[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

The unshackled actuary

I am very excited about the new 2005 syllabus. In particular, the core application subjects will, I think, encourage a new generation of students to take the actuary’s peculiar (yes, that is the right word to use…) skills into hitherto unexplored territories. For too long we have been hampered as a profession by having our skills linked to a very small sector of the economy. How many of us haven’t, at a dinner party or similar social occasion, ended up in exasperation describing our work as ‘the people who work out what insurance premiums you have to pay’ and being shunned for the rest of the evening? The problem arises, in a large part, from how we are trained. We learn to apply our skills in a particular context (life, general, or pensions) and we fool ourselves into thinking that they are only applicable in those areas. At a recent convention, after dinner and dancing, I ended up with some colleagues in a cigar bar wondering where it was that actuaries really made a difference. Our ‘traditional’ areas are predominantly pricing, reserving, and valuation. All of these are essentially about expected cashflow management. Pricing sets up expected money in to exceed that which we expect to flow out. Reserving does much the same, ensuring that we have sufficient reserves stashed away to ensure that we shall be able to pay out what we need to, when we need to. Finally, valuations monitor how the cashflows change over time, and help us to extrapolate these trends into the future. The uncertainties that surrounded these cashflows were quantified by actuaries and we became comfortable with the concepts of insurance premiums, claims and expense reserves, and resilience testing. However, we have become too familiar with these concepts and rely on them to define our profession’s scope, rather than using the underlying thought process.Which is where the new syllabus comes in. In particular the two main core application subjects, which are titled simply Liabilities and Investments. By focusing on liabilities in general rather than on the particular liabilities with which we come into contact in our normal working lives, we are more likely to grasp the underlying concepts involved. We are also more likely to be open to applying our skills in non-traditional areas. How to invest capital now and income in the future in order to cover our liabilities when they fall due is a problem that does not just occur in the worlds of insurance and pensions.So while the new syllabus may appear daunting to new students and bewildering to old, I really feel that in focusing on the essentials of what we do, it will help us to shake off the past that shackles us to a very limited set of opportunities, and opens up vast new (profit-making!) vistas.John Davidge works as an actuarial analyst for Old Mutual in South Africa