24
THE ROLE OF THE ACTUARY IN THE ECONOMY Second International Professional Meeting of Leaders of the Actuarial Profession in Africa, Lagos, Nigeria, 20-22 February 2003

THE ROLE OF THE ACTUARY IN THE ECONOMY

Embed Size (px)

DESCRIPTION

THE ROLE OF THE ACTUARY IN THE ECONOMY. Second International Professional Meeting of Leaders of the Actuarial Profession in Africa, Lagos, Nigeria, 20-22 February 2003. Actuaries make financial sense of the future. WHAT IS AN ACTUARY?. An actuary applies mathematical skills to - PowerPoint PPT Presentation

Citation preview

Page 1: THE ROLE OF THE ACTUARY IN THE ECONOMY

THE ROLE OF THE ACTUARY IN THE ECONOMY

Second International Professional Meeting of Leaders of the Actuarial

Profession in Africa,

Lagos, Nigeria, 20-22 February 2003

Page 2: THE ROLE OF THE ACTUARY IN THE ECONOMY

Actuaries make financial sense of the future

Page 3: THE ROLE OF THE ACTUARY IN THE ECONOMY

WHAT IS AN ACTUARY?

An actuary applies mathematical skills to

financial and business problems, especially

those which involve uncertain future events,

such as in life insurance, general insurance,

risk management, health care financing,

investment, corporate finance, banking,

pensions and social security

Page 4: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIES ARE…..

• acknowledged experts in the analysis and modelling of situations involving financial risk and contingent events

• concerned with both sides of the balance sheet• able to provide realistic solutions to complex

problems with a long term forward look• practical, innovative and numerate• independent, respected and trusted

Page 5: THE ROLE OF THE ACTUARY IN THE ECONOMY

THE ACTUARY - a brief history

• Roman origins of name (actuarius)• actuary of the Society for Equitable Assurances• William Morgan appointed actuary in 1775• first mention in legislation - 1819• Institute of Actuaries, 1848• Faculty of Actuaries, 1856• International Actuarial Association, 1895

Page 6: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIAL SKILLS

• mathematical modelling

• analysing and managing uncertainty

• evaluating financial consequences

• analysis of risk and risk management

• scientific pricing and reserving techniques

• asset/liability management

• overall financial management and solvency

Page 7: THE ROLE OF THE ACTUARY IN THE ECONOMY

MAJOR FIELDS OF ACTUARIAL WORK

• life insurance• general insurance• pensions • investments• health care financing• social security

• corporate finance• risk management• banking• government service• regulation• education

Page 8: THE ROLE OF THE ACTUARY IN THE ECONOMY

ROLE OF ACTUARY IN FINANCIAL INSTITUTION - 1

• product design

• pricing

• reserving

• investment strategy

• financial soundness

• risk analysis and risk management

Page 9: THE ROLE OF THE ACTUARY IN THE ECONOMY

ROLE OF ACTUARY IN FINANCIAL INSTITUTION - 2

• profitability measurement

• control of dividend or bonus systems

• disclosure to customers

• assessing shareholder value

• dynamic financial analysis

Page 10: THE ROLE OF THE ACTUARY IN THE ECONOMY

ROLE OF APPOINTED ACTUARY

• adviser to Board and senior management

• responsible for assets as well as liabilities

• continuous financial monitoring

• annual valuation of assets and liabilities

• hot line to supervisor in case of difficulties

• operating under professional standards

Page 11: THE ROLE OF THE ACTUARY IN THE ECONOMY

CONTINUOUS MONITORING OF FINANCIAL POSITION

• product design and marketing

• premium rates and options

• current investments and continuing policy

• derivative exposures

• current and future level of expenses

• reinsurance arrangements

Page 12: THE ROLE OF THE ACTUARY IN THE ECONOMY

WHISTLE-BLOWING

• professional responsibility

• responsibility to regulator

• underpinned by legislation

• responsibility to policyholders

• responsibility to company

• need for protection or indemnity?

Page 13: THE ROLE OF THE ACTUARY IN THE ECONOMY

DYNAMIC FINANCIAL ANALYSIS (STRESS-TESTING)

• capital adequacy testing• impact of regulatory requirements• realistic future cash-flows• alternative scenarios• use of stochastic modelling• identification of risks• risk management strategies

Page 14: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIES IN SUPERVISION

• understanding of actuarial issues

• effective monitoring of technical reserves

• monitoring of financial strength

• interface with actuarial profession

• support for appointed actuary

• safeguarding policyholders’ interests

Page 15: THE ROLE OF THE ACTUARY IN THE ECONOMY

GOVERNMENT ACTUARY’S DEPARTMENT

• independent source of actuarial advice

• available for all areas of government

• carries weight with the industry

• interface with actuarial profession

• easier to recruit and retain actuaries

Page 16: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIAL ROLES IN SOCIAL SECURITY SCHEMES

• demographic projections

• estimates of future benefit outgo

• estimates of future contribution income

• long-term projections of financial balance

• short-term estimates of cash-flow

• advice on funding strategies

Page 17: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIAL ROLES IN COMPLEMENTARY PENSIONS

• scheme design

• level of contributions

• funding and solvency management

• asset/liability management

• pricing of individual options

• bulk transfers

Page 18: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIES IN INVESTMENT

• portfolio management

• research and analysis

• portfolio performance measurement

• asset/liability management - mandates

• strategic asset allocation

• investment indices

• complex financial instruments

Page 19: THE ROLE OF THE ACTUARY IN THE ECONOMY

ACTUARIES IN HEALTH & CARE

• demographic studies

• projecting future costs

• design of financing mechanisms

• health insurance products

• cost-benefit analysis of treatments

• financial appraisal of alternative strategies

• financing long-term care

Page 20: THE ROLE OF THE ACTUARY IN THE ECONOMY

CORPORATE FINANCE

• appraisal of capital projects

• risk analysis and management

• innovative financing mechanisms

• performance indicators and measurement

Page 21: THE ROLE OF THE ACTUARY IN THE ECONOMY

PERSONAL FINANCIAL PLANNING

• assessment of needs and risk profile

• insurance solutions

• advice on pension products

• tax planning

• investment advice

Page 22: THE ROLE OF THE ACTUARY IN THE ECONOMY

ASSESSMENT OF DAMAGES/LOSS

• value of loss of earnings

• value of dependency

• cost of care

• pension loss

• individual characteristics

Page 23: THE ROLE OF THE ACTUARY IN THE ECONOMY

ROLE OF PROFESSION

• initial education (may be in universities)

• qualification standards

• continuing professional development

• standards of practice

• interface with regulatory bodies

• disciplinary framework

Page 24: THE ROLE OF THE ACTUARY IN THE ECONOMY

PUBLIC INTEREST

• quasi regulatory functions

• protection of policyholders

• protection of pension scheme members

• serving the public

• pursuit of excellence