THE IMPORTANCE OF ACTUARIAL PRACTICE IN ETHIOPIA

Abstract

Actuarial practice is concerned with the assessment of the economic consequences associated with phenomena that are subject to uncertainty. This practice requires an understanding of the principles underlying several fields, including statistics, economics and risk management, as well as the principles of modeling, valuation and risk classification. Accepted Actuarial Practice is a practice or practices that are generally recognized within the actuarial profession as appropriate to use in performing actuarial services within the scope of an international standard of actuarial practice or the applicable professional standards of practice. The main objective of the study is to analyze and determine the importance of actuarial practice in Ethiopia; and to give recommendations based on the findings. The study concentrated on the importance of actuarial practice as it applies to the Ethiopian insurance and financial sectors. The study mainly examines the importance of actuarial practice, the role of actuaries and actuarial firms, and the role of actuarial regulatory regime within the context of the Ethiopian insurance and financial sectors. The study is conducted within the framework of descriptive research. Both primary and secondary sources of data are used. The secondary data is collected by desk review and analysis of secondary data is used to produce theoretical findings that substantiate the research objectives. Primary data, on the other hand, is collected with mixed method involving both quantitative and qualitative methods. Survey method is applied with combination of structured questionnaire and semi structured key informants interview as tools of data collection. The findings derived from analysis of secondary data theoretically confirmed the importance of actuarial practice in Ethiopia. Similarly, the findings produced as the result of analyzing primary data practically validated the importance of actuarial practice in Ethiopia. Based on the findings of the study, actuarial practice is determined to be very important in Ethiopia. Actuarial practice is important in the Ethiopian insurance and financial sectors and contributes significantly to the development of the sectors. Actuaries, actuarial firms and the actuarial regulatory regime play an important role in promoting actuarial practice in the international domain. However, their limited roles in promoting the practice in Ethiopia resulted in a poor and underdeveloped actuarial practice observed in the country, which in turn become one of the major reasons behind the country’s underdeveloped insurance and financial sectors.