Current CAS Issues and Directions

1. Current CAS Issues and Directions Robert F Wolf (Bob) CAS Board of Directors Director, Navigant Consulting, Inc. Midwest Actuarial Forum 3/17/06 Allstate, Northbrook, IL

2. Agenda • CAS Centennial Goal / ERM Initiatives • Governance Initiatives on 2006 Ballot • Task Force on Actuarial Credibility • Task Force on Publications • Basic Education Initiatives • Research Working Parties • Continuing Education • Image of the Actuary Campaign • Your Input

3. CAS Centennial Goal The CAS will be globally recognized as the preeminent resource in educating casualty actuaries and conducting research in casualty actuarial science. CAS members will be recognized as the leading experts in the evaluation of hazard risk and the integration of hazard risk with strategic, financial and operational risk.

4. Implementing the Centennial Goal • Significant, Attainable, Measurable Goals • Interim milestones to help gauge progress towards the Centennial Goal. • 2006 LRPC Goal: Critically review the SAM Goals. • Environmental Scans – Challenges: • Competition for Risk Integration & ERM Services • Marketing Actuarial Skills • Volunteerism • Internationalism • Quantification Skills • Reputation of the Actuarial Profession

5. ERM Initiatives • During 2005, the CAS Board took actions to help the actuarial profession benefit from new opportunities in Enterprise Risk Management: • Approved CAS/SOA Risk Management Section. • Launched partnership with Enterprise Risk Management Institute International, Ltd. (ERMII). • Created new Vice President of Risk Integration and ERM position to oversee ERM-related activities. • Formed ERM Task Force to examine the CAS.

6. Risk Management Section • Similar to the existing CAS special interest sections CARe and AIR. • Both CAS and SOA members are eligible to serve on the Council that guides the activities of the Section. • Members are encouraged to join the Section. Annual dues are only $20. • Learn more on the CAS Web Site  About CAS  CAS Special Interest Sections.

7. Other ERM Initiatives • ERMII is a private, not-for-profit, independent educational and research organization led by CAS Fellow Shaun Wang. • ERMII is co-sponsored by an international group of universities and professional organizations including Georgia State University, University of New South Wales, University of Illinois, Wuhan University (China), and the CAS. • VP-Risk Integration and ERM to oversee and coordinate ERM-related activities.

8. Other ERM Initiatives • CAS ERM Task Force • Goal: Spotlight the CAS itself as an example of ERM best practices. • Charge: Implement an ERM process for the CAS, report on the outcome of this effort by the September 2006 Board meeting, and prepare an article, authored by the Executive Director and the President, for placement in a magazine such as Association Management.

9. Other ERM Initiatives • ERM Credential (SOA Initiative) • Board response – The CAS: • Discourages consideration of an independent ERM credential sponsored by the actuarial profession. • Should focus on enhancing the role of actuaries in ERM by: • Providing continuing education, conducting research, promoting actuarial skills in addressing ERM issues, and exploring changes to the CAS basic education syllabus. • Favors a partnership with ERMII -- support ERMII in its education and research, particularly as these initiatives enhance the role of actuaries in ERM. • Looks forward to a continuing partnership with the SOA in enhancing opportunities for actuaries in ERM.

10. ACAS Right to Vote • Right to vote should be granted upon earlier of: Fellowship or five years after admission as a member. • 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: • President • President - Elect • Vice President - Admissions

11. ACAS Right to Vote • Voting rights unchanged since 1914; reflect a time when there was a greater difference between classes. • Associates are an important part of the Society: • 25-30% of Associates no longer take exams. • Many Associates contribute extensively to the profession as volunteers, on committees, as speakers and authors, etc. • Contributions as practitioners; they have equal practice rights. • Associates pay full dues, but cannot vote. • Mutual Recognition issues. • Ought an ACAS have the same vote as a MR CAS member ?

12. Task Force on Governance • Board proactively considers governance issues by allotting time during Board meetings for discussion. • Formed Board Task Force on Outside Representation in CAS Governance Process in March 2005. • Charged with considering the role of outside representation in the CAS governance process.

13. Task Force on Governance • Appointed (Non-Actuary) Board MembersCreate a class of Board Members consisting of up to three additional Board Members to be appointed by the Board. • Academy Role at CAS Board MeetingsParticipation at Board Meetings by the Casualty Vice President of the AAA should be formalized through policy or, if recommendation #1 is implemented, through an appointment to the Board. • Executive Director as Member of Executive CouncilThe Executive Director should be officially designated as a member of the Executive Council.

14. Why Have Appointed, Non-Actuary Board Members? • Better Decision-Making • Broader input is always better in setting strategy and policy. • Move away from inward thinking. • Perception • Prevailing schools of thought on governance endorse this approach. • Positions CAS as outward looking and forward thinking.

15. Task Force on Actuarial Credibility Established to identify, prioritize, and investigate the feasibility of possible strategies for enhancing the perceived credibility of the actuarial profession and to develop action plans for implementation of those strategies considered to have the greatest potential for high impact.

16. Task Force on Actuarial Credibility • Enhance the transparency of the actuary’s conclusions by clearly identifying differences between management’s “best estimate” and the actuary’s “best estimate.” • Enhance the public’s understanding of actuarial estimates. • Improve the transparency of disclosures by requiring that the actuarial report contain an exhibit that summarizes changes in the actuary’s estimates from one period to the next.

17. Task Force on Actuarial Credibility • Enhance the quality of corporate governance by educating audit committees or board of directors or both on the roles and responsibilities of the appointed actuary. • Enhance the self-governance of the profession by requiring the appointed actuary to provide an explanatory document with the ABCD whenever the change in the actuary’s reserve estimates over a defined period exceeds certain predetermined thresholds.. • Elevate the unique role of the appointed actuary within the statutory financial reporting environment by incorporating an Actuarial Statement within the Jurat Page of each company’s Annual Statement.

18. Task Force on Actuarial Credibility • Task Force Report presented to the CAS Board in May 2005. Board accepted the Report and directed the EC to implement recommendations as appropriate. • Two additional Task Forces formed: • Joint Task Force for Enhancing the Reputation of Casualty Actuaries • CAS Task Force for Enhancing the Reputation of Casualty Actuaries

19. CRUSAP • Critical Review of the U.S. Actuarial Profession (CRUSAP) Task Force formed by the AAA. • CRUSAP will identify and analyze risks and opportunities facing the actuarial profession and provide recommendations for meeting emerging challenges. • 30 members serve on the CRUSAP advisory panel. • Fred Kilbourne is chairperson of the CRUSAP Task Force. • See www.crusap.net for more information.

20. Task Force on PublicationsRecommendations • Remove papers from PCAS. Keep CAS-specific content and add Yearbook content. • Create a yearly Membership Directory publication as a separate soft-cover publication. • Create a new journal where refereed papers will be published. The editor is Gary Dean. • Encourage non-CAS members to publish in the new journal; actively solicit articles from around the world.

21. Basic Education Initiatives • Validation by Educational Experience: • Economics • Finance • Applied Stats • Computer Based Testing • Modeling Workshop • FCAS Education

22. CBT Implementation for Exam 1 • September 2005 – First administration (paper/pencil backup for areas without centers). • February 2006 – Second administration • 2006 - 4 CBT administrations total. • Immediate release of grades beginning in 2006. • Rollout to other exams in future years.

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

24. FCAS Education • Task force established in late 2004 to recommend “Learning Objectives” for what it means to be an FCAS. • Considerations • Perhaps reducing total number of exams by one (i.e., 8 exams plus VEE). • Including a mandatory workshop (e.g., DFA Modeling Workshop). • Recommendations delivered to CAS Board in November 2005.

25. FCAS Education • Board Task Force on FCAS Education formed in late 2005 to consider policy-level issues. • Task Force Report was focus of January 2006 Board meeting, during which four resolutions were passed: • Prepare a White Paper. • Board endorses use of electives in basic education. • Electives to be available post-Fellowship for CE. • Mastery of core topics must be demonstrated by all candidates through rigorous methods.

26. Research Working Parties • Research task forces. • Process should result in quality work products. • Brings together the research energy of individual researchers. • Proven to be effective for GIRO, the general insurance research organization of the Faculty and Institute of Actuaries (UK).

27. Research Working Parties 2004-06 • Dynamic Risk Modeling Handbook • Public-Access DFA Model • Bornhuetter-Ferguson - Initial Expected Losses • Tail Factors • Risk Transfer Testing • Data Management and Information Educational Materials • Loss Simulation Model

28. 2006 Calendar of Events • ERM SymposiumApril 23-26, Chicago • Spring MeetingMay 7-10, Puerto Rico • Seminar on ReinsuranceJune 1-2, New York City • CLRSSeptember 11-12, Atlanta • Seminar on Predictive ModelingOctober 4-5, 2006, Boston • Annual MeetingNovember 12-15, San Francisco

29. Image of the Actuary Campaign • Profession-wide campaign. • Image Advisory Group, made up of members from each of the North American actuarial organizations, oversees campaign. • www.imageoftheactuary.org/ for more information.

30. I welcome your input regarding . . . • CAS Centennial Goal / ERM Initiatives • Governance Initiatives on 2006 Ballot • Task Force on Actuarial Credibility • Basic Education Initiatives • Research and Publications • Continuing Education • International Issues • What’s On Your Mind? • Questions?

31. Thank You!