0. What is A311 all about Flashcards
The Actuarial Control Cycle
Specifying the problem
Developing the solution
Monitoring the experience
General commercial and economic environment
Professionalism
What does ‘Specifying the problem’ involve?
SACA
Setting out clearly the problem from the viewpoint of each stakeholder
Assessing and analysing the risk for each stakeholder
Considering the strategic courses of action available to mitigate the particular risks in question
Analysing the options for designing solutions to the problem that transfer risk from one set of stakeholders to another
What does ‘Developing the solution’ involve?
ESCUICDCFC
Examining the major actuarial models currently in use
Selection of model/ construction of new model
Considering and selecting assumptions
Understanding the sensitivity of the results to the assumptions
Interpreting the results
Considering the implications on problem and stakeholders
Determining the proposed solution to the problem
Considering alternative solutions and their effects on the problem
Formalising a proposal
Communicating the proposed solution (and alternatives) to the stakeholders responsible for decision making
What does ‘Monitoring the experience’ involve?
AIFM
Analysing periodically actual experience against expected
Identifying causes of departure from expected experience and determining likelihood of each source
Feeding back into the specifying the problem and developing the solution stages
Making sure the model is ‘dynamic’ and reflects current experience
What makes the actuarial control cycle ‘actuarial’?
The estimation of the financial impact of uncertain future events
A long-term rather than short-term horizon
The recognition of stakeholders’ requirements and risk profiles
Decisions need to be made in the short term in the light of likely future outcomes
The use of models to represent future financial outcomes
The use of assumptions based on appropriate historical experience
The need to allow for the general business environment – the impact of legislation , regulation, taxation and competition
Interpretation of the results of modelling to enable practical strategies to be developed
Monitoring and periodically analysing the emerging experience
Modifying models/strategies in the light of this analysis of the emerging experience
The application of the professional judgement
Application of the ACC in Actuarial work
MADAMDDACCC
Monitoring the effects of investment mismatching
Asset-liability management
Determining the profitability of a contract
Assumptions setting for contract/scheme design
Model validation
Determining The solvency levels (Current and future)
Determining premiums/ contributions
Assessing capital requirements
Considering Insurance and reinsurance options
Considering other risk management options
Considering the need for and calculation of provisions
Suitability of ACC for risk management
Analysing situations, products and projects to determine the risks to which they are exposed
Quantifying the financial consequences of the risk events occurring
Considering and quantifying appropriate methods to managing, mitigating or transferring the risks
Monitoring the situation and the risk management procedures implemented as time develops
Modifying or changing the risk management approaches adopted over time, in light of emerging experience
Risk Occurs when?
Asset values/proceeds are important in isolation to the stakeholder and are not as expected,
Liability values/outgoes are important in isolation to the stakeholder and are not as expected.
Asset values/proceeds and liability values/outgoes are not important in isolation to the stakeholder, but the relative values and/or net cashflows are important and are not as expected
Risks affecting Assets
Market risk
Credit Risk
Risks affecting liabilities
External risk
Exposure risk
Inflation risk
Insurance risk
Operation risk
Underwriting risk
Finance risk
Types of risks
Mortality risk
Investment risk
Credit risk
Manage/Mitigate risk
Avoiding
Minimizing
Sharing
Transferring
