Is ST9 really necessary?

[Edwin]

I think I should ask what the 'forumnists' here think about Enterprise Risk Management. An attempt by Actuaries to spend money in a domain with very mild randomness (insurance). Better than nothing, but also bull****ism!

 

[Simon James]

Hi Edwin - interesting post! Not sure if this is a reasonable challenge to the discipline of ERM (which is an interesting debate, and touched on in Subject ST9), or a mild trolling of ST9 students

I'll throw the question back at you and ask to you justify a somewhat generalised statement that insurance has "very mild randomness".

Also, you may like to ponder on the idea that insurance isn't the only area where ERM can add value.

 

[cjno1]

Have you read the syllabus? It's about much more than insurance risk. The ERM qualification is, in short terms, a discussion around the role of the CRO and managing risk at a company level, regardless of the company. You could take the techniques and use them in a manufacturing business if you like.

I actually see ST9 as a good opportunity for actuaries to branch out of the traditional areas of pensions and insurance and use their risk management expertise in other industries.

 

[Oxymoron]

I actually see ST9 as a good opportunity for actuaries to branch out of the traditional areas of pensions and insurance and use their risk management expertise in other industries.

If they get somehow manage to get hired i.e

 

[cjno1]

If they get somehow manage to get hired i.e

Well that's a function of how well we market ourselves. If actuaries are happy to sit at a desk on their own and run solvency numbers then we will slowly die out. We need to be proactive in moving the profession in new directions. Most people don't even know we exist, let alone would consider asking for our help when we could give expert advice.

 

[Oxymoron]

Well that's a function of how well we market ourselves. If actuaries are happy to sit at a desk on their own and run solvency numbers then we will slowly die out. We need to be proactive in moving the profession in new directions. Most people don't even know we exist, let alone would consider asking for our help when we could give expert advice.

Well, why would someone who has slogged three fourth of a decade toiling and clearing exams want to take up that sort of a risk immediately after qualifying - especially when they are guaranteed of a high paying job?

For someone starting off their career in another field, it's not easy to progress without exam support by the company (in the form of membership/exam fee refund, raises for clearing exams and exam leaves)...and no company outside the insurance based domain provides study support. It's just too much of a risk for someone to do this (btw, I'm doing this!).

 

[cjno1]

All that is true, but there was a time when banks didn't hire actuaries, or investment houses, and now they do (and provide the study support to go with it). The way it is now does not necessarily have to be the way of the future. All it takes is some actuaries who fancy a new challenge and want to do something different to forage their way into a new industry and open the door for the rest of us.

I'm doing it too!

 

[Simon James]

There's some material on the IFoA website that may be useful...

http://www.actuaries.org.uk/practice-areas/pages/launch-erm-strategy-2012

http://www.actuaries.org.uk/communities/communities/erm/documents/enterprise-risk-management

 

[Edwin]

Hi Edwin - interesting post! Not sure if this is a reasonable challenge to the discipline of ERM (which is an interesting debate, and touched on in Subject ST9), or a mild trolling of ST9 students

I'll throw the question back at you and ask to you justify a somewhat generalised statement that insurance has "very mild randomness".

Also, you may like to ponder on the idea that insurance isn't the only area where ERM can add value.

Sources of randomness in the insurance industry;-

Mortality
Morbidity
Expenses
Inflation
Lapses
Investments (No speculation)
Operational Risk

When did we get it wrong? For starters can it really be gotten wrong?

Compare with sources of volatility in the markets? And work out the need for ERM.

On the other hand, Actuaries are quite poor at selling themselves, we need to aggresively pursue the wider areas, and that means actively competing in these wider areas.

The first step to get there is to cut down specialization, our profession is too specialized......particularly the non-market view of the world. And it is full of virtuous people, not HEROIC people!!!

P.s Specialization is for insects! By the way I have ST6 and plan to do ST9 and ST2.

 

[cjno1]

Like Simon and I have said, ERM is much wider than just insurance. And this will also allow us to market ourselves better. So to answer your intitial question, yes I believe it's necessary.

Specialisation is not just for insects, it's the best way to do anything. Ask Adam Smith. Do you also make your own clothes and grow all your food? No, you get those things from specialists

 

[Edwin]

Like Simon and I have said, ERM is much wider than just insurance. And this will also allow us to market ourselves better. So to answer your intitial question, yes I believe it's necessary.

Specialisation is not just for insects, it's the best way to do anything. Ask Adam Smith. Do you also make your own clothes and grow all your food? No, you get those things from specialists

cjno1 thanks for the reply.....

You do not move into the wider fields by introducing a subject, you identify individuals within the profession who can represent it wholeheartedly and who are capable of competing outside it, then you nurture and support them to grow the profession.

What happended to Certificate in Derivatives and Advanced Certificate in Derivatives that the profession used to offer like CERA i.e (CID and ACID)? They died out because you had the content not the people. Note, both CID and ACID are euivalent to Paul Wilmott's Certificate in Quantitative Finance (CQF).

If we want to be specialized, then let us remain to the traditional areas and not dream of compete, the markets are full of professionals who work hard and are liberal...if we want to go there we are going to need a clever plan....it's a senicure cum activity with a double dose of randomness.


"A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects."

-Robert A. Heinlein

 

[cjno1]

You do not move into the wider fields by introducing a subject, you identify individuals within the profession who can represent it wholeheartedly and who are capable of competing outside it, then you nurture and support them to grow the profession.

You need a balance of both. You need those individuals you talk about, who can represent us and move into new areas, but you also need other members to have the skills and the tools to be able to follow. ST9 gives you those tools.

So is your opinion that we should just stay where we are, and have no ambition to move into new areas? Sure, things may have failed in the past but that doesn't mean you never try again. Failure is just a speed bump on the road to success, many people who now own multi-million dollar businesses first had businesses which failed.

And also, I respectfully disagree with your take on Robert Heinlein. The fact that I can both cook a meal and build a wall does not mean that I am not better off by specialising in either of those things.

 

[Edwin]

You need a balance of both. You need those individuals you talk about, who can represent us and move into new areas, but you also need other members to have the skills and the tools to be able to follow. ST9 gives you those tools.

So is your opinion that we should just stay where we are, and have no ambition to move into new areas? Sure, things may have failed in the past but that doesn't mean you never try again. Failure is just a speed bump on the road to success, many people who now own multi-million dollar businesses first had businesses which failed.

And also, I respectfully disagree with your take on Robert Heinlein. The fact that I can both cook a meal and build a wall does not mean that I am not better off by specialising in either of those things.

You need to try something different when you try again after failing, don't you? Shift the focus to individuals!

 

[td290]

Edwin, are you forgetting that actuaries are already active in several areas besides "the insurance industry", by which you appear to mean specifically life insurance? I work in non-life insurance and I would certainly not say that we are only dealing with mild randomness there. Amongst the many sources of randomness are:

• Natural catastrophes
• Terrorism
• Latent claims
• Large losses, e.g. Deepwater Horizon, Costa Concordia

Can it really be gotten wrong? It certainly can and there are plenty of examples of it! I think anyone questioning the need for ERM in the company I work in would be looked at in astonishment.

Having said that, to return to your original question, I don't know whether this alone necessitates another exam. Two former colleagues of mine have recently moved into ERM in non-life companies and neither has attempted ST9.

 

[Calum]

When did we get it wrong? For starters can it really be gotten wrong?

Pandemic.