Actuarial Support

An actuary may be thought of as a highly skilled mathematician. His particular
expertise is not only in the collation and presentation of numerical information, but also
in projecting and predicting future trends, based on available data and assumptions. It
will immediately be understood, therefore, that such an expert has a very important role
to play in insurance. Some specific observations:
(a) Life insurance: more than any other class of business, life insurance depends
upon mathematical calculations (although they are very important to all classes).
It is essential for the life insurer to know mathematical facts about mortality (death
statistics) and projected interest earnings, for example.
Note: 1 The Insurance Companies Ordinance requires all insurers who carry
on long term business to appoint a qualified actuary, acceptable to the
Insurance Authority.
2 This Ordinance also requires long term insurers to carry out a
valuation of all assets and liabilities at least once a year. This is perhaps
the most important function of the actuary.
(b) General insurance: Their expertise, especially with long-tail business (insurance
where claims arise and develop over a long period of time until, say, 5 years or
even more after policy expiry, e.g. liability classes), is extremely valuable. This is
particularly true when having to calculate outstanding claims reserves required.
The Office of the Commissioner of Insurance requires motor and employees’
compensation insurers to annually conduct actuarial review of their reserves
relating to such statutory classes of business.
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Note: A corresponding term, ‘short-tail business’, refers to business where
claims are mostly settled within a relatively short space of time after
arising, e.g. motor (own-damage) and fire insurance.
(c) Generally: the application of an actuary’s skills is very obvious in such areas as
premium rating, the calculation of reserves and the valuation of liabilities.