Building a strong actuarial presence for sustainable development

In today’s rapidly evolving financial industry, uncertainty and risk are inherent. Ghana needs skilled professionals who can effectively assess, manage and mitigate challenges associated with our finances.  In building a more buoyant economy, Ghana needs more actuaries not only in the insurance sector but across all sectors. Actuaries play an important role in our industrial organisation.

Who is an actuary? An actuary is a professional who applies mathematical, statistical and financial techniques to assess and manage risk in various industries. Actuaries use their specialised knowledge to analyse and evaluate the likelihood and financial impact of uncertain events. Actuarial Science became a discipline of study in 1972 in Europe, but was introduced in Ghana in 2005 by the Kwame Nkrumah University of Science and Technology. The study of Actuarial Science is relatively new in Ghana and a very challenging profession to pursue.

After obtaining a bachelor’s in Actuarial Science, you do not automatically become an actuary, you must write all internationally recognised professional exams to gain the status of an actuary. However, companies and other actuarial organisations are giving out sponsorships to write these professional exams to encourage more Ghanaians to pursue this profession. In Ghana, at least ten universities currently offer a bachelor’s in Actuarial Science and are ready to set a great foundation for up-and-coming actuaries. There are about five fully-qualified actuaries practising in Ghana now, which shows the severity of the lack of actuaries in the country.

The roles of actuaries

Actuaries play vital roles across various sectors and contribute to the overall stability and growth of these sectors.

Insurance sector: Actuaries are integral to the insurance industry, where they evaluate and quantify risks associated with potential events, such as accidents, natural disasters or health issues. They develop pricing models, determine appropriate premium rates, and analyse data to project future losses and claims. Actuaries help insurance companies maintain financial stability by establishing reserves and ensuring that premiums adequately cover potential liabilities. Their work directly impacts the availability and affordability of insurance products, enabling individuals and businesses to protect themselves against unforeseen events and promoting economic stability.

Finance and investment: Actuaries provide valuable insights into the finance and investment sector, guiding investment decisions and managing financial risks. They employ statistical models and analytical techniques to evaluate investment opportunities, forecast risk profiles, and optimise investment portfolios. Actuaries also play a role in determining the pricing and risk management strategies for financial products, such as derivatives or structured securities. Their expertise helps organisations make sound financial decisions, balance risk and return, and contribute to the stability and efficiency of financial markets.

Pension and retirement: Actuaries are central to the design and management of pension plans and retirement systems. They assess demographic trends, life expectancy, and economic factors to calculate future pension liabilities. Actuaries develop funding strategies, contribution rates, and investment policies to ensure the long-term sustainability of pension funds. They also play a crucial role in evaluating the financial impact of pension reforms and developing retirement benefit packages. Their work is instrumental in providing individuals with reliable and adequate income during their retirement years, promoting financial security and social welfare.

Healthcare: Actuaries make significant contributions to the healthcare sector by analysing and managing healthcare costs. They utilise statistical modelling and data analysis techniques to evaluate the financial implications of healthcare services, insurance plans, and medical interventions. Actuaries assess health data, claim patterns, and medical trends to develop pricing models, set insurance premiums, and design cost-effective healthcare programmes. By understanding and quantifying risks, actuaries help insurers, healthcare providers, and policy-makers make informed decisions, improve resource allocation, and enhance the affordability and quality of healthcare services.

Risk management: Actuaries are essential to risk management in several different sectors of the economy. They recognise, evaluate and quantify risks related to financial, operational or strategic activities. Actuaries create risk mitigation and management methods and evaluate the probable financial effects of unfavourable events. Their knowledge enables businesses to better manage risks and safeguard their assets and reputation. The job of actuaries helps firms remain stable, viable and successful in the face of risk and volatility.

Why Ghana needs more actuaries

The role of actuaries cannot be overemphasised. Ghana’s need for actuaries is at an all-time high, and it is one profession that cannot be easily replaced or made redundant with advances in tech, especially data science and artificial intelligence.

  1. Ghana’s emerging industries: The emerging industries in Ghana, such as oil and gas and Fintech, require the expertise of actuaries to accurately quantify and manage risks associated with these sectors. Fintech involves the use of digital technology, data analytics, and automation to improve financial services, enhance efficiency, and provide innovative solutions to traditional financial processes. Fintech encompasses various areas within the financial sector, including banking, payments, lending, investment management, insurance, and more. Actuaries possess the mathematical and statistical skills necessary to analyse complex data, predict potential losses, and develop strategies that enable businesses and policy-makers to make informed decisions. By providing valuable insights and forecasts, actuaries contribute to the stability and long-term sustainability of these industries, fostering economic growth.
  2. Expanding insurance industry: Ghana’s insurance sector requires a larger pool of actuaries to cater for its evolving needs. With the low insurance penetration in Ghana, the presence of more actuaries is vital to develop innovative insurance solutions tailored to the needs of the population. The insurance industry is experiencing significant growth, driven by a rising middle class, increased awareness of insurance products and regulatory reforms. As insurance companies expand their operations and product offerings, the demand for actuaries who can assess risks, determine premiums, and design tailored insurance solutions also grows. There is a need to develop an industry mortality table which is presently lacking. Annuities are also becoming increasingly popular, and their nature is such that the expertise of actuaries is essential to their development and sustainability on the market. This calls for more actuaries on board. Their contributions will enhance financial security for individuals and businesses, driving increased participation in insurance and strengthening the overall economy.
  3. Pension scheme development: Actuaries can play a pivotal role in addressing some of the challenges facing Ghana’s pension system. The pensions sector grapples with optimising cash flows and investment decisions, highlighting the pressing need for additional actuaries to offer expert counsel on enhanced strategies. By accurately estimating future pension liabilities and developing investment strategies, actuaries contribute to the financial sustainability of pension funds. With an ageing population and the need to provide adequate retirement benefits, Ghana requires a larger number of actuaries to tackle these challenges and ensure a secure future for its citizens.

The shortage of actuaries in Ghana can be attributed to a skill gap that needs to be bridged. Actuarial Science demands a unique blend of mathematical, statistical and business skills that are currently in short supply. By encouraging more students to pursue Actuarial Science as a career path and establishing partnerships between educational institutions and industry stakeholders, Ghana can develop a pipeline of competent actuaries. Investment in actuarial education and professional development programmes is necessary to nurture talent and meet the growing demand for these specialised professionals.

Increasing the number of actuaries in Ghana is certain to enhance risk management techniques, assist evidence-based decision-making in the public and private sectors, and strengthen financial systems. It is about time we acknowledged Ghana’s urgent need for additional actuaries and take action to support their development.

There is, however, hope on the horizon, with Ghana having been selected as one of the beneficiaries of the United Nations Development Programme (UNDP) Milliman Global Actuarial Initiative. The initiative aims to build actuarial expertise in developing countries to help predict and prepare for risks in uncertain times in order to enhance global sustainable development. The goal of the initiative is as follows:

  • Promote inclusive insurance.
  • Launch oversight groups.
  • Collaborate with GIA to offer a placement programme for National Service Personnel with an interest in the actuarial profession.
  • Develop Actuarial Tool Kit for Fire, Flood and Agriculture.
  • Collaborate with GIA to educate senior management about the value of actuaries.
  • Develop a mortality table for Ghana.

Together, let’s support the development of the actuarial profession in Ghana.

>>>the writer is Head of Actuarial Services, StarLife Assurance

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