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THE ISSUE: Expertise needed like never before

SHAWN CUMBERBATCH, [email protected]

THE ISSUE: Expertise needed like never before

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THEIR VIEWS ARE NOT usually sought out by the media when compared with economists or chartered accountants, but actuaries are key players in the financial world.

These individuals, who are trained to give expert advice on the financial impact of risk and uncertainty, are heavily relied on by insurance companies and pension plans.

In Barbados’ case, this is typified by the debate surrounding actuarial reviews of the National Insurance Scheme, especially in recent years when Government’s use of NIS funds has increased, as has criticism of the practice.

“Actuaries are able to forecast the financial future by analysing past events, assessing the present risks, and modelling what could happen in the future,” the Caribbean Actuarial Association (CAA) said as it defined the actuary’s role.

“Actuaries need to be skilled mathematicians with keen analytical, project management and problem solving ability. Successful actuaries also have good business sense, solid oral and written communication skills and strong computer skills.

“Other valuable assets that can be beneficial on the road to becoming an actuary are self motivation, creativity, independence, ambition and an ability to work either alone or as part of a team,” it added.

The CAA also pointed out that “actuaries come from various academic backgrounds. Some have degrees in actuarial science, while others have degrees in business, economics, math or the liberal arts”.

Illustrating the vital role actuaries play, the CAA said: “At present, the majority of actuaries work in careers that are associated with the insurance industry, though growing numbers work in other fields. They are heavily involved in insurance because that is society’s most efficient way of managing risk. We reduce our risk of financial loss by transferring it to an insurance company that accepts the risk for a price, which is the insurance premium.

“Actuaries play a key role in designing insurance plans, determining the premium, monitoring the profitability of insurance companies and recommending corrective action when appropriate. Actuaries working in insurance companies also ensure that insurance companies have set aside enough funds to pay claims and provide advice on how to invest the insurance company’s assets.

“Actuaries work in all sectors of the economy, though they are found more in the financial services sector, including insurance companies, commercial banks, investment banks and pension funds. In the Caribbean the two main areas of actuarial work are life insurance and pensions.”

In Barbados’ case, a key development determining how these professionals function took place in May 2006 when the House of Assembly passed the Occupational Pension Benefits (Miscellaneous Provisions) Bill. Minister of Labour Rawle Eastmond said the legisation was pivotal to functioning of actuaries.

“Parliament must be careful never to leave any matter in doubt, especially those in central roles in institutions. We must ensure that persons are neither underqualified or unqualified. Parliament must also ensure that those who are qualified are not left out when it comes to that person’s role,” he said.

Before this legislation, Barbadian actuaries used their expertise to advise companies in and out of Barbados.

However, there has also been a wider international focus on these professionals. In a report titled Risk Management: The Current Financial Crisis, Lessons Learned And Future Implications, the Society of Actuaries, the Casualty Actuarial Society and the Canadian Institute of Actuaries said one of the reasons many did not see the 2009 financial crisis coming was partly because there was a failure of enterprise risk management.

“The crisis is not a result of a failure of the enterprise risk management process, per se, but rather a failure to implement enterprise risk management processes at all.

“The key to prudent enterprise risk management is in the enactment of a corporate culture that aligns desired performance with incentives and the matching of the authority to make decisions with accountability for the decisions made.

“Currently, most incentive compensation rewards returns, but without reflecting the risk undertaken to achieve the returns.”

So that as countries like Barbados continue to grapple with financial and economic problems, it is likely that actuaries will be increasingly called upon to help find solutions.