Great Risk Transfer

arrows with heading the great risk transfer

At the start of 2020 the IFoA launched its campaign on what we termed the ‘Great Risk Transfer’. Throughout the year we explored the trend to transfer risks from institutions – such as employers, the state, and financial services providers – to individuals.

Evidence of this shift exists in a number of areas of public policy and actuarial work. It amounts to a profound change in the way that individuals organise their life and finances, and represents one of the most significant yet little understood social, financial, and political challenges of our time.

While it is true that levels of numeracy, financial literacy, and understanding of risk are generally low, even many of those who consider themselves more financially aware feel ill-equipped to deal with the risks they now face.

Our work suggests that the causes of this trend are complex and cover a variety of factors, including increasing longevity, technological advances, the low interest-rate environment, and changes in financial regulation. We believe there is an urgent need for practical solutions, exacerbated by the pandemic, as individuals are confronted by the need to manage risks they did not have to worry about previously.

Between February and May 2020 we ran a call for evidence so that we could gather first-hand examples of this transfer and the ways it was impacting on the public. This evidence then informed subsequent roundtables, from which we developed the suggested solutions into practical recommendations.

“The genesis of the Great Risk Transfer was a recognition that there may be a pattern of risk transfer from institutions to individuals occurring across a range of settings in financial services. This initial hunch was confirmed by our call for evidence in Spring 2020, which suggested there were areas of real concern.

With the publication of our final Great Risk Transfer report, we will be focusing on specific recommendations from the report, seeking to engage with influential stakeholders such as Ministers, other parliamentarians, regulators and industry groups to address the very real challenges highlighted over the course of the campaign.”

John Taylor, Past President of the IFoA

This transfer of risk poses important questions about the changing priorities and responsibilities of the institutions that once managed those risks. In financial services, it means greater thought about how to ensure consumers are equipped to make decisions that are in their best interest. In public life, it means taking a close look at the relationship between citizens and the welfare state, and questioning whether the current balance of individual and collective responsibility is right.

Risk transfer also poses profound questions for our profession, as many actuaries support clients and employers in reducing risk exposures, only for consumers to be left exposed.


Our report

Our final report in the Great Risk Transfer campaign brings together a broad body of evidence to make recommendations to address two key challenges:

  • Rebalancing risks – We think there are opportunities to ease the burden for consumers by shifting the prime responsibility for certain risks back towards institutions. The mechanism for achieving this is structural changes to markets, products/services, and the legal/regulatory frameworks that shape them.
  • Helping consumers manage financial risk through good decision-making – We believe a key driver for new products and services should be to help consumers with the complex decisions involved in managing financial risks effectively and affordably. This could dramatically improve outcomes for many people, and for society as a whole.

To find out more about how these challenges can be addressed, download the final report of the Great Risk Transfer.

With the publication of our final Great Risk Transfer report, we continue to focus on these specific recommendations by engaging with influential stakeholders such as ministers, parliamentarians, regulators, and industry groups to address the challenges highlighted over the course of the campaign.

The Great Risk Transfer: campaign recommendations

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Download report

“The IFoA is calling for a public conversation about which risks are worth taking and who should stand behind those risks. Over recent decades, institutions and governments have sought to de-risk in order to manage uncertainty. In trying to reduce or eliminate risk, they have often transferred it to their customers or citizens, who are less well equipped to manage it, often without understanding their needs or preferences.

Many individuals will have been affected by the transfer of risk in more than one area of their lives. The evidence suggests that only a minority will be truly equipped to deal with the aggregate impact of these risks, and make the most of the flexibility and choice they are offered by taking them on.

Responses to the call for evidence have helped us look beyond actuarial practice areas to examples in other areas of society where this trend is taking place. These have helped to expand our understanding about the root causes and societal implications of risk transfer, and will inform our recommendations for a meaningful change in UK government policy.”

John Taylor, Past President of the IFoA

Our next steps

In this report, the IFoA has made a number of recommendations to government, regulators, and the financial services industry to address some of the negative impacts of the Great Risk Transfer. We will:

  • Plan further engagement with stakeholders, and further work with IFoA members, to inform and promote action on solutions to address the issues we have highlighted in this and our interim report. In June 2021, we ran two roundtable discussions in conjunction with think tank Demos:
    1. The Great Risk Transfer: How can the Government, employers and industry help individuals to save enough for a good retirement?
    2. The Great Risk Transfer: How can Government, employers and industry help individuals to negotiate risk barriers on the climb to financial security?
  • To launch the second part of our Great Risk Transfer Campaign the IFoA, in partnership with WPI Economics, convened a roundtable to discuss this recommendation in more detail and consider how a minimum level of insurance provision could be realised.
  • The roundtable brought together academics, industry experts, and consumer advocates to address the following questions:
    • Which types of insurance cover should be seen as essential for financial resilience?
    • To what extent is low take up a supply side or a demand side issue?
    • What ‘levers’ can government and regulators pull to increase take up of insurance to a defined level?
    • What is the role of mandation? How has this worked in other spaces?
    • How can insurers be supported to take on risks that they would not currently?
  • The discussion helped to shine a light on some of the key issues around establishing a minimum level of insurance protection, as well as a series of potential areas for further exploration. The IFoA plans to take forward and further explore a number of these, including:
    • The interaction between aggregating demand and risk sharing – how can ‘re’ schemes and mandation or defaults complement each other to address issues around low take up. By creating a bigger pool of risks, boosting demand for insurance products through mandation or defaults can help address concerns about adverse selection. The combination of these two interventions may be a particularly strong route for improving access to protection insurance, where there are concerns about both low take up and adverse selection.
    • How can we take a product-based approach to defining minimum standards – product by product, how can we determine the minimum level of protection required by different groups of people? Establishing the minimum level of protection society aims to achieve is required before introducing strategies to address take up (one of which could be mandation). The Retirement Living Standards developed by the PLSA could be an important example to build on.
    • Strategic risk management and insurance take up – more broadly, there is a need ensure that we integrate the management of the underlying risks that society faces into our thinking about insurance take up. This could include considering how we do this across climate change, cyber risk, and other risks. Flood Re already looks to do this as part of its various transition activities, such as Build Back Better
    • Social dialogue, essential products, and risk pooling – many of the questions addressed as part of this roundtable are values-based decisions for society as a whole, rather than commercial or technical ones. As a result, ways to engage the public in these questions should be considered, such as citizen assemblies.
    • Furthermore the IFoA and the wider actuarial profession we represent, has a role to play in tackling these issues. We will work to improve our members’ understanding of how consumers experience financial risks, products, services, and communications as an essential component of actuaries’ professional skillset.

By taking these steps we believe we can have a positive impact in addressing the challenges of the Great Risk Transfer.

If you would like to talk to us about working to address these issues and our recommendations, please contact


Further reading

Myra Hamilton

At our launch event attendees heard from the Australian researcher Myra Hamilton, whose work engages with the Great Risk Transfer, not only from a financial services point of view but more broadly in terms of changes to our politics and society over recent decades.

Case study - Risk Individualisation in UK Life Insurance - by Arjen van der Heide

Dr Arjen van der Heide’s research explores how risk has been individualised in the UK life insurance industry over recent decades.

Download the case study

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