The rebirth of the actuarial profession in Russia – a personal view

History tells us that there was an active actuarial profession in Russia at the end of the 19th century. Preparations were even made to hold the 8th International Congress of Actuaries in St Petersburg in 1915, although in the event this did not prove possible. Thereafter the need for actuaries ceased to be recognised, since insurance became a state monopoly.

The first time that I became aware of a stirring of interest in actuarial science in the then USSR was in 1988, when the 23rd International Congress of Actuaries in Helsinki was attended by several invited Russians.

I became directly involved in February 1991 in the developing actuarial profession in Russia, when I was contacted by Károly Mályusz from the Hungarian Actuarial Society about the possibility of offering some assistance with the formation of a Siberian Actuarial Society. In January 1991 I had organised a week-long seminar in Budapest to introduce the actuarial profession and the work of actuaries, and, shortly afterwards, the Hungarian Actuarial Society had been established. At that time we were then planning to establish a post-graduate diploma programme in Hungary. From May 1991 the Government Actuary’s Department of the United Kingdom, in cooperation with the Institute of Actuaries, started a Basic Diploma programme in actuarial science at the University of Economic Sciences in Budapest.

The contact in Russia was Professor Grigory Soifer from Kemerovo State University. He and some colleagues knew Károly from having previously studied together at Moscow State University. I organised with the Institute of Actuaries for some actuarial literature to be sent to Kemerovo. An Indian actuary, Mr J R Joshi, who was planning to visit Novosibirsk to see his grandson, had read in the March 1990 issue of The Actuary magazine of the contacts which the Institute of Actuaries had made in Hungary, and most recently with Kemerovo, and offered to meet Professor Soifer and his colleagues. The meeting took place on 11 July 1991 in Novosibirsk. I subsequently agreed to meet Professor Soifer at Cologne Airport on 6 December 1991, where, by some coincidence, our paths were to cross. The Society of Siberian Actuaries had been founded a month or two earlier, with Professor Soifer as Chairman and Professor Valeriy Mishkin as Secretary.

Professor Soifer subsequently visited London and Edinburgh from 8-14 March 1992, with a colleague from Kemerovo, Dr F Akerman. The outcome of these meetings was that I managed to interest the Institute of Actuaries in running the diploma programmes in Russia. As a first step, I recruited a small group of actuaries to present a seminar in Kemerovo on “Insurance Education in the Russian Republic”. I obtained a small amount of financial support from the Know-How Fund, administered by the UK government’s Department for International Development, and, in July 1992, went to Kemerovo with Bob Howe, Nigel Gillott and Stephen Withers to lead a three-day seminar.

Following this I was able to persuade the Know-How Fund to provide more substantial financial support and we started on a programme of diploma courses, following the Hungarian example. The first two courses were held in Kemerovo and St Petersburg in 1994. In both of these places there was a clear-cut group of individuals in a particular university who were keen to establish actuarial scientific education.

It was not so clear to me how best to organise a similar programme in Moscow, since were several universities, and several parts of Moscow State University in particular, showing an interest in actuarial science. To my perception as an outsider, most of these groups appeared to be in active competition with each other and choosing between them was not an easy matter. In the end I decided that Moscow State University should be the place, but I left it Vice-Rector Valeriy Kozlov to nominate the individuals within the university who would be on the organising committee and would liaise with us in organising the courses. These turned out to be within Academician Boris Gnedenko’s Department of Applied Mathematics and Probability. Dr Eugeniy Chepurin took over the day to day administration of the courses in Moscow. We ran a short summer school in Moscow in 1994, started the Basic Diploma Course in 1995 and ran a further short course (a winter school perhaps) in December 1995. We were then able to secure further financial support from the Know-How Fund and organised Advanced Diploma Courses in Moscow, St Petersburg and Novosibirsk, the last of these replacing the Kemerovo location, as several of the key players had by this time left Kemerovo. The Advanced Diploma Courses were administered overall by Maria Perry at the Institute of Actuaries in Oxford, with Institute of Actuaries staff actuary Graham Luffrum.

The project was subsequently extended to cover Basic and Advanced Diploma Courses in Ufa in Bashkortostan, thanks to the persistent advocacy of this as a centre by Professor Semyen Spivak, whom I had met in Novosibirsk at a conference in 1994.

On 4 March 1994, when I was on the way back to the UK from Kemerovo and knew that Walt Rugland, the then President of the Society of Actuaries (one of the main North American actuarial associations) was visiting Moscow, I agreed with Walt that we would host a meeting at the Sheremetyevo-2 Novotel to get together those whom we respectively knew who were interested in the actuarial profession, with a view to kick-starting the actuarial profession in Russia. This led in due course to the establishment of the Russian Actuarial Society. One of the participants at the Novotel meeting was Professor Gennady Medvedev from Minsk, who subsequently established the Belarussian Actuarial Society, so this can also be seen as the start of the actuarial profession in Belarus.

Over the past two and a half years from June 2000, the Government Actuary’s Department has worked with the Russian Actuarial Society and the Department of Insurance Supervision of the Ministry of Finance of the Russian Federation on a number of separate developments. These included work on life insurance reserving principles, the definition of an actuary in the Russian insurance law, translation into Russian of the 300 series examination tuition materials of the UK actuarial profession and support for the development of mortality experience studies in Russia.

Developing a vibrant actuarial profession in Russia is going to take time. Russia is a large and complex country and the history of the 20th century did not provide it with a strong basis for the development of professional organisations. Fortunately there a number of enthusiasts who are trying to take the Russian Actuarial Society forward, but they suffer from lack of time and resources and from being relatively few in number. Natural competitiveness, both in the academic environment and among the new actuaries working for commercial companies, has made it difficult to build a professional ethos which transcends other loyalties.

What has been achieved so far? Quite a lot in 10 years. Almost 100 people completed the Advanced Diploma Course in one of the four locations. Some form of actuarial education has been established in a number of Russian universities. The Russian Actuarial Society has been formed and has finally received its formal registration. Actuaries have been recognised by the insurance regulators as having an important part to play in life insurance companies and perhaps in other types of insurance. An actuarial role is envisaged in the financial management of non-state pension funds, although the definition of actuary in that context is rather weak. Actuaries have played a role in the development of life insurance reserving standards and now in the implementation of compulsory motor third party liability insurance. Discussions have taken place about the possibility of developing a mortality study based on insured lives. A number of actuaries are playing an active role in insurance companies and developing techniques appropriate to the Russian market.

What aspirations should we have for the actuarial profession in Russia? It will be important for the credibility of the Russian Actuarial Society, and necessary in order to ensure some quality control on those who wish to call themselves actuaries, that the envisaged system of Russian language examinations should be implemented soon. Initially this will cover only a few of the technical actuarial mathematics subjects – corresponding to some of the 100 series examinations of the UK actuarial profession. The aim should be to introduce examinations to cover the whole of the core syllabus and guidelines of the International Actuarial Association (or at least those topics which are not considered to be sufficiently covered in the prior university education of actuarial students).

The IAA core syllabus (more details are on the IAA website at www.actuaries.org) includes the following topics:

1. financial mathematics
2. probability and mathematical statistics
3. economics
4. accounting
5. modelling
6. statistical methods
7. actuarial mathematics
   • life insurance
   • general insurance
   • pensions
   • health care financing
8. investment and asset management
9. principles of actuarial management
10. professionalism

In some ways the most difficult aspect of this development is to put in place the infrastructure to set, administer and mark examinations, presumably with the ultimate intention of having examination centres in a number of locations around Russia. Tuition materials can be adapted from those already in use in the UK and elsewhere. The next big step after getting the first few technical subjects in place will be to introduce examinations corresponding to the subject “Principles of Actuarial Management” in the IAA core syllabus. This could use parts of the tuition materials for Subjects 301 to 304 of the UK actuarial examinations, which have now been translated, or tuition material for the new Core Applications subject which is to be introduced into the UK system from 2005, and which is modelled on the Australian subject “The Actuarial Control Cycle”.

The other essential development for actuaries in Russia will be to evolve the Russian Actuarial Society into a professional body for actuaries. As a minimum this will require putting in place a code of professional conduct which will be binding on members, together with an associated procedure for dealing with complaints against members and applying appropriate sanctions on members who act in an unprofessional way. This may seem quite a large step to take from where the Russian Actuarial Society is today, but is one of the keys to the development of the profession in Russia and to the acceptance of the Russian Actuarial Society as a full member of the International Actuarial Association (IAA).

Full membership of the IAA requires an association to have in place the following elements:

1. a legal constitution as a society in the country in question;
2. implementation of a code of conduct equivalent to that required by the European Actuarial Consultative Group (the umbrella organisation for actuarial associations in Europe);
3. a satisfactory complaints and discipline process;
4. education requirements equivalent to the IAA core syllabus and guidelines for all individuals being admitted as full members of the association from 2005 onwards;
5. payment of the annual membership fee of (currently) 6.5 Canadian dollars per full member of the association.

In the short term the Russian Actuarial Society could (and should) apply to become an Observer Member of the IAA (which requires only to be properly constituted as an association and to pay an annual IAA membership fee of 50 Canadian dollars). The RAS could also apply to become an Observer Member of the European Actuarial Consultative Group. This would begin the process of becoming familiar with what is happening in the worldwide actuarial profession and hopefully encourage Russian actuaries to seek to develop the profession actively in their country. It would also enable Russian actuaries to keep in touch with developments which will almost certainly begin to affect them in the future, such as the formulation of international accounting standards for financial instruments, insurance contracts, and pension plans and the emergence of new capital adequacy requirements for insurance companies under the auspices of the International Association of Insurance Supervisors.

Chris Daykin has been the Government Actuary of the United Kingdom since April 1989. He was President of the Institute of Actuaries from 1994 to 1996 and Chairman of the International Forum of Actuarial Associations, the precursor of the current International Actuarial Association, from 1996 to 1997.

Chris Daykin, 12 February 2003

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