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ACTUARY
DIAF Vietnam - 07/10/2015
Minh Thanh NGO
MENTION DE CONFIDENTIALITÉ
Summary
1.
Actuaries and missions
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Actuaries in banking services
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MENTION DE CONFIDENTIALITÉ
1. Actuaries and missions (1/2)
An actuary is a business professional who deals with the measurement and management of
risk and uncertainties.
 « An actuary is part super-hero, part fortune-teller and part trusted advisor » (source :
Beanactuary.org)
 Actuary uses mathematical skills to measure the probability and risk of future events
Actuary skills are in great demand in financial sector, particularly in insurance, investment and
pensions.
 Consultancies – offering advice on issues such as acquisitions, mergers, and financing capital
projects and also on occupational pension schemes
 Investment – involved in research and on the pricing and management of investments,
particularly in mitigating the risk of investment
 Insurance – providing a service to companies which need a huge range of numerical information
investigated, analyzed and explained, for example to create and price polices, or to ensure they
have enough to cover claims.
 Pension – designing and advising on company pension schemes, especially placing a value on
accumulated pension commitments
However, there are many areas where actuarial skills may come in handy:
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Transportation such as shipping and air travel
Energies such as utilities, oil, and gas
Environment such as climate change
Even government institutions (Social Security, Department of Labor or Medicare to manage and
develop regulations and legislation.
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MENTION DE CONFIDENTIALITÉ
1. Actuaries and missions (2/2)
Actuaries in number (source : L’année actuarielle – special edition for 120th anniversary of
Institut des actuaries)
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2. Actuaries in banking services: Facts (1/2)
Actuaries are working across a range of banking roles, predominately in front-office
investment banking, middle office finance and credit risk related roles.
Banking actuaries come from a diverse range of backgrounds, mainly life and general
insurance
5 | Actuary I 7 Octobre 2015
MENTION DE CONFIDENTIALITÉ
2. Actuaries in banking services: Facts (2/2)
Actuaries are working across a range of banking roles, predominately in front-office
investment banking, middle office finance and credit risk related roles.
Banking actuaries come from a diverse range of backgrounds, mainly life and general
insurance
Investment-trading analysis, portfolio management and technical pricing are skills that
actuaries share with quantitative analysts
Bancassurance, insurance-linked securities pricing, asset liability management and
other common areas of banking and insurance are the fields that actuaries have advantages.
Credit risk modeling roles are for actuaries with statistical modeling and programming skills
Risked based capital modeling are also the fields that need actuarial skills.
Regulatory change, in particular, the Basel III is also the playground for actuaries with
technical skills of liquidity risk measurement and modeling.
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MENTION DE CONFIDENTIALITÉ
2. Actuaries in banking services: Why?
Naturally, insurance is also a specific domain in finance. In particular, actuaries were
‘mathematicians in insurance’ for centuries, as old as banking, and long time before
computers were invented!
Historically, actuaries already participated actively in banking investments (derivatives trading,
bond and equity portfolio management, asset and liability management).
Actuarial training:
- Solid background in mathematics: statistics, economic theories, probability, stochastic
calculus and optimization.
- Insurance Business: strength of actuaries with understandings of accounting, corporate
finance, enterprise risk management (ERM) and laws, especially regulatory changes
(Solvency II, Basel III, IFRS).
- Adaptation: with both broad-business and deep-technical backgrounds, actuaries are
easily catching up with global trends and playing important roles (Big Data - Machine
Learning, Cyber-Insurance, Micro-insurance, Durable Development, etc.)
- In particular banking: Methodologies of pricing and risk management are converging in
finance and insurance.
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MENTION DE CONFIDENTIALITÉ
2. Actuaries in banking services :
Example ALM and Asset allocations
Asset Liability Management (ALM) is a technique of liquidity and interest rate management
which began in Anglo-Saxon establishments since 1970s.
After a sequence of financial crises, ALM comes back as a central tool for risk management
and regulatory reporting, especially in large financial institutions.
Traditionally, banking sector pays more attention in ‘Asset’. Actuaries, however, specializes
more in ‘Liability’ (pricing insurance products).
As the markets grow exponentially thanks to technology, the financial products are more and
more complicated. The systemic risks are more dangerous than ever, e.g. the subprime crisis
in America =>The need for a more ‘zen’ view: Asset Liability Management.
ALM looks at the evolution of Asset and Liability at the same time for long periods. It
integrates all the long term models in a Big picture. More specifically, ALM managers now pay
attention not only to interest rates and liquidity risks but work closely between risk managers
and portfolio managers.
Asset Allocations are then the natural reaction of the Bank (or Insurance company) to adjust
Strategic Planning regarding ALM measurement.
As the models are more and more mathematically sophisticated, ALM itself also develops
rapidly towards a technical nature, which needs the technique professionals as financial
engineers and actuaries.
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MENTION DE CONFIDENTIALITÉ