Property/Casualty Actuaries Property/Casualty Actuaries and the New US Qualification and the New US Qualification

StandardStandardA Work in ProgressA Work in Progress

Mary Frances MillerMary Frances Miller(member, AAA Committee on Qualifications)(member, AAA Committee on Qualifications)

CAS Annual MeetingCAS Annual MeetingSan Francisco, November 13, 2006San Francisco, November 13, 2006

The Code of Professional The Code of Professional Conduct Conduct

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

The Code of Professional The Code of Professional Conduct Conduct

ANNOTATION 2-1. It is the professional ANNOTATION 2-1. It is the professional responsibility of an Actuary to observe responsibility of an Actuary to observe applicable qualification standards that have applicable qualification standards that have been promulgated by a Recognized Actuarial been promulgated by a Recognized Actuarial Organization for the jurisdictions in which the Organization for the jurisdictions in which the Actuary renders Actuarial Services and to keep Actuary renders Actuarial Services and to keep current regarding changes in these standards.current regarding changes in these standards.

In the US, the AAA has been delegated In the US, the AAA has been delegated that responsibility by the other US-based that responsibility by the other US-based organizations (CAS, SoA, ASPPA, CCA)organizations (CAS, SoA, ASPPA, CCA)

Under ConstructionUnder Construction

Exposure draft – summer comment Exposure draft – summer comment deadlinedeadlineOver 200 responses receivedOver 200 responses receivedNAAC has voiced its supportNAAC has voiced its supportCurrently in redrafting stageCurrently in redrafting stage– Most changes will be clarificationsMost changes will be clarifications– COQ does not anticipate another exposureCOQ does not anticipate another exposure

AgendaAgendaThis presentation is oriented toward P/C This presentation is oriented toward P/C ActuariesActuaries– Some details, e.g. EA’s, not addressedSome details, e.g. EA’s, not addressedWho’s Affected?Who’s Affected?Basic Education & ExperienceBasic Education & ExperienceContinuing EducationContinuing EducationChanges to Specific Qualification Standard for Changes to Specific Qualification Standard for NAIC OpinionsNAIC OpinionsQualification vs MembershipQualification vs MembershipFAQ’sFAQ’sYour QuestionsYour Questions

Who’s Affected?Who’s Affected?

Who’s Affected?Who’s Affected?Actuaries who issue Statements of Actuarial Opinion Actuaries who issue Statements of Actuarial Opinion when rendering Actuarial Services in the United States when rendering Actuarial Services in the United States are required by the are required by the Code of Professional Conduct Code of Professional Conduct to to satisfy these Qualification Standards. satisfy these Qualification Standards. While this obligation may be met by an actuary obtaining While this obligation may be met by an actuary obtaining experience and education in a manner or to an extent experience and education in a manner or to an extent differing from that contained in these Qualification differing from that contained in these Qualification Standards, where an actuary has satisfied these Standards, where an actuary has satisfied these standards, in the absence of evidence to the contrary, standards, in the absence of evidence to the contrary, there is a presumption that an actuary has met the duty there is a presumption that an actuary has met the duty of qualification imposed by the of qualification imposed by the Code of Professional Code of Professional ConductConduct. .

Statement of Actuarial OpinionStatement of Actuarial Opinion

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

Statement of Actuarial OpinionStatement of Actuarial Opinion

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

Statement of Actuarial OpinionStatement of Actuarial OpinionMany actuaries hold positions that are non-actuarial in Many actuaries hold positions that are non-actuarial in nature or have non-actuarial aspects (nature or have non-actuarial aspects (e.g.,e.g., general general management positions). Actuaries in such positions may management positions). Actuaries in such positions may have general occasion to issue oral or written statements have general occasion to issue oral or written statements by virtue of the positions they hold and not because they by virtue of the positions they hold and not because they are actuaries. The Qualification Standards are not are actuaries. The Qualification Standards are not intended to apply to such statements, even though they intended to apply to such statements, even though they may happen to have actuarial aspects. If it is common may happen to have actuarial aspects. If it is common for persons holding comparable positions to issue such for persons holding comparable positions to issue such statements, whether or not they happen to be actuaries, statements, whether or not they happen to be actuaries, this is evidence that the Qualification Standards are not this is evidence that the Qualification Standards are not intended to apply. intended to apply.

Current StandardCurrent StandardCurrent standard applies only to Current standard applies only to prescribedprescribed statements of actuarial opinionstatements of actuarial opinion– A statement of actuarial opinion issued for purpose of A statement of actuarial opinion issued for purpose of

compliance with law or regulation;compliance with law or regulation;– A statement of actuarial opinion issued for purpose of A statement of actuarial opinion issued for purpose of

compliance with ASOPs as promulgated by the ASB; compliance with ASOPs as promulgated by the ASB; oror

– An actuarial communication issued for purpose of An actuarial communication issued for purpose of compliance with standards promulgated by the FASB, compliance with standards promulgated by the FASB, GASB, CASB, AICPA or FASAB. GASB, CASB, AICPA or FASAB.

Both standards (current & new) maintain Both standards (current & new) maintain additional requirements for NAIC reserve additional requirements for NAIC reserve opinionsopinions

Expanded Scope of New StandardExpanded Scope of New Standard

Because the new standard applies to Because the new standard applies to allall statements of actuarial opinion, it’s scope statements of actuarial opinion, it’s scope covers virtually all actuaries practicing in covers virtually all actuaries practicing in the United Statesthe United StatesThis probably means youThis probably means you

Basic Education & Basic Education & ExperienceExperience

Three Minimum RequirementsThree Minimum Requirements

You have to be a credentialed actuaryYou have to be a credentialed actuaryEligible for AAA membershipEligible for AAA membership– CAS, SoA, ASPPA, CCA, EA, FCIA, FFA, FIA, CAS, SoA, ASPPA, CCA, EA, FCIA, FFA, FIA,

Collegio, FIAACollegio, FIAAOr a full member of an IAA organizationOr a full member of an IAA organization

Eg a fellow of the DAV, the German actuarial societyEg a fellow of the DAV, the German actuarial societyActuaries who are not eligible for AAA membership Actuaries who are not eligible for AAA membership practice in the US, so the standard needs to cover practice in the US, so the standard needs to cover themthemEquivalent of an associate from such a society would Equivalent of an associate from such a society would not meet the standardnot meet the standard

Three Minimum RequirementsThree Minimum Requirements

You need 3 years of experienceYou need 3 years of experience– defined as work that requires knowledge and defined as work that requires knowledge and

skill in solving actuarial problems skill in solving actuarial problems

You must be knowledgeable of relevant You must be knowledgeable of relevant US laws and regulationsUS laws and regulations– through examination or documented through examination or documented

professional developmentprofessional development

Topic of Opinion Covered by a Topic of Opinion Covered by a Specialization TrackSpecialization Track

Could the actuary have completed a Could the actuary have completed a fellowship in this area in the US?fellowship in this area in the US?Then the actuary must do one of the Then the actuary must do one of the following:following:– Be a fellow in this areaBe a fellow in this area– Be a fellow in another area and have 1 year’s Be a fellow in another area and have 1 year’s

supervised experiencesupervised experience– Have 3 years’ supervised experienceHave 3 years’ supervised experience

ClarificationClarification

Latest wording changes to “Under review Latest wording changes to “Under review by an actuary who would have been by an actuary who would have been qualified to issue the SAO at the time the qualified to issue the SAO at the time the review took place under the standards in review took place under the standards in effect at that time”effect at that time”– Same language as in the current specific Same language as in the current specific

qualification standardqualification standard– Does not require the reviewing actuary to Does not require the reviewing actuary to

supervise the reviewed actuary or even be supervise the reviewed actuary or even be employed by the reviewed actuary’s employeremployed by the reviewed actuary’s employer

Compare to Current for PSAO’sCompare to Current for PSAO’s

Actuary must have obtained sufficiently Actuary must have obtained sufficiently comprehensive knowledge of the subjects comprehensive knowledge of the subjects specifically involved to be able to determine specifically involved to be able to determine which actuarial concepts and techniques are which actuarial concepts and techniques are applicable to the assignment and to apply these applicable to the assignment and to apply these concepts and techniques successfully.concepts and techniques successfully.Exams or alternative in the actuarial practice Exams or alternative in the actuarial practice area (ASA sufficient)area (ASA sufficient)– General actuarial mathematicsGeneral actuarial mathematics– Applicable economic, regulatory & legal environmentsApplicable economic, regulatory & legal environments– Identification, evaluation and management of riskIdentification, evaluation and management of risk

Compare to Current for PSAO’sCompare to Current for PSAO’sExperience involving significant responsibility in Experience involving significant responsibility in the actuarial practice area of the PSAOthe actuarial practice area of the PSAOMust be sufficiently experienced to know how to Must be sufficiently experienced to know how to apply proper techniques of validating data and apply proper techniques of validating data and results of analyses, and must have achieved results of analyses, and must have achieved sufficient breadth of perspective to determine sufficient breadth of perspective to determine properly whether all material considerations properly whether all material considerations have been addressedhave been addressed

More qualitative – should we have kept this More qualitative – should we have kept this language?language?

Continuing EducationContinuing Education

Continuing EducationContinuing Education30 hours per year30 hours per yearRelevant to the subject of the SAORelevant to the subject of the SAO– Under a very broad definition of relevantUnder a very broad definition of relevant– Up to the actuary to determineUp to the actuary to determine– Not necessarily purely actuarial in natureNot necessarily purely actuarial in nature– Professionalism encouragedProfessionalism encouraged– General business courses probably don’t have General business courses probably don’t have

enough technical contentenough technical contentOpportunities for dialog with others strongly Opportunities for dialog with others strongly encouragedencouragedDocumentation requiredDocumentation required

(Probable) Adjustments(Probable) Adjustments

At least 6 hours should be obtained At least 6 hours should be obtained through experiences that involve through experiences that involve interaction with outside actuaries or other interaction with outside actuaries or other professionals professionals 50 minute hours50 minute hoursTransition in the first year – 24 hoursTransition in the first year – 24 hoursCan meet the hours in the current or Can meet the hours in the current or preceding calendar yearpreceding calendar yearUnlimited carryover into the next yearUnlimited carryover into the next year

Specific Qualification Standard Specific Qualification Standard for NAIC p/c Opinionsfor NAIC p/c Opinions

Education Requirements Education Requirements Unchanged in Exposure DraftUnchanged in Exposure Draft

Must have passed relevant exams offered Must have passed relevant exams offered by the CAS (or the SoA) on:by the CAS (or the SoA) on:– Policy forms & coverages, underwriting & Policy forms & coverages, underwriting &

marketingmarketing– Principles of ratemakingPrinciples of ratemaking– Statutory insurance accounting & expense Statutory insurance accounting & expense

analysisanalysis– Premium, loss & expense reservesPremium, loss & expense reservesAlternative – signoff on education by an Alternative – signoff on education by an actuary who is qualified to signactuary who is qualified to sign

Probable AdditionProbable Addition

Reinsurance – requested by the Casualty Reinsurance – requested by the Casualty Practice Council in its comment letterPractice Council in its comment letter

Experience Requirement Experience Requirement UnchangedUnchanged

An actuary must obtain at least three An actuary must obtain at least three years of responsible experience relevant years of responsible experience relevant to the subject of the Statement of Actuarial to the subject of the Statement of Actuarial Opinion under review by an actuary who Opinion under review by an actuary who was qualified to issue the Statement of was qualified to issue the Statement of Actuarial Opinion at the time the review Actuarial Opinion at the time the review took place under standards in effect at that took place under standards in effect at that time. time.

Continuing EducationContinuing Education

Current StandardCurrent Standard– Average 12 hours per year in a two-year cycleAverage 12 hours per year in a two-year cycle– Minimum 6 hours “organized activities”Minimum 6 hours “organized activities”

Exposure DraftExposure Draft– 15 hours per year15 hours per year– A minimum of 6 of the 15 hours must be obtained A minimum of 6 of the 15 hours must be obtained

through experiences that involve interaction with through experiences that involve interaction with outside actuaries or professionals, such as seminars, outside actuaries or professionals, such as seminars, in-person or online courses, or committee work that is in-person or online courses, or committee work that is directly relevant directly relevant

Clarification & ChangeClarification & Change

15 hours are part of the 30 hours general 15 hours are part of the 30 hours general standard (not in addition to) - clarificationstandard (not in addition to) - clarification

Unlimited carry forward to the next year - Unlimited carry forward to the next year - changechange

Qualification vs MembershipQualification vs Membership

Qualification vs MembershipQualification vs Membership

The qualification standards set minimum The qualification standards set minimum standards for an actuary who performs standards for an actuary who performs certain activitiescertain activities– Issue statements of actuarial opinionIssue statements of actuarial opinion– Sign NAIC reserve opinionsSign NAIC reserve opinionsMembership is not affectedMembership is not affected– Retired actuariesRetired actuaries– Other actuaries who do not issue opinionsOther actuaries who do not issue opinionsSubject to discipline processSubject to discipline process

Qualification vs MembershipQualification vs Membership

Membership in the CAS is akin to an academic Membership in the CAS is akin to an academic designationdesignation– Recognizes a demonstrated level of knowledgeRecognizes a demonstrated level of knowledge– No experience requirementNo experience requirement– No practice requirementNo practice requirementHence, the CAS does not set qualification Hence, the CAS does not set qualification standardsstandards– Standards vary depending on the jurisdictionStandards vary depending on the jurisdiction– No continuing education requirement for membershipNo continuing education requirement for membership– Code of conduct also refers to conduct, not to Code of conduct also refers to conduct, not to

membershipmembership

Acknowledge QualificationAcknowledge Qualification

Standard requires affirmative Standard requires affirmative acknowledgement that the actuary is acknowledgement that the actuary is qualifiedqualifiedPer ASOP #41, must be somewhere in the Per ASOP #41, must be somewhere in the totality of the communication, not every totality of the communication, not every time the actuary speakstime the actuary speaks

Frequently Asked QuestionsFrequently Asked Questions

From the Comments on the From the Comments on the Exposure DraftExposure Draft

FAQ’s – SAO’sFAQ’s – SAO’s

I work for a very large company, so my I work for a very large company, so my work products are only internal – do I still work products are only internal – do I still have to meet the qualification standard?have to meet the qualification standard?Is your work actuarial in nature?Is your work actuarial in nature?Does someone rely on your work?Does someone rely on your work?Then you must meet the standard, Then you must meet the standard, regardless of your employerregardless of your employer

FAQ’s – SAO’sFAQ’s – SAO’s

I’m partially retired (only working part time, I’m partially retired (only working part time, raising children…) and only issue a few raising children…) and only issue a few SAO’s each year – do I still have to meet SAO’s each year – do I still have to meet the qualification standards?the qualification standards?Does your principal rely on you any less, Does your principal rely on you any less, or deserve less than your full effort?or deserve less than your full effort?Yes, you must meet the standardYes, you must meet the standard

FAQ’s – Basic Education & ExperienceFAQ’s – Basic Education & Experience

So, really, after you sift through all this wording, So, really, after you sift through all this wording, who’s qualified to issue property/casualty who’s qualified to issue property/casualty SAO’s?SAO’s?Any FCAS with US-7 & 3 years of experienceAny FCAS with US-7 & 3 years of experienceAny ACAS with US-7 & 3 years of experience Any ACAS with US-7 & 3 years of experience under review by a qualified actuaryunder review by a qualified actuaryWithout US-7, need to fulfill relevant law & Without US-7, need to fulfill relevant law & regulation requirement through documented regulation requirement through documented professional developmentprofessional development

FAQ’s – Basic Education & ExperienceFAQ’s – Basic Education & Experience

Who else?Who else?Any FIA, FFA, FIAA, etc., who Any FIA, FFA, FIAA, etc., who – Specialized in p/c (general insurance)Specialized in p/c (general insurance)– Has 3 years of experienceHas 3 years of experience– Has documented knowledge of relevant laws & regsHas documented knowledge of relevant laws & regs

Any FIA, FFA, FIAA, etc., whoAny FIA, FFA, FIAA, etc., who– Specialized in something other than p/cSpecialized in something other than p/c– Has 3 years of experienceHas 3 years of experience– Has 1 year of reviewed experience in p/cHas 1 year of reviewed experience in p/c– Has documented knowledge of relevant laws & regsHas documented knowledge of relevant laws & regs

FAQ’s – Basic Education & ExperienceFAQ’s – Basic Education & Experience

Who else?Who else?Any fully qualified member of an IAA Any fully qualified member of an IAA organization, who organization, who – Didn’t do a fellowship (specialty) trackDidn’t do a fellowship (specialty) track– Has 3 years of reviewed experience in p/cHas 3 years of reviewed experience in p/c– Has documented knowledge of relevant laws & regsHas documented knowledge of relevant laws & regsAnyone else who is qualified to be a member of Anyone else who is qualified to be a member of the AAA (e.g. an ASA), whothe AAA (e.g. an ASA), who– Has 3 years of reviewed experience in p/cHas 3 years of reviewed experience in p/c– Has documented knowledge of relevant laws & regsHas documented knowledge of relevant laws & regs

FAQ’s – ExperienceFAQ’s – Experience

Does my experience have to be after I am Does my experience have to be after I am credentialed?credentialed?No, any responsible actuarial work is No, any responsible actuarial work is relevantrelevant

FAQ’s – ExperienceFAQ’s – Experience

I’m an ACAS and the only actuary at my I’m an ACAS and the only actuary at my employer – how can I become qualified?employer – how can I become qualified?Most actuaries in this situation will have at Most actuaries in this situation will have at least some supervised work experience at least some supervised work experience at prior employersprior employersReviews by outside consultantsReviews by outside consultantsFellowship examsFellowship exams

FAQ’s – multiple practice areasFAQ’s – multiple practice areas

My employer wants me to give opinions on My employer wants me to give opinions on many areas of actuarial practice, but I’m many areas of actuarial practice, but I’m only qualified in . . .only qualified in . . .You must meet the qualification standardYou must meet the qualification standardYou could give your educated, but not You could give your educated, but not qualified, opinion provided that you stated qualified, opinion provided that you stated as muchas much

FAQ’s – multiple practice areasFAQ’s – multiple practice areas

What about opinions that are in more than What about opinions that are in more than on area?on area?Two (or more) actuaries can collectively Two (or more) actuaries can collectively meet the standard for an opinion in meet the standard for an opinion in multiple practice areas and issue a joint multiple practice areas and issue a joint opinionopinion

FAQ’s – Continuing EdFAQ’s – Continuing EdMy employer won’t pay for 30 hours of meetings My employer won’t pay for 30 hours of meetings every yearevery yearThere is no requirement that continuing ed be There is no requirement that continuing ed be meeting attendance (although that is meeting attendance (although that is encouraged)encouraged)Documented self-study is accepted and would Documented self-study is accepted and would normally make up a portion of continuing ednormally make up a portion of continuing edProbable revision – 6 hours must involve Probable revision – 6 hours must involve interaction with someone other than the gal in interaction with someone other than the gal in the next cubicle!the next cubicle!– Regional meetings, online courses, webinars, Regional meetings, online courses, webinars,

committee involvement – not just major meetings & committee involvement – not just major meetings & expensive tripsexpensive trips

Your Questions?Your Questions?