1. THE ROLE OF THE ACTUARY IN THE ECONOMY
Second International Professional Meeting of Leaders of the Actuarial Profession in Africa,
Lagos, Nigeria, February 2003

2. Actuaries make financial sense of the future

3. 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

4. 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

5. 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
Institute of Actuaries, 1848
Faculty of Actuaries, 1856
International Actuarial Association, 1895

6. 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

7. 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

8. ROLE OF ACTUARY IN FINANCIAL INSTITUTION - 1
product design
pricing
reserving
investment strategy
financial soundness
risk analysis and risk management

9. ROLE OF ACTUARY IN FINANCIAL INSTITUTION - 2
profitability measurement
control of dividend or bonus systems
disclosure to customers
assessing shareholder value
dynamic financial analysis

10. 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

11. 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

12. WHISTLE-BLOWING professional responsibility
responsibility to regulator
underpinned by legislation
responsibility to policyholders
responsibility to company
need for protection or indemnity?

13. 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

14. 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

15. 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

16. 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

17. ROLE OF ACTUARIES IN SOCIAL SECURITY REFORM
analysis of costs of existing arrangements
advice on alternative structures
modelling the transition
advice on establishment of second pillar
regulation of second pillar
financial and economic impact

18. ACTUARIAL ROLES IN COMPLEMENTARY PENSIONS
scheme design
level of contributions
funding and solvency management
asset/liability management
pricing of individual options
bulk transfers

19. ACTUARIES IN INVESTMENT
portfolio management
research and analysis
portfolio performance measurement
asset/liability management - mandates
strategic asset allocation
investment indices
complex financial instruments

20. 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

21. CORPORATE FINANCE appraisal of capital projects
risk analysis and management
innovative financing mechanisms
performance indicators and measurement

22. PERSONAL FINANCIAL PLANNING
assessment of needs and risk profile
insurance solutions
advice on pension products
tax planning
investment advice

23. ASSESSMENT OF DAMAGES/LOSS
value of loss of earnings
value of dependency
cost of care
pension loss
individual characteristics

24. ROLE OF PROFESSION initial education (may be in universities)
qualification standards
continuing professional development
standards of practice
interface with regulatory bodies
disciplinary framework

25. PUBLIC INTEREST quasi regulatory functions protection of policyholders
protection of pension scheme members
serving the public
pursuit of excellence