Andy Rallis, FSA, MAAA, EVP and global chief actuary at MetLife, has experienced firsthand the increased focus on modeling as part of actuarial practice, and he has taken bold steps to centralize the modeling function. “The modeling organization was created to address Solvency II,” says Rallis. “With 46 countries, we had to have standard approaches—if everyone was left on their own, it would have been really messy.”
But Rallis did not stop there. Recognizing the strength of the diverse group that had been assembled—with teams focused on development, production, execution and quality assurance—he expanded beyond financial reporting. “Once we had the organization in place, we moved many of our other actuarial applications to this group—embedded value, cash-flow testing, asset liability management (ALM)— anything that resembled a production process” and immediately benefitted from “greater efficiency and quality.”
Rallis continues: “It’s made the actuarial team stronger. The modeling organization serves the business users and provides the technical skills to support the modeling needs of MetLife.”
When asked about the impact outside of the actuarial team, Rallis says: “The relationship with IT has greatly improved. The modeling organization is an advocate for the business users when making IT requests. They also help communicate the IT challenges and constraints in a way the business users understand. The modeling organization also has improved the relationship with risk management and audit.”
Some modeling applications continue to exist outside of the modeling organization. Rallis says MetLife chose to “draw the line with production modeling applications” and leave “creative modeling functions with the business users.” Rallis readily acknowledges: “In other situations where a company wants to benefit from standard approaches and leverage a specialized skill set like predictive modeling, putting those roles inside the modeling organization absolutely makes sense.”
Talent is a critical aspect of the evolution of the modeling organization. Rallis notes the benefits of separating the operational modeling skills from the business skills when creating the modeling organization. Predictive analytics and data science are areas that will pose a challenge for companies to address organizationally. In fact, Rallis sees that “actuaries are being provided with opportunities to learn a wide range of skills, and many of these are highly technical and very specialized.” Companies will need a strategy for acquiring, developing and retaining these skills. MetLife “has benefitted tremendously from having a dedicated modeling organization,” says Rallis, who recognizes the positive impact of creating a technical career path that leads to very senior levels within an organization.
Just how high? A diverse team with critical responsibilities, like that which exists with the modeling organization, requires leadership. At MetLife, the modeling team is led by the global head of Actuarial Modeling, and that role is a peer to the four regional chief actuaries at MetLife. While the role is not a “chief” in title, they are seated at the table with chiefs. So, will MetLife ever have a chief modeling officer? Rallis chuckles and says, “We already do—I just chose a different title.”
Copyright © 2019 by the Society of Actuaries, Schaumburg, Illinois.