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THE ROLE OF THE ACTUARY IN THE E

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THE ROLE OF THE ACTUARY IN THE E Powered By Docstoc
					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
 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
  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
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
     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
      MAJOR FIELDS OF
      ACTUARIAL WORK

•   life insurance          •   corporate finance
•   general insurance       •   risk management
•   pensions                •   banking
•   investments             •   government service
•   health care financing   •   regulation
•   social security         •   education
   ROLE OF ACTUARY IN
FINANCIAL INSTITUTION - 1

  •   product design
  •   pricing
  •   reserving
  •   investment strategy
  •   financial soundness
  •   risk analysis and risk management
   ROLE OF ACTUARY IN
FINANCIAL INSTITUTION - 2

  •   profitability measurement
  •   control of dividend or bonus systems
  •   disclosure to customers
  •   assessing shareholder value
  •   dynamic financial analysis
      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
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
WHISTLE-BLOWING
•   professional responsibility
•   responsibility to regulator
•   underpinned by legislation
•   responsibility to policyholders
•   responsibility to company
•   need for protection or indemnity?
   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
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
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
  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
  ACTUARIAL ROLES IN
COMPLEMENTARY PENSIONS
  •   scheme design
  •   level of contributions
  •   funding and solvency management
  •   asset/liability management
  •   pricing of individual options
  •   bulk transfers
ACTUARIES IN INVESTMENT
  •   portfolio management
  •   research and analysis
  •   portfolio performance measurement
  •   asset/liability management - mandates
  •   strategic asset allocation
  •   investment indices
  •   complex financial instruments
       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
CORPORATE FINANCE

•   appraisal of capital projects
•   risk analysis and management
•   innovative financing mechanisms
•   performance indicators and measurement
PERSONAL FINANCIAL
     PLANNING

•   assessment of needs and risk profile
•   insurance solutions
•   advice on pension products
•   tax planning
•   investment advice
    ASSESSMENT OF
    DAMAGES/LOSS

•   value of loss of earnings
•   value of dependency
•   cost of care
•   pension loss
•   individual characteristics
ROLE OF PROFESSION

•   initial education (may be in universities)
•   qualification standards
•   continuing professional development
•   standards of practice
•   interface with regulatory bodies
•   disciplinary framework
       PUBLIC INTEREST

•   quasi regulatory functions
•   protection of policyholders
•   protection of pension scheme members
•   serving the public
•   pursuit of excellence

				
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posted:3/24/2010
language:English
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