1. CAS Update Where We’ve Been, Where We Are, and Where We’re Going Ontario Conference of Casualty Actuaries November 4, 2004

2. Agenda Two Important Task Forces Two Important Task Forces Task Force on ACAS Vote Task Force on ACAS Vote Task Force on Classes of Membership Task Force on Classes of Membership Education Initiatives Education Initiatives Research Working Parties Research Working Parties Your Input Your Input

3. Two Important Task Forces Task Force on the ACAS Vote Task Force on the ACAS Vote Should Associates have voting rights? Should Associates have voting rights? All ACAS? After N Years as an ACAS? All ACAS? After N Years as an ACAS? Stand for election to the Board? Stand for election to the Board? Hold officer positions, e.g., Vice President? Hold officer positions, e.g., Vice President? Serve on and chair committees? Which ones? Serve on and chair committees? Which ones? Task Force on Classes of Membership Task Force on Classes of Membership How many classes should the CAS have? How many classes should the CAS have? How should these classes be defined? How should these classes be defined?

4. Historical Perspective of Associates Since 1914, two classes of membership. Since 1914, two classes of membership. Associate/Fellow designations have changed over the years: Associate/Fellow designations have changed over the years: Initially, based on company responsibilities. Initially, based on company responsibilities. Beginning in 1915, based on exams: Beginning in 1915, based on exams: Number and content of exams has varied. Number and content of exams has varied. Currently a two exam educational difference. Currently a two exam educational difference. Currently little distinction between FCAS and ACAS in the ability to perform professional actuarial services. Currently little distinction between FCAS and ACAS in the ability to perform professional actuarial services.

5. Task Force on ACAS Vote Why are we considering this issue? Voting rights have not changed since inception and represent a time when there was a much clearer distinction between Fellows and Associates. Voting rights have not changed since inception and represent a time when there was a much clearer distinction between Fellows and Associates. A significant minority (25-30%) of Associates have stopped taking exams. We need to recognize the career Associates. A significant minority (25-30%) of Associates have stopped taking exams. We need to recognize the career Associates. Lack of true representation for Associates, despite the fact that they pay full dues. Lack of true representation for Associates, despite the fact that they pay full dues. Approval of Mutual Recognition. Approval of Mutual Recognition.

6. Task Force on ACAS Vote Right to vote should be given to members upon attainment of Fellowship or five years after they are recognized as Associates, whichever comes first. Right to vote should be unrestricted. Right to vote should be given to members upon attainment of Fellowship or five years after they are recognized as Associates, whichever comes first. Right to vote should be unrestricted. All voting members should be allowed to stand for election to the Board of Directors. All voting members should be allowed to stand for election to the Board of Directors. Voting Associates may hold all officer positions, with the exception of: Voting Associates may hold all officer positions, with the exception of: President / President Elect President / President Elect Vice President - Admissions Vice President - Admissions Committee membership is to remain restricted to Fellows for Discipline, Education Policy, Syllabus. Committee membership is to remain restricted to Fellows for Discipline, Education Policy, Syllabus.

7. Task Force on Classes of Membership Why are we considering this issue? Current structure reflects a time when there was a much clearer distinction between FCAS and ACAS. Current structure reflects a time when there was a much clearer distinction between FCAS and ACAS. Educational differences do not restrict an ACAS from completing assignments like those done by a FCAS in the US. Educational differences do not restrict an ACAS from completing assignments like those done by a FCAS in the US. Associate designation connotes lesser standing, even though the ACAS is fully qualified to sign statements of actuarial opinion. Associate designation connotes lesser standing, even though the ACAS is fully qualified to sign statements of actuarial opinion. Two designations that each mean a fully qualified actuary is confusing. Two designations that each mean a fully qualified actuary is confusing. ACAS not considered qualified outside the US. ACAS not considered qualified outside the US. ACAS does not meet IAA “fully qualified actuary” criteria. ACAS does not meet IAA “fully qualified actuary” criteria. Not enough finance – even though far above in other areas. Not enough finance – even though far above in other areas. This is an issue for the AAA (single membership class). This is an issue for the AAA (single membership class).

8. Task Force on Classes of Membership The Task Force recommended (May): Only one class of membership - Fellow. Only one class of membership - Fellow. Certificate of Achievement in Casualty Actuarial Science. Certificate of Achievement in Casualty Actuarial Science. All candidates under the Code of Professional Conduct. All candidates under the Code of Professional Conduct. ACAS continue to be awarded for a limited time. ACAS continue to be awarded for a limited time. Existing ACAS’s awarded FCAS after completing exams or after five additional years have passed. Existing ACAS’s awarded FCAS after completing exams or after five additional years have passed. Task Force was split on this issue. Task Force was split on this issue. Ideal number of exams for Fellowship is eight; necessary material can be reorganized to fit. Ideal number of exams for Fellowship is eight; necessary material can be reorganized to fit.

9. Task Force on Classes of Membership In May 2004, the Board discussed the various transition options in the Task Force Report. In May 2004, the Board discussed the various transition options in the Task Force Report. Options ranged from Options ranged from Immediately granting FCAS to ACAS and discontinuing ACAS Immediately granting FCAS to ACAS and discontinuing ACAS Completion of additional requirements Completion of additional requirements Discontinuing ACAS after a transition period and putting the ACAS into run-off. Discontinuing ACAS after a transition period and putting the ACAS into run-off. Under no circumstances would current Associates lose their status as members of the CAS. Under no circumstances would current Associates lose their status as members of the CAS.

10. Task Force on Classes of Membership Additional information was requested for the Board’s consideration during the discussion at September Board Meeting. Additional information was requested for the Board’s consideration during the discussion at September Board Meeting. Survey of the Membership Advisory Panel (MAP). Survey of the Membership Advisory Panel (MAP). Feedback from Regional Affiliate Presentations. Feedback from Regional Affiliate Presentations. Interviews with recruiters on the effects of one class of membership on attracting candidates. Interviews with recruiters on the effects of one class of membership on attracting candidates. Interviews with actuarial science professors. Interviews with actuarial science professors. Feedback submitted by members. Feedback submitted by members.

11. Task Force on Classes of Membership Summary of additional feedback received: Summary of additional feedback received: Over two-thirds (70%) of the MAP agreed with TF recommendation of one class. Over two-thirds (70%) of the MAP agreed with TF recommendation of one class. More than three-fourths (77%) disagreed with the TF recommendation to grant all ACAS the FCAS designation without additional requirements. More than three-fourths (77%) disagreed with the TF recommendation to grant all ACAS the FCAS designation without additional requirements. Most of the feedback has indicated that one class of membership will not create a competitive disadvantage for students. Most of the feedback has indicated that one class of membership will not create a competitive disadvantage for students. Actuarial Science professors may disagree. Actuarial Science professors may disagree.

12. Task Force on Classes of Membership Board Motions at September Board Meeting: That the Board instruct the Executive Council to establish a TF to propose within the next year a set of learning objectives by which FCAS can be attained: That the Board instruct the Executive Council to establish a TF to propose within the next year a set of learning objectives by which FCAS can be attained: with less material than the current exams, with less material than the current exams, with fewer than the current 9 exams, with fewer than the current 9 exams, while meeting the requirements of the IAA, while meeting the requirements of the IAA, while being consistent with the Centennial Goal. while being consistent with the Centennial Goal. It is the Board’s sense that this can be accomplished with eight exams (or seven exams with a workshop or seminar). It is the Board’s sense that this can be accomplished with eight exams (or seven exams with a workshop or seminar).

13. Task Force on Classes of Membership Board Motions at September Board Meeting: Inform the CAS membership of the foregoing action, with an indication that the Board supports a move to an eventual single class of credentialed membership, with no more new Associates, concurrent with the movement to a shorter syllabus; and will seek membership reaction to this plan. (It is expected that the then-current Associates will either complete their remaining exams and become Fellows, or remain Associates until they cease their membership in the CAS.) Inform the CAS membership of the foregoing action, with an indication that the Board supports a move to an eventual single class of credentialed membership, with no more new Associates, concurrent with the movement to a shorter syllabus; and will seek membership reaction to this plan. (It is expected that the then-current Associates will either complete their remaining exams and become Fellows, or remain Associates until they cease their membership in the CAS.)

14. Membership Involvement Board is committed to obtaining member input. Board is committed to obtaining member input. Granting voting rights requires an amendment to the Constitution approved by Fellows, however, the Board agreed to postpone further action on the ACAS Vote, pending resolution of the Classes of Membership issue. Granting voting rights requires an amendment to the Constitution approved by Fellows, however, the Board agreed to postpone further action on the ACAS Vote, pending resolution of the Classes of Membership issue. Moving to one class of credentialed member may not require a change to the Constitution, but there will be a thorough exchange of ideas. Moving to one class of credentialed member may not require a change to the Constitution, but there will be a thorough exchange of ideas.

15. Changes to Preliminary Education Current Current Prerequisites: Linear Algebra and Statistics Prerequisites: Linear Algebra and Statistics Exam 1: Calculus and Probability (4 hours) Exam 1: Calculus and Probability (4 hours) Exam 2: Interest, Economics, Finance (4 hours) Exam 2: Interest, Economics, Finance (4 hours) Exam 3: Actuarial Models– NOT JOINT (4 hours) Exam 3: Actuarial Models– NOT JOINT (4 hours) Exam 4: Actuarial Modeling (including applied stats) (4 hours) Exam 4: Actuarial Modeling (including applied stats) (4 hours)

16. Changes to Preliminary Education Approved March 2004 Board Meeting Starting Spring 2005 Starting Spring 2005 Prerequisites: Linear Algebra and Calculus Prerequisites: Linear Algebra and Calculus Exam 1: Probability with Calculus (3 hours) Exam 1: Probability with Calculus (3 hours) Exam 2: Interest (2 hours) Exam 2: Interest (2 hours) Exam 3: Actuarial Models & Statistics (4 hours) Exam 3: Actuarial Models & Statistics (4 hours) Exam 4: Actuarial Modeling (4 hours) Exam 4: Actuarial Modeling (4 hours) Verification by Educational Experience: Economics, Finance, Applied Stats Verification by Educational Experience: Economics, Finance, Applied Stats

17. Validation by Educational Experience Option 1: Submit a course syllabus for approval, and then a grade of B- or better in the course. Option 1: Submit a course syllabus for approval, and then a grade of B- or better in the course. Micro and Macro Economics Micro and Macro Economics Intermediate Corporate Finance Intermediate Corporate Finance Regression and Time Series (could be separate courses) Regression and Time Series (could be separate courses) Option 2: Pass an acceptable exam, such as the AP exams for Micro and Macroeconomics, CFA exams, etc. Option 2: Pass an acceptable exam, such as the AP exams for Micro and Macroeconomics, CFA exams, etc. Option 3: Pass college-level exams offered by the CAS. CAS committed to offering these for at least 2 years. Option 3: Pass college-level exams offered by the CAS. CAS committed to offering these for at least 2 years. Option 4: Other experiences. Option 4: Other experiences. Courses/seminars designed specifically for VEE credit Courses/seminars designed specifically for VEE credit

18. Transition 2000 Syllabus 2000 Syllabus Exam 1  Exam 1 Exam 1  Exam 1 Exam 2  Exam 2 + VEE for Econ & Finance Exam 2  Exam 2 + VEE for Econ & Finance Exam 3  Exam 3 Exam 3  Exam 3 Exam 4  Exam 4 + VEE for Applied Stats Exam 4  Exam 4 + VEE for Applied Stats Pre-2000 Syllabus Pre-2000 Syllabus Part 3A  VEE for Applied Stats Part 3A  VEE for Applied Stats Part 4A  Exam 2 Part 4A  Exam 2 Part 4B  Exam 4 Part 4B  Exam 4 Part 5A  VEE for Economics Part 5A  VEE for Economics Part 5B  VEE for Finance Part 5B  VEE for Finance

19. Why VEE? Most candidates take Econ and/or Finance Most candidates take Econ and/or Finance No need to examine topics that require background but not mastery. No need to examine topics that require background but not mastery. But verification is needed to meet international standards. But verification is needed to meet international standards. Test questions for Applied Stats stress memorization rather than application. Test questions for Applied Stats stress memorization rather than application. Our candidates need to learn how to appropriately apply regression and time series models to real data. Our candidates need to learn how to appropriately apply regression and time series models to real data. This competency cannot easily be validated in a timed paper-and-pencil exam. This competency cannot easily be validated in a timed paper-and-pencil exam.

20. Impact on Travel Time Actuarial Science majors currently graduate with exams. Actuarial Science majors currently graduate with exams. Unlikely to have much effect on these candidates. Unlikely to have much effect on these candidates. Other majors who take VEE courses in school benefit from learning experience. Other majors who take VEE courses in school benefit from learning experience. Candidates who did not have VEE courses in school: Candidates who did not have VEE courses in school: Can tackle VEE while studying for Interest exam. Can tackle VEE while studying for Interest exam. Or between exam “seasons.” Or between exam “seasons.” VEE pass rates on first attempt should be very high. VEE pass rates on first attempt should be very high.

21. Computer-Based Testing Computer-Based Testing Computer-Based Testing Targeting 2005 pilot for Exam 1. Targeting 2005 pilot for Exam 1. Expand to 4-6 computer-based administrations in 2006. Expand to 4-6 computer-based administrations in 2006. Candidate will receive preliminary results immediately (by the end of 2006). Candidate will receive preliminary results immediately (by the end of 2006). Intent is to expand to other exams if successful. Intent is to expand to other exams if successful. Approved by both CAS and SOA Boards. Approved by both CAS and SOA Boards.

22. Modeling Workshop Education in risk integration techniques is consistent with Centennial Goal. Education in risk integration techniques is consistent with Centennial Goal. DFA added to Syllabus in 2000. DFA added to Syllabus in 2000. DFA taken off Part 8 in 2003 due to inability to test in a paper-and-pencil environment. DFA taken off Part 8 in 2003 due to inability to test in a paper-and-pencil environment. Modeling Workshop Task Force established. Modeling Workshop Task Force established. Pilot a hands-on workshop experience in Nov. 2004. Pilot a hands-on workshop experience in Nov. 2004. Consider adding this as a future FCAS requirement and/or continuing education opportunity. Consider adding this as a future FCAS requirement and/or continuing education opportunity.

23. Research Working Parties Research task forces charged to produce a research product over a short timeframe. Research task forces charged to produce a research product over a short timeframe. Should produce more cohesive, accessible material in a consistent format, through the collective, managed nature of the process. Should produce more cohesive, accessible material in a consistent format, through the collective, managed nature of the process. Should help the CAS effectively address long- standing research problems, and harness the research energy of individual researchers. Should help the CAS effectively address long- standing research problems, and harness the research energy of individual researchers. Have proven to be effective research mechanisms for GIRO, the general insurance research organization of the Faculty and Institute of Actuaries (UK). Have proven to be effective research mechanisms for GIRO, the general insurance research organization of the Faculty and Institute of Actuaries (UK).

24. Research Working Parties 2003-04 Correlations and Dependencies Among All Risk Sources Correlations and Dependencies Among All Risk Sources Executive-Level Decision-Making Using Dynamic Risk Modeling Executive-Level Decision-Making Using Dynamic Risk Modeling Elicitation and Elucidation of Risk Preferences Elicitation and Elucidation of Risk Preferences Quantifying Variability in Reserves Estimates Quantifying Variability in Reserves Estimates

25. Research Working Parties 2004-05 Dynamic Risk Modeling Handbook Dynamic Risk Modeling Handbook Public-Access DFA Model Public-Access DFA Model Bornhuetter-Ferguson - Initial Expected Losses Bornhuetter-Ferguson - Initial Expected Losses Tail Factors Tail Factors

26. I welcome your input regarding... ACAS Task Forces ACAS Task Forces Education Initiatives Education Initiatives Research and Publications Research and Publications CAS Centennial Goal CAS Centennial Goal International Issues International Issues CAS Role Outside Traditional P/C Insurance CAS Role Outside Traditional P/C Insurance Membership Membership What’s On Your Mind? What’s On Your Mind? Questions? Questions?

27. Thank You!