Actuaries have always been involved in the management of risk, and more and more we are seeing actuaries take on roles that may be considered outside of the realm of “traditional” actuarial work, such as pricing and reserving. We’ve seen actuaries move into chief risk officer and chief financial officer roles, as presidents of insurance and reinsurance companies as well as banks, and heading up analytics departments.
Executive SummaryAs insurers and other financial institutions seek to rely more heavily on data analytics, and grapple with compliance issues and emerging risks, actuaries are logical choices to deliver technical expertise to evolving strategies. They may also be natural choices for leadership roles, according to recruiter Marianne Westphal, who explains how actuaries can prepare for positions in the C-suite.
This article will consider why an actuarial background might be an asset to individuals in these types of roles and some ways actuaries might work toward such leadership positions.
How Actuaries Can Round Out the C-Suite
One area that’s at the forefront of many insurance company strategies today is predictive modeling and analytics. Specifically, companies are trying to understand how to use new technology to help create more precise pricing and how to capture, comprehend and utilize the vast supporting data that is available to us all.
The actuarial capacity to both model data and analyze the ensuing results is integral to this work. One challenge may be in keeping up with the technological changes; some of these changes will be answered by actuaries collaborating with other analytics professionals, while other actuaries utilize continuing education.
Compliance is another area of great interest to insurance companies, in particular to the risk management functions as well as the CROs. Recent regulatory requirements, developed in part to respond to the financial crisis where the traditional ways of measuring capital adequacy were insufficient, are another area where actuaries can lend their modeling expertise to stress testing and financial security assessment. Europe’s Solvency II directive and the implementation of the Basel Accords on the banking side have already influenced U.S. companies—and certainly those with European parent organizations—to look to actuaries and other risk professionals to deal with current requirements and similar regulations in the future.
The professional actuarial organizations often have research areas dedicated in part to keeping up with changes and trends in the industry and are committed to moving actuaries forward in these areas. The profession, which may have a reputation of being considered thoughtful rather than quick to change, is making great effort in also being seen as progressive. The professional associations often mandate continuing education as part of the designation process and have a mission to continue to drive forward and keep pace with change. The CERA credential, created in 2007 as a standard for Enterprise Risk Management expertise, underscores the importance the industry and associations place on understanding risk from a big picture, enterprisewide perspective.
A profession that has risk management as a focus requires those experienced in dealing with myriad risks. One needs to have the ability to adapt and understand emerging risks quickly. A handful of emerging risks in the past few years have been of particular interest to insurers, such as cyber risk, terrorism and natural catastrophe risk. They also happen to be areas in which actuaries have been heavily involved.
Preparing for a C-Suite Role
Clearly, actuaries have a natural place in risk assessment. How does this translate to potential value of an actuary at the C-level, or heading up departments or functions within insurance and other organizations?
From a technical standpoint, an actuarial background and designation should set candidates apart. But candidates also need to have finely honed leadership, vison, collaboration, building consensus, strategic understanding, communication and interpersonal skills.
For actuaries looking to move into a C-level or other leadership role within an organization, there are steps that can be taken to prepare for these roles. Some of these include:
- Gaining experience managing teams, especially diverse groups that may include actuaries as well as those in other areas, such as claims and underwriting.
- Taking the opportunity to work in different areas of the company to gain a broader perspective outside of the actuarial department.
- Being visible to senior management.
- Giving voice to strategic ideas and seeing them through implementation. Further, taking the time and interest to do an honest assessment of the results.
- Attending leadership conferences or seminars with a mix of actuaries and non-actuaries, gaining exposure to the viewpoint of others in the same industry at different companies.
- Staying current in new software and technology.
- Doing self-study and research of successful executives in financial services and other industries.
Candidates in consideration to be industry leaders in financial services, including but not only in C-level roles within their organizations, need to possess the ability to have an understanding of risk and other issues the organization faces across the enterprise and be able to make holistic strategic decisions with this information, as well as build trust among peers. Certainly the ability to excel in all of these areas is specific to an individual, but there is no reason why, as actuaries grow in their careers and within their organizations, they shouldn’t be sought-after candidates for such vital roles.
In summary, actuaries are a vital part of the insurance field, and in these challenging times with more unforeseen risks that lie ahead, it is not just prudent but vital for companies to consider candidates with actuarial knowledge to lead them into the future.