Call for papers: Performativity and Governance of Actuarial Models

An international meeting hosted by the

Fondation Maison des sciences de l’homme (FMSH), Paris

Dates: 13-14 February 2018


Conveners: Donald MacKenzie (University of Edinburgh), Christian Walter (FMSH and ISJPS)

Scientific committee: Annie Cot (Univ. Paris 1, MSE), Pierre François (Sciences Po, CSO), Olivier Lopez

(Univ. Paris 6, ISUP), Donald MacKenzie, Yuval Millo (Univ. of Warwick), Emmanuel Picavet (Univ.

Paris 1, ISJPS), Christian Walter.

Submission deadline for paper proposals: 31 October


Please send a summary (in no more than 300 words) of your intended contribution to the meeting

organisers, Arjen van der Heide and Julius Kob ( or by 31

October. Say which of the meeting’s themes your paper will inform. The proposals must include a

title and at least 5 keywords. Selection of papers will be made by the scientific committee.



The governance of actuarial models is a field not yet investigated by the social studies of finance but

of growing importance for the future, in particular because of the prescription of financial models

through international prudential regulation. The meeting aims at documenting the new challenges of

model governance given the fact that financialisation has now invaded actuaries’ territory. We

encourage submissions on any of the four issues below. We would like to encourage contributions on

relevant financial, actuarial, model governance and model use topics, especially those that examine

the models in their situations. Although we welcome papers from a variety of disciplines, the

meeting will primarily focused on ‘social studies of finance’.



The practice of modelling, largely used by actuaries, has been profoundly modified with the

emergence of new mathematical techniques mainly derived from academic research in the

mathematical finance. These new techniques have hugely contributed to the financialisation of

actuarial methods. They have also altered the specific nature of actuarial models and the

relationships between models and professional practices in the financial sector. The issue of the

actuarial expertise must be rethought after this financial transformation of mathematical models.

This is all the more so as actuaries are now called upon to exercise “expert judgment” in complex

situations in which there is no history of the relevance of a model to a given situation. The

professional expertise expected of actuaries, in particular their expert judgment, constitutes the

basis of their trustworthiness.

Following similar approaches to financial ethics, trustworthiness can be seen as depending on two

things: motivation and competence (De Bruin, 2015). In this vein, trustworthy actuaries should be

capable of making an accurate diagnosis of risk models, knowing the side effects of the risk models

they prescribe, capable of recognising the boundaries of their own capacities to master risk models,

capable of seeing if their risk models are up to date. Hence two consequences: on one hand, the

importance of understanding the relationship between a mathematical model and its environment;

on the other hand, the need to identify possible dangers arising from the financialisation of actuarial

mathematical models. More generally, structures for reasoning and calculation drawn from academic

finance now invade the actuarial territory.

“Expert judgement” has been used since the actuarial profession was founded. This issue has

recently become the subject of professional standards. Recent interventions by the International

Actuarial Association (IAA) – the worldwide association of professional actuarial associations – aim to

strengthen the actuary’s professional judgment.

As a result of financialisation, and perhaps in response to it, the professional environment of

actuaries has also been modified in recent years by the emergence of rules of ethics and actuarial

standards of practice, the International Standards of Actuarial Practice (ISAP) developed by the IAA

and accompanied with national applications: North-American Actuarial Standard of Practice (ASOP),

French Actuarial Practice Standards (NPA), Canadian Standards of Practice etc. Standards of Practice

include recommendations on how actuaries should conduct their work in all areas of their business:

risk modelling, pension plans, life insurance, expertise, etc. Overall, these standards are intended to

strengthen actuarial proficiency and the confidence that can be gained by those who follow actuarial

practice in modelling (see appendix for some examples).



The international meeting will focus on a set of important, related issues:

1. Financialisation and the changes in actuarial practices

The background of this meeting is the huge transformation of the financial services industry,

characterised by the elimination of the statutory barriers between insurance companies and banking

and investment firms. This elimination can be considered as a part of the process of “financialisation”

of the economy in the sense introduced for this word by Epstein (2005). This process is redefining

whole sectors of the economy and transforming business operation logics, for instance the valuation

techniques (Chiapello, 2015). Market devices play an important role in this financialisation (Callon,

Millo, Muniesa, 2007). After a period of relative quiet, actuaries are hugely impacted by the

financialisation process, in the sense that we are witnessing a financialisation of actuarial practices.

The meeting aims at documenting this financialisation and its consequences. We are interested in

the general dynamics: how does this financialisation takes place and what does it produce in the

actuarial territory?

2. Conventions of quantification and the use of actuarial models

The financialisation process of the economy carries new methods of problem analysis, calculation

techniques and decision-making principles, well analysed in the actuarial literature (e.g. Day, 2003;

IAA, 2008; Whelan, Bowie, Hibbert, 2002). Our objective here is to complete the technical actuarial

literature with a social science approach. The notion of “conventions of quantification” (Chiapello

and Walter, 2016; Desrosières, 2008) makes clear a possible danger with financial models.

Financialised conventions are replacing the old reasonings and forms of calculation previously used in

actuarial practices. For example, market-consistent valuation based on the risk-neutral pricing

method is a financialised valuation. We aim to analyse how quantification conventions influence

professional practices. In particular, we wish to question the notion of the risk-neutral approach and

its consequences for insurance and society. How are actors reacting to the deployment of this riskneutral


3. The performativity issues as a challenge for the foundations of actuarial concepts

Most of the concepts of actuarial science are based on the positivistic philosophy of science, i.e. a

philosophy of science which radically separates “facts” and “values”, “data” and “models” (Picavet,

2009; Putnam, 2004). The fact/value dichotomy seems to constitute the epistemological foundation

of the notion of model risk in the actuarial profession (American Academy of Actuaries, 2006; Society

of Actuaries, 1992; Pemberton, 1999). If this dichotomy appears valid in most situations, it seems

that this validity is attacked in situations involving financial risk. In these situations, many studies in

the social sciences have shown the importance of the performative power of financial models

(MacKenzie, 2006; MacKenzie and Millo, 2003; Svetlova, 2012), according to equivalent evidence in

the case of the economy (Callon, 2007; Muniesa, 2014). For example, the output of a statistical risk

measure has a real economic impact adding model risk to financial risk (Danielson et al., 2016). Using

a social science analysis of the role of models, we wish to explore the following issue: could

performativity lead to changes in the methodological basis of traditional actuarial approaches?

4. Actuarial expertise and the governance of insurance

The role of actuaries within life insurance companies and pension funds is changing. Only a few

decades ago, actuaries used to be among the most important professional groups at the executive

board level of life insurance companies. At present, however, there are nearly no actuaries that seep

through to board-level positions. Moreover, positions dedicated to actuarial functions within

insurance companies have changed too. British actuaries for example tended to have an important

statutory role within life insurance companies where the ‘appointed actuary’ was tasked with

mediating between the interests of shareholders, managers and policyholders (Collins, Dewing,

Russel 2009). Currently, however, the final responsibility for the financial well-being of a firm rests

with the board. This raises interesting questions about the role of actuarial knowledge in the

governance of life insurance. How can we describe and explain the changing role of the actuary in

insurance firms? And how does the changing role impact on actuarial expertise?



Examples of standards

• ISAP1#1.1: “This ISAP provides guidance to actuaries when performing actuarial services to

give intended users confidence that (…) the assumptions and methodology (including, but

not limited to, models and modelling techniques) used are disclosed appropriately”.

• ISAP1#1.5: “Reasonable Judgment – The actuary should exercise reasonable judgment in

applying this ISAP. (…) A judgment is reasonable if it takes into account: a. The spirit and

intent of the ISAPs; b. The type of assignment; and c. Appropriate constraints on time and


• ISAP1#2.7.2: “The actuary should consider the appropriateness of the assumptions

underlying each component of the methodology used. Assumptions generally involve

significant professional judgment as to the appropriateness of the methodology used and the

parameters underlying the application of such methodology. Assumptions may (…) be

implicit or explicit and may involve interpreting past data or projecting future trends”.

• ASOP1#3.1.4: “ASOPs provide the actuary with an analytical framework for exercising

professional judgment, and identify factors that the actuary typically should consider when

rendering a particular type of actuarial service”.

• ASOP38#3.3.4: “The actuary should evaluate whether the model is appropriate for the

particular actuarial analysis, and consider limitations of the model, modifications to the

model, and the assumptions needed in order to apply the model output”.



American Academy of Actuaries (2006), “The roles of the actuary in the selection and application of Actuarial

models”, Professionalism series, 7.

Chiapello, Eve (2015), “Financialisation of Valuation”, Human Studies, 38(1), 13-35.

Chiapello, Eve and Christian Walter (2016), “The three ages of financial quantification: a conventionalist

approach to the financier’s metrology”, Historical Social Research, 41 (2), 155-177.

Callon, Michel (2007), “What does it mean to say that economics is performative?” In: Donald MacKenzie,

Fabian Muniesa and Lucia Siu (eds.), Do economists make markets? On the performativity of economics.

Princeton, Princeton University Press, 311-357.

Callon, Michel, Yuval Millo and Fabian Muniesa (2007), Market Devices. Wiley.

Society of Actuaries committee on actuarial principles (1992), “Principles underlying actuarial science”,

Transactions of Society of actuaries, 44, 565-628.

Collins, David, Ian Dewing and Peter Russell (2009), “The actuary as fallen hero: on the reform of a profession”,

Work, Employment & Society, 23 (2), 249-266.

Danielsson, Jon, Kevin James, Marcela Valenzuela & Ilknur Zer (2016), “Model risk of risk models”, Journal of

Financial Stability, 23 (April), 79-91.

Day T. (2003), “Financial Economics and Actuarial Practice”, The Institute of Actuaries of Australia.

De Bruin, Boudewijn (2015), Ethics and the Global Financial Crisis: Why Incompetence is worse than Greed

(Business, Value Creation, and Society. Cambridge University Press.

Desrosières, Alain (2008), Pour une sociologie historique de la quantification. L’argument statistique I. Paris,

Presses de l’Ecole des Mines.

Epstein G. (ed.) (2005), Financialization and the World Economy, Northampton, MA, Edward Elgar Publishing.

International Actuarial Association (2008), “A note on Financial Economics”, 11 August 2008

International Actuarial Association (2015), “International Standards of Actuarial Practice (ISAPs)”, ISAP 1A —

Governance of Models

MacKenzie, Donald (2006), An Engine, Not a Camera: How Financial Models Shape Markets. MIT Press.

MacKenzie, Donald and Yuval Millo (2003), “Constructing a Market, Performing Theory: The Historical Sociology

of a Financial Derivatives Exchange, “American Journal of Sociology, 109 (1), 107-145.

Muniesa, Fabian (2014), The Provoked Economy. Economic reality and the performative turn. Londres,


Pemberton J.-M. (1999), “The Methodology of Actuarial Science”, British Actuarial Journal, 5(1), 115-195.

Picavet, Emmanuel (2009), “Politics, Economics and the Putnam-Sen dialogue on facts and values”. In

Cherkaoui, M., P. Hamilton (dir.), Essays in Honor of Raymond Boudon. Oxford: The Bardwell Press.

Putnam, Hillary (2004), The Collapse of the Fact/Value Dichotomy. Harvard University Press, 2004.

Svetlova, Ekaterina (2012), “On the Performative Power of Financial Models”, Economy and Society, 41(3), 418-


Whelan, Shane, David Bowie and A. Hibbert (2002), “A primer in financial economics”, British Actuarial Journal,

8(1), 27-74.