It sounds like a joke in this economy, but it’s true. According to the Employee Benefit Research Institute, U.S. workers are more confident about having enough savings for retirement even after the percentage of savers declined.
It states that the 2010 Retirement Confidence Survey finds that the “record low confidence levels measured during the past two years of economic decline appear to have bottomed out. The percentage of workers very confident about having enough money for comfortable retirement has stabilized at 16%,” which is compared to the 20-year low of 13% measured in 2009.
This is odd if you take into account the fact that the survey finds that more respondents’ retirement preparations are still eroding, more have no savings at all and are clueless about savings goals, and more Americans are expected to work longer.
Could all this confidence in retirement savings be the cause of extreme denial or, possibly, just arrogant naivety?
In other retirement savings news, the United States Department of Labor proposed a new rule that aims to protect and increase retirement savings.
As The New York Times reported:
“These rules will strengthen America’s private retirement system by ensuring workers get good, objective information,” Seth Harris, deputy labor secretary, said in a statement. “When that happens, workers make the kind of decisions that are good for their families and the nation as the whole.”
Could the proposed rule and the confidence level be related?
Tagged as:
retirement savings,
united states department of labor
This came to my inbox Friday and I found it entertaining and insightful. Written by Donald Mango, chief actuary at Guy Carpenter, this fun read explores the risk management lessons from the recent winter Olympics.
We were all thrilled with the spectacle of the just-completed 2010 Olympic Winter Games from Vancouver. Winter sports are known for their inherent high levels of riskiness, so it should not be too surprising that some valuable lessons related to “personal risk management behavior” can be drawn from the way the athletes make decisions and how the competitions are conducted and judged. As risk professionals, when we watch the action on the snowy mountains and icy rinks, we can get another view on the choices made in the taking of risk or in mitigating risk. Here are just a few lessons that offer additional insights:
- Risk reward tradeoff in men’s figure skating. The most notable example being the quadruple jump. The new scoring system provides more points for a successful quadruple jump than, for example, a triple axel. The number of additional points, however, is marginal. Most skaters felt the additional reward did not match the increased risk of failing to execute the more difficult jump. Gold medalist Evan Lysacek opted not to do it, much to the chagrin of silver medalist Evgeni Plushenko, who did put in a quad. The lesson here: the scoring system drives behavior.
- Peer pressure leading to excessive risk taking in freestyle ski moguls and downhill ski. In order to contend for a medal in moguls, skiers needed to balance high speeds, precise turns and spectacular jumps. One skier’s results could lead subsequent skiers to modify jump choices or speed based on what they perceived to be necessary to win a medal. We also saw this in the women’s downhill, where eventual gold medalist Lindsey Vonn’s impressive time had two knock-on effects. First, many of the skiers who followed her crashed in their effort to match her time. Then the final skier, Maria Riesch of Germany, a gold medal favorite, was so intimidated by the crashes that she skied tentatively to an eighth place finish. The lesson: peer behavior can lead to excessive risk taking.
- Judging risk-based performance in freestyle ski moguls. Judges need to essentially quantify the qualitative. Judgment decisions are based on a combination of speed measurement (objective), turning quality (subjective), and aerials (subjective and objective). Assessment of aerials is based on the execution of the chosen trick. Each trick has an assigned degree of difficulty, and the overall weighting among the three categories is set beforehand. This provides a good framework for making risk preference / appetite decisions. Choose a set of independent factors, measure what can be measured (speed) or adopt a scale. For scaled factors, use multiple assessments (judges) and hedge against outliers (average the scores of multiple judges). Also, regularly review the scoring to ensure appropriateness and get feedback. The lesson: we CAN develop a scientific system for making decisions using expert judgment.
Sports provide us with benchmarks, analogues and evidence to illuminate the way the human mind deals with risk and reward. Applying this understanding to the rationale for companies’ risk decisions demonstrates that some actions may not be in the companies’ best interests. They may be driven by pressures to “perform” and to “follow the pack.” We were all thrilled with the spectacle of the just-completed 2010 Olympic Winter Games from Vancouver.
Risk reward tradeoff in men’s figure skating. The most notable example being the quadruple jump. The new scoring system provides more points for a successful quadruple jump than, for example, a triple axel. The number of additional points, however, is marginal. Most skaters felt the additional reward did not match the increased risk of failing to execute the more difficult jump. Gold medalist Evan Lysacek opted not to do it, much to the chagrin of silver medalist Evgeni Plushenko, who did put in a quad. The lesson here: the scoring system drives behavior.
Peer pressure leading to excessive risk taking in freestyle ski moguls and downhill ski. In order to contend for a medal in moguls, skiers needed to balance high speeds, precise turns and spectacular jumps. One skier’s results could lead subsequent skiers to modify jump choices or speed based on what they perceived to be necessary to win a medal. We also saw this in the women’s downhill, where eventual gold medalist Lindsey Vonn’s impressive time had two knock-on effects. First, many of the skiers who followed her crashed in their effort to match her time. Then the final skier, Maria Riesch of Germany, a gold medal favorite, was so intimidated by the crashes that she skied tentatively to an eighth place finish. The lesson: peer behavior can lead to excessive risk taking.
Judging risk-based performance in freestyle ski moguls. Judges need to essentially quantify the qualitative. Judgment decisions are based on a combination of speed measurement (objective), turning quality (subjective), and aerials (subjective and objective). Assessment of aerials is based on the execution of the chosen trick. Each trick has an assigned degree of difficulty, and the overall weighting among the three categories is set beforehand. This provides a good framework for making risk preference / appetite decisions. Choose a set of independent factors, measure what can be measured (speed) or adopt a scale. For scaled factors, use multiple assessments (judges) and hedge against outliers (average the scores of multiple judges). Also, regularly review the scoring to ensure appropriateness and get feedback. The lesson: we CAN develop a scientific system for making decisions using expert judgment.
Sports provide us with benchmarks, analogues and evidence to illuminate the way the human mind deals with risk and reward. Applying this understanding to the rationale for companies’ risk decisions demonstrates that some actions may not be in the companies’ best interests. They may be driven by pressures to “perform” and to “follow the pack.”
Tagged as:
2010 Olympic Winter Games,
Guy Carpenter
Spanish officials are calling it the world’s biggest network of virus-infected computers. That’s right — 13 million computers were hacked and infected with a program that allowed for the theft of personal and financial data of unwitting citizens worldwide, in what investigators have termed the “Mariposa botnet.”
The culprits? Three Spaniards, ages 31, 30 and 25 who were arrested last week in Spain’s northern Vizcaya province. During a search of their homes and computers, police found personal information from more than 800,000 users.
The suspects “copied personal and financial data of individuals, companies and official institutions in more than 190 countries,” the Civil Guards’ statement said. In addition to gaining illegal access to personal and financial information, the virus would have permitted those controlling the system to mount a large cyberattack from the infected computers, a U.S. official said.
Apparently, the hacking was first detected in May by Defence Intelligence, a Canadian firm that develops software to monitor incoming and outgoing transmissions of every computer on a corporate network.
The botnet [or, a network of computers infected with a virus that can be controlled remotely without owners' knowledge] included infected machines inside the offices of more than 40 major banks and a vast majority of the top companies on the Fortune 1000 index. Since its creation, Defence Intelligence has identified and helped to protect its customers against dozens of botnets and malicious software programs — with Mariposa botnet being the jewel in its crown.
Authorities are searching for a fourth suspect in this massive cybercrime. “Juan Salon of the Spanish Civil Guard’s cybercrime unit told reporters Wednesday investigators have learned the suspect’s Internet handle and that this person might be Venezuelan.”
Tagged as:
computer hacking,
Defence Intelligence,
Mariposa botnet
DailyFinance.com is projecting that the recent 8.8 magnitude earthquake in Chile could cause insured losses anywhere from $2 billion to more than $8 billion. The quake struck February 27th and is now believed to be one of the top 10 most powerful earthquakes ever.
Catastrophe modeling company EQECAT Inc. said insured damages from the quake could range from $3 billion to $8 billion, with economic losses ranging from $15 billion to $30 billion. Economic losses will continue to be updated as the ongoing assessment of infrastructure damage is confirmed. The company also said the speed of restoration of the transportation and utility networks will also determine the total amount of business interruption losses claimed.
Effects of the earthquake stretched from 115 miles north of the industrial city of Concepcion to the capital of Santiago — more than 325 miles away from the epicenter. “AIR Worldwide estimates that the value of insurable buildings in the quake zone is $275 billion, but very few of the structures are likely to have been insured. The company said that as little as 10% of residential buildings are believed to have been insured and about 60% of the commercial structures were insured.”
The Haitian earthquake and Chilean earthquake differ drastically in terms of insurance. Though the earthquake that struck Chile was approximately 500 times as powerful as the one that struck Haiti, Chile will recover more quickly because of it’s highly developed insurance market. In an article release today, Robert Hartwig, president of the Insurance Information Institute (I.I.I.) said that “in addition to a number of Chilean insurers, many large international insurers and reinsurers—mainly American and European—compete for business in that country, and will provide the financial resources for Chile’s reconstruction.” He contrasted the situation to that in Haiti, an area that Hartwig said has almost no private insurance market.
The I.I.I. shows the following table, titled the “10 most costly U.S. earthquakes (in millions).”
In the March issue of Risk Management, our editor, Jared Wade, takes an in-depth look at the catastrophe in Haiti and the future of natural disasters. A good read, I must say.
Tagged as:
Chile earthquake,
Haiti earthquake,
Natural Catastrophes
In an exclusive, online-only column, Robert Horkovich and Marshall Gilinsky of Anderson Kill & Olick talk about how a soft market is the perfect time to improve your insurance policies.
Changes to policy wording are most likely to be accepted during soft markets like the one that has existed over the past several years. Although in theory, underwriters price policies based on the specific risks being transferred via the actual policy, in practice, due to competition from other insurance companies, lack of effort or both, it is usually the case that requested changes to policy wording usually do not result in corresponding changes to premium. Essentially, the underwriter agrees to “throw in” the broadened coverage in order to keep the policyholder’s business.
For more about how to go about revising your policy in your favor, click here to read the full article on RMMagazine.com.
Tagged as:
Anderson Kill & Olick,
Insurance Policy,
Marshall Gilinsky,
Robert Horkovich,
Soft Market
