Malaysian Actuaries

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• Malaysian Actuaries
• in General Insurance
• 30th July 2008
• presented by
• Gary Hoo, FCAS
• JPWALL CONSULTING PARTNERS

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Presentation Overview
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Disclaimer Notes

• All views expressed are entirely my own and may
  not be the views of JPWALL Consulting Partners or
  the Actuarial Society of Malaysia
• The purpose of this presentation is to give the
  audience an overview of where we are at for
  general insurance actuaries in Malaysia and its
  vast future potential
• No part of this presentation may be reproduced in
  any format without the expressed permission of
  the author

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Intro Current Developments in Malaysia

• General Insurance (Property Casualty, or
  Non-Life) comprises any insurance that is not
  determined to be life insurance.

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Intro Current Developments in Malaysia

• Actuaries Distribution in Malaysia
• Actuaries mostly found in life insurance roles,
  primarily because of regulations (Appointed
  Actuary requirement)
• Main driver still seems to be regulations in
  Malaysia

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Intro Current Developments in Malaysia

• Growing interest in general insurance lately from
  RBC
• Most GI companies still prefer to outsource as no
  requirement for in-house actuary
• Main role IBNR reserving work slowly
  developing in other areas (pricing, capital
  modelling)

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Intro Current Developments in Malaysia

• Gradual development likely
• Hiring of actuarial resources (students)
• Requirement for in-house resource
• Setting-up actuarial department
• In-house Actuary in each company
• Future looks promising, but when?
• Consider developed countries - GI actuaries are
  essential
• Consider Malaysias life companies (gt 1 actuary
  in-house although no such requirements)

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Intro Current Developments in Malaysia

• Whats in it for you?
• Pioneering the development of the profession in
  Msia
• Being leaders of a new generation of actuaries
• The dynamic nature of general insurance
• The potential of so much more
• Probability of you being the Appointed Actuary of
  your (life insurance) company in your lifetime?
  What about CEO?
• Would it improve if you were in general insurance?

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Roles of Actuaries in Malaysia

• Roles of actuaries in Malaysia
• Reserving
• Pricing Ratemaking
• Risk-based Capital
• Reinsurance Optimization
• Mergers Acquisition

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Reserving

• The financial condition of an insurance company
  cannot be adequately assessed without sound loss
  reserve estimates
• Important to meet liabilities and to remain
  solvent
• The balancing equation

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Reserving

• Several factors are considered in IBNR
  estimation, including
• IBNR reserving deals with uncertainty in future
  claims development and it involves judgment and
  experience not just a mathematical formula or
  hit-a-button calculation

• Number of claims
• Loss Development Factors
• Claim payment patterns
• Discount rates
• Inflation
• Settlement and claim expenses
• Reinsurance coverage
• Legislative and environmental changes
• Changes in underwriting practices
• Changes in claims management practices

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Pricing Ratemaking

• Life insurance actuaries in Malaysia play a large
  role in product development and pricing
• For general insurance, it is similar in pricing
  medical and health insurance products
• What about other classes of business?
• For direct insurers, mainly personal lines such
  as Fire, Motor, Personal Accident
• For reinsurers, crucial to charge adequate yet
  competitive rates in all the different coverages
  they offer

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Pricing Ratemaking

• Fire and Motor insurance - Tariffs still in place
  in Malaysia
• But still useful for
• Product analysis
• Knowing true claims costs
• Target desired risk groups
• Avoid undesirable risk groups?
• Possibility of a de-tariff in future
• Interesting approaches e.g. GLM (generalized
  linear modeling) using database software such as
  SAS

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Capital Adequacy

• RBC requirements currently require
• Assessment of claims and premium liabilities
• Risk Margins for liabilities
• Stress Testing the Capital Adequacy Ratio
• Identifying an appropriate Internal Capital
  Target Ratio
• Preparing a Capital Management Plan
• Actuaries could and should contribute in these
  areas

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Reinsurance Optimization

• Are you buying more reinsurance than you probably
  should?
• Achieving an optimum level of reinsurance
• Reinsurance coverage analysis
• Better management of liabilities
• Determine which existing treaties to improve
• Determine if existing treaties are appropriately
  priced
• To confirm company is covered for risks it cannot
  withstand

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Mergers Acquisition

• Possibility of further consolidation
• 25 GI companies with several over-capitalized
• Utilize our skills and understanding of business
• Provide independent opinion on sale or purchase
  price
• Involves various tasks including review of
  reserve provisions and cash flow projections

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Developments in the Region

• SINGAPORE
• Actuarial certification for valuation of
  liabilities
• Similar to Malaysia, a minimum requirement of 75
  level of adequacy in reserves
• Risk Based Capital
• Minimum Capital Requirements using Standard
  Formulas

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Developments in the Region

• THAILAND
• IBNR reserving requirements in Thailand set to
  come in place in 2009
• In line with the regional development, a
  Risk-based Capital system is also being explored

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Developments in the Region

• AUSTRALIA
• Assessment of reserve provisions at 75 level of
  confidence
• Financial Condition Report (FCR) for general
  insurance, similar to that in life insurance
• RBC based on Standard Formulas but may allow
  Internal Models

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Developments in the Region

• CHINA
• Introduction of Chinas own actuarial exams for
  general insurance specialisation
• Various actuarial requirements such as reserving,
  pricing, solvency calculations for general
  insurers

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Developments in the Region

• EUROPE
• Just returned from ASTIN conference (Actuarial
  Studies in Non-life Insurance) in UK
• Current buzzword is Solvency II
• A lot of focus on development of Internal Models
  

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Conclusion

• Were probably at that stage for the life
  insurance actuarial profession some 10-15 years
  back in Malaysia
• Theres so much potential in general insurance,
  especially for those just starting out in the
  actuarial profession
• Do you dare take the leap?