Insurers seek actuaries to lower risks

By JOHN NJIRU jnjiru@ke.nationmedia.com and KENFREY KIBERENGE

In Summary

• First indigenous Kenyan to qualify as an actuary explains the dearth of qualified local peers

Local insurers plan to enhance their actuarial capabilities as part of measures introduced to strengthen risk management in the industry.

The latest move comes in the wake of the recent winding up of Concorde Insurance. The 38-year-old underwriter failed to pay claims and was placed under statutory management following in the path of seven other firms that have previously succumbed to imprudent underwriting.

Actuaries – professionals trained to deal with the financial impact of risk and uncertainty who are highly skilled in conducting risk assessments in businesses – are seen to be key to avoiding such incidents.

The Insurance Regulatory Authority (IRA) has directed all Kenyan underwriters to employ actuaries to prevent future losses since since the business of underwriting is full of uncertainties.

This could also help avert the collapse of more insurance companies.

Kenya is home to 48 insurance companies; the latest entrant being Resolution Health. Unfortunately, there are fewer than 20 resident actuaries who are expected to handle the huge risk market.

Even though the number of students undertaking actuarial science courses has been rising, there are few who qualify. Experts attribute this to the rigorous nature of the course.

“The fundamental role of an actuary is to analyse the past to project into the future. His or her role is to calculate the probability of risks and estimate the risks that will happen. This involves a lot of mathematics and very detailed formulas,” says Geoffrey Nzau, the first indigenous Kenyan to fully qualify as an actuary.

He explains the dearth of qualified actuaries in the local market as being linked to the rigorous course of study.

“The (actuarial) course is full of mathematics, and students must be ready to sacrifice. You can’t be studying actuarial science and partying at the same time. You have to choose one or the other. But the fruits of the profession are worth the sacrifice,” says Mr Nzau.

The 49-year-old actuary was one of the four Kenyans sponsored by the government in 1986 to pursue actuarial studies in the United Kingdom. At one time, Mr Nzau was in charge of Alexander Forbes in 11 African countries. He retired in 2011 to go into private business.

He says that despite the allure of good pay, there are few qualified actuaries in Kenya, and there is a need to increase the number. As of December last year, only 388 of 595 students admitted to study
Actuarial Science had graduated since the introduction of the course by the University of Nairobi in 2000 followed by JKUAT in 2005.

By last year virtually every local university was offering an undergraduate degree in actuarial science. A degree is the first step for someone pursuing the actuarial profession.

The actuarial profession is regulated by a number of global bodies that include the Canadian Institute of Actuaries (CIA), Britain’s Institute and Faculty of Actuaries (IFA), Institute of Actuaries of Australia (IAA) and American Actuarial Society (AAS).

To qualify as a member of the FIA in the UK, one has to successfully complete 10 exams.

The first nine papers are known as the core technical courses while the ninth module is a seminar-based paper.

These papers are followed by three core applications: the first being a risk module while the other two being experience- based. These are done after the student has worked under an actuary for at least three years.

Despite the lack of local actuarial skills, Kenya is the only country in the region where actuarial courses are offered.
 

There are about 950 actuaries in Africa who are tasked with handling a Sh260 trillion market, one indication of the acute shortage of actuarial skills on the continen