On february 24th, ITAM carried out the Actuarial Perspectives seminar in collaboration with the Office of Alumni Affairs, the Mexican Association of Actuaries and the National Actuarial Association. The seminar was organized the first time as a baseline scenario to discuss insurance and retirement issues in Mexico. During the opening, ITAM’s Dean, Doctor Arturo Fernández, highlighted the role ITAM has in the actuarial sector in Mexico, by having the second biggest undergraduate program in Actuarial Science in the country, just behind UNAM. He noted that 1 in every 3 actuaries in Mexico came from ITAM.
The current insurance sector
First analysis table: general overview for Mexico’s insurance sector for 2023, moderated by Mercedes Gregorio, director of the Actuarial Science undergraduate program at ITAM, and with the participation of Alejando Díaz de León, Corporate Director of Grupo BAL; Christian Carstens, CEO of Azteca Insurance; Eduardo Silva Pylipciow, CEO of GNP; and Francisco Díaz, CEO of SwissRe América.
In this first discussion panel, the participants addressed the multi-sectoral challenges the insurance companies face currently, from price issues to climate change. They talked about the risk conscience increase in the new generations and the impact this has in the insurance sector. They also mentioned thatyoung people have a bigger interest in getting insured through more accessible channels, such as Internet; and how the challenge currently is to create more personalized products, adapted to the needs that this constantly changing world has, without losing sight of the bigger data.
The specialists shared, as well, their point of view in the use of the growing technology, the challenges and the role of the actuary within this new environment. In this regard, they explained how the new generations of actuaries have a great opportunity ahead of them to evolve along with the technological advances, because is going to be necessary to have professionals that know not only to use these new tools, but to also ask the right questions and have the ability to process the obtained data, understand it and get it to the insurance sector.
Subsequently, the second discussion panel spoke about the knowledge earned by Mexico during COVID-19, it had the participation of Norma Alicia Rosas from AMIS, Pilar Rivera Popovic from Metlife, Daniel Bandle from AXA and Ricardo Casares from Solera. The panel was moderated by Fernando Belaunzarán, from the Mexican Actuarial Association. The panelists agreed in qualifying the COVID-19 pandemic as the most expensive loss in the history of insurance, having represented a cost of 26.2 millions of pesos each day of the pandemic.
Through this brief introduction, the discussion panel presented some dilemmas that resulted from this crisis, such as the actuary’s role beyond stock valuation or to consider if a pandemic could be insured. The participants emphasized in the change the actuaries and insurance companies need to make in the paradigm of analysis based in history towards a prospective analysis model that could explain new risks.
Moreover, they pointed out how the insurance sector needs to work in collaboration with the government to create public policies that increase the integration of mexicans in the insurance industry, given that only the 14% of the population in Mexico has an insurance. Additionally, they celebrated how the current regulation prevented the insurance companies from going into bankruptcy during the pandemic and how the solvency models proved to be efficient.
The panel focused on the general retirement landscape in Mexico and had the input of Pedro Ordorica Leñero from Pensiones Banorte, María de las Nieves Lanzagorta from AMAFORE, Edgar Díaz Garcilazo spokesman of PENSIONISSSTE and Héctor Santana, Head of USPSS. The panelists stated that Mexico has a fragmented retirement system with financial issues. Due to this, Pedro Ordorica considered the problems in the subject of retirement are long therm, in 2050 24% of the population in Mexico will be retired and there won’t be enough financial sufficiency. One of the solutions proposed was a national retirement system that provides social justice to the population and that can be supported financially.
During this panel, it was assured that the reforms made in the retirement system administration are important for the worker, but this is still missing a balance in impulsing investments in this sector to push the national development. According to María de las Nieves, the focus is in: the individual, that has the power of choice in their resources, but doesn’t have the knowledge of the functions of their pensions; and in the institutions, that should give as much as they can afford to the retirement funds of their employees, so they are able to get as much as they can for their retirement funds. The panel ended, establishing the responsibility of the mexican state, who should provide the conditions for the individual to make the best possible decisions for their retirement, as well as simplify the subject of yields and the administrative processes.
The future of the sector: Big data
The former president of Casualty Actuarial Society (CAS), Roosevelt Mosley, was in charge of giving the first Master Class on the future of actuarial models. The insurance expert focused on models that use machine learning and Big Data. He asserted that the challenge is in the capability to manage all the data, considering how the useful information collection comes from many different sources. Specifically, in modeling focused for insurance companies, the data is collected from houses, cars and people to be able to evaluate the risk that each of these presents.
To conclude, he mentioned the data management applications in the insurance sector, in terms of marketing, establishing prices, claims and modeling. The challenge of providing added value to the clients in the insurance sector depends on the capability of the companies of knowing their clients and, in this sense, Roosevelt Moosley states that Big Data is a tool to learn about the client behavior and be able to offer better products.
Climate change and the implications in the insurance sector
Francisco Estrada, Climate Change Research Program Coordinator at UNAM, concluded the event with the second master class: Climate change and its impact in catastrophic risks. The researcher centered his exposition in the causes and economical consequences of climate change in a global level, particularly in Mexico, highlighting how mexicans could be affected if it’s not acted on.
Asserted that, in our country, climate change is already being experienced in a major way and is due more to anthropogenic factors than to natural factors, it also can be linked to large scope socioeconomic events. Also, he highlighted that economic and population growth are intimately linked with greenhouse gas emission and manifested that where the concentration of population is greater is where the extremer events happen.
Talking about Mexico, he pointed out thatthe temperature in Mexico City has increased four degrees in the last 100 years, one degree due to global climate change and three degrees due to local climate change. Its estimated that towards 2050, Mexico City’s temperature will have increased in 5 degrees and by the end of the century, in 8 degrees.. He assured that a concern for the mexican government are costs due to river and coastal flooding that by the end of the century are estimated to be of 7 billion dollars. He concluded by saying that is in the cities where effective actions can be undertaken to slow down climate change, given that is way easier to arrive to local agreements than to get 200 countries to coordinate.
With the conclusion of the second master class marked the close of the First Actuarial Perspectives Seminar that proposes to become in a new space of analysis and dialogue about the subjects of main interest for the sector, as well as, of social impact.