"The Actuarial Profession - Constructive Partners and Valuable Advisors" - Speech by Mr Chua Kim Leng, Assistant Managing Director, Monetary Authority of Singapore, at the Singapore Actuarial Society 40th Anniversary Gala Dinner on 28 September 2016
SAS President Mr Matthew Maguire,
Ladies and Gentlemen,
A very good evening. I am delighted to be here today, to celebrate with you the 40th Anniversary of the Singapore Actuarial Society. Congratulations to all of you on achieving this significant milestone.
In 1976, the SAS was founded by a small but enterprising group of actuaries. At that time, the actuarial profession was not well known in Singapore. The establishment of the SAS then provided a common platform for actuaries to come together in an informal manner.
Barely a year later, in 1977, insurance supervision was brought under MAS’ purview. So, in a sense, the SAS and MAS have seen the industry grow and evolve.
The SAS has brought about many changes in the last 40 years. Let me highlight some of them.
- As early as 1993, in recognition of its growing prominence and influence in the industry, MAS engaged the SAS to provide comments on a piece of draft legislation that would introduce the concept of the Appointed Actuary into the supervision of life insurance companies.
- In 1994, the SAS embarked on the process of transforming itself into a proper professional body, and in 2013, it was given full membership of the International Actuarial Association.
- Today, as stated in your mission statement, you aim to be the recognised representative body of the actuarial profession in Singapore, having the final authority in setting professional standards.
MAS is thankful for the partnership and contributions of the SAS
The SAS has come a long way in the last 40 years. In our many interactions with you, MAS has consistently found the SAS to be a proactive stakeholder, and a valuable partner. I would like to cite a few notable examples.
- We appreciate the regular dialogues with the SAS, whereby you proactively engage MAS on your upcoming priorities and initiatives for the year.
- We count on the SAS to formulate and continually enhance professional guidance notes relating to MAS’s requirements, such as the guidance notes on the Actuarial Investigation reports.
- The SAS has also developed an induction course for Appointed and Certifying Actuaries, which are MAS-approved positions. Appointed and Certifying Actuaries play an important role in ensuring fairness and equity for policyholders, as well as the soundness of an insurer’s operations. The SAS has, since May 2015, successfully conducted a few of these practising certificate seminars, which also provided a useful platform for MAS to convey our expectations of approved actuaries.
- For the ongoing RBC 2 review, the SAS has provided constructive and technically robust feedback on various elements. We have had a series of meetings with you on the matching adjustment and illiquidity premium, to make them fit for purpose. You have also provided preliminary research and ideas on the Countercyclical Adjustment mechanism for the equity risk requirement, despite it being a relatively new concept.
The SAS has taken important steps in growing its membership, and in organising conferences and actuarial forums to keep the profession attuned to industry developments, while concurrently helping actuaries fulfill their continuous professional development requirements. This growth in membership numbers and, more importantly, the deepening of skills are vital for our insurance industry.
Since 2000, assets of the insurance sector in Singapore have increased by about three and a half times; and per capital expenditure on both life and general insurance has roughly doubled. The industry will continue to grow, and it needs the actuarial profession to grow with it, not only in terms of number of actuaries, but also in skills, professionalism and expertise.
The SAS, clearly, has a central role in supporting this growth.
Your professionalism and independence are paramount to further the art and science in the actuarial practice, and to build trust in the insurance sector. Indeed, MAS’s interactions with the SAS over the years have shown that you are objective and independent in providing constructive feedback. We hope that SAS members, in your capacity as actuaries within your respective firms, will continue to put the interests of the profession, and that of the policyholders, at the centre of what you do, and be that independent voice of reason.
During this year’s annual luncheons of the Life Insurance Association and General Insurance Association, I highlighted some important developments and headwinds for the insurance sector. These are just as relevant for the actuarial profession, posing challenges and presenting opportunities for you. Let me elaborate on three of these developments, as we not only celebrate the past, but look ahead to the future.
First is the rise of big data and predictive analytics. In a recent survey, the United States Society of Actuaries cited big data and predictive analytics as one of the top challenges to the actuary’s work.
- Big data is a term for data sets that are so large or complex that traditional data processing applications are no longer useful for analysing them. More advanced methods like predictive analytics are needed to extract maximum value from such data sets.
- The use of predictive models will provide more granular analyses and results. And whilst traditional actuarial work tends to focus on exposures, predictive models often incorporate behavioral and environmental factors.
- You will therefore need to incorporate these new methods in your work, and better leverage the vast amount of data available. The ones who can stay at the forefront of new and evolving techniques will stand to benefit the most.
- I am confident you can overcome this challenge, because actuaries are supposed to be good at analysing data, and developing models to solve complex problems.
Second, there will always be emerging risks and trends in the horizon. The SAS will need to be prepared to manage them and not be caught off-guard.
- Some examples of these include cyber risk, pandemics, and regulatory developments.
- The SAS is best placed to be at the forefront of emerging issues, by proactively researching them, and raising the profession’s awareness and expertise on these topics.
- You can also provide thought leadership on a number of important and increasingly pertinent issues, such as retirement solutions, healthcare, natural catastrophes, and longevity trends.
- One specific area that actuaries are well positioned to provide advice on is risk management, because you are trained in both asset risks and liability risks. We have seen more actuaries branching into the field of risk management. The SAS has also been active in promoting Enterprise Risk Management, promoting a sound risk culture, and facilitating the meaningful integration of risk assessments with business strategy. We welcome this positive development.
Third, actuaries will need to increasingly exert influence, not just at the technical level, but also at the level of the senior management and board of directors, to ensure that your views are heard and respected.
- Surveys done by major actuarial professional bodies have indicated that the role and influence of actuaries may have diminished over the years.
- In a recent commentary by Mr Lindsay Smartt, President of the Actuaries Institute of Australia1, he alluded to this trend of declining seniority and influence of the actuary in an insurer. He argued for a restoration of the role of the Chief Actuary as a senior, authoritative position that provides actuarial and strategic advice to the board and senior management.
- The United States Society of Actuaries also highlighted in its strategic plan that actuaries are often focused on communicating process and data, rather than providing strategic insights.
I would like to encourage all of you to do your part in reversing this trend; you can look beyond the technical work of reserving and actuarial reports, and comment on the business strategy of your company; and you can also seek out opportunities to advise boards and senior management on risks and strategies, based on your expertise and experience.
For some of you, the communication module in your actuarial exams may not exactly be your favourite module. But communication is a key part of what you do. Actuaries are supposed to maintain independent views, and your ability to communicate these views to the senior levels within the organisation is critical for achieving sound and balanced business decisions.
Ultimately, insurers must have a structure that supports the role of actuaries. But actuaries too need to embrace these roles, and to recognise that your opinion is an important part of a company’s decision making process.
Let me conclude. The SAS may be relatively young compared to some other actuarial professional bodies, but you have made good progress.
On this occasion, there is much to celebrate, and as always, there are also challenges ahead. The SAS needs to be prepared, to ensure that the actuarial profession stays relevant and influential.
We at MAS look forward to furthering our fruitful and constructive partnership with the SAS for the next 40 years and beyond. We may not know how different the industry will be in the future, but I am sure we will get there, together.
Congratulations, once again. Enjoy the evening.