0: What is subject A311 all about

Question 1

What makes the Actuarial Control Cycle ‘Actuarial’

Answer 1

a. Estimation of the financial impact of uncertain future events
b. Long-term rather than short-term time horizon
c. i.e. decisions are made in the short term in light of likely future outcomes.
d. Considerations of stakeholders (risk appetite and requirements)
e. The need to allow for general business environment
I.e. impact of legislation, regulation, tax and competition
f. Use of assumptions based on appropriate historical experience
g. The use of models to represent future financial outcomes
h. Interpretation of modelling results to develop strategies.
i. Monitoring and periodically analysing the emerging experience
j. The application of professional judgement

Question 2

What does the general economic and commercial environment entail?

Answer 2

a. Actuary needs to be aware of the environment in which the problem is being solved and the impact of the environment on the decisions made.
b. Consider:
* Customer needs and how needs are changing over time
* Competition?
* Jargon
* Rules and regulations
* Effect of economy on operations….

Question 3

What does specifying the problem stage of ACC involve?

Answer 3

1. Setting out the problem clearly from the view of each stakeholder
   * Investors, trustees, members of pension scheme, insurers, reinsurers
2. Assessing and analysing the risks of each stakeholder
   * Investment risk (market risk (systematic) + specific risk)
   * Credit risk
   * Mortality and morbidity risk
   * Inflation risk
   * Underwriting risk
   * Insurance risk
   * Exposure risk
   * Finance risk (risk of not obtaining finance when it is required)
   * Operation risk (loss due to fraud or mismanagement)
   * External risk
   * Currency risk
3. Considering strategic courses of action that can be taken to mitigate the particular risks
4. Analyse options to transfer risk from one stakeholder to another