Professionalism

1. Professionalism Allan Kaufman Casualty Actuaries in Europe November 29,2007

2. Imagine this • Once upon a time…. A US trained FCAS, based in the UK, an FIA by mutual recognition, doing actuarial work for a German insurer which is part of a Swiss-based group. What professionalism rules apply

3. Issues to Consider • CAS Code of Professional Conduct • American Academy of Actuaries • Qualification Standard • Actuarial Standards of Practice • Institute of Actuaries • Code of Conduct • GN 12 • German and Swiss rules

4. CAS Code of Professional Conduct Precept 2 – An Actuary shall perform Actuarial services only when the Actuary is qualified to do so on the basis of basic and continuing education and experience and only when the Actuary satisfies applicable qualification standards.

5. CAS Code of Professional Conduct ANNOTATION 2-1. It is the professional responsibility of an Actuary to observe applicable qualification standards that have been promulgated by a Recognized Actuarial Organization for the jurisdictions in which the Actuary renders Actuarial Services and to keep current regarding changes in these standards. • In the US, the AAA has been delegated that responsibility by the other US-based organizations (CAS, SoA, ASPPA, CCA) • New standard effective 1/1/08

6. Who’s Affected? • Actuaries who issue Statements of Actuarial Opinion when rendering Actuarial Services in the United States are required by the Code of Professional Conduct to satisfy the Qualification Standards. • The Academy makes a broad interpretation of rendering Actuarial Services in the United States • Depends on the status of the entity for which the work is being done, rather than on where the actuary happens to be located.

7. Statement of Actuarial Opinion For purposes of these Qualification Standards, a Statement of Actuarial Opinion (SAO) is an opinion expressed by an actuary in the course of performing Actuarial Services and intended by that actuary to be relied upon by the person or organization to which the opinion is addressed.

8. Statement of Actuarial Opinion Actuarial Services are defined in the Code of Professional Conduct as “Professional services provided to a Principal [client or employer] by an individual acting in the capacity of an actuary. Such services include the rendering of advice, recommendations, findings, or opinions based upon actuarial considerations.”

9. Statement of Actuarial Opinion • If the Principal is not subsequently sent a final report within a reasonable time frame, that is an indication that the draft report is an SAO. The actuary should communicate to the Principal that the final report replaces the draft report. • There may be instances where the actuary sends the Principal a draft report that clearly indicates it should not be relied upon (a document that is not an SAO according to the above definition) and the actuary and Principal subsequently agree that a final report will not be issued. In this case, the draft report is not an SAO.

10. Current Standard • Current standard applies only to prescribed statements of actuarial opinion • A statement of actuarial opinion issued for purpose of compliance with law or regulation; • A statement of actuarial opinion issued for purpose of compliance with ASOPs as promulgated by the ASB; or • An actuarial communication issued for purpose of compliance with standards promulgated by the FASB, GASB, CASB, AICPA or FASAB. • Both standards (current & new) maintain additional requirements for NAIC reserve opinions

11. Expanded Scope of New Standard • Because the new standard applies to all statements of actuarial opinion, it’s scope covers virtually all actuaries practicing in the United States • Does this mean you? Do you ever provide actuarial services that are intended to be relied upon by a person in the US?

12. Continuing Education • 30 hours per year (24 in 2008 for 2009) • 6 hours must be “organized” • 3 hours “professionalism” • 1 “hour” = 50 minutes • This session is 0.5 units of professionalism provided we spend 25 minutes on it • Excess carry forward is permitted, but only into the following year

13. Continuing Education • Relevant to the subject of the SAO • Under a very broad definition of relevant • Up to the actuary to determine • Not necessarily purely actuarial in nature • Professionalism encouraged • General business courses probably don’t have enough technical content – limit to 3 hours

14. Continuing Education: Organized Activities • “Organized activities” involve interaction with actuaries or other professionals working for different organizations. • Examples of organized activities include, but are not limited to, conferences, seminars, webcasts, in-person or online courses, or committee work that is directly relevant to the area of practice of the subject of the Statement of Actuarial Opinion.

15. Continuing Education: Organized Activities • In-house meetings can constitute “organized activities” by using outside speakers who are actively involved in the meeting, otherwise in-house meetings without an outside speaker could qualify as an “other activity” for CE credit purposes. • “Outside speaker” does not include someone employed by a company working at a different location.

16. Details • Transition for 2008 • Carryback/Carryforward generally • NAIC specifics rules

17. Institute of Actuaries • Old Scheme • Only compulsory for statutory actuaries • New Scheme (July 06) • All actuaries (UK and non-UK based) • Flexible – design your own program • Record keeping on website • 3 categories of skill • CPD handbook

18. Institute of Actuaries Cateogries of actuary • Category 1 – requiring practicing certificates • Category 2 – working in areas covered by sepcialist syllabus • Category 3- not 1 or 2 • Category 4 – not working

19. Institute of ActuariesCategory 1 • 15 hours verifiable CPD • 10 hours relevant to practicing certificate • 5 hours external to employer • 2 hours on professional skills – professinal ethics, non-actuarial skills • Professionalism event every 10 years

20. Institute of ActuariesCategory 2 • Same as category 1 except: • “Personally assessed activities can replace “verifiable” activities • Some activities to be external to employer

21. Current CAS Issues and Directions Allan Kaufman Casualty Actuaries in Europe November 29, 2007

22. Agenda • CAS Centennial Goal • CAS Education Strategy and Initiatives • New Variance Journal • ERM Initiatives • Your Input

23. CAS Centennial Goal • March 2003 • CAS Board adopted the Centennial Goal. • November 2006 • LRPC presented its annual report to the Board; Board agreed to revisit the goal. • March 2007 • Board reaffirmed the long-term vision for CAS; approved refreshed wording for the Goal.

24. CAS Centennial Goal The CAS will be recognized globally as a leading resource in educating casualty actuaries and conducting research in casualty actuarial science. CAS members will advance their expertise in pricing, reserving, and capital modeling; and leverage their skills in risk analysis to become recognized as experts in the evaluation of enterprise risks, particularly for the property and casualty insurance industry.

25. Update on Education Strategy White Paper on CAS Education Strategy • Released in November 2006 and feedback invited via online survey through January 2007. • Proposed: • Optional tracks for Fellowship • Enhanced continuing education program • Non-exam evaluation methods

26. Update on Education Strategy Summary of Feedback: • Fellowship tracks did not garner broad support – concern with impeding career mobility. • Providing more rigorous continuing education offerings was strongly supported. • Required workshops for basic education – some support for testing knowledge and skills. • Desire for improved study materials.

27. Update on Education Strategy • Board has discussed feedback and ideas during March, June, September 2007 meetings. • Conclusions to date: • Changes will be made to basic education • Minimizing transition issues is a priority • Will not pursue Fellowship tracks • Supports idea of Capstone Seminar • Considering Internet-based course for topics requiring only familiarity

28. Update on Education Strategy • No implementation timeline has been contemplated at this point. • We will not have details on implementation until we first decide on the specific strategy. • Implementation will not occur for several years. • Implementation plan will include a transition strategy designed to minimize disruption for candidates.

29. Other Education Issues - Improved Educational Materials • Board established the Task Force on Developing Education Materials. • Task Force issued two Requests For Proposals for authors to create educational publications on (1) ratemaking and (2) reserving.  • Board awarded contracts following the June 2007 meeting. • Ratemaking – EMB America • Reserving – KPMG

30. Other Education Issues - Candidate Code of Conduct • Board approved adoption of a Code of Professional Ethics for Candidates, and Rules of Procedure for Disciplinary Actions Involving Candidates • Purpose: to require Actuarial Candidates to adhere to the high standards of conduct, practice, and qualifications of the actuarial profession. • Effective: with registration for the 2008 Spring exam sitting.

31. New CAS Journal www.VarianceJournal.org

32. ERM Initiatives • ERM Vision • 2008 ERM Symposium • Online Course: Introduction to ERM • 2007 CAS Spring Meeting – ERM track (six sessions)

33. ERM for CAS Committee • Prioritized actuarial credibility as the most important strategic risk for the CAS. • Developed Crisis Communication Plan. • Addressed catastrophe risk as it pertains to: • CAS Office (Disaster Recovery Plan) • CAS Web Site

34. CERAChartered Enterprise Risk Analyst • What is CERA? • New Associate-level credential offered by the SOA. • CAS position: • In 2005, the CAS Board resolved that at this time, the Board discourages consideration of an independent ERM credential sponsored by the actuarial profession.

35. CERAChartered Enterprise Risk Analyst • CAS position: • The CAS, in conjunction with the Risk Management Section, should focus on enhancing the role of actuaries in ERM by: • Providing continuing education on ERM; • Conducting research to address unanswered ERM questions (e.g., operational risks, risk aggregation) • Promoting actuarial skills in addressing ERM issues; and • Exploring possible changes to the CAS basic education syllabus.

36. 2007 Calendar of Events • NEW - Reserve Variability WebinarSeptember 27, 2007 • Predictive Modeling SeminarOctober 11-12, 2007, Las Vegas • Annual MeetingNovember 11-14, 2007, Chicago • Seminar on RatemakingMarch 17-18, 2008, Boston • ERM SymposiumApril 14-16, 2008, Chicago

37. I welcome your input regarding . . . • CAS Centennial Goal • CAS Education Strategy and Initiatives • New AAA Qualification Standards • CAS Publications • ERM Initiatives • Other Topics • Questions?

38. Allan Kaufnan Casualty Actuaries of Europe November 29, 2007 Thank You!