I am getting old, some day, I will probably admit it. And I have been wondering, over the past months, if things have changed in the actuarial profession. And how. I have seen things changing in Europe, mainly due to Solvency II requirements, and I know that the ‘culture’ of actuarial studies is not the same in Europe and in North America (in Europe, as far as I know, student discover actuarial science in graduate programs, usually after a bachelor program in mathematics, or economics and business, with a strong quantitative background). But in North America, I had the feeling that actuarial studies are more ‘business’ than ‘mathematics’. So I wanted to get a better understanding of that feeling I had. When I was working on the associateship exams (while I was working as an actuary in Hong Kong), I remember reading the Loss Models, trying to get a better understanding of ruin theory and credibility concepts. But in the new edition, ruin theory has been removed, and I keep wondering when (in their studies) actuarial students in North America hear about solvency. I am still working on that, reading past syllabuses (or syllabi, I don’t understand what should be the plural) of the SOA preliminary exams.
The funny story is that in our coffee room, there are a lot of books (proceedings and records of the SOA), and yesterday, I discovered an interesting report,
Almost 25 years ago, the SOA asked a task force to think about the future of the actuarial profession. On the very first page, there is a diagram. I am not sure now to read it, but the feeling I have is that, by the end of the 80’s, actuaries had strong math skills, and poor business skills. And that, in the future, they should have stronger business skills (and since it is a rectangle, I guess poorer math skills). Which somehow confirms the feeling I had.
But the most interesting part is the part on what should be the future actuary. Future in the sense of 1989. Which was actually 2010… So, it is always good to look back at old predictions (especially for a profession claiming that prediction and uncertainty and risk is the core of their business). Here is the report (I could find the report online, only some partial records, so I did scan it, and upload it).
So risk management is clearly mentioned here. But what I still do not understand is the rectangle from the beginning. Because here, it is clearly mention that actuaries should know more about financial risks, environmental risks, political risks. But I do not see anything about the decrease of math skills, that I see in the graph in the introduction. And I can hardly see it in the syllabuses. For instance, the Black-Scholes formula, and option pricing was not there in the 80’s, but it is here now. So student should learn about continuous time stochastic processes, Ito formula. They should know about predictive modeling, which is clearly more advanced than standard regression models (OLS) that was mentioned in the syllabus in the 80’s. I am still working on it (when I can find some free time).
But if the math part is puzzling me, I am impressed by forecast made here (even if the driver can usually make better forecast about where the car is going that someone sitting in the back). But you should also read the very last paragraph of the report, where you will see that (from my point of view) things did not change much in 25 years
2 thoughts on “Actuary in 2010 (“the Future”)”
Fits with the UK Profession as well. Little real mathematical training past the core exams. Much more of a vision of the actuary as a communicator of actuarial issues.
I have met very many good actuarial business people. But I worry that this is doing systemic damage to the profession, because there is no distinguishing factor to being an actuary.
And this is really quite sad, because the specialism of being an actuary depends today more than ever on advanced mathematical concepts. The actuarial research today is very advanced in some areas? Non-life reserving/pricing and predictive modelling/stochastic modelling/solvency considerations. But the UK syllabus, in Life for example, will barely touch on the “advanced” subjects, and when it does, does not require maths. Only that one can give a high level description of the concepts.
I think the European approach emphasizes the “quant” side more?
“being an actuary depends today more than ever on advanced mathematical concepts.” I could not agree more ! and that’s what I find a bit scary. Actuaries need more maths, not less. Or they will ask consulting firms to sell them models, and rely on those ‘black boxes’. There has been a lot of recent work on prospective mortality, and nice models can be used now (actually, there will be two chapters – out of four – in the Life section of the Computational Actuarial Science with R book). It find it sad that students barely hear about them…