Another View of The Actuary In Mexico

Another View of the Actuary in Mexico

by Colegio Nacional De Actuarios

The following is written in response to an article that ran in the Dec. 2004 issue of The Actuary entitled, "The Image of the Actuary: How Does the Profession Measure Up In Other Parts of the World?" The letter is from Colegio Nacional de Actuarios.

By means of this letter the Colegio Nacional de Actuarios wants to clarify statements published in the article "The Image of the Actuary: How Does the Profession Measure Up In Other Parts of the World?" that appeared in the Dec. 2004 issue of The Actuary. The article contains a section regarding the profession in Mexico, with information provided by Jose Berrios. At one point [Berrios] states, "actuaries in Mexico, for the most part, are considered to be technicians, meaning people who are very good with detail. They are viewed as being only responsible for the technical income of the company–that is, premiums less acquisition expenses less increases in reserves–and are not involved in the operation of the company ... such as analyzing cost of capital, taxes and setting strategic objectives related to ROI, profitability, etc.," This is a very narrow point of view of the actuaries' role in Mexico.

While actuarial associations in other countries were moving to open non-traditional options in different fields for actuaries, this has been ongoing in Mexico for a while now. In Mexico, a large number of actuaries (about 11,400) work in non-traditional fields: statistics, demographics, risk management, finance, systems, govern-ment, teaching, planning and Rresearch. Very early, since the inception of the first actuarial program at UNAM, other natural markets for actuaries, besides the traditional fields, began developing. This was a result of actuaries discovering new areas of interest and specializing in them. In many instances, the market required the services of professionals trained in statistics, probabilistic issues or any other areas related to actuaries.

At present, many Mexican statisticians are actuaries. The INEGI (National Institute of Statistics, Geography and Information Science) hires a considerable number of actuaries, many of whom play a key role. Only a few years ago, the president of INEGI, who was appointed as member to the president's cabinet and is now development manager at Inter-American Development Bank is an actuary. Within INEGI itself, both the statistics general director and the general director of Political Science Information are actuaries; the heads of the departments of Social-Demographic Statistics and Population Census for the year 2000 were also actuaries. Likewise, the National Census Reports director, the 1990 Population Census principals as well as the officer responsible for all the short-term surveys (both economic and demographic) were all actuaries. Presently the undersecretary of the treasury is an actuary (Alonso Garcia Tames).

The CEO of BANCOMEXT (Mexican Foreign Trade Bank) used to be an actuary, and this bank has quite a number of colleagues who specialize in finance. Also, several actuaries had, and at present have, key roles in different government agencies, at both the Federal and State level. We also can mention that one of the current undersecretaries of the Ministry of Finance (Hacienda) is an actuary.

Many of the Mexican demographers are actuaries, who have specialized in population studies and are the ones who hold most of the main positions, especially in research institutions like Colegio de Mexico, Social Research Institute of UNAM or in demographic policy areas such as CONAPO (National Population Council).

On the other hand, if we talk about actuaries in the insurance industry, the article's viewpoint appears to come from a very limited knowledge of the Mexican insurance industry. There are around 1250 actuaries within the insurance industry. Some of them perform purely technical income related duties, but, for more than 40 years, most of them have been personally responsible for sales, operations, finance and IT in several insurance companies Mexico. CEOs and strategic top managers in several insurance companies have been actuaries. Actuaries have been involved in reserve adequacy and have had an active role in mergers and acquisitions in Mexican insurance companies and their foreign counterparts, since the early 90s. Contrary to what is said in the article, actuaries in Mexico are actively involved in:

• The operation of companies' leading redesigns of process teams, making measurements, developing and supervising underwriting policies and procedures, etc.
• Product development–from market research, to pricing, to presentations and offerings design, to operative implementation and fine-tuning, and of course, in making competitive analysis in terms of price and conditions.
• In systems development–reviewing products to re-engineer them in order to make operations smoother and cheaper, and yet accomplishing marketing targets and complying with regulation.
• Analyzing operating expenses–for pricing, profitability analysis and benchmarking?working very closely with the investment area?to be able to determine embedded values of companies, rating and product design in accordance with investment strategies and expectations of the companies, and asset liability management.
• Analyzing cost of capital and looking for ways to risk-adjust it, and setting strategic objectives related to ROI, profitability, competitiveness, etc.
• Reinsurance–Analyzing programs and their impact on profitability, risk exposure, cost of capital, their use to improve competitiveness and trying out new products and services.

All this made it possible, just to give two examples, for the Mexican insurance industry to avoid extinction in a high inflation environment, having almost no insurance company bankruptcies and avoiding, in any case, big impact on policyholders.

Another point in the article states, "the Sarbanes-Oxley law has prompted the insurance commission in Mexico to issue new regulations that will affect how companies are structured." Regulation changes in Mexico have been a result of initiatives from the actuarial profession together with the commissioner, and not as stated. Changes started to be reviewed well before Sarbanes-Oxley.

A final statement reads, "In some companies, especially foreign-owned companies, the role of the chief actuary is slowly changing to encompass certain responsibilities in these areas." This makes you perceive that changes for the good are taking place due to these foreign-owned companies. Again, this shows lack of knowledge about the Mexican market for actuarial services. The role of these companies in promoting the profession in Mexico is not consistent with what they are doing abroad. For example, many overseas companies allow study time for actuaries that are taking their exams at the Society of Actuaries. They even pay for the exams. These same companies do not have a similar program for the Mexican actuaries they hire, who are also taking these exams. As the Society of Actuaries knows, every time exams are offered, Mexican actuaries take and pass these exams–without having support from their employers!

Roberto Bonilla, president of Colegio Nacional de Actuarios, can be contacted at: rbonilla@itam.mx.