Educational Trip to BNM! =)

    Oh so yeah the trip to BNM was really awesome and eye-opening! Thanks to INTI Actuarial Society for organising it! There was a talk given by four actuaries who are working in the bank, and they started off by mentioning about roles of appointed actuary. Appointed actuary is the actuary who is working for his/her own company, and at the same time providing reliable information to the regulator which is the bank itself. Basically appointed actuary is the highest paid actuary in the whole actuarial team, but of course he/she would be the one having lots of work that worth the lucrative salary he/she gains.

    It is also responsibility of an actuary to determine the size of actuarial reserve—money set out for long term claim life insurance, to sustain the guaranteed claim to the policyholders should any loss occur, by using suitable statistical methods and mortality table or life table as they call it. One of the roles of actuary working for the regulator—BNM is to ensure that actuaries working in other companies such as insurance companies would not be too optimistic and estimate with higher confidence level that loss would not occur frequently, or out of estimation.

    In General Insurance—short term insurance for property, motor, fire and so on, actuaries act as claim executives. They use statistical methods to estimate claim that has occurred but not yet reported, and probable claim for damage. Actuaries working in BNM receive actuarial reports sent in by actuaries working in the other companies to reveal that whether their assumptions and methods used in an insurance product are reasonable or not, attempt to correct mistakes made so that the company is able to pay guaranteed claim by assessing their assets and liabilities. There are two types of insurance products—non-par product and par product. Non-par product is product that should no loss occur, the insurers would keep their profits earned from the product in their pocket and share no dividend to the policyholders; par product is product that should no loss occur, the insurers would give back 90% of their profits to the policyholders.

    Besides, actuaries working in the regulator have to ensure that the company marketers tell their policyholders that the profits of non-guaranteed product might fluctuate, based on number of death claims, investment ratio etc so that the policyholders would not anticipate much for returns of profit from the company. Other than that, actuaries working in BNM also need to carry out experience analysis—look at claim experience and expenses to balance the pricing methods, whether there are more deaths than estimated figures and in policy premiums. Next, actuaries in BNM also supervise insurance companies and evaluate them, whether they are of good rating or bad. If good, they would need less supervision from actuaries in BNM while if bad, actuaries in BNM would call them more frequently to supervise about the latest progress.

    Before approving appointment of appointed actuary or signing actuary, actuaries working in BNM need to assess suitability of qualification (Fellow of Institute and Faculty of Actuaries UK, SOA, CAS or Institute of Actuaries Australia) and past experiences, assess past performances of the candidate, check for conflicts of interest and conduct interview if necessary. There are advantages for both working in other companies and the regulator: One can always learn ways to apply on real life application if one works in other companies and more technical skills are required; whilst if one works within the regulator (BNM), one can evaluate reviews sent in by the other companies and look at the whole process at a wider point of view. Technical skills such as calculations would only be made whenever necessary during the reviewing process. 

    Actuaries working in the BNM act as a whole team, with appointed actuary as the leader followed up by qualified actuaries, associate actuaries and so on. Appointed actuary is the regulator’s arm in the company, and he/she needs to scrutinize more on the paper works and reports to ensure that most of the actuarial laws are being strictly followed, to safeguard the interest for policyholders. Besides, panel also introduced us to the Whistle Blow Protection Act, in which an appointed actuary can come to BNM earlier to notify potential calamity occur within his/her company to prevent further deterioration of condition, and yet get protected under this act.

    Also, another important role of actuaries working in BNM is to review product (insurance policy) submissions by analyzing it to prevent misleading ideas being imprinted among the public. Actuaries need to analyze process of developing the product to ensure that the product is worth embarking, and to approve a new product before launching it to the public. They even need to test the new product with a few samples to estimate the profit margin gained by the company, as well as look into their marketing brochures to prevent misinterpretation by others.

    Other than that, actuaries working in BNM also need to review bonus recommendation report for companies proposing for bonus cut. They need to ensure fair treatment of policyholders, proper communications with policyholders and review Asset Share Requirement—amount attributable to policyholders in term of bonus. Next, actuaries working in BNM also take up the consultant role internally and externally. Internally, actuaries provide technical advices related to insurance risk and actuarial matters to frontline divisions and management of ITS. Externally wise, actuaries provide development of risk-based capital framework for insurers as well as evaluate pricing.

    Next, panel mentioned about the career path of being an actuary in the BNM. Firstly, fresh graduate has to start off at feedle pool level in which RM2900 for the starting pay, like any other courses offered by BNM, for 1-2 years. Then, one will proceed to L1 (Actuarial Analyst) and subsequently to L2 (Senior Actuarial Analyst) after 3-4 years. One will proceed to L3 (Actuary) when one has completed the preliminary exams (Core Technical and Core Application stage), with minimum 5 years of experience. One would become a Senior Actuary after minimum 10 years of working experience, and become Chief Actuary after minimum 15 years of experience in BNM. As a feedle pool actuary, one would fill up reports, analyze and review the reserves and reports of other companies and so on. They would talk to the companies regularly if necessary, and visit the company to carry out prudential assessment test. As one proceeds through the next level, logically salary would increase in term of bonuses as well. 

    As the conclusion, roles of actuaries in BNM as the regulator of financial institutions in Malaysia are review actuarial reports, review product submissions, assisting with risk-based supervision of insurers and Takaful operators, and approve appointment of appointed actuary.