Louise Pryor speaks with Stephen Hyams about climate risk, models and the future direction of the actuarial role.
Louise Pryor is a software and model developer who sits on the IFoA Council and is passionate about ensuring the actuarial profession continues to evolve. She is currently the chair of the Resource and Environment (R&E) Board. "I got involved because I feel that climate change is the most important problem facing the world and we really need to try and do something about it," she explains.
Since climate-related risks have long-term financial implications, Pryor notes that actuaries will be expected to advise clients on them. She cautions that there is a reputational risk for the profession if it fails to do so, drawing a parallel with adverse press about 15 years ago over improvements in mortality rates. "How can you see that this is a long-term risk with financial impact and say, 'I'm not going to address it'?" she asks - hence the importance of the IFoA's risk alert last year.
Pryor acknowledges the challenge for actuaries in providing advice on the impact of climate change, given the lack of reliable data, but adds: "There are constructive things you can say to your client and ways you can help them." This is where the practical guides are useful, such as the one on pensions. "We are producing more as we speak: one on life insurance, one on investment and the general insurance one to follow soon," she says. "The authors are all practitioners in their respective fields, albeit they are not experts in climate change. "People have different ways of learning and this is catered for in the practical guides. Some prefer learning by example, so the case studies are fantastically helpful for that, while others are more theoretical and like to know the principles. We envisage frequent light-touch reviews to see if anything major has changed, with major reviews further down the line."
Pryor explains that the R&E Board is supporting a systems-thinking incubator, which seeks to understand the complex interactions between the different factors affecting a problem. By way of example, she cites a hot topics session she hosted at last year's Health & Care conference: "Climate change will affect healthcare, possibly through more heat-related deaths in summer and fewer cold-related deaths in winter. Natural disasters will bring infectious diseases and pollution, while we're getting flooding from wind storms in places where they haven't had them before. You then have potential secondary effect; these are highly uncertain but conceivably might include damage to health facilities and the ability of health staff to get to work to treat people. Those are very complex interactions, which systems thinking can seek to address."
I ask about the Actuaries Climate Index that has been developed by the North American actuarial professional bodies. Pryor explains that this is a communication tool to help people understand the impact of climate change - for example, a 2ºC temperature increase may sound attractive, but has a profound impact on the weather, with damaging consequences such as wind storms and melting ice. The R&E Board is not exclusively concerned with climate change, as Pryor notes: "We do think of this as a general issue; we don't want to exhaust the world." The wider scope is captured within the United Nations Sustainable Development Goals.
Our discussion turns to models, and Pryor explains how her interest began. "I realised early in my career that I had quite a unique skillset, as an actuary with experience as a commercial software developer and an academic computer science background," she says. The last point refers to her PhD in artificial intelligence.
What makes a good model? "All models are wrong because they will be some sort of simplification of the real world. A good model is one that is useful by providing insight into the problem being investigated and helping in the decision making. It's a fine line to tread between leaving things out to make the model manageable and leaving things out that are so important they would have changed your decision if left in. If you're working in a new area, you don't know what's going to turn out to be important." This is certainly pertinent when it comes to modelling the impact of climate change.
Pryor talks about her current modelling work for some developing countries, helping to formulate pension and social security policies. "The policymakers are often interested in how the benefit changes will affect a particular type of person, such as someone less well off or who takes a career break. Quite often there are various thresholds, such as minimum floors and maximum caps, so you can't just run on an average member - you need a wide variety of model points."
Education and broadening horizons
Pryor's involvement on the Education Board has incorporated a key period. "I think Curriculum 2019 is a huge step forward," she says. "It is clear that we're not going to have these major revisions in future; it will be incremental, which should allow us to respond much more rapidly to changing needs." She is especially pleased at how most of the UK-specific material has been taken out of the exams and put into the practice modules, so that the exams provide a good grounding in the principles common to all jurisdictions.
Pryor has previously chaired working parties tasked with reshaping the work-based skills and communication exams. "We managed to fairly radically rethink both of those, which I was pleased about." The replacement of the Education Board by the Lifelong Learning Board is a development Pryor wholeheartedly supports. "To be a successful professional you have to keep learning through your life, and the new Board will be looking to see how pre- and post-qualification can be viewed as a continuous process.
"The restructure of the qualifications, the increased emphasis being put on the Associate qualification and the Chartered Actuary proposal are all part of seeking to see what we think the profession should look like in 20 years' time. It's very much accepted that we need to focus on the future of the profession."
Pryor was recently re-elected to Council for a further three years and explained her particular focus. "The employment landscape for actuaries has changed enormously while I've been in the profession, and I suspect the change is going to continue and accelerate. I'm very keen that the profession, in a rapidly changing world, adapts accordingly, and that we get into new areas of work. We've got to think about how we can use our skills in different areas, such as climate risk, and not just in the context of pensions and insurance." Data science is another growth area for actuaries. Pryor also noted research being carried out by the Actuarial Research Centre on behaviour finance and economic models that differ from the classic ones - further examples of how actuaries are seeking to broaden their horizons.
A key driver in Pryor's career has been a desire to learn new things, taking advantage of opportunities that arise. "Even as an actuarial student I moved around, and within the first seven years after qualifying I worked in pensions, then life insurance and general insurance." Her desire to try new things extends to volunteering activities for the IFoA, such as when she got involved in an operational risk working party at a time before it became fashionable. She was also on a GIRO working party.
"Especially when you're working on your own, volunteering has made me feel part of something, which is very valuable, and it has been enormously interesting." Pryor took a break from volunteering while working for the Financial Reporting Council (FRC), due to a conflict of interest. As actuarial director of the Board for Actuarial Standards (BAS), she was responsible for developing the new Technical Actuarial Standards (TASs). This was a challenging time for the actuarial profession, post-Morris review. Pryor enjoyed creating principles-based standards to replace the old guidance notes, and is pleased that much of their carefully thought out wording has been retained in the latest TASs.
"The only regrets I've ever had are not getting out of things sooner when they weren't right for me," Pryor concludes. "There's always the fear of the unknown, but actually it's exciting learning new stuff, doing new things. How many people now are going to join an employer at age 22 and still be with them at age 62? My advice to young actuaries is: don't be afraid to try something new."