BusinessMirror Getting to know the actuary

Getting to know the actuary

Category: Opinion 07 Oct 2014
Written by the Technical Services Group of the Insurance Commission

NOT too many people know about

actuaries. In fact, there are still a lot
of people who mistakenly call them
actuarians. This is not surprising,
considering that, as of June 18,
only 59 fellows of the Actuarial Society of the Philippines (ASP) are in good
standing. And, yet, for such a small group, their responsibilities are so big.

What do actuaries really do?

Actuaries determine the chances of future risksbirth, disability, accidental

injury, need for medical care or premature deathand calculate the cost of
financing these uncertain events through insurance or other related means. They
use scientific actuarial principles, so that the financial aspects of these uncertain
events can be exchanged for the certainty of a premium payment.

However, actuaries are more than just mathematicians. They apply not only
mathematical, but also statistical, economic and financial analysesall of which
involve risk assessment for longer-term financial contractsto make calculations
and projections for a wide range of practical business problems. So while
actuarial work involves a lot of math, actuaries are also up-to-date on business
trends, social science, law, finance and economics. Incidentally, they also have
to be good communicators, since they often find themselves explaining to
nonactuaries.

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An actuary is actually a combination of a business executive, mathematician,

financier, sociologist and investment manager who is a key player in a
companys management team.

Little wonder, then, that actuaries move on to become senior executives of the
companies they work for. Some even become president and/or chief executive
officer.

Moreover, the role of actuaries has, over the years, widened as more industries
recognize the relevance and potential value of actuarial skills in operating a
company. Because of that, they can be now found in a wide range of companies,
from private sector to government, from financial institutions to health-
maintenance organizations.

Yet, for a career as lucrative as an actuarys, why are there so few actuaries in
the Philippines? Well, besides the fact that not all minds are created equal, with
actuaries brains shining brighter than normal, the road to becoming a full-fledged
actuary and getting accreditation from the Insurance Commission (IC) is long,
laborious and costly.

The Insurance Code, as well as the Preneed Code of the Philippines, requires
life-insurance companies, mutual-benefit associations (MBAs) and preneed
companies to engage the services of an actuary, and both codes state that only
ASP fellows or those who meet all the requirements for ASP fellowship may be
accredited by the IC.

The ASP, which is the recognized professional membership organization for

actuaries in the Philippines, has three membership classes: affiliates, associates
and fellows.

To be an affiliate, a candidate has to pass at least one of the five Society of

Actuaries (SOA) examinations on the following: probability, models for life

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contingencies, financial mathematics, construction and evaluation of actuarial

models, and models for financial economics.

To be an associate, a candidate has to pass all the aforementioned SOA

preliminary exams; complete the Validation by Educational Experience (VEE)
requirements on economics, applied statistics and corporate finance; and attend
the Associateship Admission Course (AAC). The examinations and the VEE may
be completed in any order, while the AAC may be taken upon passing any of the
SOA preliminary exams.

To be a fellow, an ASP associate must pass two ASP Fellowship Examinations

the ASP Integrated Exam A and ASP Integrated Exam Band attend the
Fellowship Admission Session (FAS) conducted by the ASP. Moreover, the
associate must complete the SOA Fundamentals of Actuarial Practice (FAP
Interim Assessment and FAP Final Assessment), and at least two of the
SOA/Casualty Actuarial Society (CAS) Fellowship Modules.

A candidate is required to take the Financial and Health Economics module. For
the other module, he or she may choose from the following modules: Investment
Strategy; Pricing, Reserving and Forecasting; Regulation and Taxation; Financial
Reporting; Social Insurance; CAS Risk Management and Insurance Operations;
Enterprise Risk Management; Health Foundations; and CAS Insurance
Accounting, Coverage Analysis and Insurance Law.

Moreover, the associate must pass at least one of the SOA/CAS Fellowship
Exams (Advanced Finance Exam; Individual Life and Annuities CSP Exam;
Group and Health DP/CSP Exam; Financial Economic Theory and Engineering
Exam; Individual Life and Annuities DP Exam; FCAS Exam 5, 7, 8 or 9;
Advanced Portfolio Management Exam; and Retirement Benefits DP/CSP
Exam). The fellowship requirements may be completed in any order, except for
the FAS, which may only be taken upon completion of other requirements.

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With all the hurdles mentioned and technical expertise required, one can
understand why only an elite few are given accreditation to sign and undertake
pertinent determination and computations for benefits, pricing, reserves
valuation, termination values, etc., for the products sold by insurance companies,
preneed companies and MBAs.

On the other hand, it should be a relief for the insuring public to know the kind of
academic and technical preparation, screening and sharpening that actuaries
undergo to ensure that premiums are reasonable, adequate and commensurate
to the promised benefits, and that actuarial projections are as precise as
possible, thus, leaving minimal room for failure to meet policy and other
contractual obligations.

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