Macro-economic factors such as growth of the insurance sector in emerging economies, increased regulatory requirements and complexity of insurance products is creating huge demand for actuaries, especially in emerging markets. Whist demand continues unabated, supply doesn't seem to be keeping up. Whilst the number of aspirant student actuaries continue to rise, the required numbers are not getting through qualifications quickly enough. This paper explores the viability of South Africa as a destination for high end actuarial knowledge based outsourcing. South Africa has a highly qualified actuarial workforce with a vibrant first world financial services industry. In 2011, South Africa had 751 qualified actuaries, with more than 90% obtaining a UK qualification. Apart from regulatory developments which will increase actuarial demand, South Africa's insurance market is saturated with the highest penetration of insurance products per GDP in the world. Unlike India, South AFrican insurance markets are not growing as rapidly and hence demand for actuaries is stable. If potential risks of outsourcing are appropriately managed, and if Cape Town is the chosen destination either for outsourcing or setting up a captive actuarial outsource function, then it certainly is worth exploring this country. The South African Government also offers some attractive cash incentives for establishing operations in the country. To find out more, get in touch: Email: jay.tikam@vedanvi.com Tel: +44 (0) 203 102 6750

1. Actuarial Outsourcing
Exploring South Africa as a Viable Destination
Jay Tikam
Vedanvi Business & Risk Consulting

2. 2
Global Actuarial Landscape
Global demand for actuaries
• Macro-economic factors - growth of insurance sector in emerging markets
• Changes in the insurance sector
• Increased amount of regulation post financial crisis
• Increased complexity of regulation – eg Solvency II
• More complex products
• Expanding role of actuary into risk management, banking, asset management,
corporate finance, consulting
• In 2005, worldwide demand for actuaries estimated at around 73,800 against
supply of 42,824 - a shortfall of 30,9761
Globally, demand for actuaries will always remain.
In UK & Europe, significant medium term demand driven by regulatory change
1.
“Actuarial Supply & Demand” by Julian D Gribble, Presentation for International Actuarial Association, International Congress, Paris, 27 May – 2 June 2006

3. 3
Global Actuarial Landscape
Global supply of actuaries
• Relatively few actuaries in world1
• In 2005, estimated 42,824 fully qualified actuaries in full member
associations – compared with (during the same period):
• 9.5 million doctors
• 5.5 million accountants
• 6.5 million engineers
• 67,000 CFAs (Chartered Financial Analysts)
Globally, demand for actuaries will always remain.
In UK & Europe, significant medium term demand driven by regulatory change
1.
“Actuarial Supply & Demand” by Julian D Gribble, Presentation for International Actuarial Association, International Congress, Paris, 27 May – 2 June 2006

4. 4
Global Actuarial Landscape
UK & European demand for actuaries
• Solvency II is major driver
• Financial crisis and market volatility
• Risk management
• Demand for qualified, rather than student actuaries
Globally, demand for actuaries will always remain.
In UK & Europe, significant medium term demand driven by regulatory change

5. 5
Options
Options
Re-Alignment
Compete
Import
Outsource / Offshore
Details
• Re-deploy actuaries doing
non actuarial work
• Recruit non-actuaries with
similar mathematical skills
• Attractive remuneration
packages
• “Poaching”
• Recruit Actuarial skills
from outside EU
• Create actuarial
outsource hub in UK
• Send work packages to
offshore in house
actuarial process centers
• Outsource actuarial
processes offshore
Advantage
• Most cost effective
solution
• Grow pool of skilled
people able to do
actuarial work
• “Intelligent” recruiting
could attract brightest and
best
• Grow pool of skills
• Overall could drive down
price of actuaries as
foreigners are willing to
earn less
• Lower cost option of
getting work done
• Expand pool of skills
• Free up local actuaries for
more complex work
Disadvantages
• Career management –
actuaries opting out may
not want to get back in
again
• Costs are high
• Will drive actuarial
salaries even higher
• Overall not an attractive
solution for industry as a
whole
• Immigration hurdles
• Unwillingness of senior
level resource to relocate
• Managing process,
especially for high end
actuarial processes
• Local Actuaries could see
at a threat – making it less
successful

6. 6
Outsourcing/Offshoring
• Solvency II & market volatility driving demand for qualified /more experienced actuaries
• India most popular destination - around 26 outsourced/offshore centers – mainly lower end
• Where is best place to outsource high end actuarial work?
Country
Possible Outsourcing Destination?
United States
16,672 (38.95%)
Yes – however not common practice and insurance sector differs to UK
UK as Comparator
6,029 (14.09%)
Canada
2,429 (5.68%)
Yes – plausible option however time zones may be an issue
Australia
1,237 (2.89%)
Yes – plausible option however time zones definitely an issue
Japan
1,058 (2.47%)
Yes - plausible however time zone may be a issue
South Africa
690 (1.61%)
Yes – plausible option and time zones work out well
Hong Kong
297 (0.69%)
Yes, however internal demand is likely to surge as Asian insurance sector grows
Singapore
113 (0.26%)
Yes – however internal demand is likely to surge in Asia as insurance sector
grows
India
148 (0.35%)
Yes – however plausible at lower end of the scale
China
56 (0.13%)
No – low numbers of Actuaries and internal demand is significant
Poland
Source:
No of Fellows
(2005 estimates)
(% of Total)
11 (0.03%)
No – low levels of qualified actuaries
“Actuarial Supply & Demand” by Julian D Gribble, Presentation for International Actuarial Association, International Congress, Paris, 27 May – 2 June 2006

7. 7
Why South Africa?
Global Competitive Index 2011/2012 – Top 20
Overall ranked 4th out of 142 for Financial Market Development
Rank
(out of
142)
Rank
(out of
142)
Institutions
Financial Market Development
Availability of financial services
3
Strength of auditing and
reporting standards
1
Financing through local equity
markets
4
Efficacy of corporate boards
2
Soundness of banks
2
Protection of minority
shareholders’ interests
3
Regulation of securities exchange
1
10
Legal rights index, 0-10 (best)
8
Strength of investor protection,
0–10 (best)*
Quality of management schools
13
Reliance on professional
management
18
Higher Education & Training
Quality of management schools
13

8. 8
Why South Africa?
• Insurance sector & insurance regulatory framework on par with Europe
• Time zone favourable and English is widely spoken – Cape Town has a
notable German population
• Culturally, South Africa more aligned with European culture
• South Africa implementing Solvency II in 2014 – emerging skills
• South African insurers use similar IT software eg Prophet, Moses & Igloo to
measure insurance risks. Algorithmics also well established within South
Africa, principally in banks
• South Africa is (anecdotally) the only place in the world where supply and
demand are balanced (not taking Solvency II into account)
1.
2.
1. South African Actuarial Society
2. “Demand for Actuarial Resources in South Africa” by W Terblanche, South African Actuarial Journal SAAJ9 (2009).

9. 9
Why South Africa?
Demographics
•
751 Fellow actuaries (698 are Fellows of the Faculty and Institute of
Actuaries in UK) & 1,241 students in 2011 with growth rate of around 200
student entrants every year1
•
Higher Fellow and Student annual growth rate compared with UK and
Australia
Country
Fellows
Students
Period
South Africa
7.0%
11.5%
1995-2007
UK
4%
7%
1995-2004
Australia
5.7%
6.6%
1992-2005
1. South African Actuarial Society

10. 10
Why South Africa?
Insurance penetration
•
Insurance market is saturated with little room for organic growth. Therefore demand
for actuaries will remain constant (not taking Solvency II into account) while supply
increases
•
Insurance penetration is the insurance premium income as % of GDP. South Africa
has the highest insurance penetration – i.e. insurance premium contributions are
highest relative to GDP when compared against other countries
Insurance Penetration vs GDP per capita2
2. “Demand for Actuarial Resources in South Africa” by W Terblanche, South African Actuarial Journal SAAJ9 (2009)

11. 11
Potential Risks & Mitigation
Potential Risks
Mitigation
Availability of skilled resource to meet demand
Cape Town (for lifestyle reasons) has healthy supply of senior level actuaries and
many senior actuaries returning to South Africa.
South African insurance markets saturated with little organic growth
Lack of willingness by actuarial functions to offshore
high end actuarial work to South Africa
Pilot projects to prove the concept.
Outsource rather than offshore for quicker exit if initiative does not work
Conflicts of interest and data privacy issues in a shared
service environment
Each insurer can have dedicated team that is separated physically from other client
teams.
Physical and IT security in place coupled with employee confidentiality contracts
Complexity of actuarial processes makes offshoring or
outsourcing difficult as South African actuaries will not
have knowledge of the organisation
Second South African actuaries to Europe for 6 months (visa permitting) to acquire
business knowledge and form relationships or send European actuary to South
Africa to educate South African actuaries about the company, its products and
processes

12. 12
Case Studies
1.
UK based multinational composite insurer (ranked among the top 10 in the
world) has recently established an Actuarial Centre of Excellence to
provide its world wide businesses with high end actuarial support. This
Centre works in conjunction with its low end actuarial offshoring Centers in
India and Poland
2.
A South African insurer listed on the London Stock Exchange offshores all
its Solvency II development work to its offices in Cape Town
3.
Many specialised management consultancies are sourcing South African
actuaries (via secondmends) to meet Europe wide demand
4.
South Africa is the one of the largest supplier of actuarial support to the
Saudi Arabian and other Middle Eastern market

13. 13
Conclusions
• Supply of Actuaries is always going to be limited given the specialised nature
of the Actuarial profession
• Regulatory development and market volatility are driving actuarial demand in
the developed world
• Rapid growth of the insurance sector is driving actuarial demand in the
emerging markets
• South Africa currently appears to be the only market suitable for high end
Actuarial outsourcing / offshoring
• This window of opportunity is small, given South Africa’s implementation of
Solvency II

14. Contact
Jay Tikam
Tel:
+44 (0) 203 102 6750
Mob:
+44 (0) 778 551 8471
Email: jay.tikam@vedanvi.com
Web:
www.vedanvi.com