Current CAS Initiatives

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Current CAS Initiatives
Robert F. Wolf, FCAS, MAAA CAS Board of
Directors Casualty Actuaries of the Southeast
(CASE) Fall 2005 Meeting, October 10,
2005 Ritz-Carlton Hotel at BuckheadAtlanta,
GAMonday, October 10, 2005
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Agenda

• CAS Centennial Goal
• ERM Initiatives
• Research Working Parties
• Other Topics
• Task Force on Actuarial Credibility
• Task Force on Publications
• Basic Education Initiatives
• Continuing Education
• Image of the Actuary Campaign
• Your Input

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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.

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Implementing the Centennial Goal

• Centennial Goal Implementation Task Force
• Subcommittee of Long Range Planning Committee
• Working with Vice Presidents and Committee Chairs
  in setting goals.
• How does my committee and its goals support the
  Centennial Goal?
• SAM Goals
• Significant, Attainable, Measurable
• Interim milestones to help gauge progress towards
  the Centennial Goal.

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ERM Initiatives

• During its March 2005 meeting, the CAS Board took
  actions to help the actuarial profession benefit
  from new opportunities in Enterprise Risk
  Management (ERM)
• Approved Joint CAS/SOA Risk Management Section.
• Launched partnership with Enterprise Risk
  Management Institute International, Ltd. (ERMII).
  
• Created new Vice President-Risk Integration
  position to oversee ERM-related activities.

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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.
• Look for the check box on the CAS dues notice in
  October.

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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 to oversee and coordinate
  ERM-related activities.

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CAS Strategies

• Take the Lead More vigorous effort
• Expansion of Research
• Publications
• Public Relations
• A Though (Idea)-
• Develop Global Journal of ERM
• Joint Sponsorship with ERMII
• Outreach to all Professions
• Research Topics, such as Operational Risk

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CAS ERM Definition

• The discipline by which an organization in any
  industry assesses, controls, exploits, finances
  and monitors risk from all sources for the
  purpose of increasing the organizations short-
  and long-term value to its stakeholders
• Key elements
• Dual nature of risk
• Value creation

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CAS ERM Conceptual Framework Two Dimensions
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Actuarial Techniques in the Broader ERM World

• Credit Risk
• One of the established methods is called the
  actuarial method
• of borrowers by rating category exposure
• Default rate by rating category frequency
• Defaults claim count
• Loss given default severity

• Operational Risk
• Basically an internal actuarial study of
  loss-generating events
• State-of-the-art is basically re-created Basics
  of Actuarial Analysis
• Dr. Ali Samad-Khans presentation from the 2004
  ERM Symposium
• www.casact.org/coneduc/erm/2004/handouts/samad-kha
  n.pdf

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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.
• Piloting a hands-on workshop experience, with the
  final pilot conducted with new Fellows in May
  2005.
• Consider adding this as a future FCAS requirement
  and/or continuing education opportunity.

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FCAS Education

• Task force established in late 2004 to recommend
  Learning Objectives for what it means to be an
  FCAS in the year 2014.
• Considerations
• Perhaps reducing total number of exams by one
  (i.e., 8 exams plus VEE).
• include a mandatory workshop (e.g., DFA Modeling
  Workshop).
• Final Recommendations due to CAS Board in
  November 2005.

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Research Working Parties

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

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Research Working Parties

• 2004-05
• Dynamic Risk Modeling Handbook
• Public-Access DFA Model
• Bornhuetter-Ferguson - Initial Expected Losses
• Tail Factors
• Risk Transfer Testing

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Bottom Line

• Actuaries are the top candidates for ERM
  leadership in insurance and pensions
• We need to stop thinking protectionist and
  embrace expansion fearlessly and confidently
• Lets lead, not follow
• Actuaries must reframe traditional roles as part
  of the larger ERM context

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Other Topics of Interest

• Your Inputs are Welcome

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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.

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Task Force on Actuarial Credibility

• Enhance the transparency of the actuarys
  conclusions by clearly identifying differences
  between managements best estimate and the
  actuarys best estimate.
• Enhance the publics understanding of actuarial
  estimates.
• Improve the transparency of disclosures by
  requiring that the actuarial report contain an
  exhibit that summarizes changes in the actuarys
  estimates from one period to the next.

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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 actuarys 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 companys
  Annual Statement.

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Task Force on Actuarial Credibility

• Task Force Report presented to the CAS Board in
  May 2005.
• Board accepted the Report and directed the
  Executive Council to consider the recommendations
  and implement them as appropriate.
• Follow-up report due to Board in November 2005.
• Report available on CAS Web Site.
• Member comments and input are welcome.

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Task Force on Publications

• 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 called the Journal of
  Casualty Actuarial Science where refereed papers
  will be published.
• Encourage non-CAS members to publish in the
  Journal actively solicit articles from around
  the world

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Task Force on Publications

• Continue to publish the Forum in hardcopy if it
  is economically feasible and subscribing members
  pay the full cost of producing and distributing
  it.
• Change the name of the Forum to The Forum A
  Clearinghouse for Expressing Ideas and
  Stimulating Discussion.
• Create a process to publish monographs (e.g.,
  collections of study notes, call papers of
  particularly high quality and focused on one
  topic).
• Produce an international monograph in 2007 to
  commemorate the ASTIN Colloquium.

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Basic Education

• Starting Spring 2005
• Prerequisites Linear Algebra and Calculus
• Validation by Educational Experience
  Economics, Finance, Applied Stats
• Exam 1 Probability with Calculus (3 hours)
• Exam 2 Interest (2 hours)
• Exam 3 Actuarial Models Statistics (4 hours)
• Exam 4 Actuarial Modeling (4 hours)

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VEE Options

• Approved university course (grade of B- or
  better)
• Approved exams (e.g., AP exams for Micro and
  Macroeconomics, CFA exams, CAS transitional
  exams).
• Other approved experiences (courses/seminars
  designed specifically for VEE credit.)

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Computer Based Testing

• Candidates take exam at a standardized testing
  center.
• Can schedule exam any time during a specified
  period (e.g., three days).
• Software tutorial provided online and before exam
  begins.
• User friendly software with easy navigation.
• Potential for immediate grading.

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CBT Implementation for Exam 1

• May 2005 - standard paper and pencil exam.
• September 2005 - CBT (paper and pencil backup for
  areas without CBT centers).
• November 2005 - no exam.
• 2006 - 4 to 6 CBT administrations.
• Immediate release of grades beginning some time
  in 2006.
• Rollout to other exams in future years.

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Code of Professional Conduct

• Beginning in 2006, candidates taking CAS Exams 3,
  and 5-9 will be required to agree to abide by the
  terms and conditions of the CAS Code of
  Professional Conduct.
• Recognizes that candidates who have not yet
  achieved Associateship perform responsible
  actuarial work and that this work should be done
  within the framework of the Code.

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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).

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Continuing Education

• AAA Exposure Draft recommends that the
  Qualification Standards apply to all statements
  of actuarial opinion defined as follows
• an opinion expressed by an actuary based upon
  actuarial considerations, and intended by the
  actuary to be relied upon by the outside person
  or organization to whom the opinion is addressed.
  The phrase outside person or organization
  refers to persons or organizations other than the
  actuarys direct employer.
• A statement of actuarial opinion, although
  usually conveyed in writing, may also be conveyed
  orally.

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2005-06 Calendar of Events

• Seminar for the Appointed Actuary (with the
  CIA), September 22-23, Montréal
• CAS Annual MeetingNovember 13-16, Baltimore, MD
• Online Course on Financial Risk
  ManagementNovember 4-20, CAS Web Site
• 2006 Seminar on RatemakingMarch 13-14, Salt Lake
  City

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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.
• Campaign kick-off CD ROM sent to all actuaries.
• www.imageoftheactuary.org/ for more information.

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I welcome your input regarding . . .

• CAS Centennial Goal
• ERM Initiatives
• Task Force on Actuarial Credibility
• Basic Education Initiatives
• Research and Publications
• Continuing Education
• International Issues
• Whats On Your Mind?
• Questions?

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• Thank You!

Robert F. Wolf, FCAS, MAAA Principal, Mercer
Oliver Wyman 10 South Wacker Drive, Suite
1700 Chicago, IL 60606-7500 312 930 0648 Fax 312
930 0641 Mobile [phone] rwolf_at_mow.com www.mer
ceroliverwyman.com