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The Actuary The magazine of the Institute & Faculty of Actuaries
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Pioneering prospects

Dan Georgescu talks to actuaries who have used the skills of their profession to explore new frontiers, paving the way for others to follow

01 NOV 2012 | DAN GEORGESCU


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Nitesh Patel

Biofuel, Biofuel Refineries Ltd


How did you come to be working in biofuel?

I had often thought about owning a business. In 2008, after 13 years in the profession, an opportunity came up and I felt it was the right time. Renewable energy has always interested me and, despite the economic downturn, government incentives for biodiesel production (from waste cooking oil) made it an attractive proposition.

What are the main opportunities/challenges?

The transition from employee to business owner was the first big challenge. Once I had got to grips with all the administration and operational requirements of a manufacturing plant, my focus quickly turned to dealing with a very changeable marketplace. Amendments to the incentive schemes and duty rates had a negative effect on SMEs like ours. So now my challenges lie in seeking new opportunities and markets for biodiesel and in developing our associations with customers, suppliers and industry bodies to grow the business.

How has your actuarial background helped?

My professional experience has helped me develop problem-solving skills to deal with challenges and communication skills to build relationships. Technically, I guess, my proficiency in Excel and financial models has got me doing lots of what-if scenarios!


How do you see the sector and your role developing?

The industry is in a challenging phase, particularly for SMEs. Biodiesel has traditionally been sold as a cheap alternative. Our aim is to change this perception for it to become a legitimate option for companies looking to reduce their carbon footprint. My role is shifting from running the company to developing new markets and educating potential customers.


What advice would you give to others?

Do lots of research – a robust business plan and a clear understanding of the market are critical. It is also important to focus on what you do best and employ others to do the rest!

Nick Silver

Callund Consulting Ltd. Pensions reform in developing countries and sustainability consulting


How did you come to be working in these sectors?

I effectively work in two sectors. The first is social security and pensions reform; it came about because I heard that Callund Consulting specialised in just what I wanted to do at the time and I hassled them until they gave me some work. The second sector you could call ‘sustainability’ consulting. Originally, this came about through my membership of the profession’s resource and environment group. I never anticipated getting any work through this, but I attended lots of conferences and networked. As I was at the time the only actuary showing interest in this field, I was recommended to do a report on insurance and climate change.


What are the main opportunities/challenges?

In my pensions reform work, the challenge is being thrown into an alien culture (we work mostly in developing countries); there is often little data and information; you have to quickly assess how the culture and economy operates, who makes decisions and what you are able to achieve. The opportunity is that the whole world is our potential market and pension problems are not going to go away! In my sustainability work, the challenge is that each job I get is totally different and I have to quickly work out exactly what the problem I am trying to solve is and how to go about doing it.

How has your actuarial background helped you?

In pensions reform, it gives me the basic modelling tools, although I have to adapt these to unusual environments. In sustainability, the main thing it brings is a way of looking at the world through a risk prism. Knowledge of financial markets, institutional investment and the fact that the qualification brings credibility have enabled me to carve out a niche.


How do you see the sector and your role developing?

Pensions reform is changing location as a lot of developing countries are becoming wealthier and have enough of a stake to think about these issues. In the longer term, the problems that have not been dealt with in the past will come home to roost. In sustainability, a lot of interest in the past has been on climate change. I think that going forward we will need to worry more about resource constraints (such as energy and water) and the sustainability of the financial sector as a whole.


What advice would you give to others hoping to succeed in this field?

In both of them you have to really want to do them and persist. In pensions reform work you cannot just apply UK pensions techniques, you have to be willing to rethink your models and learn about the way other countries’ economies work. In sustainability, there is a lot of competition in this field; all the big consultancies have large teams. You have to have genuine interest and commitment and do a lot of reading and research around the subject. You have to take a wider picture and try to understand economies and the financial system. And you have to find a niche where your skills can add value.

Daniel Clarke

Actuarial consultant, The World Bank

How did you come to work at The World Bank?

I started taking the actuarial exams as a pensions consultant, but left after four years to pursue a masters and doctoral degree in economics, with the hope of working in international development. In the first year of my D.Phil., I successfully applied for an internship with the Disaster Risk Financing and Insurance Program at the World Bank, working with low- and middle-income governments on farmer-level agricultural insurance, and government-level fiscal resilience. I now spend just over half my time working with them, and the remainder at Oxford University as a lecturer and researcher.


What are the main opportunities/challenges?

It really is a fascinating area to work in. Large hurricanes, floods, earthquakes, tsunamis, droughts, etc, can have a devastating effect, particularly in low-income countries, and better protection can make a big difference. Working with colleagues, clients and donors to try to find realistic solutions in a variety of political, cultural and economic environments keeps me on my toes. An unexpected challenge is that I look fairly young and have to work hard to establish my credibility with government officials in some countries!


How has your actuarial background helped?

Being a qualified actuary has opened a lot of doors, and I couldn’t do the things I’m doing now without both the actuarial and the development economics backgrounds.


How do you see the sector developing?

Over my working lifetime I expect demand for actuarial services in low- and lower middle-income countries to grow significantly.


What advice would you give to others?

I’d suggest joining the profession’s microinsurance working party and finishing their actuarial exams, then either spending time immersed in a developing country experience (the ILO’s microinsurance fellowship is excellent) or studying development economics.


Lisa Morgan
Microinsurance, Milliman


How did you come to work in microinsurance?
In 2008, the Microinsurance Innovation Facility of the ILO approached Milliman to ask whether we would be interested in collaborating on microinsurance projects. I jumped at the opportunity and, four years later, I have been involved in a number of projects in South Africa, Swaziland, India, Vietnam and China.

What are the main opportunities/challenges?
Microinsurance is still relatively new. There is a huge opportunity for actuaries to get involved and add immense value. Actuarial skills are scarce in many parts of the developing world, yet there is a great need for a more scientific approach to microinsurance issues.
The main challenge is that our advice is considered to be very expensive. This may act as a barrier for those wanting to work in the sector full time, as well as for microinsurers wanting to employ actuaries.

How has your actuarial background helped?
My actuarial background is invaluable: without it, I would be unable to offer technical assistance on insurance matters.

How do you see the sector developing?
There is a massive push by governments, NGOs, insurance regulatory bodies, the Access to Insurance Initiative and the ILO to grow the microinsurance sector. It is developing at a breath-taking pace – worldwide, it is estimated that 500 million risks were covered in 2011, a significant leap from just 78 million in 2006. Even so, in many countries only a small percentage (less than 5%) of the poor are reached by microinsurance or other forms of social security. I think the momentum of development will continue.

What advice would you give to others?
Get involved! Read, join networks, use Twitter, join or start working parties, go to conferences and network like crazy with non-actuaries working in the sector. They will soon realise, if they have not already, that your skills are very valuable.


Lucian Rautu
Structurer, BNP Paribas


How did you come to be working in this sector?
After starting out in consultancy helping insurance companies build reporting and risk analysis tools, I decided to apply my experience to banking. The appeal was the chance to identify transactions with a tangible effect on the balance sheet, solvency or profitability of an insurance business.
 
What are the main opportunities/challenges?
Being able to use the building blocks of the financial markets (securities, derivatives) to provide insurer solutions with an attractive marginal economic benefit while meeting regulatory, reporting and tax constraints. I had to build up my derivatives and investment knowledge and adapt to an environment where actuarial aspects form only a part of a bigger picture. A great part of the role is the range of professionals on the client side, from portfolio managers to chief investment officers.

How has your actuarial background helped?
The basis of sustainable success for an insurance firm is to have assets outperforming liabilities. A major part of this is understanding the complexity and dynamics over time of insurance benefits and the feedback loop between investments and liabilities.
 
How do you see the sector developing?

The burden of increased capital charges will force banks to do more with less, at a time when the investment and risk transfer needs of insurance clients will be greater than ever, given low volumes of new business and ultra-low interest rates. New diversification approaches and transparent and liquid strategies to extract risk premia will potentially be needed to achieve higher yielding investments with a similar risk budget. Similarly, banking disintermediation will expand the existing scope of primary capital markets from corporate and covered bonds to alternative credit assets.

What advice would you give to others?

Be prepared for a steep learning curve and to communicate in non-actuarial language.


Gemma Harding
Quantitative analyst, Deloitte


How did you come to be working as a quant?
I had been working in life for seven years, five of them at Deloitte. After taking ST6, I developed a good understanding of assets and derivatives and contacted the firm’s financial instrument valuation group in New York and joined shortly afterwards.

What are the main opportunities/challenges?
The main challenge I have faced is getting up to speed with the banking industry and the new regulations it faces. There are many changes for US banks, including Basel III, Dodd-Frank and the Supervisory Guidance on Model Risk Management. In addition, I have had to learn about asset calculations and the inputs that feed into them, such as interest rate curves built from market data.

How has your actuarial background helped?

So far I have been able to relate the banking regulations to familiar components of Solvency II. In both sets of regulations, I am seeing the increased need for governance around models and documentation.

How do you see the sector and your role developing?
The two professions could learn a great deal from each other. As part of Solvency II, the insurance industry is starting to concentrate on VaR as a tool to manage capital and calculate risk. The banking industry has been using this for decades, so quants have some very good ideas around these calculations. In addition, the banking industry is performing model validation techniques similar to what the insurance industry will soon be facing as part of Solvency II. I am hoping I can bridge the gap a little between the professions and become a quant with insurance specialisation or an actuary with quant specialisation.

What advice would you give to others?
Take ST6 as part of the actuarial exams. I am also sitting financial risk management exams with the Global Association of Risk Professionals (GARP), which offers many seminars and networking opportunities.


Jethro Green
Tutor, University of Oxford


How did you come to work in academia?

I learnt that Daniel Clarke [see p31], who was a tutor at the department, was going to the World Bank, so I phoned to ask if they needed a replacement. They didn’t, as Daniel was combining the two roles, but that started a conversation, and when they did have a vacancy, they invited me for an interview. It’s a part-time role, so I combine it with my day job at the FSA.

What are the main opportunities/challenges?
Teaching is a great way to keep on top of the theory we all learnt but are in danger of forgetting if we aren’t using it day-to-day. The biggest challenge is that the students are all better at calculus than me.

How has your actuarial background helped?
I teach the actuarial science module, so it’s essential. But what I enjoy most is explaining to the students why they are being taught particular theories, and how they are used in the industry. That’s where I use my experience most.

How do you see the sector developing?
I think it’s great how the number of university actuarial courses has expanded, and I hope this continues. Evidence suggests that students are increasingly seen as consumers, which is making universities think more about how to deliver their services – I hope this opens up more opportunities for roles like mine.
I can see why the Profession is tempted to move to an ‘all or nothing’ system for exemptions for the core technical series. But I don’t think Oxford University will ever offer a full actuarial science degree. Without an exemption, the attractiveness of the course (to both the department and students) would be reduced.

What advice would you give to others?
On a practical note, I would strongly recommend going to the Actuarial Teachers and Researchers Conference – it is really friendly, you will make great contacts and you will find lots of accessible and well presented ideas relevant to your ‘normal’ actuarial job. Even better, come and present at it!


Ben Mabley

Banker, Citigroup


How did you come to be working in banking?

I developed an interest in banking after reading several books on the subject and speaking to friends working in the industry. After carrying out some research, I discovered that a surprising number of life actuaries worked in the sector and there were opportunities out there.


What are the main opportunities/challenges?

Actuaries have fantastic opportunities in a bank because they have a deep understanding of the more technical aspects of an insurance company’s balance sheet. The main challenge that I can see is translating this understanding into how it can be used to allow insurers to achieve their commercial and strategic objectives.


How has your actuarial background helped you?

A technical actuarial background gives you the ability to sift through large volumes of data and spot opportunities. Working in a consultancy environment provides you with a good understanding of regulatory capital, economic capital and valuation - all of which are important considerations in any transaction.


How do you see the sector developing?

The banking sector, like insurance, is currently facing a number of challenges: changing regulation and capital requirements, political pressure, and a difficult economic environment.  Banks with innovative solutions to the commercial and strategic objectives of insurers will continue to add value.  The environment is changing so rapidly, I can see my role changing, but into what, I don’t know!


What advice would you give to others hoping to succeed in this field?

Anyone aiming to enter the sector would gain a lot by speaking to people already in the field as there are a range of roles at a bank with differing focuses. Successful individuals seem to display similar characteristics - an approachable personality, commercially astute, technically very strong, highly motivated, innovative and generally curious.


Simon Ashworth

Ratings analyst, Standard & Poor's (S&P)


How did you come to be working for a ratings agency?

I moved to S&P in early 2011 following a role as an actuarial consultant for Ernst & Young. I was attracted by the strength of S&P's franchise and the prospect of using the skills gained as an actuary to regularly engage with senior stakeholders outside the actuarial world.


What are the main opportunities/challenges?

I have had the opportunity to develop a deeper understanding of the linkages between economic factors and insurance markets across the globe. In addition, where an actuary would be developing a pricing or reserving model, a ratings analyst must understand different business models and competitive dynamics across multiple insurance industries.


How has your actuarial background helped you?

My main focus at S&P is on the U.K. and Dutch life insurance markets and my actuarial background helps when engaging with chief risk officers across these markets. The technical insurance background and eye for detail is important in applying S&P's rating methodology consistently to different insurers. Clarity of communication is vital, particularly when explaining rating decisions to the marketplace.


How do you see the sector and your role developing?

S&P has recently announced a proposal to enhance the transparency of the ratings methodology it applies to insurers across the globe. Greater transparency and clarity in ratings analysis is increasingly important for both policyholder and debtholders. For my role in particular, there is scope for additional insurance ratings responsibility in countries outside the U.K. and Holland, and to gain exposure to other financial institutions, such as banks.


What advice would you give to others hoping to succeed in this field?

The technical and communication skills gained through actuarial training and work experience are well-suited to work as an insurance ratings analyst. While mine has not been a traditional route for an actuary or trainee actuary to take, it offers an unrivalled breadth of exposure to how insurance markets operate from a non-actuarial perspective.


Parvinder Matharu

Recruiter: founder of Newton Recruitment


How did you come to be working in recruitment?

I had been working in the actuarial profession for about 10 years and been thinking of working in actuarial recruitment.  I had changed jobs a few times myself having moved from Life to Pensions and then to General Insurance.  In making these moves and speaking to various recruitment agents, I found that as the agents didn’t have an actuarial background they weren’t able to fully appreciate my experience to date and the sort of role that I was interested in going forward.

At that point I was speaking to an Actuary already working in recruitment, and after several conversations, I made the leap of faith and the rest is history!


What are the main opportunities/challenges?

Solvency II has thrown up a number of opportunities for me to place candidates in a variety of roles, most notably various risk management positions across the industry.

I’m always keen to encourage actuaries to consider working in new fields.  A few candidates have made such transitions, and I think this will be facilitated by senior actuaries being appointed as non-executive directors in non-traditional firms.


How has your actuarial background helped you?

It gives me a greater appreciation and understanding of the technical aspects involved in any given role.  It’s also provided me with a solid grounding in the structure of firms that recruit actuaries, and where actuaries can add value.

However, I would say the key area that it’s helped in is the relationships that I have built up over the years with all levels of actuarial staff from new graduates to chief actuaries across each of the sectors I have worked in.


How do you see the sector (and your role) developing?

I spend an increasing proportion of my time on senior appointments across the industry, and I envisage these senior appointments to take up more of my time going forward.

With regards to the sector, in the long term I see the practice area widening into non-traditional areas, facilitated by actuaries having the impetus to drive forward into new exciting sectors.


What advice would you give to others hoping to succeed in this field?

Keep in touch with fellow and student actuaries alike and ensure you’re keeping abreast of the potential movement of actuaries especially within times of any mergers & acquisitions. Network productively inside and outside of the profession in particular with professionals that work closely with actuaries.