CH 0: Actuarial Control Cycle

Question 1

Nodes of Actuarial control cycle

5 {Points)

Answer 1

Stages:

• Specify the problem
• Develope the solution
• Monitor the experience

Input:

• Professionalism
• General and commercial economic environment

Question 2

Key Topics General Commercial and Economic Environment

Answer 2

ESPERIA, a magical environment far away

• External environment
• Stakeholders
• Providers of benefits
• Economic Influences
• Regulation
• Insurance products
• Asset Classes

Question 3

Key Topics Professionalism

Answer 3

• Professional conduct standards
• Technical and ethical standards
• Views of all stakeholders
• Act with integrity and detachment from the problem
• Personal situation
• Build a relationship with the client
• Avoid conflicts of interest
• Communicaiton

Question 4

Key topics when specifying the problem

Answer 4

• Assessment of NEEDS
• Assessment of RISKS
• Core Business Requirements
• Strategic Courses of Action

Question 5

Key topics in developing the solution

Answer 5

• Selecting Appropriate Actuarial Models
• Appropriate Assumptions
• Implications for all Stakeholders
• Determine a Proposed Solution and Alternatives

Question 6

Key topics in monitoring experience

Answer 6

• Monitor actual vs expected results
• Analysis of Surplus/Deficit
• Possible reasons for departures and adjust accordingly

Question 7

Specifying the problem

Answer 7

Analyse the risks of the various stakeholders in detail
and set out clearly the problem from the point of view
of each stakeholder.
- Gives an assessment of the risks faced and how they
can be managed mitigated or transferred.
- Provide an analysis of the options for the design of plans to transfer risk from one set of stakeholders to the next.

Question 8

Developing the solution

Answer 8

MODEL CONSTRUCTION
- An examination of the major actuarial models currently in use and how they may be adjusted for the
particular problem to be solved
- Selection of the most appropriate model to use for the problem, or construction of a new model
- Consideration and selection of the assumptions to be used in the model.

MODEL RESULTS
- Interpretation of the results of the modelling process
- Consideration of the implications of the model results
on the overall problem.
- Consideration of the implications of the results for all
stakeholders

SOLUTION

• determining a proposed solution to the problem
• consideration of alternative solutions and their effects on the problem
• formalising a proposal
• communicating the proposed solution and the alternatives

Question 9

Monitoring the experience

Answer 9

• Critical that the models used are dynamic and reflect
  current experience where it is relevant.
• This stage deals with the monitoring of experience
  and its feedback into the previous stages
• Identifying causes of departures and considering the
  recurrence of departures.
• Feedback loops

Question 10

ACC applied as risk management tool

Answer 10

Risk management also involves the following cyclical process:

• analyzing 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 for managing, mitigating and 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

Question 11

Types of Risk

Answer 11

• Market
• Investment
• Credit
• Mortality/Morbidity/Longevity
• Inflation
• Underwriting
• Insurance
• Exposure
• Finance
• Operational
• External
• Transfer