Transcript Download Presentation: Skit on Reserving

Skit on Reserving
Committee on Professionalism
Education
Agenda





Professional Guidance
Skit
Small Group Discussion
Large Group Discussion
Takeaways
Professional Guidance

Precept 1 of the Code of Conduct: An Actuary
shall act honestly, with integrity and
competence, and in a manner to fulfill the
profession's responsibility to the public and to
uphold the reputation of the actuarial
profession.
Professional Guidance

Precept 1 of the Code of Conduct
Annotation 1-1 -- An Actuary shall perform
Actuarial Services with skill and care.
 Annotation 1-4 -- An Actuary shall not engage in any
professional conduct involving dishonesty, fraud,
deceit, or misrepresentation or commit any act that
reflects adversely on the actuarial profession.

Professional Guidance

Precept 8 of the Code of Conduct: An Actuary
who performs Actuarial Services shall take
reasonable steps to ensure that such services are
not used to mislead other parties.

Precept 10 of the Code of Conduct: An Actuary
shall perform Actuarial Services with courtesy
and professional respect and shall cooperate
with others in the Principal's interest.
Professional Guidance

Rule 2 Candidates Version of the Code of
Conduct: An Actuarial Candidate shall not
engage in any professional conduct involving
dishonesty, fraud, deceit, or misrepresentation
or commit any act that reflects adversely on the
actuarial profession.
Professional Guidance

CAS Statement of Principles Regarding Property and
Casualty Loss and Loss Adjustment Expense Reserves

Section III -- Understanding the trends and changes affecting the
data base is a prerequisite to the application of actuarially sound
reserving methods. A knowledge of changes in underwriting,
claims handling, data processing and accounting, as well as changes
in the legal and social environment, affecting the experience is
essential to the accurate interpretation and evaluation of observed
data and the choice of reserving methods.
Professional Guidance

ASOP 36: Statements of Actuarial Opinion
Regarding Property/Casualty Loss and Loss
Adjustment Expense Reserves

Section 3.9: Adverse Deviation -- The actuary should
consider whether there are significant risks and
uncertainties that could result in future paid amounts
being materially greater than those provided for in
the reserves.
Professional Guidance

ASOP 43: Property/Casualty Unpaid Claim
Estimates

Section 3.6.7: Changing Conditions -- The actuary
should consider whether there have been significant
changes in conditions, particularly with regard to
claims, losses, or exposures, that are likely to be
insufficiently reflected in the experience data or in
the assumptions used to estimate the unpaid claims.
Legal Disclosure
The views expressed by the panelists are their own and
may not necessarily reflect those of their respective
employers.
Skit Background

Sally is a senior manager at Actuaries Plus and a
Fellows of the Casualty Actuarial Society.

James is an actuarial student at Actuaries Plus. He has
passed five exams and has three years of experience.

Anthony is an employee at Surf-N-Sure, a small online
insurance carrier which sells mostly auto residual value
insurance.
Skit Background

Actuaries Plus has been steadily growing for the past few years
and has recently brought on a new chief actuary who is pursuing
an aggressive growth strategy for the firm. The chief is accepting
many new customers, even small insurers.

Sally is opposed to this strategy. This new direction has placed a
lot of demands on Sally, including completing a reserve analysis
for Surf-N-Sure. Anthony is her contact at Serf-N-Sure. He
follows up with Sally constantly and is a little long-winded,
making her day even busier.
Skit Background

Surf-N-Sure sells mostly auto residual value insurance
which helps guarantee an asset will have a particular
value at a future date. The expected future value of a
vehicle is set when the policy begins and if the actual
future cash value is less than expected, the insurance
covers the difference.

An auto company who does leasing might use this product to
protect the value of cars that get returned at lease end.

Ultimately, used car prices really influence how much we pay:
the higher the used car price, the less we have to pay.
Lights, Camera, Action!
General Questions

What are James’ professional obligations?

What, if any, are James’ obligations to Actuaries Plus and SurfN-Sure?

Are his obligation impacted by the fact that he is an actuarial
student?

What are Sally’s professional obligations? Specifically, what is
her obligation to her actuarial student, James’?
Small Group Discussion
Discussion of General
Questions

What are James’ professional obligations?

What, if any, are James’ obligations to Actuaries Plus and SurfN-Sure?

Are his obligation impacted by the fact that he is an actuarial
student?

What are Sally’s professional obligations? Specifically, what is
her obligation to her actuarial student, James’?
Possible Courses of Action
James’ Options

Alternative 1 -- Comply with Sally’s request.

Alternative 2 – Report the issue to the chief actuary
of Actuaries Plus.

Alternative 3 – Contact Surf-N-Sure
Key Takeaways

Changing work environments and work load can
cause an actuary to move to fast and forget to
stop and apply professional standards.

Know the Standards that apply to the work you
are doing