From the President: Big Tent Versus Little Tent

by Steven G. Lehmann

In the August issue of the Actuarial Review, I described the formation of a new CAS Task Force on Nontraditional Areas of Practice. This subject was discussed in depth at the CAS Leadership Meeting in March and the formation of the task force was an offshoot of that meeting. It is an important task force and I will keep you updated on its progress periodically.

At the same time that the CAS was pursuing these initiatives, the SOA Strategic Planning Committee began discussing a related topic: how to broaden the actuarial profession. Howard Bolnick, president of the SOA, describes the group's work by saying that the actuarial profession can proceed forward in two alternative directions, which he characterizes as "Big Tent" versus "Little Tent." (No, for those of you thinking this is another gambit at "unifying" the profession, this is not about merging the actuarial societies.)

The "Big Tent" view of the profession is a vision of the actuary as a broad-based solver of problems for the financial services industry. Under a big tent view we would stake out new ground as the profession best suited to solve risk and financial problems in all of the rapidly evolving North American and global financial services markets. It would expand the definition of actuary to include "financial engineers" and other professionals applying mathematical models to financial problems. This could lead to a dramatic increase in the number of actuaries.

For those of you not familiar with the term "financial engineer," it refers to a new college major with high level training in mathematics and applications in finance which is being offered in a number of colleges and universities. Most of the graduates of these programs are working for firms interested in pricing options, derivatives, and other financial products.

The alternative "Little Tent" vision is based on the actuarial profession staying within the boundaries of traditional actuarial work for the insurance industry and "protecting its turf" by becoming even more proficient in the insurance field. This vision would find us solving a wider range of finance, risk and business problems within institutions that we historically serve.

The "Big Tent" vision is attractive in terms of its implications for growth of the actuarial profession and the broadened role of the actuary in the financial services area. However, it remains to be seen whether the financial engineers of the world are interested in joining the actuarial community.

In any event, the CAS has agreed to work jointly with the SOA as part of a Task Force to open a dialogue with the financial engineers in order to find out more about the work they're doing and whether we have common interests with them that could be developed for the mutual benefit of both professions. This research will also be beneficial to the CAS Task Force on Nontraditional Areas of Practice.

Whether you ascribe to a "Big Tent" vision or a "Little Tent" vision, there's no reason not to investigate enlarging the tent. We will be doing this over the coming year in a variety of ways.

Editor's note: If you have comments about this column, please send them to Steve Lehmann in care of the CAS Office or send an E-mail directly to Steve (SteveL@MRHT.COM). Alternatively, if you want your view published, please send it to the Actuarial Review.