Under the Spotlight with Michael Sherris

In an exclusive interview, Michael shares his career journey, milestones, accolades and invaluable learnings, unveiling the indelible mark he’s made on the landscape of actuarial science.

For those who don’t know you, could you share a bit about yourself and your professional background?

Growing up on Sydney’s Northern Beaches, I attended a high school known for its sports stars and even Baz Luhrmann who attended a few years later. I excelled in mathematics and science. Initially, I considered a career as an engineer until I heard about actuarial studies. The challenge of qualifying and the financial rewards of the actuarial profession, along with a bursary from the Reserve Bank of Australia (RBA) and strong HSC results, saw me enrolling at Macquarie University to complete a bachelor’s degree in actuarial studies.

My career began at the Reserve Bank of Australia, where I completed my actuarial undergraduate degree and an honours year at Macquarie University and studied the examinations to quality as a Fellow of the Institute of Actuaries (London).

After a short period in life insurance I returned to the banking sector, where I held various roles, including Bank Actuary at CBC Bank and later established the Bank Actuary role at the State Bank of NSW. During this time, I embarked on a part-time MBA at the University of Sydney to enhance my business acumen.

A desire to pursue a PhD led me to a lecturer position at Macquarie University. This role exposed me to teaching and increased involvement in the actuarial profession, including the Society of Actuaries and the AFIR Section of the International Actuarial Association. Although the PhD program at the AGSM was suspended, I continued to focus on finance and investment research, contributing to professional journals and conferences.  

My involvement in executive courses at the Centre of Money, Banking and Finance led to the publication of my first practitioner textbook, Money and Capital Markets: Pricing, Yields and Analysis which was awarded the H.M. Jackson Memorial Prize from the Actuaries Institute in 1996. Subsequently, I contributed to the Financial Economics text for the Society of Actuaries.

When I joined Macquarie University it was the sole provider of actuarial studies in Australia. Subsequently, with the initial support from distance teaching by Macquarie University academic staff, the University of Melbourne and the Australian National University, actuarial programs were established.

In the late 1990’s I was appointed as Professor of Actuarial Studies at UNSW, spearheading the development of undergraduate, co-op and master’s programs as well as PhD research programs.

Our focus on teaching excellence, research and industry engagement propelled the UNSW actuarial program to global recognition.

In 2007, my contributions to the actuarial field were acknowledged with the Actuary of the Year award. Subsequently, I engaged in practice-based research and directed industry-focused projects, notably as a Chief Investigator and Director at the Australian Research Council Centre of Excellence in Population Ageing Research (CEPAR).

Retired now, I remain active as an Emeritus Professor at UNSW, mentoring students and early career researchers, and continuing research endeavours through CEPAR.

Your contributions to actuarial research have been widely acknowledged – including being awarded the H.M. Jackson Memorial Prize multiple times. Could you share some of the key findings or projects that you’re particularly proud of?

With over 110 journal publications, it’s difficult for me to highlight as every publication aims to present key and interesting findings.

Initially, my interest in financial economics and applications to pensions and insurance led to Papers that applied derivative pricing techniques to actuarial issues, including deferred capital gains tax reserving and option features in retirement benefits.

My Paper with honours student Andrew Ang, Interest Rate Risk Management: Developments in Interest Rate Term Structure Modeling published in NAAJ Vol. 1 in April 1997, provided a concise yet rigorous coverage of term structure models for actuaries and was used in the actuarial education syllabus for several years, as well as being awarded the Redington Prize of the Society of Actuaries in 1999.

In the early 2000’s, my research interest shifted to non-life insurance and the incorporation of insurance economics into actuarial approaches to pricing, solvency, and capital allocation as well as non-expected utility theory in insurance pricing. The Paper with Professor Zinoviy Landsman, Risk Measures and Insurance Premium Principles, incorporating non-expected utility into insurance pricing and published in Insurance: Mathematics and Economics in 2001, was awarded the Actuaries Institute’s H.M. Jackson Memorial Prize in 2002.

Insurance pricing and the incorporation of a price of risk were considered in the Paper with my PhD student Mahmoud Hamada ,Contingent Claim Pricing Using Probability Distortion Operators: Methods from Insurance Risk Pricing and their Relationship to Financial Theory, appearing in Applied Mathematical Finance in 2003. This Paper was awarded the H.M. Jackson Memorial Prize of the Actuaries Institute in 2004.

I was intrigued for many years about why insurers held capital many times more than the statutorily required capital, how this impacted insurance prices, particularly in a multi-line insurer, and how allocating this available capital to meet losses from all lines of business to individual lines of business. A key finding highlighting a financial approach to allocate the capital to lines of business and its impact on pricing was published in my Paper, Capital Allocation and Fair Rate of Return in Insurance, appearing in the Journal of Risk and Insurance in 2006. This Paper was awarded the Casualty Actuarial Society (CAS) annual prize for the most valuable contribution to casualty actuarial science published in an American Risk and Insurance Association journal, as well as the H.M. Jackson Memorial Prize from the Actuaries Institute in 2007.

Related Research Papers on capital allocation and pricing in insurance with honours student Shaun Yow were awarded the Geneva Association/IIS Research Program Shin Research Award for Excellence in 2007 and the International Actuarial Association’s (IAA) AFIR Section Bob Alting von Geusau Memorial Best Paper Prize in 2009. The Research Projects on insurance pricing and capital were aimed to provide insights of value to practitioners. Even though the research was more applied than theoretical, it still is regarded as academic by practitioners.

Around 2010, my research started to consider longevity risk, modelling mortality and disability, long-term care insurance as well as retirement and aged care financing. Research ranged across many issues, too many for me to highlight in detail^[1].

I have had a long-term association with the Asia Pacific Risk and Insurance Association serving on the Board several times and being elected President in 2009.

Another proud moment in my career was being recognised for my teaching, research, and service contributions by the award of the APRIA Kyobo Life Contribution Award in 2023.

You’ve also been heavily involved in various committees and taskforces within the Actuaries Institute. What were some of the strategic initiatives you’ve championed to help advance the field and support actuaries in their roles?

I’ve always actively contributed to the profession, locally and internationally, mostly related to education and new developments.

I was very active in the Investment Management course and the development of the Specialist Finance and Investment course for the Actuaries Institute and was involved with course development and examinations, and ultimately became Chief Examiner.

I’ve also served on many organising committees and taskforces and was also elected to the Actuaries Institute Council and chaired the Education Committee.

I was also active in the AFIR Section of the International Actuarial Association serving as a Board member several times, then elected Chair of the AFIR-ERM Section Board, and have served on the Scientific and Organising Committees of many international conferences.

Your editorial role at the Quarterly Journal spanned a significant period. How do you perceive the evolution of actuarial literature and its impact on the profession?

The Quarterly Journal was a joint effort with David Zaman, aiming to generate interest in research and publication of research in the Australian actuarial profession.

The actuarial research literature has evolved significantly over the last 40 years or so, moving from mostly professional journals reporting on proceedings and discussions at professional meetings to international scientific research journals with rigorous review processes and high-quality research papers, both theoretical and applied. Even though the actuarial journals do not receive the same recognition as those from other disciplines, they do address significant issues for actuaries.

An important role for researchers is to translate their research into a context and form that is relevant for practitioners. This often occurs through industry workshops and seminars, like the UNSW Actuarial Education and Research Symposium where we provide practitioners with an opportunity for industry input into the research program at UNSW. Having university researchers present their work at industry and professional conferences is important as it allows academic literature to have a greater impact on the profession.

Reflecting on your career journey so far, what do you see as the most pressing issue for actuaries?

The pressing issues include the ageing population, financing and insuring retirement incomes and aged care needs, climate change, and its impact on insurance, the transition to renewables and the development of machine learning and AI.

Although the ageing population has been an issue for many years, the financing and insuring of retirement incomes through longevity-linked insurance products – such as lifetime annuities and innovative products such as GSAs and pooled annuities – has been slow in happening, not only in Australia but in many countries around the world.

“We know how to design cost-effective, efficient longevity solutions that include investment exposure to equity, but these products are still not prevalent nor available for the many retiring Australians who would benefit from these solutions.”

Integrating these products with means-testing for age pensions and innovations including coverage for out-of-pocket aged-care costs and allowing for government aged care should be possible, especially given the development of AI and other technology solutions. It would be great to see more actuaries involved with superannuation funds supporting these much-needed innovations.

The increase in the prevalence of floods and other catastrophes has highlighted the importance of insurance solutions that can spread risks more effectively when systematic events occur, such as the Cyclone Reinsurance Pool – another area where I’d like to see greater actuarial involvement.  

Finally, the energy market and the increased cost of electricity as we transition to renewables would benefit from an actuarial perspective. Different sources of renewable energy (e.g., solar, wind and battery) have different costs and risk characteristics, producing variable amounts of energy at variable times. Batteries and pumped hydro provide smoothing of energy needs through storage and act like capital reserves in insurance. Many of the issues around pricing, risk and capital in insurance have direct and relevant applications to the economics of energy transition.

What is the most valuable skill an actuary can possess?

Actuaries are multi-skilled but amongst the most valuable is having a strong sense of fairness and professionalism.

Of course, technical skills are important, such as computing, as well as soft skills like the willingness and ability to learn new ideas and concepts. However, at the heart of the actuarial profession is the role of ensuring financial security systems – such as life insurance, pensions, health, and long-term care – are efficient and fair for the sponsors and the participants. Without this, we are all worse off.

What do you believe your legacy will be?

Of all the contributions I have made over my active professional life to date, the most significant impact that I have hopefully left as a legacy is the many students that I have had the good fortune to guide in their learning.

I have been very fortunate to have had the support of the industry when establishing the UNSW Actuarial Program, which has helped attract the best students, provide guest lectures, and input into the syllabus and assessment process.

The UNSW Actuarial Program has also been a significant legacy that has produced many present-day and future leaders.

“There is nothing better than seeing the success of previous students making impacts and having a fulfilling career.”

Could you share your insights on the future of actuarial science and what advice you would give to aspiring actuaries?

Actuarial science will continue to evolve as it always has. I’ve been fortunate enough to be actively involved as the profession embraced financial economics and further developed the stochastic approach to actuarial applications.

Its unique combination of mathematics, probability, statistics, economics and finance, along with an applied focus, will provide a challenging learning experience that will attract the best and brightest students, provided it maintains its high standards.

For aspiring actuaries, if you want a business career and enjoy problem-solving, then you cannot go wrong with completing an actuarial science degree. From this base, along with the development of business, team and communication skills, you will have numerous opportunities for an enriching, varied and satisfying career.

References

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