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The role of actuaries is crucial in the general insurance industry.

An actuary acts as the guiding light and influences important financial decisions in an insurance company. He uses his analytical skills to dissect the past and accordingly model the future after assessing the risks involved.

An important part of an actuary’s role is to clearly communicate the financial implications of the results. His mathematical expertise, statistical knowledge, economic and financial analyses and problem solving skills are indispensable to insurers to help evaluate the long-term financial implications of their decisions which could impact individuals as well as a wider community.

Historically, in India, actuarial involvement in general insurance was limited because most of the products’ benefits and premiums were prescribed by an industry-wide tariff. But following the de-tariffication in 2007, actuaries were able to help insurers design new products, determine the appropriate premiums and implement the necessary portfolio management controls.

One such area is health insurance. Currently, very few people have health insurance and the potential target market is vast. The provision and funding for healthcare is complex (think: patient – General physician – specialist – hospital – third party administrator – insurance company – policyholder).

Historically, the few healthcare products available were mostly unprofitable for general insurers. Actuaries are well placed to assist companies to develop sustainable health insurance products that address the needs of the policyholder at affordable prices.

Actuarial expertise is used across a spectrum of roles such as designing and pricing of a product, financial reporting, financial management and corporate planning. Currently, most actuaries in Indian general insurance companies are involved in activities prescribed by regulations relating to the development and pricing of new products, and the provisions for claims on the balance sheet and the investments of assets. Actuaries use the past claims payment and settlements statistics to project how much money the company needs to put aside to meet claims that could be reported and settled in the future.

Future prospects

Looking towards the future, actuaries will be able to assist in other areas of the company like setting reinsurance strategies, determining risk based economic capital required and assist in the management of the company’s capital base.

In addition to his role as an actuary, he may also have a role as a manager or management consultant to advise an insurer’s board and management, to help them meet their obligations to shareholders and potential shareholders and to define and quantify their their corporate financial objectives and to control the company’s financial operations to meet these objectives. This counsel can also be provided to auditors, legal representatives, supervisory authorities and others who may have an interest in the insurer’s operations.

Many may not be aware but there is a code of professional conduct that identifies the professional and ethical standards required of actuaries. This code of conduct demands the highest standards of personal integrity from its members.

Akin to the Hippocratic oath taken by the medical profession to pledge to work towards to ethical practice of medicine, the actuarial professional code of conduct seeks to balance the role of the actuaries in business management with responsibility for protecting the financial interests of the public promised by insurance companies. Hence it is not a surprise that the strapline of the Institute of Actuaries of India is “serving the cause of public interest”.

It is not easy to become a qualified actuary. This is a long hard journey. Those choosing to pursue a career in this profession need to pass 15 examinations – usually only after completing their degree and while working. The level of knowledge required is set very high hence success in the examinations is not guaranteed, even for the sharpest mathetimatical minds!

Who can become an actuary?

To become an actuary one must be a Fellow of a recognised professional examining body like the Institute of Actuaries of India (IAI) or the Institute of Actuaries, London. Any person with a minimum 18 years of age and having a high degree of aptitude for mathematics and statistics can take up this course and become an Actuary. Generally, first class graduates or postgraduates in Mathematics, Statistics or Econometrics will be in a better position than others to qualify as actuaries.

Those choosing to pursue a career in this profession need to pass 16 examinations – usually only after completing their degree and while working. In addition, he has to comply with other criteria such as experience requirement and attendance at a professionalism course prescribed for the purpose.

Career Opportunities

Actuaries work in a wide range of areas which include Life, general & health insurance; reinsurance companies, pension funds, risk management etc.

The following universities offer courses with actuarial science as a subject at the degree & post graduate level

• Goa University- B.Sc. with actuarial science as a subject
• University of Mumbai- B.Sc. with actuarial science as a subject
• Kurukshetra University, Haryana – BA actuarial science
• University of Delhi – BA with insurance as a subject and BA (vocational) with insurance economics and commerce as subjects
• The Dept of Statistics, University of Madras – M.Sc. actuarial science
• Bishop Herber College (Autonomous), Tiruchirapalli – M.Sc. and postgraduate diploma courses in actuarial science
• The Amity School of Insurance and Actuarial Science, New Delhi- M.Sc. actuarial science
• Narsee Monjee Institute of Management Studies (NMIMS University) – a one-year fulltime postgraduate diploma course in actuarial science (PGDAS)
• Madras School of Economics, Chennai offers Post-Graduate Diploma in Actuarial Economics.

The career opportunities for actuaries in India are steadily growing. Today, all the insurance companies employ at least two to three actuaries. In other fields, there is still a limited awareness in India about the importance of the role of actuaries.

This phenomena is slowly undergoing a change and there is a great potential for growth for actuaries in India.

The work of an actuary involves a lot of number crunching and the nature of work is quite tedious, nevertheless, it offers rewards in terms of intellectual challenge, status, job satisfaction and earnings. The journey to become a qualified actuary is a long and hard one, but one cannot underestimate the crucial role they play in the general insurance industry. In a nutshell, actuaries make financial sense of the future, thereby enabling the industry to make better informed decisions about the future with more confidence

Source : http://www.business-standard.com

1. Introduction

The Insurance Regulatory and Development Authority (IRDA) has called for actuaries to play a greater role in general insurance companies and has said financial viability of all products must be certified by the appointed actuary. This has been done to ensure that the general insurers are in a position to cope with public demand for non­life products and at the same time ensure the availability of solvency of the insurance companies on a continuous basis. From October 1, 2009 , the IRDA has mandated that appointed actuaries should be called for all board meetings and must help the insurer to ensure the availability of required solvency of the company at all points of time. The actuary should also inform the board wherever deficiency is noticed in solvency margins and if actions are not taken the regulators must be informed. The appointed actuary should also prepare the financial condition report of the non-life insurance company as per the guidelines to be issued by the IRDA.

2. Background

The Insurance Act 1938 is the basic law that governs the transaction of insurance business in India. This act has been amended from time to time to bring about required changes in the insurance sector as also to push the government agenda. One such amendment was made in 2000 which created IRDA and vested power with it to issue regulations from time to time to regulate the market and to protect the policy holders interest. This amendment opened up the insurance market in India to private players. This meant a more proactive role for the regulator to ensure the overall health of the sector as also to maintain a strict vigil on the conduct of companies. This amendment has far reaching consequences it brought I its wake for the first time the concept of “appointed Actuary” in general insurance companies operating in India. Every general insurance companies, must now is necessarily required to have an “ appointed actuary.” His role has been defined in the regulations issued by IRDA. While the appointed actuary will receive his remuneration from the company, he will also be reporting to IRDA direct on certain matters which are critical and may require immediate IRDA intervention. Unlike life insurance, general insurance contracts are mostly for one year. The feeling amongst the insurance community was that, if the experience turns out to be bad, there is always an opportunity to rectify the situation at next renewal. For the simple risk, this approach worked well. But with rising complexity of risk and very high value associated with it, there was a need felt to assess the risk on more scientific and logical methods rather than leaving it to the judgment and skill of individual underwriters. High inflation, utthroat competition, consumerism and more strict regulatory framework further compounded the situation. Pricing suddenly became very important for survival. Fortunately for insurance community in general insurance, there were parallel developments in the field of computers and statistics / actuarial science. This made it possible to have huge torage capacities and to manipulate data. The actuarial principle made it possible to use these data to draw meaningful inferences for king “informed decisions.”

3. Role of actuaries in General Insurance Business

Actuaries being professionals with mathematical expertise, statistical knowledge, economic and financial analyses and problem solving skills can act as experts in reviewing and analysing insurance operations, reserves and underwriting procedures. With their knowledge and expertise they can perform actuarial analysis of insurance rates, rating procedures, rating plans, and schedules of insurance companies. They can provide technical assistance regarding actuarial matters to policy examiners and other technical staff. In other words they are the people who ascertain in advance the uncertain events that could take place in future and come to a financial conclusion. An actuary decisions in an insurance company. He uses his analytical skills to dissect the past and accordingly model the future after assessing the risks involved. An another important part of an actuary’s role is to dearly communicate the financial implications of the results. IRDA mandated role for appointed actuary The Actuaries are mandatorily required under IRDA regulations to certify certain operations of the companies as “appointed Actuary.” The following regulations / circulars need a mention here:

•IRDA (Appointed Actuary) Regulations, 2000
•IRDA (Asset, Liabilities and solvency margins of insurer)
Regulations, 2000
• File and Use System

IRDA (Appointed Actuary) regulation clearly mentions the power that the Appointed Actuary will enjoy. It also mentions the duties and obligations of the Appointed Actuary. According to this regulation Appointed Actuary shall have access to all information or documents in possession of the insurer. He also has the right to attend the meeting of the management including Board meeting and can speak on and discuss matters concerning solvency, actuarial advice, etc. Amongst his duties and obligations the following needs mention.

a. rendering actuarial advice to the management of the insurer, in
particular in the areas of product design and pricing, insurance
contract wording, investments and reinsurance;
b. ensuring the solvency of the insurer at all times.

Hence, we can say Actuarial expertise can be used in the following:

• Claim Reserving
• Designing a product
• Pricing of a product,
• Determination of Solvency Margin
• Risk Management,

Role of Actuary in Claim Reserving

Claim Reserving is the most important role of actuary in Non Life
Insurance Sector. One of the common characteristics of insurance
sector is existence of outstanding liabilities in respect to claims that
have occurred but are not settled. The liability in relation to these may exist as :

• claim reported but not fully settled
• claim the event of which has occurred but had not been
reported yet
• settled claims which may re emerge with further claim at
future date
• the expenses with handling and discharging such claims
• claims and expenses on unexpired polices presently on the
books.
Actuary does the reserving based on the statistical techniques and
his experience and judgement. Actuary uses variety of statistical
techniques based on historical date and current case estimate data.
Some of the methods employed by actuary are:

• Chain Ladder Method
• Average Cost per claim method
• Loss ratio methods
• Blends which are combinations of methods, and
• Stochastic Methods

Besides the technical methods mentioned above, judgment finds an important place in claim reserving by an actuary. No particula method is appropriate for all cases. Therefore, the actuary has to apply his judgment to determine which would be best method to be employed in a particular situation. Moreover, all methods require certain amount of assumptions, which again depends upon the judgment of the actuary as to what assumptions are to be made. Actuaries Role in designing a product Insurers seek to design products that will meet market needs. The risks insured under their products must be ones that are capable of being managed. For example, individuals might be willing to buy a product that would insure them against the risk of unemployment, but if the insurance covered situations where an individual quit voluntarily, it is unlikely that the risk could be managed by the insurer. The roducts must also be designed to in a way that they can be priced ppropriately, from the perspectives of both the insurer and its policyholders. Actuaries often play important roles in the product design process. They assist in identifying market needs, for example, through the analysis of sales patterns, competitors’ products, and social and demographic trends. They work with others, such as marketing, underwriting, and investment experts, on product design teams. Their work can involve assessing the feasibility of product design features suggested by others, as well as proposing alternatives for consideration. Actuaries are also involved in designing compensation schemes for the intermediaries that will sell the products. The compensation schemes must be attractive to the intermediaries, affordable, and provide incentives to promote the sale of high quality business. Actuaries Role in Pricing a product If an insurer is to be successful in the long term, its products must be priced adequately to produce profits. At the same time, prices must be competitive with those offered by other insurers and, for some types of products, non­insurance alternatives. Prices must be reasonable from the policyholders’ perspective, being equitable among various classes of policyholders and bearing a reasonable relationship to the benefits provided by the policy. There are many factors that must be considered when calculating premium rates that can be expected to product profits. Some of which are

• The costs of the benefits by the product design must
be estimated, including not only basic claims costs but also
the potential costs of any guarantees and options provided to
policyholders.
• Expenses must be accounted for, including commissions,
underwriting costs, other policy administration costs, and overhead
costs.
• The prices must reflect the rates of return that the insurer expects to earn on the investment of premiums, as well as expectations about the willingness of the policyholders to continue paying premiums and maintain their policies in force.
• To the underlying cost factors mentioned above must be added the need to produce a reasonable profit margin.
• The insurers must have adequate capital to support the risks they have assumed. Therefore, the profit margins should be sufficient to provide a return on capital that is acceptable to the insurer’s shareholders.

Role of Actuary in Determination of Solvency Margin

Solvency margin is basically the difference between the values of assets and liabilities. The claims are the biggest liability of a general insurance company and obviously the solvency margin is a good index to measure the ability of the company to pay claims. The regulators worldwide are concerned about the survival of the insurance companies as also their ability to pay claims. This is essential to protect the policyholder’s interest and ensure the health of the industry. But the valuation of assets and liabilities pose problems e.g. whether to value the assets as book value or as current market value. Liabilities i.e. claims are also based on estimate of future occurrence. Different approaches both for valuation of assets and liabilities will alter the net worth or the solvency margin. There is therefore a need to have a defined valuation method which is to be followed by every company and that this needs to be certified by an independent professional in the field. This became all the more important when the monopoly of the government general insurance companies ended with the liberalization process. Private players came in the picture and tariffs were gradually withdrawn. Under these circumstances IRDA felt and rightly so to have “appointed actuary” to monitor the solvency margin of the companies on a regular basis and to certify the outstanding claims provisions relating to IBNR (incurred but not reported) and IBNER (incurred but not enough reported) as on the date of closing the account. In case of breach of solvency margin at any point of time, the appointed actuary is duty bound to inform the same to IRDA and the company concerned so that corrective measures may be taken in time. The method for working out outstanding claims inclusive of IBNR and IBNER has been spelt out in IRDA (Asset, Liabilities and solvency margins of insurer) Regulations, 2000.

Role of Actuary in Risk Management Insurers are subject to many types of risk, not only those against which they insure policyholders, which are called underwriting risks. Other types are credit, market, liquidity, and operational risks. The objectives of an insurer are to understand the nature and extent of the risks to which it is subject and to manage those risks effectively. Actuaries are often involved in the risk assessment process. They identify the specific risks that can affect insurers and consider the relevance of those risks to a particular insurer. They seek to quantify the most relevant risks, and use this information to assess the potential effect of those risks on the insurer’s financial situation. Actuaries also participate in managing the risks. For example, they may determine how much risk an insurer can afford to retain on each policy, design a reinsurance program to deal with excess amounts of risk, and negotiate the terms of reinsurance contracts with the reinsurers.

4. Conclusion

An actuary is an individual who has many duties and responsibilities
concomitant to their position. Currently, most actuaries in Indian general insurance companies are involved in activities prescribed by
regulations relating to the development and pricing of new products, and the provisions for claims on the balance sheet and the investments of assets. If one in this job role has excellent analytical, comprehension, mathematical and public speaking skills, they will most likely be individuals who excel at their job and produce the highest quality work product possible. Looking towards the future, actuaries will be able to assist in other areas of the company like setting reinsurance strategies, determining risk based economic capital required and assist in the management of the company’s capital base.

Source : The Magazine of the institute of Actuaries of India 2nd Feb’10
Compiled By : www.ivyproschool.com

Global Institute Forecasts New Ball Game for Global Capital Markets

After establishing the frame of reference as 1980 through 2007, the consulting firm’s February 8 appraisal, “Global Capital Markets: Entering a New Era,” reports world financial assets–equities, private and public debt, and bank deposits—multiplied by four times the rate of world GDP growth. This led to overheating and the meltdown down of 2008.

Concurrently with the expansion of financial assets, capital flows between nations surged, facilitated by the rapid development of communications and information technologies, and funded by an outpouring of financial products and services. From 1990 to 2008, McKinsey estimates cross-border capital inflows increased at a 15 percent compound annual growth rate (CAGR), escalating from $1 trillion to $10.5 trillion.

Toxic Debts Poisoned Confidence in World Capital Markets

Unfortunately, many of the securities exchanged were subprime mortgage IOU’s, watered down by loose fiscal standards and risky credits. The Champagne bubble of super growth popped in 2008, punctured by the spike of a metastasizing loss of confidence in the morass of those sub-prime mortgages.

Such debts often bore adjustable rates of interest, always problematic for marginal borrowers. They were securitized in voluminous packages and marketed to international investors. Too often, there was a complete disregard for the high credit risks buried in the toxic debts, as they came to be called.

When the laxity of the times morphed into the present worldwide recession, commencing December 2008, the party was over. The $178 trillion of world financial assets lost $16 trillion, biggest crash on record.

Report Expects Greater Non-bank Lending in Emerging Nations

Although the report questions whether the emphasis on globalization of financial assets and markets will continue, in view of its role in the economic trauma caused by the 2008 crisis, it evinces a strong belief in the recovery of capital flows into the emerging markets of developing countries; however, questioning what forms that investment will take.

Whether banks will resume lending at their pace before the crisis remains unclear. Their balance sheets are in a shambles. Indeed, global capital inflows of all kinds dropped by $600 billion in 2008. Non-bank lending by governmental agencies, hedge funds, investment banks and finance companies will likely have to carry the burden of expansion by the emerging countries.

Although in the beginning, analysts at McKinsey Global Institute regarded favorably the long-term growth in financial assets that outpaced the growth in world GDP, they are having second thoughts. They point out that the phenomenal jump in securitized assets like the toxic mortgages, buried in global portfolios, led to a burgeoning of funded bubbles rather than productive economic growth.

Consultants Advise Policy Makers to Improve Alternatives to Conventional Funding

Nevertheless, they suggest that global policy makers struggling to retool a broken financial system carefully consider the useful aspects of financial deepening (increasing financial assets rapidly to stimulate GDP), before purging international finance of financial asset securitization or non-bank financing products.

This suggests they believe the real remedy for rebuilding the international financial system is to improve the transparency of financial instruments, in order to improve their quality, rather than risk quashing growth prospects for the emerging countries by restraining debt summarily.

In effect, they are reprising an old bromide: Don’t throw out the baby with the bath water.

Source: www.investment.suite101.com

Compiled by: www.ivyproschool.com

May ‘10 Actuarial Examination Forms are available at Ivy Professional School. For a copy of your form, reach out to us at info@ivyproschool.com.

The Life & Longevity Markets Association, comprising a group of insurers and banks, may succeed in creating a market for products that pass on the risk of people living into old age, Moody’s Investors Service said.

The group, founded last week by Axa SA, Deutsche Bank AG, JPMorgan Chase & Co., Legal & General Group Plc, Pension Corp., Prudential Plc, Royal Bank of Scotland Group Plc and Swiss Reinsurance Co., aims to create a secondary market in so-called longevity swaps and other derivatives whose values are tied to life expectancy.

“The variety of players involved in this new project enhances the chances of the association’s success when compared with previous initiatives,” Moody’s analyst Benjamin Serra said in an e-mailed statement today. Passing risks onto capital markets is “a plausible alternative to reinsurance,” he wrote.

Longevity swaps help protect insurance companies that provide annuities from higher payouts when people live longer than expected. Until now, such protection has almost exclusively been provided by the insurance and reinsurance markets, and the cover has been “insufficient,” Moody’s said.

Total pension liabilities exceed $19 trillion in the U.S. and $3 trillion in the U.K., Moody’s said, citing estimates by International Financial Services London.

“Given the duration of these liabilities, an increase of one year in longevity from current expectations could cause a 3 percent increase in liabilities, translating into a financial risk of around $600 billion in the U.S. and $90 billion in the U.K.,” Moody’s said. “Although the risk may be less significant in other countries, it is set to increase everywhere.”

The market in longevity risk may develop slowly as investors get used to the new products, Moody’s said.

“It will take time before investors become as confident in longevity risk as they are with catastrophe risk, for example,” Moody’s said. “Longevity risk is a very long duration risk, and there is no consensus on longevity models, especially beyond a medium-term horizon.”

Source: www.bloomberg.com

Compiled by: www.ivyproschool.com

The Central Bank is trying to keep prices down, but a drought and supply bottlenecks have spurred increases.

Movie night and restaurant meals are out for Vinod Kumar. As prices for sugar, onions, and other staples have surged after poor monsoon rains damaged harvests, Kumar has been forced to cut back to keep food on the table for his family of four. “It’s never been so bad in my working life,” the 35-year-old mechanic says as he shops at Bangalore’s Johnson Market, a century-old tangle of food stalls.

It’s not just food that’s getting more expensive. Inflation in India is at a decade high, with consumer prices rising faster than in any other major economy. Industrial output in January increased at the fastest pace in 17 months, pushing up prices for raw materials. Cotton has jumped by 13% since October, while other commodities are rising fast. The benchmark wholesale price index, up 7.3% in December, could hit double digits within two months, predicts brokerage CLSA. That would spur even higher consumer prices and dent the spending power of ordinary Indians.

India’s central bank governor, Duvvuri Subbarao, is trying to cool things down. To lower the amount of capital available for lending, the Reserve Bank of India on Jan. 29 increased the cash reserve ratio for banks (the minimum they have to keep on hand) by 0.75 percentage points, to 5.75%. Tighter interest rates are probably next. The bank has moved from “managing the crisis to managing the recovery,” Subbarao told reporters on Jan. 29.

Despite India’s thriving tech sector, it remains beholden to the vagaries of the monsoon. Less than half of India’s fields have irrigation, so a drought last summer led to food shortfalls in several states. Poor railroads and highways make it tough to transport food, leading to shortages and higher prices in many cities. “You don’t have enough roads, you don’t have enough railroads, you don’t have enough ports,” says Nikhilesh Bhattacharyya, an economist with Moody’s (MCE) Economy.com. “That amplifies any price shock.”

Rising prices are a big headache for Prime Minister Manmohan Singh. In the past 15 years, Indians have ousted two national governments after inflation eroded spending power. Higher interest rates will make it harder for companies to expand, and with the budget deficit at a 16-year high, the government can scarcely afford to boost spending on infrastructure. Indian companies meanwhile, fear higher labor costs. “The rise in food prices will have a cascading effect,” says M.S. Unnikrishnan, managing director of Thermax, a Pune-based maker of heating and cooling equipment. “We can’t keep paying people the same amount if their cost of living is increasing.”

Source: www.businessweek.com

Compiled by: www.ivyproschool.com

 Compiled by www.ivyproschool.com

Response to Global Survey Indicates Greater Investment Risks Ahead

A recent survey by business consultants McKinsey & Co. suggests corporate managements should come up with new game plans, based on the lingering crises in global finance.

They say signals by players in the financial markets, as well as pundits and policy makers, are espousing an unreal notion that recovery from the recession has begun. However, global business managers are far less certain and exhibiting doubts and confusion about the certitude of a business recovery.

Consultants Caution about Expecting Near-term Recovery

For stock investors, the conclusions from McKinsey’s worldwide survey of 1,600 business executives, delving into their current outlook for the world economy, portends a longer recovery than is generally expected.

Bear in mind that the National Bureau of Economic Research (NBER) – the referees that establish benchmarks in US business cycles – are mum on the subject. Is McKinsey suggesting the presence of that old bromide: “Fools rush in, where wise men fear to tread”?

The short-termed optimists, or are they opportunists, include skilled experts too, however. FED Chair Ben Bernanke said the recession is probably over, according to AP’s Jeaninne Aversa in the Huffington Post of November 16, 2009. In addition, in an address on the same day to the Economic Club of New York, Bernanke said he expects modest growth in 2010. Of course, that raises the question: When is growth a recovery?

Twenty Percent of Managers Look for Meaningful Recovery in 2009 or 2010

In the results of the McKinsey survey, a scant 20% of the executives believed a normal recovery – one beginning in late 2009 – is probable, while 42% held that 2010 would be flat, in terms of economic activity, much less a recovery.

Around 33% held that a form of post-recession blues would be represented by a prolonged sluggishness of less than 1% annually, for several years. The seven percent remainder of respondents in the survey believed that a double-dip recession was the likely scenario.

Except for the 20% of managers expecting a recovery starting in 2009, those expectations are not the earmarks of a true bull market. Naysayers might even see a K-wave forming.

McKinsey Sampled Both Developed and Developing Countries

The survey meisters used a sampling of both developed and developing countries. Representing developed economies were the European Union, United Kingdom, Japan and the United States. Developing countries included Brazil, Central Eastern Europe, China, India and Russia.

They polled managers on expectations for a collection of key economic indicators, which in the macroeconomic category included:

• Real Estate Markets
• Consumer Spending
• Inflation Rate
• Business Environment
• Trade Momentum
• Consumer Confidence
• Business Confidence.

The study used the following economic indicators in questions about credit and capital markets:

• Equity Performance and Volatility
• Credit Availability
• Cost of Capital
• Risk Premiums
• Foreign Exchange Discontinuities.

Developing Countries Rank Higher in Economic Abilities to Cope

McKinsey avers that the survey was broad enough to reflect global conditions and attitudes. In focusing on how managers in individual countries are coping, they say developing countries are better situated and understandably more optimistic than those of developed ones. The following ranking shows how far along countries are, in recovering to the conditions of the prior expansion peak in December 2007.

1. Brazil
2. China
3. India
4. United Kingdom
5. European Union
6. Japan
7. United States
8. Central Eastern Europe
9. Russia

Analysts Point to Three Reasons Managers See Difficulties Ahead

First, they point out that when the unprecedented stimuli by governments and central banks that ended the short-term predicaments in capital and credit markets in 2008 and 2009 are exhausted, what will happen? The study suggests a drying up of risk capital and lower capital returns, in the global financial system.

The next factor in explaining the chaos in expectations among managers is their difficulty in understanding the explosion of economic data, in today’s digital blizzard. News is often relegated to sound bites and passes through the brain in a nanosecond. The big picture even for experts is difficult to focus on.

The third reason for the managers’ plight is the kind of shift going on in the tectonic plates of the global financial bedrock. McKinsey asserts the crisis had multiple land mines, setting off problems that while related, were never in lock step. Consequently, retarded credit paralyzed inventory accumulation, so that purchasing agents are only recently compensating with bigger orders.

Another factor making certainty of recovery obscure is the reduction of consumer debt and a corresponding increase in the US savings rate, which has risen to 4% from pre-recession levels of zero. If national income does not grow, a 1% increment in consumer savings reduces consumer spending by $100 billion in the US.

Surveyors Forecast Suggest Wide Range of Possibilities for US

Following the survey, McKinsey & Co. partnered with the McKinsey Global Institute to develop modeling to master the complexities of the world economy today. They recently developed four economic scenarios for the US economy.

A $2 trillion range in possible outcomes exists in GDP. The spread is from 10% higher than it is today to 3% lower, by 2012. That chasm suggests much risk and uncertainty ahead for investors in US stocks.

Investing in Such an Environment Requires Caution and agility

In view of higher rankings for developing countries, investors might want to look closely at equities and mutual fund shares representing investment in certain foreign regions. The exposure to dollar depreciation could be minimal. The US dollar has already declined 15% in exchange value with the Euro since February 2009, according to data on x-rates.com.

However, in the volatile climate McKinsey’s survey reflects, investors should also expect a bumpy ride and remain agile, wherever their holdings are sited.

Source: www.investment.suite101.com

In a recent circular IRDA (The Insurance Regulatory and Development Authority of India) has stated,

“We have reached a situation where the role of appointed actuaries has to be enhanced significantly so that general insurers are in a position to cope with public demand for non-life products and at the same time ensure the availability of solvency on a continuous basis.”

They have called for actuaries to play a greater role in general insurance companies and have mandated that appointed actuaries should be called for all board meetings. The actuary will have to help the insurer to ensure the availability of required solvency, must inform the board wherever deficiency is noticed in solvency margins and are responsible for informing the regulators if relevant action is not taken. The appointed actuary will also be responsible for preparing the financial condition report – guidelines will be issued by IRDA in the near future.

Source: www.gaapsblog.com

Some of the frequently asked questions in Actuarial Interviews –

• Why do you want to be an actuary? How did you hear about actuarial science?
• What are your future plans/goals?
• Where do you see yourself 5/10/15 years from now?
• Why do you want to work in this company?
• Why are you applying for this job?
• What distinguishes you from other twenty people who can do the same task that you can?
• Why does this company need actuaries?
• What computer skills do you have? (Excel, SAS, Visual Basic…)
• What type of work do you like to do best?
• Describe in detail your recent actuarial/excel projects.
• What do you plan on getting from this internship?
• Why did you go into actuarial science?
• Tell me about this job you had …
• Do you prefer to work in groups or by yourself?
• What do you expect an ideal company to be like?
• Tell about a situation in which you persuaded a large group to change their course of action.
• Tell me about a time in which you had to teach/train others and what the outcome was.
• Tell me about a time in which you had to deal with ambiguity and what the outcome was.
• Tell me about a time when you had to work with a difficult person and how you managed the process.
• What kind of work are you looking for?
• What area of actuarial field you are interested in? Life, casualty, pension, health?
• Have you taken any exams? If yes, but did not pass, how are you going to prepare yourself for the next exam?
• What was your most/least favorite actuarial class? Why?
• What are your weaknesses/ strengths?
• Describe a recent important decision you made.
• Describe a situation where you were not in a leadership role, but you had to change someone’s opinion.
• Describe something in your life that you are most/least proud of.
• Describe a situation that portrays your reading/communication skills.
• Give an example that shows your analytical/leadership/interpersonal skills.
• Who is your idol?
• What do you like to do in your leisure time?

Additional tips to prepare for the interview –
• Go online and read about the company: their products, their goals, their innovations, etc.
• Prepare interesting questions to ask; could be associated with what you have found out about the company, or just questions you are interested in.

Source: www.actuarialscience.ning.com