Michael Stefan - Actuarial Society 2011 Convention Template

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  • 2011 CONVENTION 8 9 NOVEMBER

    Professional development opportunities in

    the UK & European actuarial marketplace

    Michael Stefan

    Hanover Search & Selection, London, UK

  • 2011 CONVENTION 8 9 NOVEMBER

    Purpose

    1. Presentation is targeted at South African Short Term Insurance actuaries who are

    interested to know about market opportunities in the UK / European market

    2. Not intended as a recruitment exercise but rather to show the types of roles that are

    available, and to outline some specific features of these markets

    3. We will cover both actuaries working in traditional actuarial positions (pricing, reserving

    etc) as well as non traditional roles (leadership or C suite positions, broking,

    underwriting, banking, quantitative analytics, insurance linked securities etc)

    4. Most of the detail relates to the UK, however, other countries will be covered at a higher

    level (ie a bit less detail). Presentation will probably be more useful to experienced /

    qualified professionals, although student opportunities will also be covered briefly

    5. Views expressed here are my own and not necessarily those of my employer

    2

  • 2011 CONVENTION 8 9 NOVEMBER

    Some definitions

    1. Chief Actuary and Group Actuary usually mean the same thing

    2. In the UK, short term insurance as a term is generally not used; instead, following terms

    are used and inter-changeable (first two are most common)

    1. Non life

    2. General Insurance or GI

    3. Property & Casualty (aka P&C), more of a US term that has made its way to the UK

    3. PL = Personal Lines; CL = commercial lines

    3

  • 2011 CONVENTION 8 9 NOVEMBER

    Personal Lines

    Personal lines is self explanatory

    Motor / private car / auto largest, and usually least profitable product

    Household insurance (buildings & contents); some may be familiar with US term

    homeowners

    Travel and pet are also underwritten by most larger firms

    Priced using GLM pricing tools

    Usually huge teams comprised of pricing actuaries, students, statisticians, actuaries

    with no exams etc; the Top 3 Private Insurers have c staff each in the technical pricing

    area

    Teams usually combine actuaries studying for exams with statisticians who do the

    same work but dont study; that usually is not an impediment to career progression

    and some of the most senior personal lines actuaries have never qualified

    A very large proportion of personal lines insurers have their actuarial teams OUTSIDE

    London, meaning less competition for jobs but also lower salaries; usually attract

    those seeking a quieter, country lifestyle

    4

  • 2011 CONVENTION 8 9 NOVEMBER

    Small Commercial

    Small Commercial

    Also called SME (small & medium enterprise) business

    Examples: motor fleet, taxi, commercial property, business interruption etc.

    Usually priced using GLM pricing tools, as long as there is enough data

    Some attempt by some insurance companies to price traditional commercial lines

    using GLM pricing tools (best example is marine)

    Actuarial teams tend to be much smaller, but again, there is a combination of actuarial

    and non actuarial types

    Most positions based in London

    5

  • 2011 CONVENTION 8 9 NOVEMBER

    Large Commercial / Lloyds

    No agreed definition really exists, but usually called the Lloyds and London Market (or just

    London Market)

    Many companies will trade via both Lloyds and non-Lloyds distribution channels; they will

    usually do so on both an insurance and reinsurance basis

    Lloyds was set up around 1688 in a coffee house, and has grown from a traditional marine

    insurer to a diversified market

    Lloyds is not an insurance company it is an insurance market of members

    In 2009, over 21.97 billion of gross premium was transacted in Lloyd's, and it achieved a

    record pre-tax profit of over 3.8 billion

    Wont go into the details of Lloyds market it has a very complex structure and those

    wishing to find out more are encouraged to use the Internet

    6

  • 2011 CONVENTION 8 9 NOVEMBER

    Large Commercial / Lloyds (contd)

    Insurance products aimed at large risks / corporations

    Casualty / Liability

    Marine (incl Hull, Cargo etc)

    Power & Utilities / Energy

    Aviation / Space / Satellite

    Property

    Financial Lines (D&O, E&O, PI, Crime & Fidelity etc)

    Sports / Events (eg concert cancellations)

    Piracy / kidnap & ransom

    Weird & Wonderful (famous actors, The Titanic, rock stars, footballers etc)

    Actuarial teams can vary the largest employers will have between 40 and 50 actuaries

    and students (not to mention catastrophe modellers, risk specialists etc); the smallest can

    have just 2 or 3

    Supported by a large amount of actuaries working in consulting firms as well as brokers

    7

  • 2011 CONVENTION 8 9 NOVEMBER

    Large Commercial / Lloyds (contd)

    Actuaries have traditionally been involved in reserving, and so this is probably the most

    mature discipline, and also the one where the greatest numbers of actuaries work in

    Some of the first actuaries to work in the Lloyds market started around mid to late 80s, and

    virtually most companies are within a mile of the Lloyds building on Lime St

    Capital modelling has also featured very heavily since c 2004, and a huge issue now with

    the advent of Solvency II

    Pricing is a bit harder to generalise; due to lack of data, pricing usually done in a bespoke

    manner, with some lines only having 5-10 rating factors

    Pricing actuaries often sit with the underwriting teams; giant strides have been made to

    integrate pricing actuaries into Lloyds / London Market, and most underwriters are now

    familiar with (and accept) actuarial input; some pockets of resistance still exist (eg D&O)

    8

  • 2011 CONVENTION 8 9 NOVEMBER

    Large Commercial / Lloyds (contd)

    Qualification wasnt always critical to succeeding in the Lloyds market, and a number of

    senior actuaries exist who have never sat exams

    Communication / inter-personal / soft skills are critical even the largest Lloyds insurers

    are much smaller than their personal lines equivalents

    Easy to lose yourself in a team of 100 actuaries stand out much more in a team of 4 or 5

    Actuaries within smaller teams (3-5 people) will have mixed roles, though as teams get

    larger, positions become a lot more rigid

    Chief Actuary may or may not report to CRO; sometimes the Chief Actuary IS the CRO!

    9

  • 2011 CONVENTION 8 9 NOVEMBER

    Typical Structure

    10

    CFO / FD

    Chief Actuary

    (aka Group Actuary)

    Head of Pricing

    (+3-5 staff)

    Head of Reserving

    (+8-10 staff)

    Head of Capital

    (+3-7 staff)

  • 2011 CONVENTION 8 9 NOVEMBER

    Or This

    11

    CRO

    (maybe an actuary)

    Chief Actuary

    (aka Group Actuary)

    Head of Pricing

    (+3-5 staff)

    Head of Reserving

    (+8-10 staff)

    Head of Capital

    (+3-7 staff)

  • 2011 CONVENTION 8 9 NOVEMBER

    Or This

    12

    CFO / FD

    Chief Actuary

    Head of Pricing

    (+3-5 staff)

    Head of Reserving

    (+8-10 staff)

    Head of Capital & Risk

    (aka CRO)

    Head of Capital

    (+3-5 staff)

    Catastrophe team

  • 2011 CONVENTION 8 9 NOVEMBER

    Consulting

    Consulting firms have provided general insurance actuarial consulting services since the

    late 80s

    Most of the Big 4 will have teams of 50-80 GI actuaries and students, with a number of

    non-audit, pure consulting firms

    Traditionally, consulting firms provided reserving services to the Lloyds and London Market;

    this involved both outsourcing the reserving process (i.e. Consulting Firm A does the

    reserving for Syndicate X as they dont have an actuarial team) as well as providing

    opinions on reserves / signing off reserves

    Client mix has changed in the last 3 years due to the Solvency II many consulting firms

    are now targeting larger clients (typically, multi-national personal lines insurers) as they

    provide much larger engagements and hence much larger fee income

    13

  • 2011 CONVENTION 8 9 NOVEMBER

    Consulting typical work

    Reserving

    Audit support work

    Reinsurance modelling / advising on reinsurance purchase / optimisation

    Building / reviewing capital models and support work (eg documentation)

    Secondments

    Personal lines analytics risk pricing, price optimisation, using statistical techniques to

    detect claims fraud

    (Less common) Pricing and underwriting reviews for larger commercial / Lloyds clients

    Change in client mix (away from mostly Lloyds to a balance of Lloyds and personal lines) has

    meant there are many more opportunities for personal lines actuaries to gain experience of

    Lloyds work (via working for a consulting firm)

    14

  • 2011 CONVENTION 8 9 NOVEMBER

    Brokers

    Probably not all that different from brokers in SA, with the exception that the analytics

    teams of UK brokers are a) much larger and b) have a far greater mix