Dan Georgescu spoke with IFoA president, Louise Pryor, about her varied career, the actuary’s changing role, and the need to place sustainability at the heart of all we do.
Louise Pryor has worked in a great variety of roles over the course of her career, including a spell in each of the traditional actuarial fields of pensions, life and general insurance. She is currently involved in several different areas, including as a non-executive director of the Ecology Building Society, chair of the London Climate Change Partnership, and an honorary professor at the Bartlett School of Sustainable Construction. She wears these many hats lightly, describing her career simply as a “portfolio” that requires the same stringent time and diary management expected of any consultant.
“What we’re trying to do as a world is to keep the atmosphere, if you like, carbon solvent”
It is clear that there is an awful lot more to it than that, though. Variety, and the opportunity to keep learning, is a key factor when Pryor is deciding on a new role: “I’ve always looked for something where I will find it interesting, and that to me usually means learning new things, doing new things.” Furthermore, she has decided to only spend time on things she believes are worthwhile. This includes climate change and sustainability work, but also her new role with the IFoA, an organisation she believes can be a “force for good in the world”.
Looking back on how the actuary’s role has changed since she started her career, and how rapidly it is still developing, Louise believes it is incumbent on all of us to keep learning throughout our careers. “If you look back to when you started out, even if that’s only five years ago, things will have changed since then,” she observes. This learning can either be achieved by embracing frequent changes of role (or even career), or by staying in one place and keeping on top of the changes that will inevitably affect your work.
She is reluctant to predict the specific skills that actuaries might need in the future, given the pace of technological change. However, some things will always be critical, particularly the ability to understand the maths. “As you start doing different things, you maybe do less of the maths yourself, but you have to understand what’s going on and understand what the limitations of the maths are,” she says. “It becomes more about putting things in the big picture, seeing what the relevance is, seeing what the implications are.”
Beyond this, it will always be important for actuaries to understand that “decisions aren’t made by the computer, they aren’t made by the mathematical model – they’re made by a person”. We should never just blindly do what the computer says, because there are always things that aren’t in the computer.
An actuarial approach to sustainability
We can fruitfully use actuarial methods and approaches in considering carbon emissions and offsets, says Pryor – and the Actuaries’ Carbon Collaboration is currently looking at just this sort of thing. “You’ve essentially got streams of carbon flows in and carbon flows out, then cash flows,” says Pryor. “What does it mean to be neutral? It means that the flows are in balance. Is one looking for instantaneous neutrality? What sort of time period do you need to be in balance for? When you’re looking at offsets, how do the timings of the offsets compare with the timings of the emissions?
These sorts of questions have clear parallels with the world of insurance and solvency, so it seems sensible that an actuarial view of the problems could bring some real insights. “What we’re trying to do as a world is to keep the atmosphere, if you like, carbon solvent.”
The path to net zero
There has been a lot of discussion recently about achieving net-zero emissions by 2050 in order to keep climate change within reasonable bounds, but Pryor urges caution when it comes to the way we go about this. We cannot, for example, continue to create emissions at the current level for 20 years and then try to offset it all in the last few years before 2050. “Net zero is really important, but it’s not the end goal,” she says. “The 2050 goal is a milestone on a pathway that will lead us to the desired results, and so it has to be seen in that context.”
Relying on as-yet undeveloped technologies to offset our carbon in the future is “an extremely risky way to proceed as risk managers: relying on something happening in the future is not very sound risk management practice,” she points out. Even existing plans for offsetting through tree planting, for example, need to be treated with a degree of scepticism, as they can be based on nonsensical scenarios – for example a single company planning to plant more trees than there is available land for worldwide. “However many trees you plant now, how much carbon are they going to absorb within the next five years?” she continues. “Very little, so it just doesn’t add up.”
What should actuaries be doing today in practical terms? Pryor believes there are decisions to be made on both the asset and the liability side. In terms of assets, decisions about equity divestment are crucial. It has been said by CEOs that a world with a four-degree increase in temperature would be uninsurable, so “insurers have to think about whether they want to profit from or support activities that are going to make the world get to a climate situation where everything becomes uninsurable,” she says. “If you’re supporting activities that are going to result in four degrees of global warming, you are contributing to the death of your industry, as well as the death, presumably, of many individual people worldwide. Is that a good thing to be doing?”
“We cannot cope with challenges or take advantage of opportunities unless we are prepared to learn”
Equally, on the liability side, insurers need to decide what sort of activities they are willing to insure. It has been said that insurance is the lubrication of commerce, and that without it everything would grind to a halt and seize up. Insurers need to ask themselves whether they should be facilitating activities that go against their own long-term interests, and those of wider society.
In addition, Pryor would like to see insurers and financial institutions in general thinking more about how they can develop products that facilitate and support climate change mitigation and adaptation, and that address the needs of consumers or end-users, whose needs may be changing as risks change. “Is the financial service industry really serving its customers in the best way it can?” she asks. Essentially, she believes, what’s needed is for the financial world to radically reinvent itself to finance the transition required. That will inevitably involve lots of new things going on, and actuaries should be right in the heart of it, helping to do just that.
The year ahead
All this points to sustainability being a big theme of Pryor’s presidency; plans are being developed for bringing forward an academic credential in sustainability. Alongside this is the ongoing strategy for improving members’ IFoA experience and supporting the development of new skills and the move to new domains. The IFoA has two pilot online communities and is exploring other ways it can better use new technologies, and Pryor has been working with member groups to see how they can have a web presence. However, her main emphasis is the need to keep learning: “We need to absolutely embed the idea that we are always going to need new skills, and that there are different domains we can work in.
“Learning new stuff is vital to cope with change. Change isn’t only about new fields, it’s change in the traditional fields, too. We cannot cope with challenges or take advantage of opportunities unless we are prepared to learn. Learning is vital for sustainable careers. The IFoA must support and encourage both organisational learning and members’ learning in order to be sustainable.”