Actuarial science, as a core technology of the insurance industry, is gradually permeating all aspects of insurance company management and seeping into every key point of risk management.
The Institute and Faculty of Actuaries (IFoA) Asia Conference concluded on July 25 at the Yue Xiu International Conference Center in Guangzhou. Kartina Tahir Thomson successfully took over as president of IFoA at the conference. She has served on the IFoA Council for 6 years and is a member of its Audit and Risk Committee. She also sits on the Board of Directors of the Actuarial Association of Europe.
Kartina Tahir Thomson accepted an exclusive interview with the Southern Finance Omnimedia journalist during the conference, where she engaged in an in-depth discussion about the mysterious profession of actuaries, revealing their important role in risk management, predictive analysis, and addressing global challenges. She also discussed the development process of actuaries, and the insurance industry in China.
"The reason we're here is because we recognize that Guangzhou is part of growing economic and business growth," said Kartina Tahir Thomson, who believes that China's actuarial industry has tremendous potential and plays an important supporting role in society.
Kartina Tahir Thomson also shared her profound insights into the future development of the actuarial industry, including opportunities and challenges in emerging fields such as artificial intelligence, climate change, and cyber risks. She stated, "actuaries are faced with numerous opportunities," and the professional skills of actuaries are highly compatible with the artificial intelligence industry, indicating that actuaries have broad development prospects in artificial intelligence.
SFC Markets and Finance: Why did the Institute and Faculty of Actuaries (IFoA) Asia Conference 2024 choose to locate in Guangzhou this year, and what is your first impression of the Greater Bay Area?
Kartina Tahir Thomson: First of all, thank you so much for having me and I'm really excited to be here. It's such an honor to be here. The reason why we're here is because we recognize that Guangzhou is part of growing economic and business growth, and we want to be where the action is.
This is not our first time in China to host a conference. That's a recognition that as a country we have so much potential from an actuarial profession to be here to support society. So that's why we're here. In terms of my impression, Guangzhou is brilliant. I mentioned before its lovely weather and I had the best food. I'm loving it here and the city is amazing.
SFC Markets and Finance: The public may not be very familiar with the actuarial professions. Could you introduce a little bit about what actuaries normally manage?
Kartina Tahir Thomson: Absolutely. Actuaries make sense of complexity and uncertainty. We use mathematical models, statistical models and financial models to connect the different drivers of financial services, especially insurance, but broader industry as well. We make sense of uncertainty, so we can look to the future and look around scenarios on what can happen. So that's very useful for companies, for governments, for regulators, for stakeholders, to estimate what can happen in the future. So actuaries are good at that. Basically, we are part of, so we do risk management, and we do projection.
SFC Markets and Finance: Globally, the actuarial industry is facing a series of opportunities and challenges from AI to the global economic environment. In your opinion, how is the actuarial landscape changing nowadays?
Kartina Tahir Thomson: There are a few things that are impacting us. You mentioned AI, certainly something that we are very focused on, and we are looking at it as an opportunity because it's quite interconnected with the core work that we do around modeling, mathematical modeling and statistical modeling. So we can talk a bit more about AI, a bit later, but that's certainly a trend that we are focused on.
The other thing I would say is around climate. So climate risk and climate uncertainty is a big thing that we are finding our actuaries getting involved in. And the reason for that is around uncertainty and the long-term nature of the issue, and that fits very much into the core work that we do. So we look at physical risks, natural impact on Earth. We look at transition risks,so what's the impact from going to low carbon economy on investments.
And then we look at litigation risks as well, which is a bit of a liability risk, so what is the impact on firms in legal issues on that climate exposure. So we do quite a lot of that. The other thing I would say is from a core perspective, we look at pensions and investments and insurance, and we have observed that, because of the uncertainty in economic environment, there's an impact on social care and how people save for retirement and savings in their lives. So that's another thing that we are part of the discussion around. how we support society, how we support government, in terms of making sure that people are protected.
SFC Markets and Finance: China now is undergoing retirement programme and pension schemes reforms, such as the introduction of the private individual pensions. The challenge of aging population is not only in China but across the globe. So in your opinion, how would actuaries participate in such pensions challenge not limited to the Chinese market?
Kartina Tahir Thomson: This is such a core thing for us. So we've been doing pensions for hundreds of years. Because of the long-term liability and because of our understanding on demographics and mortality, we are best placed to support that. You mentioned aging population. It is an issue around savings and pensions. You mention moving from defined benefit to defined contribution where individuals take the risk of the investments, and that is a change as well. And we have seen that elsewhere.
So in the UK for example, the move from defined benefit to defined contribution and certainly there's a lot that actuaries can do around management of assets and the liabilities as well. So we do quite a lot around that, we support government around that. We also have noticed certainly in the UK but elsewhere as well, something called the protection gap where what people save is not enough for the aging population, the length of life expectancy, and the quality of life expectancy as well. So that's something that we need to work on with society around financial education and how we support people to make sure that gap is smaller than it currently is.
SFC Markets and Finance: In China, the insurance industry is currently the biggest employer of actuaries and the market continues to grow. The Conference Committee President Jiong Du talked about how she witnessed the rapid growth of China's insurance industry, which impressed me a lot. From your own perspective, how do you evaluate the development of China's insurance industry over the past decades?
Kartina Tahir Thomson: I mean she's absolutely right. There's a phenomenal growth of actuaries in China's community. It is a reflection of the value that stakeholders, so regulators, companies are seeing from our actuaries. So actually, it's a testament of the Chinese actuaries showing that value to their stakeholders. I hope that will still continue to grow and I know that will continue to grow because the financial services industry is growing in China and it's not stopping just yet, especially the insurance one as well.
So I think there's a lot of opportunity for actuaries in the core industry. But I also think that actuaries have transferable skills and that skill can go beyond the financial services. With that comment, I also think that the number of actuaries can grow even bigger than outside of financial services.
SFC Markets and Finance: You have said that actuaries can develop beyond financial sectors. What are some new opportunities for actuarial systems and actuaries in China?
Kartina Tahir Thomson: I mentioned climate risk as something that actuaries are getting into and doing quite a lot of that. So certainly at the moment it's in financial services but it can go beyond that as well. The other thing is our understanding on mortality, morbidity that can go into working with the government around population and stuff like that. I think there's a lot of opportunities for actuaries. And the fact that actuaries fit so well in the AI world and there's a lot of opportunities for actuaries in the AI world. I think there's a lot of opportunities in digitization and technological companies as well.
SFC Markets and Finance: Talking from AI, we've noticed that one of the emerging risks that has been talked a lot about in the insurance sector is cyber risk. So what would you say about the impact of it on the insurance industry?
Kartina Tahir Thomson: Cyber risk is certainly not new but it has risen in profile with the advent of, with the profile of, AI. So I would see cyber risk as a couple of things. One is on cyber risk as a whole for any organization and then that reflects kind of the cyber security and things like that. The other thing is cyber insurance. Insurance to protect people from the cyber attacks, and some companies will take out this insurance. The unique thing about cyber risk is that it's dynamic, so it changes all the time. When you have a mathematical model that uses past data predominantly, that's quite difficult because when cyber risk happens we might have a mitigant to it, and then it will change in characteristics so past data might not be appropriate for the future. So that means it requires actuaries and those in cyber risk to have a dynamic approach to assess the risk.
So I think there's this opportunity again, I mentioned that we're good in terms of modeling, and we're good at connecting different factors together especially around the interdependency of risk. And I think there's opportunity for actuaries to be a bit more involved in this type of risk as well.
SFC Markets and Finance: I've noticed that the IFoA has paid more attention to this sector in recent years. How do we connect the climate change with insurance and actuaries?
Kartina Tahir Thomson: There are a few aspects of climate risk that actuaries typically get involved in now. One is the physical risk aspects so natural catastrophe, and modeling how or if a property is going to be impacted by natural catastrophe for example. And climate obviously impacts the frequency of natural catastrophe and even the severity, so the impact, the size of how bad it can be. So that's one aspect of climate that actuaries get involved in.
The second one is transition risk, and this is typically around investments where we look at companies and how they react to reducing their carbon exposure. Because actuaries get involved in investment strategies, they will have a view on which companies are reacting better to transition risks than others. And that view is good for assessing the risk for the company.
Then the final thing is litigation risk, which is another type of risk where companies are in litigation, where climate risk is a part of. Actuaries can be involved in that in terms of understanding again how bad it can be. So because there's not much past data for it actuaries can again connect the link from one factor to another.
SFC Markets and Finance: I know that you are also very passionate about education. What skills or qualities do you think will be more important for the next generations actuaries?
Kartina Tahir Thomson: That is my passion. My theme for my presidential year is 'a sustainable future for the next generation of actuaries'. What that means is that I want to have a look and I want us to have a vision of how we can support the next generation with what skill sets they need. Are we teaching them the right skill set to be relevant to flourish in the future? And that means looking at our educational strategy and things like that.
The other thing I would say is that we need to equip our students, the young people and even current members with the growth mindset. And what that means is that I want people to go out there and take risks. And if it works out, great, but if it doesn't, then we get up and try something else. And that kind of cycle of mindset is really good for us to keep on learning, keep on being relevant and keep on adding value to society, to companies and to the people around us.
Source | SFC
