Actuarial Support 精算支援

The Role of the Actuary 精算師的角色

An actuary is a professionally qualified specialist who uses mathematics, statistics and financial theory to analyse how likely uncertain future events are (such as death, sickness, accidents and property damage) and what they would cost. Insurers rely on actuarial support to turn past experience data into reasonable estimates of future claims and costs.

Actuarial work rests on the law of large numbers: the more similar exposure units there are, the closer actual results come to expected results, and the more reliable the forecast. Actuaries therefore care a great deal about both the quantity and the quality of data.

Actuarial support runs through many of an insurer's core functions. Actuaries help product development design and price products, give underwriting its rating basis, help decide reinsurance arrangements and retention levels, work with the investment function, and calculate liabilities for financial reporting. They do not normally make day-to-day underwriting decisions on individual proposals, and they do not inspect damaged property.

Pricing and Premium Rating 釐定保費

One of the actuary's first tasks is to set premiums that are adequate, equitable and competitive. The premium must cover expected claims, operating expenses and a reasonable profit, and each policyholder should pay an equitable premium that reflects the risk they bring to the common pool.

For long term (life) business, pricing mainly considers mortality or morbidity (usually based on a mortality table), the expected investment return, expenses (including commission and administration), lapse or surrender rates, and the profit requirement. Because life policies run for many years, the investment return assumption has a particularly large effect on the premium.

For general business, pricing mainly analyses the frequency and severity of past claims, adjusted for inflation, changes in the law and changes in the nature of the risk.

Once policies are in force, the actuary carries out experience investigations that compare actual results with the pricing assumptions. If there is a significant gap, the actuary recommends revised rates or product changes for future new business.

Reserves, Solvency and Other Financial Support 準備金、償付能力及其他財務支援

Insurers collect premiums first and pay claims later, so they must set aside reserves for future obligations. In life insurance, the actuary calculates policy reserves: the amount needed to meet the future obligations under existing policies. In general insurance, the actuary helps estimate the outstanding claims reserve (claims reported but not yet paid) and the IBNR reserve (losses that have occurred but had not been reported to the insurer by the balance sheet date).

Under-reserving overstates profit and may leave the company unable to pay claims; over-reserving ties up capital unnecessarily. Actuaries also assess the company's financial condition and solvency, meaning whether its assets are enough to meet its liabilities and the regulatory capital requirements. Hong Kong's risk-based capital regime, in force since 2024, links capital requirements more directly to the risks an insurer takes, which makes actuarial measurement of risk even more important.

Actuaries also work with the investment function on asset-liability matching, so that the term and nature of assets suit the policy liabilities. They recommend the bonus or dividend levels that can be paid on participating policies, and they calculate policy values such as surrender values.

The Appointed Actuary in Hong Kong 香港的委任精算師

The Insurance Ordinance (Cap. 41) requires an authorised insurer carrying on long term business to appoint an actuary (commonly called the appointed actuary), who must hold the professional qualifications the law prescribes and the Insurance Authority accepts.

The appointed actuary's core duty is to carry out the actuarial valuation of the insurer's long term liabilities and to advise on the insurer's financial condition. The requirement reflects the fact that long term policies run for many years and their liabilities are hard to estimate, so policyholders' protection depends heavily on those liabilities being calculated prudently and properly.

Note that the statutory appointed actuary requirement is aimed at long term business. General insurers also make wide use of actuarial support, especially for pricing and for estimating claims reserves, but do not treat the long term appointed actuary requirement as the same rule for every insurer.