CASUALTY ACTUARIAL SOCIETY COURSE ON PROFESSIONALISM Canadian Panel Presentation

Panel Discussion Topics ä Professional Actuarial Organizations ä Purpose of CIA, CAS, and AAA ä Roles of Professional Actuarial Organizations ä Roles of CIA, CAS, and AAA ä Standards for Acceptable Behavior (CIA Rules of Professional Conduct) ä Standards for Acceptable Work Products (ASB Video) ä Qualification Standards (FCIA and PSAO) ä Counseling and Compliance (ABCD Video)

Professional Actuarial Organizations ä Canadian Institute of Actuaries (CIA) ä Casualty Actuarial Society (CAS) ä American Academy of Actuaries (AAA) ä Actuarial Standards Board (ASB) ä Actuarial Board for Counseling & Discipline (ABCD)

Other Professional Actuarial Organizations ä Society of Actuaries (SOA) ä Life, health, benefits and pensions ä American Society of Pension Actuaries (ASPA) ä Conference of Consulting Actuaries (CCA) ä Consultants in all practice areas ä International Institute of Actuaries (IIA) ä Actuarial Studies in Non-Life Insurance (ASTIN) ä Actuarial Approach for Financial Risks (AFIR)

Professional Actuarial Organizations Within the Casualty Actuarial Society ä Actuaries in Regulation (AIR) ä Casualty Actuaries in Reinsurance (CARE) ä Regional Affiliates of the CAS

Regional Affiliates of the CAS

CIA Membership Statistics SCHEDULE OF MEMBERSHIPEFFECTIF

CAS Membership Statistics CAS Membership Statistics

CAS Volunteer Participation 4 27% of members volunteer for the CAS, and this figure includes: Executive Council and Board members, paper authors, Regional Affiliates, speaking at a meeting or seminar, or serving on a committee 4 24% of members support our committees 4 There are approximately 914 committee positions currently filled by CAS members volunteer for different Admissions Committee positions 4 88% of our Presidents have served on the Examination Committee The Casualty Actuarial Society relies heavily on the volunteer support of its members to conduct the business of the Society.

CIA Statement of Purpose The CIA is the national organization of the actuarial profession in Canada. The CIA is the national organization of the actuarial profession in Canada. The institute is dedicated to serving the public through the provision by the profession of actuarial services and advice of the highest quality. The institute is dedicated to serving the public through the provision by the profession of actuarial services and advice of the highest quality.

CIA Statement of Purpose (Cont’d) The Institute promotes the advancement of actuarial science and sponsors programs for the education and qualification of members and prospective members. The Institute promotes the advancement of actuarial science and sponsors programs for the education and qualification of members and prospective members. The institute maintains programs to ensure that actuarial services provided by its members meet accepted professional standards. The institute maintains programs to ensure that actuarial services provided by its members meet accepted professional standards.

CIA Statement of Purpose (Cont’d) The Institute also provides services to actuaries in Canada to assist them in the discharge of their professional responsibilities. The Institute also provides services to actuaries in Canada to assist them in the discharge of their professional responsibilities. Includes all specialties of Canadian actuaries. Includes all specialties of Canadian actuaries.

CAS Purpose 0 To advance the body of knowledge of actuarial science in applications other than life insurance, 0 To establish and maintain standards of qualification for membership, 0 To promote and maintain high standards of conduct and competence for the members, and 0 To increase the awareness of actuarial science.” Source: CAS Constitution

AAA Purpose ä The Academy is a professional membership, government information, and public relations organization for all actuaries practicing in the United States, regardless of specialty. ä The Academy establishes qualification standards for making public statements of actuarial opinion. Source: 1993 Directory of Actuarial Memberships (Published by the AAA)

Roles of Professional Actuarial Organizations ä Set standards for acceptable behavior ä Agree on principles ä Define acceptable work products (Standards of Practice) ä Set membership standards ä Set qualification standards for PSAO counsel ä Ensure compliance ä Promote research ä Interface with public

Statements of Principles vs. Standards of Practice ä Statement of Principle: ä A general or fundamental rule or truth on which others are based. ä Principles are expected to be relatively constant. ä Standard of Practice: ä Define the generally accepted actuarial practices. ä Standards are expected to change over time in order to remain current.

Actuarial Standards Board 4 Direct and manage the development of actuarial standards of practice by its operating committees in all areas of actuarial practice. 4 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. 4 Provide continuous review of existing standards of practice and determine whether they are in need of amendment, alteration, expansion, or elimination. The ASB’s objectives are:

Relationships Between Standards and Statements CASUALTY ACTUARIAL SOCIETY STATEMENTS OF PRINCIPLES PROMULGATES IS AFFILIATED WITH ARE USED BY AMERICAN ACADEMY OF ACTUARIES ACTUARIAL STANDARDS BOARD STANDARDS OF PRACTICE HAS FORMED PROMULGATES

What is a PSAO? ä Actuarial opinion called for by law or regulation ä Actuarial opinion called for by a Standard of Practice ä Actuarial communication made for purposes of compliance with FASB or GASB standards

Examples of PSAO’s ä Loss reserve opinions ä Expert testimony at rate hearing ä Rate filing? ä Phone calls with regulators? ä Interviews? Speeches? ä Internal documentation? ä Others?

Roles of CIA, CAS, and AAA

Roles of CIA, CAS, and AAA (cont’d)

CIA Rules of Professional Conduct Effective: June, 1992 Effective: June, 1992 Modified 11/95 to reflect Mexican entry into NAFTA Modified 11/95 to reflect Mexican entry into NAFTA Categorized into 20 Rules that identify the professional and ethical standards with which a member of the CIA must comply and thereby serve public interest.Categorized into 20 Rules that identify the professional and ethical standards with which a member of the CIA must comply and thereby serve public interest. Annotations provide additional explanatory, educational and advisory material on how the rules are to be interpreted and applied.Annotations provide additional explanatory, educational and advisory material on how the rules are to be interpreted and applied. For professional services rendered in the United States, the AAA Code of Professional Conduct applies.For professional services rendered in the United States, the AAA Code of Professional Conduct applies. For professional services rendered in Mexico, the code of conduct of the Colegio Nacional de Actuarios (CONAC) applies.For professional services rendered in Mexico, the code of conduct of the Colegio Nacional de Actuarios (CONAC) applies.

CIA Rules of Professional Conduct (cont’d) It is the professional responsibility of the CIA member to be knowledgeable about, and to keep current with the revisions to the rules and annotations. It is the professional responsibility of the CIA member to be knowledgeable about, and to keep current with the revisions to the rules and annotations. The Property / Casualty Financial Reporting Committee and / or the Committee on the Role of the Appointed Actuary is available to provide counseling. The Property / Casualty Financial Reporting Committee and / or the Committee on the Role of the Appointed Actuary is available to provide counseling. The Committee on Discipline handles any disciplinary proceedings.The Committee on Discipline handles any disciplinary proceedings. These CIA Committees provide equivalent roles of the AAA’s Actuarial Board for Counseling and Discipline (ABCD).These CIA Committees provide equivalent roles of the AAA’s Actuarial Board for Counseling and Discipline (ABCD).

CIA Rules of Professional Conduct (cont’d) CIA By-Laws state: CIA By-Laws state: “A member or student shall comply with the by- laws, rules of professional conduct and standards of practice including recommendations on the Institute as they may be from time to time and with any order or resolution of the Council or officers of the Institute under the by-laws.”

Professional Integrity RULE 1: A member shall act honestly and in a manner to uphold the reputation of the actuarial profession and to fulfill the profession’s responsibility to the public. RULE 2: A member shall perform professional services with integrity, skill, and care.

Qualification Standards RULE 3: X A member shall perform professional services only when the member is qualified to do so and meets applicable qualification standards.

Standards of Practice RULE 4: X A member shall ensure that professional services performed by or under the direction of the member meet applicable standards of practice

DisclosureDisclosure RULE 5: X A member shall make full and timely disclosure to a client or employer of the sources of all direct and indirect compensation that the member or the member’s firm may receive in relation to an assignment for which the member provides professional services to that client or employer.

Conflict of Interest RULE 6: X A member shall not perform professional services involving a conflict of interest unless: X the member’s ability to act fairly is unimpaired, and X there has been full disclosure of the conflict to all known direct users, and X all known direct users have expressly agreed to the performance of the services by the member.

Control of Work Product RULE 7: X A member shall not perform professional services when the member has reason to believe that they may be used to mislead or to violate or evade the law.

ConfidentialityConfidentiality RULE 8: X Except as required under Rule 13, a member shall not disclose to another party any confidential information obtained through a professional assignment performed for a client or employer unless authorized to do so by the client or employer or required to do so by law.

Courtesy and Cooperation RULE 9: X A member shall perform professional services with courtesy and shall avoid unjustifiable or improper criticism of other members, and shall cooperate with others in the client’s or employer’s interest.

AdvertisingAdvertising RULE 10: X A member shall not engage in any advertising or business solicitation activities in respect of professional services that the member knows or should know are false or misleading, or that reflects unfavourably on the profession or the competence or integrity of any member thereof.

Titles and Designations RULE 11: X A member shall make use of membership titles and designations of the Institute only where that use conforms to the practices authorized by the Institute.

Collateral Obligations RULE 12: X A member shall be subject to the Institute’s disciplinary procedures if the member is convicted or found guilty of or pleads guilty to any criminal or similar offense. RULE 13: X A member shall comply with the procedures prescribed by Council if the member becomes aware of any apparent material noncompliance by another member with the rules of professional conduct or with the standards of practice. RULE 14: X A member or the member’s representative shall respond promptly in writing to any letter received from a person duly authorized by the Institute to obtain information or assistance regarding any metter arising under Section 20 of the bylaws (Discipline of Members and Students).

ReportingReporting RULE 15: X A member shall include, where appropriate, in any report or certificate a statement or reference describing or identifying the data and the actuarial methods and assumptions employed. RULE 16: X A member shall indicate clearly in giving the member’s opinions or findings that the member is the source of the opinions or findings and shall be available to provide supplementary advice and explanation as required.

Reporting (cont’d) RULE 17: X A member shall ensure that any calculations or recommendations made by the member or under the member’s direction are, wherever possible, based on sufficient and reliable data and that any assumptions made are adequate and appropriate, and, subject to Rule 18, that the methods are consistent with the principles established by precedent or common usage within the profession. RULE 18: X A member shall, where requested by a client or employer to prepare a study that, in the opinion of the member, deviates from the principles established by precedent or common usage within the profession, or is based on insufficient or unreliable data, include in any resulting report, communication or certificate an explicit qualification of the member’s findings..

Foreign Practice RULE 19: X A member who is practicing outside Canada in a country or jurisdiction in which the profession is organized under an actuarial body, of which the said member is also a member, may, provided the Council of the Institute has agreed, practice free from the requirements of Rules of Professional Conduct 15 and 16.

ObjectivityObjectivity RULE 20: X A member performing services for the purpose of making a report X required by law with respect to 1 a pension plan; or 2 an employee benefit plan; or 3 an insurance company; or X required for accounting purposes, shall perform the services without regard to any personal considerations or to any influence, interest or relationship in respect of the affairs of the member’s client or employer that might impair the member’s professional judgement or objectivity.

CIA Rules of Professional Conduct ä The Rules of Professional Conduct articulate that procedures prescribed by Council must be followed when the member is aware of a violation of these rules.

CIA Guiding Principles ¬ In carrying on its activities and programs, the Institute holds the duty of the profession to the public above the needs of the profession and its members. ­ To ensure that services are provided by qualified individuals, the Institute maintains publicly visible programs and procedures for the attainment and maintenance of professional qualifications by its members. ® The Institute develops standards of professional practice and codes of conduct and, through its disciplinary process, ensures their compliance by its members.

CIA Guiding Principles (cont’d) ¯ The Institute promotes the development of a body of expert actuarial knowledge and practice relevant to Canadian social and economic needs. It encourages actuarial research and scholarly activity and the dissemination of the results among its members. It encourages the application of actuarial science and technique to new areas where these are relevant.

CIA Guiding Principles (cont’d) ° The Institute cooperates with governments and public bodies and makes timely and relevant contributions to public policy issues. ± To assure a continuing supply of qualified professionals, the Institute encourages the recruitment and training of new actuaries. ² The Institute serves the professional needs of all Canadian actuaries regardless of area of practice, language, or geographic region.

CIA Guiding Principles (cont’d) ³ To assist its members in their professional activities, the Institute develops technical support including collection and analysis of statistical data, and the publication of actuarial handbooks and texts. ´ The Institute represents Canadian actuaries internationally and cooperates with other national actuarial bodies in areas of mutual interest. µ The Institute provides opportunities for the professional development of its members.

Qualification Standards

All Criteria must be met before an Actuary is qualified to make statements in public

Qualification Standards RULE 3: X A member shall perform professional services only when the member is qualified to do so and meets applicable qualification standards.

Qualification Standards for Public Statements of Actuarial Opinion Purpose To codify the requirements for training, experience and continuing education for actuaries who issue PSAO’s

PSAO Qualification Standards

Continuing Education Requirements Requirements 4 Average of 12 credit hours per calendar year 4 Two calendar year retrospective test - you qualify for 2004 during 2002 and Carry forwards are allowed u Maximum of 12 hours of “organized activities” u Maximum of 6 hours of “other activities” 4 No more than half of the credit hours may be obtained through “other activities” Documentation is required, and is to be maintained by the individual

Qualification Standards for PSAO’s AAA Specific Qualification Standards ä Apply to certain specific PSAO’s ä Very limited in number ä Statement of Opinion, NAIC Fire and Casualty Annual Statement ä General Qualification Standards must be met PLUS the Specific Qualification Standards must be met.