ACTUARIES PROVIDE a key social service.
Many people don’t see it and many people don’t know about us but what we do is we mainly work with insurance companies and with pension plans to ensure the solvency of these entities, so that the promises made are kept.
The work that we do with life insurance companies ensures that when persons die the benefits are payable, persons who receive annuities, that those benefits are available on time, and with pension plans as well to ensure that when people retire they are able to receive the pensions that they were promised while they were working.
So we do believe that we play a key part in the financial services sector throughout the region. As we like to say, the future is not what it used to be. There was a point in time where we would be doing our work and our projections and we were seeing relatively stable, or what we thought were relatively stable, things in terms of projections for investment returns and inflation.
When an economy is doing well and growing it seems easier to project, but when things become more volatile and more contracted, now you have to try to use the tools that you have at your fingertips to try to get some sense of when things may turn around. I am a pensions actuary.
We examine pension plans and we have to make projections for things like salary and inflation, but in difficult economic times people aren’t giving increased salaries so it becomes even harder to try to derive assumptions on which to base your work.
We don’t have a crystal ball; we do make a lot of assumptions and so when you have difficult economic times everything becomes more variable and you really and truly have to get better at communicating risk and getting your clients to understand exactly what your work means.
So whereas before you may have seen things such as more points estimates, we generally tend to give lots of our results in terms of ranges now so clients can have some sense of what the upper bound is and what the lower bound is. We are more tested than ever because of the difficult economic times in terms of trying to find innovative solutions for our clients to help them weather the harsh economic times as well.
For a large insurance company things are a lot more unsure than they use to be. They may not be selling as many policies as they did before so premium income might not be as solid as it used to be, so there is more difficulty in terms of forecasting income and profit and then also deciding how renegotiate your reinsurance, which is very key for that type of entity.
For pension plans, yes, there is definitely a lot more uncertainty just because you are having more layoffs. Generally, if you, for instance, have a client that has a defined benefit pension plan and they have layoffs, very often they look to see if there is any way of trying to help their employees out, leveraging their pension plan to provide employees with benefits to help them ride out the times too.
So definitely we are tested in the harsh economic times to try to help our clients find good solutions.
Lisa Wade is president of the Caribbean Actuarial Association.
