Modularizing Actuarial Workflows: An Excel Analogy

Consider a large and intricate Excel workbook you have created. It likely contains multiple tabs, complex formulas, and interconnected calculations. Making changes or fixing errors in this workbook can be challenging, as one wrong move could lead to unintended consequences.

The Pitfalls of Monolithic Workbooks:

This monolithic structure shares the challenges of non-modular systems:

1. Rigidity: Making changes is slow and risky, as updating one formula can affect multiple sheets and cause unforeseen errors.

2. Error-Prone: Troubleshooting is complex due to dependencies between cells and sheets; even a tiny mistake can have significant effects.

3. Collaboration Bottlenecks: Collaborating on the same workbook can lead to version control issues and conflicts.

4. Limited Reusability: Replicating parts of your workbook for other projects becomes a tedious copy-and-paste exercise.

The Power of Modularization: Your Actuarial Excel Library

Imagine having a well-organized library of Excel functions and templates, where each function performs a specific task (such as calculating present values with mortality), and templates provide the structure for standard actuarial analyses. Building models become like assembling Lego blocks:

1. Flexibility: Easily swap out components to adapt to regulatory changes or new business requirements.

2. Reliability: Thoroughly tested functions reduce the risk of errors and ensure consistent and accurate results.

3. Collaboration: Colleagues can work on different modules independently, accelerating development timelines.

4. Reusability: Leverage your library across projects, saving time and reducing redundancies.

Using modularity is the initial step toward modernizing actuarial workflows, helping us move from cumbersome spreadsheets to more scalable and efficient solutions.

Lambda Functions: The Excel Power-Up

Excel's Lambda functions elevate this concept by allowing you to create custom functions tailored for actuarial calculations that can be easily inserted into any cell.

The Dream of an Open-Source Actuarial Library

Envision a shared library of actuarial Lambda functions:

1. Standardized Calculations: Pre-built essential actuarial tasks like reserving, pricing, and valuation.
2. Industry Best Practices: Calculations align with regulatory guidelines and actuarial standards.
3. Accelerated Model Development: Actuaries can focus on analysis and insights rather than reinventing the wheel.
4. Collective Knowledge: The library becomes a hub for sharing expertise and best practices, elevating the profession.

Excel vs. Python: Bridging the Gap

Python's popularity stems from its vast collection of libraries specialized for actuarial work. Creating a similar library for Excel can combine Excel's familiarity with standardized, reusable functions, potentially revolutionizing how actuaries work and making complex modelling more accessible and efficient.

Example: PV_Life() Lambda Function

Let's illustrate the PV_Life() function with a simple example. It calculates the present value of a series of cash flows, considering discount and mortality rates to reflect the time value of money and the uncertainty of life.

The Path Forward: Collaboration and Standardization

Establishing an actuarial Excel library will require a collaborative effort and a commitment to standardization. However, the benefits of efficiency, accuracy, and professional growth are undeniable.

Let's Start the Conversation

What challenges have you faced with complex Excel models? How could a shared library of actuarial functions transform your work? Let's discuss the possibilities and turn this vision into reality.