Course On Professionalism Actuarial Organizations And Qualification Standards 1

Discussion Topics Professional Actuarial Organizations CAS Continuing Education Requirements Statements of Principles & Standards of Practice Pre-work Review U.S. Qualification Requirements (including Continuing Education) Applicability Guidelines 2

3 Casualty Actuarial Society The Purpose of the Casualty Actuarial Society is: – to advance the body of knowledge of actuarial science applied to general insurance, including property, casualty and similar risk exposures – To establish and maintain standards of qualification for membership – To promote and maintain high standards of conduct and competence for the members – To increase the awareness of actuarial science

American Academy Of Actuaries The Academy is a professional membership, government information, and public relations organization for all actuaries practicing in the United States, regardless of specialty The Academy establishes qualification standards for making public statements of actuarial opinion Professional standards of practice and discipline procedures are the responsibility of the Actuarial Standards Board (ASB) and the Actuarial Board for Counseling and Discipline (ABCD), respectively, both independent entities within the Academy In Canada, the CIA serves this role 4

Actuarial Standards Board The ASB’s objectives are: Direct and manage the development of actuarial standards of practice by its operating committees in all areas of actuarial practice Expose and promulgate actuarial standards of practice within its sole discretion and pursuant to such procedures it deems appropriate, in all areas of actuarial practice Provide continuous review of existing standards of practice and determine whether they are in need of amendment, alteration, expansion, or elimination 5

Standards Of Practice Standards of professional performance and appropriate practice Developed to identify what the actuary should consider, document and disclose when performing an actuarial assignment Provide guidance for –Dealing with commonly encountered situations –Provide flexibility for dealing with atypical situations Are Principles based and do not attempt to dictate every step and decision in the actuarial assignment Applicable only to practice in the United States 6

Focus Of Standards Indicate how fundamental concepts & methodological principles should be applied in a variety of circumstances Five “Areas of Practice” within ASB, each with its own operating sub-committee, charged with developing & reviewing appropriate Actuarial Standards of Practice (ASOPs): –Casualty –Health –Life –Pension –General 7

8 Casualty Actuarial Society Continuing Education (CE) Policy As Amended And Approved By the Casualty Actuarial Society Board of Directors Applies to Actuarial Services rendered on or after January 1, 2016

Why the CAS CE Policy? This Policy specifies 3 things: 1.How to meet CAS CE requirements 2.Continuing Education documentation/log requirement 3.Attestation requirement 9

CAS CE Policy: CAS CE requirements Meet requirements by: –Satisfying the continuing education requirements established by a national actuarial organization recognized by the Policy; (practice in U.S. :the AAA); –The Alternative Compliance Provisions was a CAS specific set of CE requirements. This component has been eliminated effective 1/1/

CAS CE Policy: Documentation/Log Requirement Members must maintain a log of their continuing education activity to document that they have met the continuing education requirements The CAS may audit a small percentage of members annually; Members who are audited must provide an attested copy of their log The CAS may be required by court order to provide information to third parties 11

CAS CE Policy: Attestation Members must certify compliance with this policy at the end of each calendar year New members need not certify compliance until the end of the calendar year following their admission to the CAS Online member directory will display compliance 12

Introduction to ASOPs Video 13

Statements Of Principles Vs. Standards Of Practice Statements of Principles : –A general or fundamental rule or truth on which others are based –Principles are expected to be relatively constant Standards of Practice : –Define the appropriate actuarial practices –Standards are expected to change over time in order to remain current 14

Relationships Between Standards And Statements CASUALTY ACTUARIAL SOCIETY CASUALTY ACTUARIAL SOCIETY 15 STATEMENTS OF PRINCIPLES STATEMENTS OF PRINCIPLES STANDARDS OF PRACTICE STANDARDS OF PRACTICE ACTUARIAL STANDARDS BOARD ACTUARIAL STANDARDS BOARD AMERICAN ACADEMY OF ACTUARIES AMERICAN ACADEMY OF ACTUARIES PROMULGATES ARE USED BY HAS FORMED PROMULGATES

Statements Of Principles specific to Property Casualty Insurance P&C Loss and Loss Adjustment Expense Unpaid Claim Estimates P&C Insurance Ratemaking P&C Valuations 16

Actuarial Standards Of Practice (Covered In e-modules Prior To Course) ASOP 1 (Introductory Standard of Practice) ASOP 17 (Expert Testimony by Actuaries) ASOP 19 (Actuarial Appraisals) ASOP 23 (Data Quality) ASOP 41 (Actuarial Communication) ASOP 43 (P/C Unpaid Claim Estimate ) Ratemaking ASOPs 12, 13, 25, 29, 30, 38, and 39 17

Code Of Conduct Precept 1* “ An actuary shall act honestly, with integrity and competence, and in a manner to fulfill the profession’s responsibility to the public and to uphold the reputation of the actuarial profession.” Violations may include: Intentionally low-balling an estimate Performing services outside of your area of expertise Failure to meet the CE requirements Not seeking peer review when necessary Criminal activities * items marked with a “*” are also applicable to CAS candidates through the Candidate Code of Conduct 18

Code Of Conduct Precepts Precept 2 – requires that prior to performing actuarial services you meet the qualification standards – Experience and Continuing Ed requirements. Precept 3 –requires that you are familiar with and appropriately apply the requirements of the ASOPs Precept 4 -relates to appropriate communication including using terminology that is appropriate to the circumstances and the audience. Precept 5 - Must identify the Principals (who you work for) Precept 6 –addresses disclosure of compensation. Precept 7 Addresses disclosing a conflict of interest and expressly having parties agree that the actuary may perform the actuarial services if an actual or apparent conflict exists Precept 8 An actuary who performs actuarial services shall take steps to ensure that such services are not used to mislead other parties. 19

Code Of Conduct Precepts Precept 9* - Actuary may not violate a confidentiality agreement unless required to do so by law. Precept 10* - An actuary shall perform services with courtesy and professionalism, respect and cooperate with others in the principal’s interest. Precept 11* - An actuary shall not engage in false advertising. Precept 12* - Relates to using membership titles and designations. Precept 13 – relates to a known violation of the code of conduct. You are advised to discuss the situation with the other actuary and attempt to resolve the violation. Otherwise the actuary must disclose the violation to the counseling body (ex: ABCD. or CIA) unless contrary to law or a confidentiality agreement (except in Canada). Precept 14* - requires you to cooperate with and respond to the A.B.C.D. or other counseling/disciplinary body 20

American Academy Of Actuaries’ Qualification Standards And Continuing Education Requirements As Amended And Approved By The Academy’s Board Of Directors Effective January 1,

Purpose Precept 2 of the Code of Conduct requires members to perform Actuarial Services only when such member “is qualified to do so on the basis of basic and continuing education and experience and only when the Actuary satisfies applicable qualification standards” This document outlines the applicable qualification standards and continuing education requirements 22

Scope Applies to all actuaries who are members of the Casualty Actuarial Society (CAS), Society of Actuaries (SOA), the Conference of Consulting Actuaries (CCA), and the American Society of Pension Professionals and Actuaries (ASPPA), or whether or not they are also members of the American Academy of Actuaries, as well as other Academy members Qualification standards apply to CAS members by virtue of the Code of Professional Conduct, which requires that actuaries observe applicable qualification standards that have been promulgated by recognized actuarial organization for the jurisdiction in which the actuary renders actuarial services 23

Scope (Continued) Applies to actuaries who issue “Statements of Actuarial Opinion” (SAO’s) Definition of SAO has been expanded to include virtually any actuarial work done by a practicing actuary This applies to you if you work in the U.S.! 24

Overview Of U.S. Qualification Standards Qualification standards are grouped into two broad categories –General Qualification Standards –Specific Qualification Standards General Qualification Standards apply to all members Specific Qualification Standards depend on the type of SAO being issued 25

U.S. General Qualification Standards Three components Basic Education Experience Requirement Continuing Education 26

U.S. General Qualification Standard (Continued) Basic Education Be a member of the Academy, a Fellow or Associate of the CAS or SOA, a Fellow of the CCA, a Member or Fellow of the ASPPA, or a fully qualified member of any IAA-member organization Be fully knowledgeable, through examination or documented professional development of all applicable laws pertaining to the SAO being issued 27

U.S. General Qualification Standard (Continued) Experience Requirement Have three years of responsible actuarial work, which is defined as work that requires knowledge and skill in solving actuarial problems 28

U.S. General Qualification Standard (Continued) Continuing Education 30 credit hours of relevant continuing education must be earned in the calendar year preceding the year in which an SAO is issued “Credit hour” defined as 50 minutes Can be composed of either “organized activities” or other activities At least 6 of the 30 hours must be “organized activities” At least 3 of the 30 hours must relate to professionalism topics (may or may not be “organized”) No more than 3 hours can relate to general business courses and educational material 29

U.S. Continuing Education Requirements Continuing Education is “relevant” if… It broadens or deepens an actuary’s understanding of one or more aspects of the work an actuary does The material expands an actuary’s knowledge of practice in related disciplines It facilitates an actuary’s entry into a new area of practice 30

U.S. Continuing Education Requirements “Organized” Activities Activities can be “organized” or “other” A minimum of 6 of the required 30 credit hours must consist of “organized” activities “Organized” activities include conferences, seminars, web casts, online courses, or committee work “Organized” activities must involve interaction with actuaries or professionals working for different organizations In-house meeting or seminars do not count as “organized” unless outside speakers are used 31

U.S. Continuing Education Requirements (Continued) Other Activities Other activities include reading actuarial literature, statutes or regulations, other books, papers or articles on relevant technical or professional topics; listening to tapes of actuarial meetings or seminars; in-house meetings, studying for actuarial exams; or preparing to speak or lead a discussion at a continuing education activity 32

U.S. Specific Qualification Standard Applies to actuaries who issue specific types of Statements of Actuarial Opinions Currently applies to actuaries who issue SAO’s in conjunction with:  NAIC Life and A&H Annual Statement  NAIC Property and Casualty Annual Statement  NAIC Health Annual Statement 33

U.S. Specific Qualification Standard (Contd.) Three Components Basic Education Experience Requirement Continuing Education 34

U.S. Specific Qualification Standard (Contd.) Basic Education Must meet the requirements for general qualification PLUS Obtain specific knowledge relating to the relevant SAO through relevant examinations given by an actuarial organization or demonstrate proof of required knowledge by obtaining a signed statement from another actuary qualified to issue the same SAO 35

U.S. Specific Qualification Standard (Contd.) Experience Requirement Have three years of responsible actuarial work relevant to the SAO being issued. Work must have been performed under review by an actuary who was qualified to issue the same SAO at the time the review took place based on standards in effect at that time 36

U.S. Specific Qualification Standard (Contd.) Continuing Education 15 credit hours of continuing education relevant to the specific SAO being issued must be earned in the calendar year preceding the year in which an SAO is issued “Credit hour” defined as 50 minutes A minimum of 6 of the 15 hours must be obtained through interaction with outside actuaries or other professionals Hours that satisfy the specific qualification standard can also be applied to the general qualification standard requirements 37

Types Of SAOs Standard includes a detailed list of the types of actuarial communications that would be regarded as an SAO to which the qualification standards apply These include virtually all types of actuarial communications, including loss reserve opinions, ratemaking opinions, expert testimony, supporting actuarial reports, rate filings, etc. 38

U.S. Recordkeeping No specific method of recordkeeping required Actuaries are expected to keep their own documentation and to keep it up to date Sample recordkeeping forms provided but are not required to be used Documentation should be kept for six years 39

“Grace” Period Typically, continuing education credit hours must be earned by December 31 of the year prior to the calendar year in which the relevant SAO is being issued The standard includes a “grace” period in which an actuary may earn additional credit hours to satisfy the qualification standards in the beginning of the current year as long as such credit hours are earned prior to the SAO being issued –These credit hours do not carry forward to the current year requirements 40

Does This Apply To Me? New ACAS’s are subject to the same requirements as FCAS’s. Once an actuary becomes a member of the CAS, he or she must meet the basic education and experience requirements before issuing a statement of actuarial opinion. Hour requirements must be met IN FULL for newly credentialed actuaries. There is no proration of hours depending on the calendar year. 41

What About Study Time And This Course? Study time (exams) may count towards the “other activities” requirement. Any excess study hours can be rolled for “other activities” hours in the following year. However study time alone won’t guarantee compliance. Actuaries must have six hours from “organized activities” and three continuing education hours on professionalism topics. This seminar may count towards both organized activities and the hours dedicated to professionalism topics, provided that you attain your ACAS this year or next. 42

43 Applicability Guidelines Revised March, 2015

Applicability Guidelines Ultimately, it remains the actuary’s responsibility to identify the standard(s) that apply to each assignment, and to appropriately apply such requirements when performing that assignment For practicing actuaries however, the applicability guidelines are a good resource of identifying the different ASOPs for the various tasks they perform The guidelines are published by the Council on Professionalism of the American Academy of Actuaries, not the ASB 44

Applicability Guidelines (Continued) The guidelines are meant to encourage the professionalism of actuaries, but are not intended to be exhaustive The guidelines are updated periodically (most recently in March 2015) The Code of Professional Conduct requires that actuarial services performed by member actuaries satisfy all applicable standards of practice. The AGs are a resource for use, not a substitute for the requirement. The actuary is responsible to keep current with changes to the ASOPs and to ensure that professional services rendered satisfy the current version of each ASOP that is applicable to the services 45

Applicability Guidelines (Continued) The guidelines provide a list of the tasks normally performed by actuaries in the different practice areas, and a list of ASOPs that are usually applicable to each task List of tasks related to Casualty: –Appraisals –Data Management –Enterprise Risk Management –Expert Advice, Witness, and/or Testimony –Financial Analysis, Projections, and Reporting –Product Development/Ratemaking/Pricing –Reserving 46

Applicability Guidelines Product Development/Ratemaking/Pricing (Excerpt) 6.1 Creation and review of a risk classification plan 6.2 Evaluation of deductibles, coinsurance, and Insurance to Value 6.4 Individual Risk Rating 6.8 Pricing for new coverage and programs 1*,12, 13, 23*, 25, 38, 39, 41* 1*,12, 13, 23*, 25, 29, 38, 41* 1*,7, 12, 13, 23*, 25, 29, 30, 38, 39, 41* 1*,7, 12, 13, 20, 23*, 25, 29, 30, 38, 39, 41* 47 * ASOP’s 1, 23, and 41 apply to all actuarial work.