The Future of Actuarial Research in Higher Education

For most aspiring actuaries, our accredited universities – Australian National University, Bond University, Curtin University, Macquarie University, Monash University, the University of Melbourne, UNSW, and Victoria University of Wellington – help deliver the Foundation Program plus half of our Actuary Program within their actuarial degrees.

These universities are more than just education pathways to qualify — their commitment and dedication to actuarial research have benefits for both the profession and the broader community.

Associate Professor Adam Butt, the Head of Actuarial Studies at the Australian National University says,

“Actuarial research is at its most valuable when it involves collaboration, both with other academic disciplines and with industry. “

“Academic collaboration with industry is mutually beneficial in providing industry with answers to questions they might not otherwise have resources to investigate, and providing academics with the data they need to answer relevant research questions.”

Millions of dollars in research grants and projects are awarded across our universities each year. Traditionally the majority of funding has been from the Australian Research Council however trends are showing funding is expanding and diversifying to include industry and professional actuarial bodies. Our universities are well placed to meet industry needs and deliver exceptional multidisciplinary research.

Research Strengths

There are some trends across our universities relating to research areas. These include actuarial applications (mortality modelling, risk management), external factors (climate risk, health), insurance (general, life), and the changing work environment (data analytics, machine learning, cyber).

At the Australian National University, located in the nation’s capital, much of their research focuses on issues of public policy interest. Within this, the areas are diverse depending on the interests of individual academics, and include retirement incomes, gender equity, mental health, ethics, income-contingent loans, and mortality modelling.

Actuarial and financial data analytics are at the forefront of actuarial research^[1] on the Gold Coast at Bond University, with newly hired actuaries, Twané Wessels and Lucia Viegas, bolstering research and industry linkages. Macquarie University also speaks to their research strengths in data analytics, with a focus on insurance; adding quantitative finance and risk management; and longevity risk and mortality modelling to their list.

Professor Zhuo Jin, the Director of Research at Macquarie, is proud of their research achievements.  “Recently, our research groups at Macquarie University have worked on various projects that utilise quantitative techniques to investigate loss events involving cyber risks, catastrophe risks, flood risks, etc. We have also engaged with industry partners for research collaborations to address the insurability of these underlying risks,” said Professor Jin.

In Western Australia, Associate Professor Jo-Anne Mogan, Program Director of Actuarial Studies at Curtin University advises, “Multidisciplinary research, particularly demand-driven research, is a highly rewarding growth area.” It’s no surprise that there is a strong focus on applied multidisciplinary research in areas of agriculture, biology, defence, and mining. Specific to traditional actuarial science, strengths relate to mortality modelling and longevity risk management.

The University of Melbourne’s research activities span diverse areas of actuarial studies, excelling in statistical modelling of risks, climate risk analysis, cyber risk, reserving, portfolio risk analysis, and applications of stochastic optimisation and machine learning. With an aim to make impactful advancements in actuarial research, Melbourne’s research is dedicated to addressing the challenges of emerging and global risks.

Down the road at Monash University, their research focus is mortality/longevity modelling, health and retirement policies and products, insurance pricing and reserving, quantitative risk management, financial mathematics, Bayesian analysis, and optimisation methods. Their actuarial research team works on a wide range of topics ranging from theoretical and technical developments to practical applications.

UNSW School of Risk and Actuarial Studies is proud to be one of the largest actuarial groups in the world and has been consistently ranked globally #1 business school in risk and insurance, and actuarial science research (UNL rankings). Their research spans three distinct areas: risk (quantitative risk management, mortality, longevity and health risks, insurance risk modelling, AI/ML enhanced actuarial analytics); insurance (general insurance, life insurance, capital and reserving, insurance pricing); and superannuation (pension economics, retirement products and decisions, behavioural insights). Members of the school are also chief/founding investigators in multidisciplinary research groups such as the ARC Centre of Excellence in Population Ageing and Research (CEPAR), the UNSW Climate Risk and Response Institute and the UNSW Business AI Lab.

Victoria University of Wellington’s main areas of research are financial mathematics, particularly options in insurance contracts and stochastic processes.

Spotlight on Data

Actuarial research is experiencing a transformative wave with the integration of machine learning and data science techniques in projects across all universities. Machine learning algorithms offer the ability to uncover complex patterns and relationships within the data, enabling researchers and actuaries to develop more accurate predictive models and identify emerging risks.

Monash has the largest group of econometricians and statisticians in a single department in Australia, creating an exceptional hub for combining actuarial studies and big data analytics to leverage the latest trends and foster innovation. At Bond University, the establishment of a University Centre for Data Analytics is helping the university establish itself as a player in the big data and analytics research space.

Macquarie is particularly proud of Professor Pavel Shevchenko’s project “Quantitative of cyber risk and its driving factors.”  This project developed quantitative stochastic models for cyber loss events to address two core questions:

1. What factors are the most significant covariates that may explain the frequency and severity of cyber loss events and are they heterogeneous over cyber risk categories?
2. Is cyber risk insurable in regard to the required premiums, risk pool sizes and how would this decision vary with the insured companies industry sector and size?

The project addressed these questions through a combination of Extreme Value Theory and Generalised Additive Models for Location Shape and Scale (GAMLSS) using leading industry cyber events datasets provided by Advisen. The results provide several key insights into the nature of the insurability of cyber risk.^[2]

Developments in Climate and Sustainability

Climate change is a key risk that can impact our social, economic, and financial systems. As an interdisciplinary issue, actuarial research in the area can support best practice and develop expertise in the industry with regards to managing climate-related risk and uncertainty. Based on university insights, actuarial research is also moving into this space.

At UNSW, in response to questions about the impact of climate risk in insurance, superannuation/pensions and financial markets, they established a Climate Change and Insurance Reading Group, which has been running since September 2022 with attendees across different schools and universities. The regular fortnightly meetings aim to enhance research capacities and foster the exploration of innovative research ideas in this field.

Melbourne’s research team aims to provide valuable insights into climate change implications for the insurance sector, fostering informed decision-making for a sustainable future. Associate Professors Han Li and Rui Zhou are delving into the potential effects of climate change on human mortality rates, alongside examining the subsequent impact on insurance and annuity valuation. Simultaneously, Professor David Pitt studies the time trends in major tornado-induced losses in the United States.

Curtin’s interdisciplinary research focus has connected sustainable agriculture and food production with data and modelling techniques. Two examples of this include the Analytics for the Australian Grains Industry (AAGI) and Food Agility Cooperative Research Centre (CRC).

Mark Hayes, a Fellow Actuary and Senior Lecturer completing doctoral research with the CRC, explains, “The research will propose a framework to quantify the myriad of agricultural risks to which broadacre grain farmers are exposed. This framework, using data and digital technology, aims to improve sustainability.”

Dr Suman Rakshit, a Senior Lecturer of Data Science and Senior Research Fellow at the Centre for Crop and Disease Management, has developed innovative statistical designs and analysis techniques enabling the answer to one of the critical questions facing the agricultural industry: how to efficiently estimate spatially-varying treatment effects^[3]. The ultimate goal is to reduce the economic impact of crop disease on the Australian grains industry.

The Importance of Collaboration

When speaking about their priorities and messages, one key word was shared by all universities — COLLABORATION.

Professor Jackie Li, the Director of Actuarial Studies at Monash University said,

“Bridging the gap between academic and industry perspectives in actuarial research requires collaboration, knowledge exchange, and interdisciplinary approaches.”

Professor Jackie Li also said, “Strong partnerships and open communication can drive advancements and ensure the relevance of actuarial research in practical industry settings.”

Associate Professor Rui Zhou, the Nominated Accredited Actuary from the University of Melbourne, agrees. “We actively seek partnerships with industry leaders, insurers, regulatory bodies, and other relevant organisations to understand their pressing concerns and co-create innovative solutions to ensure that our research remains practical, relevant, and applicable to the current needs of the industry.”

UNSW has a long track record of large-scale collaborative research projects co-funded with industry and/or government, in projects related to population ageing, annuities demand, super financial security, long-term care financing and policy, mandatory pre-funded retirement income schemes, and modelling claim dependences in general insurance.

More broadly, UNSW is also committed to developing stronger links between the academic research community and industry partners. In 2021 and 2022, they successfully organised two Risk and Actuarial Industry Workshops. The outcomes and insights from these workshops were published in Actuaries Digital^[4]. Two additional workshops will be held in 2023 – one focused on housing wealth and retirement, and one on climate risk. In addition, UNSW co-hosts the annual Colloquium on Pensions and Retirement Research, with the 31^st conference to be held in December this year. 

Connecting Research to the Classroom

Whilst much of the research discussion focuses on collaboration, industry need and trends in research grants, universities are also thinking about how to connect their research with their students in the classroom.

Bond University’s mission speaks directly to this: ‘As Australia’s first private non-profit university, Bond University strives to be recognised internationally as a leading independent university, imbued with a spirit to innovate, a commitment to influence, and a dedication to inspire tomorrow’s professionals who share a personalised and transformational student experience.’

UNSW is delivering extracurricular initiatives to support students on their education journey. Professor Bernard Wong, Head of the School of Risk and Actuarial Studies at UNSW, said, “Leading examples of the school’s commitment to be a global research leader in collaborative research with industry include the establishment of the Innovation in Risk, Insurance, and Superannuation Knowledge (IRIS) Hub at UNSW that will facilitate and provide seed funding for such activities, as well as the Co-op and UNSW Sandbox Education programs which systematically include authentic industry problems into academic programs.”

The Future

Actuarial research in higher education empowers the future generation of actuaries with knowledge, innovation, and insights to navigate the evolving landscape of risks. By fostering interdisciplinary collaboration, embracing emerging technologies, and addressing societal challenges, higher education actuarial research paves the way for a resilient and sustainable future.

The Actuaries Institute will be looking at ways to increase connections between our accredited universities and the actuarial community.

Interested in finding out more?

The following links will direct you to reports, journal articles and general research information available on our partner university websites:

• Australian National University (you can also check out recent journal articles)
• Bond University
• Curtin University
• Macquarie University
• The University of Melbourne
• Monash University
• UNSW
• Victoria University of Wellington

References

• • Hanewald, K., Wong, B., and Woo, J.-K. (2022) Retirement, superannuation, and data analytics insights from the 2022 UNSW Risk and Actuarial Industry Workshop, Actuaries Digital
  • Hanewald, K., Wong, B., and Woo, J.-K. (2022) Insights from the UNSW Risk and Actuarial Industry Workshop, Actuaries Digital link.

CPD: Actuaries Institute Members can claim two CPD points for every hour of reading articles on Actuaries Digital.