The Annual Joint P&C Actuarial Seminar in Malaysia on December 11-12 2017, was a great opportunity for us to visit our members and candidates in Kuala Lumpur, check in with the regulator and several universities, and generally update ourselves on insurance and actuarial market conditions in Malaysia.
From all fronts, we heard a clear, loud and urgent message: The insurance companies in Malaysia need and want a dramatic increase in the number of property-casualty actuaries. This message was much stronger than what we have heard in past years. The source of the need is marketplace changes, which in turn have been triggered by two very significant regulatory changes.
First, in July 1, 2016, property-casualty rates began being detariffed in controlled stages, whereas the pricing for new motor and property products were not subject to the prevailing tariff rates. Following that, policies effective July 1, 2017, provided that two of the existing motor products could deviate from tariff rates within a threshold specified by the regulator. The progress and impact of the changes will be evaluated to determine future stages beyond 2018.
While companies are permitted to continue using the preexisting insurance rates and products (some companies are doing so as an initial posture during the first phases of detariffication), many expect that natural competitive forces will soon yield significant rate activity and product innovation. The impact is likely to be particularly important for property insurance, where loss ratios have been low and underwriting profits high for many years, and a majority of residents historically have not insured their property.
Another significant feature of the current marketplace is the strong control of agents, brokers and other channels (e.g., auto dealers and mortgage lenders) over much of the business. Several insurance companies have also expressed a strong appetite to begin direct internet marketing. Insurance companies want actuaries who can work on pricing, predictive analytics, product development and more. The regulator, Bank Negara Malaysia (BNM) will require that each company have an internal pricing actuary be responsible for the actuarial pricing work.
Second, BNM is implementing appointed actuary requirements for P&C insurers: The appointed actuary will be responsible for signing off on loss reserves and issuing a broader annual financial condition report of the company. Ultimately, this role will be filled by a different person than the pricing actuary.
Employers recognize that they will need to build substantial actuarial teams to support the two lead positions. Of the approximately 30 general insurance or takaful companies making up the marketplace, many currently do not have staff actuaries. Add these new roles to the growing number of consulting, regulatory and academic jobs, and the message is clear: Credentialed P&C actuaries will be in great demand in Malaysia.
BNM views the company actuarial function as vital to sound management and regulation of insurers. Increased demand for experienced actuaries is accelerating the return of actuaries to Malaysia, and BNM would like to foster more of this. Several local universities have long-standing actuarial programs and are gearing up to produce a large number of actuarial graduates, but that won’t fill the need for experienced P&C actuaries in the immediate future.
Clearly, the insurance and takaful industry and the P&C actuarial profession are entering a dynamic era. We are excited at the prospect of the CAS continuing collaboration with the Actuarial Society of Malaysia in supporting the industry and the profession, particularly as the number of CAS members and candidates in Malaysia continues to grow in the future.
Brian Brown, FCAS, currently serves as CAS President and is a consulting actuary for Milliman, Inc. Michael Chou is the CAS international relations manager and is working in Hong Kong. Bob Conger, is currently a CAS international ambassador and a past president. Conger is a consultant with Willis Towers Watson. Wee Keat Kenny Tan, FCAS, is the newly appointed CAS ambassador to Malaysia. He recently returned to Malaysia after 14 years in the U.S. to become chief actuary with AmGeneral Insurance.
Meet Up in Malaysia
The 2017 Joint P&C Actuarial Seminar drew more than 100 people and was organized jointly by Actuarial Society of Malaysia, Casualty Actuarial Society, U.K. Institute and Faculty of Actuaries, and Australian Institute of Actuaries. This year’s seminar focused on property insurance, flood risk (by far the dominant catastrophe peril here) and detariffication. Speakers were local and from nearby Singapore as well as IFoA, IAAus and the CAS — Board Director Jim Guszcza and President Brian Brown both spoke.
An especially compelling session was a panel of local CEOs talking about detariffication’s impact on their companies. Their remarks echoed other statements on the importance of actuaries to the future success of their companies.
An interesting add-on to the seminar was an optional field trip to the control center for the Stormwater Management and Road Tunnel or SMART Tunnel. This innovative engineering feat was developed to combat flash floods. The SMART Tunnel is used for automobile traffic most of the time but, during major storms, is converted to divert and channel flood water.