What is an actuary and what does s/he do?
Alina Toma, Head of Actuarial Department CertAsig
What does one do and what are the attributes of the Actuary Function at CertAsig?
(Very) briefly, an actuary is an expert in the measurement and quantification of risks. Our scope of work involves analysing complex data sets, based on which we assess the financial impact of risks.
Responsibilities include calculating technical reserves, calculating tariffs, involvement in developing insurance products, estimating the profitability of insurance products, calculating and analysing the company’s solvency and solvency capital requirements, managing assets and liabilities, contributing to the development of investment strategies.
The impact of Solvency II and the contribution of actuaries to business
At the beginning of last year, Solvency II has transformed the way we work in the insurance industry, the way we measure success and even the way we see business priorities. Pursuing increased protection for insured clients and a common set of regulations and supervision in the insurance sector at a European level, the new solvency regime has changed the paradigm on the insurance market, in that it imposes an approach based on a comprehensive assessment of risks, compared to the previous solvency regime.
Solvency II includes measures to avoid the artificial volatility of insurers’ balance sheets, complemented by measures to encourage investment and economic growth. In this way, it seeks to achieve better capitalisation in the insurance market, thus ultimately protecting policyholders.
Already, after only 1 year and 8 months after the implementation of the new regulations, the solvency of an insurance company has become the primary indicator in the evaluation of insurers. The classification or assessment of insurers, previously based only on the volume of gross written premiums, is now, under the new regime, much more focused on aspects such as solidity and solvency.
In the CEE markets where we operate, insured clients are increasingly aware of these trends and place increasing focus on the solvency of an insurer when choosing the company with who they work. Brokers were of course among the first to grasp and integrate this aspect into their work.
Currently, for the assessment of solvency and of capital requirements, several risk categories are considered: underwriting, liquidity, concentration, market, credit and strategic risk. This is very different to the previous regime, where risk was calculated only on the basis of insurer’s exposure and of estimated claims.
Consequently, Solvency II has brought new responsibilities for actuaries, leading to a much closer involvement in the underwriting process, as well as evaluating the adequacy of the reinsurance program. In the case of CertAsig, the reinsurance program is very solid, our reinsurance partners being top rated companies, a determining factor in optimising the level of solvency capital.
Experts in the quantification of risks, for any industry
One of the challenges for an actuary at CertAsig is the assessment of a certain risk and whether or not to accept it – whether we are discussing marine, aviation, bonds or engineering insurance, so a very high exposure. I am referring to estimating the potential impact it can have on capital requirements. The risk inspection is extremely important, and then, if necessary, we start taking measure for additional reinsurance on a case by case basis.
At any time, we know what risks to take on and to what extent. It is a case of our risk appetite, risk tolerance and capital requirements. At the same time, we plan our business on a sustainable basis; at least annually, we do a mirror analysis on how much risk we are prepared to be exposed to, versus what we can take on. This analysis is ORSA, a key component of the company’s assessment process under the Solvency II regime, a regime that I consider as “best practice” and a regime in which the actuarial function plays a key role.
The Chief Actuary is therefore a key professional player in CertAsig’s business strategy, the analyst behind the underwriting process, who permanently has to balance the priorities and needs of insured clients, brokers, reinsurers, the company’s objectives as well as regulatory and compliance requirements.
So, to summarise, if you thought an actuary’s job was boring before reading my article – think again!