Day in the Life of an Actuary with Canopius

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A Day in the Life of an Actuary

Tom from Canopius presents a day in the life of an actuary.
He discusses how he got into his role and his background in engineering and teaching.
Tom explains that a degree involving math or stats is preferred for aspiring actuaries.
He highlights the transferable skill of being able to explain complex concepts to a non-technical audience.
Tom shares that he is training to be a pricing analyst in an insurance company, specifically in non-life insurance.
He mentions the benefits of working in the London insurance market, including socializing and variety in the risks dealt with.
Tom emphasizes the importance of communication in his role as a pricing analyst, enjoying the opportunity to interact with underwriters.
He mentions that he is still in the process of becoming a fully qualified actuary.

Qualifying as an Actuary and Working at Canopius

To become a qualified actuary, you need to pass 13 exams.
You can study for the exams while working, and Canopius, the company the user works for, pays for their tuition and exam fees.
The user gets a day off every week to study, but also puts in extra hours on the weekend to make up for it.
The exams are technical and challenging, with a focus on math and stats at the start and more on communication and understanding towards the end.
Canopius is a specialty reinsurer, which means they cover niche risks like satellites, oil rigs, and terrorism exposure.
Unlike traditional insurance, where risks like car insurance are similar and have abundant data, specialty risks like satellites and oil rigs have fewer instances, making it harder to create accurate models.
Actuaries play a crucial role in creating models that capture the risk characteristics of specialty risks.

Types of Insurance Covered in the Specialty Market

Boat insurance
Aviation insurance
Flood insurance
Property reinsurance (specifically impacted by flooding)
Oil rig insurance
Travel insurance
Specialty insurance for fine art or classic cars
Cyber insurance (rapidly growing due to increasing threats of hackers)
Marine insurance (various types for different boats)
Catastrophe insurance (covering flooding, earthquakes, hurricanes)
Case study on pricing actuary and the use of models in the insurance industry.

Explanation of Pricing and Risk Analysis in Insurance

Pricing in insurance involves ensuring that the company has enough assets to cover future liabilities and meets regulatory solvency requirements.
Business analytics is used in pricing to analyze data and determine the loss ratio, which should be less than one for profitability.
When evaluating a contract, analysts assess the expected losses and compare them to the premium offered by the broker.
Expected losses can be determined through exposure rating, which looks at risk characteristics and predicts future losses, or through experience rating, which analyzes past performance to infer future losses.
Experience rating is more retrospective, while exposure rating is more prospective in nature.

Predicting Financial Risks for Businesses and Marine Contract Example

When predicting future financial risks for businesses, underwriters rely on their expertise in specific lines of business and their knowledge of potential losses.
Factors such as sudden changes like a pandemic may require updating the risk models and considering the exposure and potential losses related to the new circumstances.
The weighting of past data may be adjusted based on recent years' experiences, particularly if there is an expectation that the next year will be similar to the most recent years.
Businesses often purchase insurance to cover financial risks such as business interruption or liability for faulty products or services.
The marine contract case study involves covering 500 shipping companies with various vessels for a year, with the sum of all individual losses capped at 40 million. The approach will use 10+ years of data to predict expected losses for the upcoming year.

Possible Causes of Loss for Different Types of Vessels

Sinking of the boat
Ship route being blocked
Damage to products or cargo
Oil spills
Collisions with other ships
Injury to employees working on the ship
Damage to the ship body itself
Loss of or damage to cargo at sea
Delays to the agreed contract and the financial consequences of that

Factors Affecting Losses in Shipping Industry

Losses in the shipping industry are expected to vary with changes in ship size, vessel count, and trade intensity.
Ship size is likely to impact the size of losses, with larger ships potentially leading to higher losses.
An increase in vessel count may result in more frequent losses.
Trade intensity, measured by the amount of cargo transported globally and the number of ships operating, could also influence losses.
Changes in the mix of business, such as a shift in vessel types, may affect the reliability of experience rating methods.
Inflation needs to be considered when comparing loss amounts over time, as the purchasing power of money changes.
Inflating claim amounts allows for comparing losses in today's terms with those from previous years.

Discussion on Factors Impacting Losses in 2015, 2020, and 2021

Possible factors for the spike in losses in 2015: natural disaster, high trade intensity, big catastrophic event in the property business.
Factors for the spike in losses in 2020: the COVID-19 pandemic, increased demand for goods leading to more shipping activities.
Reasons for the positive outlook in 2021: potential recovery from the pandemic, effective risk management strategies.
Possible explanations for the low loss cost: improved risk assessment and mitigation measures, fewer catastrophic events.
Uncertainty about whether the current loss trend will continue and if it should be used for future predictions.
Speculating on the percentage of losses below 500k: no specific response provided.

Analysis of Expected Losses and Performance in 2021 and 2022.

The expected losses for the year are projected to be much higher due to factors such as trade intensity, potential events like COVID-19, bad weather, and large exposure.
The data for 2021 looks promising so far, but it is important to note that the data is only available until August 2021. Therefore, there might be uncertainties in the ultimate value of claims and unreported losses.
It is not confident that 2022 will perform along the horizontal line plotted, as there are various data points that deviate from the line. Further analysis is required to determine the expected loss cost.
The attritional losses, which are the small losses below 500k, are analyzed separately from the larger losses. This is because fitting the tail of the distribution requires specific focus and using all losses would not be appropriate.
The attritional losses are grouped and summed across the years of account to determine their expected value.

Factors Affecting Loss Estimates in Insurance

Claim development and estimation process can lead to changes in loss estimates over time.
Initial estimates may be inaccurate or based on limited information.
Unforeseeable events, such as spikes in oil prices, can increase the costs associated with a claim.
The ultimate value of a loss may differ from the initial estimate.
Insurance contracts may have caps on coverage, where losses beyond a certain amount are not fully covered.
Trust between the insurer and the client is important for accurate loss estimation.
Reserves should ideally be based on the lowest estimate to avoid holding unnecessary capital.
Losses that occur after the reporting period can increase claim figures.
The chain ladder method is a commonly used technique for estimating loss reserves.

Analysis of a costly maritime incident and projection of ultimate value of losses.

Loss from a capsized ship carrying brand new cars in the Middle East was initially estimated at $115 million by the claim investigator.
The estimate has now increased to $142 million, indicating the potential inaccuracy of initial estimates and the possibility of costs escalating over time.
The high cost of the incident was due to the need for a new method of recovering and salvaging the wreckage, involving the use of a floating crane and cutting the ship into smaller pieces.
This incident is one of the most expensive and significant in the industry, with an estimated value of $842 million.
The analysis aims to project the ultimate value of losses, with the current incurred value of $1.27 million representing only 20% of the final value.
Overdevelopment is observed, with the 2018 figure of $107 million expected to decrease from the latest incurred amount of $19 million.
The pattern of development for medical malpractice claims differs from property damage claims settled outside of court.

Considerations for Settlement and Loss Projection in Legal Cases

Legal fees and inflation can impact the settlement amount in court cases.
The development of liability classes, such as medical malpractice, can take several years to determine the ultimate figure.
Losses projected to ultimate need to account for exposure to risk, including the number of ships or other relevant factors.
Rebasement of prior years based on the expected exposure in the current year helps calculate the expected loss cost.
Adjusting for exposure can significantly impact the ultimate losses and provide insights into trends and risk changes.

Considerations for determining loss costs for the next year

Safety improvements in the shipping industry may have led to lower expected losses per unit of exposure.
The general running of ships from 2002 until now should be considered, particularly in terms of safety and any trends that have emerged.
The years 2002-2008 may not be representative of the current book of business due to changes in exposure and potential anomalies.
The global financial crash in 2008 and subsequent dip in global trade could have impacted losses during that period.
Using an average of the last few years may be more relevant for determining loss costs than using data from the entire period since 2000.
Technology advancements and improved safety measures on ships may have contributed to a lower frequency of losses.
Aim for stable yearly loss costs, with more weight given to recent years and developed years.

Explanation of Loss Cost Calculation and Tips for Becoming an Actuary

The 6.8 million figure is a result of multiplying the data from eight months by five, but it is uncertain as it does not account for the performance of the remaining months.
A Cape Cod average is used to give more weight to recent years and fully developed two-year data, which helps in estimating the potential losses.
For losses less than 500k, a traditional approach is followed, while for losses more than 500k, a frequency and severity approach is used, which involves analyzing the expected frequency and severity of such losses.
Catastrophe losses may be included separately if there is exposure, usually obtained from a separate model.
As a pricing analyst, passing exams and having a strong mathematical background, including coding skills in Python and SQL, is beneficial.
Reading about the industry and talking to professionals can provide valuable insights.
Actual work experience in the industry is not necessarily required, but internships or work experience can enhance understanding and make for a stronger job application.

Gaining Experience and Work Schedule in the Actuarial Sector

Visit the Institute and Faculty of Actuaries (IFoA) website for information on different roles and sectors in the actuarial field.
Stay updated on industry news and roles through magazines like "The Actuary" or following sectors in the news.
Look for internships and job opportunities in the actuarial sector, and connect with recruiters specializing in the industry.
Coding skills are useful but not essential, and learning on the job is common. Demonstrating a propensity to learn coding on your CV can be beneficial.
The actuarial field does not typically involve mechanics, and focusing on statistics rather than mechanics in school syllabus options is recommended.
Work schedule is generally set, with typical hours from 9 am to 6 pm. Flexibility to work from home is possible, but being available during regular working hours is important.

Job Responsibilities and Social Dynamics in the Insurance Industry

Recruitment process may involve numerical tests and mathematical aptitude tests to filter applicants.
Smaller companies in the Lloyd's market have a more streamlined interview process and allow for earlier interaction with candidates.
Some actuaries may have the opportunity to travel abroad for work, although it is not a common occurrence.
Actuaries work closely with underwriters to assess risk, and underwriters may consult with other firms such as surveyors or engineers for specialized knowledge.
Actuaries may also communicate with specialists to gain a better understanding of the risk, although this may vary depending on the role.
The insurance industry as a whole is sociable, with brokers and underwriters often engaging in social activities such as golf days, skiing holidays, and pub outings.
Actuaries have a range of roles, some involving more interaction with others while others focus more on model building and require less input from external parties.

Career Progression and Advice for Actors

The biggest progression for actors starting out is becoming qualified.
Progression may involve taking on management roles or working on long-term projects to improve technical skills.
Career progression may vary depending on the size and stage of development of the company.
Switching companies can be a way to progress in the industry.
Acting is a well-paid job, with salary information available online.
Advice for interviews includes getting as much practice as possible, even for jobs you may not think you'll get, and researching the types of questions different companies ask.
Be prepared to speak in detail about projects listed on your CV and explain them to someone unfamiliar with them.
Questions can be directed to the session organizer or staff at Canopia.

Appreciation and Next Steps

Thanking Tom for designing and delivering the session.
Mentioning the positive impact of attending the session on future job applications.
Expressing gratitude to the participants for their contributions and engagement.
Informing about upcoming events and advising to regularly check the brokerage hub and website.
Acknowledging young people's interest in mentoring and promising to provide application information.
Highlighting Canopius as a great company for learning and gaining industry insights.

A Day in the Life of an Actuary at Canopius and the Use of Models in the Insurance Industry

Tom discusses his background in engineering and teaching before becoming an actuary.
A degree involving math or stats is preferred for aspiring actuaries.
Being able to explain complex concepts to a non-technical audience is a valuable skill.
Tom is training to be a pricing analyst in non-life insurance at Canopius.
Working in the London insurance market offers socializing and a variety of risks.
Communication is important in Tom's role as a pricing analyst, interacting with underwriters.
To become a qualified actuary, 13 exams need to be passed.
Canopius pays for tuition and exam fees, with one day off each week for studying.
The exams start with a focus on math and stats and later shift to communication and understanding.
Canopius specializes in covering niche risks like satellites, oil rigs, and terrorism exposure.
Specialty risks have fewer instances, making it harder to create accurate models.
Actuaries play a crucial role in creating models for specialty risks.
Canopius also covers traditional risks like motor insurance and home insurance.
Pricing in insurance involves ensuring enough assets to cover future liabilities.
Business analytics is used in pricing to analyze data and determine the loss ratio.
Expected losses can be determined through exposure rating or experience rating.
Underwriters rely on their expertise and knowledge of potential losses when predicting future risks.
Factors like a pandemic may require updating risk models and considering exposure and potential losses.
Past data may be adjusted based on recent experiences when predicting future financial risks.

Factors Affecting Losses and Loss Estimation in the Insurance Industry

Possible factors for the spike in losses in 2015: natural disaster, high trade intensity, big catastrophic event in the property business.
Factors for the spike in losses in 2020: the COVID-19 pandemic, increased demand for goods leading to more shipping activities.
Reasons for the positive outlook in 2021: potential recovery from the pandemic, effective risk management strategies.
Possible explanations for the low loss cost: improved risk assessment and mitigation measures, fewer catastrophic events.
Uncertainty about whether the current loss trend will continue and if it should be used for future predictions.
Speculating on the percentage of losses below 500k: no specific response provided.
Expected losses for the year projected to be much higher due to factors such as trade intensity, potential events like COVID-19, bad weather, and large exposure.
Data for 2021 looks promising so far, but it is important to note that the data is only available until August 2021.
Uncertainties in the ultimate value of claims and unreported losses.
2022 performance not confident as there are various data points that deviate from the line.
Further analysis required to determine the expected loss cost.
Attritional losses analyzed separately from larger losses.
Data manipulation and analysis done using tools like Excel, R, and SQL.
Claim development and estimation process can lead to changes in loss estimates over time.
Initial estimates may be inaccurate or based on limited information.
Unforeseeable events can increase claim costs.
Ultimate value of a loss may differ from initial estimate.
Insurance contracts may have coverage caps.

Summary of Key Points

The 6.8 million figure is an estimate based on multiplying data from eight months by five, but it may not account for the performance of the remaining months.
A Cape Cod average is used to give more weight to recent years and fully developed two-year data for estimating potential losses.
Different approaches, such as traditional, frequency and severity, and catastrophe modeling, are used to estimate losses based on their magnitude.
As a pricing analyst, passing exams and having a strong mathematical background, including coding skills in Python and SQL, is beneficial.
Reading about the industry and talking to professionals can provide valuable insights, and internships or work experience can enhance understanding and job applications.
Stay updated on industry news through magazines like "The Actuary" and connect with recruiters specializing in the actuarial sector.
Coding skills are useful but not essential, and learning on the job is common.
The actuarial field focuses more on statistics than mechanics, so it's recommended to prioritize statistics in school syllabus options.
Typical work hours are from 9 am to 6 pm, with some flexibility for working from home.
The recruitment process may involve numerical and mathematical aptitude tests.
Actuaries work closely with underwriters and may consult with other specialists for specialized knowledge.