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Key Characteristics of the Actuarial Leader

Key Characteristics of the Actuarial Leader . Richard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 RIF Consulting, LLC. The Actuary as Leader. Agenda Goals Characteristics of Teams of Professionals Guiding Principles Expectations of Stakeholders

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Key Characteristics of the Actuarial Leader

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  1. Key Characteristics of the Actuarial Leader • Richard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 • RIF Consulting, LLC

  2. The Actuary as Leader • Agenda • Goals • Characteristics of Teams of Professionals • Guiding Principles • Expectations of Stakeholders • Characteristics of Leaders of Pros – Chief Actuary • The Rubber Meets the Road • Conclusion

  3. Characteristics of Professional Teams • Working with Professionals • Many discussions and characterizations are available • Good site: Bob Kizlik reference on my site • Self motivated to learn profession • Takes on responsibilities and obligations • Cannot dictate/coerce professionalism • Work “with” as opposed to “manage”

  4. Characteristics of Professional Teams • Identified need/service • Defined body of knowledge which supports decision making • Highly Educated/Broad Areas • Protracted preparation process • High level of public trust • Strong service motivation • Authority to practice from the client • Accountability by the practitioner

  5. Guiding Principles • CAS Credentialing • CAS Statements of Principles/Exposure Draft of Foundational Statements • Regulatory/Financial/Jurisdictional Requirements • ASOP’s • Codes of Professional/Ethical Conduct • Precept 3 : 3-1, 3-2, 3-3 • Precept 8 : 8-1 • Personal Beliefs - Individual, Family, Community

  6. Stakeholders • Board of Directors, Owners/Shareholders • Auditors, Regulators, Others • CEO, CFO, Chief Underwriter, Executive Management Team • Actuarial management staff, Actuarial team • Family, Friends, Community • Yourself

  7. Expectations • Expectations of Stakeholders • Honesty & Integrity • Professionalism • Knowledge - Business & Technical • Credible Understandable Analysis of Alternatives • Acknowledgement/Communication of Risks • No surprises

  8. Key Characteristics of Chief Actuary • Clear line of sight to CEO/Audit Committee/Board • Acceptance of and support for Authority over Actuarial Matters - Who sells vs. Who books. • Credibility among Executive Management • Experienced, qualified and communicative team with open 2-way communication at all levels - training and rotations? 2 edged sword. • Assures team’s high level of active knowledge of firm’s businesses and operations

  9. Key Characteristics Chief Actuary • Identifies and shares risks and uncertainties of estimates with Executive Management • Has clear understanding of assumptions and bases for conclusions drawn by support team and across operating areas in which teams operate - Consistency matters • Formalizes communications with key stakeholders: Senior Executive Management, Claims, Underwriting, Pricing, Reinsurance, Finance • Clear, well-documented presentation to management of support for methods, estimates and relevant changes

  10. Key Characteristics Chief Actuary • Assures stable and responsive methodologies, updated and supplemented by objective tests and special studies • Vision/Proactive • Anticipates future areas requiring additional analyses/data • Assures a sound, high quality, relevant database to support methods - Who owns/secures? • Assures clear professional and managerial direction to all staff • Assures continuing education and training

  11. The Rubber Meets the Road • Example - Sample Quotes • “You need to be a team player” • “We can’t afford to price it that high” • “Forget the tail, it gets washed out by competition” • “This is an important client/quarter/year/result/etc.” • “Ignore that aberration - it won’t happen again”

  12. The Rubber Meets the Road • “Just take 3 year averages and use them - can’t go wrong as it’s a time tested and utilized methodology” • “There goes the bonus!” • “My supervisor insists on looking at all my assumptions - rude and unprofessional.” • “Guess what, my supervisor doesn’t look at any of my assumptions, unless the overall result is unexpected - no worries for me.” • “The Auditor is challenging our results - YIKES, you did what???”

  13. The Rubber Meets the Road • Words have power: • “We can’t afford another hit to income this quarter/year” “This kills our earnings” • Leader • Team Members • “Just use the “tail” factors we developed in 19XX. Used the last year. We always use them. “ • Leader • Team Members

  14. Conclusion • Environment - Professional, Business, Personal • Broad Spectrum of Stakeholders • Broad Expectations - At Times Conflicting • Miscommunication is high risk • Theoretical vs. Actual • Had to pick one: Personal Accountability

  15. Key Characteristics of the Actuarial Leader • Richard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 • RIF Consulting, LLC

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