June 2013 Issue Newsletter by the Actuarial Society of Malaysia the malaysian actuary malaysian actuary About the Malaysian Actuary The Malaysian Actuary is a regular newsletter/magazine published by the Actuarial Society of Malaysia. This publication is for general information purposes only, and intended only for members of the Actuarial Society of Malaysia. While all reasonable efforts are made to provide correct information, the Actuarial Society of Malaysia does not guarantee that the information provided in this newsletter is complete, reliable and accurate in every aspect. The articles in this newsletter are based on the views of the individual authors and do not necessarily represent the views of the Actuarial Society of Malaysia. The Malaysian Actuary welcomes interested members who would like to contribute to the newsletter in any way, either by submitting articles relevant to the actuarial industry, conducting interviews or contributing puzzles. With regards to submitted articles, the Malaysian Actuary reserve the rights to accept, reject or request changes before publishing the articles. In addition, the editor may amend the article for grammar, punctuation and spelling. For more information on contributions, please contact the Malaysian Actuary editor at [email protected]. Feedback on the Malaysian Actuary can be provided by filling up the form on the last page of each issue and submitting it to [email protected]. Nominations for suitable candidates for the “Up Close and Personal” section can also made via the same form. Malaysian Actuary - June 2013 Issue - Page 2 malaysian actuary Editor’s Note We’re soon going to pass the half year mark of 2013, greetings all! The end of first half has been whistled off. Let us enjoy a short half time as we face the second half of year 2013. This is your new editor rolling in for my first ASM Newsletter. A speech taken off from our previous editor’s comment from February 2013 issue, “I hope all of you will enjoy reading the newsletter as much I have in preparing them.” This issue, we have a committed reader from the Malaysian Actuary residents who contributed his article on Enterprise Risk Management: Risk Governance guideline formalises the ERM Framework in Malaysia. Lee Kin Hoe decided to bring us through the content of the guideline by BNM on Risk Governance issued on March 2013. Following closely, let’s see what happened on the ASM Talks and Annual General Meeting 2013 and the full listing of our new ASM Council 2013. Be sure to catch that! Don’t miss out on our session “Up Close and Personal” with our very new ASM Committee Members. The Committee Members will share out their thoughts on some very simple questions being asked to them. Enjoy the readings and I hope our actuarial members will be able to come back with feedbacks and thoughts on the newsletter. Article contribution is very much welcome too! With the haze that strike in most places across the country, don’t forget to consume more fluids and stay indoors! Cheers, Jack Editor, Malaysian Actuary Malaysian Actuary - June 2013 Issue - Page 3 malaysian actuary President’s Address 5 Out & About… 7 What’s happening in the industry? Enterprise Risk 8 Management: Risk Governance guideline formalises the ERM Framework in Malaysia Up Close and Personal... 14 Actuarial Society Malaysia’s 2013 Committee Members with Charlene, Krystle, Vas, and Jack Recent and Upcoming Events 17 Overview of the latest events Job Opportunities 29 Just for Fun! 30 Malaysian Actuary - June 2013 Issue - Page 4 malaysian actuary President’s Address Wow…..half a year has passed in 2013. Hope you have had a fruitful first half of 2013 and are working towards achieving an even more successful second half. The watershed event in Malaysia during the first half of the year is certainly the 13th General Election which was held on 5th May 2013 and won by the Barisan National coalition. For the financial services industry, no doubt the watershed event this year will be the implementation of the Financial Services Act (FSA) and Islamic Financial Services Act (IFSA) on 1st July 2013. Some old laws, like Insurance Act 1996 and Takaful Act 1984, which have served the industry well over the years, will be repealed. The wide ranging FSA and IFSA will give Bank Negara Malaysia (BNM) stronger powers aimed at better governance which will bode well for Malaysia’s financial industry in the long run. As well as the two legislations above, Bank Negara Malaysia has issued a concept paper titled “Appointed Actuary: Appointment and Duties” where the consultation period for the paper will end on 2nd August 2013. The concept paper proposed BNM’s enhanced supervisory expectations on the duties and responsibilities of the Appointed Actuary as well as greater clarity on the Appointed Actuary’s relationship and interaction with various stakeholders. Some of the major changes are: Appointed Actuary requirement extended to general insurance business, removal of product pricing duty from the Appointed Actuary and, greater oversight by the Board of Directors on actuarial issues. The introduction of the Appointed Actuary system to the general insurance industry is a timely development as it moves towards a de-tariffied business environment. The removal of the pricing role from the Appointed Actuary will necessitate more clarity on the requirements and duties of the Pricing Actuary which will hopefully be addressed soon. Additionally, it is a welcome development that the concept paper proposes an explicit condition on the appointment of an Appointed Actuary, that the candidate meets relevant CPD requirements. The final major change, the greater oversight by the Board of Directors on actuarial issues, means that actuaries must rise up to the communication challenge of explaining technical issues using less jargon and to make complex issues comprehensible to non-actuarial stakeholders. In terms of happenings in ASM, the society has just successfully hosted the 3rd General Insurance and Takaful Actuarial Conference on 27th May 2013 which was well attended by 127 attendees. ASM and SOA will also jointly organize the 2013 Joint Regional Seminar on 31st July and 1st August 2013. Additional seminars and talks will be held in Malaysian Actuary - June 2013 Issue - Page 5 malaysian actuary the second half of the year to help our members acquire additional actuarial knowledge while meeting CPD requirements. On the networking side, we are encouraged by the 33% rise in participation in this year ASM Badminton Tournament and hope to see more participation from members for the social and networking platforms provided by ASM. The next networking event will be the ASM “The Wolverine” movie night on 26th July 2013. See you there : ) Malaysian Actuary - June 2013 Issue - Page 6 malaysian actuary Out & About… AIA AFG Takaful Bhd is now known as AIA PUBLIC Takaful Bhd The ING insurance brand exits the Malaysia market Sanlam has BNM's Concept completed Paper on role of the Appointed Actuary acquisition of calling for public 49% of Pacific feedback & Orient for The proposed RM270 mil unemployment insurance scheme for Sun Life and Khazanah have the private sector will completed the acquisition of be a compulsory Financial Services Act 2012 CIMB Aviva scheme requires individuals with more than 10% holdings in Combined Financial LIAM has re-elected insurance company will entity of Services Act Vincent Kwo as its have 5 years to comply AmG and and Islamic President and with the 10% Kurnia will Financial Act appointed Kamaludin shareholdings limit. be named requires Ahmad as its Vice Holding companies which AmGeneral, composite President for 2013/14 own 50% or more of the however insurer and financial institution are maintaining takaful Alliance Financial also required to register as both AmG operators to Group is pulling out a financial holding and Kurnia split their from the AIA AFG company within 12 months brand life/family and Takaful joint venture from the commencement names general units by selling its 30% stake date of the Act to AIA for RM45 mil Number of FASM in Malaysia exceeds 100 for New Actuarial Society Malaysia Council the first time in history members for 2013 Thanks to Insurance News (actuaries.com.my/insurance-news) to which reference was made when compiling this section. Malaysian Actuary - June 2013 Issue - Page 7 malaysian actuary Enterprise Risk Management: Risk Governance guideline formalises the ERM Framework in Malaysia Lee Kin Hoe [email protected] In March 2013, Bank Negara Malaysia (BNM) issued guidelines on Risk Governance (RG). The guideline is the final piece of the jigsaw in bringing together the other guidelines on risks (market, credit, operational) into a complete and cohesive framework. This article highlights some of the key principles underlying the RG guidelines. In addition, an Enterprise Risk Management guideline for insurers was also issued by the Singapore regulator and this article will highlight some of the key similarities and differences between these two guidelines. Background The RG framework is principle-based and broadly descriptive on risk management, with the intention of having it applicable to all financial institutions1. The RG needs to be read together with the ICAAP to represent the Enterprise Risk Management (ERM) framework for insurers in Malaysia. The Singapore regulatory authority, the Monetary Authority of Singapore (MAS) issued an Enterprise Risk Management for Insurers (ERMI) guideline in April 2013 which is largely unchanged from the Consultation Paper. The following sections will highlight some of the key principles underlying the RG guidelines and list a few key similarities and differences between these two guidelines. 1 The paragraphs where insurers or/and takaful operators are mentioned explicitly are in paragraphs 26, 33, 49 and 61. Malaysian Actuary - June 2013 Issue - Page 8 malaysian actuary BANK NEGARA MALAYSIA (BNM) February 2012: November 2012: March 2013: Issued ICAAP Guidelines; Issued a Consultation Issued finalised guideline effective from 1 Sept Paper on Risk on Risk Governance (RG), 2012 Governance effective immediately EVENT TIMELINE January 2013: April 2013: Issued Consultation Paper Issued Guideline on on Enterprise Risk Enterprise Risk Management (ERM) for Management (ERM) for Insurers. Insurers. MONETARY AUTHORITY OF SINGAPORE (MAS) Key principles in the Risk Governance guideline The key pertinent principles in the Risk Governance guideline are highlighted below. 1) The role of a Chief Risk Officer (CRO) or independent senior risk executive has to be established with a distinct responsibility for risk management function. The person must have sufficient stature, authority and seniority to influence decisions from a risk perspective. Its independence and unimpeded access to the board and risk committee are strongly emphasized in the guideline. As such, the role has to be filled by someone with relevant qualifications, experienced in risk disciplines, understands the business and with strong communication skills. Malaysian Actuary - June 2013 Issue - Page 9 malaysian actuary 2) An independent risk management function has to be established, with sufficient resources and access to the board. The compliance function plays a role in the ERM framework as an independent auditor of the risk policies and procedures. In addition, the relationship between compliance, internal audit and risk management functions has to be clearly defined by appropriate structure and lines of reporting to ensure independence. 3) Actuarial expertise is cited in supporting the risk management function. However, to ensure independence, actuarial expertise in risk management function is not allowed to be directly responsible for other actuarial functions such as product development and design, investment and pricing. It is important to note that the valuation function is not mentioned. 4) Creation of special purpose structures or vehicles (SPV) is specified as a possible source of risk if its structure and purpose are not properly understood by board members and senior management. 5) Executive remuneration should be prudent and not promote excessive risk-taking. Persons performing control functions should have input in setting remuneration policies for other business areas to promote the alignment of risks and rewards. Key similarities between RG and ERMI guidelines There are significant similarities between the RG and ERMI guidelines. Both guidelines require the following key items: A sound risk strategy and effective risk management framework that encompasses risk appetite, risk tolerance and risk limits which are appropriate to the nature, scale and complexity of its activities/risks of the organisation. Requirements for stress testing and the resulting solvency position under stress scenarios. ERMI goes further by requiring that the insurer uses reverse stress to test “business failure2”. Malaysian Actuary - June 2013 Issue - Page 10