- Akzharkyn Uteuovna, you have been the head of the Society of Actuaries and also a teacher of actuarial mathematics course for a long time. Would it be correct to say that almost all Kazakhstan actuaries are your students?
- Yes, I have been the chairman of the Board of the Society of Actuaries of Kazakhstan and a teacher of actuarial expectations for 11 years. Therefore, yes, the majority of actuaries were trained by me and other 15 teachers of the Society. In total, we have 6 actuarial expectation courses corresponding to the Minimum Mandatory Training Program for Actuaries approved by the Act No. 151 of the Board of the National Bank of the Republic of Kazakhstan.
- Where are your students now? Do you keep track of their lives?
- Of course, we try to help with employment of all our graduates - actuaries, Master’s students in insurance market, banking sector or pension fund of Kazakhstan. Besides, the actuaries are in deficit now and they are always sought after.
- You said the actuaries are in deficit now. Then why do not young people choose this major? Or is it not a problem?
- The educational program consists of 6 courses, and there are 10 qualification exams. So it takes time to pass them. That is why not all of our students, and there were about 1500 of them since 2000, are ready to pass them all. It is possible to pass some exams and get a job as a financial expert, risk insurers, or underwriter. It takes 6 courses to become an actuary. And it takes at least a year of work to gain experience in this field and confidently sign actuarial conclusions, make calculations. The intensive courses and the high requirements of the Society of Actuaries of Kazakhstan are explained by the tremendous responsibility entrusted to the profession of the actuary.
And to become an experienced underwriter or risk insurer, I believe, it takes approximately 2-3 years for young people, having a basic knowledge of actuarial calculations (the first 2 courses).
I would like to emphasize that the Society together with the National Bank of the Republic of Kazakhstan, with the financial support of foreign sponsors, also conducted actuarial schools, where monetary officials from Azerbaijan, Armenia, Belarus, Georgia, Moldova, Ukraine, Russia, Kyrgyzstan, Uzbekistan, Tajikistan, and Mongolia came for training. Kazakhstan financial representatives also participated. We teach them insurance business, corporate finance, investments, and accounting. With such a good base, our students are willingly invited to work for various financial structures. We conducted actuarial trainings in Azerbaijan and Kyrgyzstan, and, as a result, their Societies of Actuaries were able to become Associate Members of the International Actuarial Association.
I would like to add that it is also possible to learn the profession of actuary in the Master's program by the National Bank of the Republic of Kazakhstan (Master's Degree in Narkhoz) and at the Mechanics and Mathematics Faculty of Al-Farabi National University.
- The profession actuary is complex, requiring a good theoretical basis of advanced math, because rather complicated calculations need to be made, in which numerous different factors up to the smallest ones should be considered, the forecasts for many year to come should be analyzed. How difficult was it for you to work as an actuary?
- I am a Cand. Sc. and a teacher of advanced math, so for me it is comfortable to work in this field, as I can apply my mathematical knowledge, for example, probabilities, mathematical expectations, variances, integrals ... (smiles). Without advanced mathematics, knowledge of mathematical analysis, probability theory, statistics and other fundamentals of higher mathematics, it is impossible to pass exams on actuarial courses. This is basis. And I can say that despite some deterioration of knowledge in mathematics since Soviet times, we still have young people who are good at these topics and pass qualification exams on actuarial calculations.
- Is it possible to compare the level of knowledge and training of our actuaries with the level of their counterparts in other countries?
- Under my authority, our Society of Actuaries became a full member of the International Actuarial Association on August 18, 2017. It was a great achievement for us, as we showed the compliance of our training program with international standards. Among the post-Soviet countries, Russia is the only member of this organization. Dina Urzhumova, the Chairman of the Qualification Commission of the Society and one of the renown actuaries not only in Kazakhstan, but also abroad, worked along with on this me on this.
- Can the life insurance industry be trusted?
- I believe that our life insurance industry can be trusted, since the solvency of insurance companies is regulated by the National Bank. And the regulator’s regulatory base is enough to monitor the work of these companies and prevent various risks, in case of which a system of various sanctions, fines, etc. can immediately be applied. Our insurance regulatory base, from my point of view, is one of the best in the post-Soviet space.
- In your opinion, what is the level of development of Kazakhstan's life insurance market?
- There is a general distrust of people in this sector. I also have to note a small range of life insurance products and a low level of training of insurance agents and specialists in the companies. There is still a lot of work to do with the population informing them about the need for this type of insurance. We have voluntary annuity insurance, voluntary and compulsory life insurance, including employee accident and health insurance that keep the market afloat. And this, by the way, is right, that workers can receive compensation for getting harmed on their work before reaching retirement age. These payments are also calculated by the actuary, who is responsible for the adequacy of payments with his license.
Voluntary life insurance in our country is not developing so actively due to the fact that not all people understand these products.
We were trained in accordance with international insurance standards, including life insurance by the actuaries from the USA, Canada, and Great Britain, headed by Michael Zee. They told about the US and European experience... We, for example, lack such an investment insurance product as Unit-link. It is a two-in-one product, which allows a person not only insure his life, but also choose an investment strategy. I would also suggest the National Bank to consider the possibility of insurance in Tenge as well as in US dollars, which would by several times increase the profit from investing in insurance investment products. Therefore, international companies that offer such products in US dollars, buy over some Kazakhstani clients.
- What is the role of the actuary in the life insurance companies’ solvency?
- The financial solvency of an insurance company is the ability of insurer to fulfill the obligations before the customers under agreements, taxes, and shareholders.
The amount of insurance payments for life and health insurance including situations related to death, disability, temporary disability of a person depend on actuary’s calculations. For example, the amount of insurance payment to compensate for the harm associated with the death of an employee in accident, in the form of annuity payments to beneficiaries, may vary against the number of dependents. So, many details need to be considered. And that, once again emphasize the importance of the actuary work.
Insurer's financial solvency is determined by the adequacy of insurance rate, as well as the proportionality of the insurer's resource to the obligations assumed. The insurance rate is the price of the product.
According to Kazakhstan legislation and international standards, the insurance rate is set by the actuary. Therefore, he is also responsible for his adequate calculations of risks and insurance reserves formed by the company. Solvency on both sides is related to the work of the actuary. So his role is very important. The risk insurers also play their role. Moreover, according to Solvency II, adopted by the European Union, a risk-oriented approach to regulation of supervision, estimation of solvency of insurers is proposed. But we have no trainings for risk-insurers.
- Is it possible to compare the default of the bank and the life insurance company?
- I'm not a banking specialist, but if such cases happen to be, then perhaps the banks also need to hire actuaries to settle their obligations. So far there were no defaults of life insurance companies in Kazakhstan, except for the above, when a shareholder closed the shortage of funds for obligations. But if this happens, it will have complicated consequences. Life insurance companies usually reinsure their complex products. Thus, the international market helps the local markets. For example, it happened after the collapse of two twin towers of the World Trade Center in the USA on September 11, 2001. All the obligations were fulfilled by the insurers then. Since then reinsurers raised their tariffs, as there already had been such a precedent with the correct statistics of large insurance events.
- What piece of advice would you give to the actuaries and life insurance companies’ owners to avoid default situations?
- I advise to be more careful and look not only at internal but also external risks, be guided by the local and international markets’ experience. I would also like the National Bank of the Republic of Kazakhstan to provide the market of general and life insurance with more detailed statistics, for this market has been operating for 18 years. Of course, each company has its own statistics, but it may not be enough to objectively assess the risks. Therefore, specialists need more detailed information about the risks in this area across the country. This would greatly facilitate the work of actuaries in Kazakhstan.
- Do you use the life insurance services yourself, and if yes, which ones?
- Of course, I use the services of life insurance company Halyk Life JSC, transferring my pension savings from UAPF. And now the company pays me a pension on a regular basis. It is very lucrative. A man of 55 years has the right to receive an additional pension with sufficient pension savings, and a real retirement is at the age of 63, so, there is an interval of 8 years between them. The same is for women. During this period a person already receives a pension, uses his money, accumulated in the UAPF, transferred to the LIC. And after retiring at 63, he receives a pension from both UAPF and the insurance company as well. If you keep money in UAPF, you need to keep in mind that the pension fund is limited in the size of annually issued amount, i.e. it cannot issue more than thirty-time the minimum pension, which is by now after tax deduction accounts for about 911 thousand tenge. It means, you will be able to use your funds for several years starting from the official retirement age. And when you spend all of them, the UAPF will stop paying you. Meanwhile, in LIC you can receive pension for 8 years earlier and for life, and also choose a guarantee period, for instance, 15 years, during which the insurance company will pay your guaranteed pension and you will be paid the full amount of your pension savings. You can also arrange transfer of funds to your heir during the guarantee period. Even after a guaranteed period, the insurance company will pay a pension for life. So you always have options to choose from.
According to Akzharkyn Knykova, the director of the actuarial department of life insurance company Halyk Life, as of 2017 her company collected 38 billion tenge of insurance premiums, LIC Nomad Life JSC - about 24 billion tenge, and the whole LIC market - 105 billion tenge. "All 7 life insurance companies of Kazakhstan have good insurance reserves of 219 billion KZT, including 56 billion tenge presented by LIC Nomad Life JSC, 50 billion tenge – by LIC Halyk Life. The financial solvency of the company depends on the level of insurance reserves. For example, a pension annuity is paid for life with 5% annual indexation of payments," explains Akzharkyn Uteuovna. - And since an average life time of women in Kazakhstan is 76.5 years, by having signed the pension annuity contract for 50 years, they provide themselves financially for at least another 26 years ahead. Men in Kazakhstan live on average 67.5 years. In this regard, the insurance reserves of LIC are sufficient, taking into account these long-term payments".
The development of the profession of actuary began in 2000 in Kazakhstan by the National Bank of the Republic of Kazakhstan under the joint International Project of the National Bank of the Republic of Kazakhstan and the American Agency for International Development in Central Asia (USAID). The actuarial profession itself was established in the country by the Insurance Operations Act that came into force on January 1, 200. It introduced not only new standards for accounting and financial reporting of insurance organizations, but also new principles and standards for organization of the insurance market in accordance with international standards. According to this legislation, each insurance (reinsurance) organization must have insurance reserves calculated by the licensed actuary.
Today the Society of Actuaries of Kazakhstan has more than 70 members, 66 of them are full members of the Society (meet all qualification requirements). More than the half of members of the Society work in insurance and consulting organizations, as well as in pension funds, banks and government organizations. The site of the Society is www.actuary.kz.
Photo per website: http://maf2017.ru/maf2015