Contingencies20140506 DL

A M E R I C A N A C A D E M Y O F A C T U A R I E S M AY | J U N E 2 014
Black Warrior
A Buffalo Soldier
Looks Back
GLOBAL ACTUARIAL & ANALYTICS RECRUITMENT
RETAINED - Director / VP, West USA: Healthcare service provider seeks

FSA with 10+ years of health actuarial experience and an entrepreneurial
background. This role will analyze both clinical and claims data to underwrite
risk effectively, and work directly with C-Level executives. (#41446)
RETAINED - Health Actuary, Southeast USA: This role will be involved
with the pricing of Medicare Part D and Medicare Advantage insurance products.
Knowledge of Health Care Reform is required. (#40877)
RETAINED - Senior Actuarial Analyst, Northeast USA: International P&C
insurance company seeks actuary with 7+ years experience. Commercial or
personal lines reserving and Access / SQL experience desired. (#40879)
RETAINED - Actuarial Director, Southeast USA: Our client has an
immediate opening for a life actuarial consultant with several years of experience.
Responsibilities will include pricing, reserving, financial reporting, mergers &
acquisitions, predictive modeling and enterprise risk management. (#41145)
RETAINED - Actuarial Leader, Midwest USA: Midwestern casualty
insurance company is looking to hire a seasoned FCAS. Executive leadership
position overseeing Loss Reserving, Product Pricing, and Modeling activities and
strategic execution of enterprise evolution. (#41274)
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Articles in this issue include: International
Actuarial Trends & Perspectives: Regulations, Changing

Economies, Getting Products to Market; FAQ: Working
Abroad; International Actuarial Salary Survey Preview.
FAST
& RELIABLE
LISTINGS
CONTACT
EzraJOB
Penland
AT
actuaries@EzraPenland.com
YOU CAN COUNT ON
NORTHEAST
ANALYST
MIDWEST USA-ACTUARIAL
LARGE ACCOUNT
PRICING
For PositionUSA
57096,
our RETAINED
Midwest
USA client is
looking to
hire
a ComNortheast
insurer
is searching
for experienced
property
and
casualty
mercial Large
Account
Pricing Actuary.
or ACAS
credentials required.
Reactuarial
analysts.
Requires
at least FCAS
two years
of experience.
SAS or R
proquires at least
six ideal.
years of
commercial
lines programming,
pricing and reserving
experience.
gramming
skills
Pricing,
database
statistical
modeling
and special projects.
CALIFORNIA - FCAS
For Position 57923,
our California
client hasAND
an immediate
need for a casualty
NORTHEAST
FSA
ACCIDENT
HEALTH
actuary at the
FCAS level.
Must
have 10+
years
of property
casualtyan
actuarial
Expanding
Northeast
USA
Accident
and
Health
insurerand
is seeking
actuexperience, including some reinsurance or large account pricing experience, as well
ary. This Fellow of the Society of Actuaries must have at least five years of
as capital modeling skills.
Accident and Health experience.
NORTHEAST USA - REINSURANCE FCAS
NORTHEAST
ACTUARIAL ANALYST
For Position 57838, this Northeast USA employer has asked Ezra Penland, the
Northeast
USA insurer
is searching
experienced
casualty
Leader in Actuarial
Recruitment,
to find for
an FCAS
casualtyproperty
actuary. Aand
good
underactuarial
analysts.
Requires
at
least
two
years
of
experience.
SAS
or R prostanding of catastrophe risk models ideal. Reinsurance pricing, actuarial modeling,
gramming
skills ideal.and
Pricing,
database programming, statistical modeling
statistical simulations
other assignments.
NEW YORK - RESERVING ACTUARY
NORTHEAST
FSA
ACCIDENT
HEALTH
For Position 57890,
this New
York insurer isAND
searching
for a property and casualty
Expanding
Northeast
Accident ideal.
and Health
insurer
is six
seeking
anproperty
actureserving actuary.
FCASUSA
or near-FCAS
Requires
at least
years of
ary.
This Fellow
of the
Society of Actuaries must have at least five years of
and casualty
actuarial
experience.
Accident and Health experience.
WISCONSIN - PREDICTIVE MODELING ACTUARY
For Position 57873,
a predictive modeling
actuary is immediately sought by a
NORTHEAST
ACTUARIAL
ANALYST
Wisconsin insurer
at the near-ACAS
/ ACAS
/ FCAS level.property
Experience
with
Northeast
USA insurer
is searching
for experienced
and
casualty
EMBLEM,
SAS
or
R
ideal.
Requires
three
to
twelve
years
of
property
and
casualty
actuarial analysts. Requires at least two years of experience. SAS or
R proactuarial
experience.
gramming skills ideal. Pricing, database programming, statistical modeling
and
special projects.
SOUTHEAST
USA - LIFE APPOINTED ACTUARY
For Position 57742, this Southeast USA client is searching for a life reinsurance
NORTHEAST
FSA ACCIDENT AND HEALTH
appointed actuary. Fellow of the Society of Actuaries preferred. Financial reporting
Expanding Northeast USA Accident and Health insurer is seeking an actuexperience ideal.
ary. This Fellow of the Society of Actuaries must have at least five years of
Accident
and Health
USA - CHIEF
LIFE experience.
PRICING ACTUARY
For Position 57694, our USA client is seeking a Life FSA with 12+ years of experi-
NORTHEAST
ACTUARIAL
ANALYST
ence. High-profilelife
insurance pricing
role. COLI/BOLI experience a plus.
Northeast USA insurer is searching for experienced property and casualty

actuarial
Requires ACTUARY
at least two years of experience. SAS or R proTEXAS -analysts.
CHIEF HEALTH
Our Texas health
client is
lookingdatabase
to hire an programming,
actuary at the FSA
or ASA or
neargramming
skills ideal.
Pricing,
statistical
modeling
ASAspecial
level forprojects.
Position 56943. Strong statistical analysis experience and SAS/R
and
programming skills ideal. Pricing, product development, management reporting and
actuarial modelingassignments.
NORTHEAST
FSA ACCIDENT AND HEALTH
Expanding Northeast USA Accident and Health insurer is seeking an actuARIZONA

- DIRECTOR
OF ACTUARIAL
ary.
This Fellow
of the Society
of Actuaries SERVICES
must have at least five years of
For Position 57965, this Arizona insurer has an immediate need for a Director
Accident
and
Health
experience.
of Healthcare Actuarial Services. Requires at least 10 years of experience. Some
Medicaid experience
preferred. Fellow
of the Society of Actuaries credentials ideal.
NORTHEAST
ACTUARIAL
ANALYST
Northeast USA insurer is searching for experienced property and casualty

OUR LEADING
US ACTUARIAL
SURVEYS
MAY
actuarial
analysts. Requires
at least twoSALARY
years of experience.
SAS
or RBE
programming
ideal. Pricing, database programming, statistical modeling
FOUND skills
AT EzraPenland.com/Salary.
EZRA PENLANDS
OPEN
ROLES!
THESE ROLES AND MANY MORE CAN BE FOUND AT

THESE AND MANY MORE JOBS CAN BE FOUND AT
EZRA
PENLAND.COM
EzraPenland.com
EZRA PENLAND
ACTUARIAL RECRUITMENT
Over 35 Years of Industry Experience
(800)580-3972
actuaries@EzraPenland.com
Contents
22
MAY | JUNE 2014
Features
COVER: KEN CECCUCCI / BONOTOM STUDIO
Black Warrior
A Buffalo Soldier Looks Back
To the Italian people they liberated, their skin color was

less important than their bravery and sacrifice under fire.
By Ivan J. Houston with Gordon Cohn
32
Drilling Down
Demographic and Geographic Differences in Retirement Plan Participation
Where you live, your gender, race, and educational level, and who you work for are all
predictive of whether you will participate in an employer-sponsored pension plan.
By Craig Copeland
42
The Bold Man and the Sea
The year he turned 60, he realized his

dream of rowing 2,600 nautical miles
solo across the Atlantic Ocean.
By Jean-Guy Sauriol
48
Revitalizing
Reinsurance Capacity
Life insurers cant continue to wait

for the markets to resolve the impact
the financial crisis has had on their
capacity. New ideas are needed.
By Jeff Burt
2 C O N T I N G E N C I E S MAY | JUN.14
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VOL 26 | NO 3
Departments
INSIDE TRACK
The First Step
Published by
Linda Mallon
PRESIDENTS MESSAGE
Public ConfidenceWhat Does It Take?
LETTERS
COMMENTARY
Personal ERM
10
EXECUTIVE DIRECTOR
14
DIRECTOR OF COMMUNICATIONS
Patrick Collins
UP TO CODE
Owning Precept 13
WORKSHOP
Life in the Fast LaneProxy
Techniques and Risk-Based
Decisions
Mary Downs
Charity Sack
EDITOR AND ASSISTANT DIRECTOR FOR PUBLICATIONS
Linda Mallon
18
PUBLICATIONS & MARKETING PRODUCTION MANAGER
Cindy Johns
John Purple
SPECIAL SECTION
2014 Software Showcase
PRESIDENT
Tom Terry
Tom Terry
ADVERTISING
54
Mohanna Sales Representatives

(972) 596-8777
DEPARTMENT EDITORS
58
Thomas L. Bakos
Sam Gutterman
Robert J. Rietz
Lenny Shteyman
Tom Toce
Brian R o binson
TRADECRAFT
Best Practices in Insurance Financial Modeling
60
62
Tom To ce
BRIDGE PUZZLE
Leading Trumps
64
E dith M cMu l l in
PUZZLES
Passover Special
66
Robert J. Rietz
John Moore, Chairperson

Mike Angelina
Mary Bahna-Nolan
Cecil Bykerk
Eli Greenblum
William Hines
Mary D. Miller
Art Panighetti
David Shea
Karen Terry
Tom Terry
INTERNET ADDRESS
www.contingencies.org
Lenny Shtey
man
Bob, can
we chat for a minute?
END PAPER
Mortality
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COMMUNICATIONS REVIEW COMMITTEE
Russ B ingham
CRYPTIC PUZZLE
Silver Screen
PUBLICATION DESIGN & PRODUCTION
68
Contingencies (ISSN 1048-9851) is published bimonthly by the American

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Inside Track
LINDA MALLON
The First Step

I HAVE A STRANGE PENCHANT for gripping tales of fortitude under extreme duress. Accounts of Shackletons successful open-boat crossing of the sea to South Georgia Island or Mallorys ill-fated (in fact, fatal)
attempt to ascend the north face of Mount Everest are all the more compelling to me because the chances
of my ever being caught in similar circumstances are less than zero.
THINKSTOCK
an Extraordinary Life
Its no surprise, then,
(q4el.wordpress.com).
that I spent many moments
We all have the stuff of epic journeys within us,
Launching the blog, Colduring this past cold, prowhether its rowing an ocean or simply filling a
lins told me, was way
tracted winter following
out of his comfort zone.
the adventures of Canadian
blank computer screen with words.
While he has no fear of
actuary Jean-Guy Sauriol
All we need to do is take that first step.
public speaking, writas he rowed solo across the
ing felt more exposed.
vast expanse of the Atlantic
And he didnt feel that
Ocean. Departing from the
it came naturally to him
Canary Islands on Nov. 24,
(you wouldnt know that
2013, Sauriol rowed 2,600
to read his writing, but
nautical miles, landing in
then all the artistryand
Barbados, 74 days and three
all the hard workcomes
hours later, on Feb. 6, 2014.
in making it look easy).
As he recounts in his
I remember running
compelling account of the
the marathon, thinking to myself that if I ever wanted to finish
trip, which begins on Page 42, Sauriol would get up every morna 26-mile run, I needed to start by finishing the first mile, Coling, check the weather and waves, grab a bite, and hit the oars.
lins said. Therefore, if I ever wanted to get better at writing by
Every morning during that same time, I would get up, curse
putting in my 10,000 hours, I needed to start with my first few.
the weather, grab a bite, and pull up Sauriols website, www.
Beyond the satisfaction of taking on a challenge, other benmaplelyssolo.com, to check his progress and silently cheer him on.
efits accrue from pushing your personal envelope. Ivan Houston,
While a solo crossing is not the way Id choose to celebrate
whose memoir begins on Page 22, spent several years out of his
my 60th birthday (one of the proximate causes for Sauriols
comfort zone at the behest of Uncle Sam. Yet Houston credits
grand adventure), I greatly admire his willingness to embrace
his combat experiences as a Buffalo Soldier fighting in Italy for
risk and to challenge himself both physically and mentally. I also
giving him the confidence to pursue a long and successful career
like how Sauriol completely explodes the common mispercepas a businessman in later years.
tion of actuaries as, dare I say it, slightly boring bean-counters.
I learned much about people, about suffering, about being
Over the course of my time at the Academy, Ive come to
happy, and about being proud of accomplishments in the face
know quite a few actuaries whose interest in acquiring unfamilof tremendous odds, Houston said. You learn there is always
iar skills, stretching themselves beyond comfortable boundaries,
a way of attaining your goal.
and, occasionally, working without a net as they do this belies
We all have the stuff of epic journeys within us, whether its
the stereotype.
rowing an ocean or simply filling a blank computer screen with
Take Patrick Collins. His excellent commentary on Page 14 is
words. All we need to do is take that first step.
adapted from a posting that appeared on his blog, A Quest for
Opening
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Presidents Message
TOM TERRY
Public ConfidenceWhat Does It Take?

PUBLIC CONFIDENCE. Its an essential ingredient in the success of any pension or insurance program.
Actuaries promote public confidence by saying whats what.
Thats because public confidence comes from facts, not from
smoke and mirrors. All too often, public trust succumbs to false
confidence in systems that play fast and loose with the facts.
Theyre not transparent, not accountable, and ultimately not
reliable.
We actuaries know this.
As part of the publics trust in the actuarial profession, one
of our goals is to help ensure that retirement benefits and insurance against lifes risky exposures are protected.
Individually and collectively, our work as actuaries tends to

be steady and consistent. But the terms steady and consistent
are a poor descriptor for the environments in which our pension
and insurance programs reside. As a result, public confidence
in these systems ebbs and flows as circumstances change. And
so the job of the actuary, and of the profession, needs to evolve
appropriately.
Our profession cant afford to relegate public confidence to
the category of a checkbox item that we achieve and then ignore. What worked yesterday may no longer work today. Its that
simple, and I think most of us know it.
Public Pension Plansa Call to Action

Despite nearly $3 trillion of assets held by public-sector pension plans, the covered workers and retirees, not to mention
taxpayers, are confronted daily with headlines blasting messages about the dire financial condition of these plans.
Restoring public confidence in public plans is the responsibility of many. Most important, plan sponsors must be willing to
make the appropriate funding contributions. Period.
As a profession with a public responsibility, we actuaries also
must be willing to do our part.
Taking stock, Id say we have been, but theres more to do.
Our standards of practice steer us toward appropriate actuarial practice. The Actuarial Standards Board (ASB) has been
extraordinarily busy in the past several years strengthening our
standards as they apply to pension practice. I applaud the ASB
for its hard work and for its progress.
But again, theres more to do. It relates very much to public
confidence. Or in this case, the extraordinary attention and concern related to public-sector plans.
A substantial number of states and municipalities face considerable fiscal challengesand pensions are almost always
at or near the top of the list of identified problems. Theres an
unprecedented level of interest and concern among the citizentaxpayers of these jurisdictions who, until recently, never paid
much attention to pensions. All that has changed.
As the result of this heightened interest, it has become apparent that these plans have roughly 10 million plan beneficiaries
and are supported by taxpayers in every state and in most local
jurisdictions. This just adds to the dimensions of a public confidence hurdle that is already high. We need to respond. And now.
The good news is that our profession cares and is engaged. I
believe actuaries have a significant commitment to closing this
public confidence gap.
While we will never be able to mandate that government
plan sponsors supply the robust funding needed to sustain these
plans, we can make a difference. How? Its simpleby providing
relevant and consistent information. Information thats needed
by plan sponsors, for sure. Butand this is the keyinformation
that the public wants and deserves.
The first step is to pull the best ideas from the good work of
so many across our profession and fold them into the next round
of enhancements to our practice standards. Our standards can
be the vehicle for helping restore public confidence. Thus far,
we as a profession have been reluctant to directionally focus a
practice standard only on public pension plan practice. Its time
to get beyond that reluctance.
Lets take this essential next step to respond to this essential
need.
THINKSTOCK
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Letters
e at Humana enjoyed Tom Terrys

column Keeping Up With the Brits
(January/February 2014), and we agree
that the value added by people supporting actuaries is essential to the success of
our organization.
We have an actuarial community of
about 480 associates. Approximately
one-third of that community is composed of business professionals who
work with our actuarial teams. While
we may not offer a para-actuary track
to our business professionals, we have
engaged them in all the professional development activities that we provide our
actuaries. They are included in all meetings and communications, recognized for
excellence in our quarterly meetings, and
encouraged to participate in the creation
of our newsletters, blogs, and meeting
planning. They are an integral part of
our business, and their wide range of experiences and skills is invaluable to us.
They also provide us with stability and
expertise that we depend on when our
actuaries rotate.
Our business professionals are energized and committed to excellence. We
see this yearly when Humana measures
associate engagement. Our business professionals score at a world-class level,
according to Kenexa.
Thank you for taking the time to share
different ideas on recognizing, developing, and highlighting the non-actuaries
whom so many of us count on.
Roy Goldman
Shari A. Rodriguez
Louisville, Ky.
A Changeable Compact
read with interest Bruce Schobels

points concerning retirement plans in
the letters section of the January-February 2014 issue. I must take issue, however,
with his assertion that a whole society
cannot fund its own retirement and must
therefore rely on payments from current
workers. Schobel may indeed be correct

in characterizing the present state of our
Social Security system, but that doesnt
mean that its the only approach.
As a young actuarial pup, I remember
being taught that Social Security was a
form of social insurance that was funded by contributions into a trust fundAl
Gore even famously called it a lockbox
that he promised to protect. Fast-forward
to 2013, when we heard President Obama
claiming that restrictions on the governments allowance would jeopardize those
very Social Security payments that all
along we had been told were funded!
Indeed, we now are starting to see
what may be the first stray threads in
the slow unraveling of Social Security
as its cash flow needs start to crowd out
other government programs.We increasingly hear that our contributions were in
fact taxes, thereby laying the ground for
means-testing the benefits that we all
thought had been prepaid.Also, many of
those same politicians and pundits tell
us solemnly that people are now living
longer, as if the idea of mortality improvement was some new actuarial discovery
that can be used to justify higher Social
Security tax rates.These consequences
all arise from the pay-as-you-go nature
of our Social Security system, which we
knew all along would become top heavy.
So what can we do? As Schobel points
out, we cant simply store goods and services in our basements. However, older
workers can store assets in the form of
houses, savings, stocks etc., which can be
sold to younger workers in order to raise
money for current retirement income.
1 0 C O N T I N G E N C I E S MAY | JUN.14
Those younger workers, in turn, can

build their pension fund until they are
ready to retire. Many countries, such as
Chile, have such an arrangementmuch
like a giant 401(k)to fund their Social
Security benefits. Of course you still need
to maintain a productive country for
such assets to retain their value.But far
better that the link between benefits and
the funding source be direct and explicit
than the mushy and changeable compact
we now have, which is becoming increasingly vulnerable to a larger public debt
problem.
Gary Thomas
Hamilton, Bermuda
Actuaries Needed
read Robert Reuters A Proposal for

Better Life Insurance (May/June 2013)
and Laura Mullanes National MeasureThe State of U.S. Math Literacy
(March/April 2014) with great interest.
Reuter calls for a better type of life
insurance that is based on the concept
of the economic value of human life.
Underwriting could use it to ensure
that the amount of insurance at issue
is reasonable. But because the need for
insurance declines dramatically when a
person is nearing retirement, the marketing department would probably prefer a
needs analysis. Both concepts are presented in basic life insurance textbooks.
A more appropriate approach is to use
needs analysis, but constrained by the
economic value of human life. Needs in
excess of economic value arent sustainable and could create moral hazards.
This would be consistent with the notion
that a financial plan is achievable only if
the planned lifetime spending is no more
than the expected lifetime after-tax income. When the two are equal, the plan
is optimal.
This is where Mullanes article comes
into play. An optimal financial plan can
be reduced to a simple algebra problem
of two variables and two equations. For
every set of assumptions for parameters
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Following the growth and direction of the industry,
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H Assumed, Ceded and
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Letters C O N T I N U ED
there is a unique financial plan. Many financial planners are unable to distinguish between a variable and a parameter. Factors
that are really parameters but with uncertain values often are
treated as variables. In retirement planning, clients ask: How
much to save? Annual savings is clearly a variable. Because
income = spending + savings, and income is of a known value,
spending is also a variable. But typical planning approaches ask
the clients if they would like to have their current lifestyle in
retirement, i.e., treating spending as a parameter.
As a result, most planning outcome is of questionable value. Mixing up variables and parameters makes it impossible to
conduct sensitivity analysis. Many types of planning software
include Monte Carlo simulation to assess the risk of running out
of funds. Given a questionable base plan, the simulation could
produce a false sense of security for clients.
After 26 years in the field as a life insurance agent, I am hoping the life actuaries will spend some time looking into the basic
approach to the financial planning process, and come up with
life insurance products that better fit the income-replacement
needs of our customers.
But this is strictly my personal opinion.
David Hu
Los Angeles
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any articles have been written to suggest ways to strengthen

Social Security. One frequent proposal is to raise the retirement age. This was again put forward by the Academy president
in the March/April issue (Promoting Objective Policy in a Partisan World). This suggestion often strikes me as having one
group pay for the benefits given to another group.
I have a different proposal. Based on my initial benefit level, I believe that my accumulated payments exceeded all of my
FICA taxes within three or four years into my retirement; and
my employers taxes were recovered in the next three or four
years. Even if these estimates are off by a couple of years, the
two periods probably did not exceed 10 years. Having retired
more than 10 years ago, I see that my children are paying for the
entire cost of my benefits. An additional consideration is that
the cost of living adjustment (COLA) is not significant for those
receiving higher benefit payments, and it reduced the payback
period mentioned.
I suggest that the COLA be eliminated at the higher benefit
levels, at least after eight or 10 years into retirement, and graded
upward as the initial or current benefit level decreases. I dont
know whether this would contribute much to the solvency of
Social Security. If not, a lower cutoff date or age could be considered, at least at the higher benefit levels.
Perhaps another reader will notice something that I have
overlooked. If so, that would give us more insight into the possibilities. My children already are convinced that there will be
no Social Security for them.
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Commentary
BY PATRICK COLLINS
Personal ERM
HOLY SMOKES! THATS IT!? (My palm slaps my forehead.) In some
ways, it seemed like such an obvious conclusion.Perhaps the answer
was always right there in front of me the whole time and I chose not
to see it.
endeavor. After all, before you can thrive,
you must survive. Taking steps to maximize the likelihood of survival seems like
a great first step.
Often overlooked or underappreciated is the opportunity component of
ERM. One way to manage risk is to recognize and seize opportunities. These
may be occasions for growth, diversification, or some other way to add value.
By exploiting prospects, an enterprise
actually can reduce many risks.
Really good companies have been doing ERM for centuries without formally
defining it. They understand and act to
improve the chances of success. Some
examples include:
catastrophes;
Shoring up important client
relationships;
Recognizing and retaining key
employees;
Accounting controls to prevent fraud
and theft;
Pruning unprofitable or non-strategic
business units;
Developing new business relationships or tactical alliances.
Recently, I decided to approach
these concepts in a different way and
apply ERM to my own life. The result
was enlightening.
The Enterprise Is Me
What is the best investment I can make
now in my personal enterprise, giving
me the highest return and reducing the
most risk?
SH UTTERSTOCK / BONOTOM S TU DIO
As an executive and actuary in the

insurance/reinsurance business, I have
focused a lot of energy on the subject
of risk and uncertainty over the course
of my career.Enterprise risk management (ERM) is a popular topic in my
daily work. While the concepts and
methods are getting more sophisticated, in principle its pretty simple to
understand.ERM focuses on understanding and managing business risk
to optimize the return versus the risk
dynamic.
The emphasis on risk is intuitive to
many. We tend to look at what can go
wrong and seek ways to mitigate the
risk of that happening. This is a good
Buying insurance to protect against
If only it were this easy to find

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Commentary CO NTI NUE D
I started by thinking about the concept of security. My basic premise was

that happiness and fulfillment can be
optimized with high security (being
secure). I outlined three categories of security: financial, emotional, and physical.
Drilling down, I replaced the word
security with health and asked myself
how Ive been managing the balance
between my financial, emotional, and
physical health. I realized that over the
course of my life, I was likely to spend a
certain amount of resources (time, energy, and money) on my physical health.
No matter what I did, that wasnt likely
to change. But I could influence how and
when those resources would be spent.I
could spend them sooner on wellness or
later on sickness. While no one can completely prevent accidents and emergency
illnesses, you still can improve your odds
dramatically.
Almost everyone I know who has experienced an acute medical episode has
spoken about how everything changes
the moment the episode begins. Theres
life before, and theres life after. Theres
some truth to the old clich that runs,
When you have your health, you have
everything. When you dont have your
health, nothing else really matters.
Investing more time, energy, and
money into improving my physical health
and wellness is the best investment for
my personal enterprise.Improved physical health is great in and of itself.But it
also has the bonus of improving all three
aspects of health and security, yielding
incredible potential returns.
So, how to improve my physical
health? What specific steps can I take?
For starters, Im focusing more on what
Im putting into my body. Many years ago,
when I was coding software, I became
familiar with the concept of garbage in,
garbage out. If the data coming in was
bad, the data coming out was guaranteed
to be bad as well. The quality of the food
I am ingesting is absolutely critical. My
daily eating habits need to get better if I
What is the best investment I can make now in my

personal enterprise, giving me the highest return
and reducing the most risk?
want to improve my health. For starters,
fewer processed foods, higher nutritional
content, fresher ingredients. All aspects
needed attention.
Next, Im paying attention to what Im
doing with my body. Clearly, I need to get
moving. Activity, and then more activity.
There are many straightforward actions
I can take. Ill choose to walk whenever
I can. Use the stairs instead of the elevator. Skip the cab ride and enjoy a long
stroll to the office in the city. And while
were at it, better quality activity. I have
discovered that I prefer walking the golf
course to riding in the cart. While rock
climbing and hiking upped my fitness
quotient, I also discovered how pleasurable they are. Hot yoga has improved my
flexibility greatly. And I find great joy in
shooting hoops with my sons.
After that, Im looking at what I am
putting on my body. Here the focus is on
reducing the level of toxicity of my environment. Im examining the ingredients
of the products that I put on or near
my skin. More natural fibers with fewer chemicals seem like a good idea. Im
looking at ways to improve the air quality
in my homehouseplants help, and they
look nice as well. Im checking into better ways to clean and maintain the house.
The number of natural products on the
market has grown tremendously. They
do the task and are much less harmful to
me or my environment.
To summarize my personal ERM
plan, Im focusing on my body, what Im
putting into it, what Im doing to it, and
the environment in which I place it. Now
I have the beginnings of an action plan.
Perhaps its not perfect, perhaps its not
comprehensive, but still, its a start. How
exactly Im going to implement my plan
is another matter. Magical overnight solutions rarely have worked for me. In this
case, I have opted for a more deliberative
process that Ive had success with in the
past. The steps are easy:
1. Get started;
2. Take actionand improve on how Ive
done it before;
3. Repeat Step 2.
Getting Off the Dime

As you can see, Im not a fan of complicated solutions or processes. Life is tough
enough. For me, the simpler the solution,
the better. As an actuary, Ive grown to
appreciate the exponential function over
the years. It can be seen and applied everywhere. A simple graph, like the one
below, vividly depicts how a small, steady
percentage increase can generate extraordinary returns over time. Even if
the increase is small, the improvement
can be significant over time.
In the case of improving my health,

Im thinking the same concept can apply.
All I need to do is focus on getting just a
little bit better every day.
At first I wantedto kick myself for
not reaching this conclusion earlier
in my life.But thats no excuse for getting started once I made the realization.
Theres no time to waste as high returns
are waiting. Heres to all our health!
PAT R I C K C O L L I N S is a fellow of the
Society of Actuaries and member of the
Academy. He is chief actuary for AXIS
Accident & Health, a subsidiary of AXIS
Capital, where he supports and enables
the global accident and health insurance
and reinsurance divisions to grow and
thrive. Outside of work, his current focus
is to be a good father to his two sons,
a good husband to his wife of 16 years,
and a good friend to others.
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Up to Code
BY JOHN PURPLE
Owning Precept 13
WHAT IS IT ABOUT the requirements of Precept 13 that makes many
actuaries uncomfortable? One of 14 precepts in the Code of Professional Conduct, Precept 13 requires an actuary to take action if he or
she has knowledge of a potential violation of the code by another credentialed actuary. Much like the Transportation Security Administration
ads, this is the if you see something, say something requirement.
JOE SUTTL IFF
As I thought about why we are reluctant to deal with potential violations of

the code among our peers, it occurred to
me that maybe its part of our upbringing.
As children, we were told to work things
out when interacting with playmates
and siblings. How many of us heard the
parental admonition, Dont be such a
tattletale? As we got into high school
and participated in activities such as
athletics, we were encouraged to be part
of the team. The culture there tended
to frown on a team member who ratted
out another. And, I believe, this culture
carried on into college, where most undergraduates would turn a blind eye to
all but the most egregious violations of
campus rules by their peers.
Now that we are credentialed actuaries, however, we are part of a profession,
and the rules and perceptions must
change. Code violations by our members are serious business for all of us. It
takes only a few publicized cases of bad
work to ruin the reputation of the entire
profession and undermine public trust in
what we do. As a self-regulated profession, we have established:
Rules
for admission, including basic

education and/or experience and continuing education;
A Code of Professional Conduct;
Qualification Standards and standards
of practice;
Rules addressing how and when
members may be counseled, disciplined, or removed from professional
membership.
Because the U.S. actuarial profession
is self-regulated, compliance with Precept 13 is a critical element in ensuring
that our members meet the standards we
have established. And because actuaries
understand better than those outside the
profession what might constitute a violation of the code, self-reporting is the best
vehicle for policing ourselves.
So what is it that Precept 13 requires
us to do? Precept 13 says, An Actuary
with knowledge of an apparent, unresolved, material violation of the Code by
another actuary should consider discussing the situation with the other actuary
and attempt to resolve the apparent
violation. If such discussion is not attempted or is not successful, the Actuary
shall disclose such violation to the appropriate counseling and discipline body of
the profession, except where disclosure
would be contrary to Law or would divulge Confidential Information.
Precept 13 also contains two annotations. The first deals with materiality and
says in part, A violation of the Code is
deemed to be material if it is important
or affects the outcome of a situation.
The second explains that an actuary is
not expected to discuss the violation
with the other actuary if either is prohibited by law from doing so or is acting
in an adversarial environment involving
the other.
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Up to Code CO NTI NUE D
handling a situation in which there has

been an apparent violation of the code
are very different. It can be awkward for
all parties involved. Overcoming our ingrained aversion to turning others in is
difficult. And many simply arent comfortable with that type of conflict.
From time to time, members of the
Actuarial Board for Counseling and Discipline (ABCD) get requests for guidance
from actuaries who are faced with possible Precept 13 situations. While each
instance is unique, we find that many
possible violations of the code can be
resolved by speaking with the other actuary. That discussion might even lead
to better understanding by both parties,
especially when some aspect of professional judgment has been involved. In
some instances, the discussion leads to
clarification of the issue or application of
the code or an actuarial standard of practice (ASOP), and the situation is resolved.
But what are your options if a discussion doesnt take place? Note that
Precept 13 doesnt require you to talk
with the other actuary. Annotation 13-2
says an actuary is not expected to discuss the potential violation if prohibited
by law or if an adversarial relationship
exists with the other actuary. You also
can decide that you simply dont want to
have the conversation. Or perhaps you
did talk with the other actuary and matters werent resolved to your satisfaction.
The reason doesnt matter here, but
Precept 13 clearly states that the actuary
shall disclose the violation to the ABCD if
the discussion didnt occur or was unsuccessful. And, it should be noted, failure to
comply with the requirements of Precept
13 could be a violation of Precept 1, which
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2 0 1C O N T I N G E N C I E S MAY | JUN.14
states An Actuary shall act honestly,

with integrity and competence, and in a
manner to fulfill the professions responsibility to the public and to uphold the
reputation of the actuarial profession.
Fortunately, the Academys Council
on Professionalism in December 2013
published a paper on dealing with Pre-
Overcoming our ingrained

aversion to turning others in
is difficult. And many simply
arent comfortable with that
type of conflict.
cept 13 issues, The Application of Precept
13 of the Code of Professional Conduct.
The discussion paper doesnt provide
guidance like an ASOP but provides
thought-provoking ideas from fellow
actuaries on ways to comply with this
difficult precept. The paper includes an
infographic that depicts the Precept 13
process. The paper also offers examples
and attempts to better describe the terms
apparent, unresolved, and material.
Whether or not you are facing a Precept
13 situation, I would urge you to take the
time to read this paper, which is available
at www.actuary.org/files/Precept_13_
Discussion_Paper_FINAL121913.pdf.
While it may be difficult to apply in
practice, Precept 13 is a cornerstone to
the structure of the U.S. actuarial profession. We all need to be aware of its
requirements. And, as always, if you want
to discuss a Precept 13 situation in confidence, please reach out to a member of
the ABCD. You can find us on the ABCDs
website, www.abcdboard.org/.
J O H N PU R PL E, a fellow of the Casualty
Actuarial Society, a member of the
Academy, and a member of the Actuarial
Board for Counseling and Discipline, is a
part-time actuary with Risk & Regulatory
Consulting LLC in Farmington, Conn. He is
a former regulator with the Connecticut
Insurance Department.
9/26/11 10:07 AM
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Black
Warrior
A BUFFALO SOLDIER LOOKS BACK
By Ivan J. Houston
with Gordon Cohn
Editors Note: Academy

member Ivan J. Houston
enlisted in the U.S. Army
at the age of 17 in 1943
and served as a member
of Combat Team 370
of the 92nd Infantry
Division of the U.S. 5th
Army. Also known as
the Buffalo Soldiers, it
was the only AfricanAmerican division
to fight in Europe
during World War II.
Houston, who was
chief executive officer
of Golden State Mutual
Life Insurance Co. from
1970 until his retirement
in 1990, wrote about
his experiences as a
Buffalo Soldier in his
book, Black Warriors:
The Buffalo Soldiers
of World War II
(iUniverse, 2009). What
follows is excerpted
from that book.
NO SURVIVING MEMBER of Combat Team 370 of

the 92nd Buffalo Division will ever forget Aug. 2324,
1944, the night we prepared to enter combat for the first
time. Assembled on the south bank of the Arno River
near Pontedera, Italy, not far from Pisa and the Ligurian Sea, we were a single untested African-American
infantry regiment in a racially segregated U.S. Army,
poised to fight against the retreating battle-wise forces
Men of the 92nd Division
crossing the Arno River,
of Germanys 16th Panzergrenadier Reichsfuehrer DiviAugust 1944
sion under the overall command of Field Marshal Albert
Kesselring. Once Hermann Grings deputy, Smiling Albert had commanded
Germanys air fleets during the invasion of France and the Battle of Britain in
1940 and later served as Gen. Erwin Rommels co-director of Germanys North
African campaign. Acknowledged as one of the ablest strategists in the German
high command, Kesselring was in Italy to direct a last-ditch defensive effort for
a dying army. The Germans had lost Rome to the Allies just 60 days before and
had retreated north to a deeply fortified position known as the Gothic Line; this
position stretched 170 miles from the Ligurian Sea east across the Apennine
mountains that form the spine of Italy to the Adriatic.
Our objective as the 370th Regimental
Combat Team was to cross the Arno River
and break through the Germans Gothic Line,
Field Marshal Kesselrings last major line of
defense in northern Italy.
The move to the front through small villages was quite emotional. The Italians knew
we were going to fight the dreaded Germans
and that some of us would not come back.
They threw flowers at our vehicles. They
handed flowers and wine to those of us riding in the vehicles.
Company I, under its commander, Lt. Jesse Jarman, on the left, with its command post
at Cascina, reported enemy activity around
an area designated Outpost 4. In the firing
that followed, Platoon Sgt. James E. Reid of
Company I, with whom I had played cards
and passed idle hours only days before as we
crossed the Atlantic, was wounded and later
died, thus becoming the first fatality of the 3rd
Battalion, the first battle casualty of the 92nd
Division, and the first African-American in
the European theater of war to die in infantry

To the Italian people
they liberated,
their skin color was
less important than
their bravery and
sacrifice under fire.
April 1945:
The author
on leave
in Rome
A combat patrol attacks an

enemy machine-gun nest
just 300 yards distant.
each community seemed to grow as the morncombat. Just like that, someone I had known
ing progressed. At a hamlet just north of the
was gone. There was much confusion during
Arno, the citizens greeted us with more cries
our first night in combat. A password to be
of Viva Americani! Buongiorno! and phrasused each night was given to every member of
es that were beyond our limited vocabulary.
the 5th Army, but an American woman named
Others just waved happily. Some of the womMildred Gillars, who broadcast German proen could be seen crying. The excited civilians
paganda to the American troops each night as
clung to our vehicles and showered the soldiers
Axis Sally, also had the password somehow.
with grapes, flowers, and fruit. Some ran along,
Her revelations enabled the Germans to infilpouring wine for all who would accept it, while
trate American positions. Axis Sally was to play
others of both sexes and all ages paid their tribmusic for us every nightjazzand if the Gerute with hearty kisses. They had every guy in
Houston and his mother
mans had taken any prisoners from our unit,
in Los Angeles, June 1944
the column feeling like a conquering hero. Even
she was certain to announce it. She would say
today I smile and feel good when I recall those
things like, Give up your arms, and Why
scenes. Here were white Italians greeting African-Americans as
are you fighting? We found her jabber entertaining, never
liberators and showering us with love, while in our own country
demoralizing.
we remained second-class in all respects.
It was during the assault on Ripafratta on Sept. 4 that we
Viva Americani!
learned
that the noise and dust generated by our tanks were
On Sept. 1, 1944, Combat Team 370 crossed the Arno River,
the cause of the heavy German fire. Infantrymen learned to stay
which flows between Pisa, with its famous leaning tower, and
away from our advancing tanks. As soon as our tanks appeared,
the Renaissance city of Florence.
we knew that we had to get some shelter because the Germans
As the 3rd Battalion began its offensive, we moved through
were going to start firing at the tanks. They could hear them from
the villages and towns of Lugnano, Uliveto, Caprona, and Asciaa considerable distance or probably see their dust. All kinds of
no, all on the north side of the river east of Pisa. All along the way,
artillery would come flying in if a tank was anywhere near us.
hundreds of starving and cheering Italians surrounded our veThis created a dilemma for those troops attacking with tanks
hicles. They threw flowers at us and shouted, Viva Americani!
since tanks and infantry attacked as a team. The death of Maj.
They had been living behind German lines for months without
Aubrey Biggs, the executive offer who was with Company I as
adequate food. Even though they were allies of the Germans,
it assaulted Ripafratta, was a consequence of this kind of teamthey did not like the Tedeschi, the Italian word for Germans.
work. Major Briggs was the first white officer killed in battle.
Except for a few fascists, most of the people we encountered
Also, during the battle for Ripafratta, Jumbo Joe Fry, 1st sergeant
were truly happy to see us: They were free. Celebrations in
of Company K, showed outstanding leadership
and later received a battlefield commission. Fry
was from Pennsylvania.
Our entire battalion felt the weight of enemy artillery fire that day. We took more than
500 rounds. I dont think there was an hour that
passed from the time we went on line in August
until the war ended when there was not artillery
fire coming in or going out. We could always hear
the artillery passing overhead and the hissing of
the incoming shell. Then, of course, there was
the explosion, and sometimes when it was close
we could feel the debris from it. Mortars were
different: You never knew where they were coming from. They would just start exploding around
you.
My father had been an officer in the 92nd DiSept. 1, 1944: Two
columns of Company
vision artillery in France during World War I. He
I, 3rd Battalion,
had told me that artillery fire overhead sounded
370th Regiment,
ford the Arno River
like a freight train. He was right.
unopposed, as the
I was in the temporary command post in a
5th Army advances
very
large villa when we were shelled 127 times
against the Germans.
COU RTE SY OF U.S. NATIONAL A RCHIVES
Black Warrior C ONT IN UE D
Arno River
little Spanish, a little Italian, and Portuguese. The Brazilian commander and I talked and finally clarified our situation.
Mounting Casualties
SH UTTERSTOCK
Assembled on the south bank of the Arno River

near Pontedera, Italy, not far from Pisa and the
Ligurian Sea, we were poised to fight against
the retreating battle-wise German forces.
(I counted), hits and near misses, by German artillery. Two very

large rounds from German 11- or 15-inch railroad guns at Punta
Bianca, a few miles to the northwest, fell on the soft ground in
front of the house but did not explode. When the shelling stopped,
I went outside and saw the cylindrical holes the shells had created. Had they exploded, everyone inside would have been killed.
By 0900 hours a handful of brave men of
Company L fought their way uphill to the castle.
One of them, Sgt. Charles Schoolboy Patterson
of Fort Wayne, Ind., rushed from cover, throwing hand grenades. He tossed a grenade into a
machine-gun emplacement and then snatched
a German machine gun from the site. Two other
guns were destroyed, but fire was still coming
from above the castle. Company K could not
assist because they were pinned down by five
machine guns hidden in deep emplacements on
the crest of the hill. Patterson, who won a Silver
Star for his gallantry, was an ASTP alumnus, the
Army Specialized Training Program that sent
enlisted men who scored high on the Armys General Classification Test back to college to become engineers, doctors, etc.
The army stopped this program in March 1944, sending all of us
to infantry divisions. After the war, Patterson moved to the San
FranciscoOakland area and became a successful businessman.
The next day a company of Brazilians arrived, and after a
linguistic tangle that involved everyone in the command post,
we agreedin English, Portuguese, Italian, and Spanishthat
this company would relieve Company K.
Relief by the Brazilians was almost comic. I was the only
member of the battalion headquarters staff who spoke some
Spanish and a little Italian. The Brazilian commander spoke a
The 3rd Battalion had succeeded in breaching the famed German fortifications of the Gothic (sometimes called Green) Line.
The men of the 3rd Battalion moved quickly and pressed the
retreating Germans. We surprised them with our ability to move
fast and maneuver our vehicles over impossible terrain. The
Germans continued to demolish the road before us.
After just over five weeks of combat, Combat Team 370 had
suffered 263 casualties: 19 dead, 225 wounded, and 19 missing.
There were also a number of noncombat casualties, including
the sick and those who were otherwise injured.
At the north end of Pietrasanta, near a town called Querceta,
there was a factory housing huge slabs of Carrara marble that
had been quarried from the mountains above. As I headed to
the battalion outpost just north of Querceta, the Germans began shelling. I ducked into the factory as the shelling continued.
When the slabs of marble began getting hit, the shards of stone
struck like shrapnel and the shelling became even more dangerous. I got out of there in a hurry.
In Pietrasanta we relieved a British unit during a period of
heavy shelling by the Germans. It was afternoon, and despite
the bombardment, the British paused for tea. I was invited to
join them as the area around us seemed to explode, yet none of
us was hurt or even excited during that curious
and surreal respite.
Mount Cauala dominated Seravezza, and
every move that our troops made in the shattered town was visible to the enemy in the hills
above. Medium and heavy artillery raked the
buildings at regular intervals, and small-arms
fire swept the streets if men appeared. Careful
reconnaissance was made for observation posts
and approaches to the river crossing, and company commanders were given the plan of attack.
Company I would attack Mount Cauala on the
right, Company L in the center, and Company K
on the left. K Company would lead out, carrying
the telephone wire for communication.
With the coming of daybreak, the Germans had begun to
counterattack on the mountain. Bill Rich, a corporal I knew in
K Company, told me when he came off the hill later that morning, the Germans had kept coming despite our heavy fire. He
thought they were fanatics.
German mortar fire and grenades could not dislodge our
men, and they stuck to their position throughout the afternoon
despite dwindling ammunition supplies. Pvt. Jake McInnis of
Company K was one of the mainstays in this defense, personally
killing over a dozen Germans with his Browning automatic rifle
before being knocked out by a concussion grenade. He was taken
MAY | JUN.14 C O N T I N G E N C I E S 2 5
A C onversation
with
Ivan Houston
The Serra River in Seravezza, Italy, at the point where Houston crossed
with the ammunition detail in October 1944. Mount Cauala rises
sharply on the right. This photo was taken 58 years later, on
Oct.16, 2002.
to the rear but returned days later. His stand that day earned
him the Silver Star.
I had volunteered for the ammunition supply detail with about
a dozen men. I carried a metal box of ammunition in each hand.
The boxes were rectangular and weighed about 25 pounds each.
I loosened the sling on my M-1 rifle and slung it over my back.
The first time I saw the Germans up close and shooting at us was
at Seravezza. As we approached the hill, we looked up and could
see a German machine gun raking our position. There were two
German soldiers manning the gun, and our fire hit one. The other
carried him away, and we continued toward our goal. When we
reached the base of the hill, the Germans unleashed a tremendous
artillery barrage. We crouched for a time and then continued on
our way. Halfway up the hill we encountered more machine-gun
fire and mortars. Shrapnel was flying all around, and some of it,
quite hot, landed on my clothes, burning through to the skin.
Some in our detail were hit. The detail could not continue and
returned to the base of the hill. We had failed in our mission to
supply ammunition, and soon other men from the rifle companies
were coming off the hill. It became a mess. I will never forget the
smell of burning gunpowder as the shells exploded all around us.
I lost my appetite for several weeks after this experience. For a
while I thought I had been gassed; however, it was the burning
cordite that came from the exploding shells that had made me ill.
During the battle for Seravezza a large number of the battalions officers and enlisted men were killed, wounded, or listed
as missing in action. Most of those listed as missing were later
confirmed as killed in action. Lt. Lionel Ladmirault of Company
I, an African-American from Louisiana with blue eyes, blond
hair, and white skin; Lt. Ralph Skinner of Company L; and Pfc.
Hugh Portee were killed in action. Lt. Skinner, although mortally wounded, continued to lead his men against a German
counterattack until he died. He was awarded the Silver Star
posthumously. Pfc. Portee was near me during our effort to
The changes that I have

witnessed since joining
the company in 1948 have
been truly amazing. Nearly
all of our policyholders
were African-Americans,
working-class individuals
who were serviced by
agents going door to door in
segregated communities
Yet until the late 1960s,
African-Americans were
employed by life insurers
mostly for marginal jobs
janitor, messenger, etc.
(New York and some of the
New England states with
Fair Employment Practices
Commissions may have
been the exception.)At
Golden State, all of our
employees were AfricanAmerican, and most had
a college education.Our
operation was well run and
highly efficient.
In 1948, when I
started my career, the
only major insurance
association that admitted
black companies was the
Life Office Management
Association, which was
then headquartered in New
York. It wasnt until the late
1950s and into the 1960s that
African-American insurers
were admitted to the other
major life insurance trade
associations.
During the 1950s, there
were about 60 black life

insurance companies
of various sizes.Most
were in the South.These
companies had formed the
National Negro Insurance
Association (NNIA) in 1922
(the name was later changed
to the National Insurance
Association). The NNIA met
annually at the home office
of one of its larger member
companies, and until about
1960, the hosting company
would have to struggle to
find housing for meeting
delegates because hotels
refused to accept AfricanAmerican customers.
(The National Insurance
Association no longer
exists, and most of the
companies that were a part
of that organization have
been merged into larger
companies in the industry.)
With the passage
of the 1964 Civil Rights
Act, major life insurance
companies began to hire
black employees and agents.
While this was good for
them, our company began
to lose outstanding recruits
and other employees. It
was difficult to maintain
competitive wages and
benefits. To maintain a
quality workforce, we
even undertook reverse
integration.
IVAN J. HOUS TON
After graduating from college, you went to work at Golden

State Mutual Life Insurance Co., which was founded in the
1920s to assist African-Americans who were unable to
purchase life insurance. Describe some of the changes that
you witnessed over the course of a long career in insurance.
You qualified as an actuary at a time when the profession

wasnt particularly diverse. What changes have you seen in the
actuarial profession over the course of your career?
Youve been active in numerous civic and religious

organizations, particularly in Los Angeles. To what do you
attribute your lifelong involvement in public service?
When I first got involved

in professional actuarial
organizations, I saw few
women and hardly any
African-Americans. That
has changed, especially for
women, but I still dont see a
significant number of AfricanAmericans.
The International
Association of Black Actuaries,
of which I am a member,
is making a real effort to
recruit African-Americans
to the profession. I received
a Lifetime Achievement
There are many reasons

for becoming involved
in civic and religious
organizations. First you must
like the organization and
its mission.You must also
determine what you have to
offer and what you can gain
frombeing involved.
I was active in life
insurance industry
organizations, even serving
as chairman of the Life Office
Management Association
(LOMA), because they were
a great professional resource
for me and my employees. At
one time I was president of
the Los Angeles Actuarial Club
because I felt I had something
to offer as a company actuary.
I volunteered with the Los
Angeles Urban League because
it was devoted to preparing
Award from the International

Association of Black Actuaries
in 2008 because I was among
the earliest black actuaries
in this country. They flew
me to their convention in
Washington to receive the
award.The room was full of
African-American actuaries
and actuarial students. It gave
me a wonderful feeling just to
see their numbers and to know
that these professionals and
young students are pursuing
what I think is a great career.
How did your experiences fighting in Italy help you as you

moved forward in a long and successful career as an AfricanAmerican businessman?
Fighting as an AfricanAmerican soldier in the
infantry in Italy was an
experience that is forever
engraved in my mind. I have
said to my family and friends
that nothing worse could
ever happen to me.Yet, for
some crazy reason, I learned

much about people, about
suffering, about being happy,
and about being proud of
accomplishments in the face
of tremendous odds. You
learn there is always a way
ofattaining your goal.
African-Americans for jobs.

I was involved in the Los
Angeles Area Chamber of
Commerce and the California
Chamber of Commerce
because they were engaged in
the politics of the city and the
state in which I worked, and
political decisions always have
an effect on business.
Since my retirement, Ive
become a member of the
board of trustees of Catholic
Charities of Los Angeles.Since
I no longer have a company
to be concerned about, I can
now focus on those who are in
much needthe poor and the
homeless.
Houston at the
Cinquale Canal on the
western edge of the
Gothic Line.
Official Recognition
On Oct. 17, the regimental commanding officer reported that Maj. Gen. Edward M. Almond would
inspect the battalion at 1300 hours. Maj. Gen. Almond (1892-1979), who was the commanding officer
of the 92nd Infantry Division, believed in segregation and opposed integration of the armed forces.
Maj. Gen. Almond appeared promptly and
marched up and down our formations. Col. Clarence W. Daugette and each company commander
went with him. The general stopped in front of me
and asked how long I had been with the battalion.
He talked to my commanding officer, Capt. Hugh D.
Shires, and with Col. Daugette and ordered them to
award me the Combat Infantrymans Badge for exemplary conduct in action. I guess the award was for
trying to get ammunition onto the hill above Seravezza and for surviving almost two months of continuous
combat. At any rate, I did receive the much-soughtafter badge and $10 more in pay each month. After the war, all
who had received the Combat Infantrymans Badge were entitled
to a Bronze Star upon request. I received my Bronze Star medal
years later from the War Department.
On Nov. 4, 1944, Combat Team 370 was dissolved and returned to the 92nd Infantry Division. Col. R.G. Sherman,
commanding officer of the combat team, issued the following
General Order:
As this Combat Team passes into history, I, who have had
the privilege of commanding it, desire to review, with you,
some of the highlights of its brief, but extremely active life.
Consisting of selected officers and men, this Combat Team
was designated for immediate combat duty in an active
theater and sailed from the United States, 15 July 1944,
for the Italian Theater. In addition to its Combat Mission,
Combat Team 370 was charged with the duty of preparing
the way for the remainder of the 92nd Infantry Division,
soon to follow in our footsteps.
Three weeks after landing in Italy, Combat Team 370,
then a member of the famous 5th Army, found itself fighting at the front as a team-mate of the old and experienced
1st Armored Division. Never have two units worked more
in harmony or with better resultsacross the Arno River
over Mount Pisanointo the Gothic Line defenses near
Bagni di Luccaarmor, infantry and artillery, each assisting
the other, while their respective supply units, also working
Right, 92nd Division troops

enter newly liberated Genoa.
Below, members of a mortar
company of the 92nd Division
pass ammunition to bombard
the Germans. The company is
credited with liquidating several
machine-gun nests.
U.S. NATIONAL ARCHIVES
supply ammunition at Seravezza. I knew he had been hit in a

period of heavy fire, but I was unaware until later that he had
died. The battalion suffered 70 casualties in just one day, and
there were scores of men suffering from battle shock and fatigue.
I was probably in shock but did not know it.
together, kept the assault echelons well cared for in food,

ammunition and other essentials to combat.
The record made by Combat Team 370 is enviable and
is one to which we, as the first colored Combat Team in the
European Theater, can well point with pride.
Men who were killed in action and could be identified became the responsibility of the regiments graves registration
officer. His responsibility was to arrange for temporary burial.
There would be every effort to identify the body and to send it
back to temporary burial sites well behind the lines. Later those
men who had died in action were gathered, and their burial
place became the U.S. Military Cemetery in Florence.
Today, that cemetery honors 4,402 soldiers, sailors, and airmen. I have been there three times, most recently in 2013. Few
places I know of are more beautiful than Tuscany, and in a tiny
corner of that stunning region of Italy lie 400 African-Americans,
descendants of slaves, who marched, fought, and died fighting and
defeating the great evil of Nazi Germany. The blood of Buffalo Soldiers mingles in historic soil with the blood of the ancient Romans.
The names of another 1,409 men fill a Wall of the Missing.
One of them was the last African-American infantry officer killed
during our tenure in combat. Why his body is listed as missing in
action I dont know. That was Lt. John M. Madison from Company I, winner of the Silver Star, Bronze Star, and Purple Heart.
He is listed on the wall as missing in action, yet he appears in our
battalion journal as wounded then killed on April 5, 1945.
D ocumenting
Buffalo Soldiers
U.S. MI LITARY CEMET ERY PHOTOS BY DI ANE AND BU D SCHWARZB ACK
In his book, Black Warriors: The

Buffalo Soldiers of World War II, Ivan
Houston describes his battalions Sept.
4, 1944 capture and liberation of the
15th-century Villa Orsini. The current
owner of the villa, Mattea Piazzesi,
came across Houstons book when
she was updating the website for
the bed and breakfast that she runs
there. Piazzesi contacted Houston
about using excerpts from his book
and invited him to visit the villa, now
named the Villa LaDogana. Houston took her up on the
offer and, accompanied by his family, returned to Lucca in
September 2012. He was honored in nine towns and villages
that his division had liberated in World War II.
I was astounded at the reception and gratitude given to
me by the Italians in many villages and towns in Tuscany,
Houston said. They kept saying that the Buffalo Soldiers
African-American infantry troopsgave them their freedom!
During that trip, Houston discovered that the city of
Lucca commemorates its World War II liberation by Buffalo
Soldiers every year in September. In 2013, Houston returned
to lead the celebratory procession.
Accompanying him on that trip was a filmmaker, who
shot footage for a documentary about the Buffalo Soldiers of
World War II. A 12-minute trailer for the documentary, which
is expected to be completed in 2014, can be viewed at
www.pacificfilmfoundation.org.
The armed forces in which I served

relegated most African-Americans
to service units in support of the
combat forces but never really
wanted to place them in direct
combat. We of the 92nd Infantry
Division were one of the few
exceptions. We fought the Nazis
and the Fascists with honor, faceto-face in the rugged mountains
of Italy. We suffered hundreds of
Wearing the sweater
casualties and in the end defeated
vest Grandma made
the Nazi proponents of a master
in December 1944
race and their allies. Yet the heart of
America did not change toward its
African-American soldiers or its African-American citizens.
When we returned, we encountered the same segregation
and discrimination that had existed since the end of the
Civil War. Nothing had changed.
Ivan HoustonBlack Warriors
My last visit to the Florence cemetery occurred in the process of making a documentary film about my book and the
remarkable gratitude the Italian people of Tuscany have shown
toward the Buffalo Soldiers (see left).
Unheralded Heroism
The early days of December were clear and cold. The 3rd Battalion was ordered almost 30 miles east and attached to the 6th
South African Armored Divisions 11th Armored Brigade at Castel di Casio. This sector was deep in the Apennines, northwest
of Florence and north of Pistoia along Highway 64.
The South Africans had fought with the British 8th Army
and defeated Field Marshal Erwin Rommels Afrika Korps in
the North African desert in 1943. We remained alongside the
South Africans through December and January. At first we were
housed in a castle, but we later moved to a small factory and then
to a farmhouse in the mountains.
The 3rd Battalion was now operating alongside Brazilians
and South Africans as part of an international force.
On Dec. 23, we saw the first heavy snow cover the North
Apennines, and the air was cold and windy. Some of our troops
were issued white snow uniforms. It seemed unreal to me that
African-American troops from the American South were wearing
snow-white uniforms and fighting in 10-foot-deep snowdrifts.
From our position 30 miles to the east, along Highway 64
leading to Bologna, we learned that the Germans had attacked
our division before dawn on Dec. 26 at several points on a sixmile front along the Serchio River.
During a German attack that day, 26-year-old Lt. John R. Fox,
an artillery observer with the 366th Infantrys Cannon Company, was killed after calling down artillery fire on his observation
post, the second floor of a house in Sommocolonia. The 366th
The grave of Capt.
Jesse Jarman,
370th Infantry
Regiment, 92nd
Division
The American Military Cemetery in Florence, Italy, 2007
PROJ ECT GU TENBERG E BOO K OF INT EGRATIO N OF THE ARME D F ORCES 1 9 40 -1965
Infantry was the regiment commanded

on the Ligurian Sea, and I went through the city several times
by African-American officers that Maj.
without noticing the water. As a result of the shrapnel wound, I
Gen. Almond did not want to accept
was awarded the Purple Heart.
into the 92nd Division. Fox was recommended for the Distinguished Service
Fighting Fascism and Jim Crow
Cross at the time, but his widow did not
At 1920 hours on May 2, the battalion received word that the war
receive it until May 15, 198238 years
in Italy was over. The battalion journal notes, Finito la Guerra
later! The posthumous citation noted
in Italy. The night the war ended, there was much celebration
that his body was found among those of
in battalion headquarters and even more out in the streets of
approximately 100 German soldiers.
Pontremoli. Partisans and others were firing guns, and crowds
Another 15 years passed before Presiwere drinking wine. The whole scene was wild. The Italian
dent Bill Clinton awarded him the Medal of Honor.
citizens of Pontremoli called for our commanding officer, Col.
There were many other instances of heroism. On April 7, we
Daugette, to come out onto the balcony of our headquarters and
established battalion headquarters at Querceta; the 3rd Battalion
greet the civilians. The colonel was somewhat reluctant to do
was put in regimental reserve. We heard that Lt. Vernon Bakthat because the Italians were really wild at the end of the war
er, Company C, 370th Infantry, in leading his weapons platoon
and were shooting everywhere in their jubilation. In fact, some
on April 5 and 6, had encountered the enemy near Massa and,
of them shot against walls, and the bullets ricocheted and hit the
in a series of heroic actions, had killed nine German soldiers;
person who had fired. However, Col. Daugette did eventually
destroyed three enemy machine-gun positions, an observation
step out onto the balcony, where he was cheered passionately
post, and a dugout; then covered the evacuation of several of his
by the Italians. Just a few days later, on May 7, at 1630 hours,
wounded comrades. Later we learned that Lt. Baker had actually
I noted in the battalion journal, The war in Europe is over!
fought his way into Massa and radioed headquarters that he was
During the war, the performance of the 92nd Infantry Divithere. He was not believed and had to fight his way back to our
sion had been criticized by senior officers. That criticism was
lines. For his action that day, Baker received the
answered by Lt. Col. Marcus H. Ray, who comDistinguished Service Cross. Fifty-two years later,
manded the 600th Field Artillery Battalion. Ray,
he was awarded the Medal of Honor by President
an African-American, in speaking of young AfriBill Clinton.
can-American officers said, Therefore, I feel that
Early on the morning of April 9, I moved with
those who performed in a superior manner and
other battalion headquarters personnel by truck
those who died in the proper performance of their
across the Cinquale Canal. We crossed on a Baiassigned duties are our men of the decade and all
ley bridge built by our engineers and moved into a
honor should be paid them. They were Americans
very large villa. As we approached the villa, we saw
before all else. Racially, we have been the victims
fresh vehicle tracks, and inside we found food still
of an unfortunate chain of circumstances backon the table. Apparently the Germans had left only
grounded by the unchanged American attitude as
Lt. Col. Marcus Ray
minutes before. As I was standing in the doorway,
regards the proper place of the Negro [sic]. . . .
(shown here as a
facing inward, a loud explosion blew me 10 feet
I believe Col. Rays comments are an excellent
civilian) commanded
inside. Explosions continued all around. I was on
summary
of what happened to the 92nd Division.
the 600th Field
Artillery Battalion
the floor and felt my entire back stinging. I slowly
However, the colonel wrote as an artillery officer,
of the 92nd Infintry
examined myself. All my arms and legs were still in
and I write as a (then) corporal in the infantry
Division.
place, but I discovered that a small piece of shrapwho was present when the actions that resulted
nel had entered my right shoulder. The battalion medical staff
in much of the criticism occurred. Ray lays much of the blame
was close by, so I took myself to the medical officer, Capt. Young.
on the unchanged American attitude concerning the proper
He took off my combat jacket, shirt, and undershirt, gave me a
place of African-Americans.
shot of tetanus, and poured sulfa powder over the wound after
His comment is correct but polite. I agree with those Africanremoving the shrapnel. Then he wrapped me up and told me to
American leaders at the time who said it was Jim Crow and not
get dressed. I looked around the large medical aid station and saw
a lack of education or adequate training that affected our diviwounded men lying all over the floor. They had been brought to
sions performance. We were fighting the Nazis and Italian Fascists
the aid station and just left there. The more seriously wounded
with one hand and Jim Crow with the other. Many of us from the
were later evacuated while others like me were sent back to their
North, East, and West had never before encountered the kind of
units. That day I looked out from the aid station and was amazed
racial discrimination and segregation we faced in the army. Solto see the Ligurian Sea. We had fought very close to the sea for
diers from the South knew what segregation and discrimination
many months, but I did not know it was right there. Viareggio is
were really about, and many of those rural young men with low
PUR PLE HEAR T: SHUTTER STO C K
SHUTTER STOC K
The seaside resort of Viareggio, Italy, has miles of sandy beaches, shops,
and restaurants.
test scores who formed our ranks felt they were often being sent
on suicide missions. We were hobbled by stragglers, yes, but we
fought on and in the last weeks of the war achieved a remarkable
victory with our 65-mile march through the Apennines from Barga
to Pontremoli. We defeated the Nazis and Italian Fascists, causing
thousands of them to surrender, but we did not conquer Jim Crow.
In 1978, Philippa, my wife, and I visited Italy for the first time
since the end of the war. We rented a car in Paris and drove to
Italy. Naturally we stayed in Viareggio, since that had been the
headquarters of the 92nd Division.
Walking in the little shops that dot the beachside, we

came to an artists studio. Philippa, an artist herself, said,
Lets go in. The artist was there; and as we looked around,
I said to him in Italian, I was here in 1944 and 1945. He
was a big, gruff-looking Italian, and he said, Tu Buffalo.
I said, Si. He started hugging and kissing me with the
great emotion common to Italians. He opened his wallet
and pulled out an old card that identified him as a partisan.
His name was Bruno Tintori, and he described how he had
helped us carry ammunition over the mountains. He took
us next door to a bar, introduced us to his friends, and we
talked and drank grappa the rest of the afternoon.
Bruno Tintori is now dead, but I later learned that
he had become one of Italys most famous contemporary artists. Bruno Tintoris expression of gratitude for what the Buffalo
Soldiers had done for Italy, fighting in the rugged North Apennine mountains and freeing them from the yoke of Fascism and
Nazism, will always be remembered. To the Italians we were
first class. To the Italians we were heroes.
I V AN J . H O U S T O N , a member of the Academy, retired in
1990 as the chairman of Golden State Mutual Life Insurance Co.,
in Los Angeles. He is the author of Black Warriors: The Buffalo
Soldiers of World War II.
Drilling
own
D
A
Demographic and Geographic
B y Cra i g Cop e la n d
S AN INCREASING NUMBER OF BABY BOOMERS approach
or surpass the traditional retirement age of 65, the financing of retirement in the
United States is forcing its way into the national zeitgeist. Boomers, born between
1946 and 1964 and now ages 50 to 68, currently total slightly more than 75 million
people, according to the U.S. Census Bureau. As it has from birth onward, this
cohort will alter the nations demographics as it continues to age. The resulting
sharp rise in the U.S. elderly population will make it much more expensive to support programs,
such as Social Security, that are geared for the elderly.
Under current law, a retiree beneficiary turning 65 can
expect Social Security benefits to replace approximately
30 percent to 50 percent of preretirement income, depending upon his or her earnings history. (For families
with one earner meeting the spousal benefit criteria, these
replacement rates would increase by 50 percent, because
the nonworking spouse could qualify for a benefit equal
to 50 percent of the working spouses benefit. Therefore,
on a family basis for one-earner couples, the replacement
rates would range from about 45 percent to 75 percent.)
As a result, if workers hope to maintain their preretirement standard of living even without any changes
in Social Security benefits, they may need other s ources
of income in retirement. Because an important other
source of income is an employment-based retirement
plan, understanding the percentage of workers currently
participating in those plans provides critical insight into
retirees future financial status.
SHUTTERSTOCK
Where you live, your gender, race, and educational level,

and who you work for are all predictive of whether you
will participate in an employer-sponsored pension plan.
Differences in Retirement Plan Participation

An analysis of participation levels by workers in public- and
private-sector employment-based pensions or retirement plans,
based on the U.S. Census Bureaus March 2013 Current Population Survey (CPS), yields interesting findings about worker and
employer characteristics, as well as geographic locations, that
appear to predict retirement plan participation.
Demographic Characteristics
Among the 156.5 million Americans who worked in 2012, 76.0
million worked for employers or unions that sponsored a pension
or retirement plan, and 61.6 million participated in a plan (see
Figure 1). This translates into a sponsorship rate (the percentage
of workers working for an employer or union that sponsored a
plan) of 48.6 percent and a participation level of 39.4 percent.
This measure of the workforce, however, contains the unincorporated self-employed and those younger than age 21 and
older than age 64. For wage and salary workers ages 21 to 64
(excluding only unincorporated self-employed, as incorporated self-employed workers are considered wage and salary
workers), the sponsorship rate is 53.4 percent, and the fraction participating is 44.2 percent. Separating these wage and
salary workers into public and private sectors shows that 70.5
percent of the public-sector workers participated in an employment-based retirement plan, compared with 39.1 percent of the
private-sector workers.
Another definition of the workforce that most closely resembles the workers who generally must be covered by an
employment-based retirement plan in accordance with the
Employee Retirement Income Security Act of 1974 (ERISA) is
full-time, full-year wage and salary workers ages 21 to 64. Under
this definition, 60.4 percent of workers worked for employers
sponsoring a plan, and 53.5 percent of the workers participated
in a retirement plan.
The percentage of workers who participate in a retirement
plan increases with age (see Figure 2). For those ages 21 to 24,
16.2 percent participated in a plan, compared with 49 percent
of those ages 45 to 64. Overall, male workers are slightly more
likely to participate in a plan than females, but female full-time,
Drilling Down CO NT IN UE D
FIGURE 1
Share of various workforces working for an employer that sponsored a retirement plan,
and the proportion participating in a plan, 2012
All workers
Worker category total
Working for an employer
sponsoring a plan
Participating in a plan
156.5
76.0
Wage and salary workers

Private-sector wage and
ages 2164
salary workers ages 2164
(millions)
130.4
110.0
69.6
53.3
61.6
57.6
Public-sector wage and

salary workers ages 2164
Full-time, full-year wage

and salary workers ages
2164
20.5
16.3
92.2
55.7
14.6
49.3
100.0%
79.3%
100.0%
60.4%
71.5%
53.5%
43.0
(percentage)
Worker category total

100.0%
100.0%
100.0%
Working for an employer
48.6%
53.4%
48.5%
sponsoring a plan
Participating in a plan
39.4%
44.2%
39.1%
Source: Employee Benefit Research Institute estimates from the 2013 March Current Population Survey
FIGURE 2
Share of specific workforces working for an employer that sponsored a retirement plan
and the proportion participating in a plan, by various characteristics, 2012
and salary workers
All workers
ages 2164
Sponsorship Percentage Sponsorship Percentage
Age
rate
participating
rate
participating Annual earnings
20 or younger
21.3%
4.1%
Less than $10,000
2124
32.9%
16.2%
42.7%
28.7%
$10,000$19,999
2534
47.1%
36.1%
55.2%
45.7%
$20,000$29,999
3544
52.7%
45.4%
60.9%
54.6%
$30,000$39,999
4554
55.5%
49.1%
64.9%
59.7%
$10,000$49,999
5564
55.6%
48.9%
64.5%
60.5%
$50,000$74,999
65 or older
41.4%
31.6%
$75,000 or more
Gender
Male
48.2%
39.8%
58.9%
52.3%
Management, business and
financial
Female
49.1%
38.9%
62.4%
55.0%
Professional and related
Race/ethnicity
Service
White
52.4%
43.3%
65.2%
58.5%
Sales and related
Black
48.4%
36.9%
59.4%
51.0%
Office and admin. support
Hispanic
33.1%
24.4%
41.9%
34.3%
Farming, fishing, and forestry
Other
46.4%
38.5%
57.5%
51.4%
Construction and extraction
Education
Installation, maintenance,
No high school diploma
20.9%
12.0%
29.2%
21.4%
and repair
High school diploma
42.4%
32.8%
53.1%
44.9%
Production
Some college
47.6%
36.7%
61.0%
53.0%
Transportation/material
Bachelors degree
59.4%
51.2%
68.0%
61.9%
moving
Graduate/professional degree
67.4%
61.4%
74.4%
70.6%
Marital status
Fewer than 10 employees
Married
53.8%
46.9%
63.5%
58.2%
1049 employees
Widowed
46.1%
34.9%
61.1%
51.4%
5099 employees
Divorced
51.3%
42.6%
62.1%
54.4%
100499 employees
Separated
41.9%
31.9%
52.5%
43.4%
500999 employees
Never married
39.0%
26.7%
52.8%
42.6%
1,000 or more employees
Work status
Public sector
Full time, full year
57.3%
50.6%
60.1%
53.5%
Full time, part year
Part time, full year
Part time, part year
40.0%
29.8%
25.1%
27.6%
16.4%
8.8%
Source: Employee Benefit Research Institute estimates from the 2013 March
Current Population Survey
Private sector
Agriculture, mining, and
construction
Manufacturing
Wholesale and retail trade
Transportation, utilities,
information, and financial
Professional services
Other services
Public sector

and salary workers
All workers
ages 2164
Sponsorship Percentage Sponsorship Percentage
rate
participating
rate
participating
21.3%
6.6%
25.9%
16.9%
28.1%
14.6%
26.8%
16.7%
41.9%
30.5%
45.1%
34.0%
53.6%
45.0%
57.9%
49.3%
62.4%
55.5%
65.4%
58.8%
68.1%
63.0%
71.7%
66.6%
70.4%
67.0%
74.1%
70.8%
Occupation
57.1%
51.2%
66.3%
61.2%
64.0%
30.8%
40.1%
55.1%
13.8%
32.8%
52.8%
55.1%
21.0%
28.9%
43.2%
8.8%
27.1%
44.5%
72.1%
44.4%
53.1%
65.3%
18.7%
42.8%
61.1%
66.2%
36.3%
45.7%
56.7%
15.9%
37.3%
52.8%
50.9%
42.4%
40.4%
31.9%
59.1%
51.5%
49.7%
43.4%
Employer size
14.0%
11.2%
29.7%
22.7%
44.1%
34.5%
54.2%
42.7%
59.2%
47.3%
64.9%
51.3%
77.6%
68.9%
Sector/industry
43.7%
34.4%
28.7%
23.4%
20.8%
37.5%
52.1%
61.9%
66.4%
73.6%
84.2%
17.7%
31.5%
44.0%
52.9%
57.6%
64.6%
80.2%
55.7%
38.7%
48.2%
33.1%
61.3%
44.1%
55.5%
52.4%
30.9%
47.5%
67.9%
54.5%
64.4%
60.3%
45.6%
58.2%
46.8%
24.3%
77.6%
37.7%
14.8%
68.9%
58.5%
34.3%
84.2%
50.6%
25.9%
80.2%
FIGURE 3
Share of all workers who participated in an employment-based retirement plan,

by work status and gender, 2002 and 2012
70%
Male
Female
60%
50%
56.2% 57.4%
52.5%
49.1%
40%
35.3%
30%
30.2%
30.4%
27.6%
20%
25.3%
18.8%
10%
0%
18.4%
15.4%
12.8%
10.7%
7.5%
Full-time, fullyear worker
Full-time, part- Part-time, fullyear worker

year worker
2002
Part-time, partyear worker
Full-time, fullyear worker
Full-time, part- Part-time, fullyear worker

year worker
2012
9.6%
Part-time, partyear worker
full-year workers participated in a plan at higher levels than did

male full-time, full-year workers.
Being white, having attained a higher level of education, or
being married also are associated with greater probabilities of
participating in a retirement plan. Among white workers, 43.3
percent participated in a plan, compared with 24.4 percent of
Hispanic workers. Twelve percent of workers without a high
school diploma participated in a plan, while 61.4 percent of
those holding graduate or professional degrees participated.
The higher a workers earnings are above $10,000, the more
likely he or she is to participate in a plan. Less than one-sixth
(14.6 percent) of workers who had annual earnings of $10,000
to $19,999 participated in a plan, compared with 67.0 percent of
those earning $75,000 or more. Furthermore, full-time, full-year
workers were by far the most likely type to participate in a retirement plan (50.6 percent versus 27.6 percent for the next highest
work status category). Those working in professional and related
occupations have the highest probability of participating in a retirement plan, at 55.1 percent. In comparison, workers in farming,
fishing, and forestry occupations have the lowest, at 8.8 percent.
Workers of larger employers are more likely to be retirement plan participants than are those of smaller employers (see
Figure2). Among workers of employers with fewer than 10 employees, 11.2 percent participated in a plan. This percentage
steadily increased for each larger group of employers by number
of workers, reaching 51.3 for workers of employers with 1,000 or
more employees. The sectors and industries of the employers also
had an impact on the likelihood of participating in a plan. Workers
in the manufacturing industry and the transportation, utilities, information, and financial industries have the highest probability of
participating, while those in the other-services industry have the
lowest probability. Public-sector workers are significantly more
likely to be participants than are private-sector workers.
FIGURE 4
Share of all workers who participated in an

ermployment-based retirement plan, by annual earnings
and gender, 2012
80%
70%
60%
50%
Male
Female
62.6%
69.3%
46.7%
40%
37.5%
30%
20%
10%
0%
8.8%
11.8%
Less than $20,000
$20,000$49,999
$50,000 or more
Digging Deeper
A number of other demographic breaks also are significant:
GenderFemale workers overall are found to have a lower
participation level in an employment-based retirement plan
than males. However, among full-time, full-year workers,
females have a higher rate of participation. In fact, across
all work-status categories, females were more likely to
participate in a retirement plan than males (see Figure 3).
Furthermore, the proportion of females participating in a
plan is higher than males at each earnings level (see Figure
4). As a consequence, female workers lower probability of
participation in the aggregate is a result of their overall lower
average earnings and lower rates of full-time work in comparison with males.
FIGURE 5
Share of all workers who participated in an employment-based retirement plan, by race/ethnicity,

with Hispanic detail and annual earnings, 2012
70%
60%
50%
40%
30%
White
Black
Other
Hispanic
HispanicNative Born
HispanicNon-native Born
66.1% 66.2%
57.3%
45.2% 44.1%
51.2%
40.2%
37.4%
29.5%
23.1%
20%
10%
0%
61.6%
61.2%
12.1% 11.2%
9.2%
6.1%
7.9%
4.7%
Less than $20,000
$20,000$49,999
$50,000 or more
Race/EthnicityAnalysis
of race/ethnicity shows that Hispanic workers are significantly less likely than both white and
African-American workers to participate in a retirement plan.
However, two important characteristicsbirth location and
average earningsplay into these differences. Hispanics who
were not born in this country have persistently lower probabilities of participating in a retirement plan, while U.S.-born
Hispanics have participation levels closer to those of white
and African-Americans at each earnings level (see Figure
5). Consequently, the overall differences by race/ethnicity
are largely driven by the relative earnings levels between
the groups, except for those Hispanic workers not born in
the U.S., who have lower participation levels regardless of
earnings.
Firm/SizeEmployees of smaller firms, those with fewer
employees, were significantly less likely to participate in a
retirement plan. This holds true for workers at each age group
and earnings level. Even among workers making $75,000 or
more, a considerable disparity existsjust 25 percent of those
in that income category working for the smallest employers
participated in a plan, compared with 78 percent of those
working for employers with 1,000 or more employees.
EducationWorkers with lower educational attainment have
lower levels of retirement plan participation. Educational attainment has a strong positive correlation with earnings, but
across each earnings level those with the least education (no
high school diploma) still had significantly lower levels of
participation than those with at least a high school diploma.
Specifically, 37.6 percent of those without a high school diploma
who were making $75,000 or more participated in a retirement
plan, compared with 71.5 percent for those with a graduate or
professional degree. Consequently, the education level of workers clearly plays a role in the likelihood of participation in a
retirement plan beyond determining earnings levels.
AgeYounger workers significantly lower likelihood of
participating in a plan could be caused by lower incomes.
FIGURE 6
Share of all workers who participated in an

employment-based retirement plan, by age and income,
2012
80%
70%
60%
Less than 45
45 or older
62.8%
66.7%
50%
46.1%
40%
38.9%
30%
20%
15.8%
10%
0%
7.7%
Less than $20,000
$20,000$49,999
$50,000 or more
However, younger workers are less likely to be retirement

plan participants than older workers at each earnings level
(see Figure 6). Its likely that lower retirement plan participation by younger workers is a result of it being a less pressing
issue than of income differences.
Geographic Differences
Certain worker/employer demographic characteristics are associated with different likelihoods in workers participation in an
employment-based retirement plan. Workers geographic locations within the United States are also associated with different
participation levels. Workers living in states in the South and
West, such as New Mexico, Florida, Nevada, Texas, and Arizona,
are less likely to participate in a plan. In contrast, workers living
in Midwestern, Mid-Atlantic, and Northeastern states (Iowa,
Minnesota, District of Columbia, Wisconsin, and Maryland)
have higher participation levels.
Defining Terms
The term sponsorship rate is defined as the
percentage of workers in the specified workforce who worked for an employer or union
that sponsored a plan in a given year for any
of its employees, though not necessarily for
the worker in question. The term percentage of workers participating in a plan is not
synonymous with the standard retirement
plan term participation rate, which is generally understood to mean the percentage of
eligible workers who participate in a plan.
In contrast, the terms participation level or
percentage participating refer to the fraction of the workforce participating in a plan,
regardless of plan eligibility. Consequently,
participation rate is not used.
This holds true for the reported consolidated statistical areas

(CSAs) identified in the CPS, where CSAs Johnson City-Kingsport-Bristol, Va., and Los Angeles-Long Beach-Riverside, Calif.,
which are located in the South and West, respectively, have the
lowest retirement plan participation levels. Workers from the
Appleton-Oshkosh-Neenah, Wis., CSA, which is located in the
Midwest, have the highest participation level.
Parsing Participation
The trend in the percentage of workers participating in an employment-based retirement plan has been essentially stable from
1987 to 2012. The participation level for all workers went from 37.6
percent in 1987 to 39.4 percent in 2012, while the participation level
for full-time, full-year workers went from 58.4 percent in 1987 to
53.5 percent in 2012 (see Figure 7). The share participating across
each demographic category was similarly stable from 1987 to 2012.
Furthermore, the magnitudes between the categories of the demo
graphic variable for the most part also were relatively stable.
The one significant exception to the overall result is the
closing of the gap in the participation levels between male and
female workers. In 1987, the proportion of male workers participating in a retirement plan was 40.9 percent, compared with
33.8 percent for female workers (see Figure 8). This was a gap
of 7.1 percentage points. This divergence gradually closed so
that by 2009, the percentage of female workers participating
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FIGURE 7
Share of all workers who participated in an employment-based retirement plan, 19872012

65%
60%
55%
50%
45%
40%
Full-time, full-year wage and salary workers ages 2164

All workers
35%
30%
1987
1992
1997
2002
2007
2012
FIGURE 8
Share of all workers who participated in an employment-based retirement plan, by gender, 19872012
48%
46%
44%
42%
40%
38%
36%
Male
34%
Female
32%
1987
1992
1997
2002
2007
2012
FIGURE 9
Number of those working for an employer that does not sponsor an employment-based retirement plan and number
of workers not participating in an employment-based retirement plan, by various demographic and employer
characteristics, 2012
Characteristics
Working for an employer not

sponsoring a plan
Not participating in a plan
Working for an employer not

sponsoring a plan
Millions
Total
Self-employed (not wage and salary)
Net wage and salary
Not participating in a plan
(Share of total)
80.5
94.9
100.0%
8.9
9.0
11.0%
100.0%
9.5%
71.6
85.9
100.0%
100.0%
65 years old or older and 25 years old or younger
19.1
23.5
26.7%
27.4%
Not full time, full year
32.6
40.0
45.5%
46.6%
Less than $20,000 in annual earnings
25.1
30.4
35.1%
35.4%
Fewer than 100 employees
40.2
43.6
56.2%
40.8%
exceeded that of male workers. After that year, however, the

disparity returned, reaching a 0.9 percentage point gap in 2012.
Number Without a Plan

To create a complete picture of the employment-based retirement-plan landscape, you need to consider not just the
percentage of workers with an employment-based retirement
plan but also the number of workers who arent participants and
the number of those who work for employers/unions that dont
sponsor a plan. Statistics about the numbers of workers with
certain demographic and employer characteristics who are not
participating in a plan offer important information for gauging
the potential effectiveness of any legislation that is drafted to
target certain workers or exempt others in order to boost retirement plan participation.
In 2012, 80.5 million people worked for an employer/union
that didnt sponsor a retirement plan, and 94.9 million workers
didnt participate in a plan (see Figure 9). This includes the 80.5
million who worked for employers/unions that didnt sponsor
a plan plus 14.4 million who worked for employers that sponsored a plan but who didnt participate in the plan for whatever
reason.
Of these workers, 8.9 million (11.0 percent) were self-employed. Therefore, the number of wage and salary workers who
worked for an employer that did not sponsor a plan was 71.6
million.
Of those 71.6 million, 19.1 million (26.7 percent) were ages 25
or younger or 65 or older. Almost 33 million (45.5 percent) were
not full-time, full-year workers, and 25.1 million (35.1 percent)
had annual earnings of less than $20,000. Furthermore, 40.2 million (56.2 percent) worked for employers with fewer than 100
employees. The percentages arent cumulative because some
workers could fall into more than one of these categories. For
example, 18.4 million of the 40.2 million working for companies
with fewer than 100 employees make less than $20,000 in annual
earnings. And 6.9 million of these employees of small employers are either younger than 25 years old or 65 years old or older.
Macroeconomic Factors Also Matter

The share of workers who participated in an employment-based
retirement plan varied significantly across various worker characteristics and the characteristics of their employers. Being
nonwhite, younger, female, never married; having lower educational attainment, lower earnings; not working full time, full
year, and working in service occupations or farming, fisheries,
and forestry occupations were all associated with lower levels of
participation in a retirement plan. In addition, those working for
smaller firms, private-sector firms, or firms in the other (not
professional) services industry also were less likely to participate
in a plan than their comparison groups. Another factor in the
likelihood of workers participation in a retirement plan was geographic location, with workers in the South and West less likely
to participate in a plan than those in other regions of the country.
While individual factors are important, retirement-plan participation by workers also is strongly tied to macroeconomic
factors such as stock market returns and the labor market. The
stronger macroeconomic conditions of the late 1990s resulted in
higher levels of participation, while less positive macroeconomic conditions of the 2000s led to lower levels of participation.
Regardless of the current direction, this trend has important
implications for workers, because having more opportunities
to participate in an employment-based retirement plan greatly
increases the amount of money they are likely to have available
to them when they retire.
C R AI G C O PEL AN D is senior research associate with the
Employee Benefit Research Institute.
Resources
Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability
Insurance Trust Funds, The 2013 Annual Report of the Board of Trustees of the Federal
Old-Age and Survivors Insurance and Disability Insurance Trust Funds, May 31, 2013.
www.ssa.gov/oact/TR/2013/tr2013.pdf
Copeland, Craig, Employment-Based Retirement Plan Participation: Geographic
Differences and Trends, 2012. EBRI Issue Brief, No. 392, Employee Benefit Research
Institute, November 2013.
VanDerhei, Jack, and Craig Copeland, The EBRI Retirement Readiness Rating:
Retirement Income Preparation and Future Prospects, EBRI Issue Brief, No. 344,
Employee Benefit Research Institute, July 2010.
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ONTINGENCIES could have been the first word

to flash into peoples minds when I told them that
I was preparing to cross the Atlantic Ocean in a
rowboat, solo. I cant say for sure because most
people had just a blank stare, an incredulous look.
As actuaries, we are used to blank stares (what is it
that you do exactly?). As actuaries, we also are used to
visualizing, planning, preparing, and executingexactly
what I did to row an ocean. It took me four years to prepare, the same number of years it took me to complete
my actuarial exams after I graduated from university.
My journey started in July 2004 when a friend invited me for dinner. At some point during the evening,
he said: You have to see what I just bought. We went
in the garage, and he showed me his new toy, a kayak. He told me about his weekend outings, and I said
I would like to try it. Right away, I felt the appeal of
water. I bought my first kayak a few weeks later and began browsing the Internet for interesting stories about
adventures in kayaks. I stumbled upon a book written
by Hannes Lindemann, Alone at Sea. He had crossed
the ocean twice in the 1950s, once in a dugout canoe
and once in a kayak. I became fascinated by the idea
of crossing an ocean in a small human-powered boat.
In March 2010, I read the story of Katie Spotz, a
young American woman who had just rowed solo across
the Atlantic in a high-tech boat. Immediately, I understood that this was how I would make my own crossing.
I started to research additional information. I found
several books written by ocean rowers, including Roz
Savage, Tori Murden, Maude Fontenoy, and Kevin
Biggar. I read 15 books on the subject, leaving some
haphazardly around the house and suggesting to my
wife that she might like to read one.
The big marketing ploy was under way.
The year he turned 60, he realized his dream of
PI ERRE LEVERT
Sauriol, post-journey
Bold Man
and the Sea

rowing 2,600 nautical miles solo across the Atlantic Ocean.
Maple, photographed mid ocean by

Uwe Gehring aboard catamaran
Callisto on Dec. 13, 2013
BY J EA N -G U Y S AU RI O L
Bold Man and the Sea C ONT IN UE D
My first concrete step, because it involved a financial commitment, came when I bought an indoor rowing machine in
September 2010. Later that same year, my wife and I took a
cruise across the Atlantic. As we traversed the waves, we discussed my doing the same in a rowboat.
In November 2011, I went to the Canary Islands. San Sebastian on the island of La Gomera is the starting point for an ocean
rowing race that is held every two years. Initially, I had thought I
would participate in the race, but eventually I decided to do my
crossing in its purest formtaking a boat to the water and simply
leaving. Upon my return from the Canary Islands, I made my
decision: I would row across the Atlantic from east to west using
the trade winds route that Christopher Columbus had followed.
Someone had given me the name of Tony Humphreys as a
person who could help me with all the logistics of ocean rowing. I met Tony at the Dublin airport in August 2012, and we
drove to Dingle on the southwestern coast of Ireland to check
out a boat, Positive Outcome. While I didnt buy Positive Outcome, which already had been rowed across the Atlantic once,
my trip to Ireland gave me the opportunity to get to know Tony.
He became my technical adviser and was instrumental in the
success of my adventure.
My preparations were moving forward, but it was mid-August
2012 and I still didnt have a boat. Ocean rowing boats are custom
built. And while the design has evolved over the years, in practice most of them are the brainchild of Englands Phil Morrison
(there are only a limited number of reputable builders worldwide, and the better ones are in England). Upon my return from
Ireland, I contacted Jamie Fabrizio. Jamie is arguably the best
ocean rowing boatbuilder in the world. He builds only two boats
per year, and he started mine in January 2013. By July 2013, I was
able to take delivery of Maple and transport her to Tonys home
in Plymouth, England. There, we devoted a week to getting her
ready. At that time, I spent about 36 hours on the boat, rowing
for about six of those hours and sleeping two nights in her berth.
When I returned to Canada at the end of July 2013, I moved
into the final months of preparation for my grand adventure. I
still had a few bits and pieces to buy, including all my food for
the trip, which I bought online for delivery to Tonys home in
Plymouth.
At that point, my priority became training for the expedition.
I spent as much time as possible at our country home in Brighton, Ontario, rowing on Presquile Bay, just off of Lake Ontario. I
did up to three sessions each day, rowing from two to four hours.
I also hit the gym for strength training two to three times a week.
The time for my departure, Nov. 14, 2013, came quickly
enough. I said goodbye to my wife and my son, as they werent
coming with me to the Canary Islands for the launch. The plan
was for them to greet me in Barbados at the end of my journey.
I flew into London and took the train down to Tonys home in
Plymouth. Tony and I spent three days there working on the
boat, packing the food, and getting her ready for our road trip
to the Canary Islands.
Leaving Plymouth on Sunday Nov. 17, we embarked on the

night ferry to the French port of Roscoff in Brittany. Arriving
early the next morning, we began a nonstop trek through France
and Spain. Tony did most of the driving, expertly maneuvering a
car set up for driving on the left-hand side of the roadand towing a boatover right-hand highways leading down the length of
France and into Spain. We had to be in Cdiz, on Spains southwestern coast, no later than 5 p.m. on Tuesday if we were going
to catch the ferry to Las Palmas on Gran Canaria.
We made the ferry and arrived in Las Palmas on Thursday
morning Nov. 21. Upon arrival, we drove the car directly to a
marina in Puerto Rico on the islands eastern coast. During our
time in Gran Canaria, Tony and I stayed in Puerto de Mogn
where a friend of mine, Jean-Louis, had rented an apartment.
Our first task was to get the boat ready for launching. We
needed to touch up the boats hull with anti-foul paint, which
slows the growth of barnacles and other organisms that could
affect the boats efficiency in the water, and service its water
maker. The water maker, which took salt water and converted it
to drinkable water, was the most important piece of equipment
on the boat. Jim from Mactra Marine was scheduled to come
the day after our arrival to service it.
On the morning of Sunday, Nov. 24, I just had a bit of packing
to do. By late morning, I was ready to go. Tony, my weather guru,
gave the all-clear (I needed a favorable weather window for three
to four days so as to clear the islands). I called my wife, Lucie, to
tell her I was leaving. It was a short but very emotional call. On
the dock, I hugged my friend Jean-Louis and shook hands with
Fueling the Machine

In provisioning the boat, I allocated 450,000 calories for
90 days of rowing, 5,000 a day. I found, however, that
I ate only between 3,500 and 4,000 calories a day. This
was because I ate a lot of sports energy bars that contain
the right type of sugar and the correct combination of
carbohydrates, proteins, and fat.
The 5,000 daily calories that I planned consisted of:
Dehydrated high-protein porridge breakfast,
dehydrated main meal, and dehydrated dessert,

totaling 1,800 calories;
10 or 11 energy bars, totaling 2,300 calories;
Two flapjacks, totaling 900 calories (equivalent of a
muffin, cake, or brownie).

Other snacks that werent counted in the above total
included chips, chocolate, fruit cake, peaches in syrup,
and hot chocolate.
ENERGY BAR: SHU TTERSTOCK. TO P L EFT: LU CIE COS SETTE
Planning and Preparing
Electronic Equipment
These are the electronic aids that kept Maple safe on the big
ocean:
Two satellite phones, to make voice calls and connect to the
Internet, using them as modems;

A two-way satellite SMS messenger and tracker, to send text
messages, the boats position, tweet, and post on Facebook;

A mini iPad to read books, listen to music, message using
Bluetooth, look at satellites, link with GoPro, and stargaze;

Two iPods to listen to music;
A laptop computer to send and receive emails, blog, etc.;
An EPIRB (emergency position indicating radio beacon) in
case of trouble;
A PLB (personal locator beacon) in case the EPIRB isnt
functional or is unavailable;
A GoPro to take videos;
A waterproof camera to take pictures and videos.
Tony. Getting on the boat, I knew there was no turning back. I was
going. I picked up the oars and made my way out of the marina.
Tony and Jean-Louis watched as I disappeared behind the waves.
JEA N-G UY SAU RIOL
Barbados Bound
That first day, I rowed until I began to feel seasick. It was just
past sunset. During the night, I went back to the oars to make
up for what had been a short day of rowing. I suffered from seasickness for the next two to three days, but on Friday, Nov. 29, I
woke to a flat and noiseless ocean. It was eerie. Unfortunately,
it was the start of a weather system that would cripple my advance for approximately two weeks. During those two weeks, I
looped around close to the islands from which Id departed, being pushed by contrary southwest winds and northern currents.
Fortunately, nothing lasts forever, and eventually the conditions
changed in my favor. On Dec. 13, I was able to resume my journey toward Barbados in earnest.
While I was close to the islands, I saw several ships. Most of
the time, I was alerted to their presence by my AIS (automatic
identification system), a gadget that sent and received information between my boat and surrounding vessels. The procedure
was always the same: I would call the other boat on my VHF
marine radio, explain that I was a small ocean rowing boat, and
ask them whether they could see me on their radar or AIS. The
AIS was just one of many devices that kept me from being just
a small speck on a very big ocean.
I had my first maritime scare on Dec. 13, the day that conditions improved. At a distance I saw a sailboat that seemed to
be aiming straight for me. I looked at my AIS and couldnt see
anything on the system. I called on the VHF radio but didnt get
any answer. By the time the sailboat was about half a mile away
from me, I became concerned. I fired off a white flare to let the
people aboard know I was there. That boat passed by me at a
distance of about 150 feetclose enough that we could speak to
each other. They asked me whether I needed help. I said no, and
they went on their merry way.
The change of conditions on Dec. 13 was part of a weather system that would eventually rotate 360 degrees clockwise
around me. The winds changed from south to west to north to
east. In the process, those winds created big seas with waves
coming from all directions. On Dec. 17, my boat capsized three
timesonce while I was on deck rowing and twice while I was
sleeping inside the boats cabin. The boat had two watertight
cabins, storage in the forward and living quarters in the stern. As
planned, the air in the cabins and the boats low center of gravity
caused it to right itself within seconds of a capsize.
In the first capsize, I lost a few items, such as water bottles
and food that Id brought on deck for the day. Fortunately, I wore
an ankle leash whenever I was on deck. But the cabins were a
mess afterward. I also had a helmet to wear, which protected me
the two times the boat capsized while I was sleeping. Still, after
capsizing, I didnt row for two days, opting instead to stay in my
cabin while I waited for the ocean to calm down.
Finally I began making forward progress. I also gradually
began regaining my strength. I had exhausted myself trying in
vain to extricate myself from the adverse weather system. By
Christmas, I accepted the fact that the crossing would require
90 days. During a live TV interview by satellite on Dec. 25, I said
I was planning to arrive on Feb. 22.
I had planned to be on the ocean on Dec. 31, my 60th birthday. On that day, I also was interviewed live, and the three
newscasters sang Happy Birthday, Jean-Guy while I listened
on my satellite phone from the middle of the ocean. It was a
special moment, a magical moment.
On Jan. 1, I had my best day up to that point, rowing 56 nautical miles. This was the start of a good stretch. Until mid-January,
I averaged in excess of 50 miles per day. In mid-January, I again
encountered contrary conditions that kept me from rowing for
three days. I used the time to clean the boat and went in the water to check the hull of the boat for barnacles. Luckily, the boat
was clean and I didnt have to spend more time than necessary
in the water. Also, on a very calm night with a full moon, I had
my Rachmaninoff moment. I sat on the deck, listening to Symphony No. 2. I think the third movement is the most beautiful
music ever written.
Bold Man and the Sea C ONT IN UE D

The Home Stretch
With three weeks to go, I started to be afraid
of everything. Obviously, this was just my mind
playing games with me. I think it had to do with
Jean-Guy Sauriol dedicated his trip
two things. First, I was expecting big seas over
to raising money for the Actuarial
the next several days, with possibly the stronFoundation of Canada and the
gest winds and highest waves to date. Second, so
Breakfast Club of Canada.
close to the end, you know that if you dont finish,
Its never too late to donate.
its because something has gone terribly wrong.
You will find more information
at www.maplelyssolo.com.
Luckily, nothing unfortunate happened over the
next several days. Instead, I reconciled myself
with the ocean and became comfortable again.
On the day of the biggest waves, the ocean was as
white as it had been to that point. I marveled at its
beauty, a symphony for the eyes. I was very happy
to be there, and I kept this feeling until the end.
During the final 10 days of rowing, the ocean
slowed down. To maintain forward progress, I
worked overtime, increasing the time I rowed and reducing the
a ship or some landmark of Barbados. It was still there when I
duration of my breaks. The last few days, I started to send trackdecided to try to get some sleep. When I woke up in the middle
ing information every 30 minutes and tweet the number of miles
of the night, it was gone.
to go at sunset and sunrise. My last night on the ocean, I had 31
I first sighted the island of Barbados when I had about 10
miles to go at sunset. I expected the boat would drift 18 miles
miles to go. It was lost in the clouds. I was moving well that day,
overnight. The next morning I started the day with only 12 miles
energized by the thought that within a few hours I would be
to go. My last night on the ocean, I didnt sleep well. I could see
seeing my wife and son. With about one nautical mile to go, I
a light at a distance. I wasnt able to determine whether it was
made contact with Tony, who had hired a boat and was coming
to escort me for a safe landing. On that boat with Tony were my
wife, my son, and my brother-in-law. I arrived at Port St. Charles,
Barbados, to the cheers of my family and many onlookers, including Alex and Harry, two younger men from England who
had arrived in a pairs rowboat just a few days earlier. We had
Before going to sleep, I would position the rudder
met on the ferry to Las Palmas.
so that the boat would stay on course as much as possible.
I stumbled onto the dock and hugged my wife and son. I was
If I expected that the wind would carry the boat in the
greeted
by two journalists, who wrote about my adventure in
wrong direction, I set up a sea anchor in order to slow the
an
article
that appeared in the local newspaper the next day. I
boats drift. I also had equipment that sounded an alarm
and woke me if a ship was approaching my boat.
spent about an hour clearing immigration. I then spent the next
several minutes, hours, and days eating pizza, resting, cleaning,
and preparing Maple to ship back to England to its new owner.
From the beginning, my goal was to cross the Atlantic from
the Canary Islands to Barbados in 75 days or less. I arrived after
74 days and three hours, just a few hours before the start of the
2014 Winter Olympics. This makes me the oldest as well as the
fastest Canadian to row solo across the ocean.
As I sit here trying to write this article, I realize that the most
difficult aspect of spending four years to prepare for and actually row an ocean is that eventually it must come to an end. I
took pictures and videos along the way, but the most indelible
memory is simply that I did it. Everyone has an ocean to row,
just not in the literal sense. I urge you to find your ocean and
experience the exaltation of crossing the finish line.
Rowing for a Cause
Sleeping quarters on Maple
J EAN - G U Y S AU R I O L , a fellow of the Canadian Institute of

Actuaries, is the founder of SeclonLogic in North York, Ontario,
Canada.
PHOTOS, CLOCKWISE FROM TOP L EFT: L UCIE CO SSETTE, TONY HUMPHREY S, J EAN-GUY SAURIOL
Sleeping Safely
Measure the Impact

of
Change
Bests Capital
Adequacy Ratio
Adjustment System
Bests Capital Adequacy Ratio (BCAR) is an integrated
review of an insurers underwriting, financial and asset
leverage. A.M. Best analysts use this calculation to
test the impact of scenarios that affect an insurers
financial outcomes.
The BCAR Adjustment System is a desktop application that provides
online access to the same base model and data used by A.M. Best to calculate the
BCAR score for approximately 3,000 single and group U.S. property/casualty companies.
You can use it to assess the impact of various scenarios just as an A.M. Best analyst
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Call for more information: (908) 439-2200, ext. 5311,

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internal purposes only, and such Output may not match or be consistent with the official BCAR score that A.M. Best publishes for the
same company. The Output is not guaranteed or warranted in any respect by A.M. Best.
Revitalizing
Reinsurance
Capacity
SINCE THE FINANCIAL CRISIS OF 20072008,

U.S. life insurance companies have
been buffeted by several powerful
forces, all of them combining to create serious insurance capacity problems. First, the
crisis adversely affected the solvency and reputation
of the banking industry, dissuading investors from participating in capital market ventures that could be tapped to spread
the risk of loss. Second, the U.S. Federal Reserves handling of
Life insurers
cant continue
to wait for
the markets
to resolve the
impact the
financial crisis
has had on
their capacity.
New ideas are
needed.
the economic disaster has contributed to a protracted period

of low interest rates that have eroded insurers investment returns. Finally, multiple regulatory interventions in the United
States and the European Union have forestalled the development of innovative risk transfer methods because of concerns
over enhanced scrutiny and skepticism. These developments
constrain life insurers with few options to spread risk other
than reinsurance capacity, which remains tight.
This dour scenario is vastly different from the robust environment of a decade ago, when banks were in the thick of
developing insurance-linked securities and catastrophe bonds
with values driven by insurance loss events. For life insurers,
the instruments served to spread their risk; for investors, they
provided an investment uncorrelated with other asset classes.
BY JEFF BURT
Marketed as offering generally modest returns, the instruments largely performed well for investors. They certainly
served as a vital risk-spreading mechanism for insurers. But
while these instruments didnt default during the crisis, they
were adversely affected by illiquidity and couldnt easily be
sold or exchanged for cash without a substantial loss in value.
BONOTOM STUDIO, INC. | SHUTTERSTOCK
Revitalizing Reinsurance Capacity C ONT IN UE D
This last took a toll on the instruments reputation, effectively curtailing their continuation. Investors
who backed them in the past no longer have the appetite, compelling banks to largely pull away from the
market. Given banks thorny challenges in the post-recession era, this isnt surprising. The ability of banks
to fund increases in assets and to meet obligations as they come due without incurring unacceptable losses
is under duress. It has created a liquidity crisis that has compelled many banks to restrict even traditional
products like letters of credit.
returns for investors. Most important, it could set the stage
The life insurance industry has its own financial problems,
for a return to the partnerships that existed among banks and
with some large investors now debating whether or not to conreinsurance companies in the pre-financial crisis period. The
tinue investing in the companies because of the low return on
difference this time around would be that the reinsurance incapital. A case in point is the pressure applied last year by major
dustry would be taking the lead.
shareholder and hedge fund manager John Paulson, who sits
The concept is bold: Rather than banks becoming reinsurers,
on the board of Hartford Financial Services Group, to split the
as in the pre-financial crisis period, the roles are reversed.
companys life and property/casualty units. The insurer
Unlike banks, which didnt necessarily specialize
subsequently sold its block of 700,000 individual
or concentrate on insured risk as much as
life insurance policies to Prudential Finanon other asset-backed classes, reinsurcial Inc. in a reinsurance transaction for
ers are experts in this regard. They
$615 million in cash.
underwrite only those exposures
The Hartford is not alone in
that they believe to be actuarially
this decision. The Allstate Corp.
sound. The capital for this pool
is selling its Lincoln Benefit Life
of reinsurance capacity could
Co. to Resolution Life Holdings
The concept is bold:
come from many of the same
Inc., reducing the regulatoryRather than banks becoming reinsurers,
sources that invested in bank
required capital in Allstate
products prior to the financial
Financial by approximately
as in the pre-financial crisis period,
crisis. The difference, how$1 billion. In addition, the
the roles are reversed. Unlike banks,
ever, would be a heightened
company announced it would
reinsurers are experts in this regard.
degree of visibility into the
discontinue issuing fixed anThey underwrite only those exposures
underlying risks and the consenuities. These decisions were
quent higher comfort level that
based on its strategy to serve disthat they believe to be
this
transparency could provide.
tinct customer segments in which
actuarially sound.
Before I offer arguments for why
it enjoyed a competitive advantage.
this is a prudent investment, it might be
Other insurers, like Aviva, have exited
worthwhile to explore more fully the facthe life business in certain markets, as well.
tors that gave rise to the need for such a solution.
Obviously, these developments dont bode
well for life and health insurance underwriters in the
United States. The companies are unable to source adequate
Regulatory Changes
reinsurance capacity to spread risk, they are stymied by a comThe array of complex global regulations promulgated in the
bination of regulatory and economic factors in achieving a
aftermath of the financial crisis created difficult financial condecent return on investments, and they are pressured by lower
ditions for banks. From a historical standpoint, strict regulations
demand for products as a consequence of the recessions effect
are common following a crisis. During times of bank distress,
on personal income.
governments often intervene in the activities of banks, as well
Few traditional options exist to overcome what appear to be
as provide capital support to reduce bank risk taking. This ininsuperable financial challenges. But necessity is the mother of
tervention, in turn, affects a banks liquidity creation, restricting
invention. I would like to propose a structure that could supthe availability and cost of credit.
port a potentially large source of risk-spreading capital for life
Several regulations governing bank liquidity and the riskand health underwriters. Given the mortality exposures at risk,
based capital of insurance companies either have been executed
it would be hinged to the development of a more transparent,
or are in the process of implementation on both sides of the Atlanstable, and long-term instrument offering solid risk-adjusted
tic. These new rules include Basel 3, the Dodd-Frank Wall Street
Reform and Consumer Protection Act (particularly the so-called

Volcker Rule), Solvency II, the Solvency Modernization Initiative
of the National Association of Insurance Commissioners (more
specifically the requirement that U.S. insurers routinely conduct
an Own Risk and Solvency Assessment, known as ORSA), and
the Common Framework for the Supervision of Internationally
Active Insurance Groups (ComFrame), drafted by the International Association of Insurance Supervisors.
Without venturing into the specifics of each of these new rules,
its enough to say that in combination they represent a heightened
focus on risk transparency and management, and require more
skin in the game, i.e., a greater level of capital held in reserve.
One cant fault the regulatory agencies for this intervention
when awful things happen, the judicious response is to execute
conservative safeguards to prevent them from happening again.
As always, there is a delicate balance in determining the proper
inflection point between acceptable risk and adequate safetya satisfactory level of capital reserves versus an ill-advised
amount, for instance. Without this balance, society comes to a
point where every child under 16 years of age is pinned to a car
seat by a 10-point harness.
Extreme safeguards may create market bottlenecks that
add cost to the system. While a certain amount of friction is
understandable, the challenge in a capitalist environment is to
promote market competition to bring prices down. If the safeguards are overly strict, the forces of competition dissipate and
previously robust market solutions may disappear. This is the
situation in which many banks and reinsurance companies now
find themselves. Investment capital to absorb risk has dried up,
in no small part because of the regulatory environment.
In the life insurance industry, this dilemma has effectively put
more insured risk on insurance companies balance sheets. Banks
that readily absorbed a portion of this risk and shared it with their
investors no longer have this appetite or the interest of the investment community. They effectively have abandoned the provision
of capital market insurance-linked instruments. At the same time,
the global reinsurance industry, which has a vastly smaller capital
base to leverage than global banks, is finding that more stringent
regulations are hurting its ability to increase the capacity it traditionally supplied, much less maintain that capacity.
The combination of more stringent regulations and continuing economic uncertainty is forcing life insurers to retain more
risk on their balance sheets, at a time when sales are lagging, and
traditional investments remain challenged by the historically
low interest rate environment.
Society pays a price here: If the purchase of life insurance is
uneconomic, more people will pass on the opportunity. Rather
than absorb the credit risk of the insurance company, they will
simply self-insure. Many individuals cant do this, of course, and
will fail to save enough money to protect themselves and their
The challenge
in a capitalist
environment is to
promote market
competition to
bring prices down.
If safeguards
are overly strict,
the forces of
competition
dissipate and
previously robust
market solutions
may disappear.
families from the financial impact of their deaths, jeopardizing

their well-being.
A Convergent Solution
For life insurers and their investors, these developments cry out
for a solution. Although many insurers believe the markets eventually will regain lost ground and return to historical norms, and
regulators trust that the friction caused by their interventions
ultimately will ease, there are no guarantees this will happen in
the near term. Given the difficult business conditions confronting the life insurance industry, its customer base, and society at
large, inertia isnt the answer.
From a commercial perspective, the objective should be the
development of a sound financial instrument in which investors put their capital at risk to absorb clear, transparent, and
quantifiable risks aggregated in a new investable class. While
this instrument contains the same insured risks marketed a decade ago in the capital markets, the difference is a better, more
efficient, and inherently safer structure. Most important, it requires a convergent solution by the same industriesthe capital
markets and reinsurersthat put their balance sheets at risk of
insurance exposures before the financial crisis surfaced.
Revitalizing Reinsurance Capacity C ONT IN UE D
If both markets converged in a solution in which the banks

Im not promoting the formation of dubious risk-based capibrought their investors to the table to absorb insured risks in
tal instruments for life insurance companies and investors. Nor
instruments for which reinsurers would provide a return, the
am I calling for a revival of something that was tried and that
benefit for the investors would be twofold: They would invest in
failed. Rather, Im suggesting the creation of an efficient riska security in which the underlying risks are actuarially assessed
bearing investment vehicle involving both the reinsurance and
and quantified by reinsurance actuaries, and these securities
capital markets, with the ultimate aim of increasing global rewould represent a diversified class of investment, one that is
insurance capacity to spread insured risks.
arguably safer and more predictable from a return standpoint
This efficient structure is predicated on investor interest
than what has been marketed in the past. Why? Because few
in participating in a market in which investors bear a portion
entities understand underlying liabilities better than reinsurers,
of insured risks in return for a payback on their investment.
which routinely assume these risks from direct insurers.
To encourage investment, backers must be able to understand,
The opportunity to develop this new form of risk-based
assess, quantify, and digest the insured risks they would be ascapital investment is substantial. A recent report by the rating
suming. They would further need an easily comprehensible way
agency Moodys, for example, estimates the current financing of
to invest, such as an insurance-linked security or a catastrophe
the insurance markets to be as high as $600 billion. This works
bond. Reinsurers would insure the bond or security and provide
out to an approximate $60 billion annual run rate, assuming an
a specified return to the investors over a long-term period. The
average 10-year liability duration from a risk-taking
capital would then be utilized to assume insured risk.
standpoint. If reinsurers are able to augment
These instruments may sound like the same
their financial capacity, the direct insurissuances that led to the financial crisis.
ance markets will buy this capacity.
The difference is that when the capital
markets provided these asset-backed
securities, they were not necessarTweaking the Concept
ily developed under the guidance
Other potential solutions are
of principal risk takers and
percolating, including so-called
underwritersfinancial prosidecars that allow investors to
What if both the bank and the risk takers
fessionals who deal with the
take on the risk and return of
took part in the solution together rather
economic impact of risk and
a book of business written by
than playing separate roles as before?
uncertainty on a daily basis.
an insurer or reinsurer, earnAt that time, few invesing the risk and return that
The reinsurers would acquire and even
tors questioned the soundness
arise from that business. Aninsure the insurance-linked instruments
of the underlying liabilities.
other solution has been floated
while the banks would provide
Even fewer understood that the
by the private equity and hedge
the funding necessary to
risks were fragmented into mulfund markets, which are focusing
tiple pieces that defied calculated
on
their particular value-added skill
support the issuance.
appraisal and valuation, were then resets, i.e., they would open the door
assembled into tranches, and ultimately
wider to providing asset management
were packaged up into CDOs and CLOs (colservices to the insurance industry. I believe
lateralized debt obligations and collateralized loan
mine is the best solution because it addresses the
obligations, respectively). Unlike reinsurers, the banks that consocietal implications of the insurance capacity squeeze.
structed these instruments enjoyed mammoth balance sheets
What if private equity and hedge funds, as well as pension
and virtually could print money. They also were selling products
funds and family offices, invested in this solution? Investors
with long-term horizons, and, in only a few cases, retained any
would fund the instrument, and reinsurers would provide a fair
of the underlying risk.
return for the assumed risks over a long time horizon. Insurance
What if both the bank and the risk takers took part in the soluactuaries would model and price the underlying risks over time
tion together rather than playing separate roles as before? Heres
to ensure all interests are aligned. And reinsurers would be repohow such a collaborative venture would work: The reinsurers
sitioned as a financial guarantor on the insurance-related assets.
would acquire and even insure the insurance-linked instruments
The transparency of the underlying risks, coupled with the
while the banks would provide the funding necessary to support
promise of more predictable risk-adjusted returns, would enthe issuance. This would solve the problem of not having balance
courage investors to reconsider insurance-linked securities.
sheets large enough to assume higher levels of risk.
Despite the headwinds buffeting the captive space, it might
still make sense for the invested capital to reside in offshore or

onshore captives or in special-purpose vehicles. This helps isolate the individual liabilities for underwriting purposes, while
increasing investor transparency.
Reinsurers also can assemble these instruments without
banks as an intermediary presence, collecting the risk takers
and putting all the pieces of the puzzle together in a more cost-
effective, direct approach. In another scenario, reinsurers could
buy a large portion of the ultimate issuance and then sell off the
remaining pieces to other investors. This concept is enticing
since reinsurers capital reserve requirements are built specifically to support long-term risk taking (although careful analysis still
must be weighed). Despite this added flexibility, a more robust
solution is to have banks continue to serve in their traditional intermediary capacity, as this is where the capital sourcing resides.
What is clear is that waiting for the markets to iron out the many
wrinkles produced by the financial crisis may prove to be in vain.
Certainly, no one forecasts an immediate reinvigoration of bank
appetite for insured risks or a substantial increase in reinsurance
capacity. The time has arrived for truly innovative solutions.
J EF F B U R T , a fellow of the Society of Actuaries and a member

of the Academy, is executive vice president, financial solutions,
for Hannover Life Reassurance Co. of America in Orlando, Fla.
This article is solely the opinion of its author. It does not express the official
policy of the American Academy of Actuaries; nor does it necessarily reflect
the opinions of the Academys individual officers, members, or staff.
Resources
Allstate Announces the Sale of Lincoln Benefit Life Company, Wall Street Journal,
July 17, 2013. http://online.wsj.com/article/PR-CO-20130717-911231.html
De la Merced, Michael, After Pressure From Paulson, Hartford Puts Units Up for
Sale, New York Times, March 21, 2012. http://dealbook.nytimes.com/2012/03/21/
after-pressure-from-paulson-hartford-puts-units-up-for-sale/
Mercado, Darla, The Hartford Makes 180-Degree Turn With Reorganization,
InvestmentNews, Oct. 7, 2012. http://www.investmentnews.com/article/20121007/
REG/310079973
Thomas, Denny, and Sumeet Chatterjee, Update 1Aviva May Exit India Life
Insurance BusinessSources, Reuters, Aug. 5, 2013. http://www.reuters.com/
article/2013/08/05/aviva-india-idUSL4N0G61X220130805
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at a pre-determined level of aggregation for a limited
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generated in processing the study. Insight Enterprise
has been designed to remove such limitations by using
data warehouse technologies to calculate and analyze
studies. For example, its dimensional model allows
studies to be carried out over the full range of mortality factors and other attributes available.
GGY AXIS
9465 Counselors Row, Suite 200

Indianapolis, Indiana 46240
PHONE: 1-877-GGY-AXIS
CONTACT: Rob Hrischenko
E-MAIL: Rob.Hrischenko@ggyaxis.com
WEB: www.ggyaxis.com
AXIS is the complete actuarial solution for life, fixed

and variable annuity, DI and LTC product needs. One
integrated system supports seriatim and model-based
valuation, pricing, product development and financial
projections.
AXIS is ready to use with more built-in flexibility than
other systems. We are continually enhancing AXIS to
meet changing needs and exploit new technology.
Updates are easy to install and use.
AXIS can help transform your actuarial function:

actuarial productivity without programming

robust governance and control tools

end-to-end automation includes easy integration
with corporate databases

fast seriatim processing reduces need for model
building or hardware upgrades

ALM and advanced stochastic analysis including
dynamic hedging for VAs

GGY Cloud or public cloud options for fast and
flexible scalability
Talk to any of our 2800 users then call for a free trial.
Your next software conversion will be your last!
Milliman
Milliman
Arius
Arius is the next step in the evolution of reserve
analysis solutions. Arius combines our 20+ years of
providing the most widely used deterministic tools
with our industry-leading research into using multiple models to simulate loss distributions and reserve
variability. Arius full spectrum of exhibits and projection methods help eliminate tedious number
crunching and reduce review time. Eleven different
stochastic reserving models help estimate distributions of possible outcomes on both an ultimate and a
one-year Solvency II basis. You can make more effective decisions about reserves, capital allocations, and
reinsurance; you can also incorporate volatility as a
key input into strategic decisions about premium and
profit targets, and into ERM projects.
Integrate
Integrate is a cloud-based financial projection solution that is offered by Milliman as Software as a
Service (SaaS) for the life insurance industry. Integrate offers end to end workflow automation,
assumption management, collaboration, full governance & control, and virtually unlimited computing
capacity necessary to support emerging production
modeling requirements. Integrate utilizes the Microsoft Windows Azure public cloud platform to provide
highly available services and MG-ALFA is the actuarial calculation engine at the core of Integrate.
Arius is also customizableyou can set up your

analysis to support your preferred work flow, rather
than having to live with a pre-defined approach.
Integrate has three components that are available as a

package or in various combinations:
3424 Peachtree Road, Suite 1900

Atlanta, GA 30326
CONTACT: Don Beall
PHONE: 800-404-2276 / 404-254-6752
EMAIL: actuarialsoftware@milliman.com
WEB: milliman.com/Arius
1301 Fifth Avenue, Suite 3800

Seattle, WA 98101
CONTACT: Brian Reid
PHONE: 206.504.5895
EMAIL: brian.reid@milliman.com
WEB: milliman.com/integrate
Integrate services are supported by an expert actuarial and technology support staff and Service Level
Agreements that are able to reliably support top tier
business critical applications.
Integrate Financial ProjectionsModeling automation, assumption management, collaboration, and

governance & control
Integrate Model DevelopmentBusiness logic release
management, collaboration, and governance & control
Integrate ComputeVirtually unlimited computing
capacity
Great software is only part of the solution
Next generation applications like ARCVAL and Prophet provide insurers

with the tools needed to manage and understand their business. ARCs
experienced staff of actuaries, analysts, and IT professionals have been
trusted partners for insurers for more than 25 years. In addition to
supporting our software products, our capable team of consultants can
provide staff augmentation when resources are tight, a specialist to fill
in a knowledge gap, or an expert to perform a peer review.
Financial Projections and Analysis for all product lines

Appointed Actuary Services
Product Development & Pricing
Experience Studies and Assumption Development
Audit Support and Peer Review
Principle-Based Reserving
Modeling, ALM, Cash Flow Testing
Custom Programming or Data Management
Long Term Care Expertise
Reinsurance Analysis
Federal Income Tax Issues
Expert Witness Testimony
913.451.0044
www.arcval.com
For more information about our available consulting services, please

contact us at consulting@arcval.com or (913) 451-0044.
Special Section: 2014 SOFTWARE SHOWCASE

PolySystems, Inc.
30 N. LaSalle Street, Suite 3600

Chicago, IL 60602
PHONE: 312-332-5670
CONTACT: Bob Keating
EMAIL: BKeating@PolySystems.com
WEB: www.polysystems.com
Since 1970, PolySystems has provided productiongrade actuarial software and consulting services to
life, health and annuity companies. Our integrated
software suite offers comprehensive valuation, modeling and experience study capabilities. It is used by
actuaries to calculate reserves and capital, perform
asset/liability projections for cash flow testing and
planning, set assumptions, carry out sensitivity and
stochastic analyses, manage inforce profitability, price
products and much more.
Headquartered in Chicago, we have over 90 actuaries
and IT professionals working to meet our clients actuarial software needs at both the product and
enterprise level. Our data extract professionals seamlessly integrate PolySystems with your data
architecture. Our actuarial consultants are invaluable
partners when designing complex models or performing attribution analyses.
With a unique combination of flexibility and out-ofthe-box functionality, our software can handle new
product development and complex assets and is continuously updated for the latest regulations and
product features. Partner with PolySystems, leave the
actuarial programming to the experts, and free your
actuaries to do what they were meant to do.
Towers Watson Property &

Casualty Software Solutions
71 South Wacke r Drive, Suite 2600
Chicago, IL 60606
CONTACT: Tom Hettinger
PHONE: 312-201-5438
EMAIL: software.solutions@towerswatson.com
WEB: towerswatson.com
Capital adequacy measurement and allocation, reinsurance analysis, asset-liability optimization, product
strategy and business planningour consultants have
a wealth of knowledge and expertise to help you improve business performance. Towers Watson offers the
P&C industrys widest range of analytical software
products designed to bring competitive advantage to
users:
Radar supports the rate selection process using interactive scenario testing.
TAI Life Reinsurance Systems

10727 Winterset Drive
Orland Park, IL 60467
PHONE: 708-403-7775
FAX: 708-403-7801
CONTACT: John Carroll, CEO
EMAIL: info@taire.com
WEBSITE: www.taire.com
With more than 100 successful installations in the U.S.

and Canada, TAI is the leading provider of life reinsurance reporting solutions. The new third-generation
release of the SystemVersion 3xxfeatures new
source code, expanded field sizes and increased processing functionality.
The System is a reinsurance reporting solution for life,
critical illness, long-term care, disability income and
annuity products. It features fully-automated processing that facilitates internal analysis as well as external
reporting to reinsurers. The System is designed to
handle assumed, ceded and retroceded business. It
interfaces with one or more policy administration
systems for retention management and automated
continuation processing. The System is available on
two platforms: Web-based TAI.NET and in a Mainframe version.
TAI X-PRESSThis stand-alone communication
application transmits electronic reinsurance reporting
and claims information quickly and cost effectively
from insurance companies to reinsurers and reinsurers to retrocessionnaires, using secure https transfers.
WinTech
Winklevoss Technologies, LLC

Two Greenwich Office Park
Greenwich, CT 06831
CONTACT: Colin Gilbert
PHONE: 203-861-5504
WEB: www.winklevoss.com/wintech
EMAIL: sales@winklevoss.com
and
WinTechs flagship product, ProVal is the DB and
OPEB industry standard for valuation and projection
software. ProVal has thousands of users worldwide
among more than 250 leading actuarial consulting
firms and investment advisory firms. Powered by
ProVal, ProVal PS is a graphical toolkit offering advanced financial sensitivity and asset allocation
modeling.
Emblem builds robust predictive models of customer

behavior.
Igloo is a powerful, flexible capital modeling software
with an extensive library for financial reporting and
capital calculations.
ResQ is an industry-leading loss reserving system.
Towers Watson is a leading global professional services company that helps organizations improve
performance through effective people, risk and financial management. With more than 14,000 associates
around the world, we offer consulting, technology and
solutions in the areas of benefits, talent management,
rewards, and risk and capital management.
Towers Watson Life, Health

and Annuity Software
Solutions
175 Bloor Street East
South Tower, Suite 1701
Toronto, Ontario, Canada M4W 3T6
CONTACT: Holly Starkey
PHONE: 416 407 3812
EMAIL: software.solutions@towerswatson.com
WEB: towerswatson.com
Managing products with embedded guarantees, designing

hybrid products, making financial reporting a more efficient
process with actuarial industrializationour consultants are
at the forefront of innovations in the industry. Its this combination of experience, intellectual capital and powerful software
capabilities that enables us to offer comprehensive solutions
for risk and financial management:
RiskAgility FM is a new, flexible software solution that enables
life insurers to run financial models that accurately reflect their
companys products and to run them in ways that are easily
adapted to their business processes. MoSes models can be imported into RiskAgility FM, and comprehensive out-of-the-box
functionality is available with RiskAgility FM U.S. Library applications.
RiskAgility EC provides real-time risk analytics that fully reflect the nature of your business for continuous solvency
monitoring and risk management.
Towers Watson is a leading global professional services company that helps organizations improve performance through
effective people, risk and financial management. With more
than 14,000 associates around the world, we offer consulting,
technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management.
WySTAR Global Retirement

Solutions
9210 Corporate Blvd.
Suite 300
Rockville, MD 20850
PHONE: 800-505-9076
FAX: 800-344-1258
WEB: www.wystar.com/solutions/software
E-MAIL: rsmarketing@wystar.com
Comprehensive Windows-based software featuring

sample lives, online documentation, flexible reporting, and input from various media.
DBVALMultiple decrement valuation for DB
plans. Complete flexibility for benefits, payment

forms, actuarial methods, assumptions; gain/loss by
source; valuation and FAS reports.
DBVAL WEB PROJECTIONSPlan participants
project benefits.
DCVALBalance forward recordkeeping for DC
plans, ESOPs and leveraged ESOPs.

ProAdmin, built on the ProVal platform, is a comprehensive suite of DB administration tools.ProAdmin
delivers significantly reduced implementation time
over traditional approaches. Other suite components
are ProAdmin Server, a scalable calculation engine
that integrates into existing infrastructures, and ProAdmin Online, a complete content management
system and a secure participant self-service portal
with real time calculations.
OPEVS Values post-employment benefits for
FASB, GASB and statutory accounting standards.

Trends, attribution methods, sensitivity analysis, multiple decrement assumptions.
TESTWYZCompliance testing for DB and DC
plans.
As a top actuary, youve got vision

and drive. Join EYs Insurance and
Actuarial Advisory Services team
and become an integral member of
an insurance practice full of people
who share your passion for helping
clients reach their potential. Unite
with the power of our leading national
Advisory team, and well give your
career wings.
Find out more at ey.com/us/insurance
or contact Richard Dannenberg at
richard.dannenberg@ey.com.
2014 Ernst & Young LLP. All Rights Reserved. ED 1-6-15
Wanted: actuaries
with vision
Workshop
BRIAN ROBINSON
Life in the Fast Lane

Proxy Techniques and Risk-Based Decisions
INSURANCE COMPANIES ARE IN THE BUSINESS of taking on
risks, and it has become increasingly important for senior managers to
understand the implications of these risks for their business.
The ability to monitor real-time change
and carry out what-if analysis quickly and
easily is what lies at the heart of risk-based
decision making. Managers need to be able
to assess the impact of risks across a complex portfolio of assets and liabilities so
they can determine what actions to take.
In addition, regulations such as Solvency
II are putting an increasing emphasis on
business application, requiring a demonstration of how key metrics are being used
in running the business.
Proxy techniques are a valuable tool
in helping management better understand risk exposure and make more
informed business decisions.
The Business Case for Proxy

Techniques
Mainstream use of proxy techniques
was introduced in the life industry to
support enterprise risk management
(ERM) and internal economic capital
assessment. Its growth was boosted by
rating agencies and the emergence of
market-consistent financial reporting
such as generally accepted accounting
principles (U.S. GAAP) for variable annuities and market consistent embedded
values (MCEV). The first technique to
gain traction was replicating portfolios,
in which a collection of assets was constructed to imitate the characteristics of
the liabilities. Although this proved useful, there were clear limitations with the
technique. Considerable expert judgment was required, and it was difficult
to construct a replicating portfolio that
accurately captured the dynamics of
more complex liabilities. In addition, the
technique could only be used for assessing the effect of market risks.
With the arrival of Solvency II, many
life insurers that chose to implement an
internal model started to adopt curve
fitting, which calibrates a mathematical
function that aims to replicate the underlying liabilities. In recent years this
technique has evolved to least squares
Monte Carlo (LSMC), which is becoming
more prevalent as firms seek improved
accuracy for more complex portfolios,
including both assets and liabilities.
ENABLING RISK-BASED DECISION MAKING

Complex Models
Proxy Function(s)
e.g, Y= F(x1,x2...)
Proxy
Techniques
MIN
MAX
EXAMPLE: COMPLEX ALM CASH

FLOW MODEL
FASTER TO COMPUTE AND CAN SUPPORT RISKBASED DECISION MAKING
SOU RCE: AUTHOR
SPEED
There are a wide range of business

applications for proxy techniques. As
touched on earlier, economic capital assessment was an early driver, particularly
for life insurance companies. Many life
companies have embedded options and
guarantees within their liabilities (with
profits, variable annuities, etc.) that create a nested stochastic problem for
Monte Carlo capital using a marketconsistent balance sheet. The major
challenge with the nested stochastic
problem is that it requires millions of
scenarios to be calculated using the asset liability management (ALM) models.
These ALM models were designed
primarily for accurate balance sheet
calculations and are too slow to cope
with being run millions of times for
Monte Carlo capital. More broadly, existing ALM systems arent sufficiently
equipped to meet the increasing demands of risk-based decision making
because of the run times involved.
As insurers have become more comfortable with these proxy techniques, a
broader range of business applications
has come to light. The proxy functions
used for capital modeling also can be
used in assessing balance sheet sensitivity, both for the impact of market
movements and for what-if analysis.
These techniques also can be extended to project key metrics over time,
whether for own risk and solvency assessment (ORSA) business planning,
U.S.-type runoff reserves, or MCEV.
Clearly, projecting capital is a challenge
given the difficulties encountered for
t=0 capital calculations. But its not just
projecting the capital thats difficult
allowing for path dependency when
projecting a market-consistent balance sheet also is problematic. In fact,
path dependency can have a significant
impact on the projected balance sheet
and should not be underestimated, especially when being used for business
planning purposes. Proxy functions can
capture this path dependency and better inform management regarding its
impact, especially under stress and scenario testing.
Hedging increasingly is an area in
which management is beginning to see
the power of proxy techniques. Here
managers can assess the effectiveness of
hedging strategies, calculating the hedging gain/loss over the projected runoff
of liabilities. Firms also are looking at
how they can reduce their capital requirements by allowing for the planned
management actions associated with
their hedging strategy.
Communicating Complicated
Practices
Theres no denying that some complex
mathematics lie at the heart of these
practices. Its important that senior managers understand why these techniques
are being used, how they are being applied, and any limitations they present.
From the perspective of business
applications, education clearly is important. Understanding the sophisticated
mathematics will probably be a step too
far for many senior managers, so how can
we make them comfortable with these
complicated techniques? Validation and
communication of limitations make a
good starting point. The aim of validation
is to show that the proxy functions replicate the existing complex models within
an acceptable tolerance. Communicating limitations should ensure that senior
management is aware of instances when
proxy functions are being applied inappropriately or are at the boundaries of
their use.
Common sense also plays a role. Senior managers understand the dynamics
of their business, and its important that
This article is solely the opinion of its author.
It does not express the official policy of the
American Academy of Actuaries; nor does it
necessarily reflect the opinions of the Academys
individual officers, members, or staff.
the outputs from proxy functions are

sense-checked, i.e., that the results are
in line with expectations. Sometimes
they can throw up unexpected results.
Further analysis might be necessary to
understand what is happening before
accepting those results.
The Future of Proxy Techniques

Proxy techniques are here to stay. Existing methods such as LSMC will evolve as
insurers fine-tune their application. But
we cant rule out the introduction in the
future of more sophisticated practices
that address specific complexities or new
areas of application.
Rather than any single procedure being the silver bullet, its likely that the
toolkit of proxy techniques will grow as
alternative methodologies support different business applications. Approaches
being developed for hedging, for example, may not be appropriate for capital
modeling, and vice versa.
Technology is an increasingly important tool for harnessing the benefits of
proxy techniques. There are many processes involved, including significant
data manipulation, and robust software
is necessary to manage these processes
efficiently and reduce operational risk.
While the use of proxy techniques
continues to evolve, insurance companies are becoming more comfortable
with their application. Senior managers
are able to carry out previously impossible analyses that support their risk-based
decision making. And the interest in
broader applications, for business planning and assessing hedging strategies,
for instance, is growing as well. While
proxy techniques have their limitations,
as long as they are understood and acknowledged, theres no reason they
wont become an integral part of every
senior managers toolkit.
B R I AN R O B I N S O N is directorERS
insurance for Moodys Analytics.
Tradecraft
RUSS BINGHAM
ADVANCES IN COMPUTING, the evolution of enterprise risk management (ERM), and more sophisticated approaches to dealing with
risk and return are compelling insurance companies to refine how they
measure, monitor, and report financial and operational success to management, shareholders, and regulators.
Progress has been uneven. But interest in improved reporting picks up in the
wake of certain situations, including:
Periods of high inflation and interest
rates;
Major financial market shocks;
Catastrophic events;
Increased rating agency focus on
ERM;
Regulatory pushes such as we are
currently experiencing with Solvency
II and own risk solvency assessment
(ORSA).
Although many companies are improving
their financial modeling,
the return of economic
growth, higher interest
rates, regulatory pressure,
and escalating competition very likely will speed
up innovation in this area.
Insurance company
success seldom is achieved
without a disciplined underwriting operation,
particularly in the long
run. Pricing methodology
and models play an essential role in this processpricing based
on prospective cash flows that reflect
the linkage between risk and return over
the lifetime of the policy is critical. While
the industry employs many approaches,
I plan to focus on current best financial
modeling practices that encompass pricing and financial valuation throughout
the company.
Executives are hungry for valueadded information on the performance
of their companies. While what follows
focuses on pricing, the best practices I

will outline offer companies the ability
to develop financial models that span
the full range of financial analysis, from
pricing to reporting. The information
this yields is based on a consistent, unified approach to dealing with risk and
return throughout the entire company, a
goal that often is difficult to achieve.
Essential Elements
Technical elements that any insurance
financial model must contain to meet
best-practice standards include the

following:
Policy period orientationTo price
insurance in which revenue and expense
are properly matched, a policy period
rather than a calendar period is essential.
All prospective expected cash flows pertaining to the policy period in question,
from both underwriting and investment,
must be assessed.
Economic accountingThe valuation must reflect the magnitude and
timing of all cash flows, from the policys inception until the final transaction
related to that policy period occurs. In
long-tail-claim lines of insurance, the
final transaction can be decades in the future. The valuation must reflect interest
rates and the time value of money, based
on discounted cash flows and net present
value calculations.
Risk controlSufficient risk capital must be assigned and maintained to
control the potential effect of underwriting risks on the companys financial
position. In the insurance process, risk
results from variability in the amount
and timing of cash flows over the full lifetime of the policy, from inception until
the last transaction settlement. It is important that risk capital be maintained
in proportion to the level of insurance liabilities and risk exposure
that remains at any point
over this same time frame.
Risk-based realization of profitsThe
risk-based nature of insurance pricing requires
that insurance profits be
realized in relation to insurance risk exposure
over time. Essentially,
this principle ties the release of profits (i.e., the
economic dividend) to the
resolution of risk as insurance liabilities diminish
over time (the basis of the risk exposure),
in much the same way that risk capital is
controlled. The initial underwriting income or loss that occurs when writing at
combined ratios below or above 100 must
be amortized in the same way. This parallels the effective interest method of
amortization that is used in investment
accounting to treat any initial bond purchase premium or discount.
The combination of policy period,
economic accounting, and the risk-based
THINKSTOCKP HOTOS
Best Practices in Insurance Financial Modeling
rules for controlling capital and profit

recognition is the means by which the
shortcomings found in the application
of conventional income accounting to insurance are overcome, and which allows
for comparison among lines of insurance
regardless of the time frame they span.
Separation of underwriting and investment risk and returnFinancial
results in insurance are derived primarily from underwriting and investment
activities. Underwriting pricing must
consider specific unavoidable risks, generally estimable when insurance is sold.
These are related to uncertainty in the
amount and timing of premium, loss, and
expense, but also to investment income
resulting from an essentially risk-free
investment strategy. Underwriting risk
equity is needed to support such risks in
the same way that rating agencies assign
capital charges to underwriting based
on balance-sheet insurance liabilities
that originate from the various lines of
insurance sold.
The company may undertake riskier
investment strategies when the funds
provided by underwriting are invested
to generate an additional lift in income.
These are voluntary, avoidable risks that
are the responsibility of the investment
function and are a separate risk/return
decision beyond the domain of underwriting. The increased riskiness of such
activity requires additional risk equity to
support it, much as rating agencies apply
increased capital charges to riskier asset
classes when they appear on the balance
sheet.
A best practice for measuring and
managing financial performance in an
insurance company is to separately apply a consistent methodology (including
risk and return elements) for both underwriting and investment operations.
While riskier investments should be excluded for insurance pricing purposes,
their inclusion as an incremental add-on
Editors note: This article is the first in a series of articles on insurance accounting. In the next article, the author will look at the risk-based amortization of
underwriting income (or loss) and how it parallels the effective interest method of
amortizing the bond premium or discount, essentially analogous to insurance selling above or below 100 combined ratios. This is a critical step that links the charge
for risk with the risk exposure over time and serves to overcome one of the limitations of conventional accounting.
is appropriate during valuation of the entire insurance company.

Additional elements of a best practice
financial model that broaden its usefulness and allow it to integrate smoothly
with traditional accounting and finance
perspectives include the following:
Full complement of integrated balance sheet, income, and cash flow
statementsThis provides an important link to the accounting and finance
areas within the company. The existence of a fully integrated set of financial
statements also offers a higher level of
modeling integrity. All too often, models dont differentiate between written,
earned, and collected premium, or they
base investment income on loss reserves
rather than on actual invested assets derived from cumulative cash flows.
Calendar period reporting capabilityFinancial activity created for each
calendar period over a policys lifetime
using conventional accounting rules
provides a further opportunity to link to
reported calendar period financials. By
layering successive policy period models in a triangular fashion, similar to the
Schedule P loss reserve structure, calendar period financials can be constructed
that align with accounting results. Maintaining historical experience on a
policy period basis, with reconciliation
to reported calendar financials, is an invaluable analytical tool.
Full complement of financial metricsAll financial metrics in common
use within accounting and financial areas should be calculated and presented,
ensuring a consistent, reconcilable basis. This can include return on equity,
internal rate of return, dividend yield,

investment yield, economic value added,
and embedded value. Any metric or perspective that enhances a models ability
to support financial dialogue within the
company should be made available.
A Single Unified Risk/Return

Framework
The development of pricing models
containing all the elements I have listed
here is considered best practice. Together, they provide the necessary technical
elements needed to establish a sound
economic and risk-based pricing capability. More to the point, actuaries can
help build a bridge to other accounting
and financial areas within the company
by speaking a common language. The
creation of a unified financial valuation
framework that encompasses activities,
beginning with initial product pricing
and ending with a measurement of companywide financial results that emerge
in subsequent reporting, is extremely
powerful. The ability to deal with underwriting and investment activities
separately, but consistently, enhances a
companys ability to compare lines of insurance and investment actions within a
single, unified risk/return framework.
R U S S B I N G H AM , a principal of
Benchmark Risk Return LLC, has more
than 40 years of insurance industry
expertise, including developing and
implementing the models used to
price, plan, and monitor risk and
return throughout the property/
casualty operations of a major national
insurance carrier. He can be reached at
russ.e.bingham@gmail.com.
Cryptic Puzzle
TOM TOCE
Silver Screen
BECAUSE OF THE MAGAZINES PRODUCTION SCHEDULE , my deadline for writing this puzzle coincided with the annual Academy Awards (the other Academy, the one based in Beverly Hills). As a result, I
had Best Picture winners on my mind. I memorized all of them a few years back, as I was preparing for my
appearance on Jeopardy! With a little searching, I was able to find the last fewto make sure this puzzle included one from every decade since the awards started in the late 1920s.
The following sonnet contains the anagrammed names of
14 Best Picture movies. The anagrams are of either one or two
words. The two-word anagrams always involve consecutive
words. The other words in the poem are meaningless, at least
as far as clueing goes.
Unlike the Hurricane puzzle last year, there isnt any overlapping. Its one movie per line.
My favorite movie of all time is a Best Picture winner: The
Best Years of Our Lives, which won in 1946. I would love to have
put that one in, but I found it impossible to anagram in just one
or two words. A big hint for you, then, is that most of the movies
I chose for the puzzle have short titles. Theres one from every
Solutions may be emailed to
Thomas.Toce@ey.com. In order to make the
solver list, your solutions must be
received by May 31, 2014.
decade since the 1920s, and because that makes 10, four decades
are represented with two winners.
If youre a movie buff, or if you happen to be preparing for
a quiz show, please try to get them all without consulting any
references. If you do, let me know your time: Ill send you a personalized email response of congratulations and list you in the
next issue! For those of you, most Im sure, who do not happen
to know that The Life of Emile Zola won in 1937 or even that The
Lord of the Rings: The Return of the King won in 2003 (neither title
is used in this puzzle, for obvious reasons), I recommend glancing
at Wikipedias page on Academy Awards for Best Picture for help.
Thanks to Eric Klis and Bob Fink for test-solving and editorial suggestions.
T O M T O C E is a senior manager for actuarial services with Ernst
& Young in New York and a member of the Jeopardy Hall of
Fame.
Indie Director Shoots Action Film

I sacrifice and suffer for my art.
The gator laid an egg right on the
set.
We misperceived the danger in its
threat.
In tacit praise, at least she didnt fart.
My biopic on Plato touched the heart,
But its been one long dearth, and Im
in debt.
The money guys have failed to halt me
yet!
My gut performs wild stunts at each
days start.
I never know which way my moods

may swing.
Lil Marni, an ecdysiast I know,
Says bubbeleh, we either live or die.
I want to live! To pant! To buy her bling!
To give my bun her ranch in Mexico,
A mojo nest, with lots of stimuli.
Previous Issues PuzzleCryptic Acrostic 2.0
1 2 3 3 4 5 6 7
T H E
I apologize for forgetting to put letters as well as numbers inside the boxes in the diagram for this puzzle. It was a short quote, though, so I hope it didnt slow you down too
much. For this puzzle I needed to get in touch with Scott Adams, to ask for the exact
source of the quote. There are numerous collections of Dilbert, and I wanted to cite
the proper collections title. I found his contact info at his website, and I was gratified
by how quickly Scott replied to my inquiry. He said the proper source would simply
be Dilbert, not one of the collections. That was fortunate, in a way, because a long
title would have led to many more short wordsno chrysanthemum or makeshift.
33
85
25
68
90
13
D. One whole step towards New

England
T O N E
E. Cheap little number entering

F. Someone who mistreats
Lincoln embraces our
objective, right?
A B U S
G. Losing grates, Dunkirks

centers shot
D U N K
H. As sisters use every other

symbol to evaluate
A S
34
H E
U N
V E
21 22 23 26 24 25 26 27
W O R K
28 31 29 30 34 31 32 33
M Y
34 35 36 37 38 39 40 45
T E R
O U
N N Y
66
80
89
56
78
92
86
46
65
53
B A
59 60 61
T E N
82
61
B U T
50 51 52 53
53 54 49 55 56 57 58 53
36
17
H E
74
63
62 63 64 65
C O U N
66 67 68 69 70 70 71 72
N G
T E M
E R
3
73 74 75 77 76 77 78 80
32
21
A N D
79 80 81 82 83 86 84 85
K E
R O
86 87 88 91 89 90 91 92
U N D
27
N U M B
93 94 95

7
72
51
22
E
60
40
42
39
47
93
E R
95
67
F T
12
88
52
N V
29
24
83
71
77
19
37
E N
T E
73
N. Relieve oneself inside U-boat

making a U-turn in the dark
B O G U S
O. Run to operating room after

emergency room mishap
E R R O R
P. Are you IMing Ben endlessly

at Yahoo?
R U B E
79
55
23
26
18
10
64
58
69
94
45
49
87
50
11
44
Solvers
84
20
T W O S
59
41
A. SCONEAnagram of Coens
B. CHRYSANTHEMUMAnagram of
rhythm cues, man
C. OUTERAnagram of route
D. TONETO (towards) + NE (New
England)
E. TINNYTINY (little) with N
(number entering)
F. ABUSERAB(US)E (Lincoln embraces
our objective) + R (right)
38
L. INVITEagaIN VITEbsk
M. LIENHomophone of lean
N. BOGUSGO (relieve oneself) inside
SUB (U-boat) reversed (making a
U-turn)
O. ERRORR (run) + OR (operating
room) after ER (emergency room)
P. RUBERU (are you IMing) + BE
(Ben endlessly)
Q. TWOSHomophone of TOO
(excessively) + S (ultimately tedious)
D E W Y
M. Shouting, Lean right!
Q. Twains excessively
speechifying and ultimately
tedious
48 49
A K E S H
I. Married adult, kinky from the M
91
76
81
35
70
14
get-go, with peculiar fetish,
quick and dirty
S A U T E S
J. Cooks with suet as fluid!
L. Provoke again Vitebsk in the

central region
T O R
14 15 17 16 17 18 19 20
W A Y
S C O N E
H R Y S A N T H E M U M
B. Plant crazy rhythm cues, man C
62
48
5
43
28
54
30
8
2
15
31
16
75
O
U
T
E
R
C. Peripheral route developed
K. Youthful and fresh, we say no

need to ask us twice
E A
41 42 43 44 49 45 46 47
Clues
A. Coens pitching for some
quick bread.
C R
8 9 10 11 11 12 13 13
57
G. DUNKDunkirksIRKS (losing
grates)
H. ASSESSOdd letters in As sisters use
I. MAKESHIFTM (married) + A
(adult) + K(kinky from the get-go) +
fetish (anagram)
J. SAUTESAnagram of suet as &
literally
K. DEWYHomophonic pun on do we!
(no need to ask us twice)
Michael and Jina Accardo, Dean Apps, Karl Baker,

Jack Brauner, Andrew Buckley, Bob Campbell,
Lois Cappellano, Jonathan Currier, Todd Dashoff,
Francis De Regnaucourt, Mick Diede, Micahel Dolan,
Sean Donohoe, Patrick Donovan, Dave Dougherty,
Stephen Drake, Greg Dreher, Mathew Eberhardt, Deb
Edwards, Bob Fink, Laura Forbes, Nick Franceschine,
Bruce Fuller, Phil Gollance, Sandy Gruhlke, Timothy
Grusenmeyer, Paul Haley, Walter Haner, Rich
Harder, Jason Helbraun, Pete Hepokoski, Wade Hess,
J and J Holloman, Ruth Howald, Ruth Johnson,
Brian Klimek, Eric Klis, Paul Kolell, Ken Kudrak,
George Levine, Tim Luker, Jeanette Manning,
Liz Matlack, Jeffrey McLane, Lee Michelson, Jon
Michelson, Brett Miller, Becky Moody, Philip Morse,
Jim Murray, Jim Muza, Ray Niswander, David
Olsho, Joshua Parker, David and Corinne Promislow,
Alan Putney, Joe Rakstad, Daniel Rhodes, Jay Ripps,
Gaetan Ruest, Steve Ruiter, Mike Schenk, Leon
Schmerhold, Craig Schmid, Jason Schultz, Bill Scott,
Marty Simons, Sally Jane Smith, Doug Szper, David
Treble, Jon Turnes, Howard Wachspress, Dave
Wallman, Jim Wickwire, John Zalewski, Frank Zaret
Bridge Puzzle
EDITH McMULLIN
Leading Trumps
YEARS AGO , a friend asked me to give her husbands bridge game a
quick upgrade. They were planning a trip to the Caribbean with friends:
scuba diving by day and bridge every night. I knew their friends were
better players and that the man was (still) proud of his IQ and his Ivy
League education. A fun time was going to be had by all!
I was teaching a course called Improve Your Social Bridge (the precursor
to my Easybridge! 1 book,) and I told
her Id give it a tryshorthand bridge
rules, big strokes. Eight weeks later they
set sail. The one lesson I knew theyd
learned was leads against suit contracts
and its corollary: Unless otherwise indicated, lead a trump against a part score
(a non-game-level contract).
Upon returning, my friend called
and said theyd not only won the overall
weeks score, but amazingly, had won every night as well. (Uh-oh.) I asked about
the other couples reaction. She replied,
Well, they didnt say anything until the
third or fourth night, when one of them
said, Boy, you sure lead trumps a lot!
Puzzle for social players

West: This is your hand.
A63
KQ94
9852
32
SOUTH
1
1
WEST
Pass
Pass
NORTH
1
2
Puzzle for expert players
Puzzle 1: Bloom where you are planted.

NORTH
K94
AQJ74
J4
K82
SOUTH
QJ10876
K2
AKQ3
A
Contract is 6. Opening lead: 10.
Your play?
Puzzle 2: We have some big

guns working on these puzzles.
I promised a couple of them a
challenge! You do not have to solve
this to have your name included in
the mag. Enjoy!
NORTH
EAST
Pass
All pass
OK, West: Tell me three things. How

many points does pard have? How many
trumps? What do you lead? (Try the first
expert puzzle, too.)
You will improve your game 100 percent if you always answer the first two
questions before you decide what to lead
against any suit contract.
actuary.bridge@gmail.com. In
order to make the solver list,
your solutions must be received
by May 31, 2014.
WEST
QJ103
4
J106
108652
K74
A987
A9743
Q
Experts
1Win the A and return the

K, killing dummys side entry. Watch
partners count signal in diamonds, and
hold off long enough to kill the dummy.
Puzzle 2When you discover that the
clubs are 5-3 from Easts failure to echo,
discard a diamond at trick two. Ruff the
third club, draw trumps. Finesse in diamonds. East doesnt have a club left.
If playing a duplicate pairs game
(matchpoints), ruff trick two. You risk
being set, but make an overtrick on
many layouts. Wests overcall also suggests the K. If you did trump the second
club, draw just three rounds of trump.
Finesse the diamond, losing. Ruff righthand opponents (RHO) third club. Now
run the red suits. RHO can trump when
he wants. He has only red suits to return.
Puzzle
Solvers
SOUTH
A2
KQJ1062
K52
KJ
North/South reach a 6 contract with
no opposition bidding.
Opening lead: Q ? Your best play?
Previous Issues Puzzles:

Social players
I asked how East could know how many

diamonds his pard had. Answer: by the
order in which he discards. If he plays

high-low (called an echo), he has an even
number; up-the-line, an odd number. So
even when you are just throwing junk
away, give pard info as soon and as often
as you can.
It is good to draw trumps ASAP, but
you cant afford to give up the lead yet or
they would have four immediate winners.
So take a chance. Play the A, finesse
(lead low toward the J and pray. If the
Jack wins, play the K and pitch spades
in dummy. NOW draw trumps!
Geoff Bridges, Igor Pogrebinsky,

David Promislow, Dave Forbes, Joe
Liuzzo, Mark Kinzer, Lee Michelson,
Jeff Schwarze, Hank Youngerman,
Allen Pinkham, Timothy Luker,
Richard Newell, David Llewellyn, Alan
Finkelstein, Steven Berman
EDI T H M c M U L L I N is a former
American Contract Bridge League
official and tournament director. She
is the author of Easybridge! The Comic
Book (Baron Barclay/Amazon) and other
books suitable for social and tournament
players and teaching.
THANK YOU!
The Actuarial Foundation thanks its top-level 2013
corporate sponsors for their generosity and support!
rence of
Confe
ies
uar
Con
sulting Act
Actuarial Society of
Greater New York
TM
GLOBAL ACTUARIAL & ANALYTICS RECRUITMENT
475 N. Martingale Road, Suite 600 Schaumburg, IL 60173-2226

phone: 847-706-3535 web: www.ActuarialFoundation.org
Years of Excellence
1994-2014
Preparing for Tomorrow's Possibilities through Education
Puzzles
LENNY SHTEYMAN
Passover Special
AS I WRITE THIS , my favorite holiday, Passover, is only a week away.
Its a celebration of freedom, a holiday that commemorates the miraculous exodus of the Jews from Egypt. Its also a story that leads to
many, many questions. Actually, part of the Passover tradition is to encourage questions. One of the questions that mathematically minded
people might ask is why did it take Moses and the Jewish people so
long to cover a fairly shortly distance?
restrictions on the shape of the detours
you can take? This question is more interesting mathematically, but way too
general for the scope of this column.
Instead, heres the real puzzle for this
issue. I hope you will be able to see the
connection with long-distance travel.
Previous Issues Puzzle

Solutions
Cover it up
Puzzle 1: Take the largest magazine
with area A1. Next, add the magazine that
provides the greatest incremental area
A2, in addition to A1. Clearly, A2 < area of
THINKSTOCK
This isnt the puzzle for this issue,

and if you submit an answer, you wont
get your name published. A related Passover question: Is it possible to construct a
trip from A to B, so that the total distance
traveled is much longer than distance
from A to B? What if there are additional
A unit square is divided into many

other squares of possibly uneven size.
Consider a set of smaller squares that
have non-zero intersection with the
main diagonal of the unit square.
Is it possible that the total perimeter
of the squares in this set is larger than
40?
Ad Index
To add your companys name to this list, call Mohanna Sales Representatives
at 972-596-8777 or email info@mohanna.com. For links to these
magazine added < A1. Now add six more
magazines like that. By construction, A1
> A2 > A8. If we were to construct this
sequence to the end, we would have 15
such numbers in decreasing order. The
first eight magazines clearly must cover
more than 815 of the table.
Puzzle 2: Lets assume that all pairwise intersections are strictly less than19.
In that case, the union of two polygons is
larger than 1 + 89. If we add a third polygon, its overlap with the previous union
couldnt be more than 29 ( 19 for each of
the two polygons), and the total area of
union of the three of them must be at
least 1 + 89 + 79.
Repeating this argument six more
times, we can conclude that the total
area covered by all nine polygons must be
strictly larger than 1 + 89 + 79 + ..+ 19 = 5.
This is a contradiction of the original
condition that all of the polygons must fit
in a square of area five.
advertisers email addresses and websites, visit the Contingencies website

at contingencies.org/linksto_advert.asp.
Actuarial Careers Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
914-285-5100 | actuarialcareers.com
Actuarial Foundation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
847-706-3535 | actuarialfoundation.org
Actuarial Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
913-451-0044 | arcval.com
AM Best. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
908-439-2200, ext. 5311 | sales@ambest.com
American Academy of Actuaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

202-223-8196 | actuary.org
Andover Research Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

212-986-8484 | andoverresearch.com
Casualty Actuarial Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

703-276-3100 | casact.org
DW Simpson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C2
800-837-8338 | dwsimpson.com
Ernst & Young. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

ey.com/us/insurance | richard.dannenberg@ey.com
Ezra Penland.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
800-580-3972 | ezrapenland.com
GGY Axis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Solvers
877-GGY-AXIS | ggyaxis.com
Robert Bartholomew, Andrew Beamish,

Bob Byrne, Lois Cappellano, Andrew
Dean, Mark Evans, Yan Fridman, Rui
Guo, Chi Kwok, David Lovit, Timothy
Luker, Jeff McLane, Lee Michelson,
David Promislow, Craig Schmid, Noam
Segal, John Snyder, Al Spooner, Doug
Szper, Jason Wade
Insight Decision Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
LENNY SHTEY MAN, a fellow of the

Society of Actuaries, is an actuary with
AXA Equitable in New York.
416-479-0384 | insightdecision.com
KPMG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C3
416-777-8500 | kpmg.ca/lifeactuarialservices
MIB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
781-751-6130 | mibgroup.com/healthriskID
Milliman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4041
206-624-7940 | milliman.com
Pauline Reimer/Pryor Associates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

516-935-0100 | ppryor.com
PolySystems Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C4
312-332-5670 | polysystems.com
Swiss Re. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

cont.puzzles@gmail.com.
914-828-8000 | swissre.com
TAI Life Reinsurance Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

708-403-7775 | taire.com
In order to make the solver
Towers Watson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 15
list, your solutions must by
Winklevoss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
received by May 31, 2014.
212-725-7550 | towerswatson.com
203-861-5530 | winklevoss.com/wintech
WySTAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
800-505-9076 | wystar.com
End Paper
BY ROBERT J. RIETZ
Mortality
home after a long, hard day at work and reached fearfully into the
mailbox. I knew this day was coming, and the mail confirmed that today was the day. There it was, nestled among the usual collection of
bills, magazines, and junk mail. The bright red, white, and blue envelope
belied its contents. I had just received my invitation to join AARP, documenting that I was about to turn 50.
Despite the abundance of Carolina
blue skies in the summer, theres another
dark and stormy night in my immediate
future. Im becoming more reluctant
to trudge down to the mail station to
pick up our mail. Older readers already
know the reason for my reluctance, and
younger readers may have guessed it.
Im about to become eligible for Medicare, which means that within three
months Ill turn 65.
The Social Security website tells me
that my life expectancy is 19 years. The
actuaries who developed the RP-2000
Mortality Table are more optimistic,
telling me that my white-collar life expectancy is 20 years. I like their opinion
better. As a member of the Actuarial
Board for Counseling and Discipline
(ABCD), I am particularly sensitive to
complying with actuarial standards of
practice (ASOPs). ASOP No. 35, Selection
of Demographic and Other Noneconomic
Assumptions for Measuring Pension Obligations, instructs me to project decreases
in future mortality rates, so my life expectancy stretches to 21 years. Thats not
very long.
Bill Clinton won his first presidential
election 22 years ago. Hillary Clinton is
being mentioned as a potential presidential candidate, shrinking the gap
between 1992 and today. My first grandson, Grant, was born 18 years ago. I
remember changing his diaper and going on weekend errands together. Hes
entering college this fall. I know time
flies, but does it have to cruise at supersonic speeds?
I have enough trouble remembering, let alone trying to determine what

I want to be remembered for. A good father, but could have been better. A good
husband, but ditto. A good actuary, but
some would argue that. Faithful readers
will note that I did not include being a
good golfer (In Search of Good Golf,
July/August 2011 Contingencies). Being
a good Spartan alumnus might be one
of the few accomplishments that I dont
feel the need to disclaim. A success that I
can favorably reminisce about is mentoring some very capable actuaries. Mike,
Mark, Jason, Tim and the restyou
know who you are.
In his song My Next 30 Years, Tim
McGraw catalogues all the changes that
he wants to make going forward, including, Have a few more salads and not so
many beers. The actuarial statistics tell
me its unlikely that Ill have another 30
years, but the point of the song is still valid. How do I want to change in my next
(I hope) 21 years?
Travel is a priority for many reasons,

and Ive been able to visit five continents
with a sixth planned for 2015. However,
my grandson Joey admonished Nancy
and me for skipping Antarctica. Almost
all the continents? Really? I followed
the saga of the MV Akademik Shokalskiy
trapped in Antarcticas summer ice last
January, and Im not sure I want to risk
that.
Physical deterioration affects all of
us, sooner or later, but Ill try to slow
that down by having a few more salads and not so many beers. Medicare
will make it more convenient and less
expensive to identify and stay on top
of upcoming physical ailments. Mental deterioration follows a similar glide
path, and Im trying to slow that down
by learning Spanish. Another recommended mental exercise is learning a
musical instrument, but I was the only
sixth grader who failed choir tryouts, so
Ill stick with Spanish.
Giving back is a priority. My service
on the ABCD is only a down payment on
what I owe the actuarial profession. Im
repaying Michigan State University as an
adviser to its burgeoning actuarial science
program. Im teaching a continuing education program on retirement planning at
UNC-Asheville. Theres a charity in downtown Detroit that I continue to support.
I work on being a better husband
every day, but that report card remains
confidential.
Im reminded again of the Bernie
Hoffman quote, If I were to ask you 20
years from now, Are you happy? what
would you have done in that time that
would make you answer Yes! Being a
better golfer is not my answer.
R O B ER T J . R I ET Z , a fellow of the
Society of Actuaries and a member of
the Academy, is retired from Deloitte
Consulting LLP and lives near Ashville,
N.C.
THINKSTOCKP HOTOS
IT WAS A DARK AND STORMY NIGHT many years ago. I arrived
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A M E R I C A N A C A D E M Y O F A C T U A R I E S M AY | J U N E 2 014

GLOBAL ACTUARIAL & ANALYTICS RECRUITMENT

RETAINED - Director / VP, West USA: Healthcare service provider seeks

Download the NEW

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Articles in this issue include: International

Actuarial Trends & Perspectives: Regulations, Changing

appointed actuary. Fellow of the Society of Actuaries preferred. Financial reporting

Northeast USA insurer is searching for experienced property and casualty

Expanding Northeast USA Accident and Health insurer is seeking an actuARIZONA

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THESE ROLES AND MANY MORE CAN BE FOUND AT

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MAY | JUNE 2014

A Buffalo Soldier Looks Back

To the Italian people they liberated, their skin color was

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BE SURE TO VISIT OUR DIGITAL EDITION AT WWW.CONTINGENCIES.ORG.

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ANDOVER RESEARCH, LTD.

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Individually and collectively, our work as actuaries tends to

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Towers Watson. A global company with a singular focus on our clients.

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