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From The President
From the President: From Analysis and Measurement to Management
By Christopher S. Carlson 

During our typical actuarial training, especially in the area of mathematics and statistics, we actuaries develop and hone our skills in the analysis and measurement of various risks.Whether it is estimating the cost of risk transfer, the cost of retained risk, or the cost and risk associated with the settlement of unpaid claims, we use our mathematical and statistical skills long with the deep understanding of the risk process to provide financial measurements. When we begin to think of enterprise risk management, the initial thought naturally gravitates to our ability to analyze and measure risk. There is definitely a role within enterprise risk management for actuaries, and casualty trained actuaries in particular, as we are very well qualified to provide valuable input and support to the process.      
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As many insurers made the recent transition from a long-maintained operating structure containing the traditional underwriting and pricing areas to a new product management structure, they learned that there are additional skills beyond analysis required to assume management roles. This is similar to the days when, as part of the traditional actuarial career path, a qualified actuary would move from a strict analytical role to an assignment requiring both analysis and personnel oversight. These additional management skills moved practitioners beyond those skills learned through the examination process. As we have often seen, the ability to perform detailed, quality analysis does not guarantee success leading an actuarial department. Similarly, moving from a pricing actuarial role to one of product management warrants additional skills and abilities. Our understanding of the insurance company operations and risk transfer dynamics through our rigorous training and examination process should qualify us as prime candidates for such positions. In some cases, breaking through the actuarial stereotype of a conservative focus on a single rate need and reserve indication is essential. For more on that topic, please see my previous column (“Communicating Uncertainty—The World of Variance,” May 2008 Actuarial Review).

In enterprise risk management, actuaries face a similar issue moving from analysis to management. In fact, the Society of Actuaries has recently created a new associate level credential, the Chartered Enterprise Risk Analysts (CERA—please use the initials and not the acronym). This designation seems to recognize the expertise typically associated with the analytic nature of actuarial work. And you’ll notice that the designation title does not include the word “management.” Just as all actuaries are not destined to become chief actuaries or even managers of other actuaries, in the enterprise risk management space not every actuary involved in the process is destined to become a chief risk officer. But the actuarial skills should be valuable tools in analyzing and measuring components of enterprise risk management.

In general, all actuaries should be encouraged to utilize their analytic talents within a larger framework. Specifically, those actuaries who want more responsibility in product management or ERM should develop human resource management and general business skills—highly valued expertise in our ever-changing business environment.

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