Escolar Documentos
Profissional Documentos
Cultura Documentos
Ponno Jonatan
Indonesia
Key-words: -
1. Introduction
The Destination Statement of National Committee for Good Governance for year
2009 is to place Indonesia in the top-quartile of International Good Governance
rating1. Many people doubt that this goal can be achieved due to the bankruptcy of
many companies, banking miss-management, high numbers of corruption
practices and various corporate scandals that have occurred and placed Indonesia
way behind top place in good governance rating. Even in Asia, Indonesia, as the
most corrupted country, will need many efforts to clean its reputation.
The proverb said it is better late then never. In other words, if we never try to do
something in order to address the good governance in Indonesia, than the
Destination Statement would never be fulfilled. The corruption investigation and
high functionary arrestment on corruption presumption that happen nowadays
has showed us that government supports the implementation of fairness,
transparency, supervision mechanism and responsibility towards all stakeholders
as directed by good governance. The rest depends on every role of institutions and
or professional associations to implement those values.
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P. JONATAN
The government has developed appointed actuary concept in order to address good
governance in insurance companies and pension fund. Moreover, actuaries along
with actuarial association are expected to develop actuarial profession either by
quantity or quality to get the recognition or accountability in playing the major
role.
2. Good Governance
2 Governance and Actuary, Claude Lamoureux, Toronto Actuaries’ Club, March 24th
,2004
3 Nagasawa, Takayuki. The activities of actuaries in Japanese Trust Banks for Good
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
4Actuaries and Accountability, Eduard Simon Siauw, 6th Actuarial Congress of Society of
Actuaries of Indonesia, 21st July 2005.
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P. JONATAN
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
actuary can be a mediator between the employer and the employee (pension fund
member) in communicating the current pension fund’s policy and current related
regulations. For the government, an actuary can be actively involved such as in
designing post-employment benefits regulation or social security program.
Moreover, an actuary can be a public speaker who explains the importance of
continuing earnings to public and to give guidance in choosing the right vehicles
that offered in market. Roles of an actuary in pension fund industry are shown in
figure 2.
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P. JONATAN
d) Key Requirements
To answer the challenges above, actuaries along with actuarial association must
fulfill the following requirements:
• Good Governance
Actuaries should have addressed self-governance before they implement good
governance in industries where they give contributions.
• Good Education system and Appropriate Entrance Requirements
A good educational and examination system will enable actuaries to serve
broader needs in evolving markets. Therefore, the syllabus, membership
examinations, and certification must be reviewed periodically. The actuarial
association must be able to support all members by providing them with
education facilities and systems that can enforce all members to improve their
professionalism.
• Professional conduct of members
The actuarial association need to develop and maintain a strong code of
conduct through a discipline system to all members. Therefore, every member
will act professionally in every situation they face.
• Research and Standard Process
Actuaries must be responsive to technological development, economic and
financial issues, and change in related regulations so they can be a leading
profession in the broader area. Hence, actuaries along with the association
need to conduct continuous researches, especially in developing enforceable
actuarial professional standard, so they will have tools, methodologies, and
point of view that are suitable to the current condition and be able to work
according to the current regulations.
• Continuing Professional Development
Actuaries must improve their professionalism in order to meet market demand
and to compete with other professions through continuous learning. The need
of these improvements must come up from themselves with the support of the
association.
• Good Communications
A good communication need to be built among actuaries, between actuaries
and their employer or client, and between actuaries and the public. Thus,
actuaries should have a good communication skill so they will be able to
discuss, articulate and present their job to others.
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
The next section will describe how the Society of Actuaries of Indonesia (PAI) takes
steps in developing actuarial professionalism in Indonesia.
a) Overview
Society of Actuaries of Indonesia (PAI) was established in Jakarta on 19 October
1964. Despite its existence as actuarial profession organization for almost 41
years, actuarial profession is not well known among the public, even in insurance
business where actuaries play their major roles. Currently, PAI has 309 members
(125 fellows/FSAI and 185 associates/ASAI). With the annual growth rate of 16.7%
for the last 17 years, actuarial profession is considered rare and exclusive
compared to more than 200 million people in Indonesia. The growth of PAI
membership since 1987 to 2004 is shown in figure 3:
200
180
160
140
120
100
80
60
40
20
0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
year
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
FSAI 21 21 22 24 25 29 33 36 41 53 59 71 84 96 106 114 118 124
8 8 8 9 11
ASAI Source: PAI14 16 16 18 28 40 74 112 133 149 180 183 185
About 80% of PAI members came from insurance industry with the expertise on life
insurance and pension fund. Most of them are located in Jakarta as the capital city
of Indonesia. The distribution of PAI members (ASAIs and FSAIs) can be shown in
next figures:
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P. JONATAN
P e ns io n F und
R e ins ura nc e
G o v e rnm e nt Univ e rs itie s
B a nk O the rs
P ublic
A c c o unt a nt
C o ns ult a nt
Life Ins ura nc e
G e ne ra l
Ins ura nc e
P e ns io n F und
G o v e rnm e nt
B a nk O t he rs
C o ns ult a nt
G e ne ra l
Ins ura nc e
Despite their small number of members, PAI has been consistently developing
Source: PAI
actuarial profession in Indonesia either in quantity or quality. PAI has been an
observer member of International Actuarial Association (IAA) and has constantly
tried to become a full member. PAI has been periodically conducting workshops,
seminars, and conferences in Indonesia and always send their delegations to
international actuarial events8.
b) Organizational Structure
PAI is recognized as a non-profit, non-political, and non-governmental
organization. The boards of PAI are elected trough a convention and have been
placed to positions as shown in figure 6:
8
Actuaries Bulletin., 2nd edition, January 2000
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
Those in above positions are professionals in their own field of work and have
gained trust among the entire members to work toward vision and mission that
have been established. PAI vision for period 2002-2004 is to be a professional
organization that will be recognized internationally. In order to achieve the vision,
PAI will be working under its mission that is to be a professional organization by
developing quality, skills, and profession development of all members through
continuous educational system and by gradually developing the entrance
requirements through examinations that will be acknowledged internationally, and
eventually to gain recognition from International Actuarial Association9.
c) Entrance Mechanism
According to PAI Statutes, someone can be a member of PAI if he/she has passed a
series of examinations held by PAI. Those examinations are conducted in Jakarta
twice in a year. An applicant who has passed the first five examinations can be a
member of PAI with title Assistant of Society of Actuary of Indonesia (ASAI).
Following are first five examinations for ASAI candidates:
AAI-1: Probability and statistics
AAI-2: Mathematics of Finance
AAI-3: Actuarial Mathematics
AAI-4: Mortality Table Construction
AAI-5: Economics
9
Letter to PAI members (Number 006/S/PAI/VI/2002)
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P. JONATAN
110
Success Failed
100
90
80
70
Applicants
60
50
40
30
20
10
0
AAI-1
AAI-2
AAI-3
AAI-4
AAI-5
AAI-1
AAI-2
AAI-3
AAI-4
AAI-5
AAI-1
AAI-2
AAI-3
AAI-4
AAI-5
AAI-1
AAI-2
AAI-3
AAI-4
AAI-5
AAI-1
AAI-2
AAI-3
AAI-4
AAI-5
Source: PAI
Figure 7. The result of ASAIs Examinations (June 2000 -2004)
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
ASAIs can take the second series of examinations to become a Fellow of Society of
Actuary of Indonesia (FSAI) and will obtain registration numbers inform the
Minister of Finance Department as recognition from PAI of FSAI’s authority as a
public actuary. Following are the second series of examinations for FSAI candidate:
AI-1: Life insurance Mathematics
AI-2: Pension
AI-3: Risk Selection
AI-4: Life Insurance Liability Valuation
AI-5: Life Insurance and Pension Fund Investment and Related Regulations
After passing above examinations, they must attend seminars and workshop that
are conducted by PAI for actuary candidates. Then PAI will consider if the actuary
candidate is deserved to get the recognition.
The result recapitulation of PAI examinations held in June 2000 to 2004 is shown
in the table below.
Table 2. Result Recapitulation for FSAIs Examinations (June 2000-2004)
No. of Success 4 11 8 9 11 43
No. of Success 4 17 13 2 4 40
No. of Success 4 2 7 2 1 16
No. of Success 0 9 10 0 5 24
No. of Success 4 2 7 7 6 26
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Success Failed
30
28
26
24
22
20
Applicants
18
16
14
12
10
8
6
4
2
0
AI-1
AI-2
AI-3
AI-4
AI-5
AI-1
AI-2
AI-3
AI-4
AI-5
AI-1
AI-2
AI-3
AI-4
AI-5
AI-1
AI-2
AI-3
AI-4
AI-5
AI-1
AI-2
AI-3
AI-4
AI-5
2000 2001 2002 2003 2004
Source: PAI
Examination materials developed by PAI are focused in area of Life insurance and
Pension Fund. Before 2002, PAI developed the materials independently. After that,
PAI has been working together with academics of Indonesian universities in
developing more qualified examination materials. That might be the reason why
there was a decrease on passing rate due to the increase of the examinations
quality. By cooperating with the university academics, PAI hopes to gradually align
its syllabus with IAA’s, which in turn will qualify PAI as a full member of IAA.
Entrance examinations conducted by IAA are listed below:
IAA entrance examinations:
1. Financial Mathematics
2. Probability and Mathematical Statistics
3. Economics
4. Accounting
5. Modeling
6. Statistical Methods
7. Actuarial Mathematics
8. Investment and Asset Management
9. Principles of Actuarial Management
10. Professionalism
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
Being oriented towards IAA syllabus, PAI has tried to widen and enhance its
syllabus by making gradual adjustments to the current PAI examination materials.
PAI realized that increasing the quality of the examinations would cause decrease
on number of applicants that leads to the deceleration of PAI membership growth.
Consequently, PAI tried to come up with other ways to increase their number of
members. One of them was finding a new entrance mechanism besides by
examinations.
Other countries have adopted several forms of entrance mechanism. They are
shown by list of qualifications or requirements of actuaries in selected countries in
the table below:
Table 3. Qualification/Requirements of Actuaries in Selected Countries
Country Qualification/Requirements
Argentina Examinations, University Courses
Brazil University degree program
Finland Examinations by industry bodies, government examinations
Germany Examinations, University Courses
Hungary University degree plus 18 months of practice
India Examinations by industry bodies
Japan Examinations by industry bodies
Mexico University degree program
Examinations by industry bodies, University degree
Singapore
programs
Sweden University degree program
University degree plus at least three years of qualified
Switzerland professional experience, in line with international guidelines
of ASTIN (IAA)
United
Examinations, University Courses
Kingdom
United States Examinations by industry bodies
Examinations, full recognition on other actuarial
Malaysia
organization
South Africa Full recognition on other actuarial organization
Spain University degree program
Dutch University degree program
Examinations, full recognition on other actuarial
Canada
organization
Examinations, full recognition on other actuarial
Australia
organization
Britain Examinations, University Courses
Source: International Actuarial Association (IAA)
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P. JONATAN
STRENGTHS WEAKNESS
Small numbers Small numbers
There are many qualified
Unpopular
educational institutions
Special skill in mathematics and
Lack of communication skills
statistic
Discipline and responsible Has a narrow point of view
Has a National Association
Concentrated in traditional business
recognized by government
Critical of details Work only in technical area
Capable in solving technical and
No special institution for an actuary
complex problems
Good in modeling Back-office employee
Less paid compared to other
Has many potential students
professions
OPPORTUNITIES THREATHS
Play a bigger role in traditional
The entry of foreign actuaries
business
Play a bigger role in non-traditional Another profession started to learn
business actuarial technical skills
The emerging of a long term Traditional business model are started
investment instruments to out of favor
Crisis and catastrophe has
Crisis and catastrophe has caused
increased market demand on
bankruptcy of companies
actuarial profession
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
Beside private universities that are listed in the table above, there are
many other educational institutions, which have potentials to develop
actuarial education. Nevertheless, the number of the teachers or lecturers
is not proportional to the number of potential students. Unfortunately,
most of Indonesian actuaries are workers with tight schedule, so they have
no time to be academics in universities.
Indonesian actuaries have a conservative way of thinking in applying
theory or models and in using the available tools. Usually they are “back-
office-employee” who has less communication skills compared to other
professions. On the other hand, they usually work with high discipline and
responsibility. As an actuary usually is, Indonesian actuary has technical
skills that are formed as a unique combination of mathematical and
statistical knowledge. They are critical of details and very good in
modeling. Unfortunately, even though they are scarce in labor market, they
receive less salary than some other professions.
355
P. JONATAN
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
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P. JONATAN
12
10
0
South Africa
United Kingdom
Switzerland
Korea, Republic of
Japan
OECD *)
Israel
Malaysia
Chile
Czech Republic
Poland
Moroco
Hungary
Argentina
Thailand
Greece
Brazil
India
Mexico
China
Indonesia
Philippines
Turkey
Nigeria
Egypt
Country
Non-Life Life
Based on current conditions, many things can be done by PAI in order to develop
actuarial profession in Indonesia in quality and quantity as follows:
1. Add resource of fund: maintain member contributions by maintaining
membership database, conduct examinations in other cities to get addition
exam’s fee payment, get sponsorship, conduct actuarial seminars,
358
ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
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P. JONATAN
The recommendation will be valid for a certain period of time. Therefore, PAI could
conduct surveillances to these foreign actuaries.
According to the articles 29 verse (1), insurance and reinsurance companies must
allocate fund at least 5% of their employee, director, and commissioner costs for
their employee’s education and training costs in insurance knowledge. The
regulation opens opportunities to the actuaries and students to improve their
skills. But once again, it depends on each individual, whether he or she has the
willingness to study or to step ahead.
Based on articles 22 verse (1), insurance or reinsurance companies must fire the
company’s actuary that has made violation against insurance regulations.
Furthermore, as written in article 26, the registration of appointed actuary can be
cancelled if the actuary’s membership has revoked by PAI in case of violation on
regulation or discipline procedure, or if he/she failed to pass fit and proper
assessment because of integrity factors.
PAI has a disciplinary procedure to support both regulations explained before by
investigating all complaints about the work or attitude of actuaries in Indonesia.
The disciplinary system is shown in figure 11:
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
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(
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The ethical code and discipline procedure is a “rule of games” that must be kept by
the entire PAI members. If every member obeys the rule, then the association will
be in the right track towards its vision and mission. PAI is a community where all
members must apply their skills within the boundary of ethical code. Furthermore,
PAI as an actuarial association must be fair in implementing the agreement.
Everyone who breaks the rule will be punished according to his/her fault.
361
P. JONATAN
7. Conclusion
i. Good Governance intends to provide higher customer satisfaction, to increase
the moral and commitment of the employees, to increase the value of company
and to provide contributions in solving public issues. In other words, good
governance is not only for the sake of the shareholder but also the stakeholder.
ii. The government has developed appointed actuary concept in order to address
good governance in insurance companies and pension fund. Moreover,
actuaries along with actuarial association must be developing actuarial
profession either by quantity or quality to get the recognition or accountability
in playing the major role.
iii. There are three ideas involved in a profession; they are continuous learning,
organization, and a spirit of public service.
iv. Actuary as a profession that works in financial institutions market has a major
role in addressing either good corporate governance or good pension fund
governance
v. The actuarial professionalism keys:
1. Good Governance;
2. Good Education system and Appropriate Entrance Requirements;
3. Professional conduct of members;
4. Research and Standard Process;
5. Continuing Professional Development;
6. Good Communications.
vi. The ethical code and discipline procedure is a ‘rule of games’ that must be kept
by the entire PAI members. If every member obeys the rule, then the
association will be in the right track towards its vision an mission.
References
[1] Actuaries Bulletin, 2nd Edition, January 2000.
[2] Carmichael, Jeffrey and Pomerleano, Michael. The Development and
Regulation of Non-Bank Financial Institutions, The World Bank, USA, 2002.
[3] Chengfang, Shen, Development of the Chinese Actuarial Profession: Addressing
Good Governance, 12th East Asian Actuarial Conference, Philippines, 2003.
[4] Contingencies March/April 2005.
[5] Djohanputro, Bramantyo, MBA, Ph.D, Manajemen Risiko Korporat
Terintegrasi, memastikan Keamanan & Kelanggengan Perusahaan Anda, PPM,
Jakarta, 2004.
[6] Dafras, ASAI and A.M., Tugendar, Drs.,Msc,FSAI. Profesi Aktuaris, Indonesian
Actuarial Conference II, Jawa Barat, 1993.
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ROLES OF ACTUARIES AND ACTUARIAL ASSOCIATION IN INDONESIA
[7] Fleisher, Craig S., Strategic and Competitive Analysis, Prentice Hall, USA,
2002.
[8] Guerard, Yves. IAA Wider Fields, 11th Asian Actuarial Conference, Hong-Kong,
2001.
[9] Nagasawa, Takayuki. The Activities of Actuaries in Japanese Trust Banks for
Good Governance, 12th East Asian Actuarial Conference, Philippines, 2003.
[10] Minister of Finance Decree No 426/KMK.06/2003 Business Permit and
Legitimacy of Insurance and Reinsurance Companies.
[11] Rachmatarwata, Isa. MM-UI courses: Actuarial Professionalism, Jakarta,
2005.
[12] Prime, Catherine. Actuary’s Viewpoint, 12th East Asian Actuarial Conference,
Philippines, 2003.
[13] Ethical Code of Society of Actuaries of Indonesia, Jakarta, 2005.
[14] Discipline Procedure of Society of Actuaries of Indonesia, Jakarta, 2005.
[15] Rachmatarwata, Isa and Guererd, Yves, Pension Governance in Indonesia, 12th
East Asian Actuarial Conference, Philippines, 2003.
[16] Sinaga, H. Hotbonar, Membangun Asuransi Membangun Indonesia, Jakarta,
2004.
[17] Siamat, Dahlan, Manjemen Lembaga Keuangan. Jakarta, 2004.
[18] The Actuary Volume 1 Issue I, October 2004.
[19] The Actuary Volume 1 Issue II, December 2004.
[20] Siauw, Eduard Simon, Actuaries and Accountability, 6th Actuarial Congress of
Society of Actuaries of Indonesia, Jakarta 2005.
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