basel II norms

[indian-actuary]

can anyone tell me a little about the basel 2 norms and how their implementation in 2006 will lead to a higher demand for actuaries in the banking sector? :-?

[DW Simpson]

http://www.actuarialoutpost.com/actuarial_discussion_forum/showpost.php?p=883277&postcount=10

http://www.financialexpress.com/fe_full_story.php?content_id=82725

Actuaries will actually see boom time soon

MAHUA VENKATESH
Posted online: Wednesday, February 16, 2005 at 0000 hours IST

NEW DELHI, FEB 15: The actuarial industry is all set to be the one of the biggest job providers in the next five years. The banking sector, which will implement Basel II norms in 2006, will boost the demand for actuaries. Besides, the industry is likely to get a push from the pension sector which is in the process of opening up.

According to the Actuarial Society of India, the industry is likely to generate about one lakh jobs in the next few years. At present, actuarial services in the banking sector are negligible.

According to latest data, there were only 400 actuaries in India in 2000. However, the figure is currently 4,000.

Actuarial Society of India president Liyaquat Khan said that with the implementation of Basel II norms, risk management would be key.

“Actuarial services would be required to determine asset liabilities of banks, pension and social security products.

Assessing risk and capital adequacy level would be critical in the banking and pension sectors,” he said.

He added that this would create huge demands for actuarial services,” Mr Khan said on the sidelines of the Global Conference of Actuaries.

However, Mr Khan said that the number of actuarial consultancy firms will not go up significantly, as globally the trend is to consolidate. In India, at present, there are about 80 firms extending actuarial services.

“The number is not likely to see a significant increase as most firms are looking to consolidate, in India as well as outside,” Mr Khan said.

At present, the insurance sector primarily implements actuarial inputs.

According to Actuarial Society of India, these services are required more in the general insurance sector.

[indian-actuary]

thanks for the reply, though i still have a couple of doubts-

considering that right now these functions(risk management) are being performed pretty well by non-actuarial professionals, why would banks etc be willing to invest in hiring actuaries (esp since they'll probably have give exam support and the like, thus increasing their investment) if there are others doing this job well enough?
what extra could actuaries add that would give banks an incentive to hire them?

I have a friend working at a consultancy in india whos done a bachelors in economics and he is doing risk management there... and his firm doesnt seem to see the need to hire actuaries to calculate risk for them! so if someone with an economics degree seems to be doing a good job, why hire an actuary?

[DW Simpson]

The market will decide those questions next year.

[bikram]

Also, just curious, since when has a BA in economics started doing 'risk management'? Even an average student typically graduates with a BA at 19 years of age. Its just hard to conceive that this fellow would have any 'risk managemnt' skills to speak of. I would be surprised if the RBI (for example) starts hiring a BA Econ in a risk management cadre. The only people i know of that are even considered for risk-management positions (say at ICICI) need to have at least an MBA from a top-tier school and several years of experience.
As the Indian economy opens up further it would just be a question of time before Actuaries take on a decidedly greater role in Insurance companies and also in risk-management positions.

[indian-actuary]

exactly why i asked the question!

it came as a big surprise that this guy is doing risk there.... apparently he got in through some sort of campus-recruitment-type thing. He is part of the risk advisory group.
whats really strange is that this same company is hiring actuaries in the uk, us etc to do this work, but not in india!

really makes you wonder! :oyh:

[bikram]

Simply being part of the 'risk-advisory-group' means nothing. I wouldn't be surprised if the fella has some sort of low level marketing job. Sometimes people greatly exaggerate what they do (and sometimes we read do much into somebody's bragging). 'I work for ICICI' doesn't necessarily mean that i am the regional VP. Heck i could be a clerk.
The company may very well be using US/UK actuaries (credentialed/students) to do the truly technical work because these societies have been in existence for decades and the insurance/pension market is very large and sophiscated. My guess is that the truly involved work is being done by actuaries located in US/UK but the other mechanical jobs (excel crunching or marketing or sales) is usually being handled by locally hired inexpensive staff. There are quite a few companies (some in wall street) that have started similar operations in India.
I would encourage you to pursue actuarial studies if you like them. Sooner or later the Indian market is going to be sophisticated enough to need actuaries conversant with the local nuances.

[indian-actuary]

there is no doubt in my mind about pursuing actuarial studies...

its definitely what i want to do, though i am a little concerned about the actuarial job market, which seems to be shrinking these days, especially for someone at the entry-level as myself.

but hey, as they say- things can only get better!

[DW Simpson]

http://www.actuarialoutpost.com/actuarial_discussion_forum/showthread.php?t=61120

http://www.business-standard.com/common/storypage.php?chklogin=N&autono=197685&lselect=1&leftnm=lmnu9&leftindx=9

Insurers bullish about new capital norms
Freny Patel / Mumbai August 19, 2005

Convergence of financial products and a move towards risk-based capital in the banking sector are motivating the Insurance Regulatory and Development Authority (Irda) to move beyond the traditional required solvency margin (RSM).

Indian life insurance players expect new norms on capital requirement, which would be laid down for the Indian banking industry, shortly, said life insurance CEOs.

“Moving forward, insurers could inject more capital, which is linked to their corporate strategy,” said C S Rao, chairman, Irda.

Today, Indian life insurance companies have to maintain the Irda-stipulated 150 per cent solvency margin just as Indian banks maintain a 9 per cent capital adequacy ratio, irrespective of risks underwritten.

Today, growth in the sale of insurance products is chiefly in the sale of unit-linked insurance plans (ULIPs). These products carry almost negligible risks on the books of insurance players.

Hence, “technically the requirement of capital should only be on the mortality risk as the investment risk is passed on to the policyholder,” said R Krishnamurthy, senior consultant, Watson Wyatt.

Insurance companies would be able to introduce more innovative risk products for the masses, with the introduction of risk-based weightage on capital employed, he added.

If India moves towards risk-based capital, players like Birla Sun Life Insurance Company would need a lower capital requirement than the current 150 per cent.

This is because it operates on an ULIP-based platform whereby the investment risk is passed on to policyholders, pointed out analysts. Even then, Birla Sun Life rings the bell for infusion of additional capital as soon as the RSM hits 190 per cent.

“We want to ensure we have a buffer. The moment the RSM touches 190 per cent, it is time to raise capital from shareholders,” said K S Gopalakrishnan, appointed actuary, Birla Sun Life.

Following the infusion of Rs 20 crore capital in April, Birla Sun Life has one of the highest RSMs in the country at 211 per cent — on a capital base of Rs 370 crore.

In Singapore, since the introduction of risk-based capital, insurance companies writing solely investment-linked business have seen a major reduction in capital requirement from S$25 million to S$5 million.

[Ritwik]

there are three pillars in the Basel II structure. Actuaries in insurance might be mostly associated with Pillar 1. These changes would be actually implemented in the insurance spectrum by 2010.

[kuchcha]

@D.W. Simpson Webmaster
since there has been a alot of speculation regarding there demand for US/UK actuaries...is it better to start off with SOA/CAS/UK institutes or is it better to go for ASI....im an indian...but i donot want to limit myself to india....is a fellowship of ASI reqd to practice in india

[DW Simpson]

is a fellowship of ASI reqd to practice in india

Nope. However, if you do pursue ASI, I don't think that should necessarily limit you to India, either, as the ASI credential becomes more internationally recognized.

[kuchcha]

the ASI credential becomes more internationally recognized.

@D.W. Simpson Webmaster
So not being an SOA/CAS wont cripple my chances...and ur quite sure that ASI has got an excellent reputation....then one more thing....how eazsy fis it for engineers to find entry level jobs in actuary which i beleive is not only important but also quite benificial as far as exam preps are concerned...

[DW Simpson]

@D.W. Simpson Webmaster
So not being an SOA/CAS wont cripple my chances...and ur quite sure that ASI has got an excellent reputation....then one more thing....how eazsy fis it for engineers to find entry level jobs in actuary which i beleive is not only important but also quite benificial as far as exam preps are concerned...

I can't give you guaranteed assurances as to what international actuarial credentials employers will look for 5 or 10 years from now. I can only tell you that the ASI credentials are growing in recognition.

Unfortunately, as we don't work in the Indian entry level actuarial market, I don't really have any guidance about your engineering issues.