An Interview with Tim Boonen
Expanding Horizons, November 2022
This month, Expanding Horizons had the opportunity to interview Tim Boonen, the winner of the Society of Actuaries’ (SOA’s) second Actuarial Science Early Career Award.
Expanding Horizons (EH): Congratulations on winning the SOA Actuarial Science Early Career Award. Can you tell us about your background?
Tim Boonen (TB): Thank you! It was a big honor for me. I am an associate professor in actuarial science and mathematical finance at the University of Amsterdam in the Netherlands. I was also born in Amsterdam. I finished my studies at Tilburg University, with a BSc in econometrics and operations research, and two MSc’s—one in quantitative finance and actuarial science, and one research master in finance. In 2010 I started my Ph.D., also at Tilburg University. Upon graduation, I moved to the University of Amsterdam in 2013. I am currently working in the Quantitative Economics department within the Amsterdam School of Economics. Within the school, we have a bachelor’s and a master’s program in actuarial science, and I teach within these programs. I received tenure at the university in 2019.
EH: How did you get into the profession?
TB: Actually, it turned out to be very circumstantial. Because of my undergrad and master’s, I actually had more training as an economist. To start my Ph.D., I was looking into real-life business applications of mathematical game theory. Via one of my Ph.D. advisors, Anja De Waegenaere, I got in touch with some actuarial applications in the sharing of longevity risk. Longevity risk is the systematic risk that a population lives longer than expected, and this is relevant for pension funds and annuity providers. Through this field, I developed an academic interest in risk sharing and then, in particular, in the impact of regulation and/or risk measures on the design of risk transfers among a group of competitive insurance companies. These actuarial applications formed a substantial part of my Ph.D., and after graduation I obtained a job at the University of Amsterdam as assistant professor within the actuarial research group. This group has a rich history of academic research in actuarial science. In this way, I developed an academic career in actuarial science.
EH: What are your research topics?
TB: I study risk sharing, capital allocation, applications of game theory and longevity risk modelling. In particular, I study actuarial problems with techniques that are also relevant for economists and insurance business professionals. In this way, I try to introduce some economic concepts into actuarial science. For instance, optimal reinsurance contract theory is an important application of risk sharing, and I studied concepts such as competitive equilibria and the core. Such concepts are meant to show the stability and efficiency of reinsurance contracts in an economic environment with multiple reinsurers (competitors). Recently, I also studied with coauthors the impact of multiple perils on optimal reinsurance contracts; in particular, we showed how efficiency can be obtained for reinsuring flood risk.
Moreover, since my Ph.D., I have studied capital allocation. For pricing or performance measurement, an insurer needs to allocate risk capital to the lines of business. To do this, the Euler rule gained substantial attention in the academic literature, and the Euler rule is equal to a gradient (vector of partial derivatives) of an appropriate function. In my past work, I mainly studied the impact of nonlinear risk aggregation, and I tried to generalize the Euler rule to situations in which the gradient is not well defined. Nonlinear risk aggregation arises, particularly in insurance, when portfolios are not formed as linear combinations of random loss/profit variables, but when insurance claims often arrive via a Poisson process.
EH: Did you receive any support that has substantially helped you in your early career?
TB: First and foremost, I am very grateful to my two Ph.D. advisors: Henk Norde and Anja De Waegenaere. They always supported me as a (graduate) student, and they encouraged me to continue in academia. Also, and this cannot be understated, they gave me excellent guidance in ethics and writing in academia. It is because of them that I learned to improve my writing and to be very critical about my own work before submitting a paper for publication. Moreover, I am very grateful to my colleagues at the University of Amsterdam for hiring me in 2013. At that time, I was not close to publishing my first papers, and it was not clear if I could find an academic job. The job in Amsterdam changed my early career fundamentally. Later in my career, I got great encouragement from Ken Seng Tan, Vali Asimit, Enrico Biffis and Andreas Tsanakas; they supported me at a time when I had no publications. For young researchers, it is important to have some senior researchers who support you, and I have been fortunate to have such people around me throughout my academic career.
EH: What challenge did you encounter as an actuarial researcher?
TB: While doing your Ph.D., you generally work with a supervisor, and the supervisor can tell you what problems are interesting. This has the advantage that you can focus on solving well-shaped problems, but you are often responsible for the completion of the project and not the design. For an early career researcher with a Ph.D., it is generally difficult to be an expert in all the specializations that appear in actuarial science. Nobody expects this from you, but this creates opportunities to find coauthors who can complement your research skills. It is, however, difficult to find coauthors who can both complement your expertise and enable you to develop a new and interesting approach together. I found it a lot of fun and challenging to work with young coauthors who have skills outside of my own skill set, and this led to some interesting projects in the past. A key challenge was to explain “foreign” (nonactuarial) approaches to an actuarial audience and also to contribute to different fields. When working with peers, the exchange of ideas does not necessarily need to lead to an academic paper, so there is not a lot of pressure to collaborate. Moreover, such research discussions often lead to friendships all over the world.
EH: What are your most important academic achievements?
TB: That is a hard question, because it’s hard to choose between different achievements. I am most proud of my international network and reputation, without pointing at particular projects. It has always been great fun to develop ideas with friends and colleagues, and I feel fortunate to be able to enjoy most of my daily work. I am glad to have developed a reputation in the research topics on risk sharing and capital allocation, and it makes me feel proud when people in the industry are familiar with some of my work.
EH: Any personal philosophy with regard to actuarial teaching?
TB: Prospective actuaries need a thorough understanding of a multitude of topics. This is important to have common ground with fellow actuaries, and employers will know the type of professional they hire. In this way, actuaries are trained with a wide background, which includes topics in applied probability and statistics, data science, mathematics and some foundations in economics and business. This places an actuary in a good position in the industry to be able to form connections among several specializations. I strongly believe that we also should teach actuaries to become critical thinkers and managers. With a diverse background, actuaries are in a great position to develop a critical attitude toward a variety of risk management subjects, such as regulation, pricing and loss reserving. I believe this attitude should be stimulated in (advanced) actuarial courses.
EH: Do you have any advice for young academic researchers?
TB: The most important one is the following: Study problems that you like, and try to “dig” as deep as you can into these problems!
In academic research, you are in the fortunate position of being able to spend more time solving challenging problems than nearly anyone else in the actuarial profession. This should be exploited, and do not settle for too many simplifications too soon. Once a paper is published, the paper can be read by all your peers “forever,” without you being able to rewrite it. It is therefore fundamental for your reputation to publish papers that show that you (a) like the approach and (b) are convinced your approach is the best to solve the underlying problem. For the same reason, I believe that good academic writing is very important and not to be marginalized.
EH: What is your vision about the future of actuarial research?
TB: I am very positive about the status of academic actuarial research. The main academic journals have very high standards, and this ensures that the quality of academic research remains at a high level. I believe that actuarial research is to be designed around practical problems that actuarial professionals face in their work. This connection to real-life problems is important, as it enables an actuarial researcher to apply technical skills in a constructive way. In my opinion, mathematics can be seen as a language that is used to describe and solve real-world applications. It is therefore important for actuarial researchers to only use mathematics that helps them to solve such applications and not create new mathematics that are difficult to apply.
I see writing an academic paper for an actuarial audience as an argument in a discussion. In a discussion, there should be room for feedback and for improvements, but your own argument still needs to be well thought out. One aspect of the actuarial science literature that sometimes bugs me is that there are too many papers that are not written to be read. I mean, really read. Many articles are being published, but some of these articles may not serve to advance the academic field enough. Also, not all academic papers have enough potential for applications in the actuarial industry, while this should be the potential readership for academic actuarial research.
EH: What do you see as the biggest challenge of the actuarial profession?
TB: Overall, I am pretty optimistic about the future of the actuarial profession, as it is a field that will remain in the center of risk management and insurance. The skills that actuaries ought to possess are not easy to replace with specialists in other disciplines. The biggest challenge for the actuarial profession is to adapt to new developments in the areas close to actuarial science. An obvious example here is the trend to be able to develop artificial intelligence and machine learning techniques for actuarial problems. When I was young, fast computing and the Internet were not fully developed, whereas now, two to three decades later, the world is hard to imagine without them. Also, for a proper valuation or pricing of liabilities, I believe a basic understanding of asset pricing and economics is important as well. Increasingly often, actuaries need to use and understand concepts such as the term structure of interest rates and market consistent valuation. As long as actuaries keep on adapting and improving their techniques in such changing environments, I am very optimistic about the future of the profession.
EH: Why and how do you think the insurance industry should support academic actuarial research?
TB: Firstly, I think that it is important for actuarial researchers to solve relevant problems that arise from the insurance industry. By making the academic work accessible to the industry (via seminars, workshops or industry papers), the methodologies could be implemented in actuarial tools. An important task for actuarial researchers is valorization—being able to explain and present to a practitioner’s audience why the work is relevant for the insurance sector. Also, academic research can form a basis for regulation (as can be seen in the Swiss Solvency Test in Switzerland), and this should bring academics, regulators and insurance companies together. Moreover, the independent mind of an academic researcher enables a fresh assessment of an internal problem in the actuarial industry.
Secondly, it shouldn’t be underestimated how many professionals in the insurance industry have good research ideas and are willing to dedicate time to these problems. Discussions and collaborations with academics and students will greatly benefit practitioners, and such collaboration often leads to interesting projects for all parties involved. In my experience, practitioners often display a great joy in developing such research projects, and joy in work is very important.
Thirdly, I think a fundamental job for me is to educate and train academic researchers to become important and independent professionals. This will prove to be invaluable for the insurance industry.
EH: Do you have any hobbies?
TB: It is no secret that I am a big fan of soccer, particularly my team. You may be surprised to hear that for 17 years, I’ve tried to go to every home match throughout the season. Also, traveling is a hobby of mine, and I am grateful for the travel options that academia generally provides.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.
Tim Boonen, Ph.D., is an associate professor at the University of Amsterdam. Tim’s webpage is https://www.uva.nl/profiel/b/o/t.j.boonen/t.j.boonen.html, and he can be reached at t.j.boonen@uva.nl.