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The Actuary The magazine of the Institute & Faculty of Actuaries

London Market trends

he high demand for non-life actuaries in the London Market over the past ten years has created a wealth of employment opportunities and rapidly growing salary levels. Terrorism, huge financial failures, catastrophic natural events, and increasing legislative requirements have all contributed to the actuarial workload within Lloyd’s managing agencies, London Market insurers and reinsurers, consultancies, and brokers. This article looks at some of the current developments in actuarial employment, specifically within Lloyd’s and other London Market companies.

Employment trends
I asked a number of actuaries what their thoughts were on employment trends and how the demand for actuaries within the London Market would develop. Overall they felt that, over the next five years, demand would generally keep pace with those looking for a role, as employers could see the value of actuaries to the business in capital and risk work, the increased focus on catastrophe modelling, and the push for more technical pricing. The development of advanced ICA tools was also enabling other questions for the business to be answered with regard to optimal reinsurance programmes, more detailed capital assessment, and allocation and interrogative business planning.
The view of actuaries by senior management and others within the business has steadily changed over the years. The actuaries I asked thought that they were now much less pigeonholed as only technical advisers and that, having demonstrated their worth to the business, wider opportunities have opened up.

First-time opportunities
For graduates the route into the London Market has, in the past, been to first join a non-life consultancy. The companies have instead looked for candidates with one to two years of previous non-life experience, which has often been difficult to find. Unless a candidate has had a particularly bad time with their first employer, they will not tend to move at such an early stage in their career as exam progression is more on their mind than a change in role. With the growth in team sizes, and consequently more readily available training and mentoring to develop junior members, there has been greater willingness for London Market companies to recruit academically strong graduates.
The opportunity to move discipline from pensions or life backgrounds is one area that has become more difficult over the last year or so. The larger pool of existing non-life actuaries has meant that candidates from other disciplines tend to have to be exceptional when competing for a non-life role. It is still possible to make the change although a first-class academic record, fast progress through the actuarial exams, and particularly strong interpersonal skills are generally needed.
The perceived high salaries for non-life roles in the UK have attracted a lot of interest from actuaries overseas. The view of employers of recruiting non-EU candidates has tended to be fairly mixed. Some are quite happy to go through potentially a longer process with telephone interviews and dealing with the work permit requirements. Others have preferred to wait, often quite some time, for a suitable UK candidate to come along. Recent changes to work permit requirements that have been brought out by the Home Office may have some effect on the employment opportunities for non-EU candidates. These changes include actuaries being removed from the shortage occupation list, increasing the evidence that must be provided by employers when applying for a work permit, and changes to the points system requirements for the Highly Skilled Migrant Permit.

Experienced movers
As well as first-time entrants, those already working in non-life have sometimes been finding it harder to make a move outside of their specific technical experience. Whereas a couple of years ago, any type of general insurance background would have been enough, now clients looking to fill, for example, a pricing role will require someone with fairly specific previous pricing experience. For a reserving role, knowledge of the specific products may now be needed whereas, before, broader reserving skills may have been sufficient.
In the past actuaries have moved easily from consultancies to companies But now the changing needs of the companies has affected the employment opportunities for those wishing to leave consultancy. With companies demanding people with more specific pricing and capital experience there is a much smaller sector of the consultancy market with the relevant expertise. To an extent, the greater work variety within consultancies, together with the high inflow of graduates elevating existing consultants rapidly up the promotion ladder with corresponding salary increases, has also tended to keep more people within the consultancies.

Chief actuaries
For many non-life actuaries the pinnacle of their career within the company environment has historically been considered the chief actuary role and there has been much competition to fill up those seats over the years. Actuaries have frequently taken these roles early in their career and, having achieved the position so young, a number now are considering what to do next.
For some chief actuaries it will be a case of settling back and being happy with their lot while for others there will be some seat-swapping, finding another chief actuary role in a larger company for more money. For a number, though, their target now lies within the chief officer market, with executive, financial, risk, operations, and underwriting officer positions in mind.
There has been some infiltration of actuaries into these roles over the years and the senior actuaries I spoke to within the company environment generally considered that the actuarial profile fits well with these board positions, with qualities that were often better suited than those from the underwriting, accounting, and law professions. It was felt that actuaries, by nature and training, had the most complete range of skills compared to others, combining professionalism, business and common sense, problem-solving and, importantly, the ability to ‘think outside the box’. They thought that actuaries were equally able to demonstrate decision-making skills However, some qualities required by business leaders, such as entrepreneurialism and risk-taking, did not fit so well with the actuarial profile. Finally the view was that there is still more work to be done in developing the people-management and communication skills in order to achieve these top business roles.

Developing the team
The combination of expanding team sizes and chief actuaries having reached their positions early in their career has led to mounting pressure to fulfil the ambitions of those below. With fewer opportunities to move into a chief actuary role, the actuaries coming up through the ranks are looking, at a much earlier stage, to follow a different career path within the wider business. Also the existing chief actuaries have recognised the potential issue and are trying to cater for the ambitions of their team in order to retain quality staff.
Within the bigger teams and where actuarial involvement is wider, ‘heads of’ roles have been created and in the future the ‘deputy chief actuary’ role may become more common. With this sort of structure, and by grooming a strong successor, the chief actuary’s position may well be improved when looking for that step up to a chief officer role.
Some teams have adopted a smaller core actuarial department but have then embedded actuaries elsewhere in the business, for example, within the underwriting and finance teams. This has allowed alternative career paths to be followed and has been successful in demonstrating to others the wider potential uses of actuaries within the business.

Moves outside
Non-life actuarial involvement in the London Market has gone through a number of phases as it has matured. The early days saw a general rush into Lloyd’s and other London Market businesses triggered by regulatory pressures. As teams developed, there was a keenness to be involved with the pricing work and, more recently, the development of capital modelling. Now there seems to be, as well as a move to look for wider roles within the business, a definite interest in looking outside to such areas as management consultancy and the banking sector. Also, as overseas underwriting centres develop elsewhere in Europe, the Middle East, and Asia, the strong skills base that has developed in London will be much in demand and future career development may require greater geographic mobility.

A rosy outlook?
The general feeling is that the future for London Market actuaries is rosy. However:
– Non-life actuaries will not be able to expect the rapid automatic rises upwards, both in responsibility and in salary, that they have been used to in the past.
– Competition for the more interesting roles will be greater and specific experience will be required more often.
– With increasing demand for actuarial talent globally, overseas opportunities will become more numerous and greater mobility may be needed in order to achieve long-term career goals.
– In order to reach the senior business roles it will be important to seek out opportunities outside the normal actuarial environment and to develop a wider range of skills, both technical and interpersonal.