the News

'Animal spirits' vs the efficient market hypothesis. Alex Waite asks whether actuaries are evolving to remain relevant in their economic predictions. Read the full article in The Actuary.

In a letter to The Actuary Mr W John Bishop, FIA responds to the article.

Principal researcher: Dr Iain Clacher
Lead institution: Leeds University Business School
Start date: 01 November 2016
End date: tbc

Contact Details

If you want more information about our research programmes please contact the IFoA Actuarial Research Centre: