Welcome to Matters of Mind (MM) 16 Feb 2023

"The paradoxical union of intellectual humility and ambition is something that every student can ... and should cultivate. It’s what makes learning possible." Jonathan Malesic

This is our first newsletter for 2023 and you may notice that we have had a change of name. This is because we are moving to a tab on the ASSA website which is publicly viewable and we needed to find a domain name that was not yet taken. Matters of Mind (MM) is our new name and it will go live on the 22 Feb!

MM will continue to bring you articles, discussions, podcasts and commentary that will open your mind to different ways of seeing things or matters in our world and lives. The hope is that it will foster curiosity, critique and enjoyment at the same time as increasing your knowledge about actuarial science and related fields.

At the 2023 Induction of new grads and final year actuarial science students to the profession Kwezana Matanga, Executive Associate to the CEO of Discovery, told us that at varsity she dispelled the pressure of having to achieve and to know everything even before getting into the classroom by allowing herself to be a learner. This mindset removed the anxiety of having to achieve and placed her in the best position to learn and reach her potential. Kwezana continues to be a learner in whatever she does and she is flourishing as a result. It’s a brilliant strategy, you too can adopt it and thrive!

Among other learnings this week you will find out about Takaful or Islamic models of insurance and about how primary and secondary perils are changing places in reinsurance and what higher attachment points mean in that context.

International and local economic news; geopolitical events

Earthquakes in Turkey to Cost Insurers More Than $1 Billion, Verisk Estimates

“These devasting earthquakes caused not only extensive physical damage, but also a tragic loss of life in Turkey and Syria,” said Bill Churney, president of extreme event solutions, Verisk.

Let us first realise the devastating loss of more than 37,000 lives across Turkey and Syria.  The article unpacks how the costs are measured and who pays the damage in the end. A sobering article. 5min read.

Growing geopolitical tension will make it harder for companies to sit on the fence, says risk advisory firm boss

Companies are going to find it increasingly difficult to avoid taking sides in Russia’s war against Ukraine and its Western allies, and in the rising tension between China and the West, Jay Truesdale, CEO of the risk advisory firm Veracity Worldwide, told the African Mining Indaba in Cape Town on Tuesday 7 February.

This article gives an overview of what contributes to the difficult position that many mining companies find themselves in. 5min read

Jim O’Neill: Maybe I should have called them the ‘Ics’ not ‘Brics’

Renowned economist says emerging markets have driven global growth in the last two decades and India is in the ‘sweet spot’ to be the next China. If it doesn’t miss its chance.

A macroeconomics perspective. The last comment shows up the arrogance of Western thinkers in a tactful way. 2.5min read

US Government warning about Eskom — time to think about total grid collapse

The United States Government has advised its stakeholders in South Africa to start thinking about disaster management plans for a total collapse of Eskom’s power grid.

Although a blackout remains unlikely, the risk has increased due to how unreliable Eskom’s coal fleet has become. This is evident by the higher levels of load-shedding South Africa is experiencing.

This is an important article to read as it presents the reality of what a total blackout could mean. 4min read.

Western diplomats raise alarm on South Africa-Russia-China joint naval exercise during anniversary of Ukraine invasion

By staging a joint exercise with Russia and China at a highly sensitive time, South Africa is undermining its claim of being ‘nonaligned’ in the Ukrainian war and risking good relations with the West.

What are your views on this situation? Read the article to ascertain the value, risks and ethics involved. 4min read

Insurance and related industry highlights

How the insurance industry can mitigate SA’s climate-related losses and boost economic resilience

South Africa faces numerous risks today, but none are as severe and misunderstood as climate change. While countries realise that the continued emission of greenhouse gases will cause further warming of the planet, and this warming could lead to damaging economic and social consequences, the exact timing and severity of physical effects are difficult to estimate.

This article speaks about scenario analysis as a tool to estimate risk and mitigate it to some degree. 4min read.

South African insurance companies add exclusion for total Eskom grid collapse

Hollard spokesperson Warwick Bloom said that although a total grid failure remained unlikely, it was now a “possibility”. Bloom said reinsurers — the firms that provide financial protection to insurance companies — have indicated they would not offer reinsurance cover in the event of a grid failure.

It’s all in the underwriting – be informed and check out the details. 4min read

'Takaful' models of Islamic insurance | The Actuary

Ethical, varied and a growing market – ‘takaful’ Islamic insurance is worth knowing about, wherever you’re from and whatever your beliefs, says Ali Asghar Bhuriwala.

The article is highly accessible homing in on the differences in principles and the similarities between conventional insurance and Takaful. A very useful poster is provided for additional clarity.  A very good 6min read.

Rising Costs of Secondary Perils Force Reinsurers to Require Higher Attachment Points

Economic and insured losses from secondary perils from natural catastrophes are accelerating and surpassing the loss totals from primary perils, which is leading reinsurers to require higher attachment points, according to Gallagher Re.

Find out more about how attachment points worked in the past and how recent events are changing the model.  3min read or you can listen to the article for 4.21mins.

New Zealand Braces for More Flooding from Another Rain Deluge

Auckland has seen 38% of its annual rainfall this month alone, with January set to be its wettest month on record, the National Institute of Water and Atmospheric Research said. The weather reflects the impact of atmospheric rivers, which are thin jets of air that move moisture beyond the tropics, it said.

2min read which is not essential, but it shows the intensity of flooding building across the globe.

Investments

Includes Banking, Cryptocurrency, ESG and opinions on investing

Tax season is ending soon – here’s how to get the most out of your tax efficient savings products

The tax year-end of 28 February 2023 is fast approaching. Now is the time to take advantage of tax-efficient retirement and savings products. To help you do so, Jan van der Merwe, Head of Actuarial and Product at PSG Wealth shares key insights into the features of retirement annuities and tax-free savings accounts and how to get the most out of them. 3.5min read.

Coronation: R100bn has left SA low-equity multi-asset funds

Money has flowed into income portfolios, but managers from Coronation, Allan Gray and M&G Investments believe South African and global equity could be the top-performing asset classes in 2023.

A lot of terminology here for the uninitiated, but interesting for those in quantitative finance. It covers performance of low-equity multi-asset funds and compares that to a fixed income asset.  2.5min read.

Multi-Asset Class: Definition, Fund Types, Benefits

A multi-asset class, also known as a multiple-asset class or multi-asset fund, is a combination of asset classes (such as cash, equity or bonds) used as an investment. A multi-asset class investment contains more than one asset class, thus creating a group or portfolio of assets. The weights and types of classes vary according to the individual investor.

A well written primer for defining this type of investment. 2.5min read

Building better? Cement giants’ carbon-cutting record scrutinised

Cement production is responsible for 8% of the world’s CO2 emissions. Fix the Future examines how the industry’s leaders are tackling the problem.

Great stats and trends and an explanation of how cement contributes to CO₂ emissions. 5min read.

Fintech, digitisation and AI

Naked strips down to success with $17m series B funding

Naked, a South African artificial intelligence (AI)-driven insurtech company that offers a fully digital way for consumers to insure their cars, homes, and valuables, raised $17 million (about R290 million) in series B funding.

Read more about how funding works for start-ups and how Naked has come to achieve series B funding. 3.5min read

Sanlam puts tech at forefront of future growth

The Sanlam Group is on a rapid journey to becoming intrinsically digitally led, says CEO Paul Hanratty. Speaking at the launch of the company’s latest financial education campaign, where it unveiled its Zesande metahuman influencer. Hanratty said:

“This metaverse, together with AI, insurtech and a range of other technologies, will change the face of financial services over the coming years.”

Exciting and refreshing strategy from Sanlam. 3min read

The state of AI in 2022—and a half decade in review

The results of this year’s McKinsey Global Survey on AI show the expansion of the technology’s use since we began tracking it five years ago, but with a nuanced picture underneath.

This is good review with five sections to pace your reading. There is also the option to download the full review for free. There is value in understanding the bigger picture of AI in the economy and trends recently established. 20min read of the full article.

Life-centric banking with an analytics edge

Bank Jago’s Peterjan van Nieuwenhuizen explains the value a life-centric banking approach has for AI banks.

You can read this article in five minutes or watch the two minute video. Notice how Peterjan van Nieuwenhuizen explains the offering in simple terms. It is well represented visually and the concept of the customer being part of an ecosystem is appealing.

Cyber and cyber security

The role of cyber liability insurance in protecting SA businesses 

According to recent research, South Africa is the world’s sixth biggest cybercrime hotspot, with ransomware attacks alone have doubled over the last year. For Karen Rimmer, Head of Distribution at PSG Insure, this is a stark reminder that the prevalence and scale of recent cyber-attacks on businesses of all sizes have rendered reliable cyber security a necessity. Adequate cyber liability cover is a vital component of guarding against the exponential damage that can be wrought by even the most rudimentary cyber-attacks.  

Distributed Denial of Service (DDoS) is one form of cyber-attack – what does it mean? Note how the extended ecosystems of the main target of attack must also be brought into the underwriting loop. A comprehensive 5min read.

Diversity, equity and inclusion

Women’s voices are missing in the media – including them could generate billions in income

How can the news media represent women’s voices better? The answer might be in a recent report, “From outrage to opportunity: How to include the missing perspectives of women of all colours in news leadership and coverage”.

Note that SA does well in some respects, but not in all. 3min read based on the report.

Climate change

Climate Is Forcing the Most Risk-Aware Industry to Reinvent Itself

It’s becoming a big problem. Insurance provides companies and individuals with the peace of mind that, for a small premium paid regularly, they will be covered for when catastrophes such as floods or wildfires hit. However, if the pay outs increase because more customers are making claims, then the insurance industry either takes in lower profits or it has to increase the regular premiums customers pay.

The challenge of survival for the industry is painted clearly in this article. Excellent graph. 3min read

Climate Disaster in Amazon Rainforest Could Cascade Across Earth, Study Finds

Trees set ablaze in Brazil’s Amazon rainforest could contribute to melting glaciers in the Himalayas and Antarctica because distant ecosystems that regulate the Earth’s climate are more closely connected than previously thought.

This is the crux if the matter. Many people are still not willing to believe the interconnectedness of ecosystems, why do you think that is? Think of three reasons. Note that this article was published in InsuranceJournal.com. It is a 3min read.

Unsyncopated Clocks: ‘Fire and Flood’ Book Highlights Insurers’ Climate-Change Late Show

In “Fire and Flood,” published earlier this year, Eugene Linden, a journalist who has been covering climate science for decades, examines the questionable business decisions, missed opportunities and political failures that led the world to largely dismiss or ignore the threat of climate change. The businesses of insurance and reinsurance are among those analysed.

Linden describes how the insurance industry has responded to climate change as a “cautionary tale because it shows how perverse incentives can thwart action even in an industry exquisitely tuned to risk.”

A brilliant, must read of 6mins. It seems to answer the question posed above of why people are slow to react.

Building better? Cement giants’ carbon-cutting record scrutinised

Cement production is responsible for 8% of the world’s CO2 emissions. Fix the Future examines how the industry’s leaders are tackling the problem.

Great stats and trends and an explanation of how cement contributes to CO₂ emissions. 5min read.

Health care and related topics

NHI not being built on any one country’s model – Crisp

There was no one country on which SA could model its NHI, deputy director-general for NHI Professor Nicholas Crisp told Chris Bateman, writing for MedicalBrief, in response to a hard-hitting column in BizNews in which columnist Ivo Vegter slammed as “foolhardy” attempts to build the NHI by modelling it on the UK’s NHS.

Watch out for hype around the NHI, be guided by facts – when they are provided. Below the article are related articles of interest. 3min read

The health benefits and business potential of digital therapeutics

Digital-native start-ups and healthcare incumbents can both play important roles in building and scaling digital therapeutics to improve the management of chronic health conditions.

While you catch the benefits to the business and to the patients, note the clean, clear format of the article with headings followed by text leading into main points. McKinsey articles always offer a number of key takeaways. It is good practice to ask yourself – how many elements are there to my delivery and can some be clustered together?

The best medical aid schemes in South Africa – according to members

The survey results showed that the overall medical aid scheme industry in South Africa is starting to recover from a bumpy few years dominated by the Covid-19 pandemic. All medical schemes, apart from Bonitas, showed an increase in customer satisfaction scores compared with 2021/22.

3min read

Perspectives and insights to success

What is resilience?

Resilience is the ability to not only recover quickly from a crisis but to bounce back better—and even thrive.

This McKinsey article is packed to the brim with high level advice on how to be resilient and thrive as a business. From a different perspective note how format improves readability and coherence of the discussion. There are six sections each covering a question on the theme. Each section is briefly introduced followed by bullet points each of which make a specific point. The use of relevant language, examples and quotes further enhance clarity on individual sections and the overall theme.  This is a good technique to answer questions in A311, F100 and F200 exams. 

About YOU

I’ve spent years studying happiness – here’s what actually makes for a happier life

It’s one thing to know what makes people happy, but quite another to live a happy life oneself.

Be reminded that happiness is enjoying the process of achieving your goals and being prepared to let go them if need be. This article is available on the MM site in.pdf. Or, you can go directly to the original publication using the link above.