Actuarial science is not
smoke and mirrors. It is built on the solid foundations of
mathematics, probability, statistics, and finance. And while
actuaries cannot predict the future, we can build models to project the
future assuming various actions.
First, a problem is
identified, and the risks and the client's situation are analyzed.
Data are collected and a model is built to develop possible solutions,
which are then presented to the client. Once an approach is selected
and implemented, the experience is monitored and the model is
refined. Then, the cycle starts over to determine whether the
problem is fully solved or if further changes are needed. All of
this occurs with a proper understanding of the overall environment and is
subject to high standards of professionalism.
The control cycle can be
applied to traditional areas such as health, investments, life, and
pensions, but a much wider range of problems may also come under the
rubric of this paradigm.
Over the lifetime of a
benefit program (50 years or more for pension plans), success will
ultimately be measured by ensuring that adequate contributions and
investment income are generated to pay the benefits and expenses.
Legislation requires that the Actuary assess the financial health or
employee benefit programs, generally at least every 3 years. These
short-term measurement of health can be viewed as somewhat artificial,
clouded by myopic regulatory requirements, and at odds with the long-term
strategy. Discipline and consistency are needed to stay on track
with the long-term strategy.
ELLEMENT & ELLEMENT LTD.
