Nepal’s fledgling insurance market is beckoning for qualified actuarial scientists.
--BY KRISHANA PRASAIN
Prakash Muni Bajracharya
School of Mathematical Sciences, TU
The last few years have seen significant activities in the Nepali insurance sector. Both life and general insurers have upped their market presence and the penetration rate of insurance has been growing, most notably after the devastating earthquake of 2015.
There are altogether 35 insurance companies operating in Nepal – 17 each in life and non-life areas and one reinsurance company. Among the life insurers, eight new companies have recently started their operations after receiving permits from the government. Similarly, four non-life and one life insurance companies are expected to begin operations within the next few months after fulfilling all regulatory requirements. A large portion (about 90 percent) of Nepal’s population does not have access to insurance services which has created a lucrative market for insurers.
Nevertheless, insurance companies are struggling hard to get qualified human resources to make an aggressive move in the domestic market. One reason for the low qualified workforce is the lack of university level courses in insurance in the country. For example, the absence of course on actuarial science has resulted in a severe scarcity of actuaries for the insurance companies. Actuaries are skilled professionals who are considered necessary for insurance companies to carry out risk evaluations through rigorous mathematical and statistical methods. They are deemed equally important for BFIs and other industries for a number of other works. There are no actuaries in the country and insurance companies are required to pay high remuneration for foreign actuaries to carry out the actuarial works.
Amid this precarious situation, School of Mathematical Sciences, Institute of Science and Technology, Tribhuvan University (SMS TU) is all set to start an Actuarial Science course for the first time in the country. SMS TU is offering the Actuarial Science courses in the third and fourth years of Bachelor in Mathematical Sciences (B.Math. Sc.). According to the school, students who have enrolled in 2073 will start to study the Actuarial Science courses from 2075 BS.
“The Actuarial Science programme introduced here covers the Core Technical (CT1 to CT8) courses. The courses will be similar to which the Institute and Faculty of Actuaries (IFoA), UK has been conducting the examinations,” says Prof Dr Prakash Muni Bajracharya, Director of SMS TU which is under the Institute of Science and Technology. “We are running the courses according to the curriculum approved by IFoA, UK,” he adds.
According to him, the school decided to introduce the courses after feeling its immense importance in Nepal, especially for the development of the insurance sector. “The actuarial courses introduced here are globally recognised. The students after completing the courses can work as experts in actuarial science in any part of the world,” mentions Bajracharya.
Despite the increasing number of insurance companies in Nepal, the situation, as stated earlier, is high and dry when it comes to actuaries. “At present not only insurance companies but other sectors such as BFIs, industries also needs actuaries and there is a high demand for actuaries here. Due to the lack of actuaries, most of the insurance companies have not been able to hold their annual general meetings from FY 2013/14,” he says. At present, almost all actuarial jobs are serviced from India. According to industry sources, it costs around money equivalent to INR 150,000 to carry out the simplest type of actuarial work, and that too is done via e-mail from Indian actuaries.
What is Actuarial Science?
Actuarial Science is a discipline that is used to analyse financial implications of uncertain future events by applying mathematical and statistical methods. Actuarial Science which used to be applied only in the field of life insurance in the past is now used in general insurance, health insurance and reinsurance. With the broadening of horizons, today it is used in different fields such as pension and employee benefits, investment consulting, risk management, BFIs, stock market, trade, industries and government works.
Why is it Important?
Actuarial valuations are very essential for insurance companies because such reports help companies to create new policies and introduce packages and premiums accordingly. The valuations assist the insurers to forecast profit and loss of any life or non-life insurance package. The actuaries evaluate the associated risks in the long-term.
This is one field where career prospects are abundant because the demand of the workforce largely exceeds the supply in the global scenario.
The job of actuary has been ranked among the top three professions (out of 200) in the United States in every edition of the Wall Street Journal's Jobs Rated Almanac. In the 2015 edition, actuary was ranked the number one career. While ranking the professions, the Almanac considers factors such as salary, hiring outlook, stress, and work environment.
Actuarial Science Study Process
Students in Nepal have traditionally found actuarial examinations to be difficult since they have to study on their own. However, the new academic courses will change that. Currently, SMS TU is preparing its students for the entrance exam to be conducted by Institute of Actuaries of India (IAI).
After the completion of the actuarial science programme, students will get a graduate degree in B.Math Sc from TU. Like other top-ranked professions (such as chartered accountant, law and medicine), one must pass a series of examinations conducted by professional organisations such as IAI or IFoA to achieve professional status of an actuary. In the final two years of B.Math Sc., the students can appear in 4/5 professional exams. Thus, after graduating, they can work as experts in actuarial science.
Unlike in many other courses, students of the actuarial science will have the opportunity to work as an actuary while completing the examination process—employers often allow study time during working hours, pay exam fees, provide internships, and even award raises for each exam passed.
One special feature of actuarial professional exams is that work experience helps the student succeed in those exams. For example, to complete CT9, students must possess work experience. “Once the students clear the professional exams, they can work as actuaries anywhere in the world as well as open their own firms,” states Bajracharya. According to him, if there is one field where career prospects are abundant, it is Actuarial Science.
About the Course
The course covers various aspects of mathematics, statistics, computational science, management, finance, accounting and economics. The first two years of B. Math. Sc. programme provides a foundation on a broad range of areas including mathematics, statistics and scientific computation. In the remaining two years of the programme that start from the fifth semester, students start studying Actuarial Science as a major subject.
The first semester of the foundation course comprises of Calculus with Analytical Geometry I, Statistics and Data Analysis I, Fundamentals of Computer Science, Communication Skill I and Mathematics Software (MATLAB). Similarly, Calculus with Analytical Geometry II, Linear Algebra with Application I, Statistics and Data Analysis II, Introduction to Programming I and Communication Skill II will be taught in the second semester.
Furthermore, students in the third semester undergo teaching of Linear Algebra with Application II, Theory of Probability, Introduction to Programming II, Differential Equations and General Logic. The last semester of the foundation course consists of Mathematical Statistics, Applied Probability Models, Data Structure and Algorithm, Mathematical Modeling and Discrete Maths.
Meanwhile, the major Actuarial Science course includes Financial Mathematics, Actuarial Models I: Life contingent I, Financial Accounting, Nepalese Economy and Nepali Literature I in the fifth semester. Similarly, the sixth semester course contains Actuarial Models II: Life contingent II, Investments, Principles of Economics I (micro), Managerial Accounting and Nepali Literature II.
Likewise, students in the seventh semester will study Actuarial Models III Derivative markets, Introducing to Risk and Insurance, Principles of Economics II (macro), Technical Writing Communication English, Anthropology and Project. The last semester comprises of subjects including Actuarial Modelling: Loss Models, Intermediate Business Finance, Regression and Times Series Analysis, Anthropology and Internship.
“We not only teach our students about the application of knowledge. We also teach them directly about real work procedures so that they don’t have to take extra training classes before they join their jobs,” Bajracharya says. According to him, students can directly join the companies as soon as they complete their studies as they are taught to solve practical work problems. According to him, the actuarial science course also covers CA courses enabling students to work as chartered accountants as well.
Likewise, the college is also planning to run a masters degree with professional Actuarial Science courses.
Students from any faculty can apply for the course. However, they are required to have studied mathematics of 100 marks or business mathematics at higher secondary level. “In the current batch, we have students also from engineering and nursing programmes,” says Bajracharya.
SMS TU takes admission for 36 seats for B.Math. Sc. Currently, there are 28 students studying the programme.
It costs around Rs 370,000 to complete B.Math Sc programme.
SMS TU is providing scholarships to deserving students according to the regulation of the university. It is providing full scholarships on tuition fees for an individual securing top position in the entrance exam.
Since the new building is currently under construction at Kirtipur, SMS TU has been running classes during the day in a rented building of the Public Administration Campus in Balkhu.