Evolution of the Actuarial Profession. Martin Stevenson President, Institute of Actuaries of Australia

Transcription

1 Evolution of the Actuarial Profession Martin Stevenson President, Institute of Actuaries of Australia

2 Overview Global now, Australia later Global demand for actuaries Education Professional Governance Risk Internal Governance The actuarial brand

3 Global demand for actuaries Approximate numbers of: Actuaries 43,000 Doctors 9,500,000 Accountants 5,500,000 Engineers 6,500,000

4 Global demand for actuaries (Acknowledgement Actuarial Supply and Demand by Julian D Gribble) Distribution of actuaries

5 Global demand for actuaries Actuarial density = Number of actuaries/gpd (in $US million) Current Actuarial Supply and Demand

6 Global demand for actuaries Net growth of actuarial profession in the last 2 years - 3.1% pa Increase in GDP in last 2 years - 3.7% pa

7 Global education Route to actuarial education: Professional body Universities Hybrid Convergence to hybrid

8 Global education IAA Core Syllabus: Financial mathematics Probability and mathematical statistics Economics Accounting Modelling Statistical methods Actuarial Mathematics Investment and asset management Principles of actuarial management Professionalism

9 Global education Convergence of technical syllabus: IAA Core syllabus Group Consultatif Joint Education Task Force Financial economics and corporate finance

10 Global education The Actuarial Control Cycle: Seminal paper by Jeremy Goford Part II of IAAust educational requirements IAA Principles of Actuarial Management SoA Application of Basic Actuarial Principles Core applications for UKAP IAAust text book

11 Global education New area of specialisation Need for business and communication skills Life long learning

12 Global education International Actuarial Education Programme (IAEP): World Bank Concerns Approval in principle for IAA to develop an education and examination programme Network of entities, probably mostly universities, to teach actuarial science Preparation of tuition materials IAA to retain overall control of the examination process

13 Professional Governance What Sir Derek Morris said: The issues identified in the interim assessment include: the profession overall has been too insular and slow to adapt to changing circumstances; there has been inadequate scrutiny, challenge and market-testing of actuarial advice by users: such as some pension fund trustees and Boards of insurers; there has been a lack of clarity about the accountability of actuaries to the wider public interest; in the past the educational syllabus has failed to take full account of developments in actuarial and non-actuarial thinking; professional standards have been weak, ambiguous or too limited in range; and perceived as too influenced by commercial interests; self-regulation has not been sufficient to address these issues.

14 Professional Governance.and Sir Derek also said: Although there is a clear requirement on the part of users to equip themselves with the ability to understand and challenge actuarial advice, the interim assessment also highlighted concerns about the clarity with which actuarial advice is provided. This is partly about how actuarial advice is presented and, perhaps more importantly, about what it is that actuaries choose to present to their clients. The review also recognises that problems arise simply because of the intrinsically complex nature of the subject matter.

15 Professional Governance Chris Daykin (1994) said: We must build the confidence of our clients, our employers and the ultimate consumers of our services, so that we can fairly say You can trust an actuary. We are the profession that turns financial promises into reality. Director of a leading consumer organisation (2001) said: Trust me I m an actuary is rather like Harold Shipman saying Trust me I m a doctor.

16 Professional Governance Peter Clark s view: Thus I believe the messages for the rest of the world from the process that we are going through in the UK are: Ensure that the processes of your professional association are open and transparent. Do not be afraid to open your association to scrutiny from external sources. Indeed consider involving non-actuaries in your governance processes. Adopt the Headline Test : How would a particular activity or decision appear if it were reported as a headline in the daily newspaper? Be abundantly clear in your communication both at the association level and at the level of the individual actuary. Always bear in mind that none of us least of all Past Presidents of the Institute are as good communicators as we like to think. There is always room for improvement!

17 Professional Governance FRC Structure (UK) Board Council Board for Actuarial Standards (BAS) Accounting Standards Board (ASB) Auditing Practices Board (APB) Professional Oversight Board (POB) Review Panel Discipline Board (AADB)

18 Professional Governance The Australian Reaction: Task Forces: HIH, Corporate Governance, Penrose/Morris, James Hardie External Peer Review Code of Professional Conduct Disciplinary Scheme Professional Standard on CPD Guide to Drafting Professional Standards Overhaul of all Professional Standards and Guidance Notes

19 Risk What is Enterprise Risk Management? Philosophy of managing risks holistically to achieve the desired balance between achieving stakeholder value and managing risk exposure Encompass all risks from sources across the enterprise Embedded within organisation at all levels, reinforced through actions of the Board and senior management.

20 Risk Growing importance of ERM Basel II requirements for banks need to model and hold capital for operational risk; Insurance regulators around the world planning to introduce similar capital requirements for operational risk; Ernst & Young s Global Risk survey finds Investors are rewarding and penalising companies based on their approach to risk management; S&P introduced ERM into rating assessments FASB & IASB emerging disclosure requirements

21 Risk Why should actuaries be involved in ERM? Actuaries have capacity to: Develop forward looking financial and risk reporting analytics Deal with and understand most risk aspects across an enterprise; Allow for uncertainty in outcomes and timing; Communicate results in complex situations; Critically evaluate and review business operations; Provide independent comfort to boards that due process has been followed

22 Objectives of ERMII: Risk Update on work of ERMII ERMII will be a partnership between universities and others interested on fostering university based ERM education & research ERMII will develop an accreditation system for university ERM programs so that wherever taught in the world, the ERM program will have minimum common attributes

23 Risk Education and CPD Currently ERM education is fragmented globally. There is a need for a program that will: Enhance opportunities for actuaries Develop a focused ERM qualification Evolve cross fertilisation of ideas Allow actuarial profession to adapt, diversify and grow

24 Risk Update on work of various actuarial bodies Society of Actuaries (SoA) and Casualty Actuarial Society (CAS) Canadian Institute of Actuaries (CIA) Institute of Actuaries (UK) Institute of Actuaries of Australia (IAAust)

25 Internal Governance The IAA should be a strong organisation: For operational efficiency For strong responses to global initiatives (IFRS, convergence of regulation) For risk management of the profession (pensions crisis) For an integrated approach to new domains (Risk) Global development of the Profession

26 Internal Governance However IAA is: Under resourced Ambiguous and slow moving governance Large Council Six monthly meetings of Committee and Section Subsidiarity principle Task Force appointed to examine the issues.

27 The Actuarial Brand What is a brand? A brand is a valued promise that a product or a service makes to its most important external and internal audiences. External audiences view the brand as the best and sometimes only solution to their needs. Internal audiences must believe that the brand promise is worthy of their commitment.

28 The Actuarial Brand North American initiative Desired outcomes: Position actuaries as primary leaders and decision makers with traditional employers Establish an initial footprint for actuaries in the broader financial service industry. Critical conversations with individuals representing key target audiences unveiled six key findings which together form the framework of the actuary brand promise.

29 The Actuarial Brand Actuaries use deep knowledge of the dynamics of risk and its financial impact to create social and economic value. Actuaries believe in five core values that collectively define their business and social ethics: Insight, Integrity, Creativity, Professionalism and Public Interest. Actuaries are integral to the success of the enterprise, applying rigorous training, high professional standards and a deep understanding of the relationship between risk and opportunity.

30 The Actuarial Brand Actuaries possess the unique ability to anticipate, identify, quantify and optimise risk to bring about creative solutions to complex financial challenges facing business and society. Actuaries bring a comprehensive approach to problem solving that combines excellent analytical skills, deep risk expertise and an unwavering commitment to professional standards. The actuary brand possesses human-like characteristics that make it distinct and special. Actuaries are ethical, intelligent, unbiased, creative and inquisitive people.

31 The Evolving Actuary A more consummate communicator A more global (and regional?) outlook Greater emphasis on skills rather than practice knowledge A more explicit and transparent professional governance framework A significant presence in risk management More involvement in partnering