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The Actuary The magazine of the Institute & Faculty of Actuaries

An emerging actuarial profession

I spent a week late August to give exam training on 303 General Insurance at the Shanghai University of Finance and Economics (SUFE). The Staple Inn Actuarial Society (SIAS) and SUFE sponsored my visit. This is the first 300 series tutorial that SIAS has ever sponsored in China.

Tutorials at SUFE
About 14 students attended the tutorials. The students completed their 100 series with little difficulty, but most found the 300 series papers more challenging. They face the difficulty of overcoming the language barrier as well as of shifting from the actuarial techniques of 100 series to the ‘higher-order skills’ of 300 series to apply actuarial principles in the context of alien institutions.

China’s insurance industry and legislation
The insurance business re-emerged in 1982 after over 30 years’ communist banishment. From a standing start in 1982, the life and non-life premiums written in 2002 have grown to 227bn renminbi and 78bn renminbi (about £17.7bn and £6.1bn), a 59% and 14% increase over 2001 respectively. The number of insurers has also increased from one in the early 1980s to over 50 now.
China’s first insurance law was enacted in 1995. Among other things, it requires life insurers to employ certified actuaries and to establish an actuarial reporting system. This was recently amended to extend the requirements to non-life insurers, with an effective date of January 2003.
Actuarial profession
In 1998, the China Insurance Regulatory Commission (CIRC) was established to regulate insurance companies. In October 1999, CIRC set an entrance examination on Chinese life insurance practice and legislation and certified 43 actuaries. The candidates were part-qualified actuaries who had completed 100 series or equivalent and had some work experience. To date, these 43 certified Chinese actuaries are the only actuaries who can sign life office valuation returns and submit new products for approval.
The CIRC has been the key promoter of actuarial development and has set up more than 10 examination centres to date. In July 2001, the Society of Actuaries of China (SAC) was formed after five years’ preparatory work under CIRC. Organisationally, SAC reports to CIRC through the Chinese Insurance Association.
With outside help, the SAC has developed syllabus up to associate level and is still developing the fellowship examinations. The syllabus bears some similarity to the previous Society of Actuaries’ syllabus with some non-life subjects added. Currently, SAC has over 2,000 candidates studying for its examinations, a dramatic increase from the initial entrance examination in 1999.

‘New frontiers’
The actuarial profession enjoyed dramatic growth mainly in the area of life insurance. ‘Non-life actuarial’ was an unknown phrase in China until recently. Early 2002, the president of CIRC declared his support for leading actuarial consultancy firms to set up practices in China. With the amended Insurance Act 2002 now in force, the CIRC has deregulated the motor insurance market in terms of setting premium rates and is developing a statutory role for non-life actuaries which will no doubt lead to growth in this area.
Yves Guérard, secretary-general of International Actuarial Association, summarises the actuarial development in China in one sentence: the SAC is not walking but jumping ahead. This is the way it has to be, if SAC is to meet the challenges of a super-fast-growing insurance industry and a changing regulatory environment.

SIAS and the SUFE provided travel and accommodation. The Institute of Actuaries provided excellent coordination and administration assistance and my employer kindly agreed to give me four working days for this visit. Neil Hilary also kindly provided a full set of slides he used at Mumbai, India.