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A day in the life of an Actuarial Analyst: Tsuan Yao Loi, MS Financial Engineering, 2008
Professional History
After graduating from the MS in Financial Engineering program at Stevens Institute of Technology in May 2008, I returned to Asia with the intention of working in the capital markets division of investment banks. However, due to the economic downturn at that time, capital markets opportunities in the bulge-bracket investment banks were hard to come by. I went for 2 interviews, one with a boutique trading firm, another with a reinsurer and was invited for another interview with a derivatives brokerage arm of a local bank. I decided to join the reinsurer, Asia Capital Reinsurance Group as an actuarial analyst, with the aspiration of working in the areas of insurance-linked securitization and weather derivatives in the near future. Due to the growing trend of insurers/reinsurers transferring their insurance risks to the capital markets in the form of insurance-linked bonds and weather derivatives, I see ample opportunities to combine the use of financial engineering and actuarial techniques in this interesting intersection between insurance and capital markets. One may view the area of weather derivatives and insurance-linked securitization as a rare, arcane area for financial engineers to venture into, but I think it is an area set for growth especially with greater weather unpredictability brought about by climate change and with insurance-linked securities proving to be an attractive asset class lowly-correlated with the financial markets.
Job Description
To estimate accurate and adequate insurance liabilities of the company, including outstanding claims and premium liabilities.
To support overall capital management of the company
To price reinsurance contracts and alternative risk transfer products
A day in the office:
9:20am: Reach office. Review what needs to be done to estimate the insurance liabilities of the company for the coming quarter.
9:45am: Check with IT to make sure that all the data and information we received are up-to-date and available for extraction from the database.
10:00am: Extract data and make sure they flow seamlessly into our statistical/actuarial models
10:15am: Start analyzing results produced by the statistical models for each lines of business and perform reasonableness checks to make sure the results make sense based on the data we have. We often have to re-visit our models and assumptions just to make sure that they reflect reality as accurately as possible. Reasonableness checks have to be done robustly and seriously.
12:30pm to 1:30pm: Lunch
1:30pm: Continue working on our actuarial/statistical models. Note down things we can improve on for our next quarter.
3:00pm to 4:00pm: Meet with the underwriters and claims team to get an accurate picture of our insurance risks. This is part of the process of improving our models so that they reflect reality as closely as possible.
4.00pm to 6.00pm: Although there are certain standard actuarial/statistical techniques one can use in estimating insurance liabilities, these techniques are subject to refinements. One can access free research articles online to read about the latest refinements and techniques and see if they are applicable to our line of work. A certain amount of time is spent on learning about new, relevant techniques and how we can use them to refine our current models.
6.00pm to 7.00pm: Finish analyzing a couple of lines of business and plan what needs to be done for the other lines of business.
7.00pm: End of working day
Favorite part of the job:
The intellectual nature of the job for example the modeling, the researching and learning of new techniques and the refinement of models and knowing that all this intellectual work has a direct impact on the company’s profits. An insurance company or reinsurance company is in the business of risk and it is crucial that it manages its risks well.
Least favorite part of the job:
Despite its reputation as a stable and intellectually-satisfying profession, the actuarial profession requires passing a series of professional exams for one to be a fully-qualified actuary. Passing these exams requires a lot of dedication and commitment and it is not easy to hit the books after a hard day’s work.
Advice:
There has been a lot of movement of personnel and cross-pollination of ideas between the 2 fields of actuarial science and financial engineering of late. For example, structuring a catastrophe bond and pricing it involve both actuarial and financial engineering knowledge. It is not surprising to see fully-qualified actuaries pursuing MFE programs nor is it surprising to see MFE graduates working in the actuarial field these days. Dr. Phelim Boyle, Sungard Financial Engineer of the Year in 2005, is also a fully-qualified actuary. It is important to keep an open mind to the development of techniques and improvement of current models and the opportunities in non-traditional areas that are available to financial engineering graduates.