Actuaries Around the World - Venezuela

MERCEDES CARRUIDO TIAPAMercedes Carruido Tiapa is an actuary in Venezuela with 25 years of experience in the market in a wide range of practice and geographic areas. Mercedes has worked throughout the Caribbean, in Panamá and in Venezuela in banking, pensions, products and insurance. A pleasure trip to Barbados eventually led to her first stint in overseas work located mainly in Trinidad, West Indies. Since 2009 she has been an independent consultant working mainly with La Venezolana de Seguros y Vida in Venezuela and Seguros La Floresta in Panama. She holds a Master’s in Financial Economic Management from Universidad Camilo José Cela.

How many practicing actuaries do you have?

By my estimates we have between 350 and 400 actuaries here in Venezuela.

What is the word for actuary in your local language?

Licenciado en Ciencias Actuariales (Someone who holds a Bachelor’s in Actuarial Science)

When was actuarial science first introduced?

The School of Statistics and Actuarial Science was created in the Universidad Central de Venezuela in January 1953.

What is your favorite part about being an actuary?

My work is interdisciplinary, which means that I normally work within all the areas of a company. This allows me to understand different ways of evaluating risk and offering solutions.

Could you give a brief overview of the current economic and political situation in Venezuela for those unfamiliar with what is currently happening?

Venezuela is currently in a critical situation from the political, economical and social points of view. One of the most dramatic aspects of this is the hyperinflation that has been in place since late 2017. This has led to a deterioration in buying power, the quality of goods and services, a massive emigration of Venezuelans and the devaluation of properties and real estate. [Inflation hit 130,000 percent in 2018.]

Can you share an interesting anecdote or two from your career?

In 1990, I achieved one my key objectives, working in the area of Private Banking, as the Head of Insurance, working on the renewal of the policies of a large automobile insurance line. It was a difficult task, and afterwards, we negotiated out contracts with the broker to try and reduce the bank’s commission level. The results were excellent. Eleven months later, I had a job opportunity in Trinidad, West Indies. My boss at the time insisted that I find an actuary to replace me in my position, and after a lot of work I was able to convince my first boss, and best friend, to take over for me.

How has the current situation in Venezuela impacted the actuarial profession in particular?

From the academic point of view, professors are emigrating, and therefore, so are students. Currently the School of Actuarial Science lacks professors for key classes. This has led some students to emigrate without finishing their studies. Many young actuaries are leaving the country. Even though the profession has been in place for some time, the economic crisis has obliged many actuaries to become insurance brokers and has increased the number of actuaries, especially experienced actuaries, working independently as consultants. The private sector has benefited greatly from the actuarial profession, even though there is a high turnover of actuaries.

On a positive note, we can highlight the fact that the Law on Insurance Activity, which came into effect in March 2016, highlights in Article 43 that Actuarial Rate Regulations must be approved by actuaries residing in Venezuela and registered with the Insurance Supervisory Authority.

How does the insurance market deal with hyperinflation?

First of all, it is important to point out that the most popular types of insurance in Venezuela are Health and Auto, and the general and particular conditions of these policies were dictated by the Insurance Supervisory Authority and are uniform for the entire market. In both lines of insurance, because of the use of medical supplies and services and auto parts and labor, and the corresponding inflation, there is a need to adjust the insured sums and the premiums. Not all insureds can take on these adjustments. These policies previously offered services such as ambulance and emergency towing services, but these have slowly been taken away due to cost issues. In Venezuela, there are no companies with private pensions. On the life side, the main coverage is final expense (funeral) coverage.

The increase in costs, as well as the fact that the local currency is devaluing, leads to the fact that businesses need to regularly increase their insured sums, increase the premiums, the administrative costs, and the number of policies is reduced and there are losses.

Many foreign companies saw the niche to sell policies in dollars and captured the market that has the ability to pay for these policies. This began to affect local insurance companies.

In August 2018, the law was changed to allow for policies in foreign currencies (previously prohibited). However, due to foreign exchange controls since 2003, it is difficult to obtain the currencies necessary for running an insurance company, including for reinsurance contracts, since most reinsurers are from outside of Venezuela. It is a titanic project to maintain the stability of an insurance company. Nevertheless, the Venezuelan insurance market has learned how to plan in the short-term, modify strategies and adapt themselves to the needs of the market, in order to stay afloat in this turbulent situation.

Do you have any advice for young people in your country interested in pursuing this career?

Actuarial Science is a 5-year degree which gives a good base to emigrate as a young professional and opt in to the actuarial exams that are required in other countries to work in this profession. To those young actuaries that choose to stay in Venezuela, I recommend exploring other areas outside of insurance to add value to other businesses, since many lines of business are unaware of the benefits of working with actuaries.

What are some of the highlights of the history of the actuarial profession in your country?

Statistical studies in Venezuela began in 1936 when the Minister of Development, Néstor Luis Pérez, hired the eminent Catalan statistician, Josep Antón Vandellós Solá, to work on re-establishing the national statistics service.

By recommendation of the academic council of FACES (The College of Economic and Social Sciences), in September 1952, the Department of Statistics and Actuarial Science was created, and had its first classes in January 1953. The council also discussed the need to have international technical assistance programs to bring in prestigious professors financed by the Government or the Central Bank. Thus, various renowned international professors came to give classes here.

The first group of students was a class of 54 (51 men and 3 women) and it was a four-year program.

What are some of the main challenges and projects for your association over the next 5-10 years?

The Actuarial Assocation was disintegrated due to Venezuela’s situation. In recent years, we have been focused on surviving.

What developments on the horizon could affect future opportunities in your country?

The economic, political and social crisis limits professional growth and economic well-being. Many professionals are emigrating and if actuaries that have left do return in the future, they will bring knowledge back with them.  Nevertheless, the crisis also forces us to reinvent ourselves, to create and to take on risks, for which it is necessary to train ourselves. The actuaries that remain here in Venezuela take on the responsibility of believing in our human capital and supporting the companies that have decided to bet on Venezuela’s future and not leave the country. It may sound a bit romantic, but there is a population here that has put down roots, has a patrimony to take care of, and has faith in a better future. We have understood that Venezuela belongs, above all else, to Venezuelans!

What have you seen from inside your company? Where do you think the changes to actuarial work in your country will happen in the next five years?

For now, we do not know what is happening tomorrow, we can only deal with the work of each day. The country’s current instability does not allow for medium- and long-term planning.

Who are the main employers of actuaries?

Insurance companies and IT Services Providers for Insurance Companies.

What qualifications do you find most important for upcoming actuaries?

Understanding data analysis tools for an optimal evaluation of risk, establishing models that are more flexible and understandable for our client. Handling technology is vital, because our environment changes quickly and the results soon become irrelevant. Actuaries here must be versatile and pragmatic.

Do the schools in your country have actuarial majors, minors, concentrations or do students study on their own or overseas?

A 5-year Bachelor’s degree in Actuarial Science is in existence since 1953 in the Universidad Central de Venezuela in Caracas.

Do employers support the cost and time of exam preparation?

There aren’t exams here like in the US, Canada or UK. It is a 5-year academic program which usually takes longer to complete, as approximately halfway through the degree, classes are taught at night which allows students to hold a full-time job.

What is your favorite Excel function and why?

Pivot tables, because they save me a lot of time and I can analyze the key variables quickly.

Do you have any non-actuarial hobbies?

Writing, cooking and traveling!

What could people from outside of your country do to help the profession in Venezuela?

Actuarial organizations with more experience can offer special programs to obtain actuarial qualifications at a reasonable cost outside of Venezuela. I believe similar programs exist in other parts of Latin America and Africa. This could help drive the formation of a Venezuelan Actuarial Association over the next five years.

What lessons can be taken from Venezuela for the profession worldwide?

As Actuaries, we are academically prepared to apply pre-established models to quantifiable risks; In Venezuela, in recent years, we have learned to break down and rebuild and recreate models, and sometimes make simple, quick decisions for very complex problems. And we can say that our general strategy has been to face the changes and take risks without losing sight of our final objective. We also have had to make difficult decisions quickly.

Is there anything else you would like to add?

As I am actuary, I have worked in different areas and taken on new challenges that have led not just to professional, but also personal growth. The desire to develop the profession in other countries has led me to work abroad, meet other actuaries and academically prepare myself to be up to date and open to new opportunities.