The transformation of the actuarial profession

May 17, 2023

As an emblematic profession in the insurance sector, actuaries are experts in mathematical and statistical models. They are responsible for assessing, anticipating, and managing risks. Their area of activity is vast, ranging from insurance (life insurance, savings, retirement), to finance, as well as consulting. But their jobs are currently being transformed by new tools and technologies such as artificial intelligence, data science, etc., and the evolution of standards, particularly over the last ten years (Solvency II and IFRS 17). Actuaries now having to update their skills in order to seize the opportunities arising from these developments.
 

The evolving actuarial profession
 

Actuaries are specialists in risk management. They use mathematical techniques such as probability and statistics to identify, model, and manage the financial consequences arising from uncertain events (risks). 

At BNP Paribas Cardif, actuaries are at the heart of our business and even sit on the Executive Committee itself, where several members are actuaries, including Pauline Leclerc-Glorieux, Chief Executive Officer. Actuaries work on various strategic subjects: 

•    Pricing 
•    Monitoring financial risks
•    Business and product innovation
•    Actuarial modelling  
•    Data science 
•    Accounting and regulatory standards/processes (for example IFRS17 and Solvency II) 
•    Risk Management (for example ORSA2)

At the heart of the company’s strategy and development, actuaries are in regular contact with the top management, as well as with cross-functional business lines. They need to have a sense of synthesis and to communicate and popularise complex subjects, so that all stakeholders can work together. As well as collaborating with the various internal teams, actuaries are also required to work in a diversified external ecosystem, including with reinsurers, brokers, distribution partners, professional organisations, members of the ACPR, as well as with other entities of the BNP Paribas Group. They therefore interact with different people and work on a wide range of projects.

Adapting to a constantly changing financial environment 

In an evolving and unprecedented financial context (a rapid rise in interest rates after a period of negative rates, market stresses, equities, inflation, etc.), actuaries have to constantly adapt their tools and their monitoring and get involved quickly and pro-actively in defining strategic and financial orientations (new product offerings, adapting asset management policies, changes in regulations, risk management, etc.). They must therefore master different insurance mechanisms and have an overview of the elements that can affect various financial metrics (accounting or regulatory), as well as relations with policyholders. In this aspect actuaries act as the watchtower for insurers. They also make proposals for putting in place firewalls (financial or for policyholders). In this current particularly turbulent context, actuaries must show a high capacity for adaptation, questioning, responsiveness, and pedagogy. 
 

Taking into account ESG (Environmental, Social and Governance) criteria
 

Raising awareness of CSR topics is also an opportunity for actuaries, both in the field of asset management, as well as in products and guarantees, to be more inclusive and work with more departments. Supporting the ecological and social transition of the insurance sector is now part of the role of actuaries.
 

Actuarial work subject to increasingly demanding standards
 

A series of standards implemented over recent years are also affecting the work of actuaries. 

Since the European Solvency II directive came into effect in 2016, insurance and reinsurance companies in the European Union member countries must now better adapt their own capital to tackle the risks inherent in their business operations. They are required to provide proof of a minimum amount of capital (or solvency margin), in order to guarantee their commitments to their customers, and better deal with the inherent hazards in the insurance market. Ensuring compliance with these rules is now also part of the actuaries’ job. 

The IFRS 17 standard is designed to ensure that entities provide the relevant information for assessing the impact of insurance contracts on their financial position, financial performance, and cash flows. Its adoption means that actuaries must work alongside accountants to develop assessment tools that comply with the standard.
 

Increasingly sophisticated tools for actuaries
 

The digital transformation of insurance and the development of new technologies, such as Artificial Intelligence (AI), Machine Learning, Deep Learning and Data Science have been disrupting the actuarial profession for the past ten years.  

These tools make it possible to collect a larger quantity of data to feed and improve actuarial models and risk management in insurance, manage emerging risks more effectively (cyber risks), as well as facilitate the work of actuaries by freeing them from certain time-consuming and low value-added tasks. Ultimately, they are contributing to the development of insurance companies as a whole. 

Actuary: new skills required by insurance companies
 

The emergence of new technologies and standards is changing actuarial training requirements. Students who hope to become an actuary must therefore now be trained to use the tools required for their future profession, such as data sciences, AI, etc.

Insurance companies are also providing in-house training programs for those already working as actuaries to help them develop these skills. BNP Paribas Cardif is also supporting actuaries by providing them with financing for specific continuing education courses, including Enterprise Risk Management, Certificate of Actuarial Expertise and Analytics, among others, to help them increase their knowledge and expertise. 

The digital transformation of the insurance sector and the change in standards are disrupting the actuarial profession. While these factors are pushing universities and schools to adapt their courses, they are also encouraging insurance companies to increase their actuaries’ access to continuing education in order to remain competitive.