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Role of the Actuarial Profession

Role of the Actuarial Profession. Nauman A. Cheema. FPSA, FSA Pakistan Society of Actuaries (PSOA). 14 May 2013. Flow of Presentation. Part I: Development of Actuarial Profession Part II: Role of Actuarial Profession in Retirement Schemes. Part - I. Development of Actuarial Profession.

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Role of the Actuarial Profession

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  1. Role of theActuarial Profession Nauman A. Cheema FPSA, FSA Pakistan Society of Actuaries (PSOA) 14 May 2013

  2. Flow of Presentation Part I: Development of Actuarial Profession Part II: Role of Actuarial Profession in Retirement Schemes

  3. Part - I Development of Actuarial Profession

  4. Current Hype of Actuarial Profession • Riding on high wave (particularly Fellows & Associates) • Consistently ranked among top 3 professions • Sea change over time

  5. Journey of Actuarial Profession (International) • Traditional image • Back room number cruncher • Involvement in long-term business only • Little connection with business world Cont…

  6. Journey of Actuarial Profession (International) • Resulted in actuaries generally being out of management positions • Survey showing “good actuary” an individual who communicates well • Professional institutes have introduced course on communication Cont…

  7. Journey of Actuarial Profession (International) • Move over time towards divergent directions • Technical (overdose?) • Business areas (short-term real life issues)

  8. Local Journey • Handful of actuaries 15-20 years ago • Traditionally involved in retirement benefit schemes • Major boost in demand after life insurance privatization • Supply has also subsequently increased (140+ PSOA members) Cont…

  9. Local Journey • Heavy foreign demand • Generation gap in Fellows • Unemployment at junior levels • Profession needs to grow horizontally (in non-traditional areas)

  10. External (Morris) Review of Actuarial Profession • Key development in 2004-05 • Result of Equitable Life (UK) fiasco (oldest mutual company) • Ironical as well • Equitable first company to name its mathematician as “actuary” in 1762 Cont…

  11. External (Morris) Review of Actuarial Profession • Its downfall resulted in 1st external (Govt. review) • Key findings • “Understanding Gap” between advisors and users • Profession too introspective, not forward looking enough and slow to modernize Cont…

  12. External (Morris) Review of Actuarial Profession • Insular in nature (relation with other professions) • Professional standards weak and ambiguous • Absence of proactive monitoring of compliance by members Cont…

  13. External (Morris) Review of Actuarial Profession • Results • Strengthening and clarification of professional standards • Strengthening of CPD programme • Strengthening of monitoring procedures Cont…

  14. External (Morris) Review of Actuarial Profession • Greater explicit peer reviews • Greater interaction with other professions • Overall, fairly positive impact

  15. Part - II Role of Actuarial Profession in Retirement Schemes

  16. PRIVATE SECTORLocal Retirement Schemes Gratuity Schemes (unfunded) Provident Funds Corporate Pensions VPS Post retirement medical Others (free electricity etc.)

  17. Extent of Involvement of Actuarial Profession (Movement over time) • Very low initially - main reason statutory • Few Schemes (funded, pensions) • Major boost due to reporting requirements (IAS-19) • Downward pressure due to DB conversion to DC

  18. Areas of Involvement in Private Sector Schemes in Pakistan • Financial Reporting • whenever required by law or convention • Financial Health Analysis (funded schemes) Cont…

  19. Areas of Involvement in Private Sector Schemes in Pakistan • Design of Schemes • Relatively low involvement • Mostly for funded • Benefit / Scheme changes • Legal documentation • Administration

  20. Areas of Involvement in Private Sector Schemes in Pakistan In addition to the areas described above: • Asset Liability Modeling • Preparation of Investment Policy Statement • Dealing with Regulatory Authorities • Member Communications • e.g. Benefit statements/Annual statements

  21. Involvement in LOCAL PUBLIC SECTOR Retirement Schemes Nil initially in Govt. Schemes Huge liberalization in Govt. Pension Schemes over time Rapidly escalating cash outflows Increasing involvement of actuarial profession in last 8-10 years (ADB thrust) Cont…

  22. Involvement in LOCAL PUBLIC SECTOR Retirement Schemes • Greater knowledge of Pension and GPF liabilities • Reasonable involvement for other public sector schemes (EOBI, ESSI’s).

  23. Reasons for Low (Private Sector) Involvement • No statutory role (except reporting) • Communication weakness • consciousness about risks • impact of salary increases • consistent deficits • DB to DC conversion • Passive stance adopted

  24. Way Forward for Actuarial Profession in this critical field Improve and simplify communication Become more proactive in advice Concentrate on value added (satisfy employer objectives) Cont…

  25. Way Forward for Actuarial Profession in this critical field • Users need to tie in with Scheme financial implications (cash flows vs values) • Value in DC Schemes

  26. THANK YOU !!!

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