Transcript The Actuarial Profession - Pittsburg State University

The Actuarial
Profession
An Introduction
Two Branches of Actuarial Science

Life & Health / Pension
- Society of Actuaries : SOA
- around 17,000 in United States

Property and Casualty (or Property / Liability)
- Casualty Actuarial Society : CAS
- 3,425 in United States / 3,857 total
P&C Lines of Business
Examples
Homeowners
 Earthquake
 Automobile
 Mortgage
 General Liability
 Medical Malpractice
 Workers’ Compensation
 Products Liability
 Reinsurance

Example Actuarial Problems
- Pricing New Products
- Risk Classification
- Modeling Catastrophes
- Graphing Size of Loss Distributions
- Establishing Loss Reserves
- Solvency Monitoring
- Rate Adequacy Studies
- Trending and Development of Losses
- Current Leveling of Premiums
- Credibility Measures
Pricing New Products
Body Piercing Salon Insurance
How
would
you
price
that?
Loss Development
Loss Development
12 months
24 months
36 months
48 months
60 months
1999
8,802,882
9,620,159
9,390,546
9,539,089
9,574,213
2000
9,948,091
11,042,381
10,490,262
10,595,165
2001
11,751,813
12,767,774
12,257,063
2002
13,046,926
14,351,619
2003
14,612,557
12 - 24
24-36
36-48
48-60
1999
1.09
0.98
1.02
1.00
2000
1.11
0.95
1.01
2001
1.09
0.96
2002
1.10
Average
12 - 24
24-36
36-48
48-60
1.10
0.96
1.01
1.00
Loss Development
Average
12 - 24
24-36
36-48
48-60
1.10
0.96
1.01
1.00
"Squaring the Triangle"
12 months
24 months
36 months
48 months
60 months
1999
8,802,882
9,620,159
9,390,546
9,539,089
9,574,213
2000
9,948,091
11,042,381
10,490,262
10,595,165
10,634,177
2001
11,751,813
12,767,774
12,257,063
12,415,292
12,461,006
2002
13,046,926
14,351,619
13,806,889
13,985,125
14,036,619
2003
14,612,557
16,034,700
15,426,088
15,625,226
15,682,760
Graphing
Size of Loss
Distributions
97
5K
92
5K
87
5K
82
5K
77
5K
72
5K
67
5K
62
5K
57
5K
52
5K
47
5K
42
5K
37
5K
32
5K
27
5K
22
5K
17
5K
12
5K
75
K
25
K
Claim Counts by Size
1800
1600
1400
1200
1000
800
600
400
200
0
25
K
50
K
75
10 K
0
12 K
5
15 K
0
17 K
5
20 K
0
22 K
5
25 K
0
27 K
5
30 K
0
32 K
5
35 K
0
37 K
5
40 K
0
42 K
5
45 K
0
47 K
5
50 K
0K
52
5
55 K
0
57 K
5
60 K
0
62 K
5
65 K
0
67 K
5
70 K
0
72 K
5
75 K
0
77 K
5
80 K
0
82 K
5
85 K
0
87 K
5
90 K
0
92 K
5
95 K
0
97 K
5K
1M
Lognormal Fit
1800
1600
1400
1200
1000
800
600
400
200
0
Actual
Fitted
Modeling Catastrophes
1992: Hurricane Andrew
Photograph © Allan Tannenbaum
The Costliest Hurricanes
Adjusted to 2004 Cost, Population, and Wealth Levels
















KATRINA
Southeastern Florida/Alabama
ANDREW [SE FL / LA ]
Northern Texas: Galveston
Northern Texas: Galveston
Southwestern Florida
New England
SE Florida: Lake Okeechobee
BETSY [SE FL / LA]
DONNA [FL / Eastern U.S.]
CAMILLE [MS / LA / VA ]
AGNES [NW FL / NE U.S.]
CHARLEY [SW FL]
DIANE [NE U.S.]
IVAN [NW FL / AL]
HUGO [SC]
2005
1926
1992
1900
1915
1944
1938
1928
1965
1960
1969
1972
2004
1955
2004
1989
> $125 B
$102B
$43B
$37B
$31B
$23B
$24B
$19B
$18B
$17B
$15B
$15B
$15B
$14B
$14B
$13B
2004 Prediction
National Oceanic and Atmospheric Administration
“In virtually every coastal city from Texas
to Maine, the present Tropical Prediction Center Director
(Max Mayfield) former National Hurricane Center Directors
have stated that the United States is building
towards its next hurricane disaster.
…
The areas along the United States Gulf and Atlantic coasts
where most of this country’s hurricane related fatalities
have occurred are also now experiencing the country’s most
significant growth in population. This situation, in
combination with continued building along the coast,
will lead to serious problems for
many areas in hurricanes.”
Solvency Monitoring
1906: San Francisco Earthquake
Only one regional insurance company survived,
offering company stock in place of cash to settle claims.
Are all losses
predictable?
View from Liberty International Underwriters
October 2001
Photograph by Ivan Rodriguez
Who do actuaries work for?










Insurance companies
Consulting firms
Government insurance departments
Colleges and universities
Banks and investment firms
Large corporations
Public accounting firms
Failure Analysis firms
Reinsurers
Themselves
Who do actuaries work with?
Other Actuaries (e.g. mentors, peers, students)
 Underwriting (e.g. pricing large accounts)
 Sales (e.g. developing pricing strategies)
 Marketing (e.g. retention analyses)
 Claims (e.g. loss reserving studies)
 Risk Management (e.g. response to loss trends)
 Clients / Large Insureds
 Reinsurers

Advantages
to the
Actuarial Profession












High earnings potential
No cost of graduate school – no loans to repay
Option to begin retirement savings early to compound it
Advance by examinations – no “glass ceiling”
Advancement opportunities expand throughout career
Professional Interactions – “Front Office” role
Variety of avenues to choose
Newsworthy projects
High demand – less sensitive to economic cycles
Job security
Financial Savvy – gain personal investing skills
Overall, a highly ranked profession
The Jobs Rated Almanac
ranks careers according to:
Environment
 Income
 Outlook
 Physical Demands
 Security
 Stress

Jobs Rated Almanac Top 10
2001
- #1 Financial Planner
 - #2 Website Manager
 - #3 Computer Systems Analyst


#4 ACTUARY
#5 Computer Programmer
#6 Software Engineer
#7 Meteorologist
#8 Biologist
#9 Astronomer
#10 Paralegal Assistant
Jobs Rated Almanac Top 10
2002

- #1 Biologist

#2 ACTUARY
#3 Financial Planner
#4 Computer Systems Analyst
#5 Accountant
#6 Software Engineer
#7 Meteorologist
#8 Paralegal Assistant
#9 Statistician
#10 Astronomer
Disadvantages
to the
Actuarial Profession







Difficulty of the examination process
Frustrating data problems
Narrow field with high degree of specialization
Confinement to an office (non-consultant)
Required travel and long hours (consultant)
Relocation may be necessary for ACAS or FCAS
May not provide good topics of conversation
Where do Most P&C Actuaries Live?
Illinois
414
Wisconsin
112
Connecticut
397
Minnesota
109
New York
366
D.C. (MD & VA)
107
New Jersey
317
Texas
102
California
266
Florida
97
Pennsylvania
233
Georgia
94
Massachusetts
166
Washington
64
Ohio
130
North Carolina
46
What are some other choices for
P&C Actuaries to live?
Michigan
44
Arizona
21
Iowa
42
Indiana
19
Missouri
41
Colorado
18
Kansas
40
Oregon
12
Rhode Island
35
Delaware
10
New Hampshire
31
South Carolina
9
Tennessee
22
Nebraska
8
Where might a P&C actuary be
hard pressed to find a job?
Alabama
7
Idaho
2
Louisiana
6
Montana
2
Maine
6
Oklahoma
2
Nevada
6
West Virginia
2
Kentucky
4
Arkansas
1
Vermont
4
Hawaii
1
Mississippi
3
North Dakota
1
New Mexico
3
Utah
1
Alaska
2
Wyoming
0
International CAS Members
Canada
246
China
3
Bermuda
73
Mexico
3
United Kingdom
31
South Korea
3
Switzerland
22
Brazil
2
Singapore
7
Israel
2
Taiwan
7
Barbados (W.I.)
1
Australia
6
Cayman Islands
1
France
6
Italy
1
Germany
6
Japan
1
Hong Kong
6
South Africa
1
Ireland
4
Two Branches of Actuarial Science
REVISITED
CAS: Casualty Actuarial Society (Property & Casualty)
3,425 in United States / 3,857 total
SOA: Society of Actuaries (Life & Health / Pension)
around 17,000 in United States
How do I choose
a path?
In the CAS and SOA,
Exam Parts
1, 2, & 4
are the same.
CAS Exam 1 = SOA Exam P
CAS Exam 2 = SOA Exam FM
CAS Exam 4 = SOA Exam C
CAS Actuarial Examinations
Associate Level Exams
Exam
1
2
3
4
5
6
7
Topic
Probability
Financial Mathematics
Statistics and Actuarial Models
Construction and Evaluation of Actuarial Models
Introduction to P&C Insurance and Ratemaking
Reserving, Insurance Accounting Principles,
and Reinsurance
Annual Statement, Taxation, Regulation
(U.S. or Canada)
CAS Actuarial Examinations
Fellowship Level Exams
Exam
Topic
8
9
Investments and Financial Analysis
Advanced Ratemaking, Rate of Return, and
Individual Risk Rating Plans
Validation by Educational Experience
(“VEE”)
1. Applied Statistical Methods
2. Corporate Finance
3. Economics
Skills and Personality Traits
to succeed as an Actuary
•
•
•
•
•
•
•
•
•
•
•
Analytic thinking
Problem solving
Good common sense / “business” sense
Facility with Mathematics
Ability to communicate complex ideas simply
Organized, concise writer
Determination
Independence
Disciplined study habits
Tendency to start projects early
Comfortable using computer programs
like Excel, Access, Word, SAS
Write this down!
The CAS Website: www.casact.org
1. DETAIL OF EXAMS:
Admissions/Exams
2007 Syllabus of Basic Education
Syllabus Summary
2. ABOUT THE PROFESSION:
www.BeAnActuary.org
3. INTERNSHIPS:
www.BeAnActuary.org/find/atp.cfm
4. VALIDATION BY EDUCATIONAL EXPERIENCE (VEE):
Admissions/Exams
2007 Syllabus of Basic Education
Validation by Educational Experience
5. CURRENT TOPICS:
Professional Education
Meetings and Seminar Handouts
“Click Here for the Chronological Listing”
The End