Investment efficiency is a function of the risk, return and total cost of an investment management structure, subject to the fiduciary and other constraints within which investors must operate. Institutional investors implement their investment policies through investment management structures. In this paper the aim is to enhance the investment management structure by broadening the financial objectives, by recognising the effect of behavioural issues and by incorporating governance constraints. We therefore suggest that investment efficiency should be considered as a combination of financial efficiency and non-financial efficiency.Modern portfolio theory had a revolutionary effect on portfolio construction. In the same way, we believe that investment management structures should be constructed in a more disciplined and quantitative manner. In this paper we outline the quantitative and qualitative methods by which these structures can be developed. The proposed new framework for designing investment management structures seeks to optimise net information ratios while simultaneously recognising the level of regret risk facing fiduciaries, minimising non-financiallyproductive behavioural biases and taking account of the resources available to the fiduciary to monitor these structures.

This paper overviews a practical approach to the assessment of operational risk in life insurance companies. It considers how actuaries, working in conjunction with risk management professionals and senior management, can develop a framework to assess the capital requirements relating to operational risk, taking into account the capital requirements of other risks and their interaction.This paper recognises that we do not live in an ideal world, and that a lot of the data which one might want for operational risk assessment are not, and in some cases never will be, available. Consequently, the approach outlined in this paper takes into account the fact that management and assessment of operational risk is at an early stage of development in the life industry. In addition, it outlines some of the areas where development is necessary or desirable in the coming years.There is a section on the operational risks against which it is appropriate to hold capital. As this is a new area for insurance companies, and given the governance requirements for Individual Capital Assessments, it is important to explain the results effectively to senior management. Therefore, a brief review of techniques for reporting the results of the assessment is provided.The paper concludes with some thoughts on how operational risk management can be embedded more in the business, and then considers what future work will help develop the framework. To echo the thoughts of the authors of the general insurance paper on this topic (Tripp et al., 2004), we hope that the paper will sow seeds for the development of best practice in dealing with operational risk, and will raise the awareness and increase the interest of actuaries in this emerging topic.